<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 3, 1997
REGISTRATION NO. 333-_________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------
NATIONAL HEALTHCARE CORPORATION
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 8051 APPLICATION FILED
(State or other jurisdiction of (Primary Standard (I.R.S. Employer Identification No.)
incorporation or organization) Industrial Classification
Code Number)
</TABLE>
100 VINE STREET, SUITE 1400
MURFREESBORO, TENNESSEE 37130
(615) 890-2020
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
------------------------
RICHARD F. LAROCHE, JR.
SENIOR VICE PRESIDENT AND SECRETARY
NATIONAL HEALTHCARE CORPORATION
100 VINE STREET, SUITE 1400
MURFREESBORO, TENNESSEE 37130
(615) 890-2020
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
COPY TO:
ERNEST E. HYNE II
HARWELL HOWARD HYNE GABBERT & MANNER, P.C.
1800 FIRST AMERICAN CENTER
NASHVILLE, TENNESSEE 37238
(615) 256-0500
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
===========================================================================================================================
TITLE OF EACH CLASS AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED (1) PER SHARE (2) PRICE (2) FEE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Common Stock, par value $.01 per share 10,819,400 shares $32.46 $351,216,282 $106,429.18
===========================================================================================================================
</TABLE>
(1) Based on the maximum number of shares of National HealthCare Corporation
Common Stock issuable pursuant to the Distribution.
(2) Estimated in accordance with Rule 457(f)(1) solely for the purpose of
calculating the registration fee, based on 70% of the market value of the
outstanding units of National HealthCare L.P. as of September 29, 1997.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE> 2
Dear Limited Partner:
A special meeting of limited partners (the "Special Meeting") of
National HealthCare L.P., a Delaware limited partnership ("NHC"), will be held
on Thursday, November 20, 1997, at 9:00 a.m., Central Standard time, at NHC's
partnership offices, 100 Vine Street, Suite 1400 Murfreesboro, Tennessee 37130.
At the Special Meeting, holders of NHC general and limited partnership
units ("Units") as of October 31, 1997 (the "Record Date") will be asked to
consider and vote upon the following matters:
1. Approval and adoption of a proposed plan of restructure (the
"Plan of Restructure"), pursuant to which NHC will make a
distribution (the "Distribution") of all of the outstanding
shares of common stock (the "REIT Shares") of National Health
Realty, Inc., a newly-formed Maryland corporation which is
intended to qualify as a real estate investment trust under
federal tax laws (the "REIT"), to the holders of NHC general
and limited partnership units and approximately 806,000 units
of limited partnership interest in NHR/OP, L.P., a Delaware
limited partnership (the "Operating Partnership"), to National
Health Corporation, NHC's administrative general partner, in
the manner set forth in the accompanying proxy statement and
NHC will then merge (the "Merger") with National HealthCare
Corporation, a newly-formed Delaware corporation (the
"Corporation"). Prior to the Distribution, but effective on
the date thereof, NHC will transfer to the REIT and the
Operating Partnership (i) the effective ownership (subject to
certain debt thereon) in the land, building and fixtures of 17
licensed nursing homes, six assisted living facilities and one
retirement center, (ii) NHC's interest in certain promissory
notes totaling approximately $92.5 million secured by
mortgages on approximately 23 additional nursing homes which
are owned by third parties and managed by NHC, (iii) certain
other assets having little or no book value on NHC's books and
(iv) certain liabilities.
2. Approval of the possible adjournment of the Special Meeting
for the purpose of soliciting additional votes in favor of
proposal (1) above (the "NHC Adjournment Proposal"); and
3. Such other business as may properly come before the Special
Meeting or any adjournment or postponement thereof.
Partnership approval of the Plan of Restructure is being sought to
ensure that NHC's Managing General Partner has identified and structured a
transaction appropriate for NHC and its Unitholders.
The Board of Directors of the Managing General Partner has unanimously
approved the Plan of Restructure and the transactions contemplated thereby, all
as described in the attached material, and has determined that the Plan of
Restructure and the related transactions are fair to and in the best interests
of NHC and its Unitholders. The Board of Directors of the Managing General
Partner recommends that the Unitholders vote in favor of the Plan of
Restructure. You are urged to consider carefully all aspects of the proposed
Plan of Restructure discussed in the attached Proxy Statement/Prospectus.
In the material accompanying this letter, you will find a Notice of
Special Meeting of NHC Unitholders, a proxy card and a Proxy
Statement/Prospectus relating to, among other things, the actions to be taken by
NHC at the Special Meeting. The Proxy Statement/Prospectus more fully describes
the Plan of Restructure. It also includes information about the REIT and the
Corporation and also serves as a Prospectus for the REIT and the Corporation
with respect to the securities of such entities to be issued upon the
consummation of the Plan of Restructure.
All Unitholders as of the Record Date are cordially invited to attend
the Special Meeting in person. However, whether or not you plan to attend the
Special Meeting, please complete, sign, date and return your proxy in the
enclosed postage paid envelope. If you attend the Special Meeting, you may vote
in person if you wish, even though you have previously returned your proxy. It
is important that your Units be represented and voted at the Special Meeting.
Sincerely,
Richard F. LaRoche, Jr.
Senior Vice President and Secretary
NHC, Inc.
<PAGE> 3
NATIONAL HEALTHCARE L.P.
100 VINE STREET
SUITE 1400
MURFREESBORO, TENNESSEE 37130
NOTICE OF SPECIAL MEETING OF UNITHOLDERS
TO BE HELD ON NOVEMBER 20, 1997
NOTICE IS HEREBY GIVEN that a special meeting of Unitholders (the
"Special Meeting") of National HealthCare L.P., a Delaware limited partnership
("NHC"), will be held on Thursday, November 20, 1997, at 9:00 a.m., Central
Standard time, at NHC's partnership offices, 100 Vine Street, Suite 1400,
Murfreesboro, Tennessee 37130 to consider and vote upon the following matters
more fully described in the accompanying Joint Proxy Statement/Prospectus:
1. Approval and adoption of a plan of restructure, the
("Plan of Restructure"), pursuant to which NHC will make a
distribution (the "Distribution") of all of the outstanding
shares of common stock (the "REIT Shares") of National Health
Realty, Inc., a newly-formed Maryland corporation which is
intended to qualify as a real estate investment trust under
federal income tax laws (the "REIT"), to the holders of NHC
general and limited partnership units and approximately
806,000 units of limited partnership interest in NHR/OP, L.P.,
a Delaware limited partnership (the "Operating Partnership"),
to National Health Corporation, NHC's administrative general
partner, in the manner set forth in the accompanying proxy
statement and NHC will then merge (the "Merger") with National
HealthCare Corporation, a newly-formed Delaware corporation
(the "Corporation"). Prior to the Distribution, but effective
on the date thereof, NHC will transfer to the REIT and the
Operating Partnership (i) the effective ownership (subject to
certain debt thereon) in the land, building and fixtures of 17
licensed nursing homes, six assisted living facilities and one
retirement center, (ii) NHC's interest in certain promissory
notes totaling approximately $92.5 million secured by
mortgages on approximately 23 additional nursing homes which
are owned by third parties and managed by NHC, (iii) certain
other assets having little or no book value on NHC's books and
(iv) certain liabilities.
2. Approval of the possible adjournment of the Special Meeting
for the purpose of soliciting additional votes in favor of
proposal (1) above; and
3. Such other business as may properly come before the Special
Meeting or any adjournment or postponement thereof.
Only Unitholders of record at the close of business on October 31,
1997, are entitled to notice of, and to vote at, the Special Meeting, or at any
adjournment or postponement thereof.
By order of NHC, Inc., the Managing General Partner
-------------------------------------------------------
Richard F. LaRoche, Jr.
Senior Vice President and Secretary
<PAGE> 4
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED OCTOBER 3, 1997
PROXY STATEMENT
FOR SPECIAL MEETING OF
PARTNERS OF
NATIONAL HEALTHCARE L.P.
JOINT PROSPECTUS OF
NATIONAL HEALTHCARE CORPORATION
AND
NATIONAL HEALTH REALTY, INC.
This Proxy Statement/Prospectus is being furnished by National HealthCare
L.P., a Delaware limited partnership ("NHC"), in connection with the
solicitation of proxies by the Board of Directors of NHC, Inc., the managing
general partner of NHC (the "Managing General Partner"), in connection with a
special meeting (the "Special Meeting") of the holders (the "Unitholders") of
limited partnership interests of NHC to be held on November 20, 1997, and at any
adjournment thereof to approve the proposed restructure of NHC as described in
this Proxy Statement/Prospectus. This Proxy Statement/Prospectus and form of
proxy are being mailed to Unitholders on or about November 1, 1997.
To counteract the governmentally mandated loss of taxation as a partnership
which is effective January 1, 1998, NHC has proposed a restructure whereby NHC
will make a distribution (the "Distribution") of all of the outstanding shares
of common stock (the "REIT Shares") of National Health Realty, Inc., a
newly-formed Maryland corporation which is intended to qualify as a real estate
investment trust under federal tax laws (the "REIT"), to the holders of NHC
general and limited partnership units (the "Units") on a pro rata basis, except
for approximately 806,000 units of limited partnership interests in NHR/OP,
L.P., a Delaware limited partnership (the "Operating Partnership"), which will
be distributed to National Health Corporation, NHC's administrative general
partner ("National") as discussed under "The Plan of Restructure" and NHC will
then merge (the "Merger") with and into National HealthCare Corporation, a
newly-formed Delaware corporation (the "Corporation"). Pursuant to the Merger,
each outstanding Unit of NHC will represent the right to receive one share of
common stock (the "Shares") of the Corporation. Prior to the Distribution, but
effective on the date thereof, NHC will transfer to the REIT and the Operating
Partnership (i) the effective ownership (subject to certain debt thereon) in the
land, building and fixtures of 17 licensed nursing homes, six assisted living
facilities and one retirement center (the "Owned Healthcare Facility or
Facilities"), (ii) NHC's interest in certain promissory notes totaling
approximately $92.5 million secured by mortgages on approximately 23 additional
nursing homes which are owned by third parties and managed by NHC (the "Notes"),
(iii) certain other assets having little or no book value on NHC's books (the
"Other Assets") and (iv) certain liabilities (the "Assumed Liabilities"). See
"Business -- The REIT" for a more complete description of these assets and
liabilities.
This Proxy Statement/Prospectus also constitutes the joint prospectus of:
(i) National HealthCare Corporation filed with the Securities and Exchange
Commission (the "Commission") as a part of a Registration Statement on Form S-4
(the "Corporation Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to up to 10,819,400 shares of
National HealthCare Corporation Common Stock which will be issued in the Merger
or upon the exercise of options or conversion of convertible securities and (ii)
National Health Realty, Inc., filed with the Commission as a part of a
Registration Statement on Form S-4 (the "REIT Registration Statement") under the
Securities Act, with respect to up to 10,013,400 shares of National Health
Realty, Inc. Common Stock which will be issued to NHC Unitholders in the
Distribution or upon the exercise of options or conversion of convertible
securities.
A Unitholder who executes a proxy has the right to revoke the proxy at any
time before it is voted by giving written notice of revocation to the secretary
of the Managing General Partner, by executing a proxy bearing a later date, or
by attending the Special Meeting and voting in person. Proxies will be voted in
accordance with instructions noted on the proxies. Unless otherwise specifically
instructed in the proxies, it is the intention of the persons named in the proxy
to vote all proxies received by them FOR THE PLAN OF RESTRUCTURE. Management
does not know of any other matters that will be presented for action at the
Special Meeting . If any other matter does come before the meeting, however, the
persons appointed in the proxy will vote in accordance with their best judgment
on such matter.
The cost of this proxy solicitation will be borne by NHC. It is
contemplated that proxies will be solicited solely by mail. Banks, brokers and
other custodians will be requested to forward proxy soliciting materials to
their customers where appropriate, and NHC will reimburse such banks, brokers,
and custodians for their reasonable out-of-pocket expenses in sending the proxy
materials to the beneficial Unitholders.
The Merger will be effective at 11:59 p.m. on December 31, 1997 (the
"Effective Time") and the Distribution will be made by NHC to Unitholders of
record immediately prior to the Effective Time. The Unitholders entitled to
receive the REIT Shares in the Distribution will not be required to pay any
consideration or take any action to receive those REIT Shares. Prior to the
Merger and the Distribution there has been no public market for the Shares or
the REIT Shares. Each of the Corporation and the REIT have made application to
list the Shares and REIT Shares, respectively, on the American Stock Exchange.
SEE "RISK FACTORS" ON PAGE 13 FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------
The date of this Proxy Statement/Prospectus is ________, 1997.
<PAGE> 5
TABLE OF CONTENTS
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PAGE
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INTRODUCTION..................................................................................................... 1
AVAILABLE INFORMATION............................................................................................ 1
SUMMARY OF CERTAIN INFORMATION................................................................................... 2
Summary Historical and Pro Forma Financial Information...................................................... 6
THE PLAN OF RESTRUCTURE.......................................................................................... 7
Background and Reasons for the Plan of Restructure.......................................................... 7
Certain Transactions Preceding the Distribution............................................................. 9
Manner of Effecting the Distribution and Merger............................................................. 9
Conditions to the Plan of Restructure....................................................................... 9
Federal Income Tax Aspects of the Plan of Restructure....................................................... 9
Businesses of the REIT and the Corporation after the Plan of Restructure.................................... 9
NHC's Outstanding Options and Convertible Debentures........................................................10
Effect on NHC Units.........................................................................................10
Listing and Trading of Shares and REIT Shares...............................................................12
Termination.................................................................................................12
RISK FACTORS.....................................................................................................13
Risks Associated With Forward Looking Statements............................................................13
The REIT....................................................................................................13
The Corporation.............................................................................................19
VOTING AND PROXY INFORMATION.....................................................................................25
Voting Procedures...........................................................................................25
Revocation of Proxies.......................................................................................25
Vote Required; Quorum.......................................................................................25
Solicitation of Proxies.....................................................................................25
Independent Auditors........................................................................................25
No Appraisal Rights.........................................................................................25
Other Matters...............................................................................................25
PRICE RANGE OF NHC UNITS.........................................................................................26
DIVIDEND POLICY..................................................................................................27
NHC ........................................................................................................27
The REIT....................................................................................................27
The Corporation.............................................................................................27
BUSINESS.........................................................................................................28
NHC ........................................................................................................28
The REIT....................................................................................................28
The Corporation.............................................................................................31
RELATIONSHIP BETWEEN THE REIT AND THE CORPORATION AFTER THE RESTRUCTURE..........................................46
The Assumed Liabilities.....................................................................................46
The Lease...................................................................................................46
Advisory, Administrative Services and Facilities Agreement..................................................48
PRO FORMA FINANCIAL INFORMATION..................................................................................51
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS ....................................................................................57
NHC ........................................................................................................57
The Corporation.............................................................................................61
The REIT....................................................................................................62
MANAGEMENT.......................................................................................................63
NHC ........................................................................................................63
The REIT....................................................................................................69
The Corporation.............................................................................................70
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i
<PAGE> 6
<TABLE>
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PAGE
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CERTAIN TRANSACTIONS.............................................................................................74
National ...................................................................................................74
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...................................................75
NHC ........................................................................................................75
The REIT....................................................................................................76
DESCRIPTION OF SECURITIES........................................................................................77
Shares of the Corporation...................................................................................77
Shares of the REIT..........................................................................................78
Operating Partnership Agreement.............................................................................80
COMPARISON OF STOCKHOLDER/UNITHOLDER RIGHTS......................................................................82
Fiduciary Duties............................................................................................88
FEDERAL INCOME TAX CONSIDERATIONS................................................................................89
Introduction................................................................................................89
Certain Differences Between the Ownership of Units, Shares..................................................89
The REIT....................................................................................................89
Federal Income Taxation of the REIT.........................................................................92
Opinion of REIT Counsel.....................................................................................92
Requirements for Qualification..............................................................................93
Failure to Qualify..........................................................................................95
Taxation of U.S. Stockholders...............................................................................96
Special Tax Considerations for Foreign Stockholders.........................................................97
Information Reporting Requirements and Backup Withholding Tax...............................................98
Other Tax Considerations....................................................................................98
Alternative Minimum Tax.....................................................................................99
ERISA Considerations........................................................................................99
The Corporation............................................................................................100
State and Local Taxes......................................................................................101
Unitholders Should Seek Their Own Tax Advice...............................................................101
LEGAL MATTERS...................................................................................................101
EXPERTS.........................................................................................................101
INDEX TO FINANCIAL STATEMENTS...................................................................................F-1
APPENDICES
1. Plan of Restructure...................................................................................A-1
2. Agreement of Merger ..................................................................................B-2
</TABLE>
ii
<PAGE> 7
INTRODUCTION
To counteract the governmentally mandated loss of taxation as a partnership
which is effective January 1, 1998, on August 19 and September 5, 1997, the
Board of Directors of the Managing General Partner of National HealthCare L.P.,
a Delaware limited partnership, unanimously approved in principle (i) the
formation of National Health Realty, Inc., a Maryland corporation, as a wholly
owned subsidiary of NHC and the formation of NHR/OP, L.P., a Delaware limited
partnership with respect to which the REIT would be the general partner and NHC
and the REIT would be the limited partners, (ii) the transfer to the REIT and
the Operating Partnership all of the Owned Healthcare Facilities, the Notes, the
Other Assets and the Assumed Liabilities, (iii) the formation of National
HealthCare Corporation, a Delaware corporation, as a wholly-owned subsidiary of
NHC, (iv) the Distribution of the REIT Shares to NHC's Unitholders and all
of the Operating Partnership's limited partnership units held by NHC to
National, and (v) the Merger of NHC with and into the Corporation (the "Plan of
Restructure"). The Plan of Restructure will have the effect of separating NHC
into two new independent public entities. The Distribution will be payable to
the NHC Unitholders of record immediately prior to the Effective Time, at the
rate of one REIT Share for each NHC Unit outstanding provided, however, National
shall receive either one REIT share or one Operating Partnership Unit ("OP
Unit") for each of its NHC Units. As a result of the Merger, each Unitholder
certificate in NHC will represent the identical number of shares in the
Corporation. The Merger will be effective at 11:59 p.m. on December 31, 1997.
The REIT Shares issued in the Distribution will be mailed to the Unitholders as
soon thereafter as is practicable. See "The Plan of Restructure -- Manner of
Effecting the Distribution and Merger."
Both the Corporation and the REIT were incorporated on September 26, 1997,
each as a wholly-owned subsidiary of NHC for purposes of consummating the Plan
of Restructure described herein. Prior to the Distribution, NHC will transfer to
the REIT and the Operating Partnership the Owned Healthcare Facilities, the
Notes, the Other Assets and the Assumed Liabilities.
Unitholders of NHC who have questions relating to the Plan of Restructure
should contact NHC at its principal corporate offices, 100 Vine Street, Suite
1400, Murfreesboro, Tennessee 37130, telephone (615) 890-2020, Attention:
Investor Relations. After the Effective Time, stockholders of the Corporation
who have questions relating to the Plan of Restructure should contact the
Corporation at its principal corporate offices, 100 Vine Street, Suite 1400,
Murfreesboro, Tennessee 37130, telephone (615) 890-2020, Attention: Investor
Relations and shareholders of the REIT who have questions relating to the
Distribution should contact the REIT at its principal office, 100 Vine Street,
Suite 1400, Murfreesboro, Tennessee 37130 and its telephone number is (615)
890-2020.
AVAILABLE INFORMATION
Each of the Corporation and the REIT have filed a registration statement on
Form S-4 (the "Registration Statements") with the Commission under the
Securities Act with respect to the Shares and the REIT Shares, respectively.
This Proxy Statement/Prospectus does not contain all of the information set
forth in the Registration Statements and the exhibits and schedules thereto. For
further information, reference is made hereby to the Registration Statements and
such exhibits and schedules. Statements contained herein concerning any
documents are not necessarily complete and, in each instance, reference is made
to the copies of such documents filed as exhibits to either of the Registration
Statements. Each such statement is qualified in its entirety by such reference.
Copies of these documents may be inspected without charge at the principal
office of the Commission at 450 5th Street, N.W., Washington, D.C. 20549, at the
Regional Offices of the Commission at 7 World Trade Center, Suite 1300, New
York, New York 10048 and at Northwestern Atrium Center, Suite 1400, 500 West
Madison Street, Chicago, Illinois 60661. Copies of all or any part thereof may
be obtained from the Commission upon payment of the charges prescribed by the
Commission. In addition, such Registration Statements may be electronically
accessed at the Commission's site on the World Wide Web located at
http://www.sec.gov.
Following the Distribution, the Corporation and the REIT will each be
required to comply with the reporting requirements of the Exchange Act and will
file annual, quarterly and other reports with the Commission. The Corporation
and the REIT will also each be subject to the proxy solicitation requirements of
the Exchange Act and, accordingly, will furnish audited financial statements to
their respective stockholders in connection with its annual meetings of
stockholders. Following the listing of the Corporation and the REIT common stock
on the American Stock Exchange ("AMEX"), the Corporation and the REIT will each
be required to file with AMEX copies of such reports, proxy statements and other
information which then can be inspected at the offices of AMEX at 86 Trinity
Place, New York, New York 10006-1881.
NO PERSON IS AUTHORIZED BY NHC, THE CORPORATION OR THE REIT TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROXY STATEMENT/PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY ANY SECURITIES IN ANY JURISDICTION TO ANY PERSON WHOM IT IS NOT
LAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF THE
SECURITIES MADE UNDER THIS PROXY STATEMENT/PROSPECTUS SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF NHC, THE REIT OR THE CORPORATION SINCE THE DATE OF THIS PROXY
STATEMENT/PROSPECTUS.
<PAGE> 8
SUMMARY OF CERTAIN INFORMATION
This summary is qualified by the more detailed information set forth
elsewhere in this Proxy Statement/Prospectus, which should be read in its
entirety.
<TABLE>
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THE REIT.................................... National Health Realty, Inc., a Maryland corporation, which is
intended to qualify as a real estate investment trust under Section
856 of the Internal Revenue Code of 1986, as amended (the
"Code"). As used in this Proxy Statement/Prospectus, the REIT
means National Health Realty, Inc. and its subsidiaries (including
the Operating Partnership). At the time of the Distribution, the
REIT will own (i) 15 of the Owned Healthcare Facilities and lease
nine of the Owned Healthcare Facilities with a nominal purchase
option, (ii) the Notes, and (iii) Other Assets subject to the
Assumed Liabilities. See "Business -- The REIT."
THE CORPORATION............................. National HealthCare Corporation, a Delaware corporation and its
subsidiaries. At the Effective Time of the Merger, it will acquire
all of the assets, operations and liabilities of NHC, other than the
assets and liabilities transferred to the REIT. See "Business --
The Corporation."
NHC......................................... National HealthCare L.P., a Delaware limited partnership and its
subsidiaries. See "Business -- NHC."
RISK FACTORS................................ After the Effective Time, the REIT and the Corporation will continue
to be subject to a number of risks, including those which were
applicable to the business historically operated by NHC and
litigation to which it was subject, as well as new risks, such as a
significant conflict of interest. See "Risk Factors."
REIT SHARES TO BE DISTRIBUTED............... Approximately 10,013,400 shares of common stock of National
Health Realty, Inc., a Maryland corporation. The actual number of
REIT Shares to be distributed will depend upon the number of
NHC Units outstanding at the Effective Time. Unitholders will not
be required to pay any cash or other consideration or to exchange
their Units for the REIT Shares they receive in the Distribution.
See "The Plan of Restructure -- Manner of Effecting the
Distribution and Merger" and "-- NHC's Outstanding Options and
Convertible Debentures."
SHARES TO BE ISSUED IN THE MERGER .......... Approximately 10,819,400 Shares of common stock of National
HealthCare Corporation, a Delaware corporation. The actual num
ber of Shares to be issued will depend upon the number of NHC
Units outstanding at the Effective Time. Unitholders will receive
one Share of stock for each Unit held at the Effective Time. See
"The Plan of Restructure -- Manner of Effecting the Distribution
and Merger" and "-- NHC's Outstanding Options and Convertible
Debentures."
DISTRIBUTION RATIO.......................... One REIT Share for each outstanding NHC Unit, except for certain
Units held by National Health Corporation, which will receive one
OP Unit in the Operating Partnership for each such NHC Unit.
See "The Plan of Restructure -- Manner of Effecting the
Distribution and Merger", "-- NHC's Outstanding Options and
Convertible Debentures" and "Certain Transactions -- National."
MERGER CONSIDERATION ....................... One Share for each outstanding NHC Unit. See "The Plan of
Restructure -- Manner of Effecting the Distribution and Merger"
and "-- NHC's Outstanding Options and Convertible Debentures."
DISTRIBUTION DATE........................... The distribution of REIT shares to Unitholders shall be effective on
the date of, but prior to, the Effective Time. However, with respect
to the physical delivery of REIT shares, as soon as practical after
the Effective Time, NHC will deliver the REIT Shares to the
distribution agent. The distribution agent will mail stock
certificates representing the REIT Shares as soon thereafter as
practicable. Current Unit certificates will be deemed to represent
shares of the Corporation after the Effective Time. See "The Plan
</TABLE>
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<TABLE>
<S> <C>
of Restructure -- Manner of Effecting the Distribution and
Merger."
EFFECTIVE TIME ............................. 11:59 p.m. Central Standard time on December 31,1997. As of the
Effective Time, each Unit will represent one share of the
Corporation. See "The Plan of Restructure -- Manner of Effecting
the Distribution and Merger."
REIT'S INITIAL ASSETS AND DEBT.............. The REIT's initial assets will consist of: (i) fee ownership or
capitalized leases on 17 skilled nursing centers, six assisted living
facilities and one retirement center (the "Owned Healthcare
Facilities"), (ii) certain promissory notes secured by mortgages on
approximately 23 additional nursing homes managed by NHC (the
"Notes") and (iii) certain other assets with nominal book value on
the current books of NHC (the "Other Assets"). The transfer of the
Owned Healthcare Facilities, the Notes and the Other Assets will
be subject to (and the REIT will agree to pay and perform) certain
NHC debt of approximately $105.9 (the "Assumed Liabilities").
All of the REIT's assets will be owned by the Operating
Partnership or a subsidiary partnership of the Operating
Partnership. See "Relationship between the REIT and the
Corporation After the Restructure -- Assumed Liabilities."
CORPORATION'S INITIAL ASSETS AND LIABILITIES The Corporation's initial assets and liabilities will consist
of all of the assets and liabilities of NHC, other than those
transferred to the REIT; however, the Corporation will
continue to be contingently liable on debt which the REIT has
agreed to pay. See "Business -- The Corporation."
RELATIONSHIP BETWEEN THE
CORPORATION AND THE REIT
AFTER THE PLAN OF RESTRUCTURE .............. After the Plan of Restructure, the Corporation will continue to be
engaged in the development and operation of nursing homes,
assisted living and retirement centers, home health agencies and
other related services and will lease the Owned Healthcare
Facilities from the REIT. The Corporation will render certain
advice and services to the REIT pursuant to an Advisory,
Administrative Services and Facilities Agreement (the "REIT
Advisory Agreement"), for which it will receive a fee. See
"Relationship Between the REIT and the Corporation After the
Restructure -- Advisory Administrative Services and Facility
Agreement."
REASONS FOR THE PLAN OF RESTRUCTURE ........ NHC is currently a publicly traded limited partnership. Under current
federal tax laws, beginning January 1, 1998, NHC would be taxed
as a corporation and not as a partnership. Management of NHC
believes that by dividing NHC into two entities, one of which will
be taxed as a real estate investment trust and one of which will be
taxed as a corporation, the NHC Unitholders will be able to retain
some benefits of a single federal taxable entity with respect to the
income derived from assets transferred to the REIT. In addition,
there will be a public market for the REIT Shares and the Shares.
NHC intends to transfer only tax qualifying assets to the REIT so
that the REIT will be taxed for federal income tax purposes as a
real estate investment trust and not as a taxable corporation. See
"The Plan of Restructure -- Background and Reasons for the Plan
of Restructure."
TRADING MARKET.............................. Application has been made to list both the REIT Shares and the Shares
on the American Stock Exchange.
FEDERAL TAX CONSEQUENCES.................... The formation of the Corporation and the REIT by NHC and the
contribution of assets to the REIT by NHC are intended to qualify
as tax free transfers under the Internal Revenue Code of 1986, as
amended (the "Code"), with respect to which neither the
Corporation, the REIT nor NHC generally would recognize gain,
except (as to NHC) to the extent that liabilities assumed by the
REIT or subject to assets transferred to the REIT exceed NHC's
adjusted tax basis in such assets immediately prior to such transfer.
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<S> <C>
It is not anticipated that such liabilities will exceed such
bases. See "Federal Income Tax Considerations -- The REIT
-- Formation of the REIT -- Tax Consequences, -- Nonrecognition
Rule of Code Section 351" and "Federal Income Tax
Considerations -- The Corporation -- Formation."
The formation of, and transfer of assets to, the Operating
Partnership are intended to qualify as a tax free contribution
to a partnership under the Code, with respect to which neither
the Operating Partnership, NHC nor the REIT generally would
recognize gain.
The Distribution and Merger will be treated for federal income
tax purposes as a complete termination and liquidation of NHC
in which NHC Unitholders receive Corporation shares and REIT
shares in exchange for Units. The merger of NHC into the
Corporation will be treated as a contribution of NHC's assets
(other than those contributed to the REIT or the Operating
Partnership) to the Corporation, which would generally be tax
free to the Corporation and NHC, except (as to NHC) to the
extent liabilities assumed by the Corporation or subject to
assets transferred to the Corporation exceed NHC's adjusted
tax bases in such assets immediately prior to the transfer. It
is not anticipated that such liabilities will exceed such
bases. See "Federal Income Tax Considerations -- The
Corporation -- The Merger."
The REIT is intended to qualify as a real estate investment
trust under the Code, the applicable provisions of which will
generally allow the REIT to avoid the"double taxation" of
corporate earnings to the extent of distributions made to its
shareholders. REIT shareholders would generally be taxed upon
such distributions as ordinary income to the extent of the
REIT's accumulated and current earnings and profits. See
"Federal Income Tax Considerations -- The REIT -- Taxation as
a Real Estate Investment Trust."
The Corporation will not be a pass-through entity such as NHC
or a quasi pass-through entity like the REIT. Instead, the
Corporation's earnings will be taxed at the corporate level
and, to the extent distributions are made to the Corporation's
shareholders, such distributions will generally be taxed at
the shareholder level (as ordinary income) to the extent of
the Corporation's accumulated and current earnings and
profits. See "Federal Income Tax Considerations -- Certain
Differences Between the Ownership of Units, REIT Shares and
Shares."
INVESTOR BASIS IN SHARES AND REIT SHARES Since the Distribution and Merger will be treated as a
complete termination and liquidation of NHC, a Unitholder's
initial tax basis in the REIT Shares and Shares would in the
aggregate generally be based upon such Unitholder's tax basis
in his Units. See "Federal Income Tax Considerations -- The
REIT -- The Distribution -- Tax Consequences."
INVESTMENT POLICIES........................ The Corporation intends to continue NHC's historical investment
policy of developing and acquiring nursing homes, assisted living
and retirement centers and of managing such types of facilities for
others. See "Business-- The Corporation."
The REIT will lease the Owned Healthcare Facilities to the
Corporation. The REIT may purchase additional properties,
however, the REIT Advisory Agreement provides that the REIT
will only do business with the Corporation so long as both the
REIT Advisory Agreement is in effect and the Corporation
continues to advise National Health Investors, Inc. See
"Business -- The REIT -- Investment and Other Policies."
DIVIDENDS................................... The REIT intends to pay quarterly dividends to its shareholders in an
amount at least sufficient to satisfy the distribution requirements of
a REIT. Such requirements generally necessitate that at least 95%
of the REIT's taxable income (which term does not include net
</TABLE>
4
<PAGE> 11
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<S> <C>
capital gains realized by the REIT) be distributed annually.
See "Federal Income Tax Considerations -- The REIT -- Taxation
as a REIT -- Annual Distribution Requirements." The REIT may
elect to distribute dividends in excess of 95% of its REIT
taxable income. Payment of dividends, however, will always be
at the discretion of the REIT's Board of Directors and will
depend upon such factors as the REIT's financial condition,
its earnings, anticipated investments, bank covenants and
other relevant factors. It may be necessary for the REIT to
borrow or liquidate investments to satisfy its distribution
requirements. The REIT's Board of Directors anticipates paying
a dividend that would initially be at the annual rate of $1.33
per REIT Share. See "Risk Factors -- Risks Associated with
Forward Looking Statements" and "Dividend Policy."
The Corporation may pay dividends at the discretion of the
Corporation's Board of Directors. The Corporation does not
anticipate initially paying dividends.
LEASES....................................... Initially, each of the Owned Healthcare Facilities will be leased to the
Corporation. Each lease (each a "Lease" and collectively the
"Leases") will be a "triple net" lease with (i) an original fixed term
expiring December 31, 2007, (ii) an option of the Corporation to
renew the Lease for two additional periods of 5 years each (on the
same terms as the initial 10 year term, and (iii) a right of first
refusal for NHC to purchase the Owned Healthcare Facilities. See
"Relationship Between the REIT and the Corporation after the
Restructure -- The Leases."
DEBT OF THE REIT............................. The REIT will assume (or take the Owned Healthcare Facilities
subject to and agree to pay and perform) the Assumed Liabilities
amounting to approximately $105.9 million. The REIT expects to
refinance the Assumed Liabilities soon after the Effective Time.
See "Business -- The REIT -- Assumed Liabilities." The
Corporation will remain directly liable on all of the remaining debt
of NHC. Since both the REIT and the Corporation resulted from
NHC, creditors of NHC may be able to reach the assets of both.
See "Risk Factors -- The REIT -- Lack of Consents; Acceleration
of Certain Maturities" and "-- The Corporation -- Lack of
Consents; Acceleration of Certain Maturities."
INTENTION OF THE REIT TO QUALIFY
AS A REAL ESTATE INVESTMENT TRUST.......... The REIT was organized and intends to conduct its operations so as
to qualify for taxation as a real estate investment trust under
Sections 856 through 860 of the Code. The primary advantage to
the REIT if it so qualifies is that it will generally be allowed to
deduct from its taxable income an amount equal to the dividends
paid to its shareholders. This treatment substantially eliminates the
"double taxation" normally imposed on corporate earnings. The
REIT could be subject to state excise taxes in the event a state
recognizes a REIT to be a corporation subject to such state's excise
tax. If the REIT fails to qualify as a REIT at any time, distributions
to shareholders in any such year will not be deductible by the REIT
and the amount of cash available for distribution to shareholders
could accordingly be reduced. As a result, its income subject to
taxation (including the alternative minimum tax) will be greater
than if the REIT continued to qualify as a REIT. See "Federal
Income Tax Considerations -- The REIT -- Taxation as a Real
Estate Investment Trust."
OUTSTANDING OPTIONS AND DEBENTURES........... NHC has certain outstanding unit options (the "Options") and 6% subordinated
convertible debentures (the "6% Debentures"). Any of the Options which are
not exercised, or 6% Debentures which are not converted, into NHC Units
prior to the Plan of Restructure (the payment obligation of which will
remain the obligation of the Corporation) will convert, at the election of
the holder, into the same number of Shares and REIT Shares that it would
have been convertible or exercisable into Units prior to the Plan of
Restructure. Certain covertible notes issued in October 1997 will only be
converted into Shares. See "The Plan of Restructure -- NHC's Outstanding
Options and Covertible Debentures."
</TABLE>
5
<PAGE> 12
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
Audited Financial Statements. The following selected financial data of the
Corporation has been derived from the NHC audited financial statements
included elsewhere herein. The selected financial data should be read in
conjunction with NHC's consolidated financial statements and notes thereto.
Pro Forma Financial Data. The following pro forma financial data of the
Corporation and the REIT has been prepared by the Corporation and the REIT
assuming that the transfer of the Owned Healthcare Facilities, the Notes
and the Assumed Liabilities and the execution of the Leases occurred as of
January 1, 1996. The unaudited pro forma data, in the opinion of
management, reflects all adjustments necessary to present fairly the data
set forth therein.
NATIONAL HEALTHCARE CORPORATION, SUCCESSOR TO
NATIONAL HEALTHCARE L.P.
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
-----------------------
SIX
YEAR MONTHS
ENDED ENDED
OR AS OF OR AS OF
SIX MONTHS ENDED YEAR ENDED OR DECEMBER 31, JUNE 30,
OR AS OF JUNE 30, AS OF DECEMBER 31, -----------------------
1997 1996 1996 1995 1994 1993 1992 1996 1997
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net revenues......... $212,054 $183,784 $388,660 $350,957 $298,901 $269,858 $216,378 $379,623 $207,188
Income before taxes.. 14,300 11,472 29,286 21,115 15,853 37,562 9,501 15,504 7,655
Net Income........... 14,300 11,472 29,286 21,115 15,853 37,562 9,501 9,382 4,695
Earnings per
Unit/Share........... 1.41 1.18 2.98 2.31 1.80 4.05 1.23 1.02 0.50
BALANCE SHEET DATA:
Working capital...... $24,000 $26,639 $7,291 $30,393 $42,468 $69,493 $37,983 $ 46,168
Total assets......... 462,505 361,106 404,740 355,491 396,133 344,680 304,074 $255,331
Long-term debt....... 144,867 111,291 124,678 100,871 104,243 54,625 49,299 58,009
Partners' Capital.... 137,767 116,073 128,537 108,899 101,006 92,526 67,922 0
Stockholders' Equity. 0 0 0 0 0 0 0 17,451
</TABLE>
NATIONAL HEALTH REALTY, INC.
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
----------------------------
SIX
YEAR Months
ENDED Ended
OR AS OF or as of
DECEMBER 31 June 30,
----------- --------
1996 1997
---- ----
<S> <C> <C>
INCOME STATEMENT DATA:
Net Revenues............................................................................ $20,210 $ 11,247
Net Income.............................................................................. 11,893 5,684
Earnings per share...................................................................... 1.23 0.57
BALANCE SHEET DATA:
Total Assets............................................................................ $232,473
Long-term debt.......................................................................... 86,858
Stockholders' Equity.................................................................... 145,615
</TABLE>
6
<PAGE> 13
THE PLAN OF RESTRUCTURE
BACKGROUND AND REASONS FOR THE PLAN OF RESTRUCTURE
In 1986, the predecessor to NHC converted from a corporation to a limited
partnership by forming NHC and transferring all assets to it. At that time, the
limited partnership form offered important tax advantages since there was (i) no
separate taxation of cash distributions to a partner, (ii) no federal income tax
at the partnership level and (iii) personal income tax rates were lower than
corporate tax rates. However, in late 1987, Congress passed the Revenue Act of
1987, one of the provisions of which provided that publicly traded limited
partnerships, which are frequently referred to as master limited partnerships
("MLPs"), with certain exceptions, would be taxed for federal income tax
purposes as corporations. MLPs existing on December 17, 1987 were
"grandfathered" for ten years until December 31, 1997.
For taxable periods beginning after December 31, 1997, the benefit to an
MLP of being treated as a partnership for federal income tax purposes will be
significantly reduced. For such taxable periods, existing MLPs generally have
the option of (i) being taxed as a corporation or (ii) being taxed as a
partnership by electing to be subject to additional tax at the rate of 3.5% on
its gross income. Based on NHC's projected gross income for 1997, the 3.5%
partnership tax (which would be in addition to income tax paid by NHC's
Unitholders) NHC would be required to pay if such provision had been in effect
during 1997 would be approximately $15.6 million.
In considering the best way for NHC to deal with the approaching change in
its taxation, the Board of Directors of the Managing General Partner focused on
NHC's desire to continue to make distributions to its Unitholders in conjunction
with the necessity for retaining earnings needed for NHC to continue its growth
plan. The Board agreed in its analysis of the restructuring consequences that
the first premise would be that NHC retain substantially the same percentage of
its cash flow after the restructure as it presently retains and second, that the
cash flow not retained should be available for distribution to investors to the
greatest extent practicable. With these premises in mind, the Board of Directors
of the Managing General Partner considered various alternatives, including the
following:
1. Remain a limited partnership, delist the Units from the AMEX and cease
being a "publicly traded" entity by restricting the trading in the
Units and granting investors the right to be "cashed out" by selling
their interest to third party investors.
Disadvantages
- Investors would lose the liquidity of the Units.
- Uncertainty as to whether there would be a sufficient number
of third party investors to buy Units of current investors who
wanted out.
Advantages
- NHC would continue as a limited partnership without being
taxed as a corporation because of the restrictions on
transferability.
- NHC would be able to continue to make distributions to its
Unitholders because it would not be subject to double
taxation.
2. Remain a limited partnership, delist the Units from the AMEX and cease
being a "publicly traded" entity by further restricting the trading in
the Units and granting investors the right to be "cashed out" by
selling their interests, one half to third party investors and one half
purchased by the limited partnership.
Disadvantages
- Investors would lose the liquidity of the Units.
- NHC would have to incur new debt to purchase selling
Unitholders' interests, which would likely restrict NHC's
ability to grow.
- NHC's cash balance would likely be adversely impacted by
incurring additional debt and the resulting increase in
interest expense.
- Uncertainty as to whether there would be a sufficient number
of third party investors to buy one half of the Units of
current investors who wanted out.
Advantages
- NHC would continue as a limited partnership without being
taxed as a corporation because of the restrictions on
transferability.
- NHC would be able to continue to make distributions to its
Unitholders because it would not be subject to double
taxation.
- There would not be as big a need for new third party investors
if one half of interests sold by Unitholders were purchased by
NHC
3. Convert NHC to a corporate form, which is what will happen under
current tax law, effective January 1, 1998, if NHC retains its existing
business structure.
Disadvantages
- There would be a significant loss of after tax return to
investors from distributions due to double taxation and NHC's
need to retain sufficient cash to maintain growth.
7
<PAGE> 14
Advantages
- There would likely be an increased market for NHC shares since
they would no longer produce UBIT (unrelated business income
tax), thus attracting institutional investors.
- Since the corporate form of NHC would be a public entity, the
investors would maintain liquidity in their shares.
- This would be the easiest transaction, from a structural
point of view.
4. Split NHC into two companies, one a publicly-traded entity which owns
all current real estate and notes receivables, which leases the real
estate back to NHC which would delist, and impose trading restrictions
to become a private partnership. Again, the private partnership would
offer existing investors the right to "cashout" using third party
investors or purchasing the interests at the partnership level.
Disadvantages
- Investors would lose the liquidity of the Units in the
private partnership.
- NHC would have to incur new debt to purchase at least some of
the selling Unitholders' interests, which would likely
restrict NHC's ability to grow.
- NHC's cash balance would likely be adversely impacted by
incurring additional debt and the resulting increase in
interest expense.
- Uncertainty as to whether there would be a sufficient number
of third party investors to buy at least some portion of the
Units of current investors that wanted out.
- NHC would need to include some restrictions on the
publicly-traded real estate company in order to avoid
conflicting with the objectives of National Health Investors,
Inc. ("NHI").
Advantages
- At least some of the investors liquidity would be preserved
through the publicly-traded real estate entity, which could
also avoid tax at the entity level by meeting the requirements
of an exception to the taxation of MLPs that is available to
publicly-traded partnerships with certain passive income or a
real estate investment trust.
- The operating company would continue as a limited partnership
without being taxed as a corporation because of the
restrictions on transferability.
- The operating company would be able to continue to make
distributions to its Unitholders because it would not be
subject to double taxation.
- There would not be as big a need for new third party investors
if one entity maintained a public market and at least some of
the interests sold by Unitholders were purchased by the
operating entity.
Finally, management considered the Plan of Restructure, pursuant to which
the real estate and certain other qualifying assets are contributed to a real
estate investment trust, and the remaining operating entity is converted into a
corporation. Management believes that the Plan of Restructure has the following
benefits:
- No Double Taxation of the REIT. By transferring assets to the REIT that
will generally enable it to qualify as a real estate investment trust
under the Code, the REIT will be able to continue to make distributions
to its stockholders without incurring the double taxation which would
be incurred by the Corporation.
- Maintain Public Market. The Managing General Partner has made listing
applications to list the common stock of both the Corporation and the
REIT on AMEX, thereby maintaining the public market that currently
exists for the NHC Units.
- Tax Reporting. The Managing General Partner believes that the
complexities of tax reporting associated with partnership investments
are regarded as unduly burdensome for most limited partners under
current conditions.
- Expanded Investor Base. By creating a real estate investment trust and
a corporation, instead of a passive income MLP, the Managing General
Partner believes that both entities will have a broader investor base,
which will include institutional and other investors who do not
typically invest in MLPs, including NHC, because of various tax and
administrative reasons.
Management also recognized and considered the following disadvantages to
the Plan of Restructure:
- No Dividends by the Corporation. The Corporation would likely retain
its earnings in order to maintain its growth plan and would not likely
pay dividends to its shareholders, at least initially. Any distribution
would be subject to double taxation.
- Restrictions on REIT's Business. NHC would need to include some
restrictions on the REIT in order to avoid conflicting with the
objectives of NHI.
After careful analysis of each of the possible structures, the Board of
Directors concluded, based on advice from investment advisors, accountants and
legal counsel, that the Plan of Restructure was the best alternative overall.
8
<PAGE> 15
NHC, the REIT and the Corporation will enter into a Plan of Restructure and
Agreement of Merger which provide for the Plan of Restructure described herein.
The following is a summary of certain provisions of the Plan of Restructure and
Agreement of Merger, however, such summary does not purport to be complete and
is subject to and qualified in its entirety by reference to all provisions of
the Plan of Restructure and Agreement of Merger which are attached hereto as
Annex A and B, respectively, and are incorporated herein by reference.
CERTAIN TRANSACTIONS PRECEDING THE DISTRIBUTION
Immediately prior to the Distribution, NHC will transfer to the REIT and
its subsidiaries, including the Operating Partnership, the Owned Healthcare
Facilities, the Notes, the Other Assets and the Assumed Liabilities in exchange
for a number of REIT Shares equal to the number of NHC Units (except for the OP
Units that will be distributed to National) outstanding immediately prior to the
Effective Time. In addition, the REIT will agree to issue additional REIT Shares
as required to be issued upon the exercise of current NHC options and conversion
of currently outstanding debentures. The REIT will be the sole general partner
of the Operating Partnership, which will then lease the Owned Healthcare
Facilities to the Corporation and the Corporation will enter into the REIT
Advisory Agreement with the REIT.
MANNER OF EFFECTING THE DISTRIBUTION AND MERGER
Subject to the approval of the Plan of Restructure by the Unitholders, the
REIT Shares issued in the Distribution will be mailed to the Unitholders as soon
as practicable after the Effective Time. Promptly after the Effective Time, the
REIT Shares will be delivered to SunTrust Bank, Atlanta which will act as the
distribution agent (the "Distribution Agent"). As soon as practicable
thereafter, the Distribution Agent will mail to each NHC Unitholder of record at
the Effective Time one REIT Share for every Unit.
Holders of NHC Units will not be required to pay any cash or
other consideration or to exchange their Units for the REIT
Shares they receive in the Distribution. The Distribution will
not change the number of NHC Units outstanding.
National Health Corporation, NHC's Administrative General Partner,
("National") will receive approximately 794,000 REIT Shares and 806,000 OP
Units, in connection with approximately 1,600,000 NHC Units in order for the
REIT to meet one of the requirements of a real estate investment trust. See
"Certain Transactions -- National."
At the Effective Time, each outstanding Unit will represent one Share of
the Corporation. New certificates will not be issued for the Shares until the
holder thereof subsequently sells, exchanges or surrenders the certificate to
the Corporation's transfer agent. In the event a Unitholder claims his
certificate representing his Units has been stolen, lost or destroyed, upon the
making of an affidavit of that fact by such Unitholder, the Corporation's Board
of Directors may direct a new certificate representing the Shares to be issued
in the place of such stolen, lost or destroyed certificate representing the
Units. When authorizing such issue of a new certificate, the Corporation's Board
of Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such stolen, lost or destroyed certificate or
legal representative to advertise the same in such manner as it shall require
and/or to give bond, with sufficient surety, to the Corporation to indemnify it
against any loss or claim which may arise by reason of the issuance of a new
certificate.
CONDITIONS TO THE PLAN OF RESTRUCTURE
Certain lenders to NHC must consent to the transfer of the Owned Healthcare
Facilities, the Notes, the Other Assets and the Assumed Liabilities and the
Merger. Although NHC has no reason to believe that certain lenders will not
consent, and, in fact, have received certain oral indications that consents will
be given, in the event they do not, NHC may terminate the Plan of Restructure,
or NHC may pay down the debt to a level sufficient to obtain, or obviate the
need for, a lender's consent or attempt to find substitute lenders. There can be
no assurances that NHC can obtain the funds to pay down such debt or that there
will not be penalties and other costs associated with such payments.
With respect to certain other lenders from whom NHC will not seek consent,
see "Risk Factors -- The REIT -Lack of Consents; Acceleration of Certain
Maturities."
FEDERAL INCOME TAX ASPECTS OF THE PLAN OF RESTRUCTURE
For a discussion of the income tax aspects of the Plan of Restructure, see
"Federal Income Tax Considerations."
BUSINESSES OF THE REIT AND THE CORPORATION AFTER THE PLAN OF RESTRUCTURE
The Corporation intends to continue NHC's historical business of developing
and acquiring nursing homes, assisted living and retirement centers and also
managing such types of facilities for other owners. The Corporation will also
continue to operate home health agencies and provide related ancillary services
to its patients, residents and third parties. The REIT may from time to time
provide financing to the Corporation by either acquiring facilities and having
the Corporation manage or lease them or by providing first mortgage loans to the
Corporation in order to enable it to acquire, construct or expand facilities. In
such event, a special disinterested committee will be formed by the REIT to
negotiate the terms with the Corporation.
9
<PAGE> 16
While managed by the Corporation the REIT intends to own, but not operate,
healthcare facilities, which shall be solely healthcare facilities operated by
the Corporation. However, the REIT Advisory Agreement provides that for that
period of time equal to the lesser of (i) the term of the REIT Advisory
Agreement and (ii) the Corporation being actively engaged as the investment
advisor for NHI, the REIT will not (without the prior approval of NHI) transact
business with any party, person, company or firm other than the Corporation. It
is the intent of the foregoing restriction that the REIT will not be actively or
passively engaged in the pursuit of additional investment opportunities, but
rather will focus upon its capacities as landlord and note holder of those
certain assets conveyed to it in the Plan of Restructure. The investment
policies of the REIT are explained in "Business -- The REIT -- Investment and
Other Policies of the REIT."
In connection with the REIT's assumption of, or taking property subject to,
the Assumed Liabilities, a Unitholder should be aware that a default by the REIT
under such debt could default certain of the Corporation's debt which the REIT
is not assuming. Similarly, the Corporation's default under certain of its
obligations could default the Assumed Liabilities. Although the REIT has agreed
to indemnify, defend and hold NHC and the Corporation harmless with respect to
all debt assumed by or which the REIT has agreed to pay in accordance with the
Plan of Restructure and agreed, that without the written consent of the
Corporation, the REIT will not cause or suffer any such debt to be defaulted or
otherwise breached, no assurance can be given that the REIT will not default on
such debt or will be able to pay any amounts due as a result of such
indemnification. In addition, although the Corporation has agreed to indemnify,
defend and hold the REIT harmless with respect to all debt and all obligations
of NHC except those specifically assumed by or which the REIT has agreed to pay
in accordance with the Plan of Restructure and the Corporation agreed, that
without the written consent of the REIT, the Corporation will not cause or
suffer any such debt to be defaulted or otherwise breached, no assurance can be
given that the Corporation will not default on such debt or will be able to pay
any amounts due as a result of such indemnification. Thus, either entity could
cause the other to incur substantial obligations or to lose certain of its
facilities through foreclosures. Creditors (whether contingent or absolute
liabilities) of NHC at the Effective Time could make a claim against either or
both the Corporation and the REIT and it is likely that they each would be
liable. Generally, any risk factors that applied to NHC at the time an investor
purchased his Units will continue to apply to the Corporation. For certain risks
associated with the REIT, see "Risk Factors -- The REIT", and for certain risks
associated with the Corporation, see "Risk Factors -- The Corporation."
NHC'S OUTSTANDING OPTIONS AND CONVERTIBLE DEBENTURES
All options and convertible debentures of NHC which grant rights to
subscribe for NHC Units exercisable or convertible after the Effective Time,
shall be deemed to grant the right to acquire an equal number of REIT Shares and
Shares as such right grants in NHC Units, except for the October 1997
convertible notes described in "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- The Corporation." The exercise
price for such options and receipt thereof shall be divided pro rata between
REIT and Corporation (and the pro rata distribution shall be equal to the ratio
that the closing price on the American Stock Exchange at the close of business
on the first trading day in 1998 of the REIT Shares and the Shares bear to each
other). The interest and principal and all other payments due under or
obligations due as a result of such convertible debentures is to be paid and
performed by the Corporation and if any of such debt is converted then the
Corporation shall provide written notification thereof to the REIT, and the REIT
shall issue REIT Shares equal to the number of Shares issued by Corporation upon
such conversion; and the REIT agrees, at the expense of the Corporation, to
cause to be filed any registration statement relating to REIT Shares required by
agreements binding on the Corporation or needed as determined in the sole
discretion of the Corporation.
EFFECT ON NHC UNITS
Following the Plan of Restructure, an NHC Unitholder will own a number of
REIT Shares and Shares equal to the number of Units of such Unitholder (except
for the OP Units issued to National described in "Certain Transactions
- -- National"). The following is a brief description of certain inherent
differences between NHC Units, REIT Shares and Shares.
CASH DISTRIBUTIONS
NHC Units. NHC presently makes quarterly cash distributions equal to
approximately sixty percent (60%) of its taxable income. If NHC were to remain a
partnership but be taxed as a corporation, its investors' after-tax return on
the dividends would be significantly reduced because of the double tax on
corporate earnings distributed as dividends.
REIT Shares. Distributions are declared from funds legally available
therefor in the discretion of the Board of Directors. To qualify for taxation as
a real estate investment trust, however, the REIT must generally distribute at
least 95% of its taxable income. Initially, it is anticipated that approximately
120% of the REIT's taxable income will be paid as a dividend. See "Risk Factors
- -- Risks Associated with Forward Looking Statements."
Shares. Dividends may be declared from funds legally available therefor
in the discretion of the Board of Directors. At least initially, the Corporation
anticipates retaining its earnings for operation and expansion of its business
and does not anticipate paying dividends.
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LIQUIDITY AND MARKETABILITY
NHC Units. NHC Units are freely transferable and are traded on AMEX.
REIT Shares. The REIT Shares will be freely transferable and
application has been made to list the REIT Shares on AMEX. See "Listing and
Trading of Shares and REIT Shares" below.
Shares. The Shares will be freely transferable, and application has
been made to list the Shares on AMEX. See "Listing and Trading of Shares and
REIT Shares" below.
CONTINUITY OF EXISTENCE
NHC. NHC's Partnership Agreement provides that it will terminate in
2085. However, pursuant to the Plan of Restructure, NHC will merge with and into
the Corporation and thereafter cease to exist as a limited partnership.
REIT. The REIT will have perpetual existence.
Corporation. The Corporation will have perpetual existence.
TAXATION
For a discussion of certain differences in the tax treatment of REIT
Shares and Shares, see "Federal Income Tax Considerations -- Certain Differences
Between the Ownership of Units and REIT Shares."
PERSONAL LIABILITY
NHC Units. A limited partner's liability for the obligations of NHC is
limited to his total agreed upon investment in NHC and his share of NHC's assets
and undistributed profits if he does not participate in the control of NHC's
business.
REIT Shares. REIT Shares of common stock are fully paid and
non-assessable. REIT shareholders generally do not have personal liability for
obligations of the REIT.
Shares. Shares of common stock are fully paid and non-assessable.
Shareholders generally do not have personal liability for obligations of the
Corporation.
VOTING AND LIQUIDATION RIGHTS
NHC Units. Management of NHC is vested in the Managing General Partner,
and Limited Partners have limited voting rights on matters affecting the
partnership. Certain matters require the prior approval of either (i) the
holders of more than 50% of the Units together with the unanimous approval of
the Board of the Managing General Partner or (ii) holders of 70% or more of the
Units. Holders of Units are entitled to share ratably in 99% of the proceeds
resulting from liquidation of partnership assets (subsequent to the payment of
positive capital accounts), or in limited circumstances to receive interests in
those assets, on liquidation of NHC.
REIT Shares. Each REIT Share entitles its holder to cast one vote on
matters as to which voting is permitted or required, including the election of
Directors. Certain matters require the prior approval of either (i) the holders
of more than 50% of the REIT Shares together with the majority approval of the
REIT's disinterested Board of Directors or (ii) the holders of 70% or more of
the REIT Shares. Each REIT Share entitles its holder to share ratably in any
assets available for distribution to holders of REIT Shares on liquidation of
the REIT. A shareholder has a right to inspect the books and records of the
REIT, including stock transfer records, upon notice and during reasonable
business hours.
Shares. Each Share entitles its holder to cast one vote on matters as
to which voting is permitted or required, including the election of Directors.
Certain matters require the prior approval of either (i) the holders of more
than 50% of the Shares together with the unanimous approval of the Corporation's
Board of Directors or (ii) the holders of 70% or more of the Shares. Each Share
entitles its holder to share ratably in any assets available for distribution to
holders of Shares on liquidation of the Corporation. A shareholder has a right
to inspect the books and records of the Corporation including stock transfer
records upon notice and during reasonable business hours. See "Description of
Securities."
REPORTING REQUIREMENTS
NHC Units. NHC is subject to the reporting requirements of the Exchange
Act and files annual and quarterly and other periodic reports thereunder.
REIT Shares. The REIT will also be subject to the reporting
requirements of the Exchange Act and will file quarterly and other periodic
reports thereunder. The REIT will be required to hold annual meetings of its
shareholders.
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Shares. The Corporation will also be subject to the reporting
requirements of the Exchange Act and will file annual and quarterly and other
periodic reports thereunder. The Corporation will be required to hold annual
meetings of its shareholders.
TAX BASIS
NHC Units. A holder's tax basis in each Unit generally will be
allocated between each Share and REIT Share distributed with respect to or in
exchange for, such Unit, which will generally be allocated between the Share
and the REIT Share based upon the relative adjusted bases to NHC of the Share
and the REIT Share.
REIT Shares. The REIT Shares delivered in the Distribution generally
will have an initial tax basis equal to such Unitholder's basis in his Units
minus the tax basis in such shareholder's Shares. This tax basis will be reduced
if and to the extent that the REIT's dividends in any one year exceed the REIT's
current and accumulated earnings and profits. Any reduction in such basis will
be reported on the Form 1099 distributed annually to each REIT Shareholder.
Shares. The Shares issued in the Merger will have an initial tax basis
equal to such shareholder's tax basis in his NHC Unites minus the tax basis in
such holder's REIT Shares. This tax basis will be reduced if and to the extent
that the Corporation's dividends in any one year exceed the Corporation's
current and accumulated earnings and profits. Any reduction in such basis will
be reported on the Form 1099 distributed annually to each Shareholder. See
"Federal Income Tax Consideration -- The REIT -- Other Tax Consequences."
OTHER DIFFERENCES
For a description of certain other differences between NHC, the REIT and
the Corporation which relate to differences between owning a Unit, a REIT Share
and a Share, see "Description of Securities".
LISTING AND TRADING OF SHARES AND REIT SHARES
No trading market for the Shares or the REIT Shares currently exists
because the Corporation and the REIT are wholly-owned subsidiaries of NHC. The
widespread ownership of the Shares and REIT Shares after the Effective Time of
the Plan of Restructure should assist in the establishment of a trading market,
but there can be no assurance as to the extent to which a market for Shares or
REIT Shares will develop or the prices at which Shares or REIT Shares may trade
after the Effective Time of the Plan of Restructure.
The market price and liquidity of Shares may be affected by many factors,
including, among others, the results of the Corporation's operations, the
economic condition and investor perception of the industry in which the
Corporation operates and the Corporation's dividend policy and general economic
and market conditions. Until the Shares are fully distributed and an orderly
market develops, the prices at which trading occurs may fluctuate significantly.
The market price and liquidity of Shares may also be affected by certain
provisions of the Corporation's Articles of Incorporation and By-Laws provided
for under the Delaware General Corporation Law which may also have antitakeover
effects.
The market price and liquidity of REIT Shares may be affected by many
factors, including, among others, the results of the REIT's operations, the
restrictions on the REIT's ability to do business with entities other than the
Corporation, the results of the Corporation's operations, the economic condition
and investor perception of the industry in which the REIT operates, the REIT's
dividend policy and investment policy and general economic and market
conditions. Since the REIT is restricted to doing business only with the
Corporation generally, then the operational stability of the Corporation may
greatly impact the financial stability of the REIT. Until the REIT Shares are
fully distributed and an orderly market develops, the prices at which trading
occurs may fluctuate significantly. The market price and liquidity of REIT
Shares may also be affected by certain provisions of the REIT's Articles of
Incorporation and By-Laws provided for under the Maryland General Corporation
Law or designed to enhance the REIT's ability to meet the requirements of a REIT
but that may also have antitakeover effects.
The Corporation and the REIT have each made application to list the Shares
and the REIT Shares, respectively, on AMEX.
Shares and REIT Shares will be freely transferable, except for Shares or
REIT Shares received by persons who may be deemed to be affiliates of the
Corporation, the REIT or NHC under the Securities Act or as otherwise required
to ensure the REIT satisfies certain ownership tests to maintain its
qualification as a real estate investment trust. Persons who may be deemed to be
affiliates of the Corporation, the REIT or NHC after the Distribution generally
include individuals or entities that control, are controlled by, or are under
common control with, the Corporation, the REIT or NHC, and may include certain
officers and directors as well as principal stockholders and/or unitholders, if
any, of the Corporation, the REIT or NHC. Persons who are affiliates will be
permitted to sell their Shares or REIT Shares only pursuant to an effective
registration statement under the Securities Act or pursuant to an exemption from
such registration, including, among others, Rule 144 under the Securities Act.
The REIT may also disallow the sale of REIT Shares to a person who, after
acquiring ownership of such REIT Shares, would cause the REIT to be disqualified
as a real estate investment trust. See "Description of Securities -- Shares of
the REIT -- REIT Provisions."
TERMINATION
NHC, Inc., the Managing General Partner of NHC, if in its sole discretion
it deems that it is in the best interest of the Unitholders, may determine not
to proceed with the Plan of Restructure at any time prior to the Effective Time.
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RISK FACTORS
Investment in the Shares and REIT Shares involves various risks. In
addition to general investment risks and those factors set forth elsewhere in
this Proxy Statement/Prospectus, Unitholders should consider the following
factors before making a decision to hold or dispose of the Shares or REIT
Shares.
RISKS ASSOCIATED WITH FORWARD LOOKING STATEMENTS.
This Proxy Statement/Prospectus contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), which are
intended to be covered by the safe harbors created thereby. Those statements
include, but may not be limited to, the discussions of the Corporation's and the
REIT's expectations concerning their future profitability and distributions and
the Corporation's and the REIT's operating and growth strategy, including
possible strategic acquisitions. Investors are cautioned that all
forward-looking statements involve risks and uncertainties including, without
limitation, the factors set forth under the caption "Risk Factors" in this
Prospectus. Although the Corporation and the REIT believe that the assumptions
underlying the forward-looking statements contained herein are reasonable, based
on information available on the date hereof, any of the assumptions could be
inaccurate, and therefore, there can be no assurance that the forward-looking
statements included in this Proxy Statement/Prospectus will prove to be
accurate. Factors that could cause actual results to differ materially include,
but are not limited to, the risk factors discussed below as well as changing
economic and market conditions, changes in tax laws, and other factors discussed
in Managements Discussion and Analysis of Results of Operation and Financial
Condition. Moreover, new risk factors may emerge from time to time and it is not
possible for management to predict all such risks factors, nor can it assess the
impact of all such risks on the business of the REIT or the Corporation or the
extent to which any factor, or combination of factors, may cause actual results
to differ materially from those contained in any forward-looking statements. In
light of the significant uncertainties inherent in the forward-looking
statements included herein, the inclusion of such information should not be
regarded as a representation by NHC, the Corporation, the REIT or any other
person that the objectives and plans of the Corporation and the REIT will be
achieved.
THE REIT
NEWLY ORGANIZED COMPANY
The REIT was recently organized and has no stand-alone operating history.
There has been no market for the REIT Shares and no assurance can be given that
an active trading market will develop.
REIT'S RELIANCE ON THE CORPORATION
The Owned Healthcare Facilities initially consists of 17 skilled nursing
centers, six assisted living facilities and one retirement center each of which
will be leased to the Corporation. Thus, the financial returns to the REIT and
the condition of the REIT are dependent upon the successful operation of the
Owned Healthcare Facilities by the Corporation. Such facilities will be
transferred to the REIT subject to certain debt. In addition, the Notes are
secured by mortgages on additional nursing homes that are managed by the
Corporation and have been pledged as collateral for part of the Assumed
Liabilities. Thus, a default by the Corporation under its debt instruments,
including the Assumed Liabilities, could cause the REIT to lose its assets
through foreclosure or other means or be called upon to pay the same. Such a
loss of assets could also be triggered by the Corporation's failure to fulfill
its obligations in respect of debt, the holders of which may not have consented
to the Plan of Restructure. Accordingly, the holders of such debt may have
rights to the assets of the REIT. The REIT will not have significantly
diversified its investment portfolio to include assets unrelated to the
Corporation's obligations.
Payments of rent under the Leases comprise a substantial portion of the
REIT's net income (interest payments on the Notes and investment income comprise
the remainder of such net income). Certain of the Owned Healthcare Facilities do
not generate sufficient cash flow to the Corporation to pay the entire base rent
due under the Lease of such facilities.
In the event the Corporation voluntarily or involuntarily defaults under
the terms of a Lease, the REIT will not be able to operate the facility and,
therefore, may need to find another healthcare provider willing to lease and
operate the facility, and may have to negotiate new lease terms, including
rentals due, which terms may be less favorable than those of the defaulted
Lease. In addition, NHC is only contributing the real estate to the REIT. All of
the equipment, furnishings and personal property will belong to the Corporation,
and in the event a Lease is terminated for any reason, either the REIT or a new
tenant will have to replace all equipment and furnishings. The REIT has no
healthcare licenses nor any employees and it must have both to operate a health
care facility. Any such default under or termination of a Lease could result in
a reduction in revenue derived from the affected Lease and defaults under
several Leases at the same time could have a material adverse effect on the
REIT's results of operations.
The REIT will be advised by the Corporation, under the supervision of the
REIT's Board of Directors, which is ultimately responsible for the management of
the REIT. The REIT will have no employees and will be managed by the
Corporation. The REIT Advisory Agreement can be terminated within 90 days;
however, the REIT has no other possible managers under consideration. In
addition, all services provided by the Corporation will actually be by
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employees of National since the Corporation has no employees. Investment
decisions of the REIT other transactions, including those with the Corporation,
must be approved by a majority of the Directors.
The Corporation has agreed to indemnify the REIT for certain liabilities
which may be incurred by the REIT in connection with the Owned Healthcare
Facilities, the Notes, and the Assumed Liabilities. Such indemnities relate to
matters including, without limitation, certain financial obligations,
acceleration of debt due to failure to obtain required consents, environmental
liabilities and title matters. There can be no assurance that, at the time the
REIT may seek any such indemnity, the Corporation will be financially able to
meet its indemnity obligations, which obligations are unsecured.
Since the REIT is dependent on the Corporation, all the risk factors
starting on page 19 relating to the Corporation are also applicable to the REIT.
CONFLICTS OF INTEREST
Because all of the initial directors and all of the initial officers of the
REIT occupy positions with the Corporation, there will be conflicts of interest
in their duties to the Corporation's shareholders and the REIT's shareholders.
Although management believes the terms of the Leases and the REIT Advisory
Agreement are fair and reasonable, none of the terms of the Leases or the REIT
Advisory Agreement were negotiated on an arms' length basis. Since the
Corporation will be the REIT's investment advisor, it will have a conflict of
interest in assessing the quality of the management services, determining if the
REIT Advisory Agreement should be terminated, determining the price to be paid
by the REIT for additional assets which may be purchased from the Corporation
and the terms of any leases to be entered into between the REIT and the
Corporation. Further, the REIT is likely to purchase additional equity interests
in real estate from, or make additional mortgage loans to, the Corporation.
Pursuant to the REIT Advisory Agreement, the REIT has agreed to only do
business with the Corporation and not to compete with NHI as long as both the
REIT Advisory Agreement and the NHI Advisory Agreement (as hereinafter defined)
are obligations of the Corporation. Therefore, there may be situations where the
REIT has cash available (such as from prepayments, insurance proceeds or
condemnation settlements or receipt of normal payments on principal) at a time
when the Corporation does not have a need for additional funds. In these
situations, the REIT may not be able to invest such cash in an efficient manner.
All but three of the directors of the REIT, and all of the executive
officers of the REIT are also either directors or executive officers of NHI, a
real estate investment trust that is also advised by the Corporation. The
overlap of directors and executive officers may cause a conflict in the
determination of the long term goals of the REIT, such as whether to terminate
the REIT Advisory Agreement and seek to expand its portfolio beyond the
properties leased to the Corporation, whether the REIT should consider a
potential sale of all or substantially all of its assets or a potential merger
with another real estate investment trust other than NHI. These conflicts could
have an adverse effect on the long term value of the REIT's common stock.
There may from time to time be disputes between the REIT as lessor and the
Corporation as lessee with respect to maintenance, repairs, defaults, and
similar items. However, since all board members of the REIT are also board
members of the Corporation and the Corporation manages the REIT, it is uncertain
whether potential disputes will be recognized as conflicts or that the REIT will
recognize a need for independent persons to determine how to resolve such
disputes. These disputes will be settled by binding arbitration.
Prior to their acquisition by the REIT, the Owned Healthcare Facilities
will have been owned and operated by NHC. The REIT's book and tax basis in the
Owned Healthcare Facilities generally will be the same as NHC's basis in the
properties. The REIT will not obtain independent appraisals of the Owned
Healthcare Facilities.
In connection with the Distribution, National, who is the Administrative
General Partner of NHC, will receive approximately 794,000 REIT Shares and
approximately 806,000 OP Units. The primary reason for the different treatment
of National is to prevent National from receiving Excess Shares and to help
ensure the qualification of the REIT as a real estate investment trust. As a
result, National will be treated differently than all of the other Unitholders.
See "Description of Securities -- Operating Partnership Agreement" for a
description of the rights of the holder of an OP Unit.
Counsel to the REIT also represents the Corporation on certain matters. In
the course of such representation circumstances may arise in which the REIT and
the Corporation have conflicting interests, in which event separate counsel may
be retained to represent one or both of the parties.
LEVERAGING
The REIT will initially have debt representing 42% of its total
capitalization, primarily because NHC's contribution of the Owned Healthcare
Facilities to the REIT will result in the REIT's accounting for the Owned
Healthcare Facilities at the same book value as NHC's depreciated cost, and
because such contribution is subject to the Assumed Liabilities. All of the
REIT's balance sheet debt will be mortgage indebtedness. If the REIT is unable
to meet its obligations under the various mortgage loans and guarantees, and if
there are foreclosures or conveyances in lieu of foreclosure, the REIT could
lose its interest in the Notes and its equity investment in the affected Owned
Healthcare Facilities.
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TITLE MATTERS
NHC intends to transfer some of the Owned Healthcare Facilities to the REIT
by means of "quitclaim" deeds. Such deeds contain no warranties of title,
although NHC has warranted good title to the REIT to the extent described below.
The REIT has not obtained policies insuring title to the Owned Healthcare
Facilities. As a result, in the event of a title dispute, the REIT will have
recourse solely to the Corporation (which after the Merger will be the successor
to the obligations of NHC). With respect to any title problem or dispute, the
Corporation has agreed to indemnify, defend and hold the REIT harmless to the
maximum extent the Corporation has a claim against a predecessor-in-title or a
title insurance company, but not otherwise. The REIT has no title insurance and
could suffer significant losses if a title claim does not give rise to a claim
against the Corporation under its limited indemnity described in the foregoing
sentence. In addition, certain of the Owned Healthcare Facilities will be leased
by NHC to the REIT pursuant to a 50 year lease with the REIT to have a purchase
option for a nominal purchase price.
ENVIRONMENTAL MATTERS
The REIT will become the fee simple owner of fifteen of the Owned
Healthcare Facilities and will have the right to purchase the remaining nine for
a nominal purchase price. Pursuant to the terms of the Leases, the REIT does not
have control over the operational activities of the Corporation, nor does it
monitor the Corporation with respect to environmental matters. Under various
federal, state and local environmental laws, ordinances and regulations, an
owner of real property (such as the REIT) may be liable in certain circumstances
for the costs of removal or remediation of certain hazardous or toxic substances
at, under or disposed of in connection with such property, as well as certain
other potential costs relating to hazardous or toxic substances (including
government fines and injuries to persons and adjacent property). Such laws often
impose such liability without regard to whether the owner knew or, or was
responsible for, the presence or disposal of such substances and may be imposed
on the owner in connection with the activities of an operator of the property.
The cost of any required remediation, removal, fines or personal or property
damages and the owner's liability therefore could exceed the value of the
property and/or the aggregate assets of the owner. In addition, the presence of
such substances, or the failure to properly dispose of or remediate such
substances, may adversely affect the owner's ability to sell or rent such
property or to borrow using such property as collateral which, in turn, would
reduce the REIT's revenues and ability to make distributions. The Plan of
Restructure and the REIT Master Agreement provide that the Corporation will
indemnify the REIT for any environmental matters arising on or after January 1,
1998, but the REIT is liable for any such matters arising before such date.
LACK OF CONSENTS; ACCELERATION OF CERTAIN MATURITIES
The REIT is assuming approximately $105.9 million in Assumed Liabilities.
In addition, the Corporation will retain approximately $112.6 in additional
debt. The consent of such lenders is a requirement to the transfer of the
underlying secured properties from the original obligor thereunder to any
successor obligor, and the transfer of the Owned Healthcare Facilities and Notes
to the REIT. Although NHC, the REIT and the Corporation believe that such
consents can be obtained on reasonable terms in a timely manner with respect to
the transfer of the Assumed Liabilities from NHC to the REIT or the transfer of
the Owned Healthcare Facilities and the Notes to the REIT; no assurance can be
made that such consents will be received. If the lenders were to assert their
rights, that is that the transfer of the Assumed Liabilities or the Owned
Healthcare Facilities from NHC to the REIT constituted a default under the
relevant loan or guarantee documents, then such lenders could demand that the
Corporation and the REIT perform under the loan agreements and pay the full
amount of such debt plus any prepayment penalties and costs. There can be no
assurance that the REIT or the Corporation would be able to repay such debt or
replace such debt on the same or similar terms, if at all. Failing to timely
repay such amounts could cross-default other loans.
In addition, the Plan of Restructure may require the consent of various
third parties in connection with the Notes or the Other Assets, which consents
are not being sought. For example, all of the Notes being transferred to the
REIT are owed by third parties for loans made relating to facilities managed by
NHC. In the event a dispute arises with respect to the management contract, such
third party may cease to make payments under the Notes and attempt to offset any
damages claimed by such third party against NHC against amounts owed to the REIT
pursuant to the Notes. Such offsets may be allowed if the third party has not
consented to the transfer of the Notes. In addition, since the REIT and the
Corporation both resulted from NHC, any existing NHC creditor (whether
contingent or absolute) may be able to reach the assets of the REIT for any
claim such creditor may have against NHC.
OUTSTANDING NHC OPTIONS AND CONVERTIBLE DEBENTURES
NHC currently has outstanding Options and 6% convertible debentures. The
indenture which governs the debentures and the Unit Option Plan do not
contemplate a restructure of NHC such as provided in the Plan of Restructure.
NHC's management has reviewed the indenture and Unit Option Plan and determined
that the indenture and Unit Option Plan provide that the debentures and Options
will be convertible into a number of Shares and REIT Shares equal to the number
of NHC Units, the debentures and Options are convertible into as of the
Effective Time. The indenture and Unit Option Plan may be subject to different
interpretations and there can be no assurance that holders of the debentures or
Options will not claim that they are entitled to different treatment than is
provided in the Plan of Restructure. If such a dispute should arise, there can
be no assurance how a court or other authority would interpret the indenture or
Unit Option Plan.
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INVOLVEMENT WITH FLORIDA CONVALESCENT CENTERS, INC.
NHC has outstanding loans of approximately $75.8 million and has guaranteed
approximately $36.5 million in loans made or letters of credit issued by third
parties to or for the account of Florida Convalescent Centers, Inc., a Florida
corporation ("FCC"), certain of which loans and letters of credit are guaranteed
by such corporation's primary shareholder, James McCarver, a Florida resident.
The REIT will assume NHC's position as lender. The default by such corporation
or individual, or the bankruptcy or other financial difficulty of either of
them, could result in the inability of such corporation or individual to pay its
obligations to the REIT and the Corporation, and could result in the REIT's and
the Corporation's having to make payments under their guarantees. In addition,
NHC and FCC are currently involved in a lawsuit concerning the management
agreements pursuant to which NHC manages the FCC facilities. The FCC management
agreements, as well as the lawsuit, will be maintained by the Corporation.
However, there can be no assurance that FCC will not include the payment of the
Notes in the lawsuit. Although FCC is current on its notes, no assurance can be
given that FCC will not cease making payments and attempt to set off any alleged
damages. See "Business -- The Corporation -- Legal Proceedings," and " -- The
REIT -- The Notes."
REAL ESTATE INVESTMENT RISKS
The Owned Healthcare Facilities and any subsequently acquired properties
will be subject to various real estate related risks. The acquisition of
additional properties may be subject to the ability of the REIT to borrow
amounts sufficient to enable the REIT to pay the purchase price therefor. There
can be no assurance that any such acquisition will not be made on terms less
favorable than the terms for the Owned Healthcare Facilities and the Notes.
Further, there can be no assurance that the value of any property acquired by
the REIT will appreciate or that the value of any property securing the REIT's
mortgage loans will not depreciate.
There can be no assurance that rates payable by the Corporation under the
Leases would be paid by an independent lessee. Therefore, in the event the
Corporation defaults on or terminates a Lease prior to its expiration, or in
the event that a Lease expires, there can be no assurance that a substitute
lessee could be found nor that such a lessee, if found, would pay the same rent
set forth in the relevant Leases.
Additional risks of investing in real estate are the possibilities that the
Leases will not generate income sufficient to meet operating expenses, will
generate income and capital appreciation, if any, at rates lower than those
anticipated or will yield returns lower than those available through investment
in comparable real estate or other investments. Income from properties and
yields from investments in such properties may be affected by many factors,
including changes in governmental regulation (such as zoning laws), general or
local economic conditions (such as fluctuations in interest rates and employment
conditions), the available local supply of and demand for improved real estate,
a reduction in rental income as the result of the inability to maintain
occupancy levels, natural disasters (such as earthquakes and floods) or similar
factors. Due to the illiquid nature of real estate investments, the REIT would
have difficulty in altering its investment portfolio to respond to changes in
such factors.
It is the intention of the REIT to secure, or to require the Corporation to
secure, adequate comprehensive property and liability insurance. Certain risks
may, however, be uninsurable or not economically insurable and there can be no
assurance that the REIT will have adequate funds to cover all contingencies.
Should such an uninsurable loss occur, the REIT could lose both its invested
capital, including its equity interests, and its anticipated profits relating to
such property.
Any lease arrangement, such as the Leases, creates the possibility that a
tenant may either default on the lease or fail to exercise an option to renew
the lease and in such event, the REIT may be unable to lease such property to
another tenant or, even if it could, such lease may be on less favorable terms
than those of the original lease. There can be no assurance, however, that the
Corporation will exercise its options to renew the Leases upon the expiration of
the initial terms or that, if such failure to renew were to occur, the REIT
could lease the property to others on favorable terms. In such an instance, the
REIT would continue to be responsible for payment of any indebtedness it had
incurred with respect to such property.
Certain local real property tax assessors may seek to reassess certain of
the Owned Healthcare Facilities as a result of the Plan of Restructure and the
transfer of interests to occur thereby. Further, there can be no assurance that
local real property tax assessors will not seek to reassess the Owned Healthcare
Facilities in the future. In the event any reassessment would be detrimental to
the REIT, it would vigorously oppose any such reassessment; however, no
assurance can be given that this opposition would succeed.
CERTAIN RESTRICTIONS ON TRANSFER OF REIT SHARES; BUSINESS COMBINATIONS
Provisions of the Articles of Incorporation (the "REIT Charter") of the
REIT, primarily intended to enable the REIT to maintain its status as a real
estate investment trust, authorize the REIT (i) to refuse to transfer REIT
Shares to, or prohibit exercise of rights by, any person who as a result would
beneficially own, directly or indirectly by attribution, REIT Shares in excess
of 9.8% of the outstanding stock of the REIT ("Excess Stock") or any person
whose accumulation of such stock would, in the opinion of the Board of
Directors, jeopardize the status of the REIT as a real estate investment trust
including as a result of a violation of the "related party tenant rules" and
(ii) to redeem Excess Stock, the accumulation of which would jeopardize the
status of the REIT as a real estate investment trust. In addition, the REIT
Charter prevents a shareholder from owning at any time, directly or indirectly
by attribution, more than 9.8%.
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If these transfer or ownership restrictions are declared to be void as a matter
of law or are violated by any person, common stock of the REIT acquired in
excess of these limits shall be deemed to have been acquired by and to be held
on behalf of the REIT and, as the equivalent of treasury shares for such
purpose, shall not be considered to be outstanding for quorum or voting purposes
and shall not be entitled to receive dividends.
The REIT will set forth in its Forms 10-Q and Forms 10-K filed under the
Exchange Act the percentage limitation on share ownership applicable to the
related period.
For the REIT to qualify as a real estate investment trust in any taxable
year (other than the first year for which the REIT elects to be taxed as a
REIT), no more than 50% of its outstanding REIT Shares may be owned, directly or
indirectly by attribution, by five or fewer individuals (which for this purpose
includes pension funds and certain other tax exempt entities) at any time during
the second half of the REIT's taxable year. In addition, the REIT Shares must be
owned by 100 or more persons during at least 335 days of a taxable year of
twelve months or during a proportionate part of a short taxable year. Further,
in all taxable years a large percentage (at least 75% and more likely 95%) of
the REIT's income must generally be derived from lessees in which the REIT does
not own, directly or indirectly by attribution, a 10% or greater interest. The
REIT would be generally deemed to own that percentage interest in a lessee
(including the Corporation) owned by a shareholder of the REIT who owned,
directly or indirectly by attribution, 10% or more of the Shares. See "Federal
Income Tax Considerations -- The REIT -- Taxation as a REIT -- Requirements for
Qualification," "-- Tax and Accounting Income May Vary", and " -- Real Estate
Investment Trust -- Income Tests".
The limitations on ownership of REIT Shares set forth in the REIT Charter
are intended to reduce the possibility of the REIT's failing to meet the
percentage ownership requirements for qualification as a real estate investment
trust. However, such provisions may inhibit market activity with respect to the
REIT Shares and the resulting opportunity for Shareholders to receive a premium
for their REIT Shares that might otherwise exist if an individual were
attempting to assemble a block of REIT Shares in excess of the applicable
percentage limitation. Also, there can be no assurance that such provisions will
in fact prevent the REIT from failing to meet such ownership requirements.
Accordingly, the REIT Charter restricts stock ownership of the REIT directly or
indirectly by attribution to 9.8%.
Such provisions would also make the REIT an unsuitable investment for any
person seeking to obtain ownership of more than 9.8% of the outstanding voting
equity of the REIT. Although the REIT does not anticipate that it will redeem or
otherwise reduce the number of outstanding REIT Shares except for Excess Shares,
if such number of REIT Shares were reduced, the percentage limitation might be
exceeded by a shareholder without any action on his part.
In addition, certain provisions of Maryland law regarding business
combinations (as defined therein) require approval of the holders of 80% of the
outstanding voting shares of the REIT. See "Certain Restrictions on Transfer of
REIT Shares; Business Combinations."
FEDERAL INCOME TAX RISKS
The REIT was organized and intends to conduct its operations so as to
qualify for federal income taxation as a real estate investment trust under
Sections 856 through 860 of the Code. See "Federal Income Tax Considerations --
The REIT -- Taxation as a Real Estate Investment Trust." The REIT has not
sought, nor will it seek, a ruling from the Internal Revenue Service (the "IRS")
with respect to its qualification as a real estate investment trust.
ADVERSE CONSEQUENCES OF THE REIT'S FAILURE TO QUALIFY AS A REAL ESTATE
INVESTMENT TRUST
The REIT intends to operate so as to qualify as a real estate investment
trust under the Code, commencing with its taxable year ending December 31, 1998.
Although management believes that the REIT will be organized and will operate in
such a manner, no assurance can be given that the REIT will be organized or will
be able to operate in a manner so as to qualify or remain so qualified.
Qualification as a real estate investment trust involves the satisfaction of
numerous requirements (some on an annual and quarterly basis) established under
highly technical and complex Code provisions for which there are only limited
judicial and administrative interpretations, and involves the determination of
various factual matters and circumstances not entirely within the REIT's
control. For example, in order to qualify as a real estate investment trust, at
least 95% of the REIT's gross income in any year must be derived from qualifying
sources, and the REIT must pay distributions to shareholders aggregating
annually at least 95% of its REIT taxable income (excluding capital gains). The
complexity of these provisions and of the applicable treasury regulations that
have been promulgated under the Code is greater in the case of a real estate
investment trust, such as the REIT, that holds its assets in partnership form.
No assurance can be given that legislation, new regulation administrative
interpretations or court decisions will not significantly change the tax laws
with respect to qualification as a real estate investment trust or the federal
income tax consequences of such qualification. The REIT, however, is not aware
of any pending tax legislation that would adversely affect the REIT's ability to
operate as a real estate investment trust.
Goodwin, Proctor & Hoar LLP, as special REIT tax counsel to the REIT, has
rendered an opinion to the effect that the REIT is organized in conformity with
the requirements for qualification as a real estate investment trust and its
proposed method of operation will enable it to meet the requirements for
qualification and taxation as a real estate investment trust. See "Federal
Income Tax Considerations -- The REIT -- Taxation as a Real Estate Investment
Trust." Such legal opinion, however, is based on various assumptions and factual
representations by the REIT regarding the REIT's ability to meet the various
requirements for qualification as a real estate investment trust, and no
assurance can
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be given that actual operating results will meet these requirements. Such legal
opinion is not binding on the IRS or any court. Moreover, the REIT's
qualification and taxation as a real estate investment trust will depend upon
the REIT's ability to meet (through actual annual operating results,
distribution levels and diversity of stock ownership) the various qualification
tests imposed under the Code, the result of which will not be reviewed by
special REIT tax counsel to the REIT.
If the REIT were to fail to qualify as a real estate investment trust in
any taxable year, the REIT would be subject to federal income tax (including any
applicable alternative minimum tax) on its taxable income at regular corporate
rates. Moreover, unless entitled to relief under certain statutory provisions,
the REIT also would be disqualified from treatment as a real estate investment
trust for the four taxable years following the year during which qualification
was lost. This treatment would significantly reduce the net earnings of the REIT
available for investment or distribution to shareholders because of the
additional tax liability to the REIT for the years involved. In addition,
distributions to shareholders would no longer be required to be made. See
"Federal Income Tax Considerations -- The REIT -- Taxation as a Real Estate
Investment Trust."
In the Plan of Restructure, National will receive approximately 794,000
REIT Shares and approximately 806,000 OP Units in order to permit the REIT to
comply with the various stock ownership rules referred to above.
In order to minimize the chances that the REIT will violate certain stock
ownership rules (see "Federal Income Tax Consideration -- The REIT -- Taxation
as a Real Estate Investment Trust -- Asset Test" and " -- Income Tests"), the
Directors of the REIT are given the power to redeem or prohibit the transfer of
REIT Shares and the power to prohibit the distribution of the REIT Shares to any
Unitholder if such transfer or distribution would cause the REIT to violate any
stock ownership or source of income rule. Shareholders are cautioned, however,
that because broad attribution rules are used in determining stock ownership and
a large percentage of NHC Units is held by nominees in "street name," the REIT
may be unaware of a violation of these stock ownership and source of income
rules and therefore the qualification of the REIT as a real estate investment
trust may be inadvertently lost. See also "Certain Considerations -- Certain
Restrictions on the Transfer of Shares; Business Combinations" for a further
discussion of additional requirements imposed by the Board of Directors of the
REIT as a result of such attribution rules.
If the IRS successfully challenged the status of the REIT as the owner of
the Owned Healthcare Facilities and the status of the Leases as true leases, the
REIT would not be entitled to claim depreciation with respect to any of the
Owned Healthcare Facilities. As a result, the REIT's taxable income might
increase and the REIT might fail to meet the 95% Distribution Requirement
necessary to be taxed as a real estate investment trust, or if such requirement
were met, then a larger percentage of distributions from the REIT would
constitute ordinary dividend income, instead of a partial return of capital to
the REIT's shareholders, or the REIT would be subject to an excise tax. REIT
Counsel has rendered an opinion that it is more likely than not that the REIT
will be treated as the owner of the Owned Healthcare Facilities and that the
Leases will be treated as true leases for federal income tax purposes. This
opinion is not binding on the IRS and no assurance can be given that the IRS
will not successfully challenge the status of the REIT as the owner of the Owned
Healthcare Facilities or the status of the Leases as true leases. The REIT has
not sought, and will not seek, a ruling from the IRS with respect to its status
as a real estate investment trust or the status of the Leases. See "Federal
Income Tax Considerations -- Taxation as a Real Estate Investment Trust --
Income Tests."
DEPENDENCE ON MANAGEMENT AND SKILLED PERSONNEL.
The REIT believes it depends substantially on active involvement of its
senior managers, including its executive officers (none of which are employees
of the REIT). See "Relationship Between the REIT and the Corporation After the
Restructure -- Advisory, Administrative Services and Facilities Agreement." The
loss of one or more of such officers could have a material adverse effect on the
REIT's business and future operations. The REIT does not maintain key-man
insurance on the lives of its executive officers. The REIT does not have
employment agreements with its executive officers. See "Management -- The REIT."
The agreement by which such persons are made available to the REIT is between
the Corporation and National and is outside the control of the REIT. This
agreement could be terminated between the Corporation and National without any
involvement of the REIT. See "Certain Transactions -- National."
NO PUBLIC MARKET.
There has been no public market for the REIT Shares and there can be no
assurance that an active trading market will develop or be sustained following
the Plan of Restructure. The REIT has applied for listing the REIT Shares on
AMEX. No assurance can be given as to the liquidity of the trading market for
the REIT Shares or that an active trading market for the REIT Shares will
develop. If an active market does not develop, the market price and liquidity of
the REIT Shares may be adversely affected.
ANTI-TAKEOVER CONSIDERATIONS.
The REIT is authorized to issue up to 10,000,000 shares of preferred stock,
the rights of which may be fixed by the Board of Directors without shareholder
approval. The REIT's Charter provides for the classification of its Board of
Directors into three classes, with each class of directors serving staggered
terms of three years. The REIT's Charter requires the approval of 70% of the
outstanding REIT Shares to approve certain transactions and amend certain
provisions of the REIT Charter. The foregoing matters may have the effect of
discouraging or making more difficult
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an acquisition or change of control of the REIT. See "Description of Securities
- -- Shares of the REIT -- Control Share Acquisitions."
THE CORPORATION
NEWLY ORGANIZED COMPANY
The Corporation was recently organized and has no stand-alone operating
history. There has been no market for the Shares and no assurance can be given
that an active trading market will develop.
CONFLICTS OF INTEREST
Because all but one of the initial directors and all of the initial
officers of the Corporation occupy positions with the REIT, there will be
conflicts of interest in their duties to the Corporation's shareholders and the
REIT's Shareholders. Although NHC's management believes the terms of the Leases
and the REIT Advisory Agreement are fair and reasonable, none of the terms of
the Leases or the REIT Advisory Agreement were negotiated on an arms-length
basis. The Leases provide that all maintenance and repairs, including structural
problems will be provided by the Corporation. Since the Corporation will be the
REIT's investment advisor, it will have a conflict of interest in assessing the
quality of the management services under the REIT Advisory Agreement or in
determining if the REIT Advisory Agreement should be terminated or in
determining the price to be paid by the REIT for additional assets which may be
purchased from the Corporation and the terms of any leases to be entered into
between the REIT and the Corporation. Further, the REIT is likely to purchase
additional equity interests in real estate from, or make additional mortgage
loans to, the Corporation.
The Corporation will not have any employees. All of the personnel services
will be provided by National pursuant to the Employee Services Agreement. The
Employee Services Agreement can be terminated by either party at any time.
Therefore, the Corporation will be dependent upon National to supply an adequate
number of qualified personnel to meet the needs of the Corporation, and no
assurance can be given that National will continue to provide such employees for
any time period.
There may from time to time be disputes between the Corporation as Lessee
and the REIT as Lessor with respect to maintenance, repairs, defaults and
similar items. However, since all but one of the board members of the
Corporation are also board members of the REIT, it is uncertain whether
potential disputes will be recognized as conflicts or that the Corporation will
recognize a need for independent persons to determine how to resolve such
disputes. Recognized disputes between the Corporation and the REIT will be
settled by binding arbitration.
Counsel to the Corporation also represents the REIT on certain matters. In
the course of such representation circumstances may arise in which the
Corporation and the REIT have conflicting interests, in which event separate
counsel may be retained to represent one or both of the parties.
DEPENDENCE ON REIMBURSEMENT BY THIRD-PARTY PAYORS.
Substantially all of the Corporation's nursing home revenues, including
management fees, will be directly or indirectly dependent upon reimbursement
from third-party payors, including the Medicare and Medicaid programs, and
private insurers. For the period ended June 30, 1997, approximately 60% of NHC's
net revenues were derived from Medicare and state Medicaid programs. It is not
possible to predict the impact of the Balanced Budget Act of 1997 on the
Corporation's reimbursement rates, and a further reduction in Medicare or
Medicaid rates could have an adverse impact on the Corporation and other
providers of nursing home services. The revenues and profitability of the
Corporation will be affected by the continuing efforts of third-party payors to
contain or reduce the costs of health care by lowering reimbursement rates,
increasing case management review of services and negotiating reduced contract
pricing. Changes in the mix of the Corporation's patients among the Medicaid,
Medicare, and private pay categories, and among different types of private pay
sources, can significantly affect the revenues and the profitability of the
Corporation's operations. There can be no assurance that the Corporation will be
able to maintain a profitable payor or revenue mix. In addition, any changes in
reimbursement levels under Medicaid, Medicare, or private payor programs and any
changes in applicable government regulations could significantly affect the
profitability of the Corporation. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business -- The Corporation
Government Health Care Reimbursement Programs."
In order to receive Medicare and Medicaid reimbursement, the Corporation
must be certified by Medicare and Medicaid. In 1995, the Federal Government
promulgated new survey, certification and enforcement rules governing long-term
care facilities participating in the Medicare and Medicaid programs, which
impose significant new requirements on long-term care facilities. The breadth of
the new rules creates uncertainty over the manner in which the rules will be
implemented, the ability of any long-term care facility to comply with them and
the effect of the new rules on the Corporation. Facilities which are found not
to be in compliance with the new rules are subject to decertification from
participating in the Medicare/Medicaid programs; termination of provider
agreement; temporary management; denial of payment for new admissions; civil
money penalties; closure of the facility or transfer of patients or both; and
on-site state monitoring. In the ordinary course of its business, NHC has
received and the Corporation is likely to receive notices of deficiencies for
failure to comply with various regulatory requirements. The Corporation will
review such notices and take appropriate corrective action. It is anticipated
that in most cases, the Corporation and
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the reviewing agency will agree upon the measures to be taken to bring the
facility into compliance with regulatory requirements. See "Business -- The
Corporation -- Regulation."
IMPACT OF HEALTH CARE REFORM AND LIMITS ON GOVERNMENT REIMBURSEMENT AND
OTHER PAYMENTS.
Government at both the federal and state levels has continued in its
efforts to reduce, or at least limit the growth of, spending for health care
services, including services to be provided by the Corporation. On August 5,
1997, President Clinton signed into law The Balanced Budget Act of 1997 ("BBA"),
which contains numerous Medicare and Medicaid cost-saving measures, as well as
new anti-fraud provisions. The BBA has been projected to save $115 billion in
Medicare spending over the next five years, and $13 billion in the Medicaid
program. Section 4711 of BBA, entitled "Flexibility in Payment Methods for
Hospital, Nursing Facility, ICF/MR, and Home Health Services", repealed the
Boren Amendment, which had required that state Medicaid programs pay to nursing
home providers amounts adequate to enable them to meet government quality and
safety standards; the Boren Amendment was previously the foundation of
litigation by nursing homes seeking rate increases. In place of the Boren
Amendment, the BBA requires only that, for services and items furnished on or
after October 1, 1997, a state Medicaid program must provide for a public
process for determination of Medicaid rates of payment for nursing facility
services, under which proposed rates, the methodologies underlying the
establishment of such rates, and justifications for the proposed rates are
published, and which gives providers, beneficiaries and other concerned state
residents a reasonable opportunity for review and comment on the proposed rates,
methodologies and justifications. Several of the states in which the Corporation
will operate are actively seeking ways to reduce Medicaid spending for nursing
home care by such methods as capitated payments and substantial reductions in
reimbursement rates. The BBA also requires that nursing homes transition to a
prospective payment system under the Medicare program during a three-year
"transition period" commencing with the first cost reporting period beginning on
or after July 1, 1998; home health agencies must also transition from a
cost-based reimbursement system to a prospective payment system beginning in
1999. In addition, the BBA creates a managed care Medicare Program called
"Medicare + Choice", which allows Medicare beneficiaries to participate in
either the original Medicare fee-for-service program or to enroll in a
coordinated care plan such as health maintenance organizations ("HMOs"). Such
coordinated care plans would allow HMOs to enter into risk-based contracts with
the Medicare program, and the HMO's would then contract with providers such as
the Corporation. No assurances can be given that the facilities to be operated
by the Corporation will be successful in negotiating favorable contracts with
Medicare + Choice managed care organizations. The BBA also contains several new
antifraud provisions. Given the recent enactment of the BBA, the Corporation is
unable to predict the impact of the BBA and potential changes in state Medicaid
reimbursement methodologies on its operations; however, any significant
reduction in either Medicare or Medicaid payments could adversely affect the
Corporation. Changes in certification and participation requirements of the
Medicare and Medicaid programs have restricted, and are likely to continue to
restrict further, eligibility for reimbursement under those programs. Failure to
obtain and maintain Medicare and Medicaid certification at the Corporation's
facilities will result in denial of Medicare and Medicaid payments which could
result in a significant loss of revenue to the Corporation. In addition, private
payors, including managed care payors, increasingly are demanding that providers
accept discounted fees or assume all or a portion of the financial risk for the
delivery of health care services. Such measures may include capitated payments
whereby the Corporation is responsible for providing, for a fixed fee, all
services needed by certain patients. Capitated payments can result in
significant losses if patients require expensive treatment not adequately
covered by the capitated rate. Efforts to impose reduced payments, greater
discounts and more stringent cost controls by government and other payors are
expected to continue. For the fiscal year ended December 31, 1996, NHC derived
38% and 33% of its net patient revenues from the Medicare and Medicaid programs,
respectively. Any reforms that significantly limit rates of reimbursement under
the Medicare or Medicaid programs, therefore, could have a material adverse
effect on the Corporation's profitability. The Corporation is unable to predict
what reform proposals or reimbursement limitations will be adopted in the future
or the effect such changes will have on its operations. No assurance can be
given that such reforms will not have a material adverse effect on the
Corporation. See "Business -- The Corporation -- Sources of Revenue."
Nursing homes and home health agencies have recently been the target of
health care reform, from both a fraud and reimbursement perspective. Operation
Restore Trust, a demonstration project which has been conducted by the
Department of Health and Human Services in five states, is expanding to a dozen
more states. "ORT Plus" will continue its focus on fraud in the areas of home
health, nursing home and DME suppliers, as well as adding new anti-fraud and
abuse targets. The Corporation will operate nursing homes and home health
agencies in five ORT Plus states and could be subject to increased scrutiny.
President Clinton recently announced a moratorium on the certification of home
health agencies in an attempt to curb what is perceived to be rampant fraud and
abuse in this area. The Corporation cannot predict what impact this ORT Plus or
moratorium will have on its home care programs. Although NHC's management
believes that its home care and nursing home operations are in compliance with
applicable laws and regulations, there can be no assurance that the Corporation,
its home care and nursing home operations will not be the subject of an
investigation nor that they will be found to be in compliance if investigated.
See "Business -- The Corporation -- Legal Proceedings."
GOVERNMENT REGULATION.
The United States government, and all states in which the Corporation will
operate regulate various aspects of its business. Various federal and state laws
regulate relationships among providers of services, including employment or
service contracts and investment relationships. The operation of long-term care
facilities and the provision of services are also subject to extensive federal,
state, and local laws relating to, among other things, the adequacy of medical
care, distribution of pharmaceuticals, equipment, personnel, operating policies,
environmental compliance, ADA compliance,
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fire prevention and compliance with building codes. Long-term care facilities
are also subject to periodic inspection to assure continued compliance with
various standards and licensing requirements under state law, as well as with
Medicare and Medicaid standards. The failure to obtain or renew any required
regulatory approvals or licenses could adversely affect the Corporation's growth
and could prevent it from offering the services currently offered by NHC or any
additional services. In addition, health care is an area of extensive and
frequent regulatory change. Changes in the laws or new interpretations of
existing laws can have a significant effect on methods and costs of doing
business and amounts of payments received from governmental and other payors.
The Corporation's operations could be adversely affected by, among other things,
regulatory developments such as mandatory increases in the scope and quality of
care to be afforded patients and revisions in licensing and certification
standards. The Corporation will at all times attempt to comply with all
applicable laws; however, there can be no assurance that administrative or
judicial interpretation of existing laws or regulations will not have a material
adverse effect on the Corporation's operations or financial condition.
Most states have adopted certificate of need ("CON") or similar laws that
generally require that a state agency approve certain acquisitions and determine
that a need exists for certain new services, the addition of beds and capital
expenditures or other changes. To the extent that CON or other similar approvals
are required for expansion of the Corporation's operations, either through
facility acquisitions or expansion or provision of new services or other
changes, such expansion could be adversely affected by the failure or inability
to obtain the necessary approvals, changes in standards applicable to such
approvals and possible delays and expenses associated with obtaining such
approvals. CON laws are also subject to being repealed or modified which could
increase competition by lowering competitors' barriers to enter certain markets.
The sale or transfer of a CON is generally prohibited. If the regulatory
body administering the CON program in a given state determines that the
restructuring is a "transfer," the ability of the REIT or the Corporation to
utilize an unimplemented or partially implemented CON could be restricted or a
new CON could be required. Such a process could be costly and time consuming.
The Corporation currently has four unimplemented CONs and ten partially
implemented CONs.
SELF-REFERRAL AND ANTI-KICKBACK LEGISLATION.
The health care industry is highly regulated at the state and federal
levels. In the United States, various state and federal laws regulate the
relationships between providers of health care services, physicians, and other
clinicians. These laws impose restrictions on physician referrals for designated
health services to entities with which they have financial relationships. These
laws also prohibit the offering, payment, solicitation or receipt of any form of
remuneration in return for the referral of Medicare or state health care program
patients or patient care opportunities in return for the purchase, lease or
order of any item or service that is covered by the Medicare and Medicaid
programs. There can be no assurance the Corporation's operations will not be
subject to review, scrutiny, penalties or enforcement actions under these laws,
or that these laws will not change in the future. Violations of these laws may
result in substantial civil or criminal penalties for individuals or entities,
including large civil monetary penalties and exclusion from participation in the
Medicare or Medicaid programs. Such exclusions or penalties, if applied to the
Corporation, could have a material adverse effect on the profitability of the
Corporation.
FLORIDA AUDITS AND LAWSUIT
In October 1996, two managed centers in Florida were audited by
representatives of the regional office of the Office of Inspector General
("OIG") . As part of these audits, the OIG reviewed various records of the
facilities relating to allocation of nursing hours and contracts with suppliers
of outside services. At one center, the OIG indicated during an exit conference
that it had no further questions, but has not yet issued a final report. At the
second facility, which is one of the four named in the Braeuning lawsuit
described below, the OIG determined certain records were insufficient and NHC
supplied the additional requested information.
NHC is also a defendant in a lawsuit styled Braeuning et al vs. National
HealthCare L.P., et al. filed "under seal" in the U.S. District Court of the
Northern District of Florida on April 9, 1996. The court removed the seal from
the complaint - but not the file itself - on March 20, 1997 and service of
process occurred on July 8, 1997, with the government participating as an
intervening plaintiff. The suit alleges that NHC has submitted cost reports and
routine cost limit exception requests containing "fraudulent allocation of
routine nursing services to ancillary service cost centers" and improper
allocation of skilled nursing service hours in four managed centers, all in the
state of Florida. The suit was filed under the Qui Tam provisions of the Federal
False Claims Act, commonly referred to as the "Whistleblower Act". NHC is fully
cooperating and the Corporation intends to fully cooperate with the government
in an attempt to determine dollar amounts involved, and each intends to
aggressively pursue an amicable settlement. The cost report periods under
review include periods from 1991 through 1995.
Florida is one of the states of which governmental officials are conducting
"Operating Restore Trust", a federal/state program aimed at detecting and
eliminating fraud and abuse by providers in the Medicare and Medicaid programs
(the "ORT"). The OIG has increased its investigative actions in Florida (and has
now opened a Tennessee office) as part of ORT and ORT Plus. NHC and the
Corporation will continue to review and monitor the cost reporting process and
their compliance with all government reimbursement standards, but cannot predict
whether the OIG or other government officials will take further action or
request additional information as a result of the Braeuning suit or any other
audit that may be conducted in the future. An adverse determination in the
lawsuit or as the result of an audit could subject the
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Corporation to civil or criminal fines and penalties which could have a material
negative impact on the profitability of the Corporation.
CERTAIN GUARANTEED DEBT
The Corporation will assume loan guarantees of approximately $69.5 million
in loans made or letters of credit issued by third parties to or for the account
of certain unrelated third parties for whom the Corporation will manage a
licensed healthcare center. 53% of these guarantees are on behalf of FCC. A
default by any such corporation or individual, or the bankruptcy or other
financial difficulty of such entities, could result in the inability of such
entity to pay its loan obligations, and could result in the Corporation having
to make payments under its guarantees.
FCC LAWSUIT
FCC, an independent Florida corporation for whom NHC manages sixteen
licensed nursing centers in Florida, and NHC are currently involved in a lawsuit
in the Circuit Court of the Twelfth Judicial Circuit in and for Sarasota County,
Florida, requesting the court to interpret the parties' rights under their
contractual arrangements. In the summer of 1997, FCC filed a Third Amended and
Supplemental Complaint in the Sarasota County Court action asserting fifteen
separate counts against NHC and its general partners, which are collectively
referred to as NHC in the complaint. Among the claims added in the amended
complaint are claims for breach of all management agreements between the
parties, for a declaration that FCC does not owe any deferred contingent fees to
NHC or in the alternative, a declaration that any such deferred fees constitute
usurious interest, for breach of a 1994 loan agreement between FCC and
defendants related to the construction of a facility in Orlando, for business
libel, and for breach of fiduciary duty arising from defendants' alleged
obstruction of FCC's right to audit, from defendants' alleged failure to
properly manage FCC's facilities, and from defendants' alleged self dealing by
causing FCC and defendants or their affiliates to enter into contracts that are
not customary or usual in the industry. In additional to declaratory relief, FCC
asserts that it is entitled to unspecified damages and to terminate all of the
management agreements between the parties for cause. Defendants, including NHC,
have filed an answer denying all of FCC's claims and asserting a counterclaim
against FCC. No trial date has been set in this matter. To date, FCC has
notified NHC that it currently does not intend to renew five of the sixteen
management contracts, but has agreed that NHC will remain as manager until a
final decision is reached by the Sarasota Court. The balance of the FCC
contracts may be terminated in the years 2001-2003. See "Business -- The
Corporation -- Legal Proceedings."
LACK OF CONSENTS; ACCELERATION OF CERTAIN MATURITIES
The Corporation will retain approximately $112.6 million in debt of NHC. In
addition, the REIT will assume approximately $105.9 million in Assumed
Liabilities. The consent of such lenders is a requirement to the transfer of the
underlying secured properties from the original obligor thereunder to any
successor obligor, and the transfer of the Owned Healthcare Facilities and Notes
to the REIT. NHC, the REIT and the Corporation have obtained the oral consent of
these lenders. Written documentation of such consents may not be obtained on
reasonable terms in a timely manner with respect to the transfer of the Assumed
Liabilities from NHC to the REIT or the transfer of the Owned Healthcare
Facilities and the Notes to the REIT. If the lenders were to assert their
rights, that is that the transfer of the Assumed Liabilities or the Owned
Healthcare Facilities from NHC to the REIT constituted a default under the
relevant loan or guarantee documents, then such lenders could demand that the
Corporation and the REIT perform under the loan agreements and pay the full
amount of such debt plus any prepayment penalties and costs. There can be no
assurance that the REIT or the Corporation would be able to repay such debt or
replace such debt on the same or similar terms, if at all. Failing to timely
repay such amounts could cross-default other loans.
In addition, the Plan of Restructure may require the consent of various
third parties to agreements with NHC which will be assumed by the Corporation in
the Plan of Restructure. NHC and the Corporation have determined not to seek
consents in connection with existing leases, management contracts or other
operating agreements with NHC. As a result, such third parties could claim such
agreements have been breached by NHC, seek to terminate such agreements and sue
NHC, the Corporation and the REIT for damages. In addition, since the REIT and
the Corporation both resulted from NHC, any existing NHC creditor (whether
contingent or absolute) may be able to reach the assets of the Corporation for
any claim such creditor may have against NHC. There can be no assurance that the
number of such agreements terminated, the amount of damages that could be sought
or the claims of any such creditors would not have a material adverse effect on
the Corporation.
RELATIONSHIPS BETWEEN LONG-TERM CARE FACILITIES AND OTHER PROVIDERS.
Relationships between long-term care facilities and other providers such as
providers of physical therapy and other ancillary service providers have
recently come under increased scrutiny by government and private payors. To the
extent that the Corporation, any facility with which it does business, or any of
their owners or directors have a financial relationship with each other or with
other health care entities providing services to long-term care patients, such
relationships could be subject to increased scrutiny. There can be no assurance
that the Corporation's business operations and agreements with other providers
of health care services will not be subject to change, review, penalties or
enforcement actions under state and federal laws regarding self-referrals or
fraud and abuse, or that these laws will not change in the future. See "Business
- -- Government Regulation."
22
<PAGE> 29
THIRD-PARTY INDEBTEDNESS SECURED BY ASSETS LEASED OR MANAGED BY
CORPORATION.
The Corporation, through leases and management agreements, will operate
facilities that secure the indebtedness of the owners of the facilities. As a
result, the Corporation's leases at such facilities are subject to cancellation
upon the default of these third-party owners under their credit agreements. In
addition, the payment of management fees to the Corporation at these facilities
is subordinated to the payment of the owners' debt obligations. To the extent
that the owners of the Corporation's managed facilities experience financial
difficulty or otherwise are unable to meet their obligations, the ability of the
Corporation to receive management fees or continue as manager of such facility
is jeopardized. See "Business -- Description of Management Services and
Agreements."
COMPETITION.
The long-term care industry generally, and the nursing home and assisted
living center businesses particularly, are highly competitive. The Corporation
will face direct competition for the acquisition or management of facilities. In
turn, its facilities face competition for employees, patients and residents.
Some of NHC's present and potential competitors, which will likely be the
Corporation's competitors, are significantly larger and have or may obtain
greater financial and marketing resources than those of NHC or the Corporation.
Some hospitals that provide long-term care services will also be a potential
source of competition to the Corporation. In addition, the Corporation may
encounter substantial competition from new market entrants. Consequently, there
can be no assurance that the Corporation will not encounter increased
competition in the future, which could limit its ability to attract patients or
residents or expand its business, and could materially and adversely affect its
business or decrease its market share. See "Business -- The Corporation --
Relationship with National Health Investors, Inc." and " -- Competition."
LIABILITY AND INSURANCE.
The provision of health care services involves an inherent risk of
liability. In recent years, participants in the long-term care industry have
become subject to an increasing number of lawsuits alleging malpractice or
related legal theories, many of which involve large claims and significant
defense costs. It is expected that the Corporation from time to time will be
subject to such suits as a result of the nature of its business. NHC currently
maintains liability insurance of $1.0 million per claim with additional umbrella
coverage in the amount of $5.0 million in the aggregate per annum, intended to
cover such claims which the Corporation intends to maintain and NHC believes its
insurance coverage is consistent with industry standards. There can be no
assurance, however, that claims in excess of the Corporation's insurance
coverage or claims not covered by the Corporation's insurance coverage (e.g.,
claims for punitive damages) will not arise. A successful claim against the
Corporation in excess of the Corporation's insurance coverage could have a
material adverse effect upon the Corporation and its financial condition. Claims
against the Corporation, regardless of their merit or eventual outcome, may also
have a material adverse effect upon the Corporation's ability to attract
patients or residents or expand its business. In addition, the Corporation's
insurance policies must be renewed annually. There can be no assurance that the
Corporation will be able to obtain liability insurance coverage in the future on
acceptable terms, if at all. See "Business -- The Corporation -- Legal
Proceedings."
DEPENDENCE ON MANAGEMENT AND SKILLED PERSONNEL.
The Corporation believes it will depend substantially on active involvement
of its senior managers, including its executive officers. The loss of one or
more of such officers could have a material adverse effect on the Corporation's
business and future operations. The Corporation does not intend to maintain
"key-man" insurance on the lives of its executive officers. The Corporation does
not intend to have employment agreements with executive officers. See
"Management -- The Corporation." In addition, the Corporation will depend upon
skilled personnel such as nurses. In some areas in which the Corporation will
operate there is from time to time a nursing shortage that could have a material
adverse affect upon the Corporation's ability to attract or retain sufficient
numbers of nurses. In addition, although NHC has not yet experienced
unionization efforts, there have been reports of increased unionization within
the senior care business. The Corporation cannot predict whether there will be
successful attempts to organize unions at its facilities, or what effect such
activities might have on its operations.
ABILITY TO ACQUIRE ADDITIONAL LONG-TERM CARE FACILITY OPERATIONS.
The Corporation intends to expand its business through the development and
selective acquisition of additional long-term care facility operations. See
"Business -- The Corporation -- Strategy." The Corporation's prospects for
growth are directly affected by its ability to acquire suitable long-term care
facility operations, which in turn will depend, among other things, upon the
pricing expectations of sellers, the ability to obtain financing, including the
availability of adequate working capital, the ability to obtain government
licenses and approvals, and the competitive environment for acquisitions. The
nature of such licenses and approvals and the timing and likelihood of obtaining
them vary widely from state to state, depending upon the facility or operation
and the type of services proposed. See "Business -- The Corporation --
Regulation." In making acquisitions, the Corporation will compete with other
providers, some of which have greater financial resources than the Corporation.
There can be no assurance that suitable acquisitions will be identified, that
acquisitions can be consummated or that the acquired facility operations can be
integrated successfully into the Corporation's operations. The various risks
associated with the Corporation's acquisition of long-term care facility
operations and uncertainties regarding the profitability of such operations may
affect the Corporation's financial performance in any given period. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- The Corporation -- Liquidity, and Capital Resources and Financial
Condition."
23
<PAGE> 30
NO PUBLIC MARKET.
There has been no public market for the Shares and there can be no
assurance that an active trading market will develop or be sustained following
the offering. The Corporation has applied for listing of the Shares on the
American Stock Exchange. No assurance can be given as to the liquidity of the
trading market for the Shares or that an active trading market for the Shares
will develop. If an active market does not develop, the market price and
liquidity of the Shares may be adversely affected. There can be no assurance
that the combined price at which the Shares and REIT Shares may trade in any
market subsequent to the Plan of Restructure will not be lower than the current
trading price of NHC Units.
LACK OF DIVIDENDS
The Corporation's initial policy will be to retain any earnings to finance
the operation and expansion of the Corporation's business and, therefore, to pay
no dividends in the foreseeable future. In addition, the Corporation may be
prohibited from paying dividends under certain debt instruments.
ANTI-TAKEOVER CONSIDERATIONS.
The Corporation is authorized to issue up to 10,000,000 shares of preferred
stock, the rights of which may be fixed by the Board of Directors without
shareholder approval. The Corporation's Certificate of Incorporation (the
"Corporation Certificate") provides for the classification of its Board of
Directors into three classes, with each class of directors serving staggered
terms of three years. The Corporation's Certificate requires the approval of 70%
of the outstanding shares to approve certain actions. Section 203 of the
Delaware General Corporate Law restricts the ability of a Delaware corporation
from engaging in any business combination with an interested stockholder. The
foregoing matters may have the effect of discouraging or making more difficult
an acquisition or change of control of the Corporation. See "Description of
Securities -- Shares of the Corporation."
24
<PAGE> 31
VOTING AND PROXY INFORMATION
VOTING PROCEDURES
Under the Partnership Agreement, a holder of a Unit may vote only if the
holder has been admitted as a general or limited partner of the Partnership on
or before the record date for the Special Meeting. Each Unit entitles the holder
thereof to one vote with respect to matters to be voted on at the Special
Meeting. The Managing General Partner has set the close of business on October
31, 1997 as the record date (the "Record Date") for the determination of general
and limited partners entitled to vote at the Special Meeting.
NHC will accept proxies at any time before the Plan of Restructure is voted
on at the Special Meeting. The enclosed form of proxy, when properly completed
and returned, will constitute a general or limited partner's vote for or
against, or abstention on, the Plan of Restructure. If a general or limited
partner returns a form of proxy duly signed without voting, the general or
limited partner will be deemed to have voted FOR the Plan of Restructure.
REVOCATION OF PROXIES
A general or limited partner may revoke a proxy any time during the
solicitation period before its exercise by (i) delivering written notice of
revocation to NHC, (ii) executing and delivering to NHC a later dated form of
proxy or (iii) voting in person at the Special Meeting. Any such written notice
or later dated proxy should be sent to National HealthCare L.P., 100 Vine
Street, Suite 1400, Murfreesboro, Tennessee 37130, Attention: Richard F.
LaRoche, Jr.
VOTE REQUIRED; QUORUM
Approval of the Plan of Restructure will require the affirmative vote of
general and limited partners holding an aggregate of more than 50% of the
outstanding Units. The presence, in person or by proxy, of general and limited
partners holding an aggregate of more than 50% of the outstanding Units will
constitute a quorum at the Special Meeting. Abstentions and broker non-votes
will be treated as present for the purpose of determining a quorum but will have
the effect of votes against the Plan of Restructure.
The executive officers, directors and other affiliates of the Managing
General Partner own or have the authority to vote approximately 54% of the
outstanding Units. They have advised NHC that they each intend to vote their
Units in favor of the Plan of Restructure and have delivered irrevocable proxies
coupled with an interest to vote in favor of the Plan of Restructure. Therefore,
approval of the Plan of Restructure is assured. For further information
concerning the ownership of Units by the Managing General Partner's affiliates,
executive officers and directors, see "Security Ownership of Certain Beneficial
Owners and Management."
SOLICITATION OF PROXIES
This solicitation is being made by the Managing General Partner on behalf
of NHC. NHC will pay the cost of soliciting proxies. NHC will reimburse
brokerage houses and other nominees for their reasonable expenses of forwarding
proxy materials to beneficial owners of Units.
INDEPENDENT AUDITORS
Representatives of Arthur Andersen LLP, NHC's independent accountants, are
expected to be present at the Special Meeting.
NO APPRAISAL RIGHTS
Unitholders who object to the Plan of Restructure will have no appraisal,
dissenters' or similar rights (i.e., the right, instead of receiving securities
of the REIT and the Corporation, to seek a judicial determination of the "fair
value" of their Units and to compel NHC to purchase their Units for cash in that
amount) under state law or the Partnership Agreement, nor will such rights be
voluntarily accorded to limited partners by NHC. Thus, approval of the Plan of
Restructure by the requisite vote of general and limited partners will bind all
general and limited partners, and objecting general and limited partners will
have no alternative to receipt of securities of the REIT and the Corporation
other than selling their Units (or securities of the REIT and the Corporation)
in the open market.
OTHER MATTERS
The enclosed form of proxy grants discretionary authority to the persons
named to vote on any other matters that may properly come before the Special
Meeting. NHC is not aware of any other proposals planned to be made at the
Special Meeting and has no current intention of making any additional proposals.
25
<PAGE> 32
PRICE RANGE OF NHC UNITS
NHC's Units are listed on AMEX under the symbol "NHC." The following table
sets forth, for the periods indicated, the high and low sales prices for the
Units as reported by AMEX.
<TABLE>
<CAPTION>
HIGH Low
<S> <C> <C>
1995
- ----
First Quarter $26.000 $22.875
Second Quarter 28.500 24.375
Third Quarter 31.500 28.000
Fourth Quarter 39.375 29.500
1996
- ----
First Quarter $41.125 $37.125
Second Quarter 41.375 34.875
Third Quarter 39.875 37.000
Fourth Quarter 45.000 37.500
1997
- ----
First Quarter $47.250 $44.250
Second Quarter 46.188 40.750
Third Quarter 59.250 44.375
</TABLE>
On September 30, 1997, the last reported sale price of the Units on AMEX
was $59.25 per Unit. On August 19, 1997, the date immediately preceding NHC's
announcement of the Plan of Restructure, the last reported sale price of the
Units on AMEX was $49.125 per Unit. At September 30, 1997, there were
approximately 4,168 holders of the Units, comprised of 1,982 Unitholders of
record and an additional 2,186 Unitholders indicated by security position
listings.
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<PAGE> 33
DIVIDEND POLICY
NHC
NHC paid cash distributions on its outstanding partnership Units as
follows: 1991, $1.20 per Unit; 1992, $.54 per Unit; 1993, $.88 per Unit; 1994,
$1.35 per Unit; 1995, $1.98 per Unit; and 1996, $2.16 per Unit.
THE REIT
In order to qualify for the quasi pass through tax treatment accorded to a
real estate investment trust, the REIT intends to make quarterly distributions
to holders of its common stock equal on an annual basis to at least 95% of its
real estate investment trust taxable income (excluding net capital gains), as
defined in the Code. Generally, cash available for distribution to the REIT
shareholders will be primarily derived from the distributions made by the
Operating Partnership. The Operating Partnership's cash available for
distribution will be derived primarily from the rental payments under the Leases
and interest payments on the Notes. All distributions will be made by the REIT
at the discretion of the Board of Directors and will depend on the cash flow and
earnings of the REIT, its financial condition, bank covenants and such other
factors as the Board of Directors deems relevant. The REIT's taxable income will
be calculated without reference to its cash flow. Therefore, under certain
circumstances, the REIT may not have available cash sufficient to pay its
required distributions. See "Federal Income Tax Considerations -- Taxation of
the REIT -- 95% Distribution Requirement." The REIT believes that it will have
sufficient available cash to pay its required distributions for 1998 but this is
subject to a number of risk factors. See "Risk Factors -- Risks Associated with
Forward Looking Statements." The Board of Directors has not determined when any
such distributions will be declared or paid.
The REIT's Board of Directors anticipates that, commencing in 1998, the
REIT and the Operating Partnership will pay initial annual dividend to holders
of its common stock and distribution to the OP Units equal to $1.33 per REIT
Share and OP Unit, although no assurances can be given that this will be the
case. See "Risk Factors -- Risks Associated with Forward Looking Statements."
Compensation payable by the REIT to the Corporation under the REIT Advisory
Agreement will be deferred to the extent that the REIT either does not have
Funds from Operations adequate to pay dividends at such annual rate. "Funds from
Operations" is defined in the REIT Advisory Agreement as the net income of the
REIT plus depreciation and amortization, less capital gains (or plus capital
losses) included in such net income.
For a discussion of the tax treatment of distributions to the REIT
stockholders, see "Federal Income Tax Considerations -- The REIT -- The
Distribution -- Tax Consequences."
THE CORPORATION
The Corporation's initial policy will be to retain any earnings to finance
the operations and expansion of the Corporation's business. In addition, the
Corporation may be prohibited from paying dividends under certain debt
instruments.
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<PAGE> 34
BUSINESS
NHC
NHC is a limited partnership organized under the laws of the State of
Delaware which principally operates residential care facilities, long-term
healthcare centers and home healthcare programs in the southeastern United
States. At September 30, 1997, NHC operated 111 long-term healthcare centers
with a total of 13,835 licensed beds in nine states. NHC's health care centers
provide subacute, skilled and intermediate nursing and rehabilitative care. Of
the 111 centers operated, 17 are owned, 40 are leased from NHI and 54 are
managed for other owners. NHC's homecare programs provide rehabilitative care at
a patient's residence. During 1996, NHC operated 33 homecare programs and
provided 754,000 homecare patient visits. NHC also operates 387 retirement
apartments located in one managed and three leased retirement centers.
Additionally, NHC operates 14 assisted living centers at twelve owned or leased
centers and two managed centers. Pursuant to the Plan of Restructure, NHC will
contribute to the REIT through fee ownership or 50 year capitalized leases, the
17 Owned Healthcare Facilities, six assisted living facilities and one
retirement center, certain promissory notes and certain other assets to the
REIT. NHC will then merge with and into the Corporation so that all of NHC's
remaining assets will be owned by the Corporation. The REIT will then lease the
Owned Healthcare Facilities back to the Corporation.
NHC has three general partners:
1. Managing General Partner NHC, Inc., a Tennessee corporation. As of
the Effective Time, W. Andrew Adams, NHC's Chief Executive Officer, President
and a Director of NHC, will own approximately 52% of the voting securities of
NHC, Inc. and Robert G. Adams, Senior Vice President and Chief Operating Officer
of NHC will own approximately 19.3%.
2. Administrative General Partner National Health Corporation, a
Tennessee corporation. All of the authorized, issued and outstanding stock of
National Health Corporation is owned by the National Health Corporation
Leveraged Employee Stock Ownership Plan (the "ESOP"). See "Certain Transactions
- -- National."
3. Individual General Partner W. Andrew Adams. Mr. Adams is the Chief
Executive Officer and President of NHC and will be the Chief Executive Officer,
President and a Director of both the REIT and the Corporation.
The general partners own, in the aggregate, a general partnership interest
in NHC representing a 1% interest in the profits, losses and distributions of
the partnership.
THE REIT
The REIT is a newly-formed Maryland corporation. Prior to the Distribution,
the REIT, through the Operating Partnership will acquire the Owned Healthcare
Facilities and the Notes and Other Assets (subject to the Assumed Liabilities)
and will lease the Owned Healthcare Facilities to the Corporation. The REIT will
also assume certain debt of NHC of approximately $105.9 million. See
"Relationship Between the REIT and the Corporation after the Restructure -- The
Assumed Liabilities." The Leases covering the Owned Healthcare Facilities will
be "triple net" leases. See "Relationship between the REIT and the Corporation
after the Restructure -- The Leases." The REIT will enter into an Advisory,
Administrative Services and Facilities Agreement with the Corporation pursuant
to which the Corporation will provide the REIT with investment advice, office
space and personnel. See "Relationship Between the REIT and the Corporation
after the Restructure -- The Advisory, Administrative Services and Facilities
Agreement."
However, the REIT Advisory Agreement provides that for that period of time
equal to the lesser of (i) the term of the REIT Advisory Agreement and (ii) the
Corporation being actively engaged as the investment advisor for NHI, the REIT
will not (without the prior approval of NHI) transact business with any party,
person, company or firm other than the Corporation. It is the intent of the
foregoing restriction that the REIT will not be actively or passively engaged in
the pursuit of additional investment opportunities, but rather will focus upon
its capacities as landlord and note holder of those certain assets conveyed to
it in the Plan of Restructure.
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<PAGE> 35
OWNED HEALTHCARE FACILITIES
The following table includes certain information regarding the Owned
Healthcare Facilities.
<TABLE>
<CAPTION>
No. Minimum
of Book Annual Total Debt
Name of Facility Location Beds Basis Rent Transferred
---------------- -------------------- ---- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
Healthcare Facilities
Adams Place Murfreesboro, TN 40 $6,022,834 $572,129
NHC HealthCare, Naples Naples, FL 60 5,646,872 536,453
NHC HealthCare, Clinton Clinton, SC 131 3,732,339 354,572
NHC HealthCare, Coconut Ft. Lauderdale, FL 120 9,896,567 940,174
Creek(2)
NHC HealthCare, Daytona Beach Daytona Beach, FL 60 6,297,586 598,271
NHC HealthCare, Farragut(2) Farragut, TN 60 5,393,486 512,381
NHC HealthCare, Garden City Murrells Inlet, SC 88 6,133,219 487,656
NHC HealthCare, Greenville Greenville, SC 176 5,429,906 515,841
NHC HealthCare, Lexington Lexington, SC 88 5,353,143 508,549
NHC HealthCare, Mauldin Greenville, SC 120 7,745,945 776,414
NHC HealthCare, Imperial(3) Naples, FL 90 5,311,591 504,601
NHC HealthCare, North Augusta North Augusta, SC 132 5,028,383 477,696
NHC HealthCare, Orlando Orlando, FL 120 8,628,798 819,736
NHC HealthCare, Parklane Columbia, SC 120 8,594,178 816,447
NHC HealthCare, Port Charlotte Port Charlotte, FL 180 8,594,178 816,447
West Plains Health, Care Center West Plains, MO 120 3,801,401 361,133
NHC HealthCare, Franklin(4) Franklin, TN 160 6,638,475 630,655
Assisted Living Facilities
NHC Place/ Vero Beach Vero Beach, FL 84 8,183,504 777,433
NHC Place/Anniston Anniston, AL 68 5,792,107 550,250
Adams Place Murfreesboro, TN 84 6,490,387 616,587
NHC Place/Merritt Island Merritt Island, FL 84 7,144,486 678,726
NHC Place/Stuart Stuart, FL 84 6,808,672 646,824
NHC HealthCare, Farragut(2) Farragut, TN 84 6,741,858 640,477
Retirement Center
Adams Place Murfreesboro, TN 53 14,263,000 1,354,985
Debt Transferred 105,857,629
</TABLE>
- ----------------------
(1) or debt which the property is subject to and being serviced by the
REIT.
(2) currently under construction.
(3) 30 additional beds under construction.
(4) a facility to be constructed. Construction has not began on the date
hereof.
CONVEYANCE OF FACILITIES. Immediately prior to the Plan of Restructure, NHC
will convey its fee ownership of six of the Owned Healthcare Facilities to the
REIT by means of "quitclaim" deeds and nine of the Owned Healthcare Facilities
pursuant to a 50 year capitalized lease with a purchase option at a nominal
purchase price at any time at the election of the REIT. The remaining nine Owned
Healthcare Facilities will be conveyed by warranty or special form deeds. All of
the conveyances and 50 year capitalized leases will include NHC's representation
that it has good and marketable title to the interests being conveyed and NHC
will indemnify the REIT against any title problems. The Corporation will assume
NHC's indemnification obligations to the REIT pursuant to the Merger. Quitclaim
deeds and the 50 year capitalized leases will be used in order to minimize or
eliminate, where possible, the imposition of transfer taxes.
The master capitalized lease ("Master Capitalized Lease") has a 50 year
term expiring December 31, 2048 and grants the REIT the right to purchase the
property at any time upon 90 days notice for $100. Under the Master Capitalized
Lease, the REIT as tenant is responsible for all taxes, utilities, insurance
premium costs, repairs,
29
<PAGE> 36
maintenance (including the structural maintenance and repair of the
improvements) and all other charges and expenses relating to the ownership of
the property covered by the Master Capitalized Lease.
Sources of Rental Payments. The REIT's revenues will be derived primarily
from the Corporation under the Leases. Those payments will be derived primarily
from the Owned Healthcare Facilities operated by the Corporation. See "Business
- -- The Corporation -- Sources of Revenue" for a description of the sources of
revenue generated by the Owned Healthcare Facilities.
THE NOTES.
The REIT will own approximately 50 Notes representing approximately $92.5
million loaned to the owners of approximately 23 nursing homes, all but one of
which are in Florida and managed by NHC. The loans were utilized by the owners
to acquire land, then construct and equip the nursing homes. The Notes are
secured by mortgages on each of the facilities. Forty-three of the Notes
(representing approximately $74.9 million the principal amount) are from FCC and
are personally guaranteed by its sole shareholder. The FCC Notes bear interest
at 10.25 and are payable over 10 years. Most of the FCC Notes are due in 2004.
The 19 nursing homes which are located in Florida are each licensed for
approximately 120 to 180 beds. No defaults have occurred under any of the Notes.
NHC has no reason to suspect any impending defaults under the Notes. In the
event NHC's management agreement for the facilities is not extended by the owner
at the completion of the term, the Note secured by such facility becomes
immediately due and payable.
ASSUMED LIABILITIES.
The REIT will assume or take the Owned Healthcare Facilities subject to
Assumed Liabilities of approximately $105.9 million. The Assumed Liabilities
consist of four loan agreements which are secured by mortgages on certain of the
Owned Healthcare Facilities. The interest rate on the Assumed Liabilities
include fixed rates of 8% to 8.64% and floating rate based on prime rate and
LIBOR plus 1%. The term of the loans range from 2005 through 2015. See
"Relationship between the REIT and the Corporation after the Restructure -- The
Assumed Liabilities."
INVESTMENT AND OTHER POLICIES OF THE REIT.
General. The REIT's investment objectives are: (i) to provide current
income for distribution to stockholders, (ii) to provide the opportunity for
additional returns to investors by participating in any increase in the
operating revenues of its leased properties; (iii) to provide the opportunity to
realize capital growth resulting from appreciation, if any, in the value of its
portfolio properties, and (iv) to preserve and protect stockholder's capital.
There is no assurance that these objectives will be realized. The REIT Advisory
Agreement provides that the REIT will not, without the prior approval of the
Corporation, be actively or passively engaged in the pursuit of additional
investment opportunities until the earlier of the termination of the REIT
Advisory Agreement or such time as the Corporation is no longer actively engaged
as investment advisor to NHI.
Objectives and Policies. The REIT was organized to own the Owned Healthcare
Facilities. Because of the competitive restrictions contained in the REIT
Advisory Agreement, the REIT does not intend to seek further health care-related
investment opportunities or to provide lease or mortgage financing for such
investments. The REIT expects to continue to engage in transactions with the
Corporation, but does not anticipate purchasing from, leasing to or financing
other operations.
The REIT has no present plans to issue securities other than the REIT
Shares distributed in the Plan of Restructure, including senior securities or
(except pursuant to its or NHC's stock option plan or NHC's 6% Debentures) any
additional shares of common stock, although the Board of Directors is authorized
to issue up to 30,000,000 shares of Common Stock and 10,000,000 shares of
Preferred Stock. See "Description of Securities -- Shares of the REIT." The REIT
is authorized to offer shares of its capital stock in exchange for investments
that conform to its standards and to repurchase or otherwise acquire its shares
or other securities, but does not currently intend to do so. The REIT has no
plans to invest in the securities of others for the purpose of exercising
control.
The REIT will not, without the prior approval of a majority of the Board of
Directors, enter into any joint venture relationships with or acquire from or
sell to any director, officer, or employee of the REIT or the Corporation, or
any affiliate thereof, as the case may be, any of the assets or other property
of the REIT.
In addition, see "Federal Income Tax Considerations -- The REIT -- Taxation
as a Real Estate Investment Trust" for a discussion of certain limitations on
investments and other activities of the REIT.
Subject to the REIT Advisory Agreement, the REIT Board of Directors may
alter the REIT's investment policies if they determine in the future that such a
change is in the best interests of the REIT and its stockholders. The methods of
implementing the REIT's investment policies may vary as new investment and
financing techniques are developed or for other reasons.
Borrowing Policies. The REIT is currently negotiating with a lender to
refinance the Assumed Liabilities. See "Relationship between the REIT and the
Corporation after the Restructure -- The Assumed Liabilities." The REIT may
30
<PAGE> 37
incur additional indebtedness in the future to support its current investments
in health care-related facilities when, in the opinion of the REIT Board of
Directors, it is advisable. The REIT may, for short term purposes, negotiate
other lines of credit, or arrange for other short term borrowings from banks or
otherwise. The REIT may arrange for long term borrowerings from institutional
investors or through public offerings. The REIT will own and may in the future
invest in properties subject to existing loans or secured by mortgages, deeds of
trust or similar liens with favorable terms.
THE CORPORATION
GENERAL
The Corporation is a newly formed Delaware corporation which will merge
with NHC at the Effective Time. As a result of the merger, the Corporation will
acquire all of the assets and liabilities of NHC other than those transferred to
the REIT. Thus, the Corporation will primarily operate long-term health care
centers and home health care programs in the southeastern United States. As of
September 30, 1997, NHC operated 111 long-term health care centers with a total
of approximately 13,835 licensed beds. Of these 111 centers operated, 17 will be
leased from the REIT, 40 will be leased from NHI and 54 will be managed for
other owners. As of September 30, 1997, NHC also operated 33 homecare programs,
four retirement centers (one managed and three leased) and 14 assisted living
centers (twelve leased and two managed). In addition, as of September 30, 1997,
NHC operated specialized care units such as Alzheimer's Disease care units (10),
sub-acute nursing units (8) and a number of in house pharmacies. Similar
specialty units are under development or consideration at a number of the
Corporation's centers, as well as free standing projects.
LONG-TERM HEALTH CARE CENTERS
The health care centers to be operated by the Corporation provide
in-patient skilled and intermediate nursing care services and in-patient and
out-patient rehabilitation services. Skilled nursing care consists of 24-hour
nursing service by registered or licensed practical nurses and related medical
services prescribed by the patient's physician. Intermediate nursing care
consists of similar services on a less intensive basis principally provided by
non-licensed personnel. These distinctions are generally found in the long-term
health care industry although for Medicaid reimbursement purposes, some states
in which the Corporation operates have additional classifications, while in
other states the Medicaid rate is the same regardless of patient classification.
Rehabilitative services consist of physical, speech, and occupational therapies,
which are designed to aid the patient's recovery and enable the patient to
resume normal activities.
Each health care center has a licensed administrator responsible for
supervising daily activities, and larger centers have assistant administrators.
All have medical directors, a director of nurses and full-time registered nurse
coverage. All centers provide physical therapy and most have other
rehabilitative programs, such as occupational or speech therapy. Each facility
is located near at least one hospital and is qualified to accept patients
discharged from such hospitals. Each center has a full dining room, kitchen,
treatment and examining room, emergency lighting system, and sprinkler system
where required. NHC's Management believes that all centers are in compliance
with the existing fire and life safety codes.
NHC has developed a quality assurance program which it utilizes and the
Corporation will continue to utilize in each of its health care centers to
verify that high standards of care are maintained. An integral part of the
program is a computerized patient assessment system which aids in placing the
patient in the appropriate section of each center (skilled or intermediate) and
monitors the health care needs of the patient, number and frequency of
medications and other essential medical information. The data derived from this
system is used not only to assure that appropriate care is given to each
individual patient, but also to ascertain the appropriate amount of staffing of
each section of the center. Additionally, NHC requires and the Corporation will
require a patient care survey to be performed at least quarterly by the regional
and home office nursing support team, and a "consumer view" survey by senior
management at least twice a year. NHC developed and promotes a "customer
satisfaction" rating system, using 1993 as a bench mark, and requires
significant improvement in the ratings by each center as a condition of
participation in its overall "Excellence Program". The Corporation intends to
continue this system.
The Corporation will provide centralized management and support services to
the Corporation's health care nursing centers. The management and support
services include operational support through the use of regional vice presidents
and regional nurses, accounting and financial services, cash management, data
processing, legal, consulting and services in the area of rehabilitative care.
All personnel will be employed by National and will be leased to the Corporation
pursuant to an Employee Services Agreement. National will be responsible for
overall services in the area of personnel, loss control, insurance, education
and training. The Corporation will reimburse National by paying all the costs of
personnel employed for the benefit of the Corporation as well as a fee. National
is located in Murfreesboro, Tennessee. See "Certain Transactions -- National."
The Corporation will provide the same management services to centers
operated under management contracts as it will provide to centers leased by the
Corporation. The term of each contract and the amount of the management fee will
be determined on a case-by-case basis. Typically, the Corporation will charge a
minimum of 6% of net revenues. The term of the contracts will range from five
years to twenty years. The Corporation will maintain a right of first refusal
should any owner desire to sell a managed center and, in certain situations,
special termination payments have been negotiated should an owner sell to a
third party or terminate or not renew a management contract.
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<PAGE> 38
All health care centers to be operated by the Corporation are licensed by
the appropriate state and local agencies. All except two are currently certified
as providers for Medicaid patients, and all are currently certified as Medicare
providers. All of the Corporation's centers will be subject to state and federal
licensure and certification surveys. These surveys, from time to time, may
produce statements of deficiencies. In response to such a statement, if any, the
staff at each center will file a plan of correction after consultation with the
Regional Vice President and any alleged deficiencies will be corrected.
Presently, none of NHC's facilities are operating under material statements of
deficiencies which NHC believes would have a material adverse effect on its
operations. The Corporation will have a significant monetary bonus to employees
attached to passing these surveys with few or no deficiencies.
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<PAGE> 39
LONG-TERM HEALTH CARE CENTERS
<TABLE>
<CAPTION>
Total Beds under Development Joined
State City Center Affiliation Beds and Special Care Units NHC
- ----- ---- ------ ----------- ---- ------------------------- -----
<S> <C> <C> <C> <C> <C> <C>
Alabama Anniston NHC HealthCare, Anniston Leased(1) 151 55 bed Alzheimer's unit 1973
Moulton NHC HealthCare, Moulton Leased(1) 136 29 beds under development 1973
Florida Brooksville Brooksville Nursing Manor Managed 180 30 bed Alzheimer's unit 1993
Hudson Bear Creek Nursing Center Managed 120 1993
Crystal River Cypress Cove Care Center Managed 120 1993
Datona Beach NHC HealthCare, Daytona Beach Leased(2) 60 1996
Trenton Ayers Health and Rehabilitation Center Managed 120 30 bed Alzheimer's unit 1993
36 beds under development
Ft. Lauderdale NHC of Ft. Lauderdale Managed 253 1984
New Port Richey Heather Hill Nursing Home Managed 120 1993
Hudson NHC HealthCare, Hudson Leased(1) 180 50 bed subacute care unit 1986
Ft. Lauderdale NHC HealthCare, Coconut Creek Leased(2) 120 1997
Merritt Island NHC HealthCare, Merritt Island Leased(1) 120 22 bed Alzheimer's unit 1990
60 beds under development
Panama City NHC of Panama City Managed 120 1986
Port Charlotte NHC HealthCare, Port Charlotte Leased(2) 180 60 beds subacute care unit 1994
30 bed Alzheimer's unit
Naples NHC HealthCare, Naples Leased(2) 60 1996
Naples NHC HealthCare, Imperial Leased(2) 60 30 beds under development 1994
St. Petersburg NHC HealthCare, St. Petersburg Managed 159 1984
Stuart NHC HealthCare, Stuart Leased(1) 118 24 bed Alzheimer's unit 1989
35 beds under development
Ocoee Ocoee Health Care Center Managed 120 1990
St. Cloud Osceola Health Care Center Managed 120 1991
Palatka Palatka Health Care Center Managed 180 20 bed Alzheimer's unit 1989
Clearwater Palm Garden of Clearwater Managed (3) 120 1987
Gainesville Palm Garden of Gainesville Managed (3) 120 1987
Jacksonville Palm Garden of Jacksonville Managed (3) 120 1990
Largo Palm Garden of Largo Managed (3) 140 1987
N. Miami Beach Palm Garden of N. Miami Beach Managed (3) 120 1988
Ocala Palm Garden of Ocala Managed (3) 120 60 bed subacute care unit 1987
Orlando Palm Garden of Orlando Managed (3) 120 1987
Orlando NHC HealthCare of Orlando Leased (2) 120 30 bed Alzheimer's unit 1997
20 bed subacute care unit
Pensacola Palm Garden of Pensacola Managed (3) 180 1987
Lake City Palm Garden of Lake City Managed (3) 120 28 bed Alzheimer's unit 1992
Largo Palm Garden of Pinellas Managed (3) 120 20 bed subacute care unit 1991
Port St. Lucie Palm Garden of Port St. Lucie Managed (3) 120 1988
Tampa Palm Garden of Tampa Managed (3) 120 1987
Vero Beach Palm Garden of Vero Beach Managed (3) 173 7 beds under development 1987
</TABLE>
33
<PAGE> 40
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
West Palm Beach Palm Garden of West Palm Beach Managed(3) 162 1988
Winter Haven Palm Garden of Winter Haven Managed(3) 120 1987
Plant City NHC HealthCare, Plant City Leased(1) 171 1 bed under development 1985
Dade City Royal Oak Nursing Center Managed 120 1993
Sarasota Sarasota Health Care Center Managed 120 1990
Sun City Palm Garden of Sun City Managed(3) 120 1991
Niceville The Manor at Blue Water Bay Managed 60 1993
Madison Lake Park of Madison Managed 79 23 beds under development 1995
Miami The Nursing Center at Mercy Managed 120 1995
Georgia Fort Oglethorpe NHC HealthCare, Fort Oglethorpe Owned(4) 81 54 beds under development 1989
Rossville NHC HealthCare, Rossville Leased(1) 112 1971
Indiana Brownsburg Brownsburg Health Care Center Managed 178 20 bed Alzheimer's unit 1990
Castleton Castleton Health Care Center Managed 120 18 bed Alzheimer's unit 1990
Evansville Center for Geriatric Nursing Managed 156 1997
Ladoga Ladoga Health Care Center Managed 95 1990
Logansport Camelot Care Center Managed 75 1997
Markle Markle Health Care Managed 66 1997
Plainfield Plainfield Health Care Center Managed 199 22 bed Alzheimer's unit 1990
Westfield Westfield Village Health Care Managed 80 1997
Kentucky Dawson Springs NHC HealthCare, Dawson Springs Leased(1) 80 1973
Glasgow NHC HealthCare, Glasgow Leased(1) 206 1971
Madisonville NHC HealthCare, Madisonville Leased(1) 94 1973
Missouri Desloge NHC HealthCare, Desloge Leased(1) 120 1982
Joplin NHC HealthCare, Joplin Leased(1) 126 1982
Kennett NHC HealthCare, Kennett Leased(1) 160 1982
Macon Macon Health Care Center Managed 120 1982
St. Louis NHC HealthCare, Maryland Heights Leased(1) 220 1987
Osage Beach Osage Beach Health Care Center Managed 120 1982
Springfield Springfield Health Care Center Managed 120 1982
St. Charles NHC HealthCare, St. Charles Leased(1) 120 1982
West Plains West Plains Health Care Center Leased(2) 120 1982
North Carolina Goldsboro Guardian Care Managed 49 1997
South Carolina Anderson NHC HealthCare, Anderson Leased(1) 290 1973
Greenwood NHC HealthCare, Greenwood Leased(1) 152 1973
Sumter NHC HealthCare, Hopewelll Managed 96 1985
Laurens NHC HealthCare, Laurens Leased(1) 176 1973
Aiken Mattie C. Hall Health Care Center Managed 176 44 bed Alzheimer's unit 1982
Clinton NHC HealthCare, Clinton Leased(2) 131 1993
</TABLE>
34
<PAGE> 41
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Murrells Inlet NHC HealthCare, Garden City Leased(2) 88 1992
Greenville NHC HealthCare, Greenville Leased(2) 176 1992
Lexington NHC HealthCare, Lexington Leased(2) 88 12 bed subacute care unit 1994
32 beds under development
Columbia NHC HealthCare, Parklane Leased(2) 120 32 beds under development 1997
30 bed Alzheimer's Unit
____ bed subacute care unit
North Augusta NHC HealthCare, North Augusta Leased(2) 132 1991
Greenville NHC HealthCare, Mauldin Leased(2) 120 1997
Sumter NHC HealthCare, Sumter Managed 120 3 beds under development 1985
Tennessee Murfreesboro Adams Place Leased(2) 40 1997
Carthage Smith County Health Care Center Managed 128 1997
Franklin Franklin Manor Leased(2) 47 1997
Athens NHC HealthCare, Athens Leased(1) 98 1971
Johnson City NHC HealthCare, Johnson City Leased(1) 179 18 bed Alzheimer's unit 1971
Columbia NHC HealthCare, Columbia Leased(1) 120 12 bed subacute care unit 1973
Cookeville NHC HealthCare, Cookeville Managed 96 1975
Franklin NHC HealthCare, Franklin Leased(1) 84 1979
Dickson NHC HealthCare, Dickson Leased(1) 197 1971
Columbia NHC HealthCare, Hillview Leased(1) 98 1971
Knoxville NHC HealthCare, Knoxville Leased(1) 152 1971
Knoxville NHC HealthCare, Fort Sanders Owned(4) 180 12 bed subacute unit 1977
McMinnville NHC HealthCare, McMinnville Leased(1) 150 1971
Lewisburg NHC HealthCare, Lewisburg Leased(1) 95 1971
Murfreesboro NHC HealthCare, Murfreesboro Managed 190 69 bed subacute care unit 1974
Nashville NHC HealthCare, Nashville Leased(1) 133 1975
Hendersonville NHC HealthCare, Hendersonville Leased(1) 117 1987
Lawrenceburg NHC HealthCare, Lawrenceburg Managed 97 1985
Oak Ridge NHC HealthCare, Oak Ridge Managed 130 1977
Lewisburg NHC HealthCare, Oakwood Leased(1) 62 1973
Chattanooga NHC HealthCare, Chattanooga Leased(1) 212 20 bed subacute care 1971
Pulaski NHC HealthCare, Pulaski Leased(1) 104 1971
Milan NHC HealthCare, Milan Leased(1) 129 1971
Lawrenceburg NHC HealthCare, Scott Leased(1) 62 1971
Dunlap NHC HealthCare, Sequatchie Leased(1) 60 60 beds under development 1976
Somerville NHC HealthCare, Somerville Leased(1) 72 1976
Sparta NHC HealthCare, Sparta Leased(1) 150 1975
Springfield NHC HealthCare, Springfield Leased(1) 112 1973
Smithville NHC HealthCare, Smithville Leased(1) 107 1971
Nashville The Health Center of Richland Place Managed 98 1992
Nashville West Meade Place Managed 120 1993
Farragut NHC HealthCare, Farragut Leased(2) 60 1997
Virginia Bristol NHC HealthCare, Bristol Leased(1) 120 1973
</TABLE>
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<PAGE> 42
ASSISTED LIVING UNITS
<TABLE>
<CAPTION>
State City Center
- ----- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Alabama Anniston NHC Place/Anniston (free-standing) Leased(2) 68
Florida Stuart NHC Place, Stuart Leased(2) 84
Merrit Island NHC Place, Merrit Island Leased(2) 84
Naples NHC HealthCare, Imperial Leased(1) 60
Naples NHC HealthCare, Naples Leased(1) 36
Vero Beach NHC Place/Vero Beach (free-standing) Leased(2) 84
West Palm Beach Palm Garden of West Palm Beach Managed(3) 25
Missouri St. Charles Lake St. Charles Retirement Center Leased(1) 25
Tennessee Murfreesboro Adams Place Leased(2) 84
Dickson NHC HealthCare, Dickson Leased(1) 20
Johnson City NHC HealthCare, Johnson City Leased(1) 15
Nashville, Richland Place Managed 32
Somerville NHC HealthCare, Somerville Leased(1) 12
Farragut NHC Place, Farragut Leased(2) 84
RETIREMENT APARTMENTS
Missouri St. Charles Lake St. Charles Retirement Apartments Leased(1) 155 1984
Tennessee Murfreesboro Adams Place Leased (2) 53 1997
Johnson City Colonial Hill Retirement Apartments Leased(1) 63 1987
Chattanooga Parkwood Retirement Apartments Leased(1) 32 1986
Nashville Richland Place Retirement Apartments Managed 137 1993
HOMECARE PROGRAMS
Total Beds under Development Joined
State City Center Affiliation Beds and Special Care Units NHC
- ----- ---- ------ ----------- ---- ---------------------- -----
Florida Blountstown NHC HomeCare of Blountstown Owned 1994
Carrabelle NHC HomeCare of Carrabelle Owned 1994
Chipley NHC HomeCare of Chipley Owned 1994
Crawfordville NHC HomeCare of Crawfordville Owned 1994
Madison NHC HomeCare of Madison Owned 1994
Marianna NHC HomeCare of Marianna Owned 1994
Ocala NHC HomeCare of Ocala Owned 1996
Panama City NHC HomeCare of Panama City Owned 1994
Panama City NHC Private Nursing Owned 1994
</TABLE>
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<PAGE> 43
<TABLE>
<S> <C> <C> <C> <C>
Perry NHC HomeCare of Perry Owned 1994
Port St. Joe NHC HomeCare of Port St. Joe Owned 1994
Quincy NHC HomeCare of Quincy Owned 1994
Stuart NHC HomeCare of Stuart Owned 1996
Tallahassee NHC HomeCare of Tallahassee Owned 1994
Vero Beach NHC HomeCare of Vero Beach Owned 1997
South Carolina Aiken NHC HomeCare of Aiken Owned 1996
Greenwood NHC HomeCare of Greenwood Owned 1996
Laurens NHC HomeCare of Laurens Owned 1996
Tennessee Athens NHC HomeCare of Athens Owned 1984
Johnson City NHC HomeCare of Johnson City Owned 1978
Columbia NHC HomeCare of Columbia Owned 1977
Cookeville NHC HomeCare of Cookeville Owned 1976
Dickson NHC HomeCare of Dickson Owned 1977
Lawrenceburg NHC HomeCare of Lawrenceburg Owned 1977
Lewisburg NHC HomeCare of Lewisburg Owned 1977
McMinnville NHC HomeCare of McMinnville Owned 1976
Murfreesboro NHC HomeCare of Murfreesboro Owned 1976
Knoxville NHC HomeCare of Knoxville Owned 1977
Chattanooga NHC HomeCare of Chattanooga Owned 1985
Pulaski NHC HomeCare of Pulaski Owned 1985
Milan NHC HomeCare of Milan Owned 1977
Somerville NHC HomeCare of Somerville Owned 1983
Sparta NHC HomeCare of Sparta Owned 1984
Springfield NHC HomeCare of Springfield Owned 1984
</TABLE>
- -----------------
(1) Leased from NHI
(2) Leased from REIT
(3) Managed by the NHC for FCC. NHC and FCC are currently involved in
litigation regarding certain of these management agreements. See " -- Legal
Proceedings."
(4) NHC HealthCare, Fort Oglethorpe and NHC HealthCare, Fort Sanders are owned
by two limited partnerships. The Corporation will own approximately 79% of
the partnership interest of the partnership which owns Fort Oglethorpe and
25% of the partnership interest of the partnership which owns Fort Sanders.
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<PAGE> 44
HEALTH CARE CENTERS UNDER CONSTRUCTION
The following table sets forth the long-term health care centers or
additions to existing centers under construction as of June 30, 1997 which the
Corporation will operate:
<TABLE>
<CAPTION>
Projected
Location Number of Beds Leased/ Managed Opening Date
-------- -------------- -------------------------- -------------------
<S> <C> <C> <C>
Ft. Lauderdale, FL 120 Leased October 1997
Greenville, SC 120 Leased October 1997
Farragut, TN 144 Leased May 1998
Palatka, FL 60* Managed July 1997
Dunlap, TN 60* Leased January 1998
Smithville, TN 31* Leased July 1997
Merrit Island, FL 60* Leased October 1997
Ft. Oglethorpe, GA 54* Owned October 1997
Ocala, FL 60* Managed August 1997
Naples, FL 30* Leased December 1997
Vero Beach, FL 7* Managed August 1997
Columbia, SC 32* Leased August 1998
</TABLE>
* Expansion of existing center
OCCUPANCY RATES
The following table shows certain information relating to occupancy rates
for NHC with respect to the Corporation's continuing operated long-term health
care centers:
<TABLE>
<CAPTION>
Six months
Year Ended December 31 ended June 30,
---------------------- --------------
1994 1995 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Overall census 92.8% 93.0% 93.6% 93.21%
Census excluding
acquisitions and new
openings 94.5% 93.0% 93.8% 94.67%
</TABLE>
Occupancy rates are calculated by dividing the total number of days of
patient care provided by the number of patient days available (which is
determined by multiplying the number of licensed beds by 365 or 366).
HOMECARE PROGRAMS
The Corporation's home health programs (called "homecare" by the
Corporation) will provide nursing and rehabilitative services to individuals in
their residences and are licensed by the Tennessee, South Carolina and Florida
state governments and certified by the federal government for participation in
the Medicare program. Each of NHC's 32 Medicare certified homecare programs and
its one private duty program is managed by a registered nurse, with speech,
occupational and physical therapists either employed by the program or on a
contract basis. Homecare visits increased from 717,000 visits in 1995 to 754,000
visits in 1996. Current projections are for approximately 765,000 visits in
1997.
The Corporation will have homecare programs in Tennessee, Florida, and
South Carolina. NHC opened two new program offices in South Carolina and two in
Florida in 1996. The Corporation's Tennessee homecare programs will be
associated with its long-term health care centers and, historically with NHC,
have been based within the health care center. The Corporation's new homecare
programs in Florida will be separately based in an effort to continually expand
the Corporation's market leadership in these services. NHC's experience in this
field indicates that homecare is not a substitute for institutional care in a
hospital or health care center. Instead, the Corporation's homecare programs
will
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<PAGE> 45
provide an additional level of health care because its centers will be able to
provide services to patients after they have been discharged from the center or
prior to their admission.
ASSISTED LIVING UNITS
As of June 30, 1997, NHC operates 11 assisted living units, eight of which
are located within the physical structure of a long-term health care center or
retirement center and three of which are freestanding and were opened in 1996
and 1997. The Corporation plans to add at least two free standing assisted
living projects each year with the first priority being to serve markets in
which NHC already operates health care centers. Assisted living units provide
basic room and board functions for the elderly with the on-staff availability to
assist in minor medical needs on an as needed basis. Certificates of Need are
generally not necessary to build these projects. NHC has opened one and the
Corporation expects to start construction on two free standing projects in 1998.
RETIREMENT CENTERS
The Corporation's retirement centers will offer specially designed
residential units for the active and ambulatory elderly and provide various
ancillary services for their residents, including restaurants, activity rooms
and social areas. In most cases, retirement centers will also include long-term
health care facilities, either in contiguous or adjacent licensed health care
centers. Charges for services will be paid from private sources without
assistance from governmental programs. Retirement centers may be licensed and
regulated in some states, but do not require the issuance of a Certificate of
Need such as is required for health care centers. Although NHC has developed
retirement centers adjacent to its health care properties with an initial
construction of 57 to 137 units and which are rented by the month, these centers
offer only the expansion of NHC's continuum of care, rather than a separate
profit center. The projects are designed, however, to be expandable if the
demand justifies. Thus, these retirement units offer a positive marketing aspect
of the Corporation's health care centers.
One retirement area which the Corporation will be entering is that of
"continuing care communities", where the resident pays a substantial endowment
fee and a monthly maintenance fee. The resident then receives a full range of
services - including nursing home care - without additional charge.
One such continuing care community, the 137 unit Richland Place Retirement
Center, was opened in Nashville, Tennessee in January, 1993 and is fully
occupied. NHC is currently marketing additional continuing care retirement
communities in Murfreesboro and Knoxville, Tennessee.
ADDITIONAL SERVICES
The Corporation plans to continue to expand its continuum of care for the
elderly by offering a comprehensive and increasing range of services through
related or separately structured health care centers, homecare programs,
specialized care units, pharmacy operations, rehabilitative services, assisted
living centers and retirement centers, as described below:
A. HOMECARE PROGRAMS. The Corporation's policy will be to affiliate each
of its licensed and certified homecare programs with a Corporation
operated health care center. Although NHC's existing programs have
increased their total number of visits from 94,000 in 1989 to 754,184
in 1996, NHC has applied for and received CONs to expand the program
services in both Florida and South Carolina, and the Corporation will
pursue a number of acquisition opportunities. Such acquired or new
programs are not presently planned to be operated out of a health care
center. Additional certificate of need applications will be filed by
the Corporation during 1998.
B. REHABILITATIVE SERVICES. The Corporation will continue to operate an
intensive offering of physical, speech, and occupational therapy
provided by center specific therapists. NHC increased its staff of
professionally licensed therapists from nearly 800 last year to over
1,000 in 1996. Starting in October, 1993, NHC redirected its focus
from center-based therapists to a wider operational format and has
created a separate rehabilitation subsidiary known as National Health
Rehab (NHR), which will become a subsidiary of the Corporation.
Because of NHC's extensive network of health care centers in the
southeastern United States, the Corporation believes it will be better
able to attract, employ, and retain therapists. The Corporation will
also provide contract services to 606 health care centers owned by
third parties. Provision of these services will not be covered under
the Corporation's contracts to manage health care centers and must be
renegotiated annually with the center owner. The Corporation believes
its rates for these services will be competitive with other market
rates.
C. MEDICAL SPECIALTY UNITS. NHC has required all of its centers to
participate in the Medicare program since 1973, which requirement the
Corporation will continue and intends to expand its range of services
by the creation of center-specific medical specialty units such as
NHC's twelve Alzheimer's disease care units and nine subacute nursing
units. The services will be provided not only at each of the
Corporation's operated center, but also at existing specialized care
units.
D. PHARMACY OPERATIONS. The Corporation's policy will continue to be to
have an in-house pharmacy located in each health care center in those
states where licensure permits the operation of an in-house pharmacy.
In
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<PAGE> 46
other states, pharmaceutical services will be provided by third party
contracts. The Corporation will continue to review opportunities for
regional pharmacy operations and NHC now operates three, one in east
Tennessee and two in central Florida. These pharmacy operations will
operate out of a central office and supply (on a separate contractual
basis) pharmaceutical services and supplies which were formerly
purchased by each center from local vendors. NHC's regional pharmacy
operations now have 5,450 nursing home beds under contract.
E. ASSISTED LIVING PROJECTS. NHC presently operates eleven assisted
living projects, eight of which are located within the physical
structure of a long-term health care center or retirement complex. The
Corporation has identified the assisted living market as an expanding
area for the delivery of health care and hospitality services and will
embark upon a market review in its states of operation for the
construction of free-standing assisted living centers. Assisted living
units provide basic room and board functions for the elderly with the
on-staff availability to assist in minor medical needs on an as needed
basis.
F. NUTRITIONAL SUPPORT SERVICES. The Corporation will own a medical
support services business, which will primarily provide nutritional
enteral, parenteral feeding materials, urological and medical supplies
to patients in the Corporation's facilities as well as in other
long-term care or home settings. This company is headquartered in
Knoxville, Tennessee and is known as Nutritional Support Services
("NSS"). Revenues from this subsidiary accounted for from 4% to 6%
NHC's net revenues in 1996, 1995 and 1994.
G. MANAGED CARE CONTRACTS. The Corporation will have seven regional
contract management offices, staffed by experienced case managers who
contract with managed care organizations ("MCOs") and insurance
carriers for the provision of subacute and other medical specialty
services within a regional cluster of centers. Florida, Middle and
East Tennessee, and South Carolina are currently being serviced by
NHC's seven case managers.
RELATIONSHIP WITH NATIONAL HEALTH INVESTORS, INC.
In 1991 NHC formed NHI, as a wholly-owned subsidiary. It then transferred
to NHI certain healthcare facilities then owned by NHC and then distributed the
shares of NHI to NHC's unitholders. The distribution had the effect of
separating NHC and NHI into two independent public companies. As a result of the
distribution, all of the outstanding shares of NHI were distributed to the then
NHC unitholders.
NHI MASTER AGREEMENT TO LEASE. The Master Agreement to Lease (the "NHI
Master Agreement") with NHI covering 40 nursing homes and three retirement
centers, sets forth certain terms and conditions applicable to all leases
entered into by and between NHI and NHC (each an "NHI Lease", and together, the
"NHI Leases"). the NHI Master Lease and all of the NHI Leases will be assumed by
the Corporation pursuant to the Merger. The NHI Leases are for an initial term
expiring on December 31, 2005 with two five-year renewal options at the election
of the Corporation which allow for the renewal of the NHI Leases on an omnibus
basis only unless otherwise specifically agreed in writing by NHI. During the
initial term and the first renewal term (if applicable), the Corporation is
obligated to pay annual base rent for the respective NHI Leased facilities
aggregating $15.2 million plus additional rent described below on the properties
initially sold to NHI. Additionally, $1.4 million in base rent per year as a
result of expansion of three of the facilities. During the second renewal term,
the Corporation is required to pay annual base rent based on the then fair
market rental of the property as negotiated at that time between NHI and the
Corporation. The NHI Master Agreement also obligates the Corporation to pay as
additional rent under each NHI Lease (i) all payments of interest and principal,
(ii) any other payments due under each mortgage to which the conveyance of the
respective health care facility to NHI was subject and (iii) any refinancing of
such mortgage debt that matures or is required to be paid in its entirety during
the term of the NHI Lease. In addition, each year after 1992 (the first full
calendar year of the term of the NHI Master Agreement), the Corporation is
obligated to pay percentage rent to NHI equal to 3% of the amount by which gross
revenues of each NHI Leased facility in such later year exceeds the gross
revenues of such facility in 1992. NHC paid $1.8 million as percentage rent for
1996 and expects to pay $2.3 million in 1997.
The NHI Master Agreement is a "triple net lease", under which the
Corporation will be responsible to pay all taxes, utilities, insurance premium
costs, repairs (including structural portions of the buildings, constituting a
part of the NHI Leased facilities) and other charges relating to the ownership
and operation of the NHI Leased facilities. The Corporation will be obligated at
its expense to keep all improvements and fixtures and other components of the
NHI Leased facilities covered by "all risk" insurance in an amount equal to the
full replacement costs thereof, insurance against boiler explosion and similar
insurance, flood insurance if the land constituting the NHI Leased facility is
located within a designated flood plain area and to maintain specified minimal
personal injury and property damage insurance, protecting NHI as well as the
Corporation at such NHI Leased facility. The Corporation will also be obligated
to indemnify and hold harmless NHI from all claims resulting from the use and
occupancy of each NHI Leased facility by the Corporation or persons claiming
under the Corporation and related activities, as well as to indemnify NHI
against, all costs related to any release, discovery, cleanup and removal of
hazardous substances or materials on, or other environmental responsibility with
respect to, each NHI Leased facility.
NHI ADVISORY AGREEMENT. NHI entered into an Advisory, Administrative
Services and Facilities Agreement (the "NHI Advisory Agreement") on October 15,
1991 with NHC as "Advisor", which agreement will be assumed by the Corporation
pursuant to the Merger. Under the NHI Advisory Agreement, the Corporation will
provide management and advisory services to NHI during the term of the NHI
Advisory Agreement. Under the NHI Advisory Agreement, NHI will engage the
Corporation to use its best efforts (a) to present to NHI a continuing and
suitable investment
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program consistent with the investment policies of NHI adopted by NHI's Board of
Directors from time to time; (b) to manage the day-to-day affairs and operations
of NHI; and (c) to provide administrative services and facilities appropriate
for such management. In performing its obligations under the NHI Advisory
Agreement, the Corporation will be subject to the supervision of and policies
established by NHI's Board of Directors.
The NHI Advisory Agreement was initially for a stated term which expired
December 31, 1996. The NHI Advisory Agreement is now on a year to year term.
Either party may terminate the NHI Advisory Agreement at any time on 90 days
notice, and NHI may terminate the NHI Advisory Agreement for cause at any time.
For its services under the NHI Advisory Agreement, the Corporation will be
entitled to annual compensation in a base amount of $1.625 million. Under the
NHI Advisory Agreement, NHI will reimburse the Corporation for certain out of
pocket expenses including those incurred in connection with borrowed money,
taxes, fees to independent contractors, legal and accounting services and
stockholder distributions and communications. For 1993 and later years the
annual compensation is calculated on a formula which is related to the increase
in fully diluted Funds from Operations per common share (as defined in the NHI
Advisory Agreement). In 1996, the annual compensation under the NHI Advisory
Agreement was $3.1 million and it is expected to be approximately $3.3 million
in 1997.
Pursuant to the NHI Advisory Agreement, the Corporation will manage all of
the day-to-day affairs of NHI and provide all such services through the
Corporation's personnel. The NHI Advisory Agreement provides that without regard
to the amount of compensation received by the Corporation under the NHI Advisory
Agreement, the Corporation shall pay all expenses in performing its obligations
including the employment expenses of the officers and directors and the
Corporation personnel providing services to NHI. The NHI Advisory Agreement
further provides that NHI shall pay the expenses incurred with respect to and
allocable to the prudent operation and business of NHI including any fees,
salaries, and other employment costs, taxes and expenses paid to directors,
officers and employees of NHI who are not also employees of the Corporation.
Currently, other than the NHI directors who are not employees of NHC, NHI does
not have any officers or employees who are not also employees of NHC. NHI's two
executive officers, Mr. Adams and Mr. LaRoche, will be employees of the
Corporation and all of their fees, salaries and employment costs will be paid by
the Corporation.
SOURCES OF REVENUE
The Corporation's revenues will be primarily derived from its health care
centers. The source and amount of the revenues are determined by (i) the
licensed bed capacity of its health care centers, (ii) the occupancy rate of
those centers, (iii) the extent to which the rehabilitative and other skilled
ancillary services provided at each center are utilized by the patients in the
centers, (iv) the mix of private pay, Medicare and Medicaid patients, and (v)
the rates paid by private paying patients and by the Medicare and Medicaid
programs.
The following table sets forth sources of patient revenues to NHC from
health care centers and homecare services for the periods indicated:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------
Source 1994 1995 1996
- ------ ---- ---- ----
<S> <C> <C> <C>
Private 28% 28% 28%
Medicare 35% 38% 38%
Medicaid/Skilled 11% 9% 9%
Medicaid/Intermediate 25% 24% 24%
VA and Other 1% 1% 1%
--- --- ---
Total 100% 100% 100%
--- --- ---
</TABLE>
GOVERNMENT HEALTH CARE REIMBURSEMENT PROGRAMS
The federal health insurance program for the aged is Medicare, which is
administered by the Department of Health and Human Services. State programs for
medical assistance to the indigent are generally known as Medicaid. All health
care centers to be operated by the Corporation are certified to participate in
Medicare and all but two participate in Medicaid. Eligibility for participation
in these programs depends upon a variety of factors, including, among others,
accommodations, services, equipment, patient care, safety, physical environment
and the implementation and maintenance of cost controls and accounting
procedures. In addition, some of the centers to be operated by the Corproation
have entered into separate contracts with the United States Veterans
Administration which provides reimbursement for care to veterans transferred
from Veterans Administration hospitals.
Generally, government health care reimbursement programs make payments
under a cost based reimbursement system. Although general similarities exist due
to federal mandates, each state operates under its own specific system.
Medicare, however, is uniform nationwide and pays, as defined by the program,
the reasonable direct and indirect cost
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<PAGE> 48
of services furnished to Medicare patients, including depreciation, interest and
overhead. Medicare payments have previously been limited by ceilings which,
pursuant to the 1993 Tax Reform Act, were frozen at their 1993 level for 1994,
1995 and the first nine months of 1996. During 1996 NHC had 48 owned or leased
centers which operated at Medicare costs higher than the ceiling. NHC has filed
"exception requests" with the fiscal intermediary for substantially all of these
centers. Revenues therefrom will not be booked until paid and audited by the
appropriate payors. Private paying patients, private insurance carriers and the
Veterans Administration generally pay on the basis of the center's charges or
specifically negotiated contracts. Average per capita daily room and board
revenue from private paying patients is higher than from Medicare and Medicaid
patients, while the average per capita daily revenue from Medicare patients is
higher than from Medicaid patients. The Corporation will attempt to attract an
increased percentage of private and Medicare patients by providing
rehabilitative services and by NHC increasing its marketing of those services
through market areas and "Managed Care Offices", of which four were open by
December 31, 1996. These services are designed to speed the patient's recovery
and allow the patient to return home as soon as is practical. In addition to
educating physicians and patients to the advantages of the rehabilitative
services, NHC also has implemented incentive programs which provide for the
payment of bonuses to its regional and center personnel if they are able to
obtain private and Medicare goals at their centers, which programs will be
continued by the Corporation.
Items eligible for payment under the Medicare program consist of nursing
care, room and board, social services, physical and speech therapy, drugs and
other supplies, and other necessary services of the type provided by skilled
nursing facilities. Routine service costs for extended care facilities are
subject to certain per diem costs limits. Medicare patients are entitled to have
payment made on their behalf to a skilled nursing facility for up to 100 days
during each calendar year and a prior 3-day hospital stay is required. A patient
must be certified for entitlement under the Medicare program before the skilled
nursing facility is entitled to receive Medicare payments and patients are
required to pay approximately $95.00 per day after the first 20 days of the
covered stay. Under the Medicare program, the federal government pays directly
to the skilled nursing facility the reasonable direct and indirect costs of the
services furnished. The Medicare program only reimburses for skilled nursing
services, which generally afford a more intensive level of care.
Medicaid programs provide funds for payment of medical services obtained by
"medically indigent persons". These programs are operated by state agencies
which adopt their own medical reimbursement formulas and standards, but which
are entitled to receive supplemental funds from the federal government if their
programs comply with certain federal government regulations. In all states in
which the Corporation will initially operate, the Medicaid programs authorize
reimbursement at a fixed rate per day of service. The fixed rate is established
on the basis of a predetermined average cost of operating nursing centers in the
state in which the facility is located or based upon the center's actual cost.
The rate is adjusted annually based upon changes in historical costs and/or
actual costs and a projected cost of living factor.
During the fiscal year, each facility receives payments under the
applicable government reimbursement program. Medicaid payments are generally
"prospective" in that the payment is based upon the prior years actual costs.
Medicare payments are "retrospective" in that current year payments are designed
to reasonably approximate the facility's reimbursable costs during that year.
Payments under Medicare are adjusted to actual allowable costs each year. The
actual costs incurred and reported by the facility under the Medicare program
are subject to audit with respect to proper application of the various payment
formulas. These audits can result in retroactive adjustments of interim payments
received from the program. If, as a result of such audits, it is determined that
overpayment of benefits were made, the excess amount must be repaid to the
government. If, on the other hand, it is determined that an underpayment was
made, the government agency makes an additional payment to the operator. The
Corporation will book as receivables the amounts which it expects to receive
under the Medicare and Medicaid programs and book into profit or loss any
differences in amounts actually received. To date, adjustments have not had a
material adverse effect on NHC. NHC believes that its payment formulas have been
properly applied and that any future adjustments will not be materially adverse
to the Corporation. The current reimbursement system will be modified in
accordance with the BBA. For further discussion of the BBA See "Health Care
Reform."
REGULATION
Health care centers are subject to extensive federal, state and in some
cases, local regulatory, licensing, and inspection requirements. These
requirements relate, among other things, to the adequacy of physical buildings
and equipment, qualifications of administrative personnel and nursing staff,
quality of nursing provided and continued compliance with laws and regulations
relating to the operation of the centers. In all states in which the Corporation
will initially operate, before the facility can make a capital expenditure
exceeding certain specified amounts or construct any new long-term health care
beds, approval of the state health care regulatory agency or agencies must be
obtained and a Certificate of Need issued. Alabama exempts from this review
process any bed additions which are less than 10% of the total existing licensed
beds or 10 beds, whichever is less. The appropriate state health planning agency
must determine that a need for the new beds or expenditure exists before a CON
can be issued. A CON is generally issued for a specific maximum amount of
expenditure and the project must be completed within a specific time period.
There is no advance assurance that the Corporation will be able to obtain a CON
in any particular instance. In some states, approval is also necessary in order
to purchase existing health care beds, although the purchaser is normally
permitted to avoid a full scale CON application procedure by giving advance
written notice of the acquisition and giving written assurance to the state
regulatory agency that the change of ownership will not result in a change in
the number of beds or the services offered at the facility.
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While there are currently no significant legislative proposals to eliminate
CON pending in the states in which the Corporation initially intends to do
business, deregulation in the CON area would likely result in increased
competition among nursing home companies and could adversely affect occupancy
rates and the supply of licensed and certified personnel.
HEALTH CARE REFORM
Government at both the federal and state levels has continued in its
efforts to reduce, or at least limit the growth of, spending for health care
services, including services to be provided by the Corporation. On August 5,
1997, President Clinton signed into law BBA, which contains numerous Medicare
and Medicaid cost-saving measures, as well as new anti-fraud provisions. The BBA
has been projected to save $115 billion in Medicare spending over the next five
years, and $13 billion in the Medicaid program. Section 4711 of BBA, entitled
"Flexibility in Payment Methods for Hospital, Nursing Facility, ICF/MR, and Home
Health Services", repealed the Boren Amendment, which had required that state
Medicaid programs pay to nursing home providers amounts adequate to enable them
to meet government quality and safety standards; the Boren Amendment was
previously the foundation of litigation by nursing homes seeking rate increases.
In place of the Boren Amendment, the BBA requires only that, for services and
items furnished on or after October 1, 1997, a state Medicaid program must
provide for a public process for determination of Medicaid rates of payment for
nursing facility services, under which proposed rates, the methodologies
underlying the establishment of such rates, and justifications for the proposed
rates are published, and which gives providers, beneficiaries and other
concerned state residents a reasonable opportunity for review and comment on the
proposed rates, methodologies and justifications. Several of the states in which
the Corporation will operate are actively seeking ways to reduce Medicaid
spending for nursing home care by such methods as capitated payments and
substantial reductions in reimbursement rates. The BBA also requires that
nursing homes transition to a prospective payment system under the Medicare
program during a three-year "transition period" commencing with the first cost
reporting period beginning on or after July 1, 1998. In addition, the BBA
creates a managed care Medicare Program called "Medicare + Choice", which allows
Medicare beneficiaries to participate in either the original Medicare
fee-for-service program or to enroll in a coordinated care plan such as health
maintenance organizations ("HMOs"). Such coordinated care plans would allow HMOs
to enter into risk-based contracts with the Medicare program, and the HMO's
would then contract with providers such as the Corporation. No assurances can be
given that the facilities to be operated by the Corporation will be successful
in negotiating favorable contracts with Medicare + Choice managed care
organizations. The BBA also contains several new antifraud provisions. Given the
recent enactment of the BBA, the Corporation is unable to predict the impact of
the BBA and potential changes in state Medicaid reimbursement methodologies on
its operations; however, any significant reduction in either Medicare or
Medicaid payments could adversely affect the Corporation. Changes in
certification and participation requirements of the Medicare and Medicaid
programs have restricted, and are likely to continue to restrict further,
eligibility for reimbursement under those programs. Failure to obtain and
maintain Medicare and Medicaid certification at the Corporation's facilities
will result in denial of Medicare and Medicaid payments which could result in a
significant loss of revenue to the Corporation. In addition, private payors,
including managed care payors, increasingly are demanding that providers accept
discounted fees or assume all or a portion of the financial risk for the
delivery of health care services. Such measures may include capitated payments
whereby the Corporation is responsible for providing, for a fixed fee, all
services needed by certain patients. Capitated payments can result in
significant losses if patients require expensive treatment not adequately
covered by the capitated rate. Efforts to impose reduced payments, greater
discounts and more stringent cost controls by government and other payors are
expected to continue. For the fiscal year ended December 31, 1996, NHC derived
38% and 33% of its net patient revenues from the Medicare and Medicaid programs,
respectively. Any reforms that significantly limit rates of reimbursement under
the Medicare or Medicaid programs, therefore, could have a material adverse
effect on the Corporation's profitability. The Corporation is unable to predict
what reform proposals or reimbursement limitations will be adopted in the future
or the effect such changes will have on its operations. No assurance can be
given that such reforms will not have a material adverse effect on the
Corporation. See "Business --The Corporation -- Sources of Revenue"
Nursing homes and home health agencies have recently been the target of
health care reform, from both a fraud and reimbursement perspective. Operation
Restore Trust, a demonstration project which has been conducted by the
Department of Health and Human Services in five states, is expanding to a dozen
more states. "ORT Plus" will continue its focus on fraud in the areas of home
health, nursing home and DME suppliers, as well as adding new anti-fraud and
abuse targets. The Corporation will operate nursing homes and home health
agencies in five ORT Plus states and could be subject to increased scrutiny.
President Clinton recently announced a moratorium on the certification of home
health agencies in an attempt to curb what is perceived to be rampant fraud and
abuse in this area. The Corporation cannot predict what impact ORT Plus or this
moratorium will have on its home care programs. Although NHC's management
believes that its home care and nursing home operations are in compliance with
applicable laws and regulations, there can be no assurance that the Corporation,
its home care and nursing home operations will not be the subject of an
investigation nor that they will be found to be in compliance if investigated.
See "Business -- The Corporation -- Legal Proceedings."
Although it is likely that there will be a substantial reduction in the
growth of governmental revenues for Medicare and Medicaid, the Corporation
believes that loss of governmental revenues can be offset by increased private
paying revenues and the continued expansion of its service component income.
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COMPETITION
In most of the communities in which the health care centers which will be
operated by the Corporation are located, there are other health care centers
with which the Corporation will compete. In competing for patients and staff
with these centers, the Corporation will rely upon referrals from acute care
hospitals, physicians, residential care facilities, church groups and other
community service organizations. The reputation in the community and the
physical appearance of the Corporation's health care centers will also be
important in obtaining patients, since members of the patient's family generally
participate to a greater extent in selecting health care centers than in
selecting an acute care hospital. The Corporation believes that by providing and
emphasizing rehabilitative as well as skilled care services at its centers, it
will be able to broaden its patient base and to differentiate its centers from
competing health care centers.
The Corporation will experience competition in employing and retaining
nurses, technicians, aides and other high quality professional and
non-professional employees. In order to enhance its competitive position, the
Corporation will continue NHC's educational tuition loan program, an American
Dietary Association approved internship program, a specially designed nurse's
aide training class, and make financial scholarship aid available to physical
therapy vocational programs and The Foundation for Geriatric Education. The
Corporation will also continue NHC's "Administrator in Training" course, 24
months in duration, for the professional training of administrators. Presently,
NHC has twelve full-time individuals in this program. Four of NHC's eight
regional vice presidents and 53 of its 110 health care center administrators
have graduated therefrom.
The Corporation's employee benefit package will offer a tuition
reimbursement program. The goal of the program will be to insure a well trained
qualified work force to meet future demands. While the program will be offered
to all disciplines, special emphasis will be placed on supporting students in
nursing and physical therapy programs. Students will be reimbursed at the end of
each semester after presenting tuition receipts and grades to management. The
program has been successful for NHC in providing a means for many bright
students to pursue a formal education.
EMPLOYEES
As of June 30, 1997, NHC's managed centers had approximately 16,000 full
and part time employees, who are called "Partners" by NHC. The Corporation
intends to retain all of these employees although they will be employees of
National and provided to the Corporation pursuant to the Employee Services
Agreement. No employees are presently represented by a bargaining unit. NHC and
National believe their current relations with these employees are good. See
"Certain Transactions -- National."
LEGAL PROCEEDINGS
In March 1996, FCC, an independent Florida corporation for whom NHC manages
sixteen licensed nursing centers in Florida, gave NHC notice of its intent not
to renew one management contract. Pursuant to written agreements between the
parties, NHC valued the center, offering to either purchase the center at the
price so valued or require FCC to pay to NHC certain deferred compensation based
upon that value. FCC responded on March 26, 1996, by filing a Declaratory
Judgment suit in the Circuit Court of the Twelfth Judicial Circuit in and for
Sarasota County, Florida, requesting the court to interpret the parties' rights
under their contractual arrangements. FCC next sued on April 18, 1996 in the
Circuit Court for Columbia County, Florida, removed on May 1, 1996 to the United
States District Court, Middle District, Florida, Jacksonville Division to obtain
possession of the center for which it alleged the management contract had been
terminated. This suit has now been dismissed, and the issue of possession will
be decided by the Sarasota Circuit Court.
In January, 1997, FCC notified NHC that it currently does not intend to
renew an additional four contracts which mature in 1997, but has agreed that NHC
will remain as manager until a final decision is reached by the Sarasota Court.
The balance of the FCC contracts may be terminated in the years 2001-2003. In
the summer of 1997, FCC filed a Third Amended and Supplemental Complaint in the
Sarasota County Court action asserting fifteen separate counts against NHC and
its general partners, which are collectively referred to as NHC in the
complaint. Among the claims added in the amended complaint are claims for breach
of all management agreements between the parties, for a declaration that FCC
does not owe any deferred contingent fees to NHC or in the alternative, a
declaration that any such deferred fees constitute usurious interest, for breach
of a 1994 loan agreement between FCC and defendants related to the construction
of a facility in Orlando, for business libel, and for breach of fiduciary duty
arising from defendants' alleged obstruction of FCC's right to audit, from
defendants' alleged failure to properly manage FCC's facilities, and from
defendants' alleged self dealing by causing FCC and defendants or their
affiliates to enter into contracts that are not customary or usual in the
industry. In additional to declaratory relief, FCC asserts that it is entitled
to unspecified damages and to terminate all of the management agreements between
the parties for cause. Defendants, including NHC, have filed an answer denying
all of FCC's claims and asserting a counterclaim against FCC. No trial date has
been set in this matter.
NHC is also a defendant in a lawsuit styled Braeuning, et al vs. National
HealthCare L.P., et al filed "under seal" in the U.S. District Court of the
Northern District of Florida on April 9, 1996. The court removed the seal from
the complaint - but not the file itself - on March 20, 1997 and service of
process occurred on July 8, 1997, with the government participating as an
intervening plaintiff. The suit alleges that NHC has submitted cost reports and
routine cost limit exception requests containing "fraudulent allocation of
routine nursing services to ancillary service cost centers" and improper
allocation of skilled nursing service hours in four managed centers, all in the
state of Florida.
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The suit was filed under the Qui Tam provisions of the Federal False Claims Act,
commonly referred to as the "Whistleblower Act".
In regard to the allegations contained in the lawsuit, NHC believes that
the cost report information of its centers have been either appropriately filed
or, upon appropriate amendment, will reflect adjustments only for the correction
of unintentional misallocations. Prior to the filing of the suit, NHC had
commenced an in-depth review of the nursing time allocation process at its
owned, leased and managed centers. A significant number of amended cost reports
have been filed and the Corporation will continue to schedule and prepare
revised cost reports and exception requests. It is anticipated that any years in
question will be reviewed prior to there being further action in this matter at
the judicial level. NHC is fully cooperating and the Corporation will fully
cooperate with the government in an attempt to determine dollar amounts
involved, and each intends to aggressively pursue an amicable settlement. The
cost report periods under review include periods from 1991 through 1995.
NHC would be responsible for any settlement related to its owned or leased
facilities and to the extent that managed centers have settlements, NHC's 6%
management fee would be adversely impacted. The Corporation will continue NHC's
revenue policy not reflect routine cost limit exception requests as income until
the process, including cost report audits, is completed. The Corporation cannot
predict at this time the ultimate outcome of the suit but will strongly defend
its actions in this matter.
In October 1996 two managed centers in Florida were audited by
representatives of the regional office of the OIG. As part of these audits, the
OIG reviewed various records of the facilities relating to allocation of nursing
hours and contracts with suppliers of outside services. At one center the OIG
indicated during an exit conference that it had no further questions but has not
yet issued a final report. At the second facility - which is one of four named
in the Braeuning lawsuit - the OIG determined that certain records were
insufficient and NHC supplied the additional requested information. These audits
have been incorporated into the lawsuit.
Florida is one of the states in which governmental officials are conducting
"Operation Restore Trust", a federal/state program aimed at detecting and
eliminating fraud and abuse by providers in the Medicare and Medicaid programs.
The OIG has increased its investigative actions in Florida (and has now opened a
Tennessee office) as part of Operation Restore Trust. The Corporation will
continue to review and monitor the cost reporting process and its compliance
with all government reimbursement standards, but cannot predict whether the OIG
or other government officials will take further action or request additional
information as a result of the Braeuning suit or any other audit that may be
conducted in the future. An adverse determination in the lawsuit or as a result
of an audit could subject the Corporation to civil or criminal fines and
penalties which could have a material negative impact on the profitability of
the Corporation.
NHC is subject to claims and suits in the ordinary course of business,
which will be assumed by the Corporation as a result of the Plan of Restructure.
While there are several worker's compensation and personal liability claims
presently in the court system, management believes that the ultimate resolution
of such pending proceedings other than the legal proceedings described above
will not have any material adverse effect on the Corporation or its operations.
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RELATIONSHIP BETWEEN THE REIT AND THE
CORPORATION AFTER THE RESTRUCTURE
THE ASSUMED LIABILITIES
The REIT will assume or take the Owned Healthcare Facilities subject to
Assumed Liabilities of approximately $105.9 million. The Assumed Liabilities
consist of four loan agreements which are secured by mortgages on certain of the
Owned Healthcare Facilities. The interest rate on the Assumed Liabilities
include fixed rates of 8% to 8.64% and floating rate based on prime rate and
LIBOR plus 1%. The term of the loans range from 2005 through 2015.
Although the REIT is assuming or taking the Owned Healthcare Facilities
subject to the Assumed Liabilities, unless the holder of such debt has
specifically consented, the Corporation will remain liable on such debt. The
REIT has agreed to indemnify NHC and the Corporation in respect of such
continuing liability. In connection with the transfer of the Owned Healthcare
Facilities and the Notes to the REIT, and the assumption by the REIT of the
Assumed Liabilities, NHC, the REIT and the Corporation have obtained oral
consents, subject to the preparation and execution of definitive documentation,
of the lenders of such Assumed Liabilities. Although there can be no assurance,
NHC management has no reason to believe that such documentation will not be
finalized in a timely manner. However, NHC, the REIT and the Corporation have
not obtained consents of the lenders of the remaining principal amount. See
"Risk Factors -- The REIT -- Lack of Consents; Acceleration of Certain
Maturities." In the event that the REIT or the Corporation fails to obtain any
required consent, such failure may be deemed to constitute a default under the
related Assumed Liabilities, the REIT and/or the Corporation may be required to
retire such Assumed Liabilities prior to its stated maturity. A default under
such debt, if not waived or cured, could result in a loss of certain of the
REIT's or the Corporation's assets through foreclosure or other means.
The majority of the Assumed Liabilities is cross-defaulted with other NHC
liabilities which will be assumed by the Corporation. Thus, in the event the
Corporation defaulted on its remaining obligations under its debt package, the
REIT could lose its interest in the Notes or the Owned Healthcare Facilities,
even if its own payments on the Assumed Liabilities were current.
The REIT is in the process of negotiating a new credit agreement (the "New
REIT Credit Agreement") which, if obtained, will be used to replace all but
approximately $14.8 million of the Assumed Liabilities. The REIT is seeking a
$105 million unsecured credit facility. The REIT believes it will be able to
obtain the new credit soon after the Effective Time. The New REIT Credit
Agreement will be the sole obligation of the REIT and once it is in place, the
Corporation will not have any obligations in the event of a default by the REIT.
There can be no assurance that the REIT will be able to successfully negotiate
the New REIT Credit Agreement or what the final terms of any such credit
agreement will be.
In addition, the Corporation is also in the process of negotiating a new
credit agreement (the "New Corporation Credit Agreement") which, if obtained,
will be used to replace a portion of its outstanding debt. The Corporation is
seeking a $35 million credit facility. The Corporation believes it will be able
to obtain the debt soon after the Effective Time. The New Corporation Credit
Agreement will be the sole obligation of the Corporation and once it is in
place, the REIT will not have any obligations in the event of a default by the
Corporation. There can be no assurance that the Corporation will be able to
successfully negotiate the New Corporation Credit Agreement or what the final
terms of any such credit agreement will be.
THE LEASES
Concurrently with NHC's conveyance of the Owned Healthcare Facilities to
the REIT, the REIT as "Landlord" will lease back to the Corporation, as "Tenant"
each of the Owned Healthcare Facilities. Each such facility will be the subject
of a separate Lease Agreement that will incorporate the provisions of a Master
Agreement to Lease between the REIT as Landlord and the Corporation as Tenant
(the "REIT Master Agreement").The Lease of each Owned Healthcare Facility will
include the land, the buildings and structures and other improvements thereon,
easements, rights and similar appurtenances to such land and improvements, and
permanently affixed equipment, machinery and other fixtures relating to the
operation of the Owned Healthcare Facility, but no personal property of the
Corporation that is utilized in the Corporation's operation of the Owned
Healthcare Facility will be the subject of a Lease.
The REIT Master Agreement provides that each Lease will be for an initial
term expiring on December 31, 2007 (the "Initial Term"). Provided that the
Corporation is not then in default and gives at least six months notice, the
Corporation has the option to renew all (but without REIT's consent not less
than all) of the Leases for a further five-year term expiring December 31, 2012
(the "First Renewal Term"); and, provided that the Corporation is not then in
default and gives at least six (6) months notice, the Corporation will have the
option to renew all (but not less than all) of the Leases for a term expiring
December 31, 2017 (the "Second Renewal Term").
During the Initial Term and both Renewal Terms (if applicable), the
Corporation is obligated to pay the REIT annual base rent for the respective
Owned Healthcare Facilities in the respective amounts set forth under "Business
- -The REIT -- Owned Healthcare Facilities", which amounts initially to an
aggregate $15,494,437 increased each year by 3% of the increase in gross
revenues over 1999, the "base year."
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<PAGE> 53
The REIT Master Agreement and the respective Leases will also obligate the
Corporation to pay as "other additional rent" all real estate taxes, utility
charges and other charges imposed by third parties and which, if not paid, might
become a levy or a lien upon the property. In addition to the base rent, and
other additional rent, in each year after 1999 the Corporation must pay
percentage rent to the REIT equal to 3% of the amount by which gross revenues of
each Owned Healthcare Facility in such later year exceeds the Gross Revenues of
such Owned Healthcare Facility in 1999. Base Rent, Other Additional Rent and
Percentage Rent are collectively referred to in the REIT Master Agreement as
"Rent". NHC believes that the rent the Corporation will pay to the REIT under
the various Leases represents the fair rental value for each leased property.
Each Lease of an Owned Healthcare Facility is what is commonly known as a
"triple net lease" or "absolute net lease," under which the Corporation is
responsible to pay all taxes, utilities, insurance premium costs, repairs
(including to structural portions of the buildings constituting a part of the
Owned Healthcare Facilities) and other charges relating to the ownership and
operation of the Owned Healthcare Facilities. The Corporation is obligated at
its expense to keep all improvements and fixtures and other components of the
Owned Healthcare Facilities covered by "all risk" insurance in an amount equal
to at least 100% of the full replacement costs thereof, and insured against
boiler explosion and similar insurance; to provide loss of rent insurance (if
the same is available at a reasonable cost), and flood insurance if the land
constituting the Owned Healthcare Facility is located within a designated flood
plain area; and to maintain specified minimal personal injury and property
damage insurance, protecting the REIT as well as the Corporation at each Owned
Healthcare Facility. The Corporation is also obligated to indemnify and hold
harmless the REIT from all claims resulting from the use and occupancy of each
Owned Healthcare Facility by Corporation or persons claiming under the
Corporation and related activities, as well as to be fully responsible for, and
to indemnify and hold the REIT harmless against, all costs related to any
hazardous substances or materials on, or other environmental responsibility with
respect to, each Owned Healthcare Facility.
Under each Lease, the Corporation's use of the Owned Healthcare Facility is
limited to use as a nursing home, healthcare facility or other purpose for which
the Leased Property is being used at the commencement date of the Lease unless
the REIT's consent to some other use is obtained. The Corporation has
responsibility to obtain and maintain all licenses, certificates and consents
needed to use and operate each Owned Healthcare Facility for such purposes, and
to use and maintain each Owned Healthcare Facility in a careful, safe and proper
manner and in compliance with all local board of health and other applicable
governmental and insurance regulations. Each Lease permits the Corporation to
replace fixtures at each Owned Healthcare Facility and to finance such
replacement (subject to the approval of the REIT in the case of any financing in
excess of $10,000), and to make alterations with respect to any Owned Healthcare
Facility (subject to the REIT's approval for any alteration in excess of
$150,000 at any one Owned Healthcare Facility in any one year), with the title
to any such replacement fixtures and alterations belonging to the REIT.
An "Event of Default" will be deemed to have occurred under the REIT
Master Agreement and any individual Lease if the Corporation fails to pay Rent
within ten business days after notice of nonpayment from the REIT; if the REIT
gives three or more notices of nonpayment of Rent to the Corporation in any
one year (provided however that such will not be an Event of Default if REIT
fails to exercise its remedies within 60 days after the last of such notices);
if the Corporation fails to perform any other covenant and the Corporation
does not diligently undertake to cure the same within 30 days' notice from the
REIT; with respect to a Lease of any particular Owned Healthcare Facility, if
the Corporation ceases operations thereof for more than 180 days other than as a
result of destruction or condemnation; if any bankruptcy proceedings are
instituted by or against the Corporation and, if against the Corporation, they
are not dismissed within 90 days; if a custodian or receiver is appointed for
any Owned Healthcare Facility and not discharged within 60 days or the
Corporation is enjoined or prevented from conducting a substantial part of its
business for more than 60 days; if uncontested liens on any part of the property
of the Corporation are not dismissed or bonded within 60 days; or if the
Corporation or any affiliate of the Corporation defaults on any other material
obligation to the REIT or on any material obligation under any debt associated
with any Owned Healthcare Facility or any debt co-guaranteed by the REIT and the
Corporation.
In the event of any Event of Default, the REIT may evict the Corporation
and either terminate the Lease or re-let the premises in the REIT's name but for
the account of the Corporation. In either event, the Corporation shall remain
responsible for the rental value of the premises for the stated remainder period
of the term in excess of rents received by the REIT from any successor occupant.
In addition the REIT may exercise any other rights that it may have under law.
In the event of any damage or destruction to any Owned Healthcare Facility,
the Corporation has the obligation fully to repair or restore the same at the
Corporation's expense, with the Base Rent, real estate taxes and other
impositions on the particular Owned Healthcare Facility being appropriately
abated during the time of restoration. If any Owned Healthcare Facility is
damaged to such an extent that 50% of the licensed nursing home beds at such
Owned Healthcare Facility are rendered unusable and if the Corporation has fully
complied with the insurance obligations with respect to such Owned Healthcare
Facility (including maintaining insurance against loss of rents), the
Corporation may upon turning over all insurance proceeds with respect to such
Owned Healthcare Facility terminate the Lease of that Owned Healthcare Facility.
In the event of a condemnation or taking of any leased Owned Healthcare
Facility, the Lease terminates as to the portion of the Owned Healthcare
Facility taken, and in the event of a partial taking, the Corporation is
obligated to repair the portion not taken, if the same may still be economically
used, and the Base Rent therefor will abate in proportion to the number of beds
remaining.
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<PAGE> 54
The REIT Master Agreement provides that if during the Lease Term or within
six months after termination of such Term the REIT receives a bona fide third
party offer to purchase any Owned Healthcare Facility, then, prior to accepting
such third party offer, the REIT shall give the Corporation a 15-day right of
first refusal during which the Corporation may elect to purchase such Owned
Healthcare Facility on the same terms and conditions offered by the third party.
The Corporation also is granted a thirty day right of first refusal to lease an
Owned Healthcare Facility expiring six months after the expiration of the Lease
Term, on the same terms and conditions as offered by a third party.
Various other provisions of the REIT Master Agreement with respect to
Leases of the various Owned Healthcare Facilities provide for arbitration in the
event of the REIT and the Corporation's inability to resolve disputes under the
REIT Master Agreement or any Lease. Such Agreement also provides that upon its
termination and the last of the Leases between the REIT and the Corporation, the
REIT will, upon the Corporation's request within 12 months after such
termination, use its best efforts to change its corporate name to a name that
does not include the word "National".
The REIT Master Agreement described above applies only to the 24 Leases of
the Owned Healthcare Facilities. The REIT and the Corporation anticipate that
any future leases of additional healthcare facilities between them will also
become subject to the REIT Master Agreement with appropriate modifications to
fit the specific situation. The foregoing summary of certain of the provisions
of the REIT Master Agreement does not purport to be complete and is subject to
and qualified in its entirety by reference to all provisions of the REIT Master
Agreement.
ADVISORY, ADMINISTRATIVE SERVICES AND FACILITIES AGREEMENT
The REIT intends to enter into an Advisory, Administrative Services and
Facilities Agreement with the Corporation as "Advisor" under which the
Corporation will provide management and advisory services to the REIT during the
term of the REIT Advisory Agreement. The following summary of certain provisions
of the REIT Advisory Agreement does not purport to be complete and is subject to
and qualified in its entirety by reference to all provisions of the REIT
Advisory Agreement.
SERVICES OF ADVISOR
Under the REIT Advisory Agreement, the REIT engages the Corporation and the
Corporation , as Advisor, agrees to use its best efforts (a) to present to the
REIT a continuing and suitable investment program consistent with the investment
policy of the REIT adopted by the Directors from time to time; (b) to manage the
day-to-day affairs and operations of the REIT; and (c) to provide administrative
services and facilities appropriate for such management. In performing its
obligations under the Agreement, the Advisor is subject to the supervision of
and policies established by the REIT's Board of Directors.
The specific duties of the Advisor under the REIT Advisory Agreement
include providing the REIT with economic information and evaluations with
respect to additional investment opportunities, formulating an investment
program and selecting potential investments for the REIT and recommending the
terms thereof; and also evaluating and making recommendations as to the possible
sale or other disposition of the assets of the REIT. The Advisor also is
responsible for recommending selections of tenants, lenders, providers of
professional and specialized services and handling other managerial functions
with respect to the REIT's properties. The Advisor is also obligated to provide
office and clerical facilities adequate for the REIT's operations, and to
provide or obtain others to provide accounting, custodial, funds collection and
payment, stockholder and debentureholder communications, legal and other
services necessary in connection with the REIT's operations. The Advisor also
undertakes to keep the REIT's Directors informed as to developments in the
healthcare and REIT industries useful to the REIT's existing and potential
future business and investments.
The REIT Advisory Agreement also obligates the Advisor to handle or arrange
for the handling of the REIT's financial and other records. The Advisor is also
required to keep its own records with respect to its services under the REIT
Advisory Agreement. Annually, or as more frequently requested by the REIT's
Directors, the Advisor is obligated to report to the Directors its estimated
costs in providing services under the REIT Advisory Agreement and such
information as the Advisor may reasonably obtain concerning the cost to other
REITs specializing in healthcare facility investments of administrative and
advisory services comparable to those provided by the Advisor, in order that the
REIT's Directors may evaluate the performance of the Advisor and the efficiency
of the arrangements provided to the REIT under the Agreement.
RESTRICTIONS ON INVESTMENT ACTIVITIES
The REIT Advisory Agreement provides that prior to the earlier to occur of
that period of time equal to the lesser of (i) the termination, for any reason,
of the REIT Advisory Agreement or (ii) the Corporation ceasing to be actively
engaged as the investment advisor for NHI, the REIT will not (without the prior
approval of NHI) transact business with any party, person, company or firm other
than the Corporation. It is the intent of the foregoing restriction that the
REIT will not be actively or passively engaged in the pursuit of additional
investment opportunities, but rather will focus upon its capacities as landlord
and note holder of those certain assets conveyed to it in the Plan of
Restructure.
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<PAGE> 55
TERM
The REIT Advisory Agreement is for a stated term expiring December 31, 2003
and thereafter from year to year unless earlier terminated. However, either
party may terminate the REIT Advisory Agreement at any time on or after January
1, 2000 on 90 days written notice, and the REIT may terminate the REIT Advisory
Agreement for cause at any time.
Upon termination of the REIT Advisory Agreement for any reason, the Advisor
is obligated to deliver all property of the REIT that the Advisor is holding in
its capacity as Advisor, to render a full accounting to the REIT and to
cooperate with the REIT Directors to provide an orderly management transition.
The REIT is obligated, upon such termination, to pay the Corporation all
compensation for services through the date of termination, including any
compensation the payment of which was deferred during the period the REIT
Advisory Agreement was in effect.
COMPENSATION
For its services under the REIT Advisory Agreement, the Corporation is
entitled to annual compensation of the greater of (i) two percent (2%) of the
REIT's gross consolidated revenues calculated according to generally accepted
accounting principles, or (ii) the actual expenses incurred by the Corporation
as outlined in the REIT Advisory Agreement.
However, the REIT Advisory Agreement conditions payment of such annual
compensation to the Advisor in any year upon the REIT's having Funds From
Operations (as defined in the REIT Advisory Agreement) in such year equal to at
least the product of (i) $1.33 times (ii) the average number of shares of the
REIT outstanding on each dividend record date during such year (the "Dividend
Requirement"). In the event that Funds From Operations is less than the Dividend
Requirement for any year, the compensation payable to the Corporation in respect
of such year shall be reduced by the amount of such shortfall ("Shortfall
Amount"), and the Corporation is obligated to repay any portion of the Shortfall
Amount previously received for such year. The Advisor is entitled to payment of
any Shortfall Amount from a prior year, together with interest at 2% over the
prime lending rate of the Corporation's principal bank in Tennessee, to the
extent that Funds From Operations in a subsequent year exceeds the Dividend
Requirement, and in any event upon the termination of the REIT Advisory
Agreement for any reason.
For purposes of determining the Advisor's compensation, the REIT Advisory
Agreement defines "Funds From Operations" as the consolidated net income of the
REIT computed in accordance with generally accepted accounting principles, plus
depreciation and amortization, less the amount of any capital gains or plus the
amount of any capital losses included in such net income, before applying the
payment of the compensation under the REIT Advisory Agreement. Per share Funds
From Operations, or per share dividends paid, in any year is the amount of the
Funds From Operations, or dividends paid, for that year divided by the average
number of shares of REIT Common Stock outstanding during the year determined in
accordance with generally accepted accounting principles.
PAYMENT OF EXPENSES
The REIT Advisory Agreement provides that the Corporation shall pay all
expenses incurred in performing its obligations thereunder, without regard to
the amount of compensation received under the Agreement. Expenses specifically
listed as expenses to be borne by the Corporation without reimbursement include:
the cost of accounting, statistical or bookkeeping equipment necessary for the
maintenance of the REIT's books and records; employment expenses of the officers
and directors and personnel of the Corporation and all expenses, including
travel expenses, of the Corporation incidental to the investigation and
acquisition of properties for the REIT prior to the time the REIT Directors
definitively decide to acquire the property or to have the Corporation continue
with the acquisition process, whether the property is acquired or not, and after
the REIT Directors definitively decide to dispose of a property; advertising and
promotional expenses incurred in seeking and disposing of investments for the
REIT; rent, telephone, utilities, office furniture and furnishings and other
office expenses incurred by or allocable to the Corporation for its own benefit
and account regardless of whether incurred or used in connection with rendering
the services to the REIT provided for in the REIT Advisory Agreement; all
miscellaneous administrative and other expenses of the Corporation, whether or
not relating to the performance by the Corporation of its functions under the
REIT Advisory Agreement; fees and expenses paid to independent contractors,
appraisers, consultants, attorneys, managers and other agents retained by or on
behalf of the REIT and expenses directly connected with the acquisition,
financing, refinancing, disposition and ownership of real estate interests or of
other property (including insurance premiums, legal services, brokerage and
sales commissions, maintenance, repair and improvement of property); insurance
as required by the REIT Directors (including REIT Directors' liability
insurance); expenses connected with payments of dividends or distributions in
cash or any other form made or caused to be made by the REIT Directors to REIT
shareholders and expenses connected with payments of interest to holders of the
REIT's debentures; all expenses connected with communication to holders of
securities of the REIT and the other bookkeeping and clerical work necessary in
maintaining relations with holders of securities, including the cost of printing
and mailing certificates for securities and proxy solicitation materials and
reports to holders of the REIT's securities; transfer agent's, registrar's,
dividend disbursing agent's, dividend reinvestment plan agent's and indenture
trustee's fees and charges. The REIT Advisory Agreement also confirms that the
Corporation shall pay all costs and expenses which it is obligated to pay as
tenant under any lease of healthcare facilities from the REIT.
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<PAGE> 56
The REIT Advisory Agreement also confirms that the Corporation is
responsible for all legal and auditing fees and expenses of the REIT and legal,
auditing accounting, underwriting, brokerage, listing, registration and other
fees and printing, engraving and other expenses and taxes incurred in connection
with the organization of the REIT, but such expenses incurred after January 1,
1998 for the issuance, distribution, transfer, registration and listing of the
REIT Shares shall remain the REIT's obligation.
The REIT Advisory Agreement provides that, except as the Corporation may
have responsibility for such costs as tenant under the lease of any property
from the REIT, the REIT is responsible to pay its own expenses of the following
types: dividends, the cost of borrowed money; taxes on income and taxes and
assessments on real property and all other taxes applicable to the REIT
including, without limitation, franchise and excise fees; except as assumed by
the Corporation, all ordinary and necessary expenses incurred with respect to
and allocable to the prudent operation and business of the REIT including,
without limitation, any fees, salaries and other employment costs, taxes and
expenses paid to REIT Directors, officers and employees of the REIT who are not
also employees of the Corporation.
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<PAGE> 57
PRO FORMA FINANCIAL INFORMATION
The audited financial statements of NHC for each of the years ended
December 31, 1996, 1995 and 1994 and the unaudited financial statements for the
six months ended June 30, 1997 and 1996 are included in the Proxy
Statement/Prospectus.
The following unaudited pro forma balance sheets as of June 30, 1997 and
statements of income for the year ended December 31, 1996 and the six months
ended June 30, 1997 of National HealthCare Corporation and National Health
Realty, Inc. have been prepared based on the historical statements as adjusted
to reflect the proposed Restructure between NHC, National HealthCare Corporation
and National Health Realty, Inc. and the sale and subsequent conversion of
subordinated convertible debentures by NHC as outlined in the notes to the pro
forma financial statements as if they occurred on June 30, 1997 for the balance
sheets and on January 1, 1996 for the statements of income.
NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Pro Forma
Adjustments
---------------------------
Actual Debit Credit Pro Forma
----------- ----------- ------------ ----------------
<S> <C> <C> <C> <C>
Revenues:
Rent income $ -- $ 11,173(a) $ 11,173
Interest -- 9,037(c) 9,037
----------- ------------ ----------------
Net revenues -- 20,210 20,210
----------- ------------ ----------------
Costs and Expenses:
Operating and administrative -- $ 404(e) 404
Provision for depreciation and amortization -- 3,580(b) 3,580
Interest -- 3,142(d) 3,142
----------- ----------- ----------------
Total costs and expenses -- 7,126 7,126
----------- ----------- ----------------
Net Income from Operations -- 7,126 20,210 13,084
Minority Interest in Earnings of Consolidated Subsidiary -- 1,191 (f) 1,191
----------- ----------- ------------ ----------------
Net Income $ -- $ 8,317 $ 20,210 $ 11,893
=========== =========== ============ ================
Earnings Per Share
Primary $ -- $ 1.55
=========== ================
Fully Diluted $ -- $ 1.23
=========== ================
Weighted Average Shares
Primary -- 7,663,483
=========== ================
Fully Diluted -- 9,649,890
=========== ================
</TABLE>
The REIT's anticipated transactions, reflected on a pro forma basis, are as
follows:
(a) To record rent income from the Corporation in accordance with the terms
of lease agreements between the REIT and the Corporation.
(b) To record depreciation expense on fixed assets transferred by NHC based
on the estimated remaining life.
(c) To record interest income on first mortgage notes receivable
transferred by NHC. The interest rate on $79,065 of the notes
receivable is fixed at 10.25%. The interest rate on the balance of
notes receivable is generally at prime plus 2%.
(d) To record interest expense on debt transferred from NHC related to real
property.
(e) To record administrative expenses of the REIT based on expected
operating and administrative miscellaneous expenses.
(f) To record minority interest.
(g) The REIT intends to account for the leases with the Corporation as
operating leases.
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<PAGE> 58
NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED INCOME STATEMENT
SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Pro Forma
Adjustments
------------------------
Actual Debit Credit Pro Forma
----------- ---------- ----------- ----------------
<S> <C> <C> <C> <C>
Revenues:
Rent income $ -- $ 6,381(a) $ 6,381
Interest -- 4,866(c) 4,866
----------- ----------- ----------------
Net revenues -- 11,247 11,247
----------- ----------- ----------------
Costs and Expenses:
Operating and administrative -- $ 225(e) 225
Provision for depreciation and amortization -- 2,566(b) 2,566
Interest -- 2,203(d) 2,203
----------- ---------- ----------------
Total costs and expenses -- 4,994 4,994
----------- ---------- ----------------
Net Income from Operations -- 4,994 11,247 6,253
Minority Interest in Earnings of Consolidated
Subsidiary -- 569(f) 569
----------- ---------- ----------- ----------------
Net Income $ -- $ 5,563 $ 11,247 $ 5,684
=========== ========== =========== ================
Earnings Per Share
Primary $ -- $ 0.71
=========== ================
Fully Diluted $ -- $ 0.57
=========== ================
Weighted Average Shares
Primary -- 8,023,656
=========== ================
Fully Diluted -- 9,921,944
=========== ================
</TABLE>
The REIT's anticipated transactions, reflected on a pro forma basis, are as
follows:
(a) To record rent income from the Corporation in accordance with the terms
of lease agreements between the REIT and the Corporation.
(b) To record depreciation expense on fixed assets transferred by NHC based
on the estimated remaining life.
(c) To record interest income on first mortgage notes receivable
transferred by NHC. The interest rate on $83,371 of the notes
receivable is fixed at 10.25%. The interest rate on the balance of
notes receivable is generally at prime plus 2%.
(d) To record interest expense on debt transferred from NHC related to real
property.
(e) To record administrative expenses of the REIT based on expected
operating and administrative miscellaneous expenses.
(f) To record minority interest.
(g) The REIT intends to account for the leases with the Corporation as
operating leases.
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<PAGE> 59
NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Pro Forma
Adjustments
------------------------------
Actual Debit Credit Pro Forma
------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Assets:
Cash $ -- $ 1,000(a) $ 1,000
Real Estate Properties:
Land -- 19,836(a) 19,836
Fixed Assets -- 114,497(a) 114,497
------------- ------------- -------------
Real Estate Properties, Net -- 134,333 134,333
Mortgage loans receivable -- 97,140(b) 97,140
------------- ------------- -------------
Total Assets $ -- $ 232,473 $ 232,473
============= ============= =============
Liabilities and Stockholders' Equity:
Liabilities:
Long-term notes and bonds payable $ -- $ 86,858(a) $ 86,858
------------- -------------- -------------
Total Liabilities -- 86,858 86,858
Minority interest in consolidated subsidiaries 15,056(c) 15,056
Stockholders' equity -- $ 15,056(c) 48,475(a) 130,559
97,140(b)
------------- ------------- -------------- -------------
Total Liabilities and Stockholders' Equity $ -- $ 15,056 $ 247,529 $ 232,473
============= ============= ============== =============
============= =============
Book value per share $ -- $ 16.27
============= =============
Shares outstanding -- 8,023,656
============= =============
</TABLE>
The REIT's anticipated transactions, reflected on a pro forma basis, are as
follows:
(a) To record the transfer of cash, real property and related debt from NHC
at net book value.
(b) To record the transfer of first mortgage notes receivable from NHC at
net book value.
(c) To record minority interest.
(d) The REIT intends to account for the leases with the Corporation as
operating leases.
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<PAGE> 60
NATIONAL HEALTHCARE CORPORATION AND SUBSIDIARIES,
SUCCESSOR TO NATIONAL HEALTHCARE L.P. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Pro Forma
Adjustments
---------------------------
Actual Debit Credit Pro Forma
--------------- ------------- ----------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Net patient revenues $ 341,818 $ 341,818
Other revenues 46,842 $ 9,037(d) 37,805
--------------- ------------- ---------------
Net revenues 388,660 9,037 379,623
--------------- ------------- ---------------
Costs and Expenses:
Operating and administrative 334,987 11,173(a) 346,454
294(e)
Provision for depreciation and amortization 13,634 $ 3,580(b) 10,054
Interest 10,753 3,142(c) 7,611
--------------- ------------- ----------- ---------------
Total costs and expenses 359,374 11,467 6,722 364,119
--------------- ------------- ----------- ---------------
Net income before taxes 29,286 20,504 6,722 15,504
Provision for income taxes -- 6,122(f) --(g) (6,122)
--------------- ------------- ----------- ---------------
Net Income $ 29,286 $ 26,626 $ 6,722 $ 9,382
=============== ============= =========== ===============
Earnings Per Unit/Share:
Primary $ 3.44 $ 1.04
=============== ===============
Fully Diluted $ 2.98 $ 1.02
=============== ===============
Weighted Average Units/Shares:
Primary 8,496,299 9,051,854
=============== ===============
Fully Diluted 10,455,706 11,011,261
=============== ===============
</TABLE>
The Corporation's anticipated transactions, reflected on a pro forma basis, are
as follows:
(a) To record rent expense in accordance with the Lease terms between the
REIT and the Corporation on assets intended to be transferred to the
REIT and leased by the Corporation.
(b) To remove depreciation expense on assets transferred.
(c) To remove interest expense on debt transferred to the REIT.
(d) To remove interest income on mortgage notes receivable transferred to
the REIT.
(e) To record state franchise taxes based on expected corporate structure.
(f) To record federal and state income taxes.
(g) The Corporation would have recorded non-recurring income tax benefits
of $3,964 related to the change in the Corporation's tax status.
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<PAGE> 61
NATIONAL HEALTHCARE CORPORATION AND SUBSIDIARIES, SUCCESSOR TO
NATIONAL HEALTHCARE L.P. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED INCOME STATEMENT
SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Pro Forma
Adjustments
---------------------------
Actual Debit Credit Pro Forma
-------------- ------------ ----------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Net patient revenues $ 189,240 $ 189,240
Other revenues 22,814 $ 4,866(d) 17,948
-------------- ------------ ---------------
Net revenues 212,054 4,866 207,188
-------------- ------------ ---------------
Costs and Expenses:
Operating and administrative 183,969 6,381(a) 190,517
167(e)
Provision for depreciation and amortization 7,712 $2,566(b) 5,146
Interest 6,073 2,203(c) 3,870
-------------- ------------ ----------- ---------------
Total costs and expenses 197,754 6,548 4,769 199,533
-------------- ------------ ----------- ---------------
Net income before taxes 14,300 11,414 4,769 7,655
Provision for income taxes -- 2,960(f) --(g) (2,960)
-------------- ------------ ----------- ---------------
Net Income $ 14,300 $ 14,374 $ 4,769 $ 4,695
============== ============ =========== ===============
Earnings Per Unit/Share:
Primary $ 1.62 $ 0.50
============== ===============
Fully Diluted $ 1.41 $ 0.50
============== ===============
Weighted Average Units/Shares:
Primary 8,829,472 9,385,027
============== ===============
Fully Diluted 10,727,760 11,283,315
============== ===============
</TABLE>
The Corporation's anticipated transactions, reflected on a pro forma basis, are
as follows:
(a) To record rent expense in accordance with the Lease terms between the
Corporation and the REIT on assets intended to be transferred to the
REIT and leased by the Corporation.
(b) To remove depreciation expense on assets transferred.
(c) To remove interest expense on debt transferred to the REIT.
(d) To remove interest income on mortgage notes receivable transferred to
the REIT.
(e) To record state franchise taxes based on expected corporate structure.
(f) To record federal and state income taxes.
(g) The Corporation would have recorded non-recurring income tax benefits
of $4,649 related to the change in the Corporation's tax status.
55
<PAGE> 62
NATIONAL HEALTHCARE CORPORATION AND SUBSIDIARIES, SUCCESSOR TO
NATIONAL HEALTHCARE L.P. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Pro Forma
Adjustments
--------------------------------
Actual Debit Credit Pro Forma
-------------- --------------- ------------- --------------
<S> <C> <C> <C> <C>
Assets:
Current Assets $ 126,279 $ 2,518(c) $ 148,447
19,650(d)
Property and equipment 201,866 $ 134,333(a) 67,533
Assets held by other parties 21,472 21,472
Other Assets 112,888 2,131(c) 97,140(b) 17,879
-------------- --------------- ------------- --------------
Total Assets $ 462,505 $ 24,299 $ 231,473 $ 255,331
============== =============== ============= ==============
Liabilities and Partners' Capital:
Current liabilities $ 102,279 $ 102,279
Debt serviced by other parties 32,024 32,024
Long-term debt 144,867 $ 86,858(a) 58,009
Subordinated convertible notes 28,839 28,839
Deferred income 15,945 15,945
Minority interest in consolidated subsidiaries 784 784
Partners' capital 137,767 47,475(a) $ 4,649(c) --
97,140(b) 19,650(d)
17,451(e)
Stockholders' Equity -- 17,451(e) 17,451
-------------- --------------- ------------- --------------
Total Liabilities & Stockholders' Equity $ 462,505 $ 248,924 $ 41,750 $ 255,331
============== =============== ============= ==============
Book value per unit/share $ 15.55 $ 1.85
============== ==============
Units/Shares outstanding 8,862,187 9,417,742
============== ==============
</TABLE>
The Corporation's anticipated transactions, reflected on a pro forma basis, are
as follows:
(a) To record the transfer of real property and related debt to the REIT at
net book value.
(b) To record the transfer of first mortgage notes receivable to the REIT
at net book value.
(c) To record deferred income taxes at a 40% rate.
(d) Subsequent to June 30, 1997 but prior to this filing, NHC sold
subordinated convertible debentures of $20,000. The debentures are
convertible into Corporation shares only. Since the debentures
mandatorily convert to equity on January 1, 1998, this amount has been
reflected above as an addition to partners' capital.
(e) To reclassify partners' capital.
(f) The Corporation intends to account for the distribution of assets (and
related debt) to the REIT at net book value and the subsequent leasing
of the real estate assets as operating leases.
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<PAGE> 63
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NHC
OVERVIEW
NHC is a leading provider of long-term health care services. NHC
operates or manages 110 long-term health care centers with 13,775 beds in ten
states. NHC provides nursing care as well as ancillary therapy services to
patients in a variety of settings including long-term nursing centers, managed
care specialty units, subacute care units, Alzheimer's care units, homecare
programs, and facilities for assisted living. NHC also operates retirement
centers.
RESULTS OF OPERATIONS
The following table and discussion sets forth items from the
consolidated statements of income as a percentage of net revenues for the
unaudited periods ended June 30, 1997 and 1996 and audited years ended
December 31, 1996, 1995 and 1994.
PERCENTAGE OF NET REVENUES
<TABLE>
<CAPTION>
Six Months
Ended June 30, Year Ended December 31,
------------------ -----------------------
1997 1996 1996 1995 1994
------ ------- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues:
Net patient revenues 89.2% 88.0% 87.9% 87.8% 90.2%
Other revenues 10.8 12.0 12.1 12.2 9.8
------ ------- ----- ----- -----
Net revenues 100.0 100.0 100.0 100.0 100.0
------ ------- ----- ----- -----
Costs and expenses:
Salaries, wages and benefits 55.5 55.5 53.9 53.8 52.7
Other operating 31.3 31.5 32.2 31.2 33.0
Depreciation and amortization 3.6 3.4 3.6 4.2 4.6
Interest 2.9 3.4 2.8 4.8 4.4
------ ------- ----- ----- -----
Total costs and expenses 93.3 93.8 92.5 94.0 94.7
------ ------- ----- ----- -----
Net Income 6.7% 6.2% 7.5% 6.0% 5.3%
====== ======= ===== ===== =====
</TABLE>
The following table sets forth the increase in certain items from the
consolidated statements of income as compared to the prior period.
PERIOD TO PERIOD INCREASE (DECREASE)
<TABLE>
<CAPTION>
(Unaudited)
Six Months
Ended
June 30, Year Ended December 31,
---------------------- -----------------------------------------
1997 vs. 1996 1996 vs. 1995 1995 vs. 1994
---------------------- -------------------- -------------------
(dollars in thousands) Amount Percent Amount Percent Amount Percent
-------- -------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Net patient revenues $ 27,555 17.0 $ 33,849 11.0% $38,247 14.2%
Other revenues 715 3.2 3,854 9.0 13,809 47.3
-------- ------- -------- ------ ------- ------
Net revenues 28,270 15.4 37,703 10.7 52,056 17.4
-------- ------- -------- ------ ------- ------
Costs and expenses:
Salaries, wages and benefits 15,623 15.3 20,660 10.9 31,322 19.9
Other operating 8,373 14.4 15,925 14.6 10,664 10.8
Depreciation & amortization 1,542 25.0 (915) (6.3) 967 7.1
Interest (96) (1.6) (6,138) (36.3) 3,841 29.4
-------- ------- -------- ------ ------- ------
Total costs and expenses 25,442 14.8 29,532 9.0 46,794 16.5
-------- ------- -------- ------ ------- ------
Net income $ 2,828 24.7% $ 8,171 38.7% $ 5,262 33.2%
======== ======= ======== ====== ======= ======
</TABLE>
NHC's owned or leased long-term health care centers and contract
therapy services provided 78% of net revenues in 1996, 76% in 1995, and 76% in
1994. Homecare programs provided 13% of net revenues in 1996, 15% in 1995 and
16% in 1994.
The overall census in owned or leased centers for the six months ended
June 30, 1997 and also for the six months ended June 30, 1996 was 93.2%. The
overall census in owned or leased centers for 1996 was 93.6% compared to 93.0%
in 1995 and 92.8% in 1994. The census excluding acquisitions and new openings
was 93.8%, 93.0% and 94.5%, respectively, for the same periods. NHC opened a net
of 190 new owned, leased or managed beds in 1996.
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<PAGE> 64
HEALTH CARE REVENUES
NHC's principal business is operating and managing long-term health
care centers, including the provision of routine and ancillary services.
Approximately 60% of NHC's net revenues in 1996 and 1995 and 61% in 1994 are
from participation in Medicare and Medicaid programs. Amounts paid under these
programs are generally based on a facility's allowable costs or a fixed rate
subject to program cost ceilings. Revenues are recorded at standard billing
rates less allowances and discounts principally for patients covered by
Medicare, Medicaid and other contractual programs. Amounts earned under the
Medicare and Medicaid programs are subject to review by the third party payors
and as disclosed in the notes to the financial statements, by the Office of the
Inspector General. In the opinion of management, adequate provision has been
made for any adjustments that may result from such reviews. (See "Business --
The Corporation -- Legal Proceedings"). However, substantial cash payments may
be required at the time of finalization if material adjustments are made by
auditors.
Any differences between estimated settlements and final determinations
are reflected in operations in the year finalized. NHC has submitted various
requests for exceptions to Medicare routine cost limitations for reimbursement.
NHC has received approval on certain requests, and others are pending approval.
NHC will record revenues associated with the approved requests when such
approvals, including cost report audits, are assured.
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.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30,
1996. Results for the six month period ended June 30, 1997 include a 25%
increase over the same period in 1996 in net income, a 19% increase in fully
diluted earnings per unit, and a 15% increase in net revenues.
The increased revenues for the six months ended June 30, 1997 reflect
the continued growth of operations. Compared to the six month period a year ago,
NHC has increased the number of owned, leased, and managed long-term care beds
by 1,025 beds from 12,750 beds to 13,775 beds. The number of homecare locations
has increased from 31 locations to 33 locations. Also contributing to increased
revenues are improvements in both private pay and third party payor rates.
Revenues improved during first six months of 1997 also due to increased
emphasis on rehabilitative and managed care services. NHC has extended its
rehabilitative services into additional geographic areas and to additional
customers.
Revenues from management services, which are included in the Statements
of Income in Other Revenues, increased 4.4% for the six month period in 1997
compared to the same period in 1996 from $16.3 million to $17.0 million due to
the increased number of beds being managed for others and due to increased
management fees. Management fees are generally based upon a percentage of net
revenues of the managed center and therefore tend to increase as a facility
matures and as prices rise in general.
Total costs and expenses for the 1997 six month period increased $25.4
million or 14.8% to $197.8 million from $173.2 million. Salaries, wages and
benefits, the largest operating costs of this service company, increased $15.6
million or 15.3% to $117.6 million from $102.0 million. Other operating expenses
increased $8.4 million or 14.4% to $66.3 million for the 1997 second quarter
compared to $58.0 million in the 1996 period. Depreciation and amortization
increased 25.0% to $7.7 million. Interest costs decreased $0.1 million or 1.6%
to $6.1 million from $6.2 million for last year.
Increases in salaries, wages and benefits are attributable to the
increase in staffing levels due to long-term care bed additions, assisted living
expansions, homecare expansions, and the increased emphasis on rehabilitative
services. Also contributing to higher costs of labor are inflationary increases
for salaries and the associated benefits.
Operating costs have increased due to the increased number of beds in
operation, the opening of three new assisted living projects, the expansion of
homecare services, the expansion of rehabilitative and managed care services,
and the growth in management services provided to others.
Depreciation and amortization increased as a result of NHC's placing of
newly constructed or purchased assets in service and due to capital improvements
at existing properties.
The total census at owned and leased centers for the six months
averaged 93.2% compared to an average of 93.2% for the same six months a year
ago.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995.
In 1996, NHC achieved record earnings while growing in the variety and quality
of services offered. Results for 1996 included a 39% increase in net income, a
29% increase in primary earnings per unit, and a 11% increase in net revenues.
The growth in revenues in 1996 occurred in long-term care, in
rehabilitative and managed care and in management services.
Improved revenues in long-term care were due in part to increased
numbers of owned beds having been placed in service. In 1996, 130 beds were
opened or acquired in owned and leased centers. Furthermore, 111 long-term care
beds which had been added in 1995 had improved occupancy rates in 1996. Also
contributing to improved revenues in long-term care were increases in types and
levels of services being offered and in private pay and third party payor rates.
Increases in third party payor rates were held down in part by the negative
impact of routine cost limits for Medicare certified nursing homes. During 1996
and 1995, NHC had 48 and 44, respectively, owned or leased centers which
operated at Medicare costs higher than the ceiling.
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<PAGE> 65
Homecare revenues improved due to increased payor rates and number of
visits at NHC's 16 additional Tennessee locations. At all locations, there were
754,000 visits in 1996 compared to 717,000 visits in 1995.
Revenues also improved during 1996 as a result of NHC's increased
emphasis on rehabilitative and managed care services. To boost the ability to
offer physical, speech and occupational therapy to greater numbers of patients,
NHC increased its staff of professionally licensed therapists from nearly 800
last year to over 1,000 in 1996. Over 585 companies, including school systems,
hospitals, home care companies and outpatient clinics contracted for NHC's
rehabilitative services in 1996, which number is up from 420 companies in 1995.
Revenues from management services, which are included in the Statements
of Income in Other Revenues, increased 13% in 1996 from $28,719,000 to
$32,363,000 due to increased management fees and increased interest income from
higher principal amounts on loans to managed centers. In 1996, 60 additional
long-term care beds came under management contract. Management fees are
generally based upon a percentage of net revenues of the managed center and
therefore tend to increase as a facility matures and as prices rise in general.
Increases in salaries, wages and benefits in 1996 were attributable to
the increase in staffing levels due to long-term care bed additions and the
increased emphasis on rehabilitative services. Also contributing to higher costs
of labor were inflationary increases for salaries and the associated benefits.
Operating costs increased due to the increased numbers of beds in
operation, the expansion of rehabilitative and managed care services, the growth
in management services provided to others, and due to the increase in rent
expense as explained below.
Depreciation expense and interest expense both decreased compared to
last year due primarily to capital transactions which occurred in 1995. During
December 1995, NHI prepaid debt on which NHC had also been obligated in the
amount of $20,544,000. In addition, NHC was released from its obligation on
approximately $25,324,000 of debt which had been transferred to NHI in 1991.
Since NHC is no longer obligated on transferred debt in the amount of
$45,868,000, debt serviced by other parties and assets under arrangement with
other parties was reduced by $45,868,000.
The leases with NHI provide that NHC shall continue to make
non-obligated debt service rent payments equal to the debt service including
principal and interest on the obligated debt which was prepaid and from which
NHC has been released as a direct obligor. As a result, other operating expenses
are increased by the amount of the rent payments, depreciation is decreased by
the amount of depreciation formerly charged on assets under arrangement with
other parties and interest expense is decreased by the amount of interest
expense formerly associated with the debt serviced by other parties.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994.
In 1995, NHC achieved rapid annual growth in earnings, earnings per unit, and
revenues. Net income totaled $21,115,000, a 33% increase over the comparable
prior year amount. Fully diluted earnings per unit totaled $2.31, a 28%
increase. Net revenues totaled $350,957,000, a 17% increase. NHC's net margin
ratio, which is defined as net income divided by net revenues, increased to 6.0%
from 5.3% in 1994 illustrating that in 1995 NHC grew its revenues at a faster
rate than its expenses.
The growth in net patient revenues in 1995 occurred in long-term care,
homecare, and rehabilitative and managed care.
Improved revenues in long-term care were due primarily to increased
types and levels of services being offered and to increases in private pay and
third party billing rates. Also, the total number of owned or leased beds
increased from 6,295 beds at the end of 1994 to 6,406 beds at the end of 1995.
During 1995 and 1994, NHC had 44 and 41, respectively, owned or leased centers
which operated at Medicare costs higher than the routine cost limits, which were
frozen at 1993 levels by the 1993 Tax Reform Act.
Homecare revenues improved due to increased payor rates and increased
numbers of visits at NHC's 28 Florida and Tennessee homecare locations. There
were 717,000 homecare visits in 1995 compared to 674,000 visits in 1994.
Revenues also improved during 1995 due to continued emphasis on
rehabilitative and managed care services. To boost the ability to offer
physical, speech and occupational therapy to greater numbers of patients, NHC
increased its staff of professionally licensed therapists by 19% in 1995 and by
40% in 1994. NHC has also determined to provide high acuity medical services and
has signed managed care contracts with 34 private insurance companies to provide
subacute care to their insurees, offering a less expensive alternative to acute
care and rehabilitative hospitals. NHC also is expanding its network of regional
contract offices which are staffed by experienced case managers and which assure
appropriate placement and payment for subacute patients in the NHC system.
The growth in other revenues in 1995 occurred primarily in the areas of
revenues from management services, advisory fees from NHI, and interest income.
Other revenues are more fully detailed in Note 5 to the financial statements.
Revenues from management services of $28,719,000, which are included in
the Statements of Income in Other Revenues, increased 51% in 1995 due to the
increased number of beds being managed for others, increased amounts
59
<PAGE> 66
and types of management and other support services being offered, and increased
interest income from higher principal amounts on loans to managed centers. In
1995, two long-term care centers and 273 long-term care beds came under new
management contracts. Management fees are generally based upon a percentage of
net revenues of the managed center and therefore tend to increase as a facility
matures and as prices rise in general. NHC's management contracts are generally
long-term (up to ten years) and include equity participation agreements and the
right of first refusal upon the sale of the property.
Revenues from advisory fees received from NHI of $3,265,000 represent a
52% increase over 1994 and are based upon a formula which measures the increase
in NHI's funds from operations over a base year.
Revenues from interest income totaled $6,462,000 and represent a 33%
increase over 1994 and are in part from NHC's investment in loan participation
agreements. Loan participation agreements may generally be sold in the market
should NHC require additional capital.
Increases in salaries, wages and benefits in 1995 are attributable to
the increase in staffing levels due to the increased emphasis on rehabilitative
services, homecare expansions and long-term care bed additions. Also
contributing to higher costs of labor are inflationary increases for salaries
and the associated benefits. Labor costs are the most significant costs of NHC.
Operating costs have increased due to the expansion of rehabilitative
and managed care services, the expansion of homecare services, the growth in
managed services and the increased numbers of beds in operation.
Depreciation and amortization increased as a result of NHC's placing of
newly constructed or purchased assets in service and due to capital improvements
at existing properties.
Interest expense increased due to additional borrowing for newly
constructed long-term care beds and due to increased interest rates on floating
rate debt. Approximately 35% of NHC's long-term debt was at floating rates at
the end of 1995.
GROWTH AND DEVELOPMENT
The Corporation plans to continue to expand NHC's continuum of care to
the elderly by offering a comprehensive range of services through related or
separately structured health care centers, homecare programs, specialized care
units, pharmacy operations, rehabilitative services, assisted living centers and
retirement centers.
During the first six months of 1997, the Company added a net total of
893 licensed long-term care beds, of which 336 are owned or leased and 577 of
which are managed for other parties. Additionally, 252 assisted living units in
three newly constructed projects were opened.
During 1996, NHC grew its long-term health care business by acquiring
or constructing additions totaling 130 licensed beds at owned or leased health
care centers and totaling 60 licensed beds at managed health care centers, all
located in Florida. All in all, 190 owned, leased or managed beds were added in
1996. These additions increased the total number of owned, leased or managed
centers to 100 and the total number of licensed beds to 12,882.
At June 30, 1997, NHC had 871 beds under development at 12 owned or
leased centers and six managed health care centers in various locations. These
beds are either under construction or a Certificate of Need has been received
from the appropriate state agency authorizing the construction of additional
centers or beds.
NHC has identified the assisted living market as an expanding area for
the delivery of health care and hospitality services. Assisted living centers
provide basic room and board functions for the elderly with on-staff
availability to assist in minor medical and living needs on an as needed basis.
NHC currently operates ten assisted living projects, eight of which are located
within the physical structure of a long-term care center or retirement center
and two of which are freestanding. The two freestanding projects opened in 1996.
It is expected that NHC will start
60
<PAGE> 67
construction of four additional assisted living projects in 1997. Certificates
of need are not required to build assisted living projects.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
During the first six months of 1997, the Company generated net cash of
$23.7 million from operating activities, $14.1 million from the collection of
long-term notes receivable, $23.2 million debt proceeds, $0.5 million from the
issuance of partnership units, and $5.0 million from the collection of
receivables. Of these funds, $21.4 million was used for additions to and
acquisitions of property and equipment; $18.0 million for investment in
long-term notes receivable and loan participation agreements; $4.6 million for
payments on debt; and $10.4 million for cash distributions to partners. Cash
and cash equivalents increased $10.3 million during the quarter.
During 1996 NHC spent approximately $69,970,000 on construction,
acquisitions and routine capital expenditures, $17,466,000 on cash distributions
to partners, $8,161,000 as principal payments and financing costs on debt, and
$34,798,000 to invest in notes receivable and marketable securities. These and
other cash needs were financed through cash on hand; cash flow from operations
of $51,961,000; the collection of long-term notes receivable, loan participation
agreements, investments and receivables related to stock options of $44,284,000;
the issuance of $29,183,000 of debt and the issuance of partnership units for
$1,378,000.
NHC has guaranteed approximately $69,362,000 of debt of certain health
care centers which NHC manages for others. At June 30, 1997, NHC expects to have
no additional liability as a result of its debt guarantees.
NHC's current cash on hand, marketable securities, short-term notes
receivable, operating cash flows and, as needed, its borrowing capacity are
expected to be adequate to finance NHC's and the Corporation's operating
requirements and growth and development plans for 1997 and into 1998. If
additional capital is necessary, NHC's balance sheet ratios are at commercially
reasonable levels to obtain additional capital. The current ratio is 1.2:1 at
June 30, 1997 and working capital is $24,000,000. The ratio of long-term debt to
equity, as defined in our banking relationships to include both deferred income
and subordinated convertible notes as equity, is 1:1 at June 30, 1997.
For all financial instruments except the subordinated convertible notes,
NHC believes that the financial statement carrying amounts approximate fair
value at June 30, 1997 and at December 31, 1996. The fair value of the
subordinated convertible notes were estimated based on quoted market prices.
NEW ACCOUNTING PRONOUNCEMENTS
In 1996, NHC adopted Statement of Financial Accounting Standards No.
121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" and Statement of Financial Accounting Standards No.
123 "Accounting for Stock-Based Compensation". The adoption of the provisions of
these accounting pronouncements did not have a material impact on NHC's
financial condition or results of operations.
Statement of Financial Accounting Standards No. 128 "Earnings per Share"
("SFAS 128") has been issued effective for years ending after December 15,
1997. This statement establishes standards for computing and presenting
earnings per share. NHC is required to adopt the provisions of SFAS 128 in the
fourth quarter of 1997 and does not expect adoption thereof to have a material
effect on NHC's financial position or results of operations.
Statement of Financial Accounting Standards No. 129 "Disclosure of
Information About Capital Structure" ("SFAS 129") has been issued effective for
years ending after December 15, 1997. This statement establishes standards for
disclosing information about an entity's capital structure. NHC will be
required to adopt the provisions of SFAS 129 in the fourth quarter of 1997 and
does not expect adoption thereof to have a material impact on NHC's financial
position or results of operations.
CASH DISTRIBUTIONS
NHC management intends to distribute approximately 60% of ordinary
taxable income to unitholders during 1997. Management expects that NHC's cash
distribution will never be lower than the maximum federal tax rate to
individuals unless there is a material change in our present tax rate system.
IMPACT OF INFLATION
Reimbursement rates under the Medicare and Medicaid programs generally
reflect the underlying increases in costs and expenses resulting from inflation.
For this reason, the impact of inflation on profitability has not been
significant.
THE CORPORATION
The Corporation will be the successor to NHC. Management's Discussion
and Analysis of Results of Operations and Financial Condition from NHC's Annual
Report to Partners for the year ended December 31, 1996 is included elsewhere in
this registration statement.
On a pro forma basis at June 30, 1997, the Corporation's working
capital has increased from $24,000,000 to $46,168,000 and its current ratio has
increased from 1.23 to 1.45 primarily as a result of the issuance of $20,000,000
of subordinated convertible debentures. Partners' capital/stockholders' equity
has been reduced from $137,767,000 to $17,451,000 primarily to reflect the
transfer of the equity in the assets transferred to the REIT. The results of
operations on a pro forma basis for the year ended December 31, 1996 and the six
months ended June 30, 1997 reflect reductions in interest income and
depreciation and interest expense based on the transfer of the Notes, Owned
Healthcare Facilities, Assumed Liabilities and Other Assets transferred to the
REIT. Operating and administrative expenses have increased to reflect the
additional lease and other expenses to be incurred based on the terms of the
operating leases with the REIT.
The Corporation believes that available cash and funds generated from
operations will be sufficient to satisfy capital expenditures, working capital,
and debt requirements.
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<PAGE> 68
NHC is currently negotiating the sale of $20 Million in 5.75%
Subordinated Convertible Notes, and prior to November 15, 1997 at the sole
option of NHC, an additional $10 Million 5.75% Subordinated Convertible Notes
(the "1818 Fund Notes"), to The 1818 Fund II, L.P. (the "Fund") pursuant to a
private placement. It is anticipated that the terms of the 1818 Fund Notes will
provide that, upon the completion of the Plan of Restructure, the 1818 Fund
Notes will automatically convert into common stock of the Corporation at $36 per
share. The Fund will therefore become a stockholder of the Corporation, but not
of the REIT. If the Plan of Restructure shall not have taken place prior to
January 5, 1998, the Fund may at its option convert the 1818 Fund Notes into
limited partnership Units of NHC at $53 per Unit. If the Plan of Restructure
then occurs after such conversion, the Fund will become a stockholder in both
the Corporation and the REIT. In addition, the 1818 Fund Notes would also be
granted registration rights which could be requested on or after January 5,
1998 or could be registered incidental to a registration by the Corporation of
its own securities. It is anticipated that the Corporation would also agree to
file a shelf registration with respect to the 1818 Fund Notes pursuant to Rule
415 within 18 months after the sale. The registration rights would survive the
Plan of Restructure and inure to the benefit of any holder of the 1818 Fund
Notes. Finally, the Corporation would have a right after 42 months following the
sale, to prepay or redeem the 1818 Fund Notes in whole (but not in part) at a
price equal to the then outstanding principal and accrued interest.
THE REIT
The REIT is a newly formed entity intended to qualify for federal
income tax purposes as a real estate investment trust and incorporated in
Maryland on September 26, 1997. The REIT originally issued 1,000 shares of
common stock to NHC for $1,000 cash on October 15, 1997.
LIQUIDITY AND CAPITAL RESOURCES
The REIT was organized to maintain the Owned Healthcare Facilities and
Notes transferred to the REIT from NHC. The REIT received the Owned Healthcare
Facilities, Notes, Assumed Liabilities and Other Assets from NHC in exchange for
approximately 8,060,000 shares of the REIT's common stock. The REIT has reserved
an additional 1,896,000 shares of common stock for conversion of subordinated
convertible notes held by the Corporation.
A portion of the Assumed Liabilities is currently cross-defaulted with
other NHC liabilities which will be assumed by the Corporation. In addition, a
majority of the Notes are collateral for part of the Assumed Liabilities and
for certain debt that will be assumed by the Corporation and for certain debt
of National Health Investors, Inc. and National Health Corporation. In the
event that the Corporation, National Health Investors, Inc. or National Health
Corporation defaulted on these debt obligations, the REIT could lose its
interest in the Notes or the Owned Healthcare Facilities.
The REIT has entered into an advisory services agreement with the
Corporation whereby services related to investment activities and day-to-day
management and operations are provided to the REIT by the Corporation. Because
of the competitive restrictions contained in the advisory services agreement,
the REIT does not intend to seek further health care-related investment
opportunities or to provide lease or mortgage financing for such investments.
The REIT expects to continue to engage in transactions with the Corporation but
does not anticipate purchasing from, leasing to, or financing other operations.
The REIT intends to pay quarterly dividends to its stockholders in an
amount at least sufficient to satisfy the distribution requirements of a real
estate investment trust. Such requirements necessitate that at least 95% of the
REIT's taxable income be distributed annually. The primary source for dividends
will be rental and interest income it earns on the Owned Healthcare Facilities
and the Notes transferred to the REIT from NHC.
RESULTS OF OPERATIONS
The REIT's results of operations will depend upon the rental and
interest income it earns on the Owned Healthcare Facilities and Notes
transferred to the REIT from NHC. Because of the competitive restrictions
contained in its advisory services agreement with the Corporation, the REIT does
not intend to seek further health care-related investment opportunities or to
provide lease or mortgage financing for such investments.
PRO FORMA RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On a pro forma basis, the REIT would have had $20,210,000 and
$11,247,000 in revenues for the year ended December 31, 1996 and the six months
ended June 30, 1997, respectively. The increase on an annual basis from 1996 to
1997 is primarily attributable to additional rental and interest income on the
Owned Healthcare Facilities and Notes acquired during late 1996 and early 1997
and to increases in rent under the lease agreements.
On a pro forma basis, the REIT would have had $7,126,000 and $4,994,000
in expenses for the year ended December 31, 1996 and the six months ended June
30, 1997, respectively. The REIT's pro forma depreciation and interest expenses
reflect the book basis and estimated lives of the Owned Healthcare Facilities
received by the REIT and the interest rates and terms on the Assumed
Liabilities. The increase on an annual basis from 1996 to 1997 is primarily
attributable to additional expenses on Owned Healthcare Facilities acquired and
debt assumed during late 1996 and early 1997.
The REIT is in the process of negotiating a new credit agreement to
replace the liabilities assumed from the Corporation. The REIT expects that the
rental and interest income it earns on the health care centers and mortgage
notes receivable will be sufficient to satisfy its capital expenditures, working
capital, and debt requirements.
62
<PAGE> 69
MANAGEMENT
NHC
GENERAL PARTNERS: NHC has three general partners identified in the
Amended and Restated Agreement of Limited Partnership (the "LP Agreement"):
1. Managing General Partner: NHC, Inc., a Tennessee corporation.
The authorized, issued and outstanding stock of NHC, Inc. is
owned by its board of directors and senior management, a total
of 14 individuals. W. Andrew Adams, NHC's President, owns
approximately 52% of the voting securities of NHC, Inc. and
Robert G. Adams, Senior Vice President and Chief Operating
Officer, owns 19.3%. No other person owns in excess of 9.4%.
2. Administrative General Partner: National Health Corporation, a
Tennessee corporation ("National"). National's Board of
Directors is identical to that of NHC, Inc. All of the
authorized, issued and outstanding stock of National Health
Corporation is owned by the National Health Corporation
Leveraged Employee Stock Ownership Plan and Trust. Trustees
are Olin O. Williams, a director of both NHC, Inc. and
National and Richard F. LaRoche, Jr., NHC's Senior Vice
President and General Counsel.
3. Individual General Partner: W. Andrew Adams. Mr. Adams is the
Chairman of the Board and Chief Executive Officer of NHC.
Pursuant to the LP Agreement, the three general partners are
collectively referred to as "General Partners". The General Partners own, in
aggregate, a general partnership interest in NHC representing a 1% interest in
the profits, losses and distributions of NHC.
DIRECTORS AND EXECUTIVE OFFICERS: As a limited partnership, NHC is
managed by the managing general partner, NHC, Inc. NHC, Inc.'s Board of
Directors is divided into three classes. The Directors hold office until the
annual meeting for the year in which their term expires and until their
successor is elected and qualified. As each of their terms expire, the successor
shall be elected to a three-year term. A director may be removed from office for
cause only. Officers serve at the pleasure of the Board of Directors for a term
of one year. The following table sets forth the directors of both the managing
and administrative general partners of NHC, as well as the executive officers of
NHC:
<TABLE>
<CAPTION>
Director of
Managing Officer of
General Managing
Position Partner or Current General
with NHC NHC's Term as Partner or
or Managing Predecessor Director Predecessor
Name Age General Partner Since Expires Since
---- --- --------------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C>
W. Andrew Adams 52 Chairman of the Since
Board/Chief 1995 (CEO)
Executive Officer 1974 (Pres.) 1999 1973
Dr. J. K. Twilla 70 Director 1972 1998 ---
Dr. Olin O. Williams 67 Director 1971 2000 ---
Ernest G. Burgess, III 58 Director 1991 1999 1975
Robert G. Adams 50 Sr. Vice President/
Chief Operating
Officer and
Director 1993 2000 1985
Richard F. LaRoche, Jr. 52 Sr. Vice President
and
General Counsel -- -- 1974
Steven A. Strawn 40 Vice President/
Operations -- -- 1992
Donald K. Daniel 51 Vice President/
Controller -- -- 1977
David L. Lassiter 43 Vice President/
Corporate Affairs -- -- 1995
Charlotte A. Swafford 49 Treasurer -- -- 1985
</TABLE>
63
<PAGE> 70
<TABLE>
<CAPTION>
Director of
Managing Officer of
General Managing
Position Partner or Current General
with NHC NHC's Term as Partner or
or Managing Predecessor Director Predecessor
Name Age General Partner Since Expires Since
---- --- --------------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C>
Julia W. Powell 48 Vice President/
Patient Services -- -- 1985
Joanne G. Batey 53 Vice President/
Homecare -- -- 1989
D. Gerald Coggin 46 Vice President/
Government
Affairs and
Rehabilitation
Services -- -- 1991
Kenneth D. DenBesten 45 Vice President/ -- -- 1992
Finance
</TABLE>
Drs. Twilla and Williams each were physicians in private practice in
Tennessee for more than 30 years.
Mr. W. Andrew Adams has been Chairman of the Board and Chief Executive
Officer since 1995. He was president from 1981 until 1983 of the National
Council of Health Centers, the trade association for multi-facility long-term
health care center companies, and served as Chairman of the Multi-facility
Committee of the American Health Care Association from 1992 through 1994. He has
an M.B.A. degree from Middle Tennessee State University. Mr. Adams serves on the
Board of Trust of David Lipscomb University, Nashville, Tennessee, is President
and Chairman of the Board of Directors of National Health Investors, Inc. and
serves on the Board of SunTrust Bank in Nashville, Tennessee.
Mr. Robert Adams (Senior Vice President, Chief Operating Officer and
Director) has served both as Administrator and as Regional Administrator,
holding the last position from 1977 to 1985. He has a B.S. degree from Middle
Tennessee State University. Mr. Robert Adams and Mr. W. Andrew Adams are
brothers.
Mr. Burgess (Director) served as NHC' s Senior Vice President for
Operations from 1975 through 1994. He has an M.S. degree from the University of
Tennessee.
Mr. LaRoche (Senior Vice President) has been Senior Vice President
since 1985, and General Counsel since 1971. He has a law degree from Vanderbilt
University and an A.B. degree from Dartmouth College. His responsibilities
include acquisitions and finance. Mr. LaRoche also serves on the Board of
National Health Investors, Inc.
Mr. Strawn (Vice President/Operations) has been with NHC since 1979. He
trained in NHC's A.I.T. program and then served both as administrator and
Regional Vice president before being appointed to the present position in 1995.
He has a B.S. degree from Middle Tennessee State University.
Mr. Daniel (Vice President and Controller) joined NHC in 1977 as
Controller. He received a B.A. degree from Harding University and an M.B.A. from
the University of Texas. He is a certified public accountant.
Mr. Lassiter (Vice President/Corporate Affairs) joined NHC in 1995.
From 1988 to 1995, he was Executive Vice President, Human Resources and
Administration for Vendell Healthcare. From 1980-1988, he was in human resources
positions with Hospital Corporation of America and HealthTrust Corporation. Mr.
Lassiter has B.S. and M.B.A. degrees from the University of Tennessee.
Ms. Swafford (Treasurer) has been Treasurer of NHC since 1985. She
joined NHC in 1973 and has served as Staff Accountant, Accounting Supervisor and
Assistant Treasurer. She has a B.S. degree from Tennessee Technological
University.
Ms. Powell (Vice President/Patient Services) has been with NHC since
1974. She has served as a nurse consultant and director of patient assessment
computerized services for NHC. Ms. Powell has a bachelor of science in nursing
from the University of Alabama, Birmingham, and a master's of art in sociology
with an emphasis in gerontology from Middle Tennessee State University. She
co-authored Patient Assessment Computerized in 1980 with Dr. Carl Adams, NHC's
founder.
64
<PAGE> 71
Ms. Batey (Vice President/Homecare) has been with NHC since 1976. She
served as homecare coordinator for five years before being named Vice president
in 1989. Prior to that she was director of communication disorders services. Ms.
Batey received her bachelor's and master's degrees in speech pathology from
Purdue University.
Mr. Coggin (Vice President/Government Affairs and Rehabilitation
Services) has been employed by NHC since 1973. He has served as both
Administrator and Regional Vice President before being appointed to the present
position. He received a B.A. degree from David Lipscomb University and a M.P.H.
degree from the University of Tennessee. He is responsible for NHC's
rehabilitation, managed care and legislative activities.
Mr. DenBesten (Vice President/Finance) has served as Vice President of
Finance since 1992. From 1987 to 1992, he was employed by Physicians Health
Care, most recently as Chief Operating Officer. From 1984-1986, he was employed
by Health America Corporation as Treasurer, Vice president of Finance and Chief
Financial Officer. Mr. DenBesten received a B.S. degree in business
administration and an M.S. degree in finance from the University of Arizona.
The above officers serve in identical capacities for NHC and its two
corporate general partners: NHC, Inc., and National Health Corporation.
EXECUTIVE COMPENSATION
INTRODUCTION. Pursuant to Article V of the LP Agreement of NHC, the
General Partners are given the full, exclusive and complete discretion in the
management and control of the business of NHC. Pursuant to Article 5.7, the
General Partners do not receive compensation for serving as general partners. In
compliance with the LP Agreement the General Partners hire and compensate all of
the officers of the partnership and of the corporate general partners. The
General Partners' goals in executive compensation and compensation at all levels
within NHC are derived from the following priorities: First, to encourage the
achievement of the highest levels of quality in its fields of endeavor; and
second, to provide the strongest incentive possible in order to average, over a
five year period, a 20% return on partners equity. With these goals in mind, the
General Partners' executive compensation program is based on employee
performance rewarded as follows: (1) the achievement of a return on investment
for limited partners; (2) returns generated from unit performance based
incentive plans; and (3) from base salary. The following text and tables
describe the various components of this plan as were attained and applied during
1996.
TOTAL COMPENSATION: Table I sets forth certain information concerning
the total compensation paid by the administrative general partner and reimbursed
to it by NHC for the year ended December 31, 1996 to the three executive
officers of NHC.
TABLE I
NATIONAL HEALTHCARE L.P.
SUMMARY COMPENSATION TABLE
1996-1994
<TABLE>
<CAPTION>
Long Term Compensation
---------------------------------------
Annual Compensation(1) Awards Payouts
- -------------------------------------------------------------------- ------------------------- ------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other annual Restricted Options/ All Other
Name and Compensation Stock Awards SARs LTIP Payouts Compensation
Principal Position Year Salary ($) Bonus ($)(2) ($)(3) ($) (#)(4) ($) ($)
- ------------------ ---- ---------- ---------- ------------ ------------ -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
W. Andrew Adams 1996 129,757 451,693 8,147 -0- -0- -0- -0-
CEO 1995 129,964 579,200 121,350 -0- 40,000 -0- -0-
1994 132,349 359,920 78,789 -0- 40,000 -0- -0-
Robert G. Adams 1996 140,279 225,846 8,269 -0- -0- -0- -0-
Senior Vice President 1995 145,647 646,227 6,452 -0- 30,000 -0- -0-
& COO 1994 216,384 383,430 26,828 -0- 25,000 -0- -0-
Richard F. LaRoche, Jr. 1996 135,784 225,846 18,823 -0- -0- -0- -0-
Sr. VP 1995 142,639 380,365 8,453 -0- 30,000 -0- -0-
1994 134,150 190,467 15,637 -0- 25,000 -0- -0-
</TABLE>
(1) Compensation deferred at the election of an executive has been
included in salary column (d).
(2) 1996 Performance Bonus has not yet been determined and is not
included in this table.
(3) Includes (a) life insurance benefit, (b) 401-K matching contribution,
(c) nonqualified deferred compensation matching contribution, (d)
ESOP contribution.
(4) The 1995 awards are NHC Unit Options issued at $31.00 per unit. These
officers also received stock options from National Health Investors,
Inc. in 1993 and 1995, which are disclosed in that company's Form
10-K.
The non-employee Directors of NHC, Inc. (the Managing General Partner
of NHC) are paid $2,500 per meeting attended. There were five board meetings
during 1996 and no board member missed a meeting.
65
<PAGE> 72
OPTION PLANS
At the 1994 annual meeting of the Partners, the 1994 Unit Option Plan
was adopted and approved by the Unitholders. A total of 1,200,000 Units were
reserved for issuance upon exercise of options to be granted by the Board of
Directors of the Managing General Partner.
No options were granted to key employees during 1996, however, pursuant
to the Plan, non-employee directors each receive an option to purchase 5,000
units on the date of the annual partnership meeting and for the closing Unit
price that day. 15,000 Units were granted to the three non-employee Directors at
$38.625 per unit on March 21, 1996.
At December 31, 1996, options to purchase 2,500 Units at $11.25 per
unit are outstanding, an option to purchase 5,000 Units at $24.88 per Unit is
outstanding to one director, options to purchase 6,500 Units at $25.12 per Unit
are outstanding to six employees, options to purchase 15,000 Units are
outstanding at $38.625 per Unit to three directors and options to purchase
361,000 Units at $31.00 per Unit are outstanding to 31 key employees.
Table II shows as to the three executive officers: (i) the number of
Units as to which options have been granted from January 1, 1996 through
December 31, 1996 under the Unit Option Plans; (ii) the percentage of all Units
granted represented by these individuals (iii) the option exercise price per
Unit and the expiration date; and (iv) the potential realizable value of these
options assuming both a five percent and ten percent Unit price appreciation
over the next four years.
TABLE II
NATIONAL HEALTHCARE L.P.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
December 31, 1996
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of
Unit Price Appreciation for
Option Term(2)
-----------------------------
(a) (b) (c) (d) (e) (f) (g)
% of Total
Options/SARs
Granted to
Options/SARs Employees in Exercise or Base
Executive Officers Granted (#)(1) Fiscal Year Price ($/Sh) Expiration Date 5%($) 10%($)
- ---------------------------- ------------- -------------- ----------------- --------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
W. Andrew Adams, CEO -0- -0- -0- -0- -0- -0-
Robert G. Adams, Sr., VP, -0- -0- -0- -0- -0- -0-
COO
Richard F. LaRoche, Jr., Sr. VP -0- -0- -0- -0- -0- -0-
</TABLE>
(1) No options were awarded during 1996 to executive officers.
(2) Based on remaining option term (if any) and annual compounding
Table III identifies for the same three person group all options
exercised during 1996, the value realized upon exercise, and the unrealized
value of the balance of options outstanding.
TABLE III
NATIONAL HEALTHCARE L.P.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
December 31, 1996
<TABLE>
<CAPTION> Value of Unexercised
In-the Money
Number of Unexercised Options/SARs at
Options/SARs at FY-End (#) FY-End ($)
-------------------------- ----------------
Shares acquired on Exercisable/ Exercisable/
Executive Officer Exercise (#) Value Realized ($)(1) Unexercisable Unexercisable
- ------------------------------- ------------------ --------------------- ------------- -------------
<S> <C> <C> <C> <C>
W. Andrew Adams, CEO -0- -0- 40,000/0 $500,000/0
Robert G. Adams, Sr., VP, COO -0- -0- 30,000/0 375,000/0
Richard F. LaRoche, Jr., Sr. VP -0- -0- 30,000/0 375,000/0
</TABLE>
(1) Market value of underlying securities at exercise date, minus the exercise
or base price.
NHC maintains several non-qualified deferred compensation plans for its
key employees, one of which provides a matching contribution (15%) for all
deferred compensation used to purchase Units of limited partnership interest
held by an independent trustee. The matching contribution is forfeited to NHC
unless the employee achieves eight years of vesting service before withdrawing
funds from the Trustee account. Mr. LaRoche participated in this plan during
1996. Other than as described herein or as identified in Tables I, II and III,
NHC has no other long-term incentive plans for its executive officers.
66
<PAGE> 73
EMPLOYEE STOCK OWNERSHIP PLAN
In 1986 the Administrative General Partner adopted as its Employee
Stock Ownership Plan and Trust ("ESOP") the ESOP previously sponsored by NHC's
corporate predecessor. The ESOP is a qualified pension plan under Section 401(a)
of the Internal Revenue Code. The Administrative General Partner makes
contributions to the ESOP for all employees and is reimbursed for same by NHC.
Employees make no contributions. All contributions are used by the ESOP to
purchase "qualifying employer securities" which is the Common Stock of the
Administrative General Partner. These securities are allocated among
participating employees of the Administrative General Partner who participate in
the ESOP in the ratio of the employee's wages to the total wages of all
participating employees during that fiscal year. Participating employees are all
employees, including officers, who have earned one year of service by working
more than 1,000 hours during the fiscal year.
On January 20, 1988, the Administrative General Partner of NHC formed a
Leveraged Employee Stock Purchase Plan (Leveraged ESOP). During 1988, the
Leveraged ESOP borrowed, in two separate transactions, $88.5 million from four
commercial banks, the proceeds of which were used to purchase additional stock
in the Administrative General Partner. The Administrative General Partner, in
turn, purchased eight (8) health care centers from NHC and contracted with NHC
to manage these centers for a 20-year period. The Administrative General Partner
also loaned $8.5 million to City Center, Ltd. to construct a 15-story office
building in Murfreesboro, Tennessee, approximately 60% of which is occupied by
NHC. In late 1988, the Administrative General Partner entered into a Loan
Agreement with NHC and advanced $50,000,000 to NHC to be used by NHC to pay off
its existing $30,000,000 revolving line of credit, with the balance to be used
for acquisition, development and general working capital needs. In September of
1988, the original ESOP was merged into the Leveraged ESOP so that as of
December 31, 1995, the employees still participated in only one qualified plan.
On December 28, 1990, the Leveraged ESOP borrowed $50,000,000 from three
commercial lenders, the proceeds of which were used as an equity contribution to
the Administrative General Partner, which in turn loaned said proceeds to NHC at
8.48% fixed rate of interest. The proceeds were used for acquisition and new
construction.
The Leveraged ESOP is administered by an Administrative Committee,
currently consisting of Ernest G. Burgess, III (Director), Donald K. Daniel and
Charlotte Swafford (officers of NHC), which is appointed by the Board of
Directors of the administrative general partner. The Trustees of the Leveraged
ESOP are Dr. Olin O. Williams, a director, and Richard F. LaRoche, Jr., NHC's
Senior Vice President and General Counsel.
The amounts contributed to the ESOP in 1996 and allocated to NHC's
executive officers are included in Table I, and total $19,458.
EMPLOYEE UNIT PURCHASE PLAN
NHC has established its Employee Unit Purchase Plan for employees.
Pursuant to the Plan, eligible employees may purchase units through payroll
deductions at the lesser of the closing asked price of the units as reported on
the American Stock Exchange on the first trading or the last trading day of each
year. At the end of each year, funds accumulated in the employee's account will
be used to purchase the maximum number of units at the above price. NHC makes no
contribution to the purchase price. 21,665 units were issued pursuant to the
Plan in January, 1997, with all payroll deductions being made in 1996.
All employees (including officers and directors) may elect to
participate in the Plan if they meet minimum employment requirements. The
maximum payroll deduction is the employee's normal monthly pay. Participating
employee's rights under the plan are nontransferable. Prior to the end of a
year, a participant may elect to withdraw from the Plan and the amount
accumulated as a result of his payroll deductions shall be returned to him
without interest. Any terminated employee immediately ceases to be a participant
and also receives his or her prior contributions.
In no event may a participant in the Plan purchase thereunder during a
calendar year, units having a fair market value more than $25,000.
The units purchased pursuant to the Plan are freely tradeable, except
for any shares held by an "affiliate" of NHC, which would be subject to the
limitations of Rule 144.
Only Mr. LaRoche and Mr. Robert Adams of NHC's executive officers
participated in this Plan during 1996 and the positive spread between the
purchase price and the then fair market price for these individuals is included
in Table I.
1975 PERFORMANCE BONUS PLAN
In 1975 NHC implemented a performance Bonus Plan which was reaffirmed
and readopted by the unitholders in 1994. This plan provides for the Chairman of
the Board to allocate, with the approval of the non-employee directors, the
bonus at the end of each fiscal year. The total amount available for bonuses
under the plan is 20% of NHC's net income (without regard to NHI lease payments
or Advisory fee income) after a 20% return on partners' equity as determined at
the beginning of that fiscal year. Bonuses of $3,093,901 were paid under this
plan to a total of 125 employees for fiscal year 1995.
67
<PAGE> 74
401(K) PLAN
NHC and its affiliates offer a 401(k) Plan for all employees who are
over 18 years of age. The Board of Directors has authorized a matching
contribution to be made for 50% of contributions with contributions being
matched up to 2.5% of quarterly gross wages. No employee may contribute more
than 15% of wages to the Plan, and employees who earn more than $66,000 were
limited to a contribution of no more than $3,500. These matching funds will be
used to purchase Units on the open market, which Units will vest in the
employees account only after the employee has achieved five years of vesting
service. Forfeited units are allocated among remaining participants. A total of
$1,170,000 was contributed to the Plan as matching contributions for 1996.
EMPLOYEE LOAN AND BONUS PROGRAMS
On December 31, 1986, NHC's unitholders adopted an Employee Stock
Financing Plan (the "Financing Plan"). The Plan was designed to enable key
employees of the Corporation to finance the exercise of unit options granted to
them by the Board of Directors and only if authorized by the Board. Under the
Plan, NHC may finance the exercise of any unit options by the acceptance of the
employees' full recourse promissory note bearing interest at a fixed rate equal
to 2.5% below New York prime on the date of the note, with interest payable
quarterly and principal due and payable on ninety days notice, but no longer
than 60 months. The notes are secured by Units having a fair market value equal
to twice the note amount.
The following tables shows, as to each executive officer whose
indebtedness exceeded $60,000, the largest aggregate amount of such indebtedness
since December 31, 1994 and the present outstanding balance.
<TABLE>
<CAPTION>
Financing Plan
-----------------------------------------
Largest Balance out-
Aggregate standing as of
Indebtedness 6/30/97
------------- --------------
<S> <C> <C> <C>
W. Andrew Adams President & Chief $ 4,101,131.00 $3,426,131.00
Executive Officer
Robert G. Adams Sr. Vice President & 2,426,309.00 1,920,059.00
Director
Richard F. LaRoche, Jr. Sr. Vice President & 2,418,076.00 2,136,826.00
Secretary
Ernest G. Burgess Director 1,309,368.00 1,028,118.00
J. K. Twilla Director 169,750.00 -0-
Olin O. Williams Director 679,462.50 595,087.50
-------------- -------------
All Executive Officers $11,104,096.50 $9,106,221.50
& Directors as a Group (6) ============== =============
</TABLE>
Obligations to repay the Financing Plan loans are an asset of NHC (and will
become assets of the Corporation), but are not reflected as increasing
partnership equity (or stockholder equity) until paid. From time to time the
Board has declared a special key employee bonus, directing that the proceeds of
same be used to retire some or all of these financing plan notes. These bonuses
are included in Table I.
68
<PAGE> 75
THE REIT
DIRECTORS AND EXECUTIVE OFFICERS
The Board of Directors of the REIT will be divided into three classes.
The REIT Directors will hold office until the annual meeting for the year in
which their term expires and until their successor is elected and qualified. As
each of their terms expire, the successor shall be elected to a three-year term.
A director may be removed from office for cause only. Officers serve at the
pleasure of the REIT's Board of Directors for a term of one year. The following
table sets forth the initial directors of the REIT:
<TABLE>
<CAPTION>
Name Officer of
---- Current NHC's Managing
Term as General Partner or
Director Predecessor
Expires Since
-------- ------------------
<S> <C> <C>
J. K. Twilla 2001 ---
Robert G. Adams 2000 1985
Olin O. Williams 2000 ---
W. Andrew Adams 1999 1973
Ernest G. Burgess, III 1999 1975
</TABLE>
Each of the directors of the Corporation are currently directors of NHC
and their biographies are included above.
Outside directors receive $2,500 per meeting attended. In addition, outside
directors will receive a stock option to purchase 5,000 shares of REIT common
stock at a purchase price equal to the closing price of the REIT Shares on the
initial date of trading and will be automatically granted an option to purchase
1,000 shares of REIT common stock at the closing price on the date of the REIT's
annual meeting.
The REIT's day to day operations will be conducted by personnel provided by
the Corporation. The REIT will have two executive officers, W. Andrews Adams as
President and Richard F. LaRoche, Jr., as secretary, both of whom are also
officers of the Corporation. See "Relationship Between the REIT and the
Corporation After the Restructure -- Advisory, Administrative Services and
Facilities Agreement".
The compensation of Mr. Adams and Mr. LaRoche will be set by the Board of
Directors of the Corporation and the obligations of the Corporation pursuant to
the REIT Advisory Agreement. Any compensation paid by the Corporation is
credited against the Advisory fee paid to the Corporation.
STOCK OPTION PLAN
The REIT Board of Directors and the sole shareholder of the REIT have
approved the adoption of the 1997 Stock Option and Stock Appreciation Rights
Plan (the "REIT Stock Option Plan"), under which options to purchase shares of
the REIT's common stock are available for grant to consultants, advisors,
directors and employees of the REIT, providing an equity interest in the REIT
and additional compensation based on appreciation of the value of such stock.
The REIT Stock Option Plan allows for options to purchase in the aggregate
up to 500,000 shares of REIT common stock to be granted by the REIT Board of
Directors. The REIT Board of Directors may, in its discretion grant incentive
stock options ("ISO's"), non-qualified stock options or stock appreciation
rights ("SAR's")
In addition, the REIT Stock Option Plan provides that the non-employee
directors will receive a non-qualified stock option to purchase 5,000 shares of
REIT common stock at a purchase price equal to the closing price of the REIT
Shares on the initial date of trading and will be automatically granted an
option to purchase 5,000 shares of REIT common stock annually on the date of the
REIT's annual meeting with an exercise price equal to the closing price on the
date of such annual meeting.
The REIT Stock Option Plan provides that the exercise price of an ISO
option must not be less than the fair market value of the REIT common stock on
the trading day next preceding the date of the grant. Payment for shares of REIT
common stock to be issued upon exercise of an option may be made either in cash,
REIT common stock or any combination thereof, at the discretion of the option
holder. Options are nontransferable, other than by will, the laws of descent and
distribution or pursuant to certain domestic relations orders. REIT Shares
subject to options granted under the REIT Stock Option Plan that expire,
terminate or are canceled without having been exercised in full become available
again for option grants.
The REIT Stock Option Plan is administered by the REIT Board of Directors,
or, at the discretion of the REIT Board of Directors, a committee of directors.
Subject to certain limitations, the REIT Board and its committee have the
authority to determine the recipients, as well as the exercise prices, exercise
periods, length and other terms of stock
69
<PAGE> 76
options granted pursuant to the REIT Stock Option Plan. In making such
determinations, the REIT Board may take into account the nature of the services
rendered or to be rendered by option recipients, and their past, present or
potential contributions to the REIT.
The number of shares of REIT common stock that may be granted under the
REIT Stock Option Plan or under any outstanding options granted thereunder will
be proportionately adjusted, to the nearest whole share, in the event of any
stock dividend, stock split, share combination or similar recapitalization
involving the REIT common stock or any spin-off, spin-out or other significant
distribution of the REIT's assets to its stockholders for which the REIT
receives no consideration.
Generally, in the event an option holder is terminated as an employee by
reason of disability or death, the holder or his or her representative may
exercise the option for a period of 12 months following such termination unless
the Board of Directors elects, in its sole discretion, to extend the exercise
period. If the employment of an option holder is terminated for "cause," as
defined in the REIT Stock Option Plan, the unexercised options expire. In the
event the option holder is terminated as an employee for any reason other than
disability, death or cause, the holder may exercise his or her option for a
period of three months following termination, unless extended by agreement of
the REIT.
In the event of a dissolution or liquidation of the REIT or a merger or
consolidation or acquisition in which the REIT is not the surviving corporation,
each outstanding option will become fully exercisable and each holder will have
the right, within 60 days prior to such dissolution, liquidation, merger,
consolidation or acquisition, to exercise his or her options, in whole or in
part.
Either non-qualified or incentive stock options may be granted under the
REIT Stock Option Plan. No federal income tax consequences occur to either the
REIT or the optionee upon the REIT's grant or issuance of a non-qualified stock
option. Upon an optionee's exercise of a non-qualified stock option, the
optionee will recognize ordinary income in an amount equal to the difference
between the fair market value of the REIT common stock purchased pursuant to the
exercise of the option and the exercise price of the option. However, if the
REIT common stock purchased upon exercise of the option is not transferable or
is subject to a substantial risk of forfeiture, then the optionee will not
recognize income until the stock becomes transferable or is no longer subject to
such a risk of forfeiture (unless the optionee makes an election under Internal
Revenue Code Section 83(b) to recognize the income in the year of exercise,
which election must be made within 30 days of the option exercise). The REIT
will be entitled to a deduction in an amount equal to the ordinary income
recognized by the optionee in the year in which such income is recognized by the
optionee. Upon a subsequent disposition of the shares of REIT common stock, the
optionee will recognize a capital gain to the extent the sales proceeds exceed
the optionee's cost of the shares plus the previously recognized ordinary
income.
Incentive stock options granted under the REIT Stock Option Plan are
intended to qualify for a favorable tax treatment under Internal Revenue Code
Section 422. No individual may be granted incentive stock options under the REIT
Stock Option Plan exercisable for the first time during any calendar year and
having an aggregate fair market value in excess of $100,000. If the recipient of
an incentive stock option disposes of the underlying shares before the end of
certain holding periods (essentially the later of one year after the exercise
date or two years after the grant date), he or she will generally recognize
ordinary income in the year of disposition in an amount equal to the difference
between his or her purchase price and the fair market value of the REIT common
stock on the exercise date. If a disposition does not occur until after the
expiration of the holding periods, the recipient will generally recognize a
capital gain equal to the excess of the disposition price over the price paid by
the recipient on the exercise date. The REIT generally will not be entitled to a
tax deduction for compensation expense on account of the original sales to
employees, but may be entitled to deduction if a participant disposes of stock
received upon exercise of an incentive stock option under the REIT Stock Option
Plan prior to the expiration of the holding periods.
The only options which the REIT Board of Directors has determined to grant
under the REIT Stock Option Plan to date are the options to purchase 5,000
shares of REIT common stock to be granted to non-employee directors on the first
trading date after the Effective Time.
THE CORPORATION
DIRECTORS AND EXECUTIVE OFFICERS
The Board of Directors of the Corporation will be divided into three
classes. The Directors will hold office until the annual meeting for the year in
which their term expires and until their successor is elected and qualified. As
each of their terms expire, the successor shall be elected to a three-year term.
A director may be removed from office for cause only. Officers serve at the
pleasure of the Board of Directors for a term of one year. The following table
sets forth the initial directors of the Corporation:
<TABLE>
<CAPTION>
Officer of
Current NHC's Managing
Term as General Partner or
Director Predecessor
Name Expires Since
---- -------- ------------------
<S> <C> <C>
J. K. Twilla 2001 ---
</TABLE>
70
<PAGE> 77
<TABLE>
<CAPTION>
Officer of
Current NHC's Managing
Term as General Partner or
Director Predecessor
Name Expires Since
---- --------- -----------
<S> <C> <C>
Lawrence C. Tucker 2001 ---
Robert G. Adams 2000 1985
Olin O. Williams 2000 ---
W. Andrew Adams 1999 1973
Ernest G. Burgess, III 1999 1975
</TABLE>
Each of the directors of the Corporation are currently directors of NHC
(and their biographical information is set forth above) with the exception of
Mr. Tucker.
Mr. Tucker has been with Brown Brothers Harriman & Co. ("BBH&Co."), a
private banking company, for 31 years and became a general partner in January
1979. Mr. Tucker currently serves as a member of the Steering Committee of
BBH&Co. He is responsible for the corporate finance activities of BBH&Co.,
including management of the 1818 Fund's, private equity investing partnerships
with committed capital exceeding $1 billion. Mr. Tucker is a director of
WorldCom, Inc., Riverwood International Corporation and WellCare Management
Group, Inc. Mr. Tucker has a B.S. degree from Georgia Institute of Technology
and an MBA from the Wharton School of the University of Pennsylvania.
The executive officers of the Corporation will be the same as the
current officers of NHC. See "Management -- NHC." In addition, the employees of
the Corporation will be provided pursuant to the Employee Services Agreement
between the Corporation and National. The Corporation does not have employment
agreements with any of its employees and anticipates that the compensation
received by its executive officers will be in line with the compensation
received by such officers as officers of NHC. See "Management -- NHC --
Executive Compensation."
Outside directors receive $2,500 per meeting attended. In addition,
outside directors will receive a stock option to purchase 10,000 shares of REIT
common stock at a purchase price equal to the closing price of the Corporation
Shares on the initial date of trading and will be automatically granted an
option to purchase 10,000 shares of Corporation common stock at the closing
price on the date of the Corporation's annual meeting.
The Corporation's Board of Directors and the sole shareholder of the
Corporation have approved the adoption of the 1997 Stock Option and Stock
Appreciation Rights Plan (the "Corporation Stock Option Plan"), under which
options to purchase shares of the Corporation's common stock are available for
grant to consultants, advisors, directors and employees of the Corporation,
providing an equity interest in the Corporation and additional compensation
based on appreciation of the value of such stock.
The Corporation Stock Option Plan allows for options to purchase in the
aggregate up to 1,000,000 shares of Corporation common stock to be granted by
the Corporation Board of Directors. The Corporation Board of Directors may, in
its discretion grant incentive stock options ("ISO's"), non-qualified stock
options or stock appreciation rights ("SAR's")
In addition, the Corporation Stock Option Plan provides that the
non-employee directors will receive a non-qualified stock option to purchase
10,000 shares of Corporation common stock at a purchase price equal to the
closing price of the Corporation Shares on the initial date of trading and will
be automatically granted an option to purchase 10,000 shares of Corporation
common stock annually on the date of the Corporation's annual meeting with an
exercise price equal to the closing price on the date of such annual meeting.
The Corporation Stock Option Plan provides that the exercise price of
an ISO option must not be less than the fair market value of the Corporation
common stock on the trading day next preceding the date of the grant. Payment
for shares of Corporation common stock to be issued upon exercise of an option
may be made either in cash, Corporation common stock or any combination thereof,
at the discretion of the option holder. Options are nontransferable, other than
by will, the laws of descent and distribution or pursuant to certain domestic
relations orders. Corporation Shares subject to options granted under the
Corporation Stock Option Plan that expire, terminate or are canceled without
having been exercised in full become available again for option grants.
The Corporation Stock Option Plan is administered by the Corporation
Board of Directors, or, at the discretion of the Corporation Board of Directors,
a committee of directors. Subject to certain limitations, the Corporation Board
and its committee have the authority to determine the recipients, as well as the
exercise prices, exercise periods, length and other terms of stock options
granted pursuant to the Corporation Stock Option Plan. In making such
determinations, the Corporation Board may take into account the nature of the
services rendered or to be rendered by option recipients, and their past,
present or potential contributions to the Corporation.
The number of shares of Corporation common stock that may be granted
under the Corporation Stock Option Plan or under any outstanding options granted
thereunder will be proportionately adjusted, to the nearest whole share, in the
event of any stock dividend, stock split, share combination or similar
recapitalization involving the Corporation common
71
<PAGE> 78
stock or any spin-off, spin-out or other significant distribution of the
Corporation's assets to its stockholders for which the Corporation receives no
consideration.
Generally, in the event an option holder is terminated as an employee by
reason of disability or death, the holder or his or her representative may
exercise the option for a period of 12 months following such termination unless
the Board of Directors elects, in its sole discretion, to extend the exercise
period. If the employment of an option holder is terminated for "cause," as
defined in the Corporation Stock Option Plan, the unexercised options expire. In
the event the option holder is terminated as an employee for any reason other
than disability, death or cause, the holder may exercise his or her option for a
period of three months following termination, unless extended by agreement of
the Corporation.
In the event of a dissolution or liquidation of the Corporation or a merger
or consolidation or acquisition in which the Corporation is not the surviving
corporation, each outstanding option will become fully exercisable and each
holder will have the right, within 60 days prior to such dissolution,
liquidation, merger, consolidation or acquisition, to exercise his or her
options, in whole or in part.
Either non-qualified or incentive stock options may be granted under the
Corporation Stock Option Plan. No federal income tax consequences occur to
either the Corporation or the optionee upon the Corporation's grant or issuance
of a non-qualified stock option. Upon an optionee's exercise of a non-qualified
stock option, the optionee will recognize ordinary income in an amount equal to
the difference between the fair market value of the Corporation common stock
purchased pursuant to the exercise of the option and the exercise price of the
option. However, if the Corporation common stock purchased upon exercise of the
option is not transferable or is subject to a substantial risk of forfeiture,
then the optionee will not recognize income until the stock becomes transferable
or is no longer subject to such a risk of forfeiture (unless the optionee makes
an election under Internal Revenue Code Section 83(b) to recognize the income in
the year of exercise, which election must be made within 30 days of the option
exercise). The Corporation will be entitled to a deduction in an amount equal to
the ordinary income recognized by the optionee in the year in which such income
is recognized by the optionee. Upon a subsequent disposition of the shares of
Corporation common stock, the optionee will recognize a capital gain to the
extent the sales proceeds exceed the optionee's cost of the shares plus the
previously recognized ordinary income.
Incentive stock options granted under the Corporation Stock Option Plan are
intended to qualify for a favorable tax treatment under Internal Revenue Code
Section 422. No individual may be granted incentive stock options under the
Corporation Stock Option Plan exercisable for the first time during any calendar
year and having an aggregate fair market value in excess of $100,000. If the
recipient of an incentive stock option disposes of the underlying shares before
the end of certain holding periods (essentially the later of one year after the
exercise date or two years after the grant date), he or she will generally
recognize ordinary income in the year of disposition in an amount equal to the
difference between his or her purchase price and the fair market value of the
Corporation common stock on the exercise date. If a disposition does not occur
until after the expiration of the holding periods, the recipient will generally
recognize a capital gain equal to the excess of the disposition price over the
price paid by the recipient on the exercise date. The Corporation generally will
not be entitled to a tax deduction for compensation expense on account of the
original sales to employees, but may be entitled to deduction if a participant
disposes of stock received upon exercise of an incentive stock option under the
Corporation Stock Option Plan prior to the expiration of the holding periods.
The only options which the Corporation Board of Directors has determined to
grant under the Corporation Stock Option Plan to date are the options to
purchase 10,000 shares of Corporation common stock to be granted to non-employee
directors on the first trading date after the Effective Time.
The Corporation has also established several non-qualified deferred
compensation plans for its key employees similar to the plans offered by NHC,
one of which provides a matching contribution (15%) for all deferred
compensation used to purchase shares of common stock held by an independent
trustee. The matching contribution is forfeited to the Corporation unless the
employee achieves eight years of vesting service before withdrawing funds from
the Trustee account. The Corporation will grant credit to employees for years of
service with NHC.
EMPLOYEE STOCK PURCHASE PLAN
The Corporation has established its Employee Stock Purchase Plan for
employees. Pursuant to the Plan, eligible employees may purchase shares of
Common Stock through payroll deductions at the lesser of the closing asked price
of the stock as reported on the American Stock Exchange on the first trading or
the last trading day of each plan year. At the end of each plan year, funds
accumulated in the employee's account will be used to purchase the maximum
number of Shares at the above price. The Corporation makes no contribution to
the purchase price.
All employees (including officers and directors) may elect to participate
in the Employee Stock Purchase Plan if they meet minimum employment
requirements. The maximum payroll deduction is the employee's normal monthly
pay. Participating employee's rights under the Plan are nontransferable. Prior
to the end of a year, a participant may elect to withdraw from the Plan and the
amount accumulated as a result of his payroll deductions shall be returned to
him without interest. Any terminated employee immediately ceases to be a
participant and also receives his or her prior contributions.
72
<PAGE> 79
In no event may a participant in the Employee Stock Purchase Plan purchase
thereunder during a calendar year, units having a fair market value more than
$25,000.
The Shares purchased pursuant to the Plan are freely tradeable, except for
any shares held by an "affiliate" of the Corporation, which would be subject to
the limitations of Rule 144.
EMPLOYEE STOCK OWNERSHIP PLAN
The Corporation has adopted as its Employee Stock Ownership Plan and Trust
("ESOP") the ESOP previously sponsored by NHC. The ESOP is a qualified pension
plan under Section 401(a) of the Internal Revenue Code. National Health
Corporation ("National") makes contributions to the ESOP for all employees and
is reimbursed for same by the Corporation. Employees make no contributions. All
contributions are used by the ESOP to purchase "qualifying employer securities"
which is the Common Stock of the Administrative General Partner. These
securities are allocated among participating employees of the Administrative
General Partner who participate in the ESOP in the ratio of the employee's wages
to the total wages of all participating employees during that fiscal year.
Participating employees are all employees, including officers, who have earned
one year of service by working more than 1,000 hours during the fiscal year. The
Corporation's ESOP will assume the debt on NHC's Leveraged ESOP as described
under "Management -- NHC -- Executive Compensation."
The Corporation's ESOP will be administered by an Administrative Committee,
currently consisting of Ernest G. Burgess, III (Director), Donald K. Daniel and
Charlotte Swafford (officers of the Corporation), which is appointed by the
Board of Directors of the Corporation. The Trustees of the ESOP are Dr. Olin 0.
Williams, a director, and Richard F. LaRoche, Jr., the Corporation's Senior Vice
President and General Counsel.
PERFORMANCE BONUS PLAN
The Corporation has adopted a Performance Bonus Plan. This plan provides
for the Chairman of the Board to allocate, with the approval of the non-employee
directors, the bonus at the end of each fiscal year. The total amount available
for bonuses under the plan is 20% of the Corporation's net income (without
regard to NHI lease payments or NHI Advisory fee income or the REIT Lease
payments or REIT Advisory Fee income) after a 20% return on stockholders' equity
as determined at the beginning of that fiscal year.
401(K) PLAN
The Corporation will offer a 401(k) Plan for all employees who are over 18
years of age. The Board of Directors has authorized a matching contribution to
be made for 50% of contributions with contributions being matched up to 2.5% of
quarterly gross wages. No employee may contribute more than 15% of wages to the
Plan, and employees who earn more than $66,000 were limited to a contribution of
no more than $3,500. These matching funds will be used to purchase Shares on the
open market, which Shares will vest in the employees account only after the
employee has achieved five years of vesting service. Forfeited Shares will be
allocated among remaining participants.
EMPLOYEE LOAN AND BONUS PROGRAMS
The Corporation has adopted an Employee Stock Financing Plan (the
"Financing Plan"). The Plan was designed to enable key employees of the
Corporation to finance the exercise of stock options granted to them by the
Board of Directors and only if authorized by the Board. Under the Plan, the
Corporation may finance the exercise of any options by the acceptance of the
employees' full recourse promissory note bearing interest at a fixed rate equal
to 2.5% below New York prime on the date of the note, with interest payable
quarterly and principal due and payable on ninety days notice, but no longer
than 60 months. The notes are secured by Shares having a fair market value equal
to twice the note amount.
Obligations to repay the Financing Plan loans are an asset of the
Corporation, but are not reflected as increasing Equity until paid. From time to
time the Board may declare a special key employee bonus, directing that the
proceeds of same be used to retire some or all of these financing plan notes.
73
<PAGE> 80
CERTAIN TRANSACTIONS
W. ANDREW ADAMS
NHC has successfully developed a continuing care retirement community in
Nashville, Tennessee (Richland Place) and is pursuing similar projects in
Tennessee and Florida. Having identified Murfreesboro, Rutherford County,
Tennessee as a viable market, the Company invited a number of potential
residents to serve as a focus group to assist in the location and design of the
project. After reviewing a number of potential locations, management and the
focus group chose a twenty-two acre tract with extensive frontage on US Highway
231 as the optimum location. This site was owned and occupied by Mr. and Mrs. W.
Andrew Adams, NHC's chief executive officer. After negotiations and appraisal,
the Company acquired in 1993 and 1994 (by exchange of like kind property and
cash) the site from Mr. and Mrs. Adams for a total valuation of $1,500,000,
which the Company believes to be equal to or even less than comparable property
in the market. Mr. and Mrs. Adams are currently renting the residence on the
site on a month to month basis and for a fair market value.
NATIONAL
In January, 1988, NHC sold the assets of eight health care centers (1,121
licensed beds) to National for a total consideration of $40,000,000. The
consideration consisted of $30,000,000 in cash and a $10,000,000 note receivable
due December 31, 2007. The note receivable earns interest at 8.5% per annum. NHC
has agreed to manage the centers under a 20-year management contract for
management fees comparable to those in the industry. NHC has a receivable from
National for management fees of approximately $3.2 million at December 31, 1996.
As of December 31, 1996, National had borrowed $2,153,000 form NHC to finance
the construction of additions at two health care centers. These notes are
unsecured, mature in 1998 and require monthly principal and interest payments,
with interest at the prime rate.
In January, 1988, NHC obtained long-term financing of $8.5 million from
National for its new headquarters building. The note requires quarterly
principal and interest payments with interest at 9%. At December 31, 1996, the
outstanding balance was approximately $5.5 million. The building is owned by a
separate partnership of which NHC is the general partner and the other building
tenants are limited partners. NHC has guaranteed the debt service of the
building partnership (and the Corporation will receive this general partnership
interest). In addition, NHC's bank credit facility and the senior secured notes
were financed through National and National's ESOP. NHC's interest costs,
financing expenses and principal payments are equal to those incurred by
National. In October 1991, NHC borrowed $10.0 million from National. This term
note requires quarterly interest payments at 8.5% with the entire principal due
at maturity in 1998.
The Corporation and National intend to enter into an Employee Services
Agreement (the "Employee Services Agreement") whereby the Corporation will lease
all of its employees from National. Pursuant to the Employee Lease Agreement,
The Corporation will reimburse National for the gross payroll of employees
provided to the Corporation plus a monthly fee equal to one percent of such
month's gross payroll, but in shall such fee be less than the actual cost of
administering the payroll and personnel department. The Employee Services
Agreement may be terminated by either at anytime with or without notice.
National will be responsible for: the employment of all persons necessary
to conduct the business of the Corporation and set all wages and salaries, and
provide all fringe benefits; utilization of any qualified leveraged employee
stock ownership plan; payment of pensions, and establishment or continue and
carry out pension, profit sharing, bonus, purchase, option, savings, thrift and
other incentive and employee benefit plans; purchase and payment of insurance;
the indemnification and purchase of insurance on behalf of any fiduciary of any
employee benefit plans and health insurance on behalf of any fiduciary of such
plans.
In the Employee Services Agreement, the Corporation agrees to indemnify,
defend and hold harmless National from any damages caused by a misrepresentation
by the Corporation, litigation arising from the acts or failure to act of the
Corporation or its agents in accordance with law or the Employee Services
Agreement, any employment matters relating to the employees as a result of gross
negligence or intentional misconduct by the Corporation or the failure of the
Corporation to obtain and/or follow specific advice and direction from National
in matters of employee separation and/or discipline. In addition, National
agrees to indemnify and defend and hold harmless the Corporation from any
damages caused by reason of or resulting from or relating to employee separation
and/or discipline of National employees.
In connection with the Plan of Restructure, with respect to approximately
806,000 of the Units owned by National, instead of receiving REIT Shares,
National will receive approximately 806,000 OP Units. National will receive the
OP Units in order to preserve the ownership restrictions required for the REIT
to qualify as a real estate investment trust. Therefore, after the Effective
Time, National will own approximately 794,000 REIT Shares and 806,000 OP Units.
74
<PAGE> 81
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
NHC
The following table sets forth certain information as to the number of
general and limited partnership Units of NHC beneficially owned as of July 31,
1997 (a) by each person (including any "group" as that term is used in Section
13(d) (3) of the Exchange Act) who is known to NHC to own beneficially 5% or
more of the outstanding Units (8,862,187 Units as of July 31, 1997), (b) by each
director of the Managing or Administrative General Partner, and (c) by all
executive officers and directors of NHC, Managing General Partner and the
Administrative General Partner as a group. Members of management of NHC listed
below are all members of management and/or the Board of Directors of the
Managing and Administrative General Partners, but they disclaim that they are
acting as a "group" and the table below is not reflective of them acting as a
group:
<TABLE>
<CAPTION>
Names and Addresses Number of Units Percentage of
of Beneficial Owner Beneficially Owned (1) Total Units
------------------- ---------------------- -------------
<S> <C> <C>
W. Andrew Adams, President and 1,062,173 12.00%
Individual General Partner
1927 Memorial Blvd.
Murfreesboro, TN 37129
Dr. J. K. Twilla, Director 73,155 .82%
525 Golf Club Lane
Smithville, TN 37166
Dr. Olin O. Williams, Director 99,340 1.12%
2007 Riverview Drive
Murfreesboro, TN 37139
Robert G. Adams, Director & Sr. V.P. 438,073 4.94%
2217 Tomahawk Trace
Murfreesboro, TN 37129
Ernest G. Burgess, Director 178,592 2.02%
2239 Shannon Drive
Murfreesboro, TN 37129
Richard F. LaRoche, Jr., Sr. V.P. 374,685 4.23%
2103 Shannon Drive
Murfreesboro, TN 37130
National Health Corporation, (2) 1,271,058 14.34%
Admin. General Partner
P. O. Box 1398
Murfreesboro, TN 37133
NHC, Inc., Managing General Partner 87,715 .99%
P. O. Box 1398
Murfreesboro, TN 37133
Albert O. Nicholas 443,600 5.00%
6002 North Highway 83
Hartland, WI 53029
All Executive Officers, Directors of the 3,579,988 40.40%
Corporate General Partners and the
Corporate General Partners as a Group
</TABLE>
(1) Assumes exercise of unit options and convertible subordinated
debentures outstanding. See "Management -- NHC -- Option Plans."
(2) Does not include 99,495 Units owned by a revocable trust under NHC's
deferred compensation plan or 239,600 Units owned by National for the
benefit of a third party, of which National may be deemed the
beneficial owner. National disclaims beneficial ownership of such
Units.
75
<PAGE> 82
THE REIT
Since its incorporation, the REIT has been and until the Distribution
occurs will be a wholly-owned subsidiary of NHC. As a result, NHC currently
owns 100% of the outstanding REIT Shares. Immediately following the Effective
Time of the Plan of Restructure, the REIT will be beneficially owned by each
person and with the same percentage ownership as NHC is currently owned except
that National will own approximately 794,000 REIT Shares and 806,000 OP Units
and there will be approximately 806,000 fewer REIT Shares outstanding. See
"Certain Transactions - National."
After applying certain ownership attribution rules of the Code, the two
largest shareholders of the REIT will be (i) W. Andrew Adams and other members
of his family, and (ii) National Health Corporation. See "Federal Income Tax
Considerations - The REIT - Taxation as a Real Estate Investment Trust." The
following table sets forth certain information as to REIT Shares estimated to
be beneficially owned after the Effective Time.
<TABLE>
<CAPTION>
Number of REIT Shares Percentage of
Names and Addresses Beneficially Owned After the Total REIT Shares After the
of Beneficial Owner Restructure (1) Restructure (2)
------------------- ---------------------------- ---------------------------
<S> <C> <C>
W. Andrew Adams, President and 1,062,173 10.61%
Individual General Partner
1927 Memorial Blvd.
Murfreesboro, TN 37129
Dr. J. K. Twilla, Director 73,155 0.73%
525 Golf Club Lane
Smithville, TN 37166
Dr. Olin O. Williams, Director 99,340 0.99%
2007 Riverview Drive
Murfreesboro, TN 37139
Robert G. Adams, Director & Sr. V.P. 438,073 4.37%
2217 Tomahawk Trace
Murfreesboro, TN 37129
Ernest G. Burgess, Director 178,592 1.78%
2239 Shannon Drive
Murfreesboro, TN 37129
Richard F. LaRoche, Jr., Sr. V.P. 374,685 3.74%
2103 Shannon Drive
Murfreesboro, TN 37130
National Health Corporation, 794,000 7.93%
Admin. General Partner
P. O. Box 1398
Murfreesboro, TN 37133
All Executive Officers, Directors of the 2,221,215 22.18%
REIT
</TABLE>
(1) Assumes exercise of options outstanding.
(2) Based on an estimated 10,013,400 to be outstanding immediately after
the Effective Time.
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<PAGE> 83
THE CORPORATION
Since its incorporation, the Corporation has been and until the Merger
occurs will be a wholly-owned subsidiary of NHC. As a result, NHC currently owns
100% of the outstanding Shares. Immediately following the Effective Time of the
Plan of Restructure, the Corporation will be beneficially owned by each person
and with the same percentage ownership as NHC except that the 1818 Notes, if
issued, will immediately be converted into approximatley 555,555 Shares at the
Effective Time. The following table sets forth certain information as to Shares
estimated to be beneficially owned after the Effective Time.
<TABLE>
<CAPTION>
Number of Corporation Shares Percentage of
Names and Addresses Beneficially Owned After the Total Corporation Shares After the
of Beneficial Owner Restructure (1) Restructure (2)
------------------- ---------------------------- ---------------------------
<S> <C> <C>
W. Andrew Adams, Director, CEO 1,062,173 10.61%
1927 Memorial Blvd.
Murfreesboro, TN 37129
Dr. J.K. Twilla, Director 73,155 0.73%
525 Golf Club Lane
Smithville, TN 37166
Dr. Olin O. Williams, Director 99,340 0.99%
2007 Riverview Drive
Murfreesboro, TN 37139
Robert G. Adams, Director & Sr.V.P. 438,073 4.37%
2217 Tomahawk Trace
Murfreesboro, TN 37129
Ernest G. Burgess, Director 178,592 1.78%
2239 Shannon Drive
Murfreesboro, TN 37129
Lawrence C. Tucker, Director (3) 555,555 5.13%
59 Wall Street
New York, NY 10005
Richard F. LaRoche, Jr., Sr.V.P. 374,685 3.74%
2103 Shannon Drive
Murfreesboro, TN 37130
National Health Corporation (4) 1,271,058 11.75%
P.O. Box 1398
Murfreesboro, TN 37133
1818 Fund 555,555 5.13%
59 Wall Street
New York, New York 10005
All Executive Officers, Directors of the 2,776,770 25.66%
Corporation
</TABLE>
(1) Assumes exercise of options outstanding.
(2) Based on an estimated 10,819,400 to be outstanding immediately after
the Effective Time.
(3) Mr. Tucker is a general partner of 1818 Fund and may be deemed to be
the beneficial owner of the Shares owned by the 1881 Fund. Mr. Tucker
disclaims beneficial ownership.
(4) Does not include 99,495 Units owned by a revocable trust under NHC'S
deferred compensation plan or 239,600 Units owned by National for the
benefit of a third party of which National may be deemed the beneficial
owner. National disclaims beneficial ownership of such Shares.
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<PAGE> 84
DESCRIPTION OF SECURITIES
SHARES OF THE CORPORATION
COMMON STOCK
The Corporation is authorized to issue 30,000,000 shares of common stock,
par value $.01 per share and 10,000,000 shares of preferred stock, par value
$.01 per share.
Holders of the Shares are entitled to one vote for each share held of
record on all matters to be voted on by stockholders. There is no cumulative
voting with respect to the election of directors. Holders of the Shares are
entitled to receive dividends when, as and if declared by the board of directors
out of funds legally available therefor. In the event of a liquidation,
dissolution or winding up of the Corporation, holders of the Shares are entitled
to share ratably in all assets remaining available for distribution to them
after payment of liabilities and after provision has been made for each class of
stock, if any, having preference over the Shares. Holders of the Shares, as
such, have no conversion, preemptive or other subscription rights, and there are
no redemption provisions applicable to the Shares. All of the Shares outstanding
are fully paid and nonassessable.
The Corporation's board of directors is authorized to issue preferred stock
in one or more series and, with respect to each series, to determine the number
of shares constituting any series, and the preferences, conversion and other
rights, voting powers, restrictions and limitations as to dividends,
qualifications and terms and conditions of redemption.
The preferred stock and the variety of characteristics available for it
offers the Corporation flexibility in financing and acquisition transactions. An
issuance of preferred stock could dilute the book value or adversely affect the
relative voting power of the Corporation Shares. The issuance of such shares
could be used to discourage unsolicited business combinations, for example, by
providing for class voting rights which would enable the holder to block such a
transaction. Although the Corporation's board of directors is required when
issuing such stock to act based on its judgment as to the best interests of the
stockholders of the Corporation, the board of directors could act in a manner
that would discourage or prevent a transaction some stockholders might believe
is in the Corporation's best interests or in which stockholders could or would
receive a premium for their Corporation Shares over the market price.
The Corporation's board of directors has authority to classify or
reclassify authorized but unissued shares of preferred stock by setting or
changing the preferences, conversion and other rights, voting powers,
restrictions and limitations as to dividends, qualifications, and terms and
conditions of redemption of stock.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The certificate of incorporation of the Corporation (the "Corporation
Certificate") provides that directors of the Corporation will not be personally
liable to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
directors' duty of loyalty to the Corporation or its stockholders, (ii) for acts
of omissions not in good faith or involving intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the DGCL relating to prohibited
dividends or distribution or the repurchase or redemption of stock or (iv) for
any transaction from which the director derives an improper personal benefit.
The provision does not apply to claims against directors for violations of
certain laws, including federal securities laws. If the DGCL is amended to
authorize further elimination or limitation of director's liability, then the
liability of directors of the Corporation shall automatically be limited to the
fullest extent provided by law. The Corporation Certificate and the bylaws of
the Corporation (the "Corporation Bylaws") also contain provisions to indemnify
the directors, officers, employees or other agents to the fullest extent
permitted by the DGCL. These provisions may have the practical effect in certain
cases of eliminating the ability of stockholders to collect monetary damages
from directors.
BUSINESS COMBINATIONS
Subject to certain exceptions, Section 203 of the DGCL prohibits a public
Delaware corporation from engaging in a business combination (as defined
therein) with an "interested stockholder" (defined generally as any person who
beneficially owns 15% or more of the outstanding voting stock of the corporation
or any person affiliated with such person) for a period of three years following
the date that such stockholder became an interested stockholder, unless (i)
prior to such date the board of directors of the corporation approved either the
business combination or the transaction that resulted in the stockholder
becoming an interested stockholder; (ii) upon consummation of the transaction
that resulted in the stockholder becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
at the time the transaction commenced (excluding for purposes of determining the
number of shares outstanding those shares owned (a) by directors who are also
officers of the corporation and (b) by employee stock plans in which employee
participants do not have the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender or exchange offer); or
(iii) on or subsequent to such date the business combination is approved by the
board of directors of the corporation and authorized at a meeting of
stockholders by the affirmative vote of at least two-thirds of the outstanding
voting stock of the corporation not owned by the interested stockholder. Section
203 of the DGCL may have the effect of deterring merger proposals, tender offers
or other attempts to effect changes in control of the Corporation that are not
negotiated with and approved by the Corporation's board of directors.
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TRANSFER AGENT AND REGISTRATION
The transfer agent and registrar for the Shares will be SunTrust Bank,
Atlanta.
SHARES OF THE REIT
COMMON STOCK
The REIT is authorized to issue 30,000,000 shares of common stock, par
value $.01 per share, and 10,000,000 shares of preferred stock, par value $.01
per share.
Each REIT Share is entitled to one vote on each matter submitted to a vote
of stockholders. There is no right of cumulative voting in connection with the
election of directors. Any of the REIT Shares issued and sold hereunder will be
fully paid and nonassessable. Holders of the REIT Shares are entitled to
receive, pro rata, dividends declared by the REIT board of directors out of
funds legally available therefor. In the event of any liquidation, dissolution
or winding up of the REIT, holders of the REIT Shares are entitled to share
ratably in the assets available for distribution to stockholders. There are no
pre-emptive or other subscription rights, conversion rights, or redemption or
sinking fund provisions with respect to the REIT Shares.
PREFERRED STOCK
The REIT's board of directors is authorized to issue preferred stock in one
or more series and, with respect to each series, to determine the number of
shares constituting any series, and the preferences, conversion and other
rights, voting powers, restrictions and limitations as to dividends,
qualifications and terms and conditions of redemption.
The preferred stock and the variety of characteristics available for it
offers the REIT flexibility in financing and acquisition transactions. An
issuance of preferred stock could dilute the book value or adversely affect the
relative voting power of the REIT Shares. The issuance of such shares could be
used to discourage unsolicited business combinations, for example, by providing
for class voting rights which would enable the holder to block such a
transaction. Although the REIT board of directors is required when issuing such
stock to act based on its judgment as to the best interests of the stockholders
of the REIT, the board of directors could act in a manner that would discourage
or prevent a transaction some stockholders might believe is in the REIT's best
interests or in which stockholders could or would receive a premium for their
REIT Shares over the market price.
The REIT's board of directors has authority to classify or reclassify
authorized but unissued shares of preferred stock by setting or changing the
preferences, conversion and other rights, voting powers, restrictions and
limitations as to dividends, qualifications, and terms and conditions of
redemption of stock.
REIT PROVISIONS
The REIT Charter contains certain limitations on the number of shares of
the REIT's stock that any one stockholder may own, which limitations are
designed to ensure that the REIT maintains its status as a real estate
investment trust.
Upon demand of the REIT, each stockholder must disclose to the REIT such
information with respect to direct and indirect ownership of stock owned (or
deemed to be owned after applying the rules applicable to real estate investment
trusts under the Code) as the REIT board of directors deems reasonably necessary
in order that the REIT may fully comply with the real estate investment trust
provisions of the Code. Proposed transferees of stock must also satisfy the
board, upon demand, that such transferees will not cause the REIT to fall out of
compliance with such provisions.
The Code generally prevents a company from qualifying as a real estate
investment trust if more than 50% in value of its stock is owned, directly or
indirectly, by five or fewer individuals, which includes certain entities
treated as individuals (the "Closely-Held Rule"). The REIT Charter prohibits a
stockholder from owning more than 9.8% of any other class of capital stock of
the REIT. Any shares of common stock in excess of such limit are deemed to be
"Excess Shares". Excess Shares shall be deemed automatically to have been
converted into a class separate and distinct from the class from which converted
and from any other class of Excess Shares, each such class being designated
"Excess Shares of [stockholder's name]" or in the event of excess preferred
stock, "Excess Preferred Stock of [stockholder's name]". No Excess Shares may be
voted, nor considered outstanding for the purpose of determining a quorum at any
meeting of stockholders. Any dividends or other distributions payable upon the
Excess Shares may, in the discretion of the REIT, be paid into a non-interest
bearing account and released to the stockholder only at such time as he or she
ceases to be the holder of Excess Shares. The REIT, upon authorization of the
board of directors, may redeem any or all Excess Shares, and from the date of
the giving of notice of redemption such shares shall cease to be outstanding and
the stockholder shall cease to be entitled to dividends, voting rights and other
benefits with respect to such shares. The redemption price will be based on the
trading prices of the class of stock from which the Excess Shares being redeemed
were converted, and is payable, without interest, only upon the liquidation of
the REIT. However, the REIT Charter contains provisions under which the holder
of Excess Shares may cause the REIT to rescind such redemption by selling (and
notifying the REIT of such sale), within 30 days after notice of the redemption,
a number of the shares held by such holder equal to the number of Excess Shares.
In addition, Excess Shares held by any holder may be converted back into shares
of the original class and series of stock if the holder sells such shares prior
to their being called for redemption.
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<PAGE> 86
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Maryland General Corporate Law (the "MGCL") permits a Maryland
corporation to include in its charter a provision limiting the liability of its
directors and officers to the corporation and its stockholders from money
damages, excluding liability resulting from (a) actual receipt of an improper
benefit or profit in money, property or services or (b) active and deliberate
dishonesty established by a final judgment as being material to the cause of
action. The REIT Charter contains such a provision, which eliminates such
liability to the maximum extent permitted by the MGCL.
The REIT Charter obligates the REIT, to the maximum extent permitted by
Maryland law, to indemnify and to pay or reimburse reasonable expenses in
advance of final disposition of a proceeding to (a) any present or former
director or officer who is made a party to the proceeding by reason of his
service in that capacity or (b) any individual who, at the request of the REIT,
serves or has served another entity and who is made a party to the proceeding by
reason of his service in that capacity. The MGCL also permits the REIT to
indemnify and advance expenses to any person who served a predecessor of the
REIT in any of the capacities described above and to any employee or agent of
the REIT or a predecessor of the REIT.
The MGCL requires a corporation (unless its charter provides otherwise,
which the REIT Charter does not) to indemnify a director or officer who has been
successful, on the merits or otherwise, in the defense of any proceeding to
which he is made a party by reason of his service in that capacity. The MGCL
permits a corporation to indemnify its present and former directors and
officers, among others, against judgments, penalties, fines. settlements and
reasonable expenses actually incurred by them in connection with any proceeding
to which they may be made a party by reason of their service in those or other
capacities unless it is established that (a) the act or omission of the director
or officer was material to the matter giving rise tot he proceeding and (i) was
committed in bad faith or (ii) was the result of active and deliberate
dishonesty, (b) the director or officer actually received an improper personal
benefit in money, property or services or (c) in the case of any criminal
proceeding, the director or officer had reasonable cause to believe that the act
or omission was unlawful. However, a Maryland corporation may not indemnify for
an adverse judgment in a suit by or in the right of the corporation. In
addition, the MGCL requires the REIT, as a condition to advancing expenses, to
obtain (a) a written affirmation by the director or officer of his good faith
belief that he has met the standard of conduct necessary for indemnification by
the REIT as authorized by the bylaws and (b) a written undertaking by or in his
behalf to repay the amount paid or reimbursed by the REIT if it shall ultimately
be determined that the standard of conduct was not met. The REIT will indemnify
all of its officers and directors to the fullest extent permitted under Maryland
law.
BUSINESS COMBINATIONS
Under the Maryland General Corporation Law (the "MGCL"), certain "Business
Combinations" (including a merger, consolidation, share exchange, or, in certain
circumstances, an asset transfer or issuance of equity securities) between a
Maryland corporation and any person who beneficially owns 10% or more of the
voting power of the REIT's outstanding voting stock (an "Interested
Stockholder") must be: (a) recommended by the REIT's board of directors; and (b)
approved by the affirmative vote of at least (i) 80% of the REIT's outstanding
shares entitled to vote and (ii) two-thirds of the outstanding shares entitled
to vote that is not held by the Interested Stockholder with whom the business
combination is to be effected, unless, among other things, the REIT's common
stockholders receive a minimum price (as defined in the statute) for their
shares and the consideration is received in cash or in the same form as
previously paid by the Interested Stockholder for his shares. In addition, an
Interested Stockholder or any affiliate thereof may not engage in a "Business
Combination" with the REIT for a period of five years following the date he
becomes an Interested Stockholder. These provisions of MGCL do not apply,
however, to Business Combinations that are approved or exempted by the board of
directors prior to a person's becoming an Interested Stockholder. The REIT may
expressly elect not to be governed by these provisions, in whole or in part, by
so providing in its Charter or by adopting a charter amendment.
CONTROL SHARE ACQUISITIONS
The MGCL provides that "control shares" of a Maryland corporation acquired
in a "control share acquisition" may not be voted except to the extent approved
by a vote of two-thirds of the votes entitled to be cast by stockholders
excluding shares owned by the acquirer, officers and directors who are employees
of the REIT. "Control shares" are shares that, if aggregated with all other
shares previously acquired that the person is entitled to vote, would entitle
the acquirer to vote (i) 20% or more but less than one-third, (ii) one-third or
more but less than a majority, or (iii) a majority of the outstanding shares.
Control shares do not include shares the acquiring person is entitled to vote
because stockholder approval has previously been obtained. A "control share
acquisition" means the acquisition of control shares, subject to certain
exceptions.
A person who has made or proposes to make a control share acquisition and
who has obtained a definitive financing agreement with a responsible financial
institution providing for any amount of financing not to be provided by the
acquiring person may compel the REIT's board of directors to call a special
meeting of stockholders to be held within 50 days of demand to consider the
voting rights of the shares. If no request for a meeting is made, the REIT may
itself present the question at any stockholders' meeting.
Subject to certain conditions and limitations, the REIT may redeem any or
all of the control shares, except those for which voting rights have previously
been approved, for fair value determined, without regard to voting rights, as of
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<PAGE> 87
the date of the last control shares acquisition or of any meeting of
stockholders at which the voting rights of such shares are considered and not
approved. If voting rights for control shares are approved at a stockholders'
meeting and the acquirer is entitled to vote a majority of the shares entitled
to vote, all other stockholders may exercise appraisal rights. The fair value of
the shares as determined for purposes of such appraisal rights may not be less
than the highest price per share in the control shares acquisition, and certain
limitations and restrictions otherwise applicable to the exercise of dissenter's
rights do not apply in the context of control share acquisition.
The control share acquisition statute does not apply to shares acquired in
a merger, consolidation or share exchange if the corporation is a party to the
transaction, or to the acquisitions approved or excepted by the REIT Charter or
REIT Bylaws prior to a control share acquisition.
The limitation on ownership of stock set forth in the REIT Charter, as well
as Maryland business combination and control share acquisition statutes could
have the effect of discouraging offers to acquire the REIT and of increasing the
difficulty of consummating any such offer.
TRANSFER AGENT AND REGISTRAR
SunTrust Bank in Nashville will act as transfer agent and registrar for the
REIT Shares.
OPERATING PARTNERSHIP AGREEMENT
The following summary of the Operating Partnership Agreement describes the
material provisions of such agreement. This summary is qualified in its entirety
by reference to the Operating Partnership Agreement, which is filed as an
exhibit to the Registration Statement of which this Prospectus is a part.
MANAGEMENT
The Operating Partnership was organized as a Delaware limited partnership
in October, 1997. The REIT is the sole general partner of, and will hold
approximately 91% of the economic interests in, the Operating Partnership. The
REIT will hold a one percent general partner interest in the Operating
Partnership and the balance will be held as a limited partner interest. The REIT
will conduct substantially all of its business through the Operating Partnership
and its subsidiaries. It is contemplated that National Health Corporation
initially will be the sole limited partner of the Operating Partnership.
Pursuant to the Operating Partnership Agreement, the REIT, as the sole
general partner of the Operating Partnership, generally has full, exclusive and
complete responsibility and discretion in the management, operation and control
of the Operating Partnership, including the ability to cause the Operating
Partnership to enter into certain major transactions, including acquisitions,
developments and dispositions of properties and refinancings of existing
indebtedness. No limited partner may take part in the operation, management or
control of the business of the Operating Partnership by virtue of being a holder
of OP Units.
The limited partners of the Operating Partnership have agreed that in the
event of any conflict in the fiduciary duties owed by the REIT to its
stockholders and by the REIT, as general partner of the Operating Partnership,
to such limited partners, the REIT may act in the best interests of the REIT's
stockholders without violating its fiduciary duties to such limited partners or
being liable for any resulting breach of its duties to the limited partners.
The Operating Partnership Agreement provides that all business activities
of the REIT, including all activities pertaining to the acquisition and
operation of properties, must be conducted through the Operating Partnership,
and that the Operating Partnership must be operated in a manner that will enable
the REIT to satisfy the requirements for being classified as a real estate
investment trust.
REMOVAL OF THE GENERAL PARTNER; TRANSFER OF THE GENERAL PARTNER'S INTEREST
The Operating Partnership provides that the limited partners may not remove
the REIT as general partner of the Operating Partnership. The REIT may not
transfer any of its interests as general or limited partner in the Operating
Partnership except (i) in connection with a merger or sale of all or
substantially all of its assets pursuant to a transaction for which it has
obtained the requisite approval in accordance with the terms of the Operating
Partnership Agreement (ii) if the limited partners holding at least
three-fourths of the OP Units (excluding OP Units owned by the REIT) consent to
such transfer or (iii) to certain affiliates of the REIT.
AMENDMENTS OF THE OPERATING PARTNERSHIP AGREEMENT
Amendments to the Operating Partnership Agreement may be proposed by the
REIT or by limited partners owning at least 25% of the OP Units.
Generally, the Operating Partnership Agreement may be amended with the
approval of the REIT, as general partner, and limited partners (including the
REIT) holding a majority of the OP Units. Certain amendments that would, among
other things, convert a limited partner's interest into a general partner's
interest, modify the limited liability of a limited partner, alter the interest
of a partner in profits or losses or the right to receive any distributions,
alter or modify the
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redemption right described above, or cause the termination of the Operating
Partnership at a time or on terms inconsistent with those set forth in the
Operating Partnership Agreement must be approved by the REIT and each limited
partner that would be adversely affected by such amendment. Notwithstanding the
foregoing, the REIT, as general partner, will have the power, without the
consent of the limited partners, to amend the Operating Partnership Agreement as
may be required to (1) add to the obligations of the REIT as general partner or
surrender any right or power granted to the REIT as general partner; (2) reflect
the admission, substitution, termination or withdrawal of partners in accordance
with the terms of the Operating Partnership Agreement; (3) establish the rights,
powers, duties and preferences of any additional partnership interests issued in
accordance with the terms of the Operating Partnership Agreement; (4) reflect a
change of an inconsequential nature that does not materially adversely affect
the limited partners, or cure any ambiguity, correct or supplement any
provisions of the Operating Partnership Agreement not inconsistent with law or
with other provisions of the Operating Partnership Agreement, or make other
changes concerning matters under the Operating Partnership Agreement that are
not otherwise inconsistent with the Operating Partnership Agreement or law; or
(5) satisfy any requirements of federal or state law. Certain provisions
affecting the rights and duties of the REIT as general partner (e.g.,
restrictions on the REIT's power to conduct businesses other than owning OP
Units; restrictions relating to the issuance of securities of the REIT and
related capital contributions to the Operating Partnership; restrictions
relating to certain extraordinary transactions involving the REIT or the
Operating Partnership) may not be amended without the approval of a majority or,
in certain instances, a supermajority of the OP Units not held by the REIT.
TRANSFER OF OP UNITS; SUBSTITUTE LIMITED PARTNERS
The Operating Partnership Agreement provides that limited partners
generally may transfer their OP Units without the consent of any other person,
but may substitute a transferee as a limited partner only with the prior written
consent of the REIT as the sole general partner of the Operating Partnership. In
addition, limited partners may not transfer OP Units in violation of certain
regulatory and other restrictions set forth in the Operating Partnership
Agreement.
ISSUANCE OF ADDITIONAL LIMITED PARTNERSHIP INTERESTS
The REIT is authorized, without the consent of the limited partners, to
cause the Operating Partnership to issue additional OP Units to the REIT, to the
limited partners or to other persons for such consideration and on such terms
and conditions as the REIT deems appropriate. If additional OP Units are issued
to the REIT, then the REIT must (i) issue additional shares of Common Stock and
must contribute to the Operating Partnership the entire proceeds received by the
REIT from such issuance or (ii) issue additional OP Units to all partners in
proportion to their respective interests in the Operating Partnership. In
addition, the REIT may cause the Operating Partnership to issue to the REIT
additional partnership interests in different series or classes, which may be
senior to the OP Units, in conjunction with an offering of securities of the
REIT having substantially similar rights, in which the proceeds thereof are
contributed to the Operating Partnership. Consideration for additional
partnership interests may be cash or other property or assets. No limited
partner has preemptive, preferential or similar rights with respect to
additional capital contributions to the Operating Partnership or the issuance or
sale of any partnership interests therein.
EXTRAORDINARY TRANSACTIONS
The Operating Partnership Agreement provides that the REIT may not
generally engage in any merger, consolidation or other combination with or into
another person or sale of all or substantially all of its assets, or any
reclassification, or any recapitalization or change of outstanding shares of
Common Stock (a "Business Combination"), unless the holders of OP Units will
receive, or have the opportunity to receive, the same consideration per OP Unit
as holders of Common Stock receive per share of Common Stock in the transaction;
the REIT may not engage in such transaction unless limited partners holding at
least 51% of the OP Units held by limited partners vote to approve the Business
Combination.
EXCULPATION AND INDEMNIFICATION OF THE GENERAL PARTNER
The Operating Partnership Agreement generally provides that the REIT, as
general partner of the Operating Partnership, will incur no liability to the
Operating Partnership or any limited partner for losses sustained or liabilities
incurred as a result of errors in judgment or of any act or omission if the REIT
carried out its duties in good faith. In addition, the REIT is not responsible
for any misconduct or negligence on the part of its agents, provided the REIT
appointed such agents in good faith. The REIT may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers and other
consultants and advisors, and any action it takes or omits to take in reliance
upon the opinion of such persons, as to matters that the REIT reasonably
believes to be within their professional or expert competence, shall be
conclusively presumed to have been done or omitted in good faith and in
accordance with such opinion.
The Operating Partnership Agreement also provides for indemnification of
the REIT, the directors and officers of the REIT, and such other persons as the
REIT may from time to time designate against any judgments, penalties, fines,
settlements and reasonable expenses actually incurred by such person in
connection with the preceding unless it is established that: (1) the act or
omission of the indemnified person was material to the matter giving rise to the
preceding and either was committed in bad faith or was the result of active and
deliberate dishonesty; (2) the indemnified person actually received an improper
personal benefit in money, property or services; or (3) in the case of any
criminal proceeding, the indemnified person had reasonable cause to believe that
the act or omission was unlawful.
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TAX MATTERS
The REIT will be the tax matters partner of the Operating Partnership and,
as such, will have the authority to make tax elections under the Code on behalf
of the Operating Partnership.
TERM
The Operating Partnership will continue in full force and effect until
_______________, or until sooner dissolved pursuant to the terms of the
Operating Partnership Agreement.
COMPARISON OF STOCKHOLDER/UNITHOLDER RIGHTS
NHC is a limited partnership existing under the laws of the State of
Delaware, and the rights of the holders of the Units as such are governed in
part by the Delaware Revised Uniform Limited Partnership Act and the Partnership
Agreement. The Corporation is incorporated in the State of Delaware, and the
rights of the holders of the Shares are governed in part by the DGCL, the
Corporation Certificate and the Corporation Bylaws. The REIT is incorporated
under the laws of the State of Maryland, and the rights of the holders of the
REIT Shares as such are governed in part by the MGCL, the REIT Charter and the
REIT Bylaws.
The following summary compares a number of differences between ownership of
the Units and ownership of the Shares and the REIT Shares and the effects
relating thereto. This summary is not intended to be complete and is qualified
in its entirety by reference to the Delaware Revised Limited Partnership Act,
the DGCL, the MGCL, and the constituent documents of NHC, the Corporation and
the REIT. See also "Description of Securities."
<TABLE>
<CAPTION>
ISSUER
UNITS SHARES REIT SHARES
NHC The Corporation The REIT
TAXATION
UNITS SHARES REIT SHARES
<S> <C> <C>
Under current law, NHC does not The Corporation is a taxable entity The REIT is a taxable entity with
pay tax on its net income. with respect to its income after respect to its income after
However, in order to continue its allowable deductions and credits. allowable deductions and credits.
current operations and remain a Stockholders will have taxable As a REIT, the REIT may
partnership for tax purposes for income from the Corporation's generally deduct from its taxable
periods beginning after December operations only to the extent that income an amount equal to the
31, 1997, it will have to pay tax at a taxable dividends and other dividends paid to its Shareholders.
rate of 3.5% of gross income. distributions are declared and paid Stockholders will have taxable
Otherwise, it will be taxed as a on the Shares. See "Federal Income income from the REIT's
corporation. Each Unitholder Tax Considerations." operations only to the extent that
annually includes the holder's share taxable dividends and other
of the income and gain and, subject distributions are declared and paid
to certain limitations, the losses, on the REIT Shares. See "Federal
deductions and credits of NHC in Income Tax Considerations."
computing taxable income without
regard to any cash distributed to the
limited partner. Generally, cash
distributions to holders of Units are
not taxable, unless such distributions
exceed the limited partner's basis in
the Units. See "Federal Income
Tax Considerations."
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
A tax-exempt limited partner's No portion of the earnings of, or any No portion of the earnings of, or
share of NHC's taxable income dividends received from, the any dividends received from, the
constitutes unrelated business Corporation will generally constitute REIT will generally constitute
taxable income to the tax-exempt unrelated business taxable income to unrelated business taxable income
unitholder. See "Federal Income tax-exempt stockholders, except to to tax-exempt stockholders,
Tax Considerations." the extent their investment in stock except to the extent their
of the Corporation is considered investment in stock of the REIT is
debt-financed. See "Federal Income considered debt-financed. See
Tax Considerations." "Federal Income Tax
Considerations."
DISTRIBUTIONS AND DIVIDENDS
UNITS SHARES REIT SHARES
The Managing General Partner of The board of directors of the The MGCL provides that the
NHC has the discretion under the Corporation has the discretion to Board of Directors of the REIT
Partnership Agreement to make determine whether or not and when has the discretion to determine
distributions of NHC's Cash to declare and pay dividends and the whether or not and when to
Available for Distribution. Cash amount of any dividend. Holders of declare and pay dividends and the
Available for Distribution generally the Shares will have no contractual amount of any dividend.
means NHC's cash less (i) cash right to receive dividends. However, in order to qualify as a
expenses, liabilities and obligations real estate investment trust for
of NHC and (ii) reserves federal tax purposes the REIT
established by the Managing must distribute at least 95% of the
General Partner in its sole REIT's taxable income. See
discretion for capital expenditures, "Federal Income Tax
and other improvements, retirement Considerations-- The REIT--
of indebtedness, operations or Annual Distribution
contingencies and liabilities. Requirements." Holders of REIT
Shares will have no contractual
right to receive dividends.
MANAGEMENT
UNITS SHARES REIT SHARES
The business and affairs of NHC The business and affairs of the The business and affairs of the
are managed by the Managing Corporation are managed by or REIT are managed by or under
General Partner, NHC, Inc. under the direction of the board of the direction of the board of
directors of the Corporation. The directors of the REIT. The
personnel in control of the personnel in control of the REIT
Corporation will be substantially the will be identical to that of NHC.
same as that of NHC.
Subject to the procedure prescribed Holders of the Shares will have the Holders of the REIT Shares will
in the Partnership Agreement, the ability to elect members of the board have the ability to elect members
Managing General Partner may be of directors with a plurality of the of the board of directors with a
removed by vote of (i) 50% or votes cast for such election and to plurality of the votes cast for such
greater of the Units together with remove the board of directors with a election and to remove the board
the unanimous consent of the board majority vote of the common stock of directors with a majority vote
of directors of the Managing outstanding and entitled to vote. of the common stock outstanding
General Partner or (ii) and entitled to vote.
approximately 70% of the Units.
</TABLE>
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<TABLE>
<CAPTION>
VOTING RIGHTS
UNITS SHARES REIT SHARES
<S> <C> <C>
Under Delaware law and the Holders of the Shares will have the Holders of the REIT Shares will
Partnership Agreement, limited right to vote on matters specified by have the right to vote on matters
partners have voting rights with Delaware law affecting the specified by Maryland law
respect to (i) the removal and corporate structure of the affecting the corporate structure
replacement of the Managing Corporation, including election of of the REIT, including election of
General Partner, (ii) the merger of the board of directors. Stockholders the board of directors.
NHC, (iii) the sale of all or of the Corporation will have the Stockholders of the REIT will
substantially all of the assets right to vote on all matters on which have the right to vote on all
owned, directly or indirectly, by stockholders must be permitted to matters on which stockholders
NHC, (iv) the dissolution of NHC, vote including ,as a general matter, must be permitted to vote
and (v) material amendments to the election of directors, fundamental including, as a general matter,
Partnership Agreement, subject to changes in the Corporation, sale of election of directors, fundamental
certain limitations. all or substantially all of the assets changes in the REIT, sale of all or
of the Corporation and amendments substantially all of the assets of
to the Corporation Certificate. the REIT and amendments to the
REIT Charter.
Each Unit entitles the holder Each Share entitles its holder to cast Each REIT Share entitles its
thereof who is admitted as a limited one vote on each matter presented to holder to cast one vote on each
partner to the Partnership to cast the stockholders. matter presented to the
one vote on all matters presented to stockholders.
limited partners.
Approval of any matter submitted Approval of any matter submitted to Approval on any matter submitted
to limited partners generally the stockholders generally requires to the stockholders generally
requires the affirmative vote of the affirmative vote of holders of requires the affirmative vote of
limited partners holding more than more than 50% of the Shares more than 50% of the REIT
50% of the Units then outstanding. outstanding and entitled to vote. Shares outstanding and entitled to
The removal of the Managing Certain matters require the vote. Certain matters require the
General Partner requires the affirmative vote of approximately affirmative vote of approximately
affirmative vote of 70% of the 70% of the outstanding Shares, 70% of the outstanding Shares,
outstanding Units, except that a except that a vote of more than 50% except that a vote of more than
vote of 50% of the outstanding is required for such matters if the 50% is required for such matters
Units is sufficient to remove the board of directors of the if the board of directors of the
Managing General Partner if the Corporation unanimously consents. Corporation unanimously
board of directors of the Managing consents.
General Partner unanimously
consents.
Holders of 10% of the Units held Amendment of the Corporation Amendment of the REIT Charter
by limited partners may propose Certificate or Bylaws requires or the REIT Bylaws requires
amendments to the Partnership approval of a majority of the approval of a majority of the
Agreement. members of the board of directors board of directors and, in certain
and, in certain cases, approval by cases, approval by the
the stockholders. stockholders.
Any action that may be taken at a Stockholders may act by written Stockholders may act by
meeting of limited partners may be consent in lieu of a meeting with a unanimous written consent in lieu
taken by written consent in lieu of a number of votes sufficient for such of a meeting.
meeting executed by limited action.
partners sufficient to authorize such
action at a meeting of limited
partners.
</TABLE>
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<TABLE>
<CAPTION>
SPECIAL MEETINGS
UNITS SHARES REIT SHARES
<S> <C> <C>
Special meetings of the Unitholders Special meetings of stockholders Special meetings of stockholders
may be called by the Managing can only be called by the board of can only be called by the board of
General Partner or by Unitholders directors or president. directors or president.
holding at least 10% of the
outstanding Units.
CONVERSION RIGHTS
UNITS SHARES REIT SHARES
The Units are not convertible into The Shares are not convertible into The REIT Shares are not
any other securities. any other securities. convertible into any other
securities.
REDEMPTION
UNITS SHARES REIT SHARES
The Units are not subject to The Shares are not subject to The REIT Shares are not subject
mandatory or optional redemption. mandatory or optional redemption. to mandatory or optional
redemption.
LIQUIDATION RIGHTS
UNITS SHARES REIT SHARES
In the event of the liquidation of In the event of a liquidation of the In the event of a liquidation of the
NHC the assets of NHC remaining Corporation, the holders of the REIT, the holders of the REIT
after payments to creditors of NHC Shares would be entitled to share Shares would be entitled to share
(except partners of NHC) are ratably in any assets remaining after ratably in any assets remaining
distributed pro rata to the general satisfaction of obligations to after satisfaction of obligations to
partners of NHC to satisfy amounts creditors and any liquidation creditors and any liquidation
due the general partners pursuant to preferences on any series of preferences on any series of
the Partnership Agreement; next preferred stock of the Corporation preferred stock of the REIT that
pro rata to partners of NHC for that may then be outstanding. may then be outstanding.
loans (and other indebtedness)
made by such partners to NHC;
next to partners of NHC in
accordance with their capital
accounts; and finally to the partners
of NHC in accordance with their
ownership interests in NHC.
</TABLE>
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<TABLE>
<CAPTION>
RIGHT TO COMPEL DISSOLUTION
UNITS SHARES REIT SHARES
<S> <C> <C>
Under the Partnership Agreement, Under Delaware law, holders of Stockholders of the REIT may not
limited partners may compel Common Stock may compel unilaterally compel the dissolution
termination of NHC by the dissolution of the Corporation, of the REIT. A majority of the
affirmative vote of the holders of absent prior action by the board of board of directors is required to
70% of the outstanding REIT Units. directors, only if all holders consent adopt a resolution declaring the
in writing. A plan of dissolution advisability of the REIT's
unanimously adopted by the board dissolution and direct that the
of directors must be approved by a proposed plan of dissolution be
majority of the Common Stock submitted to the stockholders,
outstanding and entitled to vote. who must approve the plan by
affirmative vote of two-thirds
of the votes entitled to be cast
on the matter. Stockholders of
the REIT may under certain
circumstances, petition a court
of equity to dissolve the REIT.
LIMITED LIABILITY
UNITS SHARES REIT SHARES
In general, holders of the Units are The Shares, upon receipt by the The REIT Shares, upon receipt by
limited partners in a Delaware Unitholders, will be fully paid and the Unitholders, will be fully paid
limited partnership, and do not have nonassessable. Stockholders and nonassessable. Stockholders
personal liability for obligations of generally will not have personal generally will not have personal
NHC. liability for obligations of the liability for obligations of the
Corporation. REIT.
LIQUIDITY AND MARKETABILITY
UNITS SHARES REIT SHARES
The Units are freely transferable The Shares will be freely The REIT Shares will be freely
and are currently listed and traded transferable and application has transferable and application has
on AMEX. been made for listing the Shares on been made for listing the REIT
AMEX. Shares on AMEX.
CONTINUITY OF EXISTENCE
UNITS SHARES REIT SHARES
The Partnership Agreement The Corporation Certificate The REIT Charter provides for
provides for NHC to continue in provides for perpetual existence, perpetual existence, subject to
existence until December 31, 2085, subject to Delaware law. Maryland law.
unless earlier terminated in
accordance with the Partnership
Agreement.
</TABLE>
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<TABLE>
<CAPTION>
SEC FILINGS
UNITS SHARES REIT SHARES
<S> <C> <C>
NHC is subject to the reporting The Corporation will be subject to The REIT will be subject to the
requirements of the Exchange Act the reporting requirements of the reporting requirements of the
and files annual and quarterly Exchange Act and will file annual Exchange Act and will file annual
reports thereunder. NHC also and quarterly reports thereunder. and quarterly reports thereunder.
provides annual reports to its The Corporation also will provide The REIT will also provide
limited partners. annual reports to its stockholders. annual reports to its stockholders.
CERTAIN LEGAL RIGHTS
UNITS SHARES REIT SHARES
Delaware law allows a limited Delaware law affords stockholders Maryland law affords
partner to institute legal action on of a corporation rights to bring stockholders no similar such right.
behalf of NHC (a partnership stockholder derivative actions when
derivative action) to recover the board of directors has failed to
damages from a third party or a institute an action against third
general partner where the general parties or directors of the
partner has failed to institute the corporation, and class actions to
action. In addition, a limited recover damages from directors for
partner may have rights to institute violations of their fiduciary duties.
legal action on behalf of the limited Stockholders may also have rights to
partner or all other similarly bring actions in federal courts to
situated limited partners (a class enforce federal rights. These rights
action) to recover damages from a are comparable to the rights of the
general partner for violations of limited partners in the Partnership.
fiduciary duties to the limited
partners. Limited partners may also
have rights to bring actions in
federal courts to enforce federal
rights.
</TABLE>
87
<PAGE> 95
<TABLE>
<CAPTION>
RIGHT TO LIST OF HOLDERS; INSPECTION OF BOOK AND RECORDS
UNITS SHARES REIT SHARES
<S> <C> <C>
Upon reasonable demand, at the Under Delaware law, upon written Under Maryland law, a
limited partner's own expense and request, at reasonable times and for stockholder may inspect during
for a purpose reasonably related to a proper purpose reasonably related usual business hours the bylaws,
his interest in NHC, a limited to a stockholder's interest as a minutes of the proceedings of the
partner may have access, at stockholder, any stockholder of stockholders and any voting trust
reasonable times, to certain record shall have the right to agreements on file at the REIT's
information regarding the status of examine and copy the Corporation's principal office. Upon written
the business and financial condition stock ledger, a list of its request, any stockholder may
of NHC, tax returns, governing stockholders and its other books and review a statement showing all
instruments of NHC and a current records. In certain circumstances stock and securities issued by the
list of the partners of NHC, under Delaware law, stockholders REIT during a specified period of
provided that the Managing General may not have the same right to not more than 12 months before
Partner may keep confidential any information regarding the the date of the request. In
trade secrets or any other Corporation that they currently have addition, stockholders owning at
information the disclosure of which with respect to information least 5% of any class of securities
could damage NHC or violate any regarding NHC. of the REIT may, upon written
agreement or applicable law. request, inspect during usual
business hours a statement of the REIT's
assets and liabilities and a list of the
REIT's stockholders. Stockholders of the
REIT will have generally less access to the
records of the REIT than do the Unitholders
with respect to NHC.
SUBORDINATION
UNITS SHARES REIT SHARES
Subordinated to claims of creditors Subordinated to claims of creditors Subordinated to claims of
of NHC. of the Corporation. creditors of the REIT.
</TABLE>
FIDUCIARY DUTIES
Delaware courts have generally held that a general partner of a limited
partnership is liable for a breach of fiduciary duty only when he acts in bad
faith by ignoring the provisions of the partnership agreement. It should be
noted that, with respect to issues or concerns not governed by the express terms
of the limited partnership agreement, general principles of fiduciary duty law
will apply. In those circumstances, a general partner holds a fiduciary duty to
the limited partnership (as do the officers and directors of a corporate general
partner) to exercise the utmost good faith, fairness and loyalty. However,
section 17-403(b) of the Delaware Revised Limited Partnership Act provides that
contractual provisions in the partnership agreement addressing the liability of
a general partner to limited partnership and to other partners may modify the
general fiduciary duties standard.
The Partnership Agreement provides that no General Partner shall have
liability to the Unitholders for the return of their capital contributions or
for any loss, damage, liability or expense arising out of the Partnership
Agreement or the business of NHC except as caused by gross negligence,
misconduct in the performance of his or its fiduciary duties to NHC, violation
of any of the provisions of the Partnership Agreement or as otherwise provided
in the Partnership Agreement. Under the Partnership Agreement, the Partnership
is required to indemnify general partners and the officers, directors, employees
and agents of the general partners against liabilities and expenses incurred by
the general partners or such persons if (i) the general partner or such person
acted in good faith, and in a manner reasonably believed to be in, or not
opposed to, the interests of NHC and, with respect to any criminal proceeding,
had no reason to believe the conduct was unlawful and (ii) the general partner's
or such person's conduct did not constitute actual fraud, gross negligence or
willful misconduct. See "Description of Securities -- Shares of the Corporation
- -- Limitation of Liability and Indemnification Matters" and "-- Shares of the
REIT -- Limitation of Liability and Indemnification Matters" for description of
provisions relating to the liability and indemnification of the directors of the
Corporation and the REIT, respectively.
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<PAGE> 96
FEDERAL INCOME TAX CONSIDERATIONS
THE FOLLOWING DISCUSSION OF FEDERAL INCOME TAX CONSIDERATIONS SHOULD BE
READ IN ITS ENTIRETY BY ALL UNITHOLDERS OF NHC. THIS DISCUSSION IS A SUMMARY
ONLY, AND IS NOT INTENDED TO ADDRESS THE SPECIFIC TAX SITUATION OF EACH
UNITHOLDER. EACH UNITHOLDER SHOULD CONSULT HIS OWN TAX ADVISOR AS TO THE
FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF THE FORMATION OF THE REIT AND THE
CORPORATION, THE PLAN OF RESTRUCTURE, THE OWNERSHIP OF SHARES AND REIT SHARES
AND THE TAXATION OF THE REIT AS A REAL ESTATE INVESTMENT TRUST. NO RULING FROM
THE IRS, OR FROM ANY OTHER TAXING AUTHORITY, WILL BE SOUGHT OR OBTAINED AS TO
ANY OF THE FOLLOWING TAX CONSIDERATIONS. MOREOVER, THE IRS IS NOT BOUND BY THE
DISCUSSION OR THE OPINIONS OF SPECIAL REIT OR TAX COUNSEL SET FORTH BELOW.
INTRODUCTION
GENERAL SUMMARY ONLY. The following is a general summary of material
federal income tax consequences of the Plan of Restructure, and the taxation of
the REIT as a real estate investment trust. The discussion is based upon current
interpretations of the Code, applicable U.S. treasury regulations and
administrative interpretations thereunder, and case law, any of which could
change at any time, even on a retroactive basis. Because of the complexity of
tax laws, and the varying tax situations of different taxpayers, each Unitholder
should consult his own tax advisor. This summary of federal income tax
consequences has been prepared by Harwell Howard Hyne Gabbert & Manner, P.C.,
Nashville, Tennessee, special counsel to NHC and the Corporation ("Tax Counsel")
and Goodwin, Proctor & Hoar, LLP, Boston, Massachusetts, special counsel to NHC
and the REIT ("REIT Counsel").
OPINION OF TAX COUNSEL. In the opinion of Tax Counsel, which opinion is
attached hereto and is subject to such qualifications and assumptions contained
therein, the following summary describes in general the material U.S. federal
income tax consequences of the Plan of Restructure.
NO RULINGS. No rulings have been, or will be, sought from the IRS or from
any other taxing authority as to any of the matters described in this Proxy
Statement/Prospectus. In the absence of any such rulings, no assurances can be
given that the IRS will agree with this discussion. Neither Tax Counsel nor REIT
Counsel can offer any assurance that the applicable law will not change
adversely, that the assumptions underlying the following discussion and opinions
will prove to be accurate, or that the courts will agree with the conclusions of
Tax Counsel or REIT Counsel in the event of a challenge by the IRS.
CERTAIN DIFFERENCES BETWEEN THE OWNERSHIP OF UNITS, SHARES AND REIT SHARES
NHC is organized as a limited partnership under the laws of the State of
Delaware. A partnership is not generally subject to federal income taxation.
Instead, a partnership generally acts as a conduit, and the tax consequences of
its operations are reflected in the personal income tax returns of its partners.
In the Plan of Restructure, NHC Unitholders will receive common stock of the
REIT, which intends to qualify and elect to be taxed as a real estate investment
trust, and common stock of the Corporation.
A significant difference between owning Units and owning REIT Shares
involves the treatment and amount of income (or loss) reportable by investors.
As Unitholders, investors must take into account their distributive shares of
all separately reportable items of NHC's income or loss, regardless of the
amount of any distributions of cash to the Unitholders. That information is
supplied to each Unitholder annually on a Form K-1. Under Code Section 469(k),
net income from publicly traded partnerships, such as NHC, constitutes portfolio
income. Under the passive loss rules, portfolio income cannot be offset by
passive losses, but can be offset by net investment interest expense. Moreover,
each partner in a publicly traded partnership must treat loss (if any) from the
partnership as separate from income or loss from any other publicly traded
partnership, and also as separate from any income or loss from passive
activities. As of January 1, 1998, however, a publicly traded limited
partnership will generally be taxed as a corporation.
In contrast, as a shareholder of the REIT, an investor is taxed based on
the amount of distributions received from the REIT. The taxable portion of such
distributions will generally depend on the amount of the REIT's earnings and
profits. Each REIT shareholder will receive a Form 1099 reporting the amount of
taxable and nontaxable distributions paid to him during the preceding year. The
character of this income is not dependent on its character to the REIT, and is
generally ordinary income to the shareholders. Under the passive loss rules,
this income is generally further classified as portfolio income. Furthermore,
while losses incurred by a partnership are reportable to the partners, should
the REIT incur a taxable loss, that amount will not be passed through to its
shareholders.
The Corporation will not be a pass-through entity such as NHC or a quasi
pass-through entity like the REIT. Instead, the Corporation's earnings will be
taxed at the corporate level and, to the extent distributions are made to the
Corporation's shareholders, such distributions will be taxed at the shareholder
level to the extent of the Corporation's accumulated and current earnings and
profits.
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<PAGE> 97
THE REIT
FORMATION OF THE REIT - TAX CONSEQUENCES
NONRECOGNITION RULE OF CODE SECTION 351. Under the general rule of Code
Section 351, no gain or loss is recognized upon the transfer of property to a
corporation by the transferors of such property solely in exchange for stock in
the corporation if immediately thereafter the transferors are in control of the
corporation. Control is defined in Section 368(c) as the ownership of eighty
percent (80%) of the voting stock and eighty percent (80%) of each class of
non-voting stock of a corporation.
In exchange for the Owned Healthcare Facilities, the Notes and the Other
Assets, subject to the Assumed Liabilities, NHC will receive one hundred percent
(100%) of the outstanding stock of the REIT. NHC will then immediately
distribute all of such stock to its Unitholders. As a result of this
distribution, NHC will hold the REIT Shares immediately after its transfer of
assets to the REIT, but it will hold them for only an instant. Whether such a
two-step transaction should be collapsed or integrated for purposes of
determining whether the "immediately after" requirement of Section 351 is
satisfied has frequently been the subject of interpretation by the IRS and
courts.
In the case of a partnership that contributes its assets to a corporation
in exchange for corporate stock and immediately thereafter liquidates by
distributing the stock to its partners "in proportion to their partnership
interests," the IRS has ruled that the "immediately after" requirement of
Section 351 is satisfied. Revenue Ruling 84-111, 1984-2 C.B. 88. This is so even
though the identities of the actual contributor or transferor of property to the
corporation and the ultimate recipient of the corporate stock were not the same.
While this ruling involves a partnership that liquidates as a result of its
distribution of shares in a corporation, the ruling is enlightening because
Section 351 was found to apply despite the short period during which the
partnership held the stock. Although NHC will actually merge into the
Corporation, thereby ceasing to exist as a separate entity, it will be treated
as liquidating for tax purposes.
Similarly, Code Section 351(c) provides that in determining control for
these purposes, the fact that a corporate transferor distributes part or all of
the stock it received in a transaction subject to Section 351 to its
shareholders will not be taken into account. While the Code contains no
analogous provision for such distributions by a partnership, Tax Counsel
believes it is appropriate for the same result to follow, and that the general
nonrecognition rule of Section 351 would apply to NHC's contribution of assets
to the REIT, except as otherwise provided below.
INVESTMENT COMPANY EXCEPTION. An exception to the general rule of
nonrecognition under Code Section 351 is found in subsection 351(e), which
provides that Section 351 shall not apply to a "transfer of property to an
investment company." The Regulations state that a transfer is considered to be
to an investment company if: (i) the transfer is to, inter alia, a real estate
investment trust, and (ii) the transfer results, directly or indirectly, in the
diversification of the transferors' interests. Regulation ss. 1.351 - 1(c) (1).
As described elsewhere in this Proxy Statement/Prospectus, NHC and the REIT
intend that the REIT qualify and be taxed as a real estate investment trust.
In that regard, REIT Counsel has rendered an opinion that the form of
organization of the REIT will permit it to be so classified. Therefore, it is
anticipated that one of the two investment company definitional requirements
will be met.
With respect to the second requirement, a transfer ordinarily results in
the diversification of the transferors' interests if two or more persons
transfer non-identical assets to a corporation in the exchange. Regulation ss.
1.351-1(c) (5). Since NHC is the only transferor, the second requirement of an
investment company is absent, and therefore, the general nonrecognition Rule of
Section 351 should apply to the incorporation of the REIT.
CODE SECTION 357. Code Section 357 generally permits a corporation, in
addition to issuing stock in a Code Section 351 transaction, to assume
liabilities of the transferor, without causing the transferor to recognize gain
or be precluded from obtaining the benefits of Code Section 351. This rule does
not apply, however, if either (i) the principal purpose for the assumption was
tax avoidance (or was not a bona fide business purpose), or (ii) the liabilities
exceeded the transferor's basis in the contributed assets. NHC has represented
that the Assumed Liabilities do not exceed NHC's adjusted tax basis in the Owned
Healthcare Facilities, the Notes and the Other Assets, and that the principal
purpose of the REIT's assumption of the Assumed Liabilities is not the avoidance
of taxes.
OTHER TAX CONSEQUENCES. NHC will have a tax basis in the REIT Shares it
receives generally equal to its basis in the assets it contributes to the REIT,
net of the amount of the NHC liabilities the REIT assumes or acquires in the
transfer. NHC's holding period for the REIT Shares it receives in the exchange
will include its holding period in the capital and Section 1231 assets it
transfers to the REIT. If any of the assets NHC contributes to the REIT are
deemed not to be capital or Section 1231 assets, then NHC's holding period in
the REIT Shares will be bifurcated; the holding period for that portion of the
REIT Shares received in exchange for such other assets would begin on the day
following the date of the exchange.
Pursuant to Code Section 1032, the REIT will not recognize any gain or loss
on the receipt of the NHC assets and assumption of NHC liabilities in exchange
for the issuance of the REIT Shares. The initial tax bases of the assets
received will generally equal their tax basis in the hands of NHC immediately
prior to the exchange. The REIT's holding period for each asset acquired in the
exchange will generally include NHC's holding period for that asset.
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<PAGE> 98
THE DISTRIBUTION - TAX CONSEQUENCES
Code Section 731(b) provides that a partnership will not recognize gain
upon its distribution of property or money to its partners. As to the partners,
Code Section 731(a)(1) generally provides that no gain or loss shall be
recognized by a partner upon a distribution to him of property, other than
money. For purposes of Section 731(a), "marketable securities" are generally
treated as money. Marketable securities are defined to include, in part, (i)
stock that is, as of the date of distribution, actively traded within the
meaning of Code Section 1092(d)(1) and (ii) other equity interests that,
pursuant to their terms or any other arrangement, are readily convertible into,
or exchangeable for, money or marketable securities. Regulations promulgated
under Section 731(c) provide that stock is actively traded if it is of a type
that is, as of the date of distribution, listed on a national securities
exchange. It is anticipated that as of the Effective Time the REIT Shares will
be approved for listing on the American Stock Exchange, although such listing
will not be effective until after the Effective Time. Furthermore, while the
Operating Partnership units will not be listed on an exchange, they will be
convertible into REIT Shares.
However, Section 731(a) does not apply to the distribution of marketable
securities in a "qualified partnership liquidation" if (i) such securities were
received by the partnership in a nonrecognition transaction for substantially
all of the partnership's assets, (ii) such securities are distributed by the
partnership within 90 days after their receipt by the partnership, and (iii) the
partnership is liquidated before the beginning of the partnership's first
taxable year beginning after December 31, 1997. For purposes of this
transitional rule, a "qualified partnership liquidation" is a complete
liquidation of a publicly traded partnership as defined in Code Section 7704(b)
that is an existing partnership as defined in Section 10211(c)(2) of the Revenue
Act of 1987.
NHC is a publicly traded and existing partnership as so defined. The REIT
Shares and the Shares will be issued to NHC in exchange for all of NHC's assets
under the nonrecognition rule of Section 351 and will be issued within 90 days
of their receipt by NHC. As discussed below in The Corporation -- The Merger,
the Distribution and Merger will be treated for federal income tax purposes as
a complete termination and liquidation of NHC, which is to be effective prior
to NHC's first taxable year after December 31, 1997. Accordingly, Tax Counsel
believes it is more likely than not that Code Section 731(c) would not apply
to the Distribution.
Under Code Section 732(b), a Unitholder's aggregate initial tax basis in
his REIT Shares and the Shares will be generally equal to the Unitholder's
adjusted basis in his Units, decreased by the amount of any marketable
securities treated as money and increased by the amount of any gain recognized
as a result thereof, which shall be allocated between the REIT Shares and the
Shares generally based upon the relative adjusted bases to NHC of the REIT
Shares and the Shares.
Each Unitholder may have multiple holding periods for the REIT Shares and
the Shares received, depending upon the holding periods and character of the
various assets transferred by NHC to the REIT and the Corporation. The holding
period of the portion of the REIT Shares and the Shares attributable to capital
assets and Code Section 1231 assets transferred by NHC to the REIT or the
Corporation will include NHC's holding period for those assets. The holding
period for REIT Shares and the Shares attributable to other NHC assets, if any,
will begin on the day following the Effective Time. The period during which
Unitholders have held their Units will have no impact on their holding period in
REIT Shares or the Shares.
TAXATION AS A REAL ESTATE INVESTMENT TRUST
GENERAL PRINCIPLES. The Code provides special tax treatment for
organizations that qualify and elect to be taxed as real estate investment
trusts. If certain conditions are met (see "Requirements for Qualification"
below), entities that primarily invest in real estate or mortgages secured by
real estate and would otherwise be taxed as regular corporations may elect real
estate investment trust status so that they are, with certain limited
exceptions, not taxed at the corporate level on their ordinary net income or
capital gains distributed currently to their shareholders. This treatment
substantially eliminates the "double taxation" (at the corporate and shareholder
levels) that typically results from the use of corporate investment vehicles.
The REIT will elect to be taxed as a real estate investment trust as soon as
practicable after it meets the necessary requirements.
Upon consultation with its advisers, the REIT believes that it is in a
position to qualify for treatment as a real estate investment trust for the year
ending December 31, 1998, upon filing of its election to be taxed as a real
estate investment trust, and intends to operate so as to meet the requirements
under the Code for qualification as a real estate investment trust, commencing
with its taxable year ending December 31, 1998 and thereafter. The REIT also
believes, after consultation with its advisers, that it has been organized, has
operated and will operate in such a manner as to qualify for taxation as a real
estate investment trust under the Code. No assurance can be given, however, that
such requirements have been or will be met.
OPINION OF REIT COUNSEL. In the opinion of REIT Counsel, commencing with
the REIT's taxable year ending December 31, 1998, the REIT will qualify to be
taxed as a real estate investment trust under the Code, provided that (i) the
elections and other procedural steps described in this discussion of "Federal
Income Tax Considerations" are completed in a timely fashion and (ii) the REIT
and the Operating Partnership operate in accordance with various assumptions and
factual representations made by NHC, the REIT and the Operating Partnership
concerning their business, properties and operations. It must be emphasized that
REIT Counsel's opinion is based on various assumptions and is conditioned upon
such assumptions and representations made by NHC, the REIT and the Operating
Partnership concerning their business and properties as set forth in this Proxy
Statement/Prospectus. Such factual assumptions and
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representations are set forth below in this discussion of "Federal Income Tax
Considerations." In addition, REIT Counsel's opinion is based upon the factual
representations of NHC, the REIT and the Operating Partnership concerning its
business and properties as set forth in this Proxy Statement/Prospectus.
Moreover, such qualification and taxation as a real estate investment trust
depends upon the REIT's ability to meet, through actual annual operating
results, distribution levels and diversity of stock ownership, the various
qualification tests imposed under the Code discussed below, the results of which
will not be reviewed by REIT Counsel. Accordingly, no assurance can be given
that the actual results of the REIT's operations for any one taxable year will
satisfy such requirements. See "Risk Factors -- The REIT -- Adverse Consequences
of the REIT's Failure to Qualify as a Real Estate Investment Trust."
The opinion of REIT Counsel is also based upon existing law as currently
applicable, U.S. treasury regulations, currently published administrative
positions of the IRS and judicial decisions, which are subject to change either
prospectively or retroactively. No assurance can be given that any such changes
would not modify the conclusions expressed in the opinion. Moreover, unlike a
private letter ruling (which will not be sought), an opinion of counsel is not
binding on the IRS, and no assurance can be given that the IRS will not
successfully challenge the status of the REIT as a real estate investment trust.
If the REIT qualifies for taxation as a real estate investment trust, it
generally will not be subject to federal corporate income taxes on that portion
of its ordinary income or capital gain that is currently distributed to its
stockholders. The real estate investment trust provisions of the Code generally
allow a real estate investment trust to deduct dividends paid to its
stockholders. This deduction for dividends paid to stockholders substantially
eliminates the federal "double taxation" on earnings (once at the corporate
level and once again at the stockholder level) that usually results from
investments in a corporation.
FEDERAL INCOME TAXATION OF THE REIT
Upon consultation with its advisers, the REIT believes that it is in a
position to qualify for treatment as a real estate investment trust for the year
ended December 31, 1998, upon filing of its election to be taxed as a real
estate investment trust, and intends to operate so as to meet the requirements
under the Code for qualification as a real estate investment trust, commencing
with its taxable year ended December 31, 1998 and thereafter. The REIT also
believes, after consultation with its advisers, that it has been organized, has
operated and will operate in such a manner as to qualify for taxation as a real
estate investment trust under the Code. No assurance can be given, however, that
such requirements have been or will be met.
OPINION OF REIT COUNSEL
Goodwin, Procter & Hoar LLP has acted as special REIT tax counsel to the
REIT in connection with the formation of the REIT and the REIT's election to be
taxed as a real estate investment trust. In the opinion of Goodwin, Procter &
Hoar LLP, commencing with the REIT's taxable year ended December 31, 1998, the
REIT will qualify to be taxed as a real estate investment trust under the Code,
provided that (i) the elections and other procedural steps described in this
discussion of "Federal Income Tax Considerations" are completed in a timely
fashion and (ii) the REIT and the Operating Partnership operate in accordance
with various assumptions and factual representations made by the REIT concerning
their business, properties and operations. It must be emphasized that Goodwin,
Procter & Hoar LLP's opinion is based on various assumptions and is conditioned
upon such assumptions and representations made by the REIT concerning their
business and properties. Such factual assumptions and representations are set
forth below in this discussion of "Federal Income Tax Considerations." In
addition, Goodwin, Procter & Hoar LLP's opinion is based upon the factual
representations of the REIT and the Operating Partnership concerning its
business and properties. Moreover, such qualification and taxation as a real
estate investment trust depends upon the REIT's ability to meet, through actual
annual operating results, distribution levels and diversity of stock ownership,
the various qualification tests imposed under the Code discussed below, the
results of which will not be reviewed by Goodwin, Procter & Hoar LLP.
Accordingly, no assurance can be given that the actual results of the REIT's
operations for any one taxable year will satisfy such requirements. See "Risk
Factors -- The REIT -- Adverse Consequences of The REIT's Failure to Qualify as
a Real Estate Investment Trust."
The opinion of Goodwin, Procter & Hoar LLP is also based upon existing law
as currently applicable, IRS regulations, currently published administrative
positions of the IRS and judicial decisions, which are subject to change either
prospectively or retroactively. No assurance can be given that any such changes
would not modify the conclusions expressed in the opinion. Moreover, unlike a
private letter ruling (which will not be sought), an opinion of counsel is not
binding on the IRS, and no assurance can be given that the IRS will not
successfully challenge the status of the real estate investment trust as a REIT.
If the REIT qualifies for taxation as a real estate investment trust, it
generally will not be subject to federal corporate income taxes on that portion
of its ordinary income or capital gain that is currently distributed to
stockholders. The real estate investment trust provisions of the Code generally
allow a real estate investment trust to deduct dividends paid to its
stockholders. This deduction for dividends paid to stockholders substantially
eliminates the federal "double taxation" on earnings (once at the corporate
level and once again at the stockholder level) that usually results from
investments in a corporation.
Even if the REIT qualifies for taxation as a real estate investment trust,
however, the REIT will be subject to federal income tax, as follows: First, the
REIT will be taxed at regular corporate rates on its undistributed REIT taxable
income.
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The REIT may elect to retain and pay income tax on its net long-term capital
gains received during the taxable year. Second, under certain circumstances, the
REIT may be subject to the "alternative minimum tax." Third, if the REIT has net
income from the sale or other disposition of "foreclosure property" that is held
primarily for sale to customers in the ordinary course of business or other
non-qualifying income from foreclosure property, it will be subject to tax at
the highest corporate rate on such income. Fourth, if the REIT has net income
from prohibited transactions (which are, in general, certain sales or other
dispositions of property other than foreclosure property held primarily for sale
to customers in the ordinary course of business), such income will be subject to
a 100% tax. Fifth, if the REIT should fail to satisfy either the 75% or 95%
gross income test (discussed below) but has nonetheless maintained its
qualification as a REIT because certain other requirements have been met, it
will be subject to a 100% tax on the net income attributable to the greater of
the amount by which the REIT fails the 75% or 95% test, multiplied by a
fraction intended to reflect the REIT's profitability. Sixth, if the REIT fails
to distribute during each year at least the sum of (i) 85% of its REIT ordinary
income for such year, (ii) 95% of its REIT capital gain net income for such
year (unless the REIT has elected to retain and pay income tax on a portion of
its net long-term capital gain) and (iii) any undistributed taxable income from
prior periods, the REIT will be subject to a 4% excise tax on the excess of such
required distribution over the amounts actually distributed. Seventh, if the
REIT should acquire any asset from a C corporation (i.e., a corporation
generally subject to full corporate-level tax) in a carryover-basis transaction
and the REIT subsequently recognizes gain on the disposition of such asset
during the ten-year period (the "Recognition Period") beginning on the date on
which the asset was acquired by the REIT, then, to the extent of the excess of
(a) the fair market value of the asset as of the beginning of the applicable
Recognition Period over (b) the REIT's adjusted basis in such asset as of the
beginning of such Recognition Period (the "Built-In Gain"), such gain will be
subject to tax at the highest regular corporate rate, pursuant to guidelines
issued by the IRS (the "Built-In Gain Rules").
REQUIREMENTS FOR QUALIFICATION
To qualify as a real estate investment trust, the REIT must elect to be so
treated and must meet the requirements, discussed below, relating to the REIT's
organization, sources of income, nature of assets and distributions of income to
stockholders.
ORGANIZATIONAL REQUIREMENTS
The Code defines a real estate investment trust as a corporation, trust or
association: (i) that is managed by one or more directors or trustees, (ii) the
beneficial ownership of which is evidenced by transferable shares or by
transferable certificates of beneficial interest, (iii) that would be taxable as
a domestic corporation but for the real estate investment trust requirements,
(iv) that is neither a financial institution nor an insurance real estate
investment trust subject to certain provisions of the Code, (v) the beneficial
ownership of which is held by 100 or more persons, and (vi) during the last half
of each taxable year not more than 50% in value of the outstanding stock of
which is owned, directly or indirectly through the application of certain
attribution rules, by five or fewer individuals (as defined in the Code to
include certain entities). In addition, certain other tests, described below,
regarding the nature of its income and assets also must be satisfied. The Code
provides that conditions (i) through (iv), inclusive, must be met during the
entire taxable year and that condition (v) must be met during at least 335 days
of a taxable year of 12 months, or during a proportionate part of a taxable year
of less than 12 months. Conditions (v) and (vi) (the "100 Stockholder
Requirement" and "Five or Fewer Requirement") will not apply until after the
first taxable year for which an election is made to be taxed as a real estate
investment trust. For purposes of conditions (v) and (vi), pension funds and
certain other tax-exempt entities are treated as individuals, subject to a
"look-through" exception in the case of condition (vi).
In order to protect the REIT from a concentration of ownership of its stock
that would cause the REIT to fail the Five or Fewer Requirement, the REIT's
Certificate provides that stock owned, or deemed to be owned or transferred to a
stockholder in excess of the Ownership Limit will automatically be converted
into Excess Stock. See "Description of Securities -- Shares of the REIT -- REIT
Provisions." Because of the absence of authority on this issue, however, there
is no assurance that the operation of the Excess Stock or other provisions
contained in the Certificate will, as a matter of law, prevent a concentration
of ownership of stock in excess of the Ownership Limit from causing the REIT to
violate the Five or Fewer Requirement. If there were a concentration of
ownership that would cause the REIT to violate the Five or Fewer Requirement,
and the operation of the Excess Stock or other provisions contained in the
Certificate were not held to cure such violation, the REIT would be disqualified
as a real estate investment trust. In rendering its opinion that the REIT is
organized in a manner that permits the REIT to qualify as a real estate
investment trust, Goodwin, Procter & Hoar LLP is relying on the representation
of the REIT that the ownership of its stock (without regard to the Excess Stock
provisions) satisfies the Five or Fewer Requirement, and Goodwin, Procter & Hoar
LLP expresses no opinion as to whether, as a matter of law, the Excess Stock or
other provisions contained in the Certificate preclude the REIT from failing the
Five or Fewer Requirement.
In addition, a corporation may not elect to become a real estate investment
trust unless its taxable year is the calendar year. The REIT's taxable year is
the calendar year.
In the case of a real estate investment trust that is a partner in a
partnership, treasury regulations provide that the real estate investment trust
will be deemed to own its proportionate share (based on its interest in
partnership capital) of the assets of the partnership and will be deemed to be
entitled to the income of the partnership attributable to such share. In
addition, the character of the assets and gross income of the partnership shall
retain the same character in the hands of the real estate investment trust for
purposes of Section 856 of the Code, including satisfying the gross income tests
and asset tests. Thus, the REIT's proportionate share of the assets, liabilities
and items of income with respect to
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any partnership, including the Operating Partnership, in which it holds an
interest will be treated as assets, liabilities and items of income of the REIT
for purposes of applying the requirements described herein.
INCOME TESTS
To maintain qualification as a real estate investment trust, three gross
income requirements must be satisfied annually.
- First, at least 75% of the REIT's gross income, excluding gross income
from certain dispositions of property held primarily for sale to
customers in the ordinary course of a trade or business ("prohibited
transactions"), for each taxable year must be derived directly or
indirectly from investments relating to real property or mortgages on
real property (including "rents from real property" and, in certain
circumstances, interest) or from certain types of temporary
investments. The REIT, however, is permitted under new tax legislation
to receive up to one percent of all amounts received or accrued during
a taxable year with respect to a property from certain impermissible
tenant services.
- Second, at least 95% of the REIT's gross income (excluding gross
income from prohibited transactions) for each taxable year must be
derived from such real property investments described above and from
dividends, interest and gain from the sale or disposition of stock or
securities or from any combination of the foregoing. The REIT, however,
is permitted under new tax legislation to receive up to one percent of
all amounts received or accrued during a taxable year with respect to a
property from certain impermissible tenant services.
Rents received or deemed to be received by the REIT will qualify as "rents
from real property" in satisfying the gross income requirements for a REIT
described above only if several conditions are met.
- First, the amount of rent generally must not be based in whole or in
part on the income or profits of any person. An amount received or
accrued generally will not be excluded from the term "rents from real
property," however, solely by reason of being based on a fixed
percentage or percentages of receipts or sales.
- Second, the Code provides that rents received from a tenant will not
qualify as "rents from real property" in satisfying the gross income
tests if the REIT, or an owner of 10% or more of the REIT, directly or
constructively owns 10% or more of such tenant (a "Related Party
Tenant") or a subtenant of such tenant (in which case only rent
attributable to the subtenant is disqualified).
- Third, if rent attributable to personal property, leased in connection
with a lease of real property, is greater than 15% of the total rent
received under the lease, then the portion of rent attributable to the
personal property will not qualify as "rents from real property."
- Finally, for rents to qualify as "rents from real property" the REIT
must not operate or manage the property or furnish or render
to tenants, other than through an "independent contractor"
who is adequately compensated and from whom the REIT does not derive
any income; provided, however, that a REIT may provide services with
respect to its properties and the income will qualify as "rents from
real property" if the services are "usually or customarily rendered"
in connection with the rental of room or other space for occupancy
only and are not otherwise considered "rendered to the occupant." In
addition, under new tax legislation, a real estate investment trust
can furnish or render otherwise impermissible services to tenants if
the amount treated as received by the REIT from such services does
not exceed one percent of all amounts received or accrued with
respect to the property. The amount treated as received for any such
impermissible service must be at least 150 percent of the direct
cost of the REIT in furnishing or rendering such service or
providing such management or operation.
The REIT does not charge rent that is based in whole or in part on the
income or profits of any person (except by reason of being based on a fixed
percentage or percentages of receipts or sales consistent with the rule
described above). The REIT does not derive, and does not anticipate deriving,
rent attributable to personal property leased in connection with real property
that exceeds 15% of the total rents.
If the REIT fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it may nevertheless qualify as a REIT for that year
if it is eligible for relief under certain provisions of the Code. These relief
provisions generally will be available if (i) the REIT's failure to meet these
tests was due to reasonable cause and not due to willful neglect, (ii) the REIT
attaches a schedule of the sources of its income to its federal income tax
return and (iii) any incorrect information on the schedule is not due to fraud
with intent to evade tax. It is not possible, however, to state whether, in all
circumstances, the REIT would be entitled to the benefit of these relief
provisions. For example, if the REIT fails to satisfy the gross income tests
because nonqualifying income that the REIT intentionally incurs exceeds the
limits on such income, the IRS could conclude that the REIT's failure to satisfy
the tests was not due to reasonable cause. As discussed above in "-- Opinion of
REIT Counsel," even if these relief provisions apply, a tax would be imposed
with respect to the excess net income. See "Risk Factors -- The REIT -- Adverse
Consequences of the REIT's Failure to Qualify as a Real Estate Investment
Trust."
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ASSET TESTS
At the close of each quarter of its taxable year, the REIT also must
satisfy three tests relating to the nature and diversification of its assets.
- First, at least 75% of the value of the REIT's total assets
must be represented by real estate assets, cash, cash items
and government securities.
- Second, no more than 25% of the REIT's total assets may be
represented by securities other than those in the 75% asset
class.
- Third, of the investments included in the 25% asset class, the
value of any one issuer's securities owned by the REIT may not
exceed 5% of the value of the REIT's total assets, and the
REIT may not own more than 10% of any one issuer's outstanding
voting securities.
After initially meeting the asset tests at the close of any quarter,
the REIT will not lose its status as a REIT for failure to satisfy the asset
tests at the end of a later quarter solely by reason of changes in asset
values. If the failure to satisfy the asset tests results from an acquisition
of securities or other property during a quarter, the failure can be cured by
disposition of sufficient nonqualifying assets within 30 days after the close
of that quarter. The REIT maintains, and will continue to maintain, adequate
records of the value of its assets to ensure compliance with the asset tests
and will take such other actions within 30 days after the close of any quarter
as may be required to cure any noncompliance.
ANNUAL DISTRIBUTION REQUIREMENTS
In order to be taxed as a real estate investment trust, the REIT is
required to distribute dividends (other than capital gain dividends) to its
stockholders in an amount at least equal to (a) the sum of (i) 95% of the
REIT's "REIT taxable income" (computed without regard to the dividends-paid
deduction and the REIT's capital gain) and (ii) 95% of the net income, if any,
from foreclosure property in excess of the special tax on income from
foreclosure property, minus (b) the sum of certain items of non-cash income.
Such distributions must be paid in the taxable year to which they relate, or in
the following taxable year if declared before the REIT timely files its federal
income tax return for such year and if paid on or before the first regular
dividend payment after such declaration. Even if the REIT satisfies the
foregoing distribution requirements, to the extent that the REIT does not
distribute all of its net capital gain or "REIT taxable income" as adjusted, it
will be subject to tax thereon at regular capital gains or ordinary corporate
tax rates. Furthermore, if the REIT should fail to distribute during each
calendar year at least the sum of (a) 85% of its ordinary income for that year,
(b) 95% of its capital gain net income for that year (unless the REIT has
elected to retain and pay income tax on a portion of its net long-term capital
gain) and (c) any undistributed taxable income from prior periods, the REIT
would be subject to a 4% excise tax on the excess of such required distribution
over the amounts actually distributed. In addition, if the REIT disposes of any
asset subject to the Built-In Gain Rules during the applicable Recognition
Period, the REIT will be required, pursuant to guidance issued by the IRS, to
distribute at least 95% of the Built-In Gain (after tax), if any, recognized
on the disposition of the asset. The REIT intends to make timely distributions
sufficient to satisfy the annual distribution requirements.
It is expected that the REIT's "REIT taxable income" will be less than
its cash flow due to the allowance of depreciation and other non-cash charges
in computing REIT taxable income. Accordingly, the REIT anticipates that it
will generally have sufficient cash or liquid assets to enable it to satisfy
the 95% distribution requirement. It is possible, however, that the REIT, from
time to time, may not have sufficient cash or other liquid assets to meet the
95% distribution requirement or to distribute such greater amount as may be
necessary to avoid income and excise taxation, as a result of timing
differences between (i) the actual receipt of income and actual payment of
deductible expenses and (ii) the inclusion of such income and deduction of such
expenses in arriving at taxable income of the REIT, or as a result of
nondeductible expenses such as principal amortization or capital expenditures
in excess of noncash deductions. In the event that such timing differences
occur, the REIT may find it necessary to arrange for borrowings or, if
possible, pay taxable stock dividends in order to meet the dividend
requirement.
Under certain circumstances, the REIT may be able to rectify a failure
to meet the distribution requirement for a year by paying "deficiency
dividends" to stockholders in a later year, which may be included in the REIT's
deduction for dividends paid for the earlier year. Thus, the REIT may be able
to avoid being taxed on amounts distributed as deficiency dividends. The REIT
will, however, be required to pay interest based upon the amount of any
deduction taken for deficiency dividends.
FAILURE TO QUALIFY
If the REIT fails to qualify for taxation as a real estate investment
trust in any taxable year and the relief provisions do not apply, the REIT will
be subject to tax (including any applicable alternative minimum tax) on its
taxable income at regular corporate rates. Distributions to stockholders in any
year in which the REIT fails to qualify will not be deductible by the REIT nor
will they be required to be made. In such event, to the extent of current or
accumulated earnings and profits, all distributions to stockholders will be
dividends, taxable as ordinary income, and subject to certain limitations of
the Code, corporate distributees may be eligible for the dividends-received
deduction. Unless the REIT is entitled to relief under specific statutory
provisions, the REIT also will be disqualified from taxation as a REIT for the
four taxable years following the year during which qualification was lost. It
is not possible to state whether in
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all circumstances the REIT would be entitled to such statutory relief. For
example, if the REIT fails to satisfy the gross income tests because
nonqualifying income that the REIT intentionally incurs exceeds the limit on
such income, the IRS could conclude that the REIT's failure to satisfy the
tests was not due to reasonable cause. See "Risk Factors -- The REIT -- Adverse
Consequences of the REIT's Failure to Qualify as a Real Estate Investment
Trust."
TAXATION OF U.S. STOCKHOLDERS
As used herein, the term "U.S. Stockholder" means a holder of Common
Stock for United States federal income tax purposes who is (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States or of any
political subdivision thereof, (iii) an estate, the income of which is subject
to United States federal income taxation regardless of its source or (iv) a
trust, if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United States
persons have the authority to control all substantial decisions of the trust
and (v) is not an entity that has a special status under the Code (such as a
tax-exempt organization or a dealer in securities).
DISTRIBUTIONS GENERALLY
Distributions to U.S. Stockholders, other than capital gain dividends
discussed below, will constitute dividends up to the amount of the REIT's
current or accumulated earnings and profits and will be taxable to the
stockholders as ordinary income. These distributions are not eligible for the
dividends-received deduction for corporations. To the extent that the REIT
makes a distribution in excess of its current or accumulated earnings and
profits, the distribution will be treated first as a tax-free return of
capital, reducing the tax basis in the U.S. Stockholder's REIT Shares and the
amount of such distribution in excess of a U.S. Stockholder's tax basis in its
REIT Shares will be taxable as gain realized from the sale of its REIT Shares.
Dividends declared by the REIT in October, November or December of any year
payable to a stockholder of record on a specified date in any such month shall
be treated as both paid by the REIT and received by the stockholder on December
31 of the year, provided that the dividend is actually paid by the REIT during
January of the following calendar year. Stockholders may not include on their
own federal income tax returns any losses of the REIT.
The REIT will be treated as having sufficient earnings and profits to
treat as a dividend any distribution by the REIT up to the amount required to
be distributed in order to avoid imposition of the 4% excise tax as discussed
in "-- Opinion of Tax Counsel" above. Moreover, any "deficiency dividend" will
be treated as an ordinary or capital gain dividend, as the case may be,
regardless of the REIT's earnings and profits. As a result, stockholders may be
required to treat certain distributions that would otherwise result in a
tax-free return of capital as taxable dividends.
The REIT may elect to retain and pay income tax on its net long-term
capital gains received during the taxable year. For taxable years beginning
after December 31, 1997, if the REIT so elects for a taxable year, the REIT's
shareholders would include in income as long-term capital gains their
proportionate share of such portion of the REIT's undistributed long-term
capital gains for the taxable year as the REIT may designate. A stockholder
would be deemed to have paid his share of the tax paid by the REIT on such
undistributed capital gains, which would be credited or refunded to the
shareholder. The shareholder's basis in his shares of REIT Shares would be
increased by the amount of undistributed long-term capital gains (less the
capital gains tax paid by the REIT) included in the stockholder's long-term
capital gains.
CAPITAL GAIN DIVIDENDS
Subject to the discussion below regarding changes to the capital gains
tax rates, distributions that are designated as capital gain dividends will be
taxed as long-term capital gains (to the extent they do not exceed the REIT 's
actual net capital gain for the taxable year) without regard to the period for
which the shareholder has held his REIT Shares. However, corporate shareholders
may be required to treat up to 20% of certain capital gain dividends as
ordinary income. Capital gain dividends are not eligible for the
dividends-received deduction for corporations.
The Taxpayer Relief Act of 1997 (the "Relief Act") alters the taxation
of capital gain income. Under the Relief Act, individuals, trusts and estates
that hold certain investments for more than 18 months may be taxed at a maximum
long-term capital gain tax of 20% on the sale or exchange of those investments.
Individuals, trusts and estates that hold certain assets for more than 12
months but not more than 18 months may be taxed at a maximum mid-term capital
gain rate of 28% on the sale or exchange of those investments. The Relief Act
also provides a maximum rate of 25% for "unrecaptured section 1250 gain" for
individuals, trusts, and estates, special rules for "qualified 5-year gain," as
well as other changes to prior law. The Relief Act allows the IRS to prescribe
regulations on how the Relief Act's new capital gain rates will apply to sales
of capital assets by "pass-through entities," which include REITs such as the
REIT. To date regulations have not yet been prescribed, and it remains unclear
how the Relief Act's new rates will apply to capital gain dividends or
undistributed capital gains, including, for example the extent, if any, to
which capital gain dividends or undistributed capital gains from the REIT will
be taxed to individuals at the new rates for mid-term capital gains and
unrecaptured section 1250 gain, rather than the long-term capital gain rates.
Investors are urged to consult their own tax advisors with respect to the new
rules contained in the Relief Act.
PASSIVE ACTIVITY LOSS AND INVESTMENT INTEREST LIMITATIONS
Distributions from the REIT and gain from the disposition of REIT
Shares will not be treated as passive activity income, and therefore
stockholders may not be able to apply any "passive losses" against such income.
Dividends from
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the REIT (to the extent they do not constitute a return of capital) will
generally be treated as investment income for purposes of the investment
interest limitation. Capital gains from the disposition of REIT Shares (or
distributions treated as such) will be treated as investment income only if the
shareholder so elects, in which case such capital gains will be taxed at
ordinary income rates.
CERTAIN DISPOSITIONS OF SHARES
In general, any gain or loss realized upon a taxable disposition of
the REIT Shares by a shareholder who is not a dealer in securities will be
treated as long-term capital gain or loss if the REIT Shares have been held for
more than one year, (or, in the case of individuals, trusts, and estates,
mid-term capital gain or loss if the shares have been held for more than one
year but not more than 18 months and long-term capital gain or loss if the
shares have been held for more than 18 months) and otherwise as short-term
capital gain or loss. However, any loss upon a sale or exchange of REIT Shares
by a stockholder who has held such stock for six months or less (after applying
certain holding period rules), will be treated as a long-term capital loss to
the extent of distributions from the REIT or undistributed capital gains
required to be treated by such shareholder as long-term capital gain. All or a
portion of any loss realized upon a taxable disposition of REIT Shares may be
disallowed if other REIT Shares are purchased within 30 days before or after
the disposition.
TREATMENT OF TAX-EXEMPT STOCKHOLDERS
Distributions from the REIT to a tax-exempt employee pension trust or
other domestic tax-exempt stockholder generally, will not constitute "unrelated
business taxable income" ("UBTI") unless the stockholder has borrowed to
acquire or carry its REIT Shares. Qualified trusts that hold more than 10% (by
value) of the shares of certain REITs, however, may be required to treat a
certain percentage of such a REIT's distributions as UBTI. This requirement
will apply only if (i) the REIT would not qualify as such for federal income
tax purposes but for the application of the "look-through" exception to the
Five or Fewer Requirement applicable to shares held by qualified trusts and
(ii) the REIT is "predominantly held" by qualified trusts. A REIT is
predominantly held by qualified trusts if either (i) a single qualified trust
holds more than 25% by value of the interests in the REIT or (ii) one or more
qualified trusts, each owning more than 10% by value of the interests in the
REIT, hold in the aggregate more than 50% of the interests in the REIT. The
percentage of any REIT dividend treated as UBTI is equal to the ratio of (a)
the UBTI earned by the REIT (treating the REIT as if it were a qualified trust
and therefore subject to tax on UBTI) to (b) the total gross income (less
certain associated expenses) of the REIT. A de minimis exception applies where
the ratio set forth in the preceding sentence is less than 5% for any year. For
these purposes, a qualified trust is any trust described in section 401(a) of
the Code and exempt from tax under section 501(a) of the Code. The provisions
requiring qualified trusts to treat a portion of REIT distributions as UBTI
will not apply if the REIT is able to satisfy the Five or Fewer Requirement
without relying upon the "look-through" exception.
SPECIAL TAX CONSIDERATIONS FOR FOREIGN STOCKHOLDERS
The rules governing United States income taxation of non-resident
alien individuals, foreign corporations, foreign partnerships and foreign
trusts and estates (collectively, "Non-U.S. Stockholders") are complex, and the
following discussion is intended only as a summary of these rules. Prospective
Non-U.S. Stockholders should consult with their own tax advisors to determine
the impact of federal, state and local income tax laws on an investment in the
REIT, including any reporting requirements.
In general, Non-U.S. Stockholders will be subject to regular United
States federal income tax with respect to their investment in the REIT if the
investment is "effectively connected" with the Non-U.S. Stockholder's conduct
of a trade or business in the United States. A corporate Non-U.S. Stockholder
that receives income that is (or is treated as) effectively connected with a
U.S. trade or business also may be subject to the branch profits tax under
section 884 of the Code, which is payable in addition to regular United States
federal corporate income tax. The following discussion will apply to Non-U.S.
Stockholders whose investment in the REIT is not so effectively connected.
A distribution by the REIT that is not attributable to gain from the
sale or exchange by the REIT of a United States real property interest and that
is not designated by the REIT as a capital gain dividend will be treated as an
ordinary income dividend to the extent that it is made out of current or
accumulated earnings and profits. Generally, any ordinary income dividend will
be subject to a United States federal income tax equal to 30% of the gross
amount of the dividend unless this tax is reduced by an applicable tax treaty.
Such a distribution in excess of the REIT's earnings and profits will be
treated first as a return of capital that will reduce a Non-U.S. Stockholder's
basis in its Common Stock (but not below zero) and then as gain from the
disposition of such shares, the tax treatment of which is described under the
rules discussed below with respect to dispositions of Common Stock.
Distributions by the REIT that are attributable to gain from the sale
or exchange of a United States real property interest will be taxed to a
Non-U.S. Stockholder under the Foreign Investment in Real Property Tax Act of
1980 ("FIRPTA"). Under FIRPTA, such distributions are taxed to a Non-U.S.
Stockholder as if the distributions were gains "effectively connected" with a
United States trade or business. Accordingly, a Non-U.S. Stockholder will be
taxed at the normal capital gain rates applicable to a U.S. Stockholder
(subject to any applicable alternative minimum tax and a special alternative
minimum tax in the case of non-resident alien individuals). Distributions
subject to FIRPTA also may be subject to a 30% branch profits tax when made to
a foreign corporate stockholder that is not entitled to treaty exemptions.
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Although tax treaties may reduce the REIT's withholding obligations,
the REIT generally will be required to withhold from distributions to Non-U.S.
Stockholders, and remit to the IRS, (i) 35% of designated capital gain
dividends (or, if greater, 35% of the amount of any distributions that could
be designated as capital gain dividends) and (ii) 30% of ordinary dividends
paid out of earnings and profits. In addition, if the REIT designates prior
distributions as capital gain dividends, subsequent distributions, up to the
amount of such prior distributions, will be treated as capital gain dividends
for purposes of withholding. A distribution in excess of the REIT's earnings
and profits will be subject to 30% dividend withholding if at the time of the
distribution it cannot be determined whether the distribution will be in an
amount in excess of the REIT's current or accumulated earnings and profits. If
the amount of tax withheld by the REIT with respect to a distribution to a
Non-U.S. Stockholder exceeds the stockholder's United States tax liability with
respect to such distribution, the Non-U.S. Stockholder may file for a refund of
such excess from the IRS.
Unless the REIT Share constitutes a "United States real property
interest" within the meaning of FIRPTA, a sale of REIT Shares by a Non-U.S.
Stockholder generally will not be subject to United States federal income
taxation. The REIT Share will not constitute a United States real property
interest if the REIT is a "domestically controlled REIT." A domestically
controlled REIT is a REIT in which at all times during a specified testing
period less than 50% in value of its shares is held directly or indirectly by
Non-U.S. Stockholders. It is currently anticipated that the REIT will be a
domestically controlled REIT and therefore that sales of REIT Shares will not
be subject to taxation under FIRPTA. However, because the REIT will be
publicly traded, no assurance can be given that the REIT will continue to be a
domestically controlled REIT. If the REIT were not a domestically controlled
REIT, whether a Non-U.S. Stockholder's sale of REIT Shares would be subject to
tax under FIRPTA as a sale of a United States real property interest would
depend on whether the REIT Shares were "regularly traded" on an established
securities market (such as AMEX on which the REIT will be listed) and on the
size of the selling stockholder's interest in the REIT. If the gain on the sale
of REIT Shares were subject to taxation under FIRPTA, the Non-U.S. Stockholder
would be subject to the same treatment as a U.S. Stockholder with respect to
the gain (subject to any applicable alternative minimum tax and a special
alternative minimum tax in the case of non-resident alien individuals). In
addition, distributions that are treated as gain from the disposition of REIT
Shares and are subject to tax under FIRPTA also may be subject to a 30% branch
profit tax when made to a foreign corporate stockholder that is not entitled to
treaty exemptions. In any event, a purchaser of REIT Shares from a Non-U.S.
Stockholder will not be required to withhold under FIRPTA on the purchase price
if the purchased REIT Shares are "regularly traded" on an established
securities market (such as AMEX) or if the REIT is a domestically controlled
REIT. Otherwise, under FIRPTA the purchaser of REIT Shares may be required to
withhold 10% of the purchase price and remit this amount to the IRS. Capital
gains not subject to FIRPTA will be taxable to a Non-U.S. Stockholder if the
Non-U.S. Stockholder is a non-resident alien individual who is present in the
United States for 183 days or more during the taxable year and certain other
conditions apply, in which case the non-resident alien individual will be
subject to a 30% tax on his or her U.S. source capital gains.
INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX
Under certain circumstances, U.S. Stockholders may be subject to
backup withholding at a rate of 31% on payments made with respect to, or cash
proceeds of a sale or exchange of, REIT Shares. Backup withholding will apply
only if the holder (i) fails to furnish his or her taxpayer identification
number ("TIN") (which, for an individual, would be his or her Social Security
Number), (ii) furnishes an incorrect TIN, (iii) is notified by the IRS that he
or she has failed properly to report payments of interest and dividends or is
otherwise subject to backup withholding or (iv) under certain circumstances,
fails to certify, under penalties of perjury, that he or she has furnished a
correct TIN and (a) that he or she has not been notified by the IRS that he or
she is subject to backup withholding for failure to report interest and
dividend payments or (b) that he or she has been notified by the IRS that he or
she is no longer subject to backup withholding. Backup withholding will not
apply with respect to payments made to certain exempt recipients, such as
corporations and tax-exempt organizations.
U.S. Stockholders should consult their own tax advisors regarding
their qualifications for exemption from backup withholding and the procedure
for obtaining such an exemption. Backup withholding is not an additional tax.
Rather, the amount of any backup withholding with respect to a payment to a
U.S. Stockholder will be allowed as a credit against the U.S. Stockholder's
United States federal income tax liability and may entitle the U.S. Stockholder
to a refund, provided that the required information is furnished to the IRS.
Additional issues may arise pertaining to information reporting and
backup withholding for Non-U.S. Stockholders. Non-U.S. Stockholders should
consult their tax advisors with regard to U.S. information reporting and backup
withholding.
OTHER TAX CONSIDERATIONS
STATE AND LOCAL TAX
The REIT and its operating subsidiaries may be subject to state and
local tax in states and localities in which they do business or own property.
The tax treatment of the REIT and its operating subsidiaries and the holders of
REIT Shares in such jurisdictions may differ from the federal income tax
treatment described above.
As previously noted, the Code requires the use of broad attribution
rules to determine certain direct and indirect stock ownership. Because of the
breadth of these rules, it may not be possible for the REIT to maintain
complete ownership records, as described above, or to know whether a violation
of the 100 Stockholder Requirement or Five or
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Fewer Requirement have occurred. For example, a shareholder of the REIT would
be deemed to own REIT Shares owned by his parents, children, spouse, siblings
and, in certain instances, his proportionate interest of shares owned by
another corporation, partnership, estate or trust in which the shareholder has
an interest. Accordingly, no assurances can be given that the REIT will be able
to satisfy these requirements and at all times qualify as a real estate
investment trust.
TAX AND ACCOUNTING INCOME MAY VARY
Due to differences between accounting rules for federal income tax
purposes and generally accepted accounting principles for financial reporting
purposes, the REIT's taxable income may vary from its net income for financial
reporting purposes. For tax purposes, the REIT will use the accrual method of
accounting.
EFFECT OF TAX STATUS OF OPERATING PARTNERSHIP ON QUALIFICATION OF THE
REIT AS A REAL ESTATE INVESTMENT TRUST
Substantially all of the REIT's investments are through the Operating
Partnership. In addition, the Operating Partnership holds interests in
certain Owned Healthcare Facilities through subsidiary partnerships. The REIT's
interest in these partnerships may involve special tax considerations. Such
considerations include (i) the allocations of items of income and expense,
which could affect the computation of taxable income of the REIT, (ii) the
status of the Operating Partnership, and other subsidiary partnerships as
partnerships (as opposed to associations taxable as corporations) for federal
income tax purposes, and (iii) the taking of actions by the Operating
Partnership and subsidiary partnerships that could adversely affect the REIT's
qualification as a real estate investment trust. In the opinion of REIT
Counsel, based on certain representations of the REIT and its subsidiaries,
each of the Operating Partnership and the other subsidiary partnerships in
which the Operating Partnership has an interest will be treated for federal
income tax purposes as a partnership (and not as an association taxable as a
corporation). If any of the Operating Partnership or other subsidiary
partnerships in which the Operating Partnership has an interest were treated as
an association taxable as a corporation, the REIT would fail to qualify as a
real estate investment trust for a number of reasons.
ALTERNATIVE MINIMUM TAX
The REIT's operations could generate items of tax preference under the
alternative minimum tax. For example, the REIT's alternative minimum taxable
income may be adjusted to take into account the difference between depreciation
allowable for regular tax purposes and depreciation allowable for purposes of
the alternative minimum tax. The REIT's shareholders are also subject to the
alternative minimum tax to the extent that it exceeds their regular tax. The
shareholders should therefore consult their own tax advisors as to the possible
application of the alternative minimum tax rules.
ERISA CONSIDERATIONS
The assets of certain pension plans, profit sharing plans and Keogh
Plans (collectively "Qualified Plans") must be valued annually. In addition,
valuation may become necessary in connection with distributions to participants
or beneficiaries, or for other reasons. Each year the trustee or custodian of
an individual retirement account ("IRA") must furnish to the person who has
established the IRA a statement which indicates the value of the IRA at the end
of the preceding calendar year. Otherwise, the assets of an IRA need to be
valued only in rare circumstances. The REIT does not contemplate providing
shareholders with an annual appraisal of its properties. However, it is
anticipated that a public trading market will develop for the REIT Shares, and
this market may provide sufficient data to value the REIT Shares.
Fiduciaries of Qualified Plans subject to the Employee Retirement
Income Securities Act of 1974, as amended ("ERISA"), should also consider
whether (i) under the fiduciary standards of ERISA an investment in the REIT is
prudent because of possible limitations on the marketability of the REIT
Shares, (ii) an investment in the REIT satisfies ERISA's diversification
requirements and (iii) such fiduciaries have authority to hold REIT Shares
under the appropriate governing instrument and Title I of ERISA. Fiduciaries of
an "IRA" should similarly note that an IRA may only make investments that are
authorized by the appropriate governing instrument.
Fiduciaries of Qualified Plans should also consider ERISA's
prohibition on improper delegation of control over or responsibility for "plan
assets." Qualified Plan and IRA fiduciaries should note that the Department of
Labor, which has certain administrative responsibilities over these employee
benefit plans, issued regulations defining "plan assets" on November 13, 1986.
Under the regulations, the assets of an entity in which employee benefit plans
make equity investments will not be treated as plan assets if interests in the
entity are (i) freely transferable, (ii) widely held and (iii) registered
pursuant to the Securities Exchange Act of 1934 or sold to the plan in a public
offering pursuant to a registration statement under the Securities Act of 1933.
It is anticipated that the REIT Shares will be freely transferable, widely
held, and registered pursuant to the Exchange Act.
If the REIT does not satisfy the above-described conditions, the
assets of the REIT could be deemed to be plan assets under ERISA. In such case,
(i) the prudence standards and other provisions of Part 4 of Title I of ERISA
(which impose liability on fiduciaries) would extend to investments made by the
REIT (which could materially impact the operations of the REIT); (ii) the
persons who have investment discretion over the assets of Qualified Plans which
hold REIT Shares could be liable under Part 4 of Title I for investments made
by the REIT which do not conform to such ERISA standards; and (iii) certain
transactions that the REIT might enter into in the ordinary course of its
business and operations might constitute "prohibited transactions" under ERISA.
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Finally, the tax-exempt status of an IRA could be lost if an
investment in the REIT constituted a prohibited transaction under Section
408(e) (2) of the Code by reason of the REIT engaging in a prohibited
transaction with the individual who established the IRA or his beneficiary.
Qualified Plans and IRAs contemplating the retention of REIT Shares
are urged to consult their tax advisors.
THE CORPORATION
FORMATION. The formation of the Corporation by NHC is intended to
qualify as a tax free incorporation under Code Section 351. Under Section 351,
neither the Corporation nor NHC would generally recognize gain upon formation
of the Corporation.
THE MERGER. The Merger (together with the Distribution) will be
treated for federal income tax purposes as a complete termination and
liquidation of NHC in which NHC Unitholders receive shares in the Corporation
and shares in the REIT in exchange for their Units. The merger of NHC into the
Corporation will be treated as a contribution of NHC's assets (other than those
contributed to the REIT or the Operating Partnership) to the Corporation, which
would generally be tax free under Code Section 351. Under the general rule of
Code Section 351, no gain or loss is recognized upon the transfer of property
to a corporation by the transferors of such property solely in exchange for
stock in the corporation if immediately thereafter the transferors are in
control of the corporation. Control is defined in Section 368(c) as the
ownership of eighty percent (80%) of the voting stock and eighty percent (80%)
of each class of non-voting stock of a corporation.
In the case of a partnership that contributes its assets to a
corporation in exchange for corporate stock and immediately thereafter
liquidates by distributing the stock to its partners "in proportion to their
partnership interests," the IRS has ruled that the "immediately after"
requirement of Section 351 is satisfied. Revenue Ruling 84-111, 1984-2 C.B. 88.
This is so even though the identities of the actual contributor or transferor
of property to the corporation and the ultimate recipient of the corporate
stock were not the same. While this ruling involves a partnership that
liquidates as a result of its distribution of shares in a corporation, the
ruling is enlightening because Section 351 was found to apply despite the short
period during which the partnership held the stock. Although NHC will
actually merge into the Corporation, thereby ceasing to exist as a separate
entity, it will be treated as liquidating for tax purposes.
Similarly, Code Section 351(c) provides that in determining control
for these purposes, the fact that a corporate transferor distributes part or
all of the stock it received in a transaction subject to Section 351 to its
shareholders will not be taken into account. While the Code contains no
analogous provision for such distributions by a partnership, Tax Counsel
believes it is appropriate for the same result to follow, and that it is more
likely than not that the general nonrecognition rule of Section 351 would apply
to constructive contribution of assets to the Corporation, except as otherwise
provided below.
Code Section 357 generally permits a corporation, in addition to
issuing stock in a Section 351 transaction, to assume liabilities of the
transferor, without causing the transferor to recognize gain or be precluded
from obtaining the benefits of Code Section 351. This rule does not apply,
however, if either (i) the principal purpose for the assumption was tax
avoidance (or was not a bona fide business purpose), or (ii) the liabilities
exceeded the transferor's basis in the contributed assets. NHC has represented
that the liabilities to be assumed by the Corporation or subject to assets
constructively contributed to the Corporation do not exceed NHC's adjusted tax
bases in the assets constructively contributed to the Corporation, and that the
principal purpose of the Corporation's assumption of such liabilities is not
the avoidance of taxes.
NHC will have a tax basis in the Shares it receives generally equal
to NHC's basis in the assets it constructively contributes to the Corporation,
net of the amount of the NHC liabilities the Corporation assumes or acquires in
the transfer. NHC's holding period for the Shares it receives in the exchange
will include NHC's holding period in the capital and Section 1231 assets it
transfers to the Corporation. If any of the assets NHC contributes to the
Corporation are deemed not to be capital or Section 1231 assets, then NHC's
holding period in the Shares will be bifurcated; the holding period for that
portion of the Shares received in exchange for such other assets would begin on
the day following the date of the exchange.
Pursuant to Code Section 1032, the Corporation will not recognize any
gain or loss on the receipt of the NHC assets and assumption of NHC liabilities
in exchange for the issuance of the Shares. The initial tax bases of the assets
received will generally equal their tax basis in the hands of NHC immediately
prior to the exchange. The Corporation's holding period for each asset acquired
in the exchange will generally include NHC's holding period for that asset.
Generally, under Code Section 731, NHC's Unitholders would not
recognize gain upon the complete liquidation of their limited partnership
interests in NHC in exchange for the Shares and the REIT shares.
Code Section 731(b) provides that a partnership will not recognize
gain upon its distribution of property or money to its partners. As to the
partners, Code Section 731(a)(1) generally provides that no gain or loss shall
be recognized by a partner upon a distribution to him of property, other than
money. For purposes of Section 731(a), "marketable securities" are generally
treated as money. Marketable securities are defined to include, in part, (i)
stock that is, as of the date of distribution, actively traded within the
meaning of Code Section 1092(d)(1) and (ii) other equity interests that,
pursuant to their terms or any other arrangement, are readily convertible into,
or exchangeable for, money or marketable securities. Regulations promulgated
under Section 731(c) provide that stock is actively traded if it is of a
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type that is, as of the date of distribution, listed on a national securities
exchange. It is anticipated that as of the Effective Time the Shares will be
approved for listing on the American Stock Exchange, though such listing will
not be effective until January 2, 1998.
However, Section 731(a) does not apply to the distribution of
marketable securities in a "qualified partnership liquidation" if (i) such
securities were received by the partnership in a nonrecognition transaction for
substantially all of the partnership's assets, (ii) such securities are
distributed by the partnership within 90 days after their receipt by the
partnership, and (iii) the partnership is liquidated before the beginning of
the partnership's first taxable year beginning after December 31, 1997. For
purposes of this transitional rule, a "qualified partnership liquidation" is a
complete liquidation of a publicly traded partnership as defined in Code
Section 7704(b) that is an existing partnership as defined in Section
10211(c)(2) of the Revenue Act of 1987.
NHC is a publicly traded and existing partnership as so defined. The
REIT Shares and the Shares will be issued to NHC in exchange for all of its
assets under the nonrecognition rule of Section 351 and will be issued within
90 days of their receipt by NHC. The Distribution and Merger will be treated
for federal income tax purposes as a complete termination and liquidation of
NHC, which is to be effective prior to NHC's first taxable year after December
31, 1997. Accordingly, Tax Counsel believes it is more likely than not that
Code Section 731(c) would not apply to the Merger.
Under Code Section 732(b), a Unitholder's aggregate initial tax basis
in his REIT Shares and the Shares will be generally equal to the Unitholder's
adjusted basis in his Units, decreased by the amount of any marketable
securities treated as money and increased by the amount of any gain recognized
as a result thereof, which shall be allocated between the REIT Shares and the
Shares generally based upon the relative adjusted bases to NHC of the REIT
Shares and the Shares.
Each Unitholder may have multiple holding periods for the REIT Shares
and the Shares received, depending upon the holding periods and character of
the various assets transferred by NHC to the REIT and the Corporation. The
holding period of the portion of the REIT Shares and the Shares attributable to
capital assets and Code Section 1231 assets transferred by NHC to the REIT or
the Corporation will include NHC's holding period for those assets. The holding
period for REIT Shares and the Shares attributable to other NHC assets, if any,
will begin on the day following the Effective Time. The period during which
Unitholders have held their Units will have no impact on their holding period
in REIT Shares or the Shares.
STATE AND LOCAL TAXES
The REIT, the Corporation, and each of their shareholders may be
subject to state or local taxation in various states or local jurisdictions,
including those in which they transact business or reside. Moreover, the tax
treatment in such jurisdictions may differ from the federal income tax
treatment. For instance, while some states recognize the status of real estate
investment trusts as corporations and permit them to substantially eliminate
corporate-level taxation via deductible distributions, other states may not.
Each Unitholder should therefore consult with his own tax advisor as to the
actual or potential impact of federal, state and local taxation on the Plan of
Restructure and the holding of REIT Shares and Shares.
UNITHOLDERS SHOULD SEEK THEIR OWN TAX ADVICE
The preceding is a brief summary of the tax considerations potentially
affecting NHC, its Unitholders, the REIT and the Corporation and their
respective shareholders. This discussion is based on the current state of the
law, which is subject to legislative, administrative or judicial actions, which
may apply retroactively. Moreover, the discussion does not address
considerations that may adversely affect the treatment of certain Unitholders
(such as corporations, foreign and tax-exempt investors). In these
circumstances, and particularly because the ultimate tax impact may vary
depending upon the personal circumstances of each investor, ALL UNITHOLDERS
SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE TAX ASPECTS OF THE
FORMATION OF THE REIT AND THE CORPORATION, THE PLAN OF RESTRUCTURE, AND THE
OWNING AND DISPOSING OF REIT SHARES AND SHARES OF THE CORPORATION.
LEGAL MATTERS
Certain legal matters in connection with the Distribution of the Shares and
the REIT Shares being offered hereby will be passed upon for the REIT by McQuire
Woods Battle & Boothe LLP, Baltimore, Maryland and the Corporation by Harwell
Howard Hyne Gabbert & Manner, P.C., Nashville, Tennessee.
EXPERTS
The consolidated financial statements and schedules of NHC at December
31, 1996 and 1995, and for each of the three years in the period ended December
31, 1996 and the audited balance sheet of the REIT as of September 26, 1997
which are included in this Proxy Statement/Prospectus have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
NATIONAL HEALTHCARE L.P.
Report of Independent Public Accountants F-2
Consolidated Statements of Income F-3
Consolidated Balance Sheets F-4
Consolidated Statements of Cash Flows F-5
Consolidated Statements of Partners' Capital F-6
Notes to Consolidated Financial Statements F-7
Interim Condensed Consolidated Statements of Income F-18
Interim Condensed Consolidated Balance Sheets F-19
Interim Condensed Consolidated Statements of Cash Flows F-21
Interim Condensed Consolidated Statements of Changes in Partners' Capital F-23
Notes to Interim Condensed Consolidated Financial Statements F-24
NATIONAL HEALTH REALTY, INC.
Report of Independent Public Accountants F-27
Balance Sheet dated October 15, 1997 F-28
Notes to Balance Sheet F-29
</TABLE>
<PAGE> 110
To the Partners of National HealthCare L.P.:
We have audited the accompanying consolidated balance sheets of
National HealthCare L.P. (a Delaware partnership) and subsidiaries as of
December 31, 1996 and 1995, and the related consolidated statements of income,
partners' capital and cash flows for each of the three years in the period
ended December 31, 1996. These consolidated financial statements are the
responsibility of National HealthCare L.P.'s management. Our responsibility is
to express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
National HealthCare L.P. and subsidiaries as of December 31, 1996 and 1995, and
the results of its operations and its cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Nashville, Tennessee
February 3, 1997
F-2
<PAGE> 111
NATIONAL HEALTHCARE L.P.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except unit amounts)
<TABLE>
<CAPTION>
Year Ended December 31 1996 1995 1994
-------------- -------------- ------------
<S> <C> <C> <C>
Revenues:
Net patient revenues $ 341,818 $ 307,969 $ 269,722
Other revenues 46,842 42,988 29,179
------------ ------------ ----------
Net revenues 388,660 350,957 298,901
------------ ------------ ----------
Costs and Expenses:
Salaries, wages and benefits 209,645 188,985 157,663
Other operating 125,342 109,417 98,753
Depreciation and amortization 13,634 14,549 13,582
Interest 10,753 16,891 13,050
------------ ------------ ----------
Total costs and expenses 359,374 329,842 283,048
------------ ------------ ----------
Net Income $ 29,286 $ 21,115 $ 15,853
============ ============ ==========
Earnings Per Unit:
Primary $ 3.44 $ 2.65 $ 2.02
Fully diluted 2.98 2.31 1.80
Weighted Average Units Outstanding:
Primary 8,496,299 7,953,651 7,834,375
Fully diluted 10,455,706 9,971,867 9,807,241
Net Income Allocable to Partners:
General Partners $ 293 $ 211 $ 159
Limited Partners 28,993 20,904 15,694
============ ============ ==========
$ 29,286 $ 21,115 $ 15,853
============ ============ ==========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these consolidated statements.
F-3
<PAGE> 112
NATIONAL HEALTHCARE L.P.
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 31 1996 1995
- ----------- -------- --------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 1,881 $ 4,835
Cash held by trustees 2,274 1,721
Marketable securities 17,968 1,514
Accounts receivable, less allowance for doubtful accounts of $4,739 and $4,441, respectively 50,902 47,285
Notes receivable 2,515 2,538
Loan participation agreements --- 27,579
Inventory, at lower of cost (first-in, first-out method) or market 3,572 3,075
Prepaid expenses and other assets 982 893
---------- ---------
Total current assets 80,094 89,440
---------- ---------
Property, Equipment and Assets Under Arrangement With Other Parties:
Property and equipment, at cost 234,934 165,265
Accumulated depreciation and amortization (48,171) (38,265)
Assets under arrangement with other parties, net 22,538 29,921
---------- ---------
Net property, equipment and assets under arrangement with other parties 209,301 156,921
---------- ---------
Other Assets:
Bond reserve funds, mortgage replacement reserves and other deposits 141 1,789
Unamortized financing costs 1,601 1,937
Notes receivable 95,206 86,178
Notes receivable from National 12,153 12,271
Minority equity investments and other 6,244 6,955
---------- ---------
Total other assets 115,345 109,130
---------- ---------
$ 404,740 $ 355,491
========== =========
Liabilities and Partners' Capital
Current Liabilities:
Current portion of long-term debt $ 8,574 $ 8,558
Trade accounts payable 11,835 6,142
Accrued payroll 28,963 23,876
Amount due to third party payors 13,135 9,800
Accrued interest 501 1,822
Other current liabilities 9,795 8,849
---------- ---------
Total current liabilities 72,803 59,047
---------- ---------
Long-term Debt, Less Current Portion 124,678 100,871
Debt Serviced by Other Parties, Less Current Portion 32,857 40,771
Minority Interests in Consolidated Subsidiaries 791 812
Commitments, Contingencies and Guarantees Subordinated Convertible Notes 28,908 30,000
Deferred Income 16,166 15,091
Partners' Capital:
General partners 1,408 1,290
Limited partners, less notes receivable and cumulative unrealized gains and losses on
securities 127,129 107,609
---------- ---------
Total partners' capital 128,537 108,899
---------- ---------
$ 404,740 $ 355,491
========== =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these consolidated statements.
F-4
<PAGE> 113
NATIONAL HEALTHCARE L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year Ended December 31 1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 29,286 $ 21,115 $ 15,853
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 12,453 14,081 13,147
Provision for doubtful accounts receivable 1,654 2,182 2,118
Amortization of intangibles and deferred charges 1,083 1,845 848
Amortization of deferred income (295) (497) (403)
Equity in earnings of unconsolidated investments (313) (347) (450)
Distributions from unconsolidated investments and other 210 236 333
Changes in assets and liabilities:
Increase in accounts receivable (5,271) (1,095) (20,095)
Increase in inventory (497) (123) (19)
(Increase) decrease in prepaid expenses and other assets (89) 680 (1,012)
Increase (decrease) in trade accounts payable 5,693 (10,910) 12,331
Increase in accrued payroll 5,087 5,232 4,663
Increase in amounts due to third party payors 3,335 5,404 769
Increase (decrease) in accrued interest (1,321) (401) 1,235
Increase in other current liabilities 946 2,456 2,057
-------- -------- --------
Net cash provided by operating activities 51,961 39,858 31,375
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to and acquisitions of property and equipment, net (69,970) (29,435) (9,599)
Investments in notes receivable and loan participation agreements (20,170) (30,694) (112,069)
Collections of long-term notes receivable and loan participation agreements 38,862 39,157 80,199
Increase (decrease) in minority equity investments and other (441) 210 (3,984)
(Increase) decrease in marketable securities, net (14,628) 2,361 2,140
Sales of investments 1,900 --- 136
-------- -------- --------
Net cash used in investing activities (64,447) (18,401) (43,177)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt issuance 29,183 2,368 34,225
Increase in cash held by trustees (553) (117) (315)
(Increase) decrease in minority interests in subsidiaries (21) 10 35
Issuance of partnership units 1,378 820 773
Collections of receivables from exercise of options 3,522 795 437
(Increase) decrease in bond reserve funds, mortgage replacement reserves and
other deposits 1,648 (69) (57)
Payments on debt (8,138) (6,767) (4,360)
Cash distributions to partners (17,466) (14,702) (17,639)
Increase in financing costs (21) (402) ---
-------- -------- --------
Net cash provided by (used in) financing activities 9,532 (18,064) 13,099
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,954) 3,393 1,297
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,835 1,442 145
-------- -------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,881 $ 4,835 $ 1,442
======== ======== ========
<CAPTION>
Year Ended December 31 1996 1995 1994
-------- -------- --------
SUPPLEMENTAL INFORMATION:
Cash payments for interest expense $ 12,074 $ 17,292 $ 11,815
-------- -------- --------
During 1996 and 1995, NHC was released from its liability on debt serviced by
others by the respective lenders.
Debt serviced by other parties $ (5,136) $(45,868) $ ---
======== ======== ========
Assets under arrangement with other parties $ 5,136 $ 45,868 $ ---
======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these consolidated statements.
F-5
<PAGE> 114
NATIONAL HEALTHCARE L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
(in thousands, except unit amounts)
<TABLE>
<CAPTION>
Unrealized
Receivables Gains Total
Number from Sale (Losses) on General Limited Partners'
of Units of Units Securities Partner Partners Capital
---------- ------------ ----------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1993 7,796,433 $ (15,134) $ --- $1,027 $106,633 $ 92,526
--------- --------- ----- ----- ------- -------
Net income --- --- --- 159 15,694 15,853
Collection of receivables --- 437 --- --- --- 437
Units sold 29,732 --- --- --- 773 773
Unrealized gains on securities --- --- 480 --- --- 480
Cash distributions declared
($1.17 per unit) --- --- --- (91) (8,972) (9,063)
--------- ------- ----- ----- ------- -------
BALANCE AT DECEMBER 31, 1994 7,826,165 (14,697) 480 1,095 114,128 101,006
--------- -------- ----- ----- ------- -------
Net income --- --- --- 211 20,904 21,115
Collection of receivables --- 795 --- --- --- 795
Units sold 526,949 (12,294) --- 131 12,983 820
Unrealized losses on securities --- --- (135) --- --- (135)
Cash distributions declared
($1.88 per unit) --- --- --- (147) (14,555) (14,702)
--------- ------- ----- ----- ------- -------
BALANCE AT DECEMBER 31, 1995 8,353,114 (26,196) 345 1,290 133,460 108,899
--------- ------- ----- ----- ------- -------
Net income --- --- --- 293 28,993 29,286
Collection of receivables --- 3,522 --- --- --- 3,522
Units sold 43,035 --- --- --- 1,378 1,378
Units issued in conversion of 71,810 --- --- --- 1,092 1,092
convertible debentures to
partnership units
Unrealized gains on securities --- --- 1,826 --- --- 1,826
Cash distributions declared
($2.08 per unit) --- --- --- (175) (17,291) (17,466)
--------- -------- ------ ------ -------- --------
BALANCE AT DECEMBER 31, 1996 8,467,959 $(22,674) $2,171 $1,408 $147,632 $128,537
========= ======== ====== ====== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these consolidated statements.
F-6
<PAGE> 115
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Presentation--
The consolidated financial statements include the accounts of National
HealthCare L.P. and its subsidiaries (NHC). Investments are accounted for on
either the cost or equity method. All material intercompany balances, profits,
and transactions have been eliminated in consolidation, and minority interests
are reflected in consolidation. Certain reclassifications have been made to
the 1994 and 1995 financial statements to conform to the 1996 presentation.
Use of Estimates--
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the 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.
Health Care Revenues--
NHC's principal business is operating and managing long-term health care
centers, including the provision of routine and ancillary services.
Approximately 60% of NHC's net revenues in 1996 and 1995 and 61% in 1994 are
from participation in Medicare and Medicaid programs. Amounts paid under these
programs are generally based on a facility's allowable costs or a fixed rate
subject to program cost ceilings. Revenues are recorded at standard billing
rates less allowances and discounts principally for patients covered by
Medicare, Medicaid and other contractual programs. These allowances and
discounts were $110,795,000, $103,186,000 and $82,443,000 for 1996, 1995 and
1994, respectively. Amounts earned under the Medicare and Medicaid programs
are subject to review by the third party payors. In the opinion of management,
adequate provision has been made for any adjustments that may result from such
reviews. NHC generally expects final determinations to occur two to three
years subsequent to the year in which amounts are earned. Any differences
between estimated settlements and final determinations are reflected in
operations in the year finalized. NHC has submitted various requests for
exceptions to Medicare routine cost limitations for reimbursement. NHC has
received approval on certain requests, and others are pending approval. NHC
will record revenues associated with the approved requests when such approvals,
including cost report audits, are assured.
Provision for Doubtful Accounts--
Provisions for estimated uncollectible accounts and notes receivable are
included in other operating expenses.
Property, Equipment and Assets Under Arrangement with Other Parties--
NHC uses the straight-line method of depreciation over the expected useful
lives of property and equipment estimated as follows: buildings and
improvements, 20-40 years; equipment and furniture, 3-15 years; and properties
under arrangement with other parties, 10-20 years. The provision for
depreciation includes the amortization of properties under capital leases and
properties under arrangement with National Health Investors, Inc. (NHI) (See
Note 3).
Expenditures for repairs and maintenance are charged against income as
incurred. Betterments are capitalized. NHC removes the costs and related
allowances from the accounts for properties sold or retired, and any resulting
gains or losses are included in income. NHC includes interest costs incurred
during construction periods in the cost of buildings ($1,428,000 in 1996 and
$1,057,000 in 1995).
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets To Be Disposed Of" (SFAS 121). NHC
adopted the provisions of SFAS 121 effective January 1, 1996. The effect of
adoption of SFAS 121 is not material to NHC's financial statements. In
accordance with SFAS 121, NHC evaluates the recoverability of the carrying
values of its properties on a property by property basis.
Investments in Marketable Securities--
NHC considers its investments in marketable securities as available for sale
securities and unrealized gains and losses are recorded in partners' capital in
accordance with Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" (SFAS 115).
F-7
<PAGE> 116
Intangible Assets--
Any excess of cost over net assets of companies purchased is amortized
generally over 40 years using the straight-line method. Deferred financing
costs are amortized principally by the interest method over the terms of the
related loans.
Income Taxes--
NHC is not a taxable entity. Accordingly, no provision for income taxes has
been made in the Consolidated Statements of Income.
The earnings of NHC are taxable to the individual partners. Partners are
required to report their distributive share of the income, gain, loss,
deductions and credits of the partnership on their individual income tax
returns.
The Revenue Act of 1987 contains provisions which cause some publicly traded
partnerships to be taxed as corporations. Because NHC was in existence and
publicly traded on December 17, 1987, it will continue to be treated as a
partnership for the 1987 through 1997 taxable years.
NHC adopted Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" (SFAS 109) effective January 1, 1993. SFAS 109 generally
requires NHC to record any income tax provisions or income taxes payable based
on the liability method. NHC management believes, based on current
information, that the initial recognition of any income tax assets or
liabilities that would be recorded in 1998, the year that master limited
partnerships become taxable as a corporation, would not be material to NHC's
financial condition or results of operations.
Concentration of Credit Risks--
NHC's credit risks primarily relate to cash and cash equivalents, cash held
by trustees, accounts receivable, marketable securities, notes receivable and
loan participation agreements. Cash and cash equivalents are primarily held in
bank accounts and overnight investments. Cash held by trustees is primarily
invested in commercial paper and certificates of deposit with financial
institutions. Accounts receivable consist primarily of amounts due from
patients (funded approximately 80% through Medicare, Medicaid, and other
contractual programs and approximately 20% through private payors) in the
states of Alabama, Florida, Georgia, Kentucky, Missouri, South Carolina,
Tennessee, and Virginia and from other health care companies for management
services. NHC performs continual credit evaluations of its clients and
maintains allowances for doubtful accounts on these accounts receivable.
Marketable securities are held primarily in two accounts with brokerage
institutions. Notes receivable relate primarily to secured loans with health
care facilities and to secured notes receivable from officers, directors and
supervisory employees as discussed in Notes 13 and 14. NHC also has notes
receivable from National Health Corporation as discussed in Note 4.
NHC's financial instruments, principally its notes receivable (which are
predominantly with Florida Convalescent Centers, Inc.) are subject to the
possibility of loss of the carrying values as a result of either the failure of
other parties to perform according to their contractual obligations or changes
in market prices which may make the instruments less valuable. NHC obtains
various collateral and other protective rights, and continually monitors these
rights, in order to reduce such possibilities of loss. NHC evaluates the need
to provide for reserves for potential losses on its financial instruments based
on management's periodic review of its portfolio on an instrument by instrument
basis. See Notes 13 and 14 for additional information on the notes receivable.
Cash and Cash Equivalents--
Cash equivalents include highly liquid investments with an original maturity
of less than three months.
NOTE 2 - ORGANIZATION OF THE PARTNERSHIP:
The general partners of NHC are as follows: (1) NHC, Inc. (the "Managing
General Partner"), a Tennessee corporation, which is owned by its board of
directors and senior management of NHC; (2) National Health Corporation
("National" and "Administrative General Partner"), a Tennessee corporation,
which is owned by the National Health Corporation Leveraged Employee Stock
Ownership Plan and Trust (the "ESOP"); and (3) W. Andrew Adams, NHC Inc.'s
President (the "Individual General Partner"). The Managing General Partner,
the Administrative General Partner and the Individual General Partner are
collectively called "the General Partners". The General Partners own a general
partnership interest in NHC representing a 1% interest in the profits, losses
and distributions of NHC.
F-8
<PAGE> 117
NOTE 3 - RELATIONSHIP WITH NATIONAL HEALTH INVESTORS, INC.:
Leases--
On October 17, 1991, concurrent with NHC's conveyance of real property to
NHI, NHC leased from NHI the real property of 40 long-term care centers and
three retirement centers. Each lease is for an initial term expiring December
31, 2001, with two additional five-year renewal terms at the option of NHC,
assuming no defaults. NHC accounts for the leases as operating leases.
During the initial term and first renewal term of the leases, NHC is
obligated to pay NHI annual base rent on all 43 facilities of $15,238,000. If
NHC exercises its option to extend the leases for the second renewal term, the
base rent will be the then fair rental value as negotiated by NHC and NHI.
The leases also obligate NHC to pay as debt service rent all payments of
interest and principal due under each mortgage to which the conveyance of the
facilities was subject. The payments are required over the remaining life of
the mortgages as of the conveyance date, but only during the term of the lease.
Payments for debt service rent are being treated by NHC as payments of
principal and interest if NHC remains obligated on the debt ("obligated debt
service rent") and as operating expense payments if NHC has been relieved of
the debt obligation by the lender ("non-obligated debt service rent"). See
"Accounting Treatment of the Transfer" for further discussion.
In addition to base rent and debt service rent, in each year after 1992, NHC
must pay percentage rent to NHI equal to 3% of the amount by which gross
revenues of each facility in such later year exceed the gross revenues of such
facility in 1992. Percentage rent for 1996 and 1995 was approximately
$1,817,000 and $1,237,000, respectively.
Each lease with NHI is a "triple net lease" under which NHC is responsible
for paying all taxes, utilities, insurance premium costs, repairs and other
charges relating to the ownership of the facilities. NHC is obligated at its
expense to maintain adequate insurance on the facilities' assets.
NHC has a right of first refusal with NHI to purchase any of the properties
transferred from NHC should NHI receive an offer from an unrelated party during
the term of the lease or up to 180 days after termination of the related lease.
Base rent expense to NHI was $15,238,000 in 1996, 1995 and 1994 and
non-obligated debt service rent to NHI was $5,048,000 in 1996. At December 31,
1996, the approximate future minimum base rent and non-obligated debt service
rent commitments to be paid by NHC on non-cancelable operating leases with NHI
during the initial term are as follows:
<TABLE>
<S> <C>
1997 20,298,000
1998 20,354,000
1999 20,372,000
2000 20,409,000
2001 20,486,000
Thereafter ---
</TABLE>
Advisory Agreement--
NHC has entered into an Advisory Agreement with NHI whereby services related
to investment activities and day-to-day management and operations are provided
to NHI by NHC as Advisor. The Advisor is subject to the supervision and
policies established by NHI's Board of Directors.
Either party may terminate the Advisory Agreement on 90 days notice at any
time. NHI may terminate the Advisory Agreement for cause at any time.
For its services under the Advisory Agreement, NHC's annual compensation is
calculated to be $3,100,000, $2,827,000, and $2,570,000 in 1996, 1995 and 1994,
respectively. However, the payment of such annual compensation is conditional
upon NHI having sufficient funds from operations to pay annual dividends of
$2.00 per share and upon NHI paying such dividends. NHI met this condition in
1996, 1995 and 1994.
Accounting Treatment of the Transfer--
NHC has accounted for the conveyance in 1991 of assets (and related debt) to
NHI and the subsequent leasing of the real estate assets as a
"financing/leasing" arrangement. Since NHC remains obligated on certain of the
transferred debt, the obligated debt and
F-9
<PAGE> 118
applicable asset balances have been reflected on the Consolidated Balance
Sheets as "assets under arrangement with other parties" and "debt serviced by
other parties". The net book value equity of the assets transferred has been
transferred from NHC to NHI. As NHC utilizes the applicable real estate over
the lease term, its Consolidated Statements of Income will reflect the
continued depreciation of the applicable assets over the lease term, the
continued interest expenses on the obligated debt balances and the additional
base and non-obligated debt service rents (as an operating expense) payable to
NHI each year. NHC has recovery provisions from NHI if NHC is required to
service the debt through a default by NHI.
Release from Debt Serviced by Other Parties--
In 1996 and 1995, NHI prepaid debt on which NHC had also been obligated in
the amounts of $5,136,000 and $20,544,000, respectively. In addition, in 1995,
NHC was released from its obligation on approximately $25,324,000 of the
transferred debt. Since NHC is no longer obligated on this transferred debt,
debt serviced by other parties and assets under arrangement with other parties
have been reduced by $5,136,000 and $45,868,000 in 1996 and 1995, respectively.
The leases with NHI provide that NHC shall continue to make non-obligated debt
service rent payments equal to the debt service including principal and
interest on the obligated debt which was prepaid and from which NHC has been
released.
NOTE 4 - RELATIONSHIP WITH NATIONAL HEALTH CORPORATION:
Sale of Health Care Centers--
On January 20, 1988, NHC sold the assets (inventory, property and equipment)
of eight health care centers (1,121 licensed beds) to National, the
administrative general partner of NHC, for a total consideration of
$40,000,000. The consideration consisted of $30,000,000 in cash and a
$10,000,000 note receivable due December 31, 2007. The note receivable earns
interest at 8.5%. NHC has agreed to manage the centers under a 20-year
management contract for management fees comparable to those in the industry.
NHC has a receivable from National for management fees of approximately
$3,184,000 and $1,864,000 at December 31, 1996 and 1995, respectively.
NHC's basis in the assets sold was approximately $24,255,000. The resulting
profit of $15,745,000 was deferred and will be amortized into income beginning
with the collection of the note receivable (up to $12,000,000) with the balance
($3,745,000) of the profit being amortized into income on a straight-line
basis over the management contract period.
As of December 31, 1996, National had borrowed $2,153,000 from NHC to finance
the construction of additions at two health care centers. The notes require
monthly principal and interest payments. The interest rate is equal to the
prime rate, and the notes mature in 1998.
Financing Activities--
On January 20, 1988, NHC obtained long-term financing of $8,500,000 for its
new headquarters building from National through the National Health Corporation
Leveraged Employee Stock Ownership Plan and Trust. The note requires quarterly
principal and interest payments with interest at 9%. At December 31, 1996 and
1995, the outstanding balance on the note was approximately $5,520,000 and
$5,961,000, respectively. The building is owned by a separate partnership of
which NHC is the general partner and building tenants are limited partners.
NHC has guaranteed the debt service of the building partnership.
In addition, NHC's bank credit facility and the senior secured notes
described in Note 10 were financed through National and National's ESOP. NHC's
interest costs, financing expenses and principal payments are equal to those
incurred by National. In October 1991, NHC borrowed $10,000,000 from National.
The term note payable requires quarterly interest payments at 8.5%. The entire
principal is due at maturity in 1998.
Duties as Administrative General Partner--
The personnel conducting the business of NHC are employees of National, which
provides payroll services, provides employee fringe benefits, and maintains
certain liability insurance. NHC pays to National all the costs of personnel
employed for the benefit of NHC, as well as an administrative fee ($1,820,000
in 1996) equal to 1% of payroll costs.
National maintains and makes contributions to its ESOP for the benefit of
eligible employees.
F-10
<PAGE> 119
NOTE 5 - OTHER REVENUES:
Revenues from management services include management fees, interest income on
notes receivable, and revenues from other services provided to managed
long-term care centers. "Other" revenues include non-health care related
earnings.
<TABLE>
<CAPTION>
(in thousands)
Year Ended December 31 1996 1995 1994
---------------------- ---- ---- ----
<S> <C> <C> <C>
Revenues from managed services $32,363 $28,719 $19,035
Guarantee fees 693 814 936
Advisory fees from NHI 3,100 3,265 2,138
Dividends and other realized gains (losses) on securities 932 450 (47)
Equity in earnings of unconsolidated investments 313 347 450
Interest income 4,386 6,457 4,817
Other 5,055 2,936 1,850
------- ------- -------
$46,842 $42,988 $29,179
======= ======= =======
</TABLE>
NOTE 6 - EARNINGS PER UNIT:
Primary earnings per unit is based on the weighted average number of common
and common equivalent units outstanding. Common equivalent units result from
dilutive unit options computed using the treasury stock method.
Fully diluted earnings per unit assumes, in addition to the above, that the
6% subordinated convertible notes were converted at the date issued with
earnings being increased for interest expense thereon.
The following table summarizes the earnings and the average number of common
units and common equivalent units used in the calculation of primary and fully
diluted earnings per unit.
(dollars in thousands, except per unit amounts)
<TABLE>
<CAPTION>
Year Ended December 31 1996 1995 1994
- ---------------------- ---- ---- ----
<S> <C> <C> <C>
Primary:
Weighted average common units 8,421,523 7,920,795 7,796,508
Stock options 74,776 32,856 37,867
---------- ---------- ---------
Average common units outstanding 8,496,299 7,953,651 7,834,375
========== ========== =========
Earnings $ 29,286 $ 21,115 $ 15,853
========== ========== =========
Earnings per unit, primary $ 3.44 $ 2.65 $ 2.02
========== ========== =========
Fully Diluted:
Weighted average common units 8,421,523 7,920,795 7,796,508
Stock options 108,045 78,206 37,867
Convertible subordinated notes 1,926,138 1,972,866 1,972,866
---------- ---------- ---------
Assumed average common units
outstanding 10,455,706 9,971,867 9,807,241
========== ========== =========
Earnings $ 31,136 $ 23,007 $ 17,653
========== ========== =========
Earnings per unit, fully diluted $ 2.98 $ 2.31 $ 1.80
========== ========== =========
</TABLE>
F-11
<PAGE> 120
NOTE 7 - PROPERTY, EQUIPMENT AND ASSETS UNDER ARRANGEMENT WITH OTHER PARTIES:
Property and equipment, at cost, consist of the following:
<TABLE>
<CAPTION>
(in thousands)
December 31 1996 1995
- ----------- ---- ----
<S> <C> <C>
Land $ 20,607 $ 21,117
Buildings and improvements 99,564 67,576
Furniture and equipment 70,947 58,772
Construction in progress 43,816 17,800
-------- --------
$234,934 $165,265
======== ========
</TABLE>
Assets under arrangement with other parties, net of accumulated
depreciation, consist of the following:
<TABLE>
<CAPTION>
(in thousands)
December 31 1996 1995
- ----------- ---- ----
<S> <C> <C>
Land $ 2,313 $ 2,612
Buildings and improvements 15,885 22,625
Fixed equipment 1,664 2,008
Mortgage notes receivable 2,676 2,676
------- --------
$22,538 $ 29,921
======= ========
</TABLE>
NOTE 8 - ACQUISITIONS AND DISPOSITIONS:
In July 1996, NHC purchased, for total consideration of approximately
$4,680,000, a 120 bed long-term health care center located in West Plains,
Missouri. NHC had managed the health care center since its opening in 1982.
Also in July 1996, NHC purchased, for total consideration of approximately
$6,500,000, a long-term health care center with assisted living apartments
located in Naples, Florida. There are 60 long-term health care beds and 36
assisted living apartments.
The purchase prices for the acquisitions above were allocated to the
underlying assets based on their relative fair market values. The Consolidated
Statement of Income for 1996 includes the results of operations from the
respective dates of acquisition.
NOTE 9 - INVESTMENTS IN MARKETABLE SECURITIES:
NHC considers its investments in marketable securities as available
for sale securities and unrealized gains and losses are recorded in partners'
capital in accordance with SFAS 115.
The adoption of SFAS 115 did not have a material effect on NHC's
financial position or results of operations.
Proceeds from the sale of investments in debt and equity securities
during the years ended December 31, 1996 and 1995 were $1,669,000 and
$2,696,000 respectively. Gross investment gains of $92,000 and $335,000 were
realized on these sales during the years ended December 31, 1996 and 1995.
Gross investment losses of $41,000 were realized on these sales during the year
ended December 31, 1996. Realized gains and losses from securities sales are
determined on the specific identification of the securities.
F-12
<PAGE> 121
NOTE 10 - DEBT AND LEASE COMMITMENTS:
Long-Term Debt--
Long-term debt and debt serviced by other parties consist of the
following:
<TABLE>
<CAPTION>
Weighted Average Final Debt Service by
Interest Rate Maturities Other Parties Long-Term Debt
-------------------- ---------- ------------- --------------
(in thousands)
December 31 1996 1995 1996 1995
----------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Bank revolving credit facility, interest
payable periodically, principal due at
maturity variable, 6.7% 1999 $ --- $ --- $ 28,000 $ ---
Bank credit facility, principal and
interest payable quarterly variable, 6.0 2009 --- --- 14,831 15,518
Senior secured notes, principal and
interest payable semiannually 8.4 2005 17,567 19,462 24,397 27,860
First mortgage notes, principal and
interest payable quarterly variable, 6.8 2002 --- --- 22,106 22,612
Notes and other obligations, principal and
interest payable in periodic installments 6.4 1997-2019 4,443 9,822 30,679 30,065
First mortgage revenue bonds, principal
payable in periodic installments,
interest payable monthly variable, 4.5 2000-2010 14,086 14,861 --- ---
Unsecured term note payable to National,
interest payable quarterly, principal
payable at maturity 8.5 1998 --- --- 10,000 10,000
------- -------- -------- --------
36,096 44,145 130,013 106,055
Less current portion (3,239) (3,374) (5,335) (5,184)
------- -------- -------- --------
$32,857 $ 40,771 $124,678 $100,871
======= ======== ======== ========
</TABLE>
The bank credit facility and the senior secured notes were borrowed through
NHC's administrative partner, National. NHC granted certain credits and
interest rate concessions related to its management fees from National in
obtaining these loans.
The debt identified above as senior secured notes is cross-defaulted with
other NHC and NHI liabilities and is cross-collateralized to the extent of
approximately $24,397,000 of other debt.
To obtain the consent of various lenders to the transfer of assets, NHI
guaranteed certain NHC debt which was not transferred to NHI. A default by NHI
under its obligations would default the debt or guarantees of NHC.
The aggregate maturities of long-term debt and debt serviced by others for
the five years subsequent to December 31, 1996 are as follows:
<TABLE>
<CAPTION>
Long-term Debt Serviced
Debt By Others Total
--------- ------------- ----------
<S> <C> <C> <C>
1997 $ 5,335,000 $3,239,000 $ 8,574,000
1998 6,450,000 2,496,000 8,946,000
1999 32,931,000 3,995,000 36,926,000
2000 34,414,000 3,895,000 38,309,000
2001 6,293,000 3,284,000 9,577,000
</TABLE>
Certain property and equipment of NHC and NHI are pledged as
collateral on long-term debt or capital lease obligations. Other property and
assets are available for use as collateral as needed.
F-13
<PAGE> 122
Certain loan agreements require maintenance of specified operating
ratios as well as specified levels of cash held in escrow, working capital and
partners' capital by NHC and NHI. All such covenants have been met by NHC, and
management believes that NHI is in compliance with the loan covenants.
Lease Commitments--
Operating expenses for the years ended December 31, 1996, 1995, and
1994 include expenses for leased premises and equipment under operating leases
of $25,036,000, $18,820,000, and $16,692,000, respectively. See Note 3 for the
approximate future minimum base rent and non-obligated debt service rent
commitments on non-cancelable operating leases with NHI.
Construction and Financing Commitments--
NHC is committed to spend approximately $25,217,000 for ongoing
construction contracts and to provide financing to managed facilities in the
amount of $3,423,000 for ongoing construction contracts in 1997. NHC's cash on
hand, marketable securities, short-term notes receivable, operating cash flow
and, as needed, its borrowing capacity are expected to be adequate to fund
these commitments.
NOTE 11 - SUBORDINATED CONVERTIBLE NOTES:
At December 31, 1996, $28,908,000 of 6% subordinated convertible notes
("the notes") remain outstanding. The notes mature July 1, 2000. Interest is
payable quarterly. The notes are convertible at the option of the holder at
any time into units of NHC at a price of $15.2063 per unit, subject to
adjustment for certain changes in the number of units outstanding. The notes
may be redeemed at the option of NHC, but only if NHC has elected to be taxed
as a corporation and only if the market price of NHC's units is such as to
guarantee certain specified returns to the holders of the notes. During 1996,
$1,092,000 of the notes were converted into 71,810 units. NHC has reserved an
additional 1,901,057 units for conversion of the notes.
NOTE 12 - CONTINGENCIES AND GUARANTEES:
Litigation--
There is certain litigation incidental to NHC's business, none of
which, in management's opinion, would be material to the financial position or
results of operations of NHC.
In March 1996, Florida Convalescent Centers, Inc. (FCC), an
independent Florida corporation for whom NHC manages sixteen licensed nursing
centers in Florida, gave NHC notice of its intent not to renew one management
contract. Pursuant to written agreements between the parties, NHC valued the
center, offering to either purchase the center at the price so valued or
require FCC to pay to NHC certain deferred compensation based upon that value.
FCC responded by requesting the court to interpret the parties' rights under
their contractual arrangements. FCC also sued to obtain possession of the
center for which it alleged the management contract had been terminated. This
suit has now been dismissed, and the issue of possession will be decided in
connection with the original suit. The remaining suit is still in the
preliminary stages and no hearing date has been scheduled.
In January 1997, FCC notified NHC that it will not renew the four
contracts which mature in 1997 but has agreed that NHC will remain as manager
until a final decision is reached in the remaining suit. The balance of the
contracts may be terminated in the years 1998-2002.
Third Party Reviews--
Amounts earned under Medicare, Medicaid and other governmental
programs are subject to review by third party payors. NHC has recently been
notified that audits or reviews by the Office of the Inspector General have
commenced at certain long-term care centers. NHC intends to continually
monitor the progress of these audits and reviews.
Professional Liability and Other Insurance--
NHC carries a professional liability insurance policy ($1,000,000 per
claim with additional umbrella coverage in the amount of $5,000,000 in the
aggregate per annum) for coverage from liability claims and losses incurred in
its health care business. The policy is a fixed premium and occurrence form
policy and has no provisions for a retrospective refund or assessment due to
actual loss experience. In the opinion of management, NHC's insurance coverage
is adequate to cover settlement of outstanding claims against NHC.
F-14
<PAGE> 123
NHC has assumed certain risks related to health insurance and workers
compensation insurance claims of the employees of National and the managed
facilities. The liability for reported claims and estimates for incurred but
unreported claims of the managed facilities is $5,078,000 and $4,433,000 at
December 31, 1996 and December 31, 1995, respectively. The liability is
included in other current liabilities in the Consolidated Balance Sheets. NHC
remits for the claims with regards to National's employees utilized by NHC on a
monthly basis. The amounts are subject to adjustment for actual claims
incurred.
Guarantees and Related Events--
In order to obtain management agreements and to facilitate
construction or acquisition of certain health care centers which NHC manages
for others, NHC has guaranteed some or all of the centers' first mortgage bond
debt (principal and interest). For this service, NHC charges an annual
guarantee fee of 1% to 2% of the outstanding principal balance guaranteed,
which fee is in addition to NHC's management fee. The principal amount
outstanding under the guarantees is approximately $72,919,000 (net of available
debt service reserves) at variable and fixed interest rates with a weighted
average rate of 5.1% at December 31, 1996.
In management's opinion, these guarantee fees approximate fees that
NHC would currently charge to enter into similar guarantees.
All of the guaranteed indebtedness is secured by first mortgages,
pledges of personal property, accounts receivable and, in certain instances, by
the personal guarantees of the owners of the facilities. The borrower has
granted second mortgages over the relevant properties in favor of NHC. Such
rights may be enforced if NHC is required to pay under its guarantees.
NHI has guaranteed certain of the debts of NHC. NHC has agreed to
indemnify and hold harmless NHI against any and all loss, liability or harm
incurred by NHI as a result of having to perform under its guarantee of any or
all of the guaranteed debt.
NHC has entered into an interest rate cap arrangement with a managed
entity under which NHC has guaranteed that the entity's weighted average
interest rate on its first and second mortgage debt will not exceed 9.0%. The
entity's first mortgage debt is tax-exempt, floating-rate bonds and its second
mortgage debt is owed to NHC. The bond debt outstanding under the arrangement
is $16,100,000 and the weighted average rate of both debts is 6.7% at December
31, 1996. NHC is obligated under the agreement only for the term of its
management contract, as extended, and only so long as the tax-exempt bonds are
outstanding. At December 31, 1996, NHC expects to have no additional liability
as a result of this interest rate cap arrangement.
NOTE 13 - NOTES RECEIVABLE:
Notes receivable generally consist of loans and accrued interest to
managed health care centers (predominantly FCC) and retirement centers for
construction costs, development costs incurred during construction and working
capital during initial operating periods. The notes generally require monthly
payments with maturities ranging from five to twenty-five years. The majority
of the notes mature in 2004. Interest on the notes is generally at prime plus
2% or at a fixed rate of 10.25%, payable monthly. The collateral for the notes
consists of first and second mortgages, certificates of need, personal
guarantees and stock pledges.
F-15
<PAGE> 124
NOTE 14 - PARTNERS' CAPITAL:
NHC has Incentive Option Plans which provide for the granting of
options to key employees and directors to purchase units at no less than market
value on the date of grant. The options may be exercised immediately, but NHC
may purchase the units at the grant price if employment is terminated prior to
six years from the date of grant. The maximum term of the options is five
years. The following table summarizes option activity:
<TABLE>
<CAPTION>
Number of Weighted Average
Units Exercise Price
<S> <C> <C>
Options outstanding December 31, 1993 5,000 $11.25
Options granted 485,500 25.15
Options exercised --- ---
Options outstanding December 31, 1994 490,500 25.00
Options granted 376,000 30.76
Options exercised 489,000 25.14
------- -----
Options outstanding December 31, 1995 377,500 30.56
Options granted 15,000 38.63
Options exercised 2,500 11.25
------- -----
Options outstanding December 31, 1996 390,000 $30.99
</TABLE>
At December 31, 1996, all options outstanding are exercisable.
Exercise prices on the exercisable options range from $11.25 to $38.63. The
weighted average remaining contractual life of options outstanding at December
31, 1996 is 2.9 years.
Additionally, NHC has an employee unit purchase plan which allows
employees to purchase ownership units of NHC through payroll deductions. The
plan allows employees to terminate participation at any time.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (SFAS 123). SFAS 123 establishes new financial
accounting and reporting standards for stock-based compensation plans. NHC has
adopted the disclosure-only provisions of SFAS 123. As a result, no
compensation cost has been recognized for NHC's stock-based compensation plans.
Management believes that any compensation cost attributable to stock-based
compensation plans is immaterial.
In connection with the exercise of certain stock options, NHC has
received interest-bearing (ranging from 3.5% to 6.25%), full recourse notes in
the amount of $22,674,000 at December 31, 1996. The notes are secured by units
of NHC or shares of NHI having a fair market value of not less than 150% of the
amount of the note. The principal balances of the notes are reflected as a
reduction of partners' capital in the consolidated financial statements.
NOTE 15 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practical to
estimate that value:
Cash and cash equivalents; Cash held by trustees; Bond reserve funds, mortgage
replacement reserves and other deposits; Loan participation agreements; and
Accrued interest--
The fair value approximates the carrying amount because of the short
maturity or the nature of these instruments.
Marketable securities--
The fair value is estimated based on quoted market prices and is the
same as the carrying amount.
Notes receivable--
The fair value of NHC's notes receivable is estimated based on the
current rates offered by NHC or comparable parties for the same or similar type
of notes receivable of the same or similar maturities and is approximately the
same as the carrying amount.
F-16
<PAGE> 125
Long-term debt and Debt serviced by other parties--
The fair value is estimated based on the current rates offered to NHC
for similar debt of the same maturities and is approximately the same as the
carrying amounts.
Subordinated convertible notes--
The fair values are estimated based on quoted market prices and
approximate $82,995,000 and $76,942,000 at December 31, 1996 and December 31,
1995, respectively, as compared to carrying values of $28,908,000 and
$30,000,000 at December 31, 1996 and December 31, 1995, respectively.
F-17
<PAGE> 126
NATIONAL HEALTHCARE L.P.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
-------------------------- -------------------------
1997 1996 1997 1996
------------ ----------- ----------- -----------
(in thousands (in thousands
except unit amounts) except unit amounts)
<S> <C> <C> <C> <C>
REVENUES:
Net patient revenues $ 94,657 $ 81,078 $ 189,240 $ 161,685
Other revenues 11,534 10,551 22,814 22,099
---------- ---------- ---------- ----------
Net revenues 106,191 91,629 212,054 183,784
---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Salaries, wages and benefits 58,414 50,137 117,629 102,006
Other operating 33,214 29,653 66,340 57,967
Depreciation and amortization 3,977 3,135 7,712 6,170
Interest 3,244 2,697 6,073 6,169
---------- ---------- ---------- ----------
Total costs and expenses 98,849 85,622 197,754 172,312
---------- ---------- ---------- ----------
NET INCOME $ 7,342 $ 6,007 $ 14,300 $ 11,472
========== ========== ========== ==========
EARNINGS PER UNIT:
Primary $ .83 $ .70 $ 1.62 $ 1.34
========== ========== ========== ==========
Fully diluted $ .72 $ .62 $ 1.41 $ 1.18
========== ========== ========== ==========
WEIGHTED AVERAGE UNITS OUTSTANDING:
Primary 8,861,960 8,586,893 8,829,472 8,578,654
Fully diluted 10,759,346 10,518,688 10,727,760 10,527,339
CASH DISTRIBUTIONS PAID PER UNIT $ .60 $ .52 $ 1.20 $ 1.04
========== ========== ========== ==========
NET INCOME ALLOCABLE TO PARTNERS:
General Partners $ 73 $ 60 $ 143 $ 115
Limited Partners 7,269 5,947 14,157 11,357
---------- ---------- ---------- ----------
$ 7,342 $ 6,007 $ 14,300 $ 11,472
========== ========== ========== ==========
</TABLE>
The accompanying notes to interim condensed consolidated financial statements
are an integral part of these statements.
F-18
<PAGE> 127
NATIONAL HEALTHCARE L.P.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
June 30 December 31
1997 1996
----------- -----------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 12,193 $ 1,881
Cash held by trustees 3,752 2,274
Marketable securities 17,298 17,968
Accounts receivable, less allowance for doubtful accounts of $5,472
and $4,079 78,586 50,902
Notes receivable 9,189 2,515
Inventory at lower of cost (first-in, first-out method) or market 4,077 3,572
Prepaid expenses and other assets 1,184 982
-------- --------
Total current assets 126,279 80,094
-------- --------
PROPERTY AND EQUIPMENT AND ASSETS UNDER
ARRANGEMENT WITH OTHER PARTIES:
Property and equipment at cost 256,345 234,934
Less accumulated depreciation and amortization (54,479) (48,171)
Assets under arrangement with other parties 21,472 22,538
-------- --------
Net property, equipment and assets under arrangement with other parties 223,338 209,301
-------- --------
OTHER ASSETS:
Bond reserve funds, mortgage replacement reserves and other deposits 282 141
Unamortized financing costs 1,505 1,601
Notes receivable 93,980 95,206
Notes receivable from National 10,647 12,153
Minority equity investments and other 6,474 6,244
-------- --------
Total other assets 112,888 115,345
-------- --------
$462,505 $404,740
======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these consolidated balance sheets.
F-19
<PAGE> 128
NATIONAL HEALTHCARE L.P.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
LIABILITIES AND CAPITAL
<TABLE>
<CAPTION>
June 30 December 31
1997 1996
------------ ----------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt $ 7,865 $ 8,574
Trade accounts payable 29,361 11,835
Accrued payroll 30,259 28,963
Amount due to third-party payors 21,725 13,135
Accrued interest 1,067 501
Other current liabilities 12,002 9,795
-------- ---------
Total current liabilities 102,279 72,803
-------- ---------
LONG-TERM DEBT, less current portion 144,867 124,678
DEBT SERVICED BY OTHER PARTIES, LESS
CURRENT PORTION 32,024 32,857
MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES 784 791
COMMITMENTS, CONTINGENCIES AND GUARANTEES
SUBORDINATED CONVERTIBLE NOTES 28,839 28,908
DEFERRED INCOME 15,945 16,166
PARTNERS' CAPITAL:
General partners 1,447 1,408
Limited partners 136,320 127,129
-------- ---------
Total partners' capital 137,767 128,537
-------- ---------
$462,505 $ 404,740
======== =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these consolidated balance sheets.
F-20
<PAGE> 129
NATIONAL HEALTHCARE L.P. INTERIM CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30
-----------------
1997 1996
---- ----
(in thousands)
<S> <C> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net income $ 14,300 $ 11,472
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation 7,342 5,785
Provision for doubtful accounts 1,253 1,140
Amortization of intangibles and deferred charges 418 638
Amortization of deferred income (221) (130)
Equity in earnings of unconsolidated investments (40) (107)
Distributions from unconsolidated investments 154 180
Changes in assets and liabilities:
(Increase) Decrease in accounts receivable (28,937) 1,362
Increase in inventory (505) (504)
Increase in prepaid expenses and other assets (202) (84)
Increase in trade accounts payable 17,527 3,355
Increase (Decrease) in accrued payroll 1,296 (3,753)
Increase (Decrease) in amounts due to third party payors 8,590 (6,130)
Increase (Decrease) in accrued interest payable 566 (746)
Increase in other current liabilities 2,206 172
---------- ----------
23,747 12,650
---------- ----------
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Additions to and acquisitions of property and equipment, net (21,379) (11,592)
Investment in long-term notes receivable and loan participation agreements (18,022) (15,132)
Collection of long-term notes receivable and loan participation agreements 14,080 24,654
Increase in minority equity investments and other (574) (2,850)
(Increase) Decrease in debt and equity securities 362 (15,395)
----------- ----------
(25,533) (20,315)
----------- ----------
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Proceeds from debt issuance 23,166 13,311
Increase in cash held by trustee (1,478) (1,358)
Decrease in minority interest in subsidiaries (7) (3)
Increase (Decrease) in bond reserve funds, mortgage replacement reserves
and other deposits (141) 1,081
Issuance of partnership units 539 571
Collection of receivables 5,014 3,340
Payments on debt (4,601) (3,639)
Cash distributions to partners (10,384) (8,708)
Increase in financing costs (10) (94)
----------- -----------
12,098 4,501
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 10,312 (3,164)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,881 4,835
----------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 12,193 $ 1,671
=========== ==========
Supplemental Information:
Cash payments for interest expense $ 6,920 $ 6,920
=========== ==========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these consolidated statements.
F-21
<PAGE> 130
NATIONAL HEALTHCARE L.P.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30
-----------------
1997 1996
---- ----
(in thousands)
<S> <C> <C>
During the six months ended June 30, 1996, NHC was released from its liability
on debt serviced by others by the respective lenders
Debt serviced by other parties $ (3,841) $(3,841)
Assets under arrangement with other parties 3,841 3,841
During the six months ended June 30, 1997 and June 30, 1996, respectively
$69,000 and $686,000 of convertible subordinated debentures were converted
into 4,534 and 45,112 units of NHC's partnership units:
Convertible subordinated debentures (69) (686)
Financing costs 1 1
Accrued interest (1) (5)
Partner's capital 69 690
</TABLE>
F-22
<PAGE> 131
NATIONAL HEALTHCARE L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
RECEIVABLES UNREALIZED TOTAL
NUMBER OF FROM SALE OF GAINS(LOSSES) GENERAL LIMITED PARTNERS'
UNITS UNITS ON SECURITIES PARTNERS PARTNERS CAPITAL
----- ----- ------------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT 12/31/96 8,467,959 $(22,674) $2,171 $1,408 $147,632 $128,537
Net income -- -- -- 143 14,157 14,300
Collection of
receivables -- 5,014 -- -- -- 5,014
Units sold 389,694 (11,577) -- -- 12,116 539
Units in conversion of
convertible debentures
to partnership units 4,534 -- -- -- 69 69
Unrealized losses on
securities -- -- (308) -- -- (308)
Cash distributions
($1.20 per unit) -- -- -- (104) (10,280) (10,384)
--------- -------- ------ ------ -------- --------
BALANCE AT 6/30/97 8,862,187 $(29,237) $1,863 $1,447 $163,694 $137,767
========= ======= ====== ====== ======== ========
BALANCE AT 12/31/95 8,353,114 $(26,196) $ 345 $1,290 $133,460 $108,899
Net income -- -- -- 115 11,357 11,472
Collection of
receivables -- 3,340 -- -- -- 3,340
Units sold 24,270 -- -- -- 571 571
Units in conversion of
convertible debentures
to partnership units 45,112 -- -- -- 690 690
Unrealized losses on
securities -- -- (191) -- -- (191)
Cash distributions
($1.04 per unit) -- -- -- (87) (8,621) (8,708)
--------- -------- ------ ------ -------- -------
BALANCE AT 6/30/96 8,422,496 $(22,856) $ 154 $1,318 $137,457 $116,073
========= ======== ====== ====== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these consolidated statements.
F-23
<PAGE> 132
NATIONAL HEALTHCARE L.P.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
(Unaudited)
Note 1 - CONSOLIDATED FINANCIAL STATEMENTS:
The financial statements for the six months ended June 30, 1997 and
1996, which have not been examined by independent public accountants, reflect,
in the opinion of management, all adjustments necessary to present fairly the
data for such periods. The results of the operations for the six months ended
June 30, 1997 are not necessarily indicative of the results that may be
expected for the entire fiscal year ended December 31, 1997. The interim
condensed balance sheet at December 31, 1996 is taken from the audited
financial statements at that date. The interim condensed financial statements
should be read in conjunction with the consolidated financial statements,
including the notes thereto, for the periods ended December 31, 1996, December
31, 1995, and December 31, 1994.
Note 2 - OTHER REVENUES:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
-------------------- ----------------
1997 1996 1997 1996
---- ---- ---- ----
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Revenue from managed centers $ 8,713 $ 7,943 $16,995 $16,284
Guarantee fees 150 185 312 365
Advisory fee from NHI 776 797 1,551 1,594
Earnings on securities 370 64 891 125
Equity in earnings of unconsolidated investments 24 (59) 24 101
Interest income 968 1,133 1,949 2,722
Other 533 488 1,092 908
------- ------- ------- -------
$11,534 $10,551 $22,814 $22,099
======= ======= ======= =======
</TABLE>
Revenues from managed centers include management fees and interest
income on notes receivable from the managed centers. "Other" revenues include
non-health care related earnings.
Note 3 - INVESTMENT IN MARKETABLE SECURITIES:
NHC considers its investments in marketable securities as available
for sale securities and unrealized gains and losses are recorded in partners'
capital in accordance with SFAS 115.
The adoption of SFAS 115 did not have a material effect on NHC's
financial position or results of operations.
Proceeds from the sale of investments in debt and equity securities
for the period ended June 30, 1996 was $511,000. Gross investment gains of
$149,000 were realized on these sales during the period ended June 30, 1997.
Realized gains and losses from securities sales are determined on the specific
identification of the securities.
F-24
<PAGE> 133
Note 4 - GUARANTEES:
In order to obtain management agreements and to facilitate the
construction or acquisition of certain health care centers which NHC manages
for others, NHC has guaranteed some or all of the debt (principal and interest)
on those centers. For this service NHC charges an annual guarantee fee of 1%
to 2% of the outstanding principal balance guaranteed, which fee is in addition
to NHC's management fee. The principal amounts outstanding under the
guarantees is approximately $69,362,000 (net of available debt service
reserves) at variable and fixed interest rates with a weighted average of 4.7%
at June 30, 1997.
NHC has entered into an interest rate cap arrangement with a managed
entity under which NHC has guaranteed that the entity's weighted average
interest rate on its first and second mortgage debt will not exceed 9.0%. The
entity's first mortgage debt is tax-exempt, floating-rate bonds and its second
mortgage debt is owed to NHC. The bond debt outstanding under the arrangement
is $15,600,000 and the weighted average rate of both debts is 6.9% at June 30,
1997. NHC is obligated under the agreement only for the term of its management
contract, as extended, and only so long as the tax-exempt bonds are
outstanding. At June 30, 1997, NHC expects to have no additional liability as
a result of this interest rate cap arrangement.
NOTE 5 - NEW ACCOUNTING PRONOUNCEMENTS:
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 129, "Disclosure of Information about Capital Structure," ("SFAS
129"), SFAS 129 establishes standards for disclosing information about an
entity's capital structure. NHC will be required to adopt SFAS 129 in the
fourth quarter of 1997. Management does not expect the adoption to have a
material impact on NHC's financial position results of operations or cash
flows.
Statement of Financial Accounting Standards No. 128,"Earnings per
Share," ("SFAS 128") has been issued effective for fiscal periods ending after
December 15, 1997. SFAS No. 128 establishes standards for computing and
presenting earnings per share. NHC is required to adopt the provisions of SFAS
No. 128 in the fourth quarter of 1997. Under the standards established by SFAS
128, earnings per share is measured at two levels: basic earnings per share and
diluted earnings per share. Basic earnings per share is computed by dividing
net income by the weighted average number of common shares outstanding during
the year. Diluted earnings per share is computed by dividing net income by the
weighted average number of common shares after considering the additional
dilution related to preferred stock, convertible debt, options and warrants.
Management does not expect the adoption to have a material impact on NHC's
financial position, results of operations or cash flows.
Note 6 - LEGAL PROCEEDINGS:
In March 1996, Florida Convalescent Centers, Inc. (FCC), an
independent Florida corporation for whom the company manages sixteen licensed
nursing centers in Florida, gave NHC notice of its intent not to renew a
management contract at one of the centers. Pursuant to written agreements
between the parties, NHC valued the center, offering to either purchase the
center at the price so valued or require FCC to pay to NHC certain deferred
compensation based upon that value. FCC responded on March 26, 1996, by filing
a Declaratory Judgment suit in the Circuit Court of the Twelfth Judicial
Circuit in and for Sarasota County, Florida, requesting the court to interpret
the parties' rights under their contractual arrangements. Since that time, FCC
has amended the suit to allege, among other items, that NHC has "self-dealt"
with or mismanaged the centers, that the deferred compensation creates a
usurious rate of interest, and that the recorded mortgages securing FCC's debt
to NHC do not secure the payment of the deferred compensation. NHC has denied
all allegations and conclusions. The suit is still in the preliminary stages
and no trial date has been scheduled.
F-25
<PAGE> 134
In January, 1997, NHC was notified that FCC currently does not intend
to renew an additional four contracts which mature in 1997, but FCC agreed that
NHC will remain as manager until a final decision is reached by the Sarasota
Court. The balance of the FCC contracts may be terminated in the years
2001-2003.
NHC is also a defendant in a lawsuit styled Braeuning et al vs.
National HealthCare L.P. et al filed "under seal" in the U. S. District Court
of the Northern district of Florida on April 9, 1996. The court removed the
seal from the complaint - but not the file itself - on March 20, 1997 and
service of process occurred on July 8, 1997 with the government participating
as an intervening plaintiff. The suit alleges that NHC has submitted cost
reports and routine cost limit exception requests containing "fraudulent
allocation of routine nursing services to ancillary service cost centers" and
improper allocation of skilled nursing service hours in four managed centers,
all in the state of Florida. The suit was filed under the Qui Tam provisions
of the Federal False Claims Act, commonly referred to as the "Whistleblower
Act".
In regard to the allegations contained in the lawsuit, NHC believes
that the cost report information of its centers have been either appropriately
filed or, upon appropriate amendment, will reflect adjustments only for the
correction of unintentional misallocations. Prior to the filing of the suit,
the Company had commenced an in-depth review of the nursing time allocation
process at its owned, leased and managed centers. A significant number of
amended cost reports have been filed and the Company continues to schedule and
prepare revised cost reports and exception requests. It is anticipated that
any years in question will be reviewed prior to there being further action in
this matter at the judicial level. The Company is fully cooperating with the
government in an attempt to determine dollar amounts involved, and intends to
aggressively pursue an amicable settlement of this matter. The cost report
periods under review include periods from 1991 through 1995.
NHC would be responsible for any settlement related to its owned
facilities and to the extent that managed centers have settlements, NHC's 6%
management fee would be impacted. NHC's revenue policy is to not reflect
routine cost limit exception requests as income until the process, including
cost report audits, is completed. NHC cannot predict at this time the ultimate
outcome of the suit but will strongly defend its actions in this matter.
As reported in NHC's 1996 10-K, in October 1996 two managed centers in
Florida were audited by representatives of the regional office of the Office of
the Inspector General ("OIG"). As part of these audits, the OIG reviewed
various records of the facilities relating to allocation of nursing hours and
contracts with suppliers of outside services. At one center the OIG indicated
during an exit conference that it had no further questions but has not yet
issued a final report. At the second facility - which is one of four named in
the Braeuning lawsuit - the OIG determined that certain records were
insufficient and NHC supplied the additional requested information. These
audits have been incorporated into the lawsuit.
Florida is one of the states in which governmental officials are
conducting "Operation Restore Trust", a federal/state program aimed at
detecting and eliminating fraud and abuse by providers in the Medicare and
Medicaid programs. The OIG has increased its investigative actions in Florida
(and has now opened a Tennessee office) as part of Operation Restore Trust.
NHC will continue to review and monitor the cost reporting process and its
compliance with all government reimbursement standards, but cannot predict
whether the OIG or other government officials will take further action or
request additional information as a result of the Braeuning suit or any other
audit that may be conducted in the future.
Note 7 - SUBSEQUENT EVENTS
The Board of Directors of the Managing General Partner of NHC has
unanimously approved in principle the following effective December 31, 1997:
(i) the formation of National Health Realty, Inc. (the "REIT" and a
wholly-owned subsidiary of NHC) and the formation of NHR/OP, L.P. (the
"Operating Partnership" and a subsidiary of the REIT), (ii) the transfer to the
Operating Partnership 17 licensed nursing homes, six assisted living centers,
one retirement center (the "Owned Healthcare Facilities"), certain promissory
notes (the "Notes"), certain other assets (the "Other Assets") and certain debt
(the "Assumed Liabilities"), (iii) the formation of National HealthCare
Corporation (the "Corporation" and a wholly-owned subsidiary of NHC), (iv) the
distribution of REIT Shares to NHC's unitholders and (v) the merger of NHC with
and into the Corporation. The Operating Partnership is expected to lease the
Owned Healthcare Facilities to the Corporation. Each lease will be a "triple
net" lease with (i) an initial fixed term expiring December 31, 2007, (ii) an
option for NHC to renew for two additional five-year periods on identical terms
as the initial period, and (iii) a right of first refusal for NHC to purchase
the Owned Healthcare Facilities.
The Corporation Board of Directors and the sole shareholder of the
Corporation have approved the 1997 Stock Appreciation Rights Plan (the
"Corporation Stock Option Plan"). The Corporation Stock Option Plan
allows for options to purchase up to 1,000,000 shares of Corporation common
stock to be granted by the Corporation Board of Directors. The Corporation
Board of Directors may grant incentive stock options ("ISO's"), non-qualified
stock options or stock appreciation rights. The Corporation Stock Option Plan
provides that the exercise price of an ISO must not be less than the fair
market value of the Corporation stock.
F-26
<PAGE> 135
After the initial capitalization of National Health Realty, Inc. as discussed
in Note 1 to National Health Realty, Inc.'s financial statement is effected, we
expect to be in a position to render the following audit report.
ARTHUR ANDERSEN LLP
Nashville, Tennessee
October 15, 1997
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To National Health Realty, Inc.:
We have audited the accompanying balance sheet of NATIONAL HEALTH REALTY, INC.
(a Maryland corporation and a wholly owned subsidiary of National HealthCare
L.P.) as of October 15, 1997 (date of capitalization). This financial statement
is the responsibility of management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of National Health Realty, Inc. as of
October 15, 1997 in conformity with generally accepted accounting principles.
F-27
<PAGE> 136
NATIONAL HEALTH REALTY, INC.
BALANCE SHEET
OCTOBER 15, 1997
<TABLE>
<S> <C> <C>
ASSETS
Cash and temporary investments $ 1,000
================
LIABILITIES AND STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 10,000,000 shares authorized;
none outstanding $ -
Common stock, $.01 par value; 30,000,000 shares authorized;
1,000 shares issued and outstanding 10
Additional paid-in capital 990
----------------
$ 1,000
================
</TABLE>
The accompanying notes are an integral part of this balance sheet.
F-28
<PAGE> 137
NATIONAL HEALTH REALTY, INC.
NOTES TO BALANCE SHEET
OCTOBER 15, 1997
1. ORGANIZATION
National Health Realty, Inc. (the "REIT" and a wholly owned
subsidiary of National HealthCare L.P) was incorporated on
September 26, 1997. The REIT has had no operations to date but
issued 1,000 shares of common stock to National HealthCare
L.P ("NHC") on October 15, 1997 for consideration of $1,000.
2. FEDERAL INCOME TAXES
At the earliest possible date, after the spinoff from NHC, the
REIT intends to qualify as a real estate investment trust
under the Internal Revenue Code and, accordingly, will not be
subject to federal income taxes on amounts distributed to
stockholders providing it distributes at least 95% of its real
estate investment trust taxable income and meets certain other
conditions.
3. PREFERRED STOCK
No shares of preferred stock are outstanding. Preferred stock
may be issued from time to time without stockholder approval
with terms and conditions established by the Board of
Directors of the REIT.
4. Events subsequent to Date of Balance Sheet
NHC has announced its intentions to distribute shares of the
REIT to its unitholders. NHC expects to form NHR/OP,
L.P. (the "Operating Partnership" and a subsidiary of the
REIT) and, immediately prior to the distribution of shares,
will transfer to the Operating Partnership 17 licensed nursing
homes, six assisted living centers, one retirement center (the
"Owned Healthcare Facilities") and certain promissory notes
(the "Notes") secured by mortgages on 23 nursing homes. NHC
will convey its ownership in 15 of the Owned Healthcare
Facilities. The remaining nine Owned Healthcare Facilities
will be transferred pursuant to a 50-year capitalized lease.
The transfer will be subject to certain assumed debts (the
"Assumed Liabilities").
The Operating Partnership is expected to lease the Owned
Healthcare Facilities to NHC pursuant to operating leases.
Each operating lease will be a "triple net" lease with (i) an
initial fixed term expiring December 31, 2007, (ii) an option
for NHC to renew for two additional five-year periods on
identical terms as the initial period, and (iii) a right of
first refusal for NHC to purchase the Owned Healthcare
Facilities.
NHC will retain all of the equipment, furnishings and personal
property in the Owned Healthcare Facilities. In the event that
a lease with NHC is terminated for any reason, either the
Operating Partnership or a new tenant will have to replace all
of the equipment and furnishings. Because the Operating
Partnership has neither licenses nor employees to operate the
Owned Healthcare Facilities, the termination of a lease or
leases with NHC could have a material adverse effect on the
REIT's results of operations.
NHC will advise the REIT under the supervision of the REIT's
Board of Directors. The REIT's Board of Directors is
ultimately responsible for the management of the REIT.
The Notes are secured by mortgages on additional nursing homes
managed by NHC and have been pledged as collateral for part of
the Assumed Liabilities. In addition, parties to certain of
the Assumed Liabilities may not have consented to the transfer
of the Assumed Liabilities. Thus, a default by NHC under its
debt obligations could cause the Operating Partnership to lose
its assets through foreclosure or other means.
A significant portion of the Notes transferred to the Operating
Partnership is due from one company for which NHC manages 16
nursing homes. Although the Notes have been guaranteed by that
company's primary shareholder, the default, bankruptcy, or
other financial difficulty by the company or the guarantor
could have a material adverse effect on the Operating
Partnership's results of operations. NHC and the company are
currently involved in a lawsuit regarding the management
agreements of the 16 nursing homes.
The REIT does not intend to seek further healthcare-related
investment opportunities or to provide lease or mortgage
financing for such investments; consequently, the REIT's
results of operations and financial condition are dependent
upon the successful operation of the Owned Healthcare
Facilities and the realizability of the Notes.
The REIT's Board of Directors has approved the adoption of the
1997 Stock Option and Stock Appreciation Rights Plan (the "REIT
Stock Option Plan"). The REIT Stock Option Plan allows for
options to purchase in the aggregate 500,000 shares of REIT
common stock to be granted by the REIT's Board of Directors.
The REIT's Board of Directors may, in its discretion, grant
incentive stock options, non-qualified stock options, or stock
appreciation rights.
F-29
<PAGE> 138
APPENDIX A
PLAN OF RESTRUCTURE OF NATIONAL HEALTH CARE L.P.
NATIONAL HEALTHCARE L.P. ("NHC"), and its two wholly owned
subsidiaries, NATIONAL HEALTHCARE CORPORATION (the "Corporation"), and NATIONAL
HEALTH REALTY, INC. (the "REIT") hereby adopt a plan of restructure (the
"Plan") pursuant to and in accordance with the provisions of Sections
5.2(a)(xxvii) and 6.4(a) of the Amended and Restated Agreement of Limited
Partnership of NHC, Section 17-211 of the Delaware Revised Uniform Limited
Partnership Act and Section 263 of the Delaware General Corporation Law and
other applicable sections of the foregoing.
4. Purpose of the Plan. The purpose of this Plan is to set forth
the effective date and other terms of the restructure of NHC into the
Corporation and REIT, as soon as the Plan is consummated. NHC has recently
formed the Corporation and REIT as wholly owned subsidiaries. Upon adoption of
the Plan and the effectiveness as set forth herein, the stock of the REIT will
be distributed to the holders of the outstanding units (the "Units") of NHC in
proportion to their ownership of outstanding Units (except with respect to
Excess Stock, as later defined, the holder thereof shall be entitled to receive
the consideration described in Paragraph 6 hereof); and NHC shall merge with
and into the Corporation with the Corporation being the survivor thereof.
5. Unitholder Approval. A resolution approving the Plan shall be
submitted to the Unitholders of NHC for action on the resolution at a Special
Meeting to be held at the offices of NHC no later than November 20, 1997.
Consummation of the Plan shall be subject to: (i) adoption of the Plan by the
affirmative vote of at least a majority of the Units outstanding on the Record
Date for the meeting, and (ii) such rights to terminate or amend the Plan as
are set forth herein. If the Plan is so adopted, then the directors and
officers of the managing general partner of NHC shall cause this Plan to be
implemented in accordance with the following terms, all of which must be
accomplished on or before 12:00:01 a.m. central time on January 1, 1998.
6. Contribution to REIT's Operating Partnership of Qualifying
Assets and Assumption by REIT of Certain Liabilities. NHC has formed the REIT
under the Maryland General Corporation Law and REIT has formed NHR/OP, L.P., a
Delaware limited partnership (the "Operating Partnership"). NHC shall
contribute to Operating Partnership the specified assets, subject to certain
specified liabilities, effective at 4:00 p.m. central time on December 31, 1997
pursuant to the Contribution Agreement (the "Contribution Agreement") attached
hereto as Exhibit A pursuant to which: (a) real estate located in Florida owned
by NHC shall be leased to the Operating Partnership pursuant to a long term
capitalized lease (the "Capitalized Lease"), (b) substantially all other real
estate owned by NHC shall be conveyed by deed (the "Deeds") to the Operating
Partnership pursuant to deed forms selected by officers of the managing general
partner of NHC, (c) debt described in the Contribution Agreement secured by the
real property located in South Carolina shall be paid by, but not assumed by,
the Operating Partnership, (d) other debt of NHC described in the Contribution
Agreement shall be assumed by the Operating Partnership, (e) the notes and
related security including mortgages owned by NHC, as lender, specified in the
Contribution Agreement shall be conveyed to the Operating Partnership, and (f)
certain other assets having little or no book value on NHC's books, as
specified in the Contribution Agreement, shall be conveyed to the Operating
Partnership.
7. Agreements Between REIT and Corporation. Immediately after
the effectiveness of the matters described in paragraph 3 above, the following
shall occur: (a) the Operating Partnership shall lease to the Corporation, and
the Corporation shall lease from the Operating Partnership, pursuant to the
Operating Lease (the "Operating Lease"), attached hereto as Exhibit B all real
estate subject to the Contribution Agreement and, (b) the REIT, Operating
Partnership and Corporation shall enter into the Advisory Agreement, attached
hereto as Exhibit C. In the event of a title problem or dispute involving the
real property subject to the Capitalized Lease or conveyed pursuant to the
Deeds, to the maximum extent that NHC (or the Corporation, as successor to NHC
after the Merger) has a claim against a predecessor-in-title or a title
insurance company, NHC (or the Corporation as successor to NHC after the
Merger) shall
<PAGE> 139
indemnify, defend and hold REIT harmless from all damages, but not otherwise.
REIT and Operating Partnership, jointly and severally, shall indemnify, defend
and hold NHC and Corporation harmless with respect to all debt assumed by or
which REIT or Operating Partnership has agreed to pay in accordance with the
foregoing. REIT and Operating Partnership agree, without the written consent
of the Corporation, not to cause or suffer any such debt to be defaulted or
otherwise breached. Corporation shall indemnify, defend and hold REIT and
Operating Partnership harmless with respect to all debt and all obligations of
NHC except those specifically assumed by or which REIT or Operating Partnership
have agreed to pay in accordance with the foregoing. Corporation agrees,
without the written consent of REIT and Operating Partnership, not to cause or
suffer any such debt to be defaulted or otherwise breached. The Corporation
shall use its best efforts to provide to REIT and Operating Partnership
financial statements of the Corporation, and any predecessor, and the
unqualified opinion from a nationally recognized independent accounting firm
with respect to such annual financial statements, and consents of auditors to
the inclusion of such financial statements in any registration statements,
private placement memoranda, filings on any exchange or with any regulatory
body, if any, necessary or appropriate in order to enable REIT and Operating
Partnership to comply with applicable registration and reporting requirements
of federal and state securities laws or exchange requirements; and expenses
relating to the foregoing shall be borne by the Corporation (including
obtaining audits if required by the foregoing even if the Corporation does not
otherwise need to obtain them) as long as the Corporation is the investment
advisor of the REIT (whether pursuant to the Advisory Agreement attached
hereto, any amendment thereof, or a replacement thereto) and for such period of
time after such advisory relationship ends until such time as REIT and
Operating Partnership no longer are legally required to include such financial
statements in its SEC filings; the Corporation shall indemnify, defend and hold
REIT and Operating Partnership harmless with respect to any damages caused by
any errors or misstatements in such financial statements.
8. Contingent Liabilities. The Corporation, by reason of the
merger described below, shall assume and agree to pay (to the extent that NHC
is liable therefor, subject to all of the defenses and offsets which are
available to NHC) all absolute and contingent liabilities of NHC, except as
follows, each of which shall be assumed by the REIT and Operating Partnership,
jointly and severally, effective with the effectiveness of the Contribution
Agreement: (a) the absolute liabilities described in paragraph 3 above and
described more fully in the Contribution Agreement, and (b) environmental and
hazardous material liabilities relating to the land or improvements thereon
which are subject to either the Capitalized Lease or the Operating Leases,
described above, except those created from and after January 1, 1998 by the
Corporation or its tenants, subcontractors, agents or employees.
9. Issuance of REIT Shares to NHC; Distribution to Unitholders.
In consideration for the Contribution Agreement REIT shall issue to NHC that
number of shares of REIT common stock which is equal to the number of Units
outstanding on the date of the Contribution Agreement; provided, however, the
Excess Stock, as defined in the REIT Charter, which would have been issued to
National Health Corporation ("National") shall, instead, entitle National to
receive one Unit in the Operating Partnership ("OP Units") for each share of
Excess Stock. NHC shall immediately thereafter distribute or cause to be
distributed to each Unitholder of record immediately prior to the Effective
Time, as later defined, one (1) share of REIT common stock for each Unit owned
by the Unitholder subject to the proviso in the immediately preceding sentence.
Such actions shall result in the spin out of the REIT, without the necessity of
the surrender of unit certificates. All such actions shall be effective for
all purposes on or before 11:59 p.m. central time, December 31, 1997; provided,
however, the physical delivery of the certificates representing the REIT shares
and OP Units shall take place as soon as practical thereafter. REIT and
Corporation agree that all options and convertible debentures of NHC which
grant rights to subscribe for NHC Units exercisable or convertible after
December 31, 1997, shall be deemed to grant the right to acquire an equal
number of shares of REIT shares and an equal number of Corporation shares as
such right grants in Units of NHC. The exercise price for such options and
receipt thereof shall be divided pro rata between REIT and Corporation (and the
pro rata distribution shall be equal to the ratio that the closing price on the
American Stock Exchange at the close of business on the first trading day in
1998 of REIT shares and Corporation shares bear to each other). The interest
and principal and all other payments due under or obligations due as a result
of such convertible debentures is to be paid and performed by the Corporation
and if the conversion rights of any of such debt is exercised then the
Corporation shall provide written notification thereof to REIT, and the REIT
shall issue (upon payment of cash by Corporation to REIT in the amount of the
par value for such REIT shares) REIT shares equal to the number of shares
issued by Corporation upon such conversion; and REIT agrees, at the expense of
A-2
<PAGE> 140
Corporation, to cause to be filed any registration statement relating to REIT
shares required by agreements binding on Corporation or needed as determined in
the sole discretion of Corporation. Notwithstanding the foregoing in this
paragraph 6, the Convertible Debentures issued pursuant to the Note Purchase
Agreement dated in October 1997 shall be convertible solely into Corporation
shares and all obligations of NHC pursuant to such agreement (as well as the
related Note and Registration Rights Agreement) shall be solely those of the
Corporation.
10. Merger. Effective as of 11:59 p.m., central time, December
31, 1997 (the "Effective Time") NHC shall merge with and into the Corporation
pursuant to the Merger Agreement attached hereto as Exhibit D.
11. Amendment or Abandonment of Plan. The Board of Directors of
the managing general partner of NHC may modify or amend the Plan at any time
prior to Unitholder approval. Such Board of Directors may abandon the Plan
without Unitholder approval at any time prior to 11:59 p.m., central time,
December 31, 1997 (either before or after Unitholder adoption) in its sole and
absolute discretion if it deems such abandonment in the best interest of
Unitholders.
If the Plan is not implemented because it does not receive the
requisite Unitholder vote or the other conditions specified herein are not met,
or because the Board of Directors determines for some other reason that it is
advisable to abandon the Plan, the business and legal structure of NHC will
continue substantially in the present manner.
12. Miscellaneous.
(a) In connection with the Plan, the unit option plans of
NHC will be terminated and the unit options outstanding thereunder as of
December 31, 1997 to the extent not then exercised, will be cancelled to the
maximum extent permitted contractually and by law.
(b) All other employee benefit plans of NHC which are not
described in the Registration Statement on Form S-4 as employee benefits of the
Corporation shall be cancelled on December 31, 1997.
(c) The Board of Directors of the managing general
partner of NHC and the officers of NHC shall have the power to adopt all
resolutions, and the officers of NHC shall have the power to execute, deliver,
and file all instruments, documents and certificates in the offices of the
Secretaries of State of the State of Tennessee, Delaware and Maryland or other
offices, and to publish and give such notices, and to do any and all other or
additional things (including the setting of record dates and the closing of
stock transfer books), as are required by the laws of the State of Tennessee,
Delaware and Maryland or other applicable laws, or as such Board of Directors
or other officers may deem necessary, desirable or appropriate to carry out the
provisions of this Plan.
(d) This Plan is attached to and is part of a
Registration Statement on Form S-4 filed by the Corporation with the Securities
and Exchange Commission, reference to which is hereby made for any and all
purposes.
A-3
<PAGE> 141
Executed as of the _____ day of ________________, 1997.
NATIONAL HEALTHCARE L.P.
By its Managing General Partner NHC, Inc.
By:
------------------------------------
W. Andrew Adams, President
NATIONAL HEALTHCARE CORPORATION
By:
------------------------------------
W. Andrew Adams, President
NATIONAL HEALTH REALTY, INC.
By:
------------------------------------
W. Andrew Adams, President
NHR/OP, L.P.
By: National Health Realty, Inc.,
its general partner
By:
------------------------------------
W. Andrew Adams, President
A-4
<PAGE> 142
EXHIBIT INDEX
Exhibit A Contribution Agreement
Exhibit B Operating Lease Agreement
Exhibit C Advisory Agreement
Exhibit D Merger Agreement
A-5
<PAGE> 143
APPENDIX B
AGREEMENT OF MERGER
OF
NATIONAL HEALTHCARE L.P.
(A DELAWARE LIMITED PARTNERSHIP)
AND
NATIONAL HEALTHCARE CORPORATION
(A DELAWARE CORPORATION)
THIS AGREEMENT OF MERGER is made and entered into this ___ day of
_________________, 1997 by and between NATIONAL HEALTHCARE L.P., a Delaware
limited partnership ("NHC"), and NATIONAL HEALTHCARE CORPORATION, a Delaware
corporation ("CORPORATION").
WHEREAS, National HealthCare L.P. is a business limited partnership of
the State of Delaware with its registered office therein located at 1013 Centre
Road, City of Wilmington, County of New Castle; and
WHEREAS, National HealthCare Corporation is a business corporation of
the State of Delaware with its registered office therein located at 9 East
Loockerman Street, City of Dover, County of Kent; and
WHEREAS, Section 263 of the Delaware General Corporation Law and
Section 17-211 of the Delaware Revised Uniform Limited Partnership Act permit
the merger of a corporation and limited partnership; and
WHEREAS, the Board of Directors of the Corporation and the Board of
Directors of NHC, Inc., the Managing General Partner of NHC, deem it is
advisable and to the advantage, welfare and best interests of said entities and
their respective stockholders and unitholders to merge NHC with and into the
Corporation pursuant to and in accordance with the provisions of Section 263 of
the General Corporation Law of the State of Delaware, Section 17-211 of the
Delaware Revised Uniform Limited Partnership Act and Section 6.4(a) of the
Amended and Restated Agreement of Limited Partnership of NHC, upon the terms
and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreement of the parties hereto, being thereunto duly approved and adopted by
the general partners and a majority of the limited partners of NHC and by the
Board of Directors and stockholders of the Corporation, the parties agree as
follows:
1. Terms and Conditions of Merger; Method of Effecting Merger.
Upon the Effective Time (as defined herein), NHC shall merge with and into the
Corporation and the separate partnership existence of NHC shall cease, and the
Corporation shall continue as the surviving corporation (sometimes hereinafter
referred to as the "SURVIVING CORPORATION"). The merger shall be effected by
the filing of a Certificate of Merger with the Delaware Secretary of State.
2. Effective Time. The effective date and time of the merger
shall be 11:59 p.m., central time, December 31, 1997 (the "EFFECTIVE TIME").
3. Manner of Converting Shares and Partnership Interests. Each
issued and outstanding unit of limited partnership interest ("UNIT") of NHC
shall, at the Effective Time, represent one share of common stock of the
Corporation. New certificates will not be issued for the shares of the
Corporation until the holder thereof subsequently sells, exchanges or
surrenders the certificate to the Corporation's transfer agent. The shares of
the Corporation issued
<PAGE> 144
prior to the merger shall not be converted or exchanged in any manner, but each
said share which is issued as of the Effective Time shall be canceled without
any action on the holder's part.
4. Assumption of Rights and Liabilities by Corporation. At the
Effective Time, NHC shall be merged into the Corporation which shall continue
as the Surviving Corporation, and the Surviving Corporation shall become the
owner, without transfer, of all rights, powers, assets, qualifications and
property of NHC, and the Surviving Corporation shall become subject to all
debts and liabilities of NHC in the same manner as if the Surviving Corporation
had itself incurred them.
5. Name. The Corporation shall continue its existence as the
Surviving Corporation under its present name.
6. Certificate of Incorporation of Surviving Corporation. The
Certificate of Incorporation of the Corporation, as now in force and effect,
shall continue to be the Certificate of Incorporation of said Surviving
Corporation until amended and changed in the manner prescribed by the
provisions of the General Corporation Law of the State of Delaware.
7. Bylaws of Surviving Corporation. The present Bylaws of the
Corporation, as now in force and effect, shall continue to be the Bylaws of
said Surviving Corporation until changed, altered or amended as therein
provided and in the manner prescribed by the provisions of the General
Corporation Law of the State of Delaware.
8. Directors and Officers of Surviving Corporation. The
directors and officers in office of the Corporation at the Effective Time shall
be the members of the Board of Directors of and the officers of said Surviving
Corporation, all of whom shall hold their directorships and offices until the
election and qualification of their respective successors or until their tenure
is otherwise terminated in accordance with the Bylaws of the Surviving
Corporation.
9. Amendment or Abandonment of Agreement of Merger. The Board of
Directors of NHC, Inc., the Managing General Partner of NHC, may modify or
amend this Agreement of Merger at any time prior to approval by the holders of
the Units (the "UNITHOLDERS"). Such Board of Directors may abandon the
Agreement of Merger without Unitholder approval at any time prior to 11:59
p.m., central time, December 31, 1997 (either before or after Unitholder
adoption) in its sole and absolute discretion if it deems such abandonment in
the best interest of Unitholders. If the Agreement of Merger is not
implemented because it does not receive the requisite Unitholder vote or the
other conditions specified herein are not met, or because the Board of
Directors of NHC, Inc. determines for some other reason that it is advisable to
abandon the Agreement of Merger, the business and legal structure of NHC will
continue substantially in the present manner.
10. General Authorization. The Board of Directors and the proper
officers of NHC, Inc. and of the Corporation and Surviving Corporation are
hereby authorized, empowered and directed to do any and all acts and things,
and to make, execute, deliver, file and record any and all instruments, papers
and documents which shall be or become necessary, proper or convenient to carry
out or put into effect any of the provisions of this Agreement of Merger or of
the merger provided for herein.
B-2
<PAGE> 145
IN WITNESS WHEREOF, the undersigned have executed this Agreement of
Merger as of the ____ day of ______________, 1997.
NHC:
NATIONAL HEALTHCARE L.P.
By: NHC, Inc., its Managing General Partner
By:
------------------------------------------
Printed Name:
--------------------------------
Title of Authorized Officer:
----------------
CORPORATION:
NATIONAL HEALTHCARE CORPORATION
By:
------------------------------------------
Printed Name:
--------------------------------
Title of Authorized Officer:
-----------------
B-3
<PAGE> 146
CERTIFICATE OF SECRETARY OF
NATIONAL HEALTHCARE CORPORATION
(a Delaware corporation)
The undersigned, being the Secretary of National HealthCare
Corporation, a Delaware corporation, does hereby certify that the holders of
all of the outstanding stock of said corporation dispensed with a meeting and
vote of shareholders, and all of the shareholders entitled to vote consented in
writing, pursuant to the provisions of Section 228 of the General Corporation
Law of the State of Delaware, to the adoption of the foregoing Agreement of
Merger.
Executed on this ____ day of _________________, 1997.
NATIONAL HEALTHCARE CORPORATION
By:
-------------------------------
Richard F. LaRoche, Jr.
Secretary
B-4
<PAGE> 147
CERTIFICATE OF SECRETARY OF
THE MANAGING GENERAL PARTNER
OF
NATIONAL HEALTHCARE L.P.
(a Delaware limited partnership)
The undersigned, being the Secretary of NHC, Inc., a Tennessee
corporation and the Managing General Partner of National HealthCare L.P., does
hereby certify that the foregoing Agreement of Merger was submitted to the
Unitholders of National HealthCare L.P. entitled to vote at a special meeting
thereof for the purpose of acting on the Agreement of Merger. Due notice of
the time, place, and purpose of said meeting was mailed to each Unitholder of
said limited partnership at least 20 days prior to the date of the meeting. At
said meeting, the Agreement of Merger was considered by the Unitholders
entitled to vote and, a vote having been taken for the adoption or rejection by
them of the Agreement of Merger, at least a majority of the outstanding units
entitled to vote of the limited partnership was voted in favor of the adoption
of the Agreement of Merger.
Executed on this ____ day of _________________, 1997.
NHC, INC., Managing General Partner of
NATIONAL HEALTHCARE L.P.
By:
-----------------------------
Richard F. LaRoche, Jr.
Secretary
B-5
<PAGE> 148
APPENDIX C
PROXY PROXY
NATIONAL HEALTHCARE L.P.
SPECIAL MEETING OF PARTNERS, NOVEMBER 20, 1997
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
THE MANAGING GENERAL PARTNER
The undersigned hereby appoints W. Andrew Adams and Richard F.
LaRoche, or either of them, as proxies, with power of substitution, to vote all
Units of the undersigned at the Special Meeting of Limited Partners of National
HealthCare L.P. to be held on Thursday, November 20, 1997, at 9:00 a.m. Central
Standard Time, at the Managing General Partners's Offices located at 100 Vine
Street, Murfreesboro, Tennessee, and at any adjournments or postponements
thereof, in accordance with the following instructions:
(1) APPROVAL AND ADOPTION OF A PLAN OF RESTRUCTURE, PURSUANT TO WHICH NHC
WILL MAKE A DISTRIBUTION OF ALL OF THE OUTSTANDING SHARES OF COMMON
STOCK OF NATIONAL HEALTH REALTY, INC. TO THE HOLDERS OF NHC GENERAL AND
LIMITED PARTNERSHIP UNITS IN THE MANNER SET FORTH IN THE ACCOMPANYING
PROXY STATEMENT AND NHC WILL THEN MERGE WITH AND INTO NATIONAL
HEALTHCARE CORPORATION.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(2) APPROVAL OF THE POSSIBLE ADJOURNMENT OF THE SPECIAL MEETING FOR THE
PURPOSE OF SOLICITING ADDITIONAL VOTES IN FAVOR OF PROPOSAL (1) ABOVE;
AND
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE SPECIAL MEETING OR
ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(CONTINUED ON REVERSE SIDE)
- --------------------------------------------------------------------------------
(CONTINUED FROM OTHER SIDE)
THE UNITS REPRESENTED HEREBY WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, THE UNITS WILL BE VOTED FOR THE PLAN OF RESTRUCTURE AND
IN THE DISCRETION OF THE PROXIES ON SUCH OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING.
PLEASE SIGN AND DATE BELOW AND RETURN PROMPTLY.
DATED: , 1997
--------------------
--------------------------------
DATED: , 1997
--------------------
--------------------------------
Signature(s) of Unitholder(s)
should correspond exactly with
the name(s) printed hereon.
Joint owners should each sign
personally. Executors,
administrators, trustees, etc.,
should give full title and
authority.
<PAGE> 149
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law ("DGCL") applies to the
Corporation and the relevant portion of the DGCL provides as follows:
145. INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS; INSURANCE.
(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act m good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the corporation to procure a judgment in its
favor by reason of the fact that he is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him
in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in
which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for
such expenses which the Court of Chancery or such other court shall deem
proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made
(1) by the board of directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (2) if
such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a
written opinion, or (3) by the stockholders.
<PAGE> 150
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount
if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this section. Such expenses
(including attorneys' fees) incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the board of directors deems
appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding
such office.
(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising
out of his status as such, whether or not the corporation would have the
power to indemnify him against such liability under this section.
(h) For purposes of this section, references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers and
employees or agents, so that any person who is or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at
the request of such constituent corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under this section with respect
to the resulting or surviving corporation as he would have with respect to
such constituent corporation if its separate existence had continued.
(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include
any excise taxes assessed on a person with respect to any employee benefit
plan; and references to "serving at the request of the corporation" shall
include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such director,
officer, employee, or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to
in this section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction
to hear and determine all actions for advancement of expenses or
indemnification brought under this section or under any bylaw, agreement,
vote of stockholders or disinterested directors, or otherwise. The Court of
Chancery may summarily determine a corporation's obligation to advance
expenses (including attorneys' fees).
The Certificate of Incorporation limits the liability of directors (in their
capacity as directors, but not in their capacity as officers) to The
Corporation or its stockholders to the fullest extent permitted by the DGCL, as
amended. Specifically, no director of The Corporation will be personally
liable to The Corporation or its stockholders for monetary damages for breach
of the director's fiduciary duty as a director, except as provided in Section
102 of the DGCL for liability: (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders; (ii) for acts or omissions not
in good faith and which involve intentional misconduct or knowing violation of
law; (iii) under Section 174 of the DGCL, which relates to unlawful payments of
dividends or unlawful stock repurchases or redemptions; or
II-2
<PAGE> 151
(iv) for any transaction from which the director derived an improper personal
benefit. The inclusion of this provision in the Certificate of Incorporation
may have the effect of reducing the likelihood of derivative litigation against
directors, and may discourage or deter stockholders or management from bringing
a lawsuit against directors for breach of their duty of care, even though such
action, if successful, might otherwise have benefitted the Corporation and its
stockholders.
Under the Certificate of Incorporation and in accordance with Section 145 of
the DGCL, the Corporation will indemnify any person who was or is a party, or
is threatened to be made a party, to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than a "derivative" action by or in the right of the
Corporation) by reason of the fact that such person was or is a director or
officer of the Corporation, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with such action, suit or proceeding if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such acts
were unlawful. A similar standard of care is applicable in the case of
derivative actions, except that indemnification only extends to expenses
(including attorneys' fees) actually and reasonably incurred in connection with
the defense or settlement of such an action and then, where the person is
adjudged to be liable to the Corporation, only if and to the extent that the
Court of Chancery of the State of Delaware or the court in which such action
was brought determines that such person is fairly and reasonably entitled to
such indemnity and then only for such expenses as the court deems proper. The
Corporation will indemnify, pursuant to the standard enumerated in Section 145
of the DGCL, any past or present officer or director who was or is a party, or
is threatened to be made a party, to any threatened, pending or completed
derivative action by or in the right of the Corporation.
The Certification of Incorporation of the Corporation provides that the
Corporation may pay for the expenses incurred by an indemnified director or
officer in defending the proceedings specified above in advance of their final
disposition, provided that, if the DGCL so requires, such indemnified person
agrees to reimburse the Corporation if it is ultimately determined that such
person is not entitled to indemnification. The Corporation's Certificate of
Incorporation also allows the Corporation, in its sole discretion, to indemnify
any person who is or was one of its employees and agents to the same degree as
the foregoing indemnification of directors and officers. To the extent that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred
to in subsections (a) and (b) of Section 145 of the DGCL, or in defense of any
claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection therewith. In addition, the Corporation may purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation or another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against and
incurred by such person in such capacity, or arising out of the person's status
as such whether or not the Corporation would have the power or obligation to
indemnify such person against such liability under the provisions of the DGCL.
The Corporation maintains insurance for the benefit of the Corporation's
officers and directors insuring such persons against certain liabilities,
including civil liabilities under the securities laws. Additionally, the
Corporation has entered into indemnification agreements with each of the
Directors of the Corporation, which, among other things, provides that the
Corporation will indemnify such Directors to the fullest extent permitted by
the Certificate of Incorporation and the DGCL and will advance expenses of
defending claims against such Directors.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following exhibits are filed as part of the Registration Statement.
The Registrant agrees to furnish supplementally a copy of any omitted schedule
to the SEC upon request.
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
2.1 Plan of Restructure
</TABLE>
II-3
<PAGE> 152
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
2.2 Agreement of Merger
3.1 Articles of Incorporation of National HealthCare Corporation
3.2 Bylaws of National HealthCare Corporation
4.1 Indenture between National HealthCare L.P. and First American National Bank, dated August
29, 1995 relating to 6.0% Convertible Senior Subordinated Debentures due 2000 aggregating
$30,000,000
4.2 Indenture of Mortgage and Deed of Trust dated as of October 15, 1989 by and among National
HealthCorp L.P. and Boatmen's Trust Company, Corporate Trustee, and H.E. Bradford,
Individual Trustee, relating to $20,000,000 ___% First Mortgage Bonds due 2005
4.3 Indenture of Trust and Security Agreement dated as of December 1, 1990 by and among
National Health Corporation Leveraged Employee Stock Ownership Trust, National Health
Corporation and National HealthCorp L.P. to State Street Bank and Trust Company of
Connecticut, National Association, as Indenture Trustee, and Barnett Banks Trust Company,
National Association, as Florida Co-Indenture Trustee
4.4 First Supplemental Indenture of Trust and Security Agreement dated as of November 1, 1991
by and among National Health Corporation Leveraged Employee Stock Ownership Trust, National
Health Corporation and National HealthCorp L.P. to State Street Bank and Trust Company of
Connecticut, National Association, as Indenture Trustee, and Barnett Banks Trust Company,
National Association, as Florida Co-Indenture Trustee
5 Legal Opinion of Harwell Howard Hyne Gabbert & Manner, P.C., counsel to the Registrant, as
to the due formation of the Corporation
8 * Legal Opinion of Harwell Howard Hyne Gabbert & Manner, P.C., counsel to the Registrant, as
to the tax effect to securityholders
10.1 Master Agreement of Lease dated as of October 17, 1991 by and among National Health
Investors, Inc. and National HealthCorp L.P.
10.2 REIT Master Lease effective as of January 1, 1998, by and among National HealthCare
Corporation, National Health Realty, Inc. and NHR/OP, L.P.
10.3 Advisory, Administrative Services and Facilities Agreement dated as of October 17, 1991
between National Health Investors, Inc. and National HealthCorp L.P.
10.4 Advisory, Administrative Services and Facilities Agreement effective as of January 1, 1998,
between National HealthCare Corporation, National Health Realty, Inc. and NHR/OP, L.P.
10.5.1 Form of Service Agreement by and between National Health Corporation and National
HealthCare Corporation.
10.5.2 * Form of National HealthCare Corporation 1997 Employee Stock Purchase Plan
10.5.3 Form of National HealthCare Corporation 1997 Stock Option of Stock Appreciation Rights Plan
10.6 Loan and Security Agreement dated as of December 16, 1988 regarding the Registrant's
guaranty of National Health Corporation Leveraged Employee Stock Ownership Trust's
obligation under $50,000,000 loan
</TABLE>
II-4
<PAGE> 153
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
10.7 Amended and Restated Revolving Credit Note dated as of September 1, 1995 by and between
National Health Corporation and National HealthCare L.P.
10.8 Amended and Restated Revolving Credit Agreement dated as of September 1, 1995 by and
between National Health Corporation and National HealthCare L.P.
10.9 Third Amendment to Guarantee and Contingent Purchase Agreement dated as of October 14, 1993
by and among National HealthCare L.P., National Health Corporation and Third National Bank
in Nashville, as agent for the Banks
10.10 Fourth Amendment to Guarantee and Contingent Purchase Agreement dated as of December 30,
1993 by and among National HealthCare L.P., National Health Corporation and Third National
Bank in Nashville, as agent for the Banks
10.11 Fifth Amendment to Guarantee and Contingent Purchase Agreement dated as of September 1,
1995, by and among National HealthCare L.P., National Health Corporation and Third National
Bank in Nashville, as agent for the Banks
10.12 Suretyship Agreement dated as of March 8, 1988 by and among City Center, Ltd., NHESOP, Inc.
and National HealthCorp L.P.
10.13 Guaranty Agreement dated as of December 1, 1987 by and among National HealthCorp L.P.,
James O. McCarver and The Toronto-Dominion Bank
10.14 Guaranty Agreement dated as of May 1, 1993 by and between National HealthCorp L.P. and
Societe Generale
10.15 Guaranty Agreement dated as of March 5, 1991 by and between National HealthCorp L.P. and
The Bank of Tokyo, Ltd., New York Agency (Palm Beach County)
10.16 Guaranty Agreement dated as of March 5, 1991 by and between National HealthCorp L.P. and
The Bank of Tokyo, Ltd., New York Agency (Dade County)
10.17 Amendment to Guaranty Agreement dated as of October 17, 1991 by and among National
HealthCorp L.P., James O. McCarver and The Toronto-Dominion Bank
10.18 Amendment to Guaranty Agreement dated as of July 22, 1992 by and among National HealthCorp
L.P., James O. McCarver and The Toronto-Dominion Bank
10.19 Fourth Amendment to Guaranty Agreement dated as of June 30, 1995 by and among National
HealthCare L.P., James O. McCarver and The Toronto-Dominion Bank
10.20 Subordination Agreement dated as of May 1, 1993 by and among National HealthCorp L.P.,
Societe Generale and Richland Place, Inc.
10.21 Renewal Note dated as of December 31, 1993 in the principal amount of $10 million payable
to National HealthCorp L.P. by National Health Corporation
10.22 Second Deed of Trust Note dated as of January 20, 1988 in the principal amount of $10
million payable to National HealthCorp L.P. by NHESOP, Inc.
10.23 First Amended Second Deed of Trust Note dated as of December 21, 1988 payable to National
HealthCorp L.P. by NHESOP, Inc.
</TABLE>
II-5
<PAGE> 154
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
10.24 Promissory Note dated as of January 15, 1996 in the principal amount of $2,797,511.28
payable to National Health Investors, Inc. by National HealthCare L.P.
10.25 Renewal Term Note dated as of January 1, 1992 in the principal amount of $10 million
payalbe to National Health Corporation by National HealthCorp L.P.
10.26 Assumption and Modification Agreement dated as of October 17, 1991 by and among National
Health Investors, Inc., National HealthCorp L.P. and Third National Bank in Nashville,
Agent
10.27 Amended and Restated Reimbursement Agreement dated as of December 1, 1986, and Amended and
Restated as of March 1, 1991, by and among Florida Convalescent Associates, National
HealthCorp L.P. and The Bank of Tokyo, Ltd., New York Agency
10.28 Contribution and Assumption Agreement dated as of October 17, 1991 by and between National
HealthCorp L.P. and National Health Investors, Inc.
21 Subsidiaries of the Registrant
23 Consent of Arthur Andersen LLP, independent public accountants.
24 Power of Attorney (included on the signature page hereto)
</TABLE>
- ----------
* To be filed by amendment.
(b) The Schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable and, therefore, have been omitted.
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
1. That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
2. That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable registration form
with respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
3. That every prospectus (i) that is filed pursuant to the paragraph
immediately preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Securities Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-6
<PAGE> 155
4. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
5. The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form S-4, within one business day of receipt
of such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
6. The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became Effective.
II-7
<PAGE> 156
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement on Form S-4 to be signed on its behalf by
the undersigned, thereunto duly authorized, in the city of Murfreesboro, State
of Tennessee on the 3rd day of October, 1997.
NATIONAL HEALTHCARE CORPORATION
/s/ W. Andrew Adams
By: -------------------------------------
W. Andrew Adams
President and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature to the Registration Statement appears below
hereby appoints W. Andrew Adams and Richard F. LaRoche, Jr., and each of them,
as his attorneys-in-fact to execute in the name and on behalf of any such
person, individually and in the capacity stated below, and to file all
amendments and post-effective amendments to this Registration Statement, which
amendment or amendments may make such changes and additions in this
Registration Statement as such attorneys-in-fact may deem necessary or
appropriate.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed on the dates indicated by the following
persons in the capacities indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ W. Andrew Adams Chairman, President, Chief October 3, 1997
- -------------------------------------------- Executive Officer and Director
W. Andrew Adams (Chief Executive Officer)
/s/ Donald K. Daniel Vice President, Controller, October 3, 1997
- -------------------------------------------- Chief Financial Officer and
Donald K. Daniel Chief Accounting Officer
/s/ J. K. Twilla Director October 3, 1997
- ---------------------------------------------
J. K. Twilla
Director October __, 1997
- ---------------------------------------------
Olin O. Williams
/s/ Robert G. Adams Director October 3, 1997
- ---------------------------------------------
Robert G. Adams
/s/ Ernest G. Burgess Director October 3, 1997
- ---------------------------------------------
Ernest G. Burgess
Director October __, 1997
- ---------------------------------------------
Lawrence C. Tucker
</TABLE>
II-8
<PAGE> 1
Exhibit 2.1
[DRAFT - 10/1/97]
PLAN OF RESTRUCTURE OF NATIONAL HEALTH CARE L.P.
NATIONAL HEALTHCARE L.P. ("NHC"), and its two wholly owned
subsidiaries, NATIONAL HEALTHCARE CORPORATION (the "Corporation"), and NATIONAL
HEALTH REALTY, INC. (the "REIT") hereby adopt a plan of restructure (the "Plan")
pursuant to and in accordance with the provisions of Sections 5.2(a)(xxvii) and
6.4(a) of the Amended and Restated Agreement of Limited Partnership of NHC,
Section 17-211 of the Delaware Revised Uniform Limited Partnership Act and
Section 263 of the Delaware General Corporation Law and other applicable
sections of the foregoing.
1. Purpose of the Plan. The purpose of this Plan is to set forth the
effective date and other terms of the restructure of NHC into the Corporation
and REIT, as soon as the Plan is consummated. NHC has recently formed the
Corporation and REIT as wholly owned subsidiaries. Upon adoption of the Plan and
the effectiveness as set forth herein, the stock of the REIT will be distributed
to the holders of the outstanding units (the "Units") of NHC in proportion to
their ownership of outstanding Units (except with respect to Excess Stock, as
later defined, the holder thereof shall be entitled to receive the consideration
described in Paragraph 6 hereof); and NHC shall merge with and into the
Corporation with the Corporation being the survivor thereof.
2. Unitholder Approval. A resolution approving the Plan shall be
submitted to the Unitholders of NHC for action on the resolution at a Special
Meeting to be held at the offices of NHC no later than November 20, 1997.
Consummation of the Plan shall be subject to: (i) adoption of the Plan by the
affirmative vote of at least a majority of the Units outstanding on the Record
Date for the meeting, and (ii) such rights to terminate or amend the Plan as are
set forth herein. If the Plan is so adopted, then the directors and officers of
the managing general partner of NHC shall cause this Plan to be implemented in
accordance with the following terms, all of which must be accomplished on or
before 12:00:01 a.m. central time on January 1, 1998.
3. Contribution to REIT's Operating Partnership of Qualifying Assets
and Assumption by REIT of Certain Liabilities. NHC has formed the REIT under the
Maryland General Corporation Law and REIT has formed NHR/OP, L.P., a Delaware
limited partnership (the "Operating Partnership"). NHC shall contribute to
Operating Partnership the specified assets, subject to certain specified
liabilities, effective at 4:00 p.m. central time on December 31, 1997 pursuant
to the Contribution Agreement (the "Contribution Agreement") attached hereto as
Exhibit A pursuant to which: (a) real estate located in Florida owned by NHC
shall be leased to the Operating Partnership pursuant to a long term capitalized
lease (the "Capitalized Lease"), (b) substantially all other real estate owned
by NHC shall be conveyed by deed (the "Deeds") to the Operating Partnership
pursuant to deed forms selected by officers of the managing general partner of
NHC, (c) debt described in the Contribution Agreement secured by the real
property located
<PAGE> 2
in South Carolina shall be paid by, but not assumed by, the Operating
Partnership, (d) other debt of NHC described in the Contribution Agreement shall
be assumed by the Operating Partnership, (e) the notes and related security
including mortgages owned by NHC, as lender, specified in the Contribution
Agreement shall be conveyed to the Operating Partnership, and (f) certain other
assets having little or no book value on NHC's books, as specified in the
Contribution Agreement, shall be conveyed to the Operating Partnership.
4. Agreements Between REIT and Corporation. Immediately after the
effectiveness of the matters described in paragraph 3 above, the following shall
occur: (a) the Operating Partnership shall lease to the Corporation, and the
Corporation shall lease from the Operating Partnership, pursuant to the
Operating Lease (the "Operating Lease"), attached hereto as Exhibit B all real
estate subject to the Contribution Agreement and, (b) the REIT, Operating
Partnership and Corporation shall enter into the Advisory Agreement, attached
hereto as Exhibit C. In the event of a title problem or dispute involving the
real property subject to the Capitalized Lease or conveyed pursuant to the
Deeds, to the maximum extent that NHC (or the Corporation, as successor to NHC
after the Merger) has a claim against a predecessor-in-title or a title
insurance company, NHC (or the Corporation as successor to NHC after the Merger)
shall indemnify, defend and hold REIT harmless from all damages, but not
otherwise. REIT and Operating Partnership, jointly and severally, shall
indemnify, defend and hold NHC and Corporation harmless with respect to all debt
assumed by or which REIT or Operating Partnership has agreed to pay in
accordance with the foregoing. REIT and Operating Partnership agree, without the
written consent of the Corporation, not to cause or suffer any such debt to be
defaulted or otherwise breached. Corporation shall indemnify, defend and hold
REIT and Operating Partnership harmless with respect to all debt and all
obligations of NHC except those specifically assumed by or which REIT or
Operating Partnership have agreed to pay in accordance with the foregoing.
Corporation agrees, without the written consent of REIT and Operating
Partnership, not to cause or suffer any such debt to be defaulted or otherwise
breached. The Corporation shall use its best efforts to provide to REIT and
Operating Partnership financial statements of the Corporation, and any
predecessor, and the unqualified opinion from a nationally recognized
independent accounting firm with respect to such annual financial statements,
and consents of auditors to the inclusion of such financial statements in any
registration statements, private placement memoranda, filings on any exchange or
with any regulatory body, if any, necessary or appropriate in order to enable
REIT and Operating Partnership to comply with applicable registration and
reporting requirements of federal and state securities laws or exchange
requirements; and expenses relating to the foregoing shall be borne by the
Corporation (including obtaining audits if required by the foregoing even if the
Corporation does not otherwise need to obtain them) as long as the Corporation
is the investment advisor of the REIT (whether pursuant to the Advisory
Agreement attached hereto, any amendment thereof, or a replacement thereto) and
for such period of time after such advisory relationship ends until such time as
REIT and Operating Partnership no longer are legally required to include such
financial statements in its SEC filings; the Corporation shall indemnify, defend
and hold REIT and Operating Partnership harmless with respect to any damages
caused by any errors or misstatements in such financial statements.
2
<PAGE> 3
5. Contingent Liabilities. The Corporation, by reason of the merger
described below, shall assume and agree to pay (to the extent that NHC is liable
therefor, subject to all of the defenses and offsets which are available to NHC)
all absolute and contingent liabilities of NHC, except as follows, each of which
shall be assumed by the REIT and Operating Partnership, jointly and severally,
effective with the effectiveness of the Contribution Agreement: (a) the absolute
liabilities described in paragraph 3 above and described more fully in the
Contribution Agreement, and (b) environmental and hazardous material liabilities
relating to the land or improvements thereon which are subject to either the
Capitalized Lease or the Operating Leases, described above, except those created
from and after January 1, 1998 by the Corporation or its tenants,
subcontractors, agents or employees.
6. Issuance of REIT Shares to NHC; Distribution to Unitholders. In
consideration for the Contribution Agreement REIT shall issue to NHC that number
of shares of REIT common stock which is equal to the number of Units outstanding
on the date of the Contribution Agreement; provided, however, the Excess Stock,
as defined in the REIT Charter, which would have been issued to National Health
Corporation ("National") shall, instead, entitle National to receive one Unit in
the Operating Partnership ("OP Units") for each share of Excess Stock. NHC shall
immediately thereafter distribute or cause to be distributed to each Unitholder
of record immediately prior to the Effective Time, as later defined, one (1)
share of REIT common stock for each Unit owned by the Unitholder subject to the
proviso in the immediately preceding sentence. Such actions shall result in the
spin out of the REIT, without the necessity of the surrender of unit
certificates. All such actions shall be effective for all purposes on or before
11:59 p.m. central time, December 31, 1997; provided, however, the physical
delivery of the certificates representing the REIT shares and OP Units shall
take place as soon as practical thereafter. REIT and Corporation agree that all
options and convertible debentures of NHC which grant rights to subscribe for
NHC Units exercisable or convertible after December 31, 1997, shall be deemed to
grant the right to acquire an equal number of shares of REIT shares and an equal
number of Corporation shares as such right grants in Units of NHC. The exercise
price for such options and receipt thereof shall be divided pro rata between
REIT and Corporation (and the pro rata distribution shall be equal to the ratio
that the closing price on the American Stock Exchange at the close of business
on the first trading day in 1998 of REIT shares and Corporation shares bear to
each other). The interest and principal and all other payments due under or
obligations due as a result of such convertible debentures is to be paid and
performed by the Corporation and if the conversion rights of any of such debt is
exercised then the Corporation shall provide written notification thereof to
REIT, and the REIT shall issue (upon payment of cash by Corporation to REIT in
the amount of the par value for such REIT shares) REIT shares equal to the
number of shares issued by Corporation upon such conversion; and REIT agrees, at
the expense of Corporation, to cause to be filed any registration statement
relating to REIT shares required by agreements binding on Corporation or needed
as determined in the sole discretion of Corporation. Notwithstanding the
foregoing in this paragraph 6, the Convertible Debentures issued pursuant to the
Note Purchase Agreement dated in October 1997 shall be convertible solely into
Corporation shares and all obligations of NHC pursuant to such agreement (as
well as the related Note and Registration Rights Agreement) shall be solely
those of the Corporation.
3
<PAGE> 4
7. Merger. Effective as of 11:59 p.m., central time, December 31, 1997
(the "Effective Time") NHC shall merge with and into the Corporation pursuant to
the Merger Agreement attached hereto as Exhibit D.
8. Amendment or Abandonment of Plan. The Board of Directors of the
managing general partner of NHC may modify or amend the Plan at any time prior
to Unitholder approval. Such Board of Directors may abandon the Plan without
Unitholder approval at any time prior to 11:59 p.m., central time, December 31,
1997 (either before or after Unitholder adoption) in its sole and absolute
discretion if it deems such abandonment in the best interest of Unitholders.
If the Plan is not implemented because it does not receive the
requisite Unitholder vote or the other conditions specified herein are not met,
or because the Board of Directors determines for some other reason that it is
advisable to abandon the Plan, the business and legal structure of NHC will
continue substantially in the present manner.
9. Miscellaneous.
(a) In connection with the Plan, the unit option plans of NHC
will be terminated and the unit options outstanding thereunder as of December
31, 1997 to the extent not then exercised, will be cancelled to the maximum
extent permitted contractually and by law.
(b) All other employee benefit plans of NHC which are not
described in the Registration Statement on Form S-4 as employee benefits of the
Corporation shall be cancelled on December 31, 1997.
(c) The Board of Directors of the managing general partner of
NHC and the officers of NHC shall have the power to adopt all resolutions, and
the officers of NHC shall have the power to execute, deliver, and file all
instruments, documents and certificates in the offices of the Secretaries of
State of the State of Tennessee, Delaware and Maryland or other offices, and to
publish and give such notices, and to do any and all other or additional things
(including the setting of record dates and the closing of stock transfer books),
as are required by the laws of the State of Tennessee, Delaware and Maryland or
other applicable laws, or as such Board of Directors or other officers may deem
necessary, desirable or appropriate to carry out the provisions of this Plan.
(d) This Plan is attached to and is part of a Registration
Statement on Form S-4 filed by the Corporation with the Securities and Exchange
Commission, reference to which is hereby made for any and all purposes.
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<PAGE> 5
Executed as of the _____ day of ________________, 1997.
NATIONAL HEALTHCARE L.P.
By its Managing General Partner NHC, Inc.
By: _____________________________________
W. Andrew Adams, President
NATIONAL HEALTHCARE CORPORATION
By: _____________________________________
W. Andrew Adams, President
NATIONAL HEALTH REALTY, INC.
By: _____________________________________
W. Andrew Adams, President
NHR/OP, L.P.
By: National Health Realty, Inc., its general partner
By:
_____________________________________
W. Andrew Adams, President
5
<PAGE> 6
EXHIBIT INDEX
Exhibit A Contribution Agreement
Exhibit B Operating Lease Agreement
Exhibit C Advisory Agreement
Exhibit D Merger Agreement
6
<PAGE> 1
Exhibit 2.2
AGREEMENT OF MERGER
OF
NATIONAL HEALTHCARE L.P.
(a Delaware limited partnership)
AND
NATIONAL HEALTHCARE CORPORATION
(a Delaware corporation)
THIS AGREEMENT OF MERGER is made and entered into this ___ day of
_________________, 1997 by and between NATIONAL HEALTHCARE L.P., a Delaware
limited partnership ("NHC"), and NATIONAL HEALTHCARE CORPORATION, a Delaware
corporation ("CORPORATION").
WHEREAS, National HealthCare L.P. is a business limited partnership of
the State of Delaware with its registered office therein located at 1013 Centre
Road, City of Wilmington, County of New Castle; and
WHEREAS, National HealthCare Corporation is a business corporation of
the State of Delaware with its registered office therein located at 9 East
Loockerman Street, City of Dover, County of Kent; and
WHEREAS, Section 263 of the Delaware General Corporation Law and
Section 17-211 of the Delaware Revised Uniform Limited Partnership Act permit
the merger of a corporation and limited partnership; and
WHEREAS, the Board of Directors of the Corporation and the Board of
Directors of NHC, Inc., the Managing General Partner of NHC, deem it is
advisable and to the advantage, welfare and best interests of said entities and
their respective stockholders and unitholders to merge NHC with and into the
Corporation pursuant to and in accordance with the provisions of Section 263 of
the General Corporation Law of the State of Delaware, Section 17-211 of the
Delaware Revised Uniform Limited Partnership Act and Section 6.4(a) of the
Amended and Restated Agreement of Limited Partnership of NHC, upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreement of the parties hereto, being thereunto duly approved and adopted by
the general partners and a majority of the limited partners of NHC and by the
Board of Directors and stockholders of the Corporation, the parties agree as
follows:
<PAGE> 2
1. Terms and Conditions of Merger; Method of Effecting Merger. Upon the
Effective Time (as defined herein), NHC shall merge with and into the
Corporation and the separate partnership existence of NHC shall cease, and the
Corporation shall continue as the surviving corporation (sometimes hereinafter
referred to as the "SURVIVING CORPORATION"). The merger shall be effected by the
filing of a Certificate of Merger with the Delaware Secretary of State.
2. Effective Time. The effective date and time of the merger shall be
11:59 p.m., central time, December 31, 1997 (the "EFFECTIVE TIME").
3. Manner of Converting Shares and Partnership Interests. Each issued
and outstanding unit of limited partnership interest ("UNIT") of NHC shall, at
the Effective Time, represent one share of common stock of the Corporation. New
certificates will not be issued for the shares of the Corporation until the
holder thereof subsequently sells, exchanges or surrenders the certificate to
the Corporation's transfer agent. The shares of the Corporation issued prior to
the merger shall not be converted or exchanged in any manner, but each said
share which is issued as of the Effective Time shall be canceled without any
action on the holder's part.
4. Assumption of Rights and Liabilities by Corporation. At the
Effective Time, NHC shall be merged into the Corporation which shall continue as
the Surviving Corporation, and the Surviving Corporation shall become the owner,
without transfer, of all rights, powers, assets, qualifications and property of
NHC, and the Surviving Corporation shall become subject to all debts and
liabilities of NHC in the same manner as if the Surviving Corporation had itself
incurred them.
5. Name. The Corporation shall continue its existence as the Surviving
Corporation under its present name.
6. Certificate of Incorporation of Surviving Corporation. The
Certificate of Incorporation of the Corporation, as now in force and effect,
shall continue to be the Certificate of Incorporation of said Surviving
Corporation until amended and changed in the manner prescribed by the provisions
of the General Corporation Law of the State of Delaware.
7. Bylaws of Surviving Corporation. The present Bylaws of the
Corporation, as now in force and effect, shall continue to be the Bylaws of said
Surviving Corporation until changed, altered or amended as therein provided and
in the manner prescribed by the provisions of the General Corporation Law of the
State of Delaware.
8. Directors and Officers of Surviving Corporation. The directors and
officers in office of the Corporation at the Effective Time shall be the members
of the Board of Directors of and the officers of said Surviving Corporation, all
of whom shall hold their directorships and offices until the election and
qualification of their respective successors or until their tenure is otherwise
terminated in accordance with the Bylaws of the Surviving Corporation.
<PAGE> 3
9. Amendment or Abandonment of Agreement of Merger. The Board of
Directors of NHC, Inc., the Managing General Partner of NHC, may modify or amend
this Agreement of Merger at any time prior to approval by the holders of the
Units (the "UNITHOLDERS"). Such Board of Directors may abandon the Agreement of
Merger without Unitholder approval at any time prior to 11:59 p.m., central
time, December 31, 1997 (either before or after Unitholder adoption) in its sole
and absolute discretion if it deems such abandonment in the best interest of
Unitholders. If the Agreement of Merger is not implemented because it does not
receive the requisite Unitholder vote or the other conditions specified herein
are not met, or because the Board of Directors of NHC, Inc. determines for some
other reason that it is advisable to abandon the Agreement of Merger, the
business and legal structure of NHC will continue substantially in the present
manner.
10. General Authorization. The Board of Directors and the proper
officers of NHC, Inc. and of the Corporation and Surviving Corporation are
hereby authorized, empowered and directed to do any and all acts and things, and
to make, execute, deliver, file and record any and all instruments, papers and
documents which shall be or become necessary, proper or convenient to carry out
or put into effect any of the provisions of this Agreement of Merger or of the
merger provided for herein.
IN WITNESS WHEREOF, the undersigned have executed this Agreement of
Merger as of the ____ day of ______________, 1997.
NHC:
NATIONAL HEALTHCARE L.P.
By: NHC, Inc., its Managing General Partner
By:_________________________________________
Printed Name:_______________________________
Title of Authorized Officer:________________
CORPORATION:
NATIONAL HEALTHCARE CORPORATION
By:_________________________________________
Printed Name:_______________________________
Title of Authorized Officer:________________
<PAGE> 4
CERTIFICATE OF SECRETARY OF
NATIONAL HEALTHCARE CORPORATION
(a Delaware corporation)
The undersigned, being the Secretary of National HealthCare
Corporation, a Delaware corporation, does hereby certify that the holders of all
of the outstanding stock of said corporation dispensed with a meeting and vote
of shareholders, and all of the shareholders entitled to vote consented in
writing, pursuant to the provisions of Section 228 of the General Corporation
Law of the State of Delaware, to the adoption of the foregoing Agreement of
Merger.
Executed on this ____ day of _________________, 1997.
NATIONAL HEALTHCARE CORPORATION
By: ________________________________
Richard F. LaRoche, Jr.
Secretary
<PAGE> 5
CERTIFICATE OF SECRETARY OF
THE MANAGING GENERAL PARTNER
OF
NATIONAL HEALTHCARE L.P.
(a Delaware limited partnership)
The undersigned, being the Secretary of NHC, Inc., a Tennessee
corporation and the Managing General Partner of National HealthCare L.P., does
hereby certify that the foregoing Agreement of Merger was submitted to the
Unitholders of National HealthCare L.P. entitled to vote at a special meeting
thereof for the purpose of acting on the Agreement of Merger. Due notice of the
time, place, and purpose of said meeting was mailed to each Unitholder of said
limited partnership at least 20 days prior to the date of the meeting. At said
meeting, the Agreement of Merger was considered by the Unitholders entitled to
vote and, a vote having been taken for the adoption or rejection by them of the
Agreement of Merger, at least a majority of the outstanding units entitled to
vote of the limited partnership was voted in favor of the adoption of the
Agreement of Merger.
Executed on this ____ day of _________________, 1997.
NHC, INC., Managing General Partner of
NATIONAL HEALTHCARE L.P.
By: ________________________________
Richard F. LaRoche, Jr.
Secretary
<PAGE> 1
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
NATIONAL HEALTHCARE CORPORATION
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the
acts amendatory thereof and supplemental thereto, and known, identified, and
referred to as the "Delaware General Corporation Law"), hereby certifies that:
FIRST: The name of the Corporation (hereinafter called the
"Corporation") is NATIONAL HEALTHCARE CORPORATION.
SECOND: The address, including street, number, city, and county, of the
registered office of the Corporation in the State of Delaware is 9 East
Loockerman Street, Dover, Delaware 19901, County of Kent; and the name of the
registered agent of the Corporation in the State of Delaware at such address is
National Registered Agents, Inc.
THIRD: The nature of the business or purposes of the Corporation is to
engage in any lawful act or activity for which corporations may be organized
under the Delaware General Corporation Law.
FOURTH:
1. The maximum number of shares of stock which the Corporation shall
have the authority to issue is thirty million (30,000,000) shares of Common
Stock, having a par value of $.01 per share, which shares shall not be subject
to any preemptive rights and ten million (10,000,000) shares of undesignated
preferred stock having a par value of $.01 per share.
2. Pursuant to Section 151 of the Delaware General Corporation Law, a
statement of the designations, powers, preferences and rights, and the
qualifications, limitations and restrictions thereof, in respect of each class
of capital stock is as follows:
A. PREFERRED STOCK
The Board of Directors is hereby expressly authorized at any time, and
from time to time, to provide for the issuance of shares of preferred stock in
one or more series, with such voting powers, full or limited, or no voting
powers, and with such designations, preferences and relative, participating,
optional or other rights, and qualifications or
<PAGE> 2
restrictions thereof, as shall be stated and expressed in the resolution or
resolutions providing for the issue thereof adopted by a majority of the Board
of Directors then in office and the certificate of designations filed under the
Delaware General Corporation Law setting forth such resolution or resolutions,
including (without limiting the generality thereof) the following as to each
such series:
(i) the designation of such series;
(ii) the dividends, if any, payable with respect to such series,
the rates or basis for determining such dividends, any
conditions and dates upon which such dividends shall be
payable, the preferences, if any, of such dividends over, or
the relation of such dividends to, the dividends payable on
the Common Stock or any other series of preferred stock,
whether such dividends shall be noncumulative or cumulative,
and, if cumulative, the date or dates from which such
dividends shall be cumulative;
(iii) whether shares of such series shall be redeemable at the
option of the Board of Directors or the holder, or both, upon
the happening of a specified event and, if redeemable, whether
for cash, property or rights, including securities of the
Corporation, the time, prices or rates and any adjustment and
other terms and conditions of such redemption;
(iv) the terms and amount of any sinking, retirement or purchase
fund provided for the purchase or redemption of shares of such
series;
(v) whether shares of such series shall be convertible into or
exchangeable for shares of Common Stock or any other series of
preferred stock, at the option of the Corporation or of the
holder, or both, or upon the happening of a specified event
and, if provision be made for such conversion or exchange, the
terms, prices, rates, adjustments and any other terms and
conditions thereof;
(vi) the extent, if any, to which the holders of shares of such
series shall be entitled to vote with respect to the election
of directors or otherwise, including, without limitation, the
extent, if any, to which such holders shall be entitled,
voting as a series or as a part of a class, to elect one or
more directors upon the happening of a specified event or
otherwise;
(vii) the restrictions, if any, on the issue or reissue of shares of
such series or any other series;
(viii) the extent, if any, to which the holders of shares of such
series shall be entitled to preemptive rights; and
2
<PAGE> 3
(ix) the rights of the holders of shares of such series upon the
liquidation of the Corporation or any distribution of its
assets.
B. COMMON STOCK
(i) Dividends and Distributions. No payment of dividends or
distributions shall be made to the holders of shares of
Common Stock unless and until the holders of shares of
preferred stock receive any preferential amounts to which
they are entitled under this Article Fourth or in the
resolution or resolutions providing for the issue of shares
of preferred stock. Subject to the limitation set forth in
the preceding sentence of this Paragraph (i) and except as
otherwise provided by this Certificate of Incorporation or
in the resolution or resolutions providing for the issue of
shares of preferred stock, the holders of shares of Common
Stock shall be entitled to receive such dividends and
distributions as may be declared upon such shares of Common
Stock, from time to time by a resolution or resolutions
adopted by the Board of Directors.
(ii) Voting Rights. All holders of Common Stock shall be entitled
to notice of any stockholders' meeting. Subject to the
provisions of any applicable law and except as otherwise
provided in this Certificate of Incorporation or by the
resolution or resolutions providing for the issue of shares
of preferred stock, all voting rights shall be vested solely
in the Common Stock. The holders of shares of Common Stock
shall be entitled to vote upon the election of directors and
upon any other matter submitted to the stockholders for a
vote. Each share of Common Stock issued and outstanding
shall be entitled to one noncumulative vote. A fraction of a
share of Common Stock shall not be entitled to any voting
rights whatsoever.
(iii) Liquidation, Dissolution or Winding Up. Except as otherwise
provided in this Certificate of Incorporation and subject to
the rights of holders, if any, of preferred stock to receive
preferential liquidation distributions to which they are
entitled under this Article Fourth or under the resolution
or resolutions providing for the issue of shares of
preferred stock, in the event of any liquidation,
dissolution or winding up of the Corporation, whether
voluntary or involuntary, after payment or provision for
payment of the debts and liabilities of the Corporation, all
assets of the Corporation shall be shared pro rata among
the holders of the Common Stock.
3. Except as otherwise provided in this Certificate of Incorporation or
by applicable law, the Corporation's capital stock, regardless of class, may be
issued for such consideration and for such corporate purposes as the Board of
Directors may from time to
3
<PAGE> 4
time determine by a resolution or resolutions adopted by a majority of the Board
of Directors then in office.
FIFTH: The name and the mailing address of the incorporator are
as follows:
NAME MAILING ADDRESS
---- ---------------
Ernest E. Hyne, II 1800 First American Center
315 Deaderick Street
Nashville, Tennessee 37238
SIXTH: The Corporation shall have perpetual existence.
SEVENTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors, or any class of them, and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
ss.291 of Title 8 of the Delaware Code, or on the application of trustees in
dissolution or of any receiver or receivers appointed for this Corporation under
ss.279 of Title 8 of the Delaware Code, order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths (3/4) in value of
the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this Corporation, as the case
may be, and also on this Corporation.
EIGHTH:
1. The management of the business and the conduct of the affairs of the
Corporation shall be vested in its Board of Directors.
2. The Board of Directors shall be comprised of not less than six (6)
or more than twelve (12) members, the exact numbers to be fixed from time to
time by the Board of Directors pursuant to a resolution adopted by a majority of
directors then in office. The number of directors of the Corporation may be
increased or decreased outside of this range only in the following manner:
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<PAGE> 5
A. By a majority of the shareholders of the Corporation entitled
to vote if the then existing Board of Directors of the
Corporation unanimously approve the proposed increase or
decrease in members; or
B. By a vote of the holders of 70% or more of the combined voting
power of the then outstanding shares of stock entitled to vote
generally in the election of directors voting together as a
single class.
Notwithstanding anything contained in the Bylaws or this Certificate of
Incorporation of the Corporation to the contrary, the affirmative vote of the
holders of at least 70% of the voting power of all of the shares of stock of the
Corporation entitled to vote generally in the election of directors voting
together as a single class shall be required to alter, amend or repeal this
Section 2 or adopt any provision inconsistent therewith.
3. The Board of Directors shall be divided into three classes,
designated Class 1, Class 2 and Class 3. Each class shall consist, as nearly as
may be possible, of one-third of the number of directors constituting the Board
of Directors. The term of office for Class 1 directors will first expire at the
annual meeting of stockholders for 1999; the term of office of Class 2 directors
will first expire at the annual meeting of stockholders for 2000; and the term
of office of Class 3 directors will first expire at the annual meeting of
stockholders for 2001, and in each case until their successors are duly elected
and qualified. At each annual meeting of stockholders commencing with the first
annual meeting of stockholders, successors to the class of directors whose terms
expire at the annual meeting of stockholders shall be elected by stockholders
for a three-year term and until their successors are duly elected and qualified.
Except as otherwise provided herein or in the Bylaws, increases in the size of
the Board of Directors shall be distributed among the classes so as to render
the class as nearly equal in size as possible. Whenever the holders of preferred
stock issued pursuant to this Certificate of Incorporation or the resolution or
resolutions adopted by a majority of the Board of Directors then in office
providing for the issue of shares of preferred stock shall have the right,
voting as a separate class, to elect directors, the election, term of office,
filling of vacancies and other terms of such directorships shall be governed by
the terms of this Certificate of Incorporation or such resolution or
resolutions, as the case may be, and such directorships shall not be divided
into serial classes or otherwise subject to this Section 3 unless expressly so
provided therein.
4. One or more directors or the entire Board of Directors of the
Corporation may be removed at any time for "cause" by the affirmative vote of
the holders of a majority of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors (considered
for this purpose as one class). "Cause," for purposes of this section shall be
(i) any fraudulent or dishonest act or activity by the director; or (ii)
behavior materially detrimental to the business of the Corporation.
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5. Whenever the Corporation shall be authorized to issue only one class
of stock, each outstanding share shall entitle the holder thereof to notice of,
and the right to vote at, any meeting of stockholders. Whenever the Corporation
shall be authorized to issue more than one class of stock, no outstanding share
of any class of stock which is denied voting power under the provisions of this
Certificate of Incorporation shall entitle the holder thereof to the right to
vote at any meeting of stockholders except as otherwise provided by applicable
law; provided, that no share of any such class which is otherwise denied voting
power shall entitle the holder thereof to vote upon the increase or decrease in
the number of authorized shares of said class.
NINTH: The personal liability of the directors of the Corporation is
hereby eliminated to the fullest extent permitted by paragraph (7) of clause (b)
of ss.102 of the Delaware General Corporation Law, as the same may be amended or
supplemented. The provisions of this Article Ninth are not intended to, and
shall not, limit, supersede or modify any other defense available to a director
under applicable law. Any repeal or modification of this Article Ninth by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
TENTH:
1. The Corporation shall, to the fullest extent permitted by ss.145 of
the Delaware General Corporation Law, as the same may be amended or supplemented
(but in the case of any such amendment or supplement, only to the extent that
such amendment or supplement permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment or supplement), indemnify any and all directors and officers
whom it shall have power to indemnify under said section from and against any
and all of the expenses, liabilities or other matters referred to in or covered
by said section, and the indemnification provided for herein shall continue as
to a person who has ceased to be a director or officer and shall inure to the
benefit of the heirs, executors and administrators of such person. The
Corporation may, in its sole discretion and to the fullest extent permitted by
ss.145 of the Delaware General Corporation Law, as the same may be amended or
supplemented, indemnify any and all employees and agents whom it shall have
power to indemnify under said section from and against any and all of the
expenses, liabilities, or other matters referred to in or covered by said
section, and the indemnification provided for herein shall continue as to a
person who has ceased to be an employee or agent and shall inure to the benefit
of the heirs, executors, and administrators of such person.
2. The Corporation shall pay the expenses incurred in defending any
proceeding against a director or officer which is or may be subject to
indemnification pursuant to this Article Tenth in advance of final disposition
of such proceeding; provided, however, if the Delaware General Corporation Law
so requires, that the payment of such
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expenses incurred by a director or officer shall be made only upon receipt of an
undertaking by the director or officer to repay all amounts advanced if it
should be ultimately determined that the director or officer is not entitled to
be indemnified under this Article Tenth or otherwise. The Corporation may, in
its sole discretion, advance expenses incurred by its employees or agents to the
same extent as expenses may be advanced to its directors and officers hereunder.
3. The rights conferred on any person by this Article Tenth shall be
deemed contract rights and shall not be exclusive of any other rights which such
person may have or hereafter acquire under any statute, provision of this
Certificate of Incorporation or the Corporation's Bylaws, agreement, or vote of
stockholders or disinterested directors or otherwise.
4. The Corporation may purchase and maintain insurance to protect
itself and any other director, officer, employee or agent of the Corporation or
any corporation, partnership, joint venture, trust or other enterprise against
any liability, whether or not the Corporation would have the power to indemnify
such person under the Delaware General Corporation Law.
ELEVENTH:
1. From time to time any of the provisions of this Certificate of
Incorporation may be amended, altered or repealed in accordance with the laws of
the State of Delaware at the time in force; provided, however, that the
affirmative vote of the holders of at least a majority of the outstanding shares
of the Corporation's capital stock entitled to vote thereon and a majority of
the members of the Board of Directors then holding office is required to amend
those provisions of this Certificate of Incorporation set forth in Articles
Eighth, Ninth, Tenth, Eleventh or Twelfth.
2. The Corporation's Bylaws may be amended, added to or repealed by an
affirmative vote of at least a majority of either (i) the shares of the
Corporation's capital stock entitled to vote thereon, or (ii) the Board of
Directors.
TWELFTH: The President or a majority of the Board of Directors of the
Corporation may call special meetings of stockholders.
THIRTEENTH: The vote of stockholders of the Corporation required to
approve any Business Combination shall be as set forth in this Article
Thirteenth. The term "Business Combination" as used in this Article Thirteenth
shall mean any transaction that is referred to in any one or more clauses A - E
of Section 1 of this Article; each other capitalized term used in this Article
shall have the meaning ascribed to it in Section 3 of this Article.
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1. In addition to any affirmative vote required by law or this
Certificate of Incorporation, and except as otherwise expressly provided in
Section 2 of this Article Thirteenth, the following Business Combinations shall
not be consummated without the affirmative vote of the holders of at least 70
percent of the combined voting power of the then outstanding shares of stock of
all classes and series of the Corporation entitled to vote generally in the
election of directors ("Voting Stock"), in each case voting together as a single
class (such affirmative vote shall be required notwithstanding the fact that no
vote may be required, or that a lesser percentage may be specified, by law or by
this Certificate of Incorporation):
A. any merger or consolidation of the Corporation or any
subsidiary with (i) any Interested Stockholder or (ii) any
other Corporation or entity (whether or not itself an
Interested Stockholder) which is or after each merger or
consolidation would be, an Affiliate of an Interested
Stockholder; or
B. any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions)
to or with any Interested Stockholder or any Affiliate of any
Interested Stockholder of assets of the Corporation or any
Subsidiary having an aggregate fair market value of
$10,000,000 or more; or
C. the issuance or transfer by the Corporation or any Subsidiary
(in one transaction or a series or transactions) of any
securities of the Corporation or any Subsidiary to any
Interested Stockholder or any Affiliate of any Interested
Stockholder in exchange for cash, securities or other
property (or a combination thereof) having an aggregate fair
market value of $10,000,000 or more, other than the issuance
of securities upon the conversion of convertible securities
of the Corporation or any Subsidiary which were not acquired
by such Interested Stockholder (or such Affiliate) from the
Corporation or a Subsidiary; or
D. the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of
an Interested Stockholder or any Affiliate of any Interested
Stockholder; or
E. any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any
merger or consolidation of the Corporation with any of its
Subsidiaries or any other transaction (whether or not with or
into or otherwise involving an Interested Stockholder) which
in any such case has the effect, directly or indirectly, of
increasing the proportionate outstanding shares of any class
or series of stock or securities convertible into stock of the
Corporation or any Subsidiary which is directly
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or indirectly beneficially owned by any Interested
Stockholder or any Affiliate of any Interested Stockholder.
2. The provisions of Section 1 of this Article Thirteenth shall not be
applicable to any Business Combination which shall have been approved by a
majority of the Disinterested Directors, and such Business Combination shall
require only such affirmative vote as is required by law and any other provision
of this Certificate of Incorporation.
3. For purposes of this Article Thirteenth:
A. A "person" shall mean any individual, firm, company or other
entity.
B. "Interested Stockholder" shall mean any person (other than the
Corporation, any Subsidiary, or the National Health
Corporation Employee Stock Ownership Plan and Trust) who or
which:
(i) is the beneficial owner, directly or indirectly, of
more than 20 percent of the combined voting power of
the then outstanding shares of Voting Stock; or
(ii) is an Affiliate of the Corporation and at any time
within the two-year period immediately prior to the
date in question was the beneficial owner, directly
or indirectly, of 20 percent or more of the combined
voting power of the then outstanding shares of Voting
Stock; or
(iii) is an assignee of or has otherwise succeeded to the
beneficial ownership of any shares of Voting Stock
that were at any time within the two-year period
immediately prior to the date in question
beneficially owned by any Interested Stockholder, if
such assignment or succession shall have occurred in
the course of a transaction or series of transactions
not involving a public offering within the meaning of
the Securities Act of 1933.
C. A person shall be a "beneficial owner" of any Voting Stock:
(i) which such person or any of its Affiliates or
Associates beneficially owns directly or
indirectly; or
(ii) which such person or any of its Affiliates or
Associates has (a) the right to acquire (whether such
right is exercisable immediately or only after the
passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or
options, or otherwise, or (b) the right to vote or
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direct the vote pursuant to any agreement,
arrangement or understanding; or
(iii) which are beneficially owned, directly or indirectly,
by any other person with which such person or any of
its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of
acquiring, holding, or disposing of any shares of
Voting Stock.
D. For the purposes of determining whether a person is an
Interested Stockholder pursuant to Section 3.B of this Article
Thirteenth, the number of shares of Voting Stock deemed to be
outstanding shall include shares deemed owned through
application of Section 3.C of this Article but shall not
include any other shares of Voting Stock that may be issuable
pursuant to any agreement, arrangement or understanding, or
upon exercise of conversion rights, warrants or options, or
otherwise.
E. "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as
amended.
F. "Subsidiary" means any company more than 50 percent of whose
outstanding stock having ordinary voting power in the
election of directors is owned, directly or indirectly, by
the Corporation or by a Subsidiary or by the Corporation and
one or more Subsidiaries; provided, however, that for the
purposes of the definition of Interested Stockholder set
forth in Section 3.B of this Article Thirteenth, the term
"Subsidiary" shall mean only a company of which a majority
of each class of equity security is owned, directly or
indirectly, by the Corporation.
G. "Disinterested Directors" means any member of the Board of
Directors of the Corporation who is unaffiliated with, and
not a nominee of, the Interested Stockholder and was a
member of the Board prior to the time that the Interested
Stockholder became an Interested Stockholder, and any
successor of a Disinterested Director who is unaffiliated
with, and not a nominee of, the Interested Stockholder and
who is recommended to succeed a Disinterested Director by a
majority of Disinterested Directors then on the Board of
Directors.
4. A majority of the Disinterested Directors of the Corporation shall
have the power and duty to determine, on the basis of information known to them
after reasonable inquiry, all facts necessary to determine compliance with this
Article Thirteenth, including, without limitation,
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A. whether a person is an Interested Stockholder,
B. the number of shares of Voting Stock beneficially owned by any
person,
C. whether a person is an Affiliate or Associate of another
person,
D. whether the requirements of Section 2 of this Article
Thirteenth have been met with respect to any Business
Combination, and
E. whether the assets which are the subject of any Business
Combination have, or the consideration to be received for the
issuance or transfer of securities by the Corporation or any
Subsidiary in any Business Combination has an aggregate fair
market value of $10,000,000 or more. The good faith
determination of a majority of the Disinterested Directors on
such matters shall be conclusive and binding for all purposes
of this Article Thirteenth.
5. Nothing contained in this Article Thirteenth shall be construed to
relieve any Interested Stockholder from any fiduciary obligation imposed by law.
6. Notwithstanding anything contained in this Certificate of
Incorporation to the contrary, the affirmative vote of the holders of at least
70 percent of the voting power of the Voting Stock, voting together as a single
class, shall be required to alter, amend, or repeal this Article Thirteenth or
to adopt any provision inconsistent therewith.
The undersigned, being the incorporator, for the purpose of forming a
Corporation under the laws of the State of Delaware does make, file and record
this Certificate of Incorporation, does certify that the facts herein stated are
true, and, accordingly, has hereto set his hand and seal this 26th day of
September, 1997.
/s/ Ernest E. Hyne, II
----------------------------------
Ernest E. Hyne, II
Incorporator
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Exhibit 3.2
Bylaws
of
National HealthCare Corporation
ARTICLE I
MEETINGS OF STOCKHOLDERS
1.1 Annual Meeting. The annual meeting of the stockholders shall be
held, at such place within or without the state of incorporation as may be
designated by the Board of Directors, on such date and at such time as shall be
designated each year by the Board of Directors and stated in the notice of the
meeting. At the annual meeting the stockholders shall elect directors by a
plurality vote and transact such other business as may properly be brought
before the meeting.
1.2 Special Meetings. Special meetings of the stockholders may be
called by the President or a majority of the Board of Directors. The place of
said meetings shall be designated by the directors. The business transacted at
special meetings of the stockholders of the corporation shall be confined to the
business stated in the notice given to the stockholders.
1.3 Notice of Stockholder Meetings. Written or printed notice of
stockholders meetings shall state the place, day, and hour of the meeting, and,
in the case of a special meeting, the purpose or purposes for which the meeting
is called and the person or persons calling the meeting; notice may be
communicated in person, by mail or private carrier or by other means of written
communication by or at the direction of the President, Secretary, officer, or
person calling the meeting to each stockholder entitled to vote at the meeting.
Such notice shall be delivered not less than ten (l0) nor more than sixty (60)
days before the date of the meeting; provided, however, that any such notice may
be waived in writing, either prior to or subsequent to such meeting.
1.4 Advance Notice Requirements. The provisions of this Section 1.4 are
in addition to, and do not waive, any standards in effect under applicable
federal or state law regarding stockholder proposals.
(a) At an annual or special meeting of stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. To be
properly brought before a meeting, business must be (i) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the Board
of Directors or the President, (ii) otherwise properly brought before the
meeting by or at the direction of the Board of Directors or President, or (iii)
brought before the meeting by a stockholder in accordance with these Bylaws. For
business to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof
<PAGE> 2
in writing to the Secretary of the corporation. To be timely, a stockholder's
notice must be delivered to or mailed and received at the principal executive
offices of the corporation not less than sixty (60) nor more than ninety (90)
days prior to the meeting; provided, however, that in the event that less than
seventy (70) days notice or prior public disclosure of the date of the meeting
is given or made to stockholders, notice by the stockholder to be timely must be
so received not later than the close of business on the tenth (10th) day
following the day on which such notice of the date of the meeting was mailed or
such public disclosure was made. A stockholder's notice shall set forth as to
each matter the stockholder proposes to bring before the meeting (i) a brief
description of the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting, (ii) the name and address,
as they appear on the corporation's books, of the stockholder proposing such
business, (iii) the class and number of shares which are beneficially owned by
the stockholder as of the record date of the meeting (if such record date is
publicly available) and as of the date of the notice, and (iv) any material
interest of the stockholder in such business. Notwithstanding anything in these
Bylaws to the contrary, no business shall be conducted at any annual or special
meeting except in accordance with the procedures set forth in this Section
1.4(a). The chairman of the meeting shall, if the facts warrant, determine that
the business was not properly brought before the meeting and in accordance with
the provisions of this Section 1.4(a), and if he shall so determine, he shall so
declare to the meeting and any such business not properly brought before the
meeting shall not be transacted.
(b) Notwithstanding anything to the contrary set forth in these Bylaws,
including the provisions of Section 1.4(a), only persons who are nominated in
accordance with the procedures set forth in this Section 1.4(b) shall be
eligible for election as directors. Nominations of persons for election to the
Board of Directors of the corporation may be made at a meeting of stockholders
by or at the direction of a majority of the Board of Directors or a duly
authorized committee thereof (which committee in the case of any nomination of a
director who is to be an Independent Director (as such term is defined in
Section 2.2 below) shall have a majority of Independent Directors) or by any
stockholder of the corporation entitled to vote for the election of directors at
the meeting who complies with the notice procedures set forth in this Section
1.4(b). Such nominations, other than those made by or at the direction of the
Board of Directors or a duly authorized committee thereof, shall be made
pursuant to written notice timely made in writing to the Secretary of the
corporation. To be timely, a stockholder's notice shall be delivered to or
mailed and received at the principal executive offices of the corporation within
the time periods specified in Section 1.4(a). Such notice shall set forth (i) as
to each person whom the stockholder proposes to nominate for election or
re-election as a director (w) the name, age, business address and residence
address of such person, (x) the principal occupation or employment of such
person (y) the class and number of shares of the corporation which are
beneficially owned by such person as of the record date of such meeting (if such
record date is publicly available) and as of the date of such notice, and (z)
any other information relating to such person that is required to be disclosed
in solicitations of proxies for election of directors or is otherwise required
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(including, without limitation, such person's written consent to being named in
the proxy statement as a nominee and to serve as a director if elected); and
(ii) as to the stockholder giving notice (y) the name and address, as they
appear on the corporation's books, of such
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stockholder, and (z) the class and number of shares of the corporation's capital
stock which are beneficially owned by such stockholder as of the record date of
the meeting (if such record date is publicly available) and as of the date of
such notice. At the request of the Board of Directors or a committee appointed
by it, any person nominated by the board or such committee for election as a
director shall furnish to the Secretary of the corporation that information
required to be set forth in a stockholder's notice of nomination which pertains
to the nominee. No person shall be eligible for election as a director unless
nominated in accordance with the procedure set forth in this Section 1.4(b). The
chairman of the meeting shall, if the facts warrant, determine that a nomination
was not made in accordance with the procedures prescribed by these Bylaws, and
if he should so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
1.5 Quorum Requirements. A majority of the shares entitled to vote,
present in person or represented by proxy, shall constitute a quorum for the
transaction of business. A meeting may be adjourned despite the absence of a
quorum, and notice of an adjourned meeting need not be given if the time and
place to which the meeting is adjourned are announced at the meeting at which
the adjournment is taken. When a quorum is present at any meeting, a majority in
interest of the stock there represented shall decide any question brought before
such meeting, unless the question is one upon which, by express provision of the
Certificate of Incorporation or Bylaws, or by the laws of Delaware, a larger or
different vote is required, in which case such express provision shall govern
the decision of such question.
1.6 Voting and Proxies. Every stockholder entitled to vote at a meeting
may do so either in person or by proxy appointment made by an instrument in
writing subscribed by such stockholder which proxy shall be filed with the
secretary of the meeting before being voted. Such proxy shall entitle the
holders thereof to vote adjournment of such meeting, but shall not be valid
after the final adjournment thereof. No proxy shall be valid after the
expiration of three (3) years from the date of its execution, unless the said
instrument expressly provides for a longer period.
ARTICLE II
BOARD OF DIRECTORS
2.1 Qualification and Election. Directors need not be stockholders or
residents of this State, but must be of legal age. They shall be elected by a
plurality of the votes cast at the annual meetings of the stockholders or at a
special meeting of the stockholders called for that purpose. Each director shall
hold office until the expiration of the term for which he is elected, and
thereafter until his successor has been elected and qualified.
2.2 Number. The Board of Directors shall be comprised of not less than
six (6) or more than twelve (12) members, the exact numbers to be fixed from
time to time by the Board of Directors pursuant to a resolution adopted by a
majority of directors then in office. The number of directors of the Corporation
may be increased or decreased outside of this range only in the following
manner:
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(a) By a majority of the shareholders of the Corporation entitled to
vote if the then existing Board of Directors of the Corporation unanimously
approve the proposed increase or decrease in members; or
(b) By a vote of the holders of 70% or more of the combined voting
power of the then outstanding shares of stock entitled to vote generally in the
election of directors voting together as a single class.
Notwithstanding anything contained in these Bylaws or the Certificate
of Incorporation of the Corporation to the contrary, the affirmative vote of the
holders of at least 70% of the voting power of all of the shares of stock of the
Corporation entitled to vote generally in the election of directors voting
together as a single class shall be required to alter, amend or repeal this
Section 2.2 or adopt any provision inconsistent therewith.
At least a majority of the Directors shall at all times (except
temporarily pending the filling of a vacancy as hereinafter provided) be persons
("Independent Directors") who are not officers, employees or owners (except for
less than 1% of any public company) of any corporation, partnership or other
person (including themselves) (a) which is a landlord of this corporation, or
(b) which has any other relationship with this corporation that would prevent
such person from serving on the Audit Committee of the Board of Directors of a
corporation having stock listed on the American Stock Exchange or the New York
Stock Exchange.
2.3 Classes. The Board of Directors shall be divided into three
classes, designated Class 1, Class 2 and Class 3. Each class shall consist, as
nearly as may be possible, of one-third of the number of directors constituting
the Board of Directors. The term of office for Class 1 directors will first
expire at the annual meeting of stockholders for 1999; the term of office of
Class 2 directors will first expire at the annual meeting of stockholders for
2000; and the term of office of Class 3 directors will first expire at the
annual meeting of stockholders for 2001, and in each case until their successors
are duly elected and qualified. At each annual meeting of stockholders
commencing with the first annual meeting of stockholders, successors to the
class of directors whose terms expire at the annual meeting of stockholders
shall be elected by stockholders for a three-year term and until their
successors are duly elected and qualified. Except as otherwise provided herein
or in the Certificate of Incorporation, increases in the size of the Board of
Directors shall be distributed among the classes so as to render the class as
nearly equal in size as possible. Whenever the holders of preferred stock issued
pursuant to the Certificate of Incorporation or the resolution or resolutions
adopted by a majority of the Board of Directors then in office providing for the
issue of shares of preferred stock shall have the right, voting as a separate
class, to elect directors, the election, term of office, filling of vacancies
and other terms of such directorships shall be governed by the terms of the
Certificate of Incorporation or such resolution or resolutions, as the case may
be, and such directorships shall not be divided into serial classes or otherwise
subject to this Section 2.3 unless expressly so provided therein.
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2.4 Meetings. The annual meeting of the Board of Directors shall be
held immediately after the adjournment of the annual meeting of the
stockholders, at which time the officers of the corporation shall be elected.
The board may also designate more frequent intervals for regular meetings.
Special meetings may be called at any time by the chairman of the board,
President, or any two directors. Members of the Board of Directors may
participate in a meeting of the Board of Directors by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
in such manner shall constitute presence in person at such a meeting.
2.5 Notice of Directors' Meetings. The annual and all regular board
meetings may be held without notice of the date, time, place or purpose of the
meeting. Special meetings shall be held upon notice sent by any usual means of
communication not less than twenty-four (24) hours before the meeting noting the
date, time and place of the meeting. The notice need not describe the purposes
of the special meeting. Attendance by a director at a meeting or subsequent
execution or approval by a director of the minutes of a meeting or a consent
action shall constitute a waiver of any defects in notice of such meeting and/or
consent action.
2.6 Quorum and Vote. A majority of the Directors then in office shall
constitute a quorum for transaction of business at any meeting of the Board of
Directors; provided, however, that a quorum for transaction of business with
respect to any matter in which any director (or affiliate of such director) who
is not an Independent Director has any interest shall consist of a majority of
the directors including a majority of the Independent Directors, then in office.
Except as otherwise required by law or by the Certificate of Incorporation, the
act of a majority of directors present at a meeting at which a quorum is present
shall constitute the act of the Board of Directors, except that no act relating
to any matter in which any director (or affiliate of such director) who is not
an Independent Director has any interest shall be the act of the Board unless a
majority of the Independent Directors on the Board vote for such act.
2.7 Executive, Audit and Other Committees. The Board of Directors, by a
resolution adopted by a majority of its members, may designate an executive
committee, consisting of two or more directors, an audit committee, a majority
of the members of which shall be Independent Directors, and other committees,
consisting of two or more directors. If any committee may take or authorize any
act as to any matter in which any director (or affiliate of such director) who
is not an Independent Director has or may have any interest, a majority of the
members of such committee shall be Independent Directors , except that any such
committee consisting of only two directors may have one Independent Director and
one director who is not an Independent Director. The Board may delegate to such
committee or committees any and all such authority as it deems desirable,
including the right to delegate to an executive committee the power to exercise
all the authority of the Board of Directors in the management of the affairs and
property of the corporation, except those powers which the Board of Directors is
specifically prohibited from delegating pursuant to Section 141(c)(2) of the
General Corporation Law of the State of Delaware. The Board of Directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of a
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member of a committee, the member or members present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the Board of Directors at act
at the meeting in the place of any such absent or disqualified member.
ARTICLE III
OFFICERS
3.1 Number. The corporation shall have a President, a Secretary, and
such other officers as the Board of Directors shall from time to time deem
necessary. Any two or more offices may be held by the same person, except the
offices of President and Secretary.
3.2 Election and Term. The officers shall be elected by, and shall hold
office at the pleasure of, the Board of Directors.
3.3 Duties. All officers shall have such authority and perform such
duties in the management of the corporation as are normally incident to their
offices and as the Board of Directors may from time to time provide.
ARTICLE IV
RESIGNATIONS, REMOVALS AND VACANCIES
4.1 Resignations. Any officer or director may resign at any time by
giving written notice to the Chairman of the Board, the President or the
Secretary. Any such resignation shall take effect at the time specified therein,
or, if no time is specified, then upon its acceptance by the Board of Directors.
4.2 Removal of Officers. Any officer or agent may be removed at any
time with or without cause by the Board of Directors.
4.3 Removal of Directors. Any or all of the directors may be removed at
any time for "cause" by the affirmative vote of the holders of a majority of the
outstanding shares of capital stock of the corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class). "Cause" for purposes of these Bylaws shall be: (i) any fraudulent or
dishonest act or activity by the director; or (ii) behavior materially
detrimental to the business of the Corporation.
4.4 Vacancies. Newly created directorships resulting from an increase
in the number of directors, and vacancies occurring in any office or
directorship for any reason, including removal of an officer or director, may be
filled by the vote of a majority of the directors remaining in office, even if
less than a quorum exists; provided, however, that any vacancy created by
removal of a director pursuant to Section 4.3 may be filled by action of the
stockholders taken at the same meeting
6
<PAGE> 7
at which the vacancy was created, such action to be taken upon the affirmative
vote of the holders of not less than a majority of the voting power of the
outstanding capital stock of the corporation entitled to vote in the election of
directors, voting as a single class.
ARTICLE V
CAPITAL STOCK
5.1 Stock Certificates. Every stockholder shall be entitled to a
certificate or certificates of capital stock of the corporation in such form as
may be prescribed by the Board of Directors. Unless otherwise decided by the
board, such certificates shall be signed by the President and the Secretary of
the corporation, however, any or all of the signatures may be a facsimile. The
corporation shall be entitled to treat the holder of record of any share or
shares of stock of the corporation as the holder in fact thereof and,
accordingly, shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it has actual or other notice thereof, except as provided by law.
5.2 Transfer of Shares. Shares of stock may be transferred on the books
of the corporation by delivery and surrender of the properly assigned
certificate, but subject to any restrictions on transfer imposed by either the
applicable securities laws or any stockholder agreement.
5.3 Loss, Theft or Destruction of Certificates. In the case of the
loss, theft, mutilation, or destruction of a certificate of stock, a duplicate
certificate may be issued upon such terms as the Board of Directors shall
prescribe.
ARTICLE VI
ACTION BY CONSENT
6.1 Directors. Whenever the directors are required or permitted to take
any action by vote, such action may be taken without a meeting on written
consent, setting forth the action so taken, signed by all the persons or
entities entitled to vote thereon, and such action shall be as valid and
effective as any action taken at a regular or special meeting of the directors.
6.2 Stockholders. Any action required or permitted to be taken by the
holders of the issued and outstanding stock of the Corporation may be effected
solely at an annual or special meeting of stockholders duly called and held in
accordance with law, the Certificate of Incorporation and these Bylaws, and not
by the consent in writing of such stockholders or any of them, provided,
however, that holders of shares of any series of the Corporation's preferred
stock may exercise the special voting rights, if any, of such series to elect
directors upon the occurrence of certain events specified in the Certificate of
Incorporation or in the resolution or resolutions adopted by a majority
7
<PAGE> 8
of the Board of Directors then in office providing for the issue of any series
of preferred stock pursuant to the Certificate of Incorporation, in any manner
now or hereafter permitted by the Certificate of Incorporation or the General
Corporation Law of the State of Delaware.
ARTICLE VII
AMENDMENT OF BYLAWS
These Bylaws may be amended, added to or repealed by an affirmative
vote of a majority of either (1) the shares of the corporation's capital stock
entitled to vote thereon represented at any duly constituted stockholders'
meeting, or (2) the Board of Directors.
ARTICLE VIII
FISCAL YEAR
The fiscal year for the corporation shall be fixed from time to time by
the Board of Directors.
CERTIFICATION
I certify that these Bylaws were adopted by written consent of the
Board of Directors of the corporation and became effective on _______________,
1997.
-----------------------------------
Richard F. LaRoche, Jr.
Secretary
8
<PAGE> 1
Exhibit 4.1
- --------------------------------------------------------------------------------
NATIONAL HEALTHCARE L.P.
$30,000,000
6.0% Convertible Senior Subordinated Debenture due 2000
INDENTURE
Dated as of August 29, 1995
FIRST AMERICAN NATIONAL BANK,
AS TRUSTEE
- --------------------------------------------------------------------------------
<PAGE> 2
CROSS-REFERENCE TABLE
NATIONAL HEALTHCARE L.P.
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture
- --------------- ---------
<S> <C>
ss.310 (a)(1) 7.10
(a)(2) 7.10
(a)(3) Not Applicable
(a)(4) Not Applicable
(b) 7.08; 7.10; 13.02
(c) Not Applicable
ss.311 (a) 7.11
(b) 7.11
(c) Not Applicable
ss.312 (a) 2.12
(b) 13.03
(c) 13.03
ss.313 (a) 7.06
(b)(1) Not Applicable
(b)(2) 7.06
(c) 7.06; 13.02
(d) 7.06
ss.314 (a) 4.02; 13.02
(b) Not Applicable
(c)(1) 13.04
(c)(2) 13.04
(c)(3) Not Applicable
(d) Not Applicable
(e) 13.05
(f) Not Applicable
ss.315 (a) 7.01(b)
(b) 7.05; 13.02
(c) 7.01(a)
(d) 7.01(c)
(e) 6.10
ss.316 (a)(last sentence) 13.06
(a)(1)(A) 6.05
(a)(1)(B) 6.04
(a)(2) Not Applicable
(b) 6.06
ss.317 (a)(1) 6.07
(a)(2) 6.08
(b) 2.05
ss.318 (a) 12.01
</TABLE>
- ----------
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C> <C>
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE....................................................2
SECTION 1.01 Definitions...........................................................2
SECTION 1.02 Other Definitions.....................................................9
SECTION 1.03 Incorporation by Reference to Trust Indenture Act.....................9
SECTION 1.04 Rules of Construction................................................10
ARTICLE 2 THE SECURITIES...............................................................................10
SECTION 2.01 Dating; Incorporation of Form in Indenture...........................10
SECTION 2.02 Execution and Authentication.........................................10
SECTION 2.03 Global Securities....................................................11
SECTION 2.04 Registrar and Agents.................................................12
SECTION 2.05 Paying Agent to Hold Money in Trust..................................12
SECTION 2.06 Transfer and Exchange................................................13
SECTION 2.07 Replacement Securities...............................................14
SECTION 2.08 Outstanding Securities...............................................14
SECTION 2.09 Temporary Securities.................................................14
SECTION 2.10 Cancellation.........................................................15
SECTION 2.11 Defaulted Interest...................................................15
SECTION 2.12 Securityholder Lists.................................................15
SECTION 2.13 Persons Deemed Owners................................................16
SECTION 2.14 CUSIP Number.........................................................16
ARTICLE 3 REDEMPTION...................................................................................16
SECTION 3.01 Right of Redemption; Notices to Trustee..............................16
SECTION 3.02 Selection of Securities to be Redeemed...............................17
SECTION 3.03 Notice of Redemption by the Company..................................17
SECTION 3.04 Effect of Notice of Redemption.......................................19
SECTION 3.05 Deposit of Redemption Price. ........................................19
SECTION 3.06 Securities Redeemed in Part. ........................................19
SECTION 3.07 Termination of Rights................................................19
ARTICLE 4 COVENANTS....................................................................................20
SECTION 4.01 Payment of the Securities............................................20
SECTION 4.02 Commission Reports...................................................20
SECTION 4.03 Distributions........................................................20
SECTION 4.04 Notice of Default....................................................21
SECTION 4.05 Compliance Certificates. ............................................21
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C> <C>
SECTION 4.06 Reserved.............................................................21
SECTION 4.07 Additional Indebtedness..............................................21
SECTION 4.08 Preservation of Existence............................................22
SECTION 4.09 Payment of Obligations...............................................22
SECTION 4.10 Compliance with Laws.................................................22
SECTION 4.11 Registration and Listing.............................................23
SECTION 4.12 Transactions with Affiliates.........................................23
SECTION 4.13 No Inconsistent Agreements...........................................23
ARTICLE 5 SUCCESSOR CORPORATION........................................................................23
SECTION 5.01 When Company May Merge, etc..........................................23
SECTION 5.02 Successor Corporation or Trust Substituted...........................24
ARTICLE 6 DEFAULTS AND REMEDIES........................................................................25
SECTION 6.01 Events of Default....................................................25
SECTION 6.02 Acceleration.........................................................26
SECTION 6.03 Other Remedies.......................................................27
SECTION 6.04 Waiver of Defaults and Events of Default.............................27
SECTION 6.05 Control by Majority..................................................27
SECTION 6.06 Rights of Holders to Receive Payment.................................27
SECTION 6.07 Collection Suit by Trustee...........................................28
SECTION 6.08 Trustee May File Proofs of Claim.....................................28
SECTION 6.09 Priorities...........................................................29
SECTION 6.10 Undertaking for Costs................................................29
SECTION 6.11 Limitations on Suits.................................................29
ARTICLE 7 TRUSTEE......................................................................................30
SECTION 7.01 Duties of Trustee....................................................30
SECTION 7.02 Rights of Trustee....................................................31
SECTION 7.03 Individual Rights of Trustee.........................................32
SECTION 7.04 Trustee's Disclaimer.................................................32
SECTION 7.05 Notice of Defaults...................................................32
SECTION 7.06 Reports by Trustee to Holders........................................33
SECTION 7.07 Compensation and Indemnity...........................................33
SECTION 7.08 Replacement of Trustee...............................................34
SECTION 7.09 Successor Trustee by Merger, etc.....................................35
SECTION 7.10 Eligibility; Disqualification........................................35
SECTION 7.11 Preferential Collection of Claims Against Company....................35
ARTICLE 8 SATISFACTION AND DISCHARGE OF INDENTURE......................................................35
SECTION 8.01 Satisfaction, Discharge and Defeasance of the Securities.............35
SECTION 8.02 Satisfaction and Discharge of Indenture..............................36
</TABLE>
ii
<PAGE> 5
<TABLE>
<S> <C> <C> <C>
SECTION 8.03 Survival of Certain Obligations......................................37
SECTION 8.04 Application of Trust Money...........................................37
SECTION 8.05 Paying Agent to Repay Monies Held....................................38
SECTION 8.06 Return of Unclaimed Monies...........................................38
SECTION 8.07 Reinstatement........................................................38
ARTICLE 9 SUPPLEMENTAL INDENTURES......................................................................39
SECTION 9.01 Supplemental Indentures Without Consent of Holders...................39
SECTION 9.02 Supplemental Indentures with Consent of Holders......................39
SECTION 9.03 Compliance with Trust Indenture Act..................................41
SECTION 9.04 Revocation and Effect of Consents....................................41
SECTION 9.05 Notation on or Exchange of Securities................................41
SECTION 9.06 Effect of Supplemental Indentures....................................42
SECTION 9.07 Reference in Securities to Supplemental Indentures...................42
ARTICLE 10 CONVERSION OF SECURITIES.....................................................................42
SECTION 10.01 Right of Conversion; Conversion Price. ..............................42
SECTION 10.02 Issuance of Units on Conversion. ....................................43
SECTION 10.03 Payment of Interest..................................................43
SECTION 10.04 Adjustment of Conversion Price. .....................................43
SECTION 10.05 Notice of Adjustment of Conversion Price.............................48
SECTION 10.06 Notice of Certain Corporate Action...................................48
SECTION 10.07 Taxes on Conversions.................................................49
SECTION 10.08 Fractional Units.....................................................50
SECTION 10.09 Cancellation of Converted Securities.................................50
SECTION 10.10 Provisions in Case of Consolidation, Merger or Sale of Assets........50
SECTION 10.11 Disclaimer by Trustee of Responsibility for Certain Matters..........51
SECTION 10.12 Covenant to Reserve Units............................................51
ARTICLE 11 CHANGE IN CONTROL............................................................................52
SECTION 11.01 Change of Control Offer..............................................52
SECTION 11.02 Definition of Change of Control......................................52
SECTION 11.03 Notice of Offer......................................................54
ARTICLE 12 SUBORDINATION; SENIORITY.....................................................................55
SECTION 12.01 Securities Subordinated to Senior Indebtedness.......................55
SECTION 12.02 Company Not to Make Payments with Respect to Securities in
Certain Circumstances................................................56
SECTION 12.03 Subrogation of Securities............................................57
SECTION 12.04 Authorization by Holders of Securities...............................59
SECTION 12.05 Notices to Trustee...................................................59
SECTION 12.06 Trustee's Relation to Senior Indebtedness............................60
</TABLE>
iii
<PAGE> 6
<TABLE>
<S> <C> <C> <C>
SECTION 12.07 No Impairment of Subordination.......................................60
SECTION 12.08 Article 12 Not To Prevent Events of Default..........................60
SECTION 12.09 Paying Agents other than the Trustee.................................60
SECTION 12.10 Securities Senior to Subordinated Indebtedness.......................61
SECTION 12.11 Holder's Relation to Senior Indebtedness.............................61
ARTICLE 13 MISCELLANEOUS................................................................................61
SECTION 13.01 Trust Indenture Act Controls.........................................61
SECTION 13.02 Notices..............................................................61
SECTION 13.03 Communications by Holders with Other Holders.........................63
SECTION 13.04 Certificate and Opinion as to Conditions Precedent...................63
SECTION 13.05 Statements Required in Certificate and Opinion.......................63
SECTION 13.06 Rules by Trustee and Agents..........................................63
SECTION 13.07 Record Date..........................................................64
SECTION 13.08 Legal Holidays.......................................................64
SECTION 13.09 Governing Law........................................................64
SECTION 13.10 No Adverse Interpretation of Other Agreements........................64
SECTION 13.11 No Recourse Against Others...........................................64
SECTION 13.12 Successors...........................................................64
SECTION 13.13 Multiple Counterparts................................................64
SECTION 13.14 Table of Contents, Headings, etc.....................................65
SECTION 13.15 Severability.........................................................65
</TABLE>
iv
<PAGE> 7
INDENTURE dated as of August __, 1995, by and between National
HealthCare L.P., a Delaware limited partnership ("Company"), and First American
National Bank, a national banking association ("Trustee").
RECITALS OF THE COMPANY
WHEREAS, the Company has duly authorized the creation of its 6.0%
Convertible Senior Subordinated Debentures due 2000 (the "Securities") and to
provide therefor the Company has duly authorized the execution and delivery of
this Indenture; and
WHEREAS, all things necessary to make the Securities, when executed by
the Company and authenticated and delivered by the Trustee hereunder and duly
issued by the Company, the valid obligations of the Company, and to make this
Indenture a valid agreement of the Company, in accordance with the terms hereof
and the terms of the Securities, have been done.
NOW THEREFORE, each party agrees as follows for the benefit of the
other party and for the equal and ratable benefit of the Holders of the
Securities:
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01 Definitions.
"Additional Interest" means any and all additional interest paid on the
Note on or before May 12, 1995 in an amount equal to the amount by which (i) the
aggregate amount of all distributions of cash or cash equivalents on or with
respect to Units ("Cash Distribution") made during the 12-month period ending on
the last day of any fiscal quarter (the "Relevant Period") and received by a
holder of the number of Units for which the Note was convertible on the record
date for such Cash Distributions, less all amounts of Additional Interest, if
any, actually paid (whether or not to the current holder) with respect to the
Note during the Relevant Period, exceeds (ii) the amount of interest that
accrued (whether or not paid) on the Note pursuant to the Note during the
Relevant Period.
"Affiliate" means any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company. For
the purposes of this definition, "control" (including, with correlative
meanings, the terms "controlled by" and "under common control with"), as used
with respect to any Person, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities or by agreement
or otherwise.
2
<PAGE> 8
"Agent" means any Registrar, Paying Agent, Conversion Agent,
co-registrar or agent for service of notices and demands.
"Bankruptcy Law" means Title 11 of the U.S. Code or any similar Federal
or State law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Managing
General Partner of the Company or any committee of the Board.
"Board Resolution" means a resolution certified by the Secretary or an
Assistant Secretary of the Company to have been duly adopted by the Board of
Directors and to be in full force and effect on the date of such certification,
and delivered to the Trustee.
"Business Day" means any day other than a Saturday, Sunday or other day
on which commercial banks in the City of New York are authorized or required by
law or executive order to close.
"Capital Stock" means any and all shares or other equivalents (however
designated) of capital stock, including all common stock, all preferred stock
and all limited partnership units.
"Closing Price" means with respect to the Units on any day, (i) the
last reported sales price regular way or, in case no such reported sale takes
place on such day, the average of the reported closing bid and asked prices
regular way, in either case on the American Stock Exchange, or (ii) if the Units
are not listed or admitted to trading on the American Stock Exchange, the last
reported sales price regular way, or in case no such reported sale takes place
on such day, the average of the reported closing bid and asked prices regular
way, on the principal national securities exchange on which the limited
partnership units are listed or admitted to trading, or (iii) if the Units are
not listed or admitted to trading on any national securities exchange, the
average of the closing bid and asked prices as furnished by any American Stock
Exchange member firm selected from time to time by the Company for that purpose.
"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means the
successor.
"Corporate Trust Office" means the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered, which office at the date of execution of this Indenture is located
at Nashville, Tennessee.
"Credit Agreement" shall mean the Loan Agreements, Indentures of Trust,
Guarantees and other documents relating to Company indebtedness with or to State
Street Bank and Trust Company of Connecticut, Third National Bank in Nashville
and/or the Toronto Dominion Bank, as any of such documents may be amended,
modified or replaced from time to time.
3
<PAGE> 9
"Current Market Price" per Unit shall mean, on any date specified
herein for the determination thereof, (a) the average daily Market Price of the
Units for the twenty trading days immediately preceding such date (if no Market
Price is available for any given trading day, such trading day shall not be
included in the determination of the Current Market Price), and (b) if the Units
are not then listed or admitted to trading on any national securities exchange
or quoted in the over-counter market, a market price per share determined at the
Company's expense by an appraiser chosen by the holders of a majority of the
Securities with the consent of the Company, which consent shall not be
unreasonably withheld or, if no such appraiser is so chosen more than twenty
business days after notice of the necessity of such calculation shall have been
delivered by the Company to the Trustee and the holders of the Securities, then
by an appraiser chosen by the Company.
"Custodian" means any receiver, trustee, liquidator or similar official
under any Bankruptcy Law.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Depository" means, with respect to the Securities issuable or issued
in whole or in part in global form, The Depository Trust Company, until a
successor shall have been appointed and become such pursuant to the applicable
provisions of this Indenture, and thereafter, "Depository" shall mean or include
such successor.
"Dollar" or "$" means the lawful currency of the United States of
America.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in effect at the
time of determination.
"Holder" or "Securityholder" means the Person in whose name a Security
is registered on the Registrar's books.
"Indebtedness" means as to any Person (a) all obligations of such
Person for borrowed money (including, without limitation, reimbursement and all
other obligations with respect to surety bonds, letters of credit and bankers'
acceptances, whether or not matured), (b) all obligations evidenced by notes,
bonds, debentures or similar instruments, (c) all obligations to pay the
deferred purchase price of property or services, except trade accounts payable
and accrued liabilities arising in the ordinary course of business, (d) all
interest rate and currency swaps and similar agreements under which payments are
obligated to be made, whether periodically or upon the happening of a
contingency, (e) all indebtedness created or arising under any conditional sale
or other title retention agreement with respect to property acquired by such
Person (even though the rights and remedies of the seller
4
<PAGE> 10
or lender under such agreement in the event of default are limited to
repossession or sale of such property), (f) all obligations under leases which
have been or should be, in accordance with GAAP, recorded as capital leases, (g)
all indebtedness secured by any Lien (other than Liens in favor of lessors under
leases other than leases included in clause (f)) on any property or asset owned
or held by that Person regardless of whether the indebtedness secured thereby
shall have been assumed by that Person or is non-recourse to the credit of that
Person, and (h) any Contingent Obligation for any of the foregoing.
"Indenture" means this Indenture as originally executed or, if amended
or supplemented as provided in Article 9, as amended or supplemented from time
to time.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other) or preference, priority or
other security interest or preferential arrangement of any kind or nature
whatsoever (including, without limitation, those created by, arising under or
evidenced by any conditional sale or other title retention agreement, the
interest of a lessor under a capitalized lease obligation, or any financing
lease having substantially the same economic effect as any of the foregoing).
"Managing General Partner" has the meaning assigned to that term in the
Amended and Restated Agreement of Limited Partnership of the Company, and, as of
the date hereof, is NHC, Inc., a Tennessee corporation.
"Market Price" shall mean, per Unit, on any date specified herein: (a)
the closing price per share of the Units on such date published in the Wall
Street Journal or, if no such closing price on such date is published in the
Wall Street Journal, the closing price on such date, as officially reported on
the principal national securities exchange on which the Units are then listed or
admitted to trading; or (b) if the Units are not then listed or admitted to
trading on any national securities exchange but are designated as a national
market system security by the National Association of Securities Dealers, Inc.,
the last trading price (the closing sale price) of the Units on such date; or
(c) if there shall have been no trading on such date or if the Units are not so
designated, the average of the reported closing bid and asked prices of the
Units, on such date as shown by the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotations System (NASDAQ) and
reported by any member firm of the American Stock Exchange, Inc.
selected by the Company.
"Note" means the Note dated May 12, 1992 in the principal amount of
$30,000,000 issued by the Company and which was converted into the Securities.
"Officer" means the Chairman of the Board, the President, any Vice
President, the Treasurer, the Secretary or the Controller of the Company.
5
<PAGE> 11
"Officers' Certificate" means a certificate signed by two Officers or
by an Officer and an Assistant Treasurer, Assistant Secretary or Assistant
Controller of the Company. See Sections 13.04 and 13.05.
"Opinion of Counsel" means a written opinion from Harwell, Howard,
Gabbert & Manner or any other legal counsel who is reasonably acceptable to the
Trustee. The counsel may be an employee of or counsel to the Company or the
Trustee. See Sections 13.04 and 13.05.
"Outstanding" when used with respect to the Securities means, as of the
date of the determination, all Securities theretofore authenticated and
delivered under this Indenture except:
(a) Securities theretofore canceled by the Trustee or the
Conversion Agent or delivered to the Trustee or the Conversion Agent for
cancellation upon conversion or otherwise;
(b) Securities in exchange for or in lieu of which other
Securities have been authenticated and delivered pursuant to this Indenture,
other than any Securities in respect of which there shall have been presented to
the Trustee proof satisfactory to it that such Securities are held by a bona
fide purchaser in whose hands such Securities are valid obligations of the
Issuer;
(c) Securities discharged in accordance with Article 8 of
this Indenture; and
(d) Securities described in Section 2.08 of this Indenture as
not Outstanding;
provided, that in determining whether the Securityholders of the requisite
principal amount of Outstanding Securities are present at a meeting of
Securityholders for quorum purposes or have voted or taken or concurred in any
action under this Indenture, including the making of any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not Outstanding,
except that, in determining whether the Trustee shall be protected in relying
upon any such determination as to the presence of a quorum or upon such request,
demand, authorization, direction, notice, consent or waiver, only Securities
which a Trust Officer of the Trustee actually knows to be so owned shall be
disregarded.
"Person" means any individual, firm, corporation, partnership, joint
venture, incorporated or unincorporated association, joint stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity of any kind and shall include any successor (by
merger or otherwise) of such entity.
"Principal" of a Security means the principal of the Security plus,
when appropriate, the premium, if any, on the Security.
6
<PAGE> 12
"Redemption Date" when used with respect to any Security to be
redeemed, means the date fixed for such redemption pursuant to this Indenture
which date must be a Business Day.
"Redemption Price", when used with respect to any Security to be
redeemed,has the meaning assigned thereto in Section 3.01 hereof.
"Securities" means the securities in the form of Exhibit A hereto that
are issued under this Indenture as amended or supplemented from time to time,
pursuant to this Indenture.
"Senior Indebtedness" means the principal of, premium, if any, and
interest on, and any other payment due pursuant to any of the following, whether
outstanding at the date hereof or hereafter incurred or created:
(a) all indebtedness of the Company for money borrowed arising
under or in connection with any of the Credit Agreements, as amended and as any
of them may be further amended or modified from time to time, and all renewals,
extensions, refundings or refinancings of such indebtedness incurred with
financial institutions, insurance companies or other institutional lenders, (any
such indebtedness and renewals, extensions, refundings or refinancings thereof,
"Senior Institutional Indebtedness");
(b) all indebtedness of the Company for money borrowed other
than Senior Institutional Indebtedness (including, without limitation, any
indebtedness secured by a mortgage, conditional sales contract or other lien
which is (i) given to secure all or part of the purchase price of property
subject thereto, whether given to the vendor of such property or to another, or
(ii) existing on property at the time of acquisition thereof);
(c) all indebtedness of the Company evidenced by notes,
debentures, bonds or other securities sold by the Company for money;
(d) all lease obligations of the Company which are capitalized
on the books of the Company in accordance with generally accepted accounting
principles;
(e) all indebtedness of others of the kinds described in
either of the preceding clauses (b) or (c) and all lease obligations of others
of the kind described in the preceding clause (d) assumed by or guaranteed in
any manner by the Company or in effect guaranteed by the Company through an
agreement to purchase, contingent or otherwise.
(f) all indebtedness of any subsidiary of the Company or of
National Health Investors, Inc., for which the Company is liable as a guarantor;
7
<PAGE> 13
(g) all renewals, extensions, refundings or refinancings of
indebtedness of the kinds described in any of the preceding clauses (b), (c),
(e) and (f) and all renewals or extensions of lease obligations of the kinds
described in either of the preceding clauses (d) and (e);
(h) interest accruing subsequent to the filing of a petition
initiating any bankruptcy, insolvency or similar proceeding with respect to any
indebtedness or lease obligation of the Company;
(i) all obligations of the Company in respect of any rate
hedging agreement entered into with any holder of any Senior Indebtedness; and
(j) all fees, expenses, reimbursements and other amounts
payable to holders of Senior Indebtedness under the terms of the instrument or
lease creating or evidencing the same,
unless in the case of any particular indebtedness, lease, renewal, extension,
refunding or refinancing, the instrument or lease creating or evidencing the
same or the assumption or guarantee of the same expressly provides that such
indebtedness, lease, renewal, extension, refunding or refinancing is or such
fees, expenses, reimbursements or other amounts are, not senior in right of
payment to the Securities or is or are expressly subordinate by its or their
terms in right of payment to all other indebtedness of the Company.
"Subsidiary" means, with respect to any Person, a corporation or other
entity of which 50% or more of the voting power of the voting equity securities
or equity interest is owned, directly or indirectly, by such person.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code
ss. ss. 7aaa-77bbbb) as amended by the Trust Indenture Reform Act of 1990 and
as in effect on the date of this Indenture.
"Trustee" means the entity named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means the
successor.
"Trust Officer", when used with respect to the Trustee, means the
chairman or any vice-chairman of the board of directors, the chairman or any
vice-chairman of the executive committee of the board of directors, the chairman
of the trust committee, the president, any vice-president, the secretary, any
assistant secretary, the treasurer, any assistant treasurer, the cashier, any
assistant cashier, any Trust Officer or assistant Trust Officer, the controller
or any assistant controller or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer of the Trustee to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"United States" means the United States of America.
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"Units" means the limited partnership units of the Company.
SECTION 1.02 Other Definitions.
<TABLE>
<CAPTION>
Term Defined in Section
---- ------------------
<S> <C>
"Change of Control" 11.01
"Change of Control Offer" 11.01
"Company Order" 2.03
"Continuing Director" 11.02
"Conversion Agent" 2.04
"Conversion Price" 10.01
"Current Management" 11.02
"Event of Default" 6.01
"Legal Holiday" 13.08
"Paying Agent" 2.04
"Payment or Distribution" 12.01
"Recovery Amount" 3.01
"Redemption Price" 3.01
"Registrar" 2.04
"Regular Distribution" 10.04
"Relevant Period" 1.01
"Rule 13e-3 Transaction" 10.06
"Securities" Recitals
"U.S. Government Obligations" 8.01
</TABLE>
SECTION 1.03 Incorporation by Reference to Trust Indenture Act.
Whenever this Indenture refers to a provision of the Trust Indenture
Act of 1939 (the "TIA"), the provision is incorporated by reference in and made
a part of this Indenture. The following TIA terms used in this Indenture have
the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company or any other
obligor on the indenture securities.
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<PAGE> 15
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rules have
the meanings assigned to them therein.
SECTION 1.04 Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with United States generally accepted accounting principles
in effect as of the time as to which such accounting principles are to be
applied;
(3) "or" is not exclusive; and
(4) words in the singular include the plural, and in the plural include
the singular.
ARTICLE 2
THE SECURITIES
SECTION 2.01 Dating; Incorporation of Form in Indenture.
The Securities and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A which is incorporated in and made part of
this Indenture. The Securities may have notations, legends or endorsements
required by law, stock exchange rules, agreements to which the Company is
subject, or usage. The Company shall approve the form of the Securities and any
notation, legend or endorsement on them. Each Security shall be dated the date
of its authentication.
The terms and provisions contained in the Securities shall constitute,
and are hereby expressly made, a part of this Indenture, and to the extent
applicable, the Company and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions to be bound thereby.
SECTION 2.02 Execution and Authentication.
Two Officers shall sign the Securities for the Company by manual or
facsimile signature. The Company's seal shall be impressed, affixed, imprinted
or reproduced on the Securities and may be in facsimile form.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall
nevertheless be valid.
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A Security shall not be valid until the Trustee manually signs the
certificate of authentication on the Security. Such signature shall be
conclusive evidence that the Security has been authenticated under this
Indenture.
The Trustee shall authenticate Securities for original issue in the
aggregate principal amount of up to $30,000,000 upon execution of the Indenture
and a written order or orders of the Company signed by two Officers or by an
Officer and an Assistant Treasurer of the Company (a "Company Order"). The
aggregate principal amount of securities Outstanding at any time may not exceed
that amount except as provided in Section 2.07.
The Trustee may appoint (at the expense of the Company) an
authenticating agent to authenticate Securities. An authenticating agent may
authenticate Securities whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
agent. An authenticating agent has the same rights as an Agent to deal with the
Company or an Affiliate.
The Securities may be issued in registered form without coupons. The
Securities shall be issuable only in denominations of $1,000 principal amount
and any integral multiple thereof.
SECTION 2.03 Global Securities.
The Securities may be issued initially in the form of one or more
permanent global securities in definitive, fully registered form without
interest coupons, with the global securities legend (a "Global Security"), which
shall be deposited on behalf of the purchasers of the Securities represented
thereby with the Trustee, at its New York office, as custodian for the
Depository, and registered in the name of the Depository or a nominee of the
Depository, duly executed by the Company and authenticated by the Trustee as
hereinafter provided. The aggregate principal amount of the Global Securities
may from time to time be increased or decreased by adjustments made on the
records of the Trustee and the Depository or its nominee as hereinafter
provided.
The Company shall execute and the Trustee shall, upon receipt of an
Officers' Certificate, in accordance with this Section 2.03 and Section 2.02,
authenticate and deliver initially one or more Global Securities that (a) shall
be registered in the name of the Depository for such Global Security or Global
Securities or the nominee of such Depository and (b) shall be delivered by the
Trustee to such Depository or pursuant to such Depository's instructions or held
by the Trustee as custodian for the Depository.
Members of, or participants in, the Depository ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depository or by the Trustee as the custodian or the
Depository or under such Global Security, and the Depository may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing
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<PAGE> 17
herein shall prevent the Company, the Trustee or any agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depository or impair, as between the Depository
and its Agent Members, the operation of customary practices of such Depository
governing the exercise of the rights of a holder of a beneficial interest in any
Global Security.
Except as otherwise specifically provided, owners of beneficial
interests in Global Securities will not be entitled to receive physical delivery
of definitive Securities.
SECTION 2.04 Registrar and Agents.
The Company shall maintain an office or agency where Securities may be
presented for registration of transfer or for exchange ("Registrar"), an office
or agency where Securities may be presented for payment ("Paying Agent"), an
office or agency where Securities may be presented for conversion ("Conversion
Agent") and an office or agency where notices and demands to or upon the Company
in respect of the Securities and this Indenture may be served. The Registrar
shall keep a register of the Securities and of their transfer and exchange. The
Company may have one or more co-registrars, one or more additional Paying Agents
and one or more additional Conversion Agents. The Company or any Subsidiary may
act as Paying Agent and/or Conversion Agent. The term "Paying Agent" includes
any additional paying agent and the term "Conversion Agent" includes any
additional conversion agent.
The Company may change any Paying Agent, Registrar, Conversion Agent or
Co-Registrar on sixty (60) days' prior written notice to the Trustee. The
Company shall notify the Trustee in writing of the name and address of any such
Agent. If the Company fails to maintain a Registrar, Paying Agent, Conversion
Agent or agent for service of notices and demands, or fails to give the
foregoing notice, the Trustee shall act as such.
The Company initially appoints the Trustee as Registrar, Paying Agent,
Conversion Agent and agent for service of notices and demands.
SECTION 2.05 Paying Agent to Hold Money in Trust.
Prior to each due date of the principal of, premium if any, and
interest on any Securities, the Company shall deposit with each Paying Agent a
sum sufficient to pay such principal, premium, if any, and interest so becoming
due. The Company shall require each Paying Agent other than the Trustee to agree
in writing that it will hold in trust for the benefit of Holders of Securities
or the Trustee all money held by the Paying Agent for the payment of principal
of, premium if any, or interest on the Securities and to notify the Trustee in
writing of any default by the Company (or any other obligor on the Securities)
in making any such payment. If the Company or a Subsidiary acts as Paying Agent,
it shall on or before each due date of the principal of, premium, if any, or
interest on any Securities segregate the money and hold it as a separate trust
fund. The Company at any time
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<PAGE> 18
may require a Paying Agent to pay all money held by it to the Trustee and the
Trustee may at any time during the continuance of any payment default, upon
written request to a Paying Agent, require such Paying Agent to forthwith pay to
the Trustee all sums so held in trust by such Paying Agent. Upon doing so, the
Paying Agent (other than the Company or a Subsidiary thereof) shall have no
further liability for the money.
The final installment of principal of and premium, if any, on this
Security shall be payable only upon surrender of this Security at the address of
the Trustee's Corporate Trust Office in New York, New York. Payments of
principal of and premium, if any, and interest on this Security shall be made at
the address of the Trustee's Corporate Trust Office in New York, New York, or,
in the case of any such payments other than the final payment of principal and
premium, if any, at the Company's option, by check mailed to the Person entitled
thereto at such Person's address last appearing on the Company's register.
SECTION 2.06 Transfer and Exchange.
When a Security is presented to the Registrar or a co-registrar with a
request to register the transfer, the Registrar or co-registrar shall register
the transfer as requested and when Securities are presented to the Registrar or
a co-registrar with a request to exchange them for a like aggregate principal
amount of Securities in other authorized denominations, the Registrar shall make
the exchange as requested, provided that every Security presented or surrendered
for registration or transfer or exchange shall be duly endorsed, or be
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Registrar duly executed by the Holder thereof or his
attorney-in-fact duly authorized in writing. To permit registrations of
transfers and exchanges, the Company shall issue and the Trustee or any
authenticating agent shall authenticate Securities at the Registrar's or
co-registrar's written request. No service charge shall be made to a
Securityholder for any registration of transfer or exchange of Securities but
the Company may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto, but this provision
shall not apply to any exchange pursuant to Section 2.09, 3.06, 9.05 or 10.02
not involving any transfer.
The Registrar shall not be required (i) to issue, register the transfer
of, or exchange Securities during a period beginning at the opening of business
15 days before the day of any selection of Securities for redemption under
Section 3.02 and ending at the close of business on the day of selection, (ii)
to register the transfer or exchange of any Security so selected for redemption
in whole or in part, except the unredeemed portion of any Security being
redeemed in part, or (iii) to register the transfer or exchange of any
Securities during a period beginning at the opening of business 15 days before
the day of any selection of Securities for redemption under Section 3.02 and
ending at the close of business on the day interest is to be paid on Securities.
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<PAGE> 19
SECTION 2.07 Replacement Securities.
If a mutilated Security is surrendered to the Trustee or if the Holder
of a Security presents evidence to the satisfaction of the Company and the
Trustee that the Security has been lost, destroyed or wrongfully taken, the
Company shall issue and the Trustee shall authenticate a replacement Security if
the requirements of the Trustee and the Company are met. An indemnity bond may
be required by the Company or the Trustee that is sufficient in the judgment of
the Company to protect the Company and is sufficient in the judgment of the
Trustee to protect the Trustee or any Agent from any loss which it may suffer if
a Security is replaced. The Company may charge for its expense in replacing a
Security.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its sole discretion
may, instead of issuing a new Security, pay or authorize the payment or convert
or authorize the conversion of such Security.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security 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 Securities duly issued hereunder.
SECTION 2.08 Outstanding Securities.
Securities Outstanding at any time are all Securities authenticated by
the Trustee except for those canceled by it, those delivered to it for
cancellation and those described in this Section 2.08 as not Outstanding.
If a Security is replaced pursuant to Section 2.07, it ceases to be
Outstanding until the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the Paying Agent (other than the Company or a Subsidiary) holds on a
Redemption Date or maturity date money deposited with it by or on behalf of the
Company sufficient to pay the principal of and accrued interest on Securities
payable on that date, then on and after that date such Securities cease to be
Outstanding and interest on them ceases to accrue.
A Security does not cease to be Outstanding because the Company or an
Affiliate holds the Security.
SECTION 2.09 Temporary Securities.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of
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<PAGE> 20
definitive Securities but may have non-material variations that the Company
considers appropriate for temporary Securities. Without unreasonable delay, the
Company shall prepare and the Trustee shall authenticate definitive Securities
in exchange for temporary Securities upon written order of the Company signed by
two Officers. Until so exchanged, temporary Securities represent the same rights
as definitive Securities. Upon request of the Trustee, the Company shall provide
a certificate to the effect that the temporary Securities meet the requirements
of the second sentence of this Section 2.09.
SECTION 2.10 Cancellation.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar, the Paying Agent and the Conversion Agent shall
forward to the Trustee any Securities surrendered to them for transfer,
exchange, payment or conversion. The Trustee shall cancel all Securities
surrendered for transfer, exchange, payment or conversion and destroy canceled
Securities in accordance with its customary destruction procedures and deliver a
certificate of such destruction to the Company unless the Company directs the
Trustee in writing prior to such destruction to deliver canceled Securities to
the Company. Subject to Sections 2.07, 3.06 and the second paragraph of Section
10.02, the Company may not issue Securities to replace Securities that it has
previously paid or delivered to the Trustee for cancellation or that a
Securityholder has converted pursuant to Article 10 hereof.
SECTION 2.11 Defaulted Interest.
If the Company defaults in a payment of interest on Securities, it
shall pay the defaulted interest to the Persons who are Holders of the
Securities on a subsequent special record date. After the deposit by the Company
with the Trustee of money sufficient to pay such defaulted interest, the Trustee
shall fix the record date and payment date. Each such special record date shall
be not less than 10 days prior to such payment date. Each such payment date
shall be not more than 60 days after the deposit by the Company of money to pay
the defaulted interest. At least 15 days before the special record date, the
Company shall mail to each Holder of a Security a notice that states the special
record date, the payment date, and the amount of defaulted interest to be paid.
The Company may pay defaulted interest in any other lawful manner if, after
prior notice to the Trustee, such payment shall be deemed operationally
practicable by the Trustee.
SECTION 2.12 Securityholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders of Securities. If the Trustee is not the Registrar, the Company or other
obligor, if any, shall furnish to the Trustee at least seven Business Days prior
to each quarterly interest payment date and at such other times as the Trustee
may request in writing a list in such form and as of such date as the Trustee
may reasonably require of the names and addresses of Holders of Securities upon
which the Trustee may conclusively rely. The Trustee
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<PAGE> 21
may destroy any such list upon receipt of a replacement list. The Paying Agent
will solicit from each Securityholder a certification of social security number
or taxpayer identification number in accordance with its customary practice and
as required by law, unless the Paying Agent is in possession of such
certification. Each Paying Agent is authorized to impose back-up withholding
with respect to payments to be made to Securityholders to the extent required by
law.
SECTION 2.13 Persons Deemed Owners.
Prior to presentment of a Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name such Security is registered as the owner of such Security
and neither the Company, the Trustee nor any agent of the Company or the Trustee
shall be affected by notice to the contrary.
SECTION 2.14 CUSIP Number.
The Company may use a "CUSIP" number when issuing Securities, and if
so, the Trustee may use the CUSIP number in notices of redemption or exchange as
a convenience to Holders of such Securities; provided, that any such notice may
state that no representation is made as to the correctness or accuracy of the
CUSIP number printed in the notice or on the Securities, and that reliance may
be placed only on the other identification numbers printed on the Securities.
ARTICLE 3
REDEMPTION
SECTION 3.01 Right of Redemption; Notices to Trustee.
(a) Except as otherwise provided herein and in the Securities, the
Company shall not have any right to prepay or redeem the Securities. On and
after January 1, 1998 or, if the Company shall have elected to be taxable as a
corporation and as of the Redemption Date the Current Market Price of the
aggregate number of Units into which the Securities to be redeemed shall be
convertible as of the Redemption Date shall equal or exceed the Recovery Amount
(defined below), on or after May 12, 1996, the Company shall have the right, at
any time and from time to time at its sole option and election, to redeem the
Securities, in whole or in part, in integral multiples of $10,000,000 by
Outstanding principal amount at a price (the "Redemption Price") equal to (i)
the Outstanding principal amount of the Securities to be redeemed plus (ii) an
amount equal to all accrued and unpaid interest thereon, whether or not
currently payable, to the applicable Redemption Date, in cash or other
immediately available funds. For purposes hereof, "Recovery Amount" shall mean
the amount by which (i) the amount that results from compounding the principal
amount of the Securities to be redeemed at a rate of 25 percent per annum from
the date of issuance of the Securities to the Redemption Date exceeds (ii) the
amount that results from compounding all amounts of interest paid, including
Additional Interest, and other distributions made with respect to the principal
amount
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of the Securities to be redeemed on or prior to the Redemption Date at a rate of
25 percent per annum from, in the case of each such payment of interest or other
distribution, the date such payment or other distribution is made to the
Redemption Date. The election of the Company to redeem any Securities pursuant
to this Section shall be evidenced by a Board Resolution. The Company shall, at
least 30, but not more than 60, days prior to the Redemption Date which shall be
a Business Day fixed by the Company (unless a shorter period shall be
satisfactory to the Trustee), notify the Trustee of such Redemption Date and, in
the case of any redemption at the election of the Company of less than all the
Securities, of the principal amount of Securities to be redeemed.
(b) If the Company wants to redeem the Securities pursuant to the
optional redemption provisions of this Section 3.01, it shall notify the Trustee
of the Redemption Date and the principal amount of Securities to be redeemed.
The notice shall be in writing and accompanied by an Officers' Certificate
stating that the redemption complies with the provisions of this Indenture and
the provisions of the applicable Board Resolution, if any, and in the
Securities.
SECTION 3.02 Selection of Securities to be Redeemed.
If less than all the Securities are to be redeemed by the Company on
the Redemption Date, the Trustee shall select the Securities to be redeemed in
the manner required by the principal securities exchange on which the Securities
are then listed for trading or, if the Securities are not so listed or no manner
of selection is required, pro rata based on the registered holdings of each
Holder. The Trustee shall promptly notify the Company of the Securities to be so
called for redemption. The Trustee shall make the selection from Securities
Outstanding and not previously called for redemption. The Trustee may select for
redemption portions of the principal of Securities that have denominations
larger than $1,000 principal amount. Securities and portions thereof selected
shall aggregate at least $10,000,000 in principal amount. Provisions of this
Indenture that apply to Securities called for redemption also apply to portions
of Securities called for redemption. The Trustee's selection of Securities for
redemption by any method authorized by this Section 3.02 shall be conclusively
deemed reasonable.
Upon any redemption of less than all the Securities, the Company and
the Trustee, for the purpose of selecting Securities to be redeemed, may treat
as Outstanding any Securities surrendered for conversion during the period of 15
days next preceding the selection of the Securities and need not treat as
Outstanding any Security authenticated and delivered during such period in
exchange for the unconverted portion of any Security converted in part during
such period.
SECTION 3.03 Notice of Redemption by the Company.
At least 30 days but not more than 60 days before a Redemption Date,
the Company shall mail a notice of redemption by first-class mail to each Holder
of Securities to be redeemed.
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In order to facilitate the redemption of the Securities, the Board of
Directors may fix a record date for the determination of the Securities to be
redeemed, or may cause the transfer books of the Company for the Securities to
be closed, not more than 60 days or less than 30 days prior to the date fixed
for such redemption.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) the Conversion Price;
(4) the name and address of the Paying Agent and the Conversion
Agent;
(5) that Securities called for redemption must be surrendered to
the Paying Agent to collect the Redemption Price;
(6) that interest on Securities called for redemption ceases to
accrue on and after the Redemption Date;
(7) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that,
after the Redemption Date, upon surrender of such Security, a
new Security or Securities in principal amount equal to the
unredeemed portion thereof will be issued;
(8) any conversion rights with respect to the Securities and the
applicable procedures required to be followed in connection
with a conversion of Securities; and
(9) that Securities called for redemption may be converted at any
time before the close of business on the Redemption Date and,
if not converted prior to the close of business on the
Redemption Date, the right of conversion will be lost.
At the Company's written request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. If a CUSIP number
is listed in such notice or printed on the Security, the notice shall state that
no representation is made as to the correctness or accuracy of such CUSIP
number.
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SECTION 3.04 Effect of Notice of Redemption.
Once notice of redemption is mailed, Securities called for redemption
become due and payable on the applicable Redemption Date and at the applicable
Redemption Price. Upon surrender to the Paying Agent, such Securities shall be
paid at the Redemption Price, plus accrued interest to the Redemption Date.
SECTION 3.05 Deposit of Redemption Price.
On or before the Redemption Date with respect to the Securities, the
Company shall deposit with the Paying Agent (which for purposes of this Section
only shall be a bank or trust company in the Borough of Manhattan, the City of
New York, having a capital and surplus of at least $100,000,000) in immediately
available funds money sufficient to pay the Redemption Price of and accrued
interest on all Securities to be redeemed on that date. The Trustee or the
Paying Agent shall return to the Company any money so received not required for
that purpose.
SECTION 3.06 Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part, the Trustee
shall authenticate for the Holder, at the expense of the Company, a new Security
equal in principal amount to the unredeemed portion of the Security surrendered.
SECTION 3.07 Termination of Rights.
Notice of redemption having been given as aforesaid, upon the deposit
of funds pursuant to Section 3.05 in respect of Securities to be redeemed
pursuant to Section 3.01, notwithstanding that any such Securities themselves
shall not have been surrendered for cancellation, from and after the date of
redemption designated in the notice of redemption (i) that portion of the
principal amount of the Securities that is to be redeemed shall no longer be
deemed Outstanding, (ii) the rights to receive interest thereon shall cease to
accrue and (iii) all rights of the Holders of Securities to be redeemed shall
cease and terminate with respect to that portion of the principal amount of the
Securities that is to be redeemed, excepting only the right to receive the
Redemption price therefor and the right to convert such Securities into Units
until the close of business on the Redemption Date, in accordance with Article
10; provided, however, that if the Company shall default in the payment of the
Redemption Price, that portion of the principal amount of the Securities that
was to be redeemed shall thereafter be deemed to be Outstanding and the Holders
thereof shall have all of the rights of a Holder of Securities until such time
as such default shall no longer be continuing or shall have been waived by
Holders of at least 66-2/3% of the then Outstanding principal amount of all
Securities.
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ARTICLE 4
COVENANTS
SECTION 4.01 Payment of the Securities.
The Company shall pay the principal of, premium, if any, and interest
on the Securities on the dates and in the manner provided in the Securities and
this Indenture in immediately available funds in Dollars. An installment of
principal, premium, if any, or interest shall be considered paid on the date it
is due if the Trustee or Paying Agent (other than the Company or a Subsidiary)
holds on that date money designated for and sufficient to pay the installment.
The Company shall pay interest on overdue principal and premium, if any, at the
rate borne by the Security; it shall pay interest, including post-petition
interest in the event of a proceeding under the Bankruptcy Laws, on overdue
installments of interest at the same rate to the extent lawful.
SECTION 4.02 Commission Reports.
So long as the Securities remain Outstanding, the Company shall file
with the Trustee and mail to the Holders at their addresses appearing in the
register of Securities maintained by the Registrar, promptly after it files them
with the Commission, copies of the annual reports and of the information,
documents and other reports (or copies of such portions of any of the foregoing
as the Commission may by rules and regulations prescribe) which the Company is
required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act. If at anytime the Company is not subject to Section 13 or 15(d) of
the Exchange Act, upon the request of a Holder, the Company shall deliver to
such Holder information of the type that would satisfy the requirement of
subsection (d)(4)(i) of Rule 144A (or any similar successor provision) under the
Securities Act of 1933, as amended. The Company shall also comply with the other
provisions of TIA ss. 314(a).
So long as the Securities remain Outstanding, the Company shall cause
its annual reports to shareholders (containing audited financial statements) and
any other financial reports furnished by it to shareholders to be mailed to the
Holders at their addresses appearing in the register of Securities maintained by
the Registrar.
SECTION 4.03 Distributions.
In the event that the Company shall declare a dividend or make any
other distribution (including, without limitation, in capital stock (which shall
include, without limitation, any options, warrants or other rights to acquire
capital stock) of the Company, whether or not pursuant to a shareholder rights
plan, "poison pill" or similar arrangement, or other property or assets) on or
with respect to the Units other than a Regular Distribution, distributions that
result in the payment of Additional Interest or a dividend or distribution paid
solely in Units, then the Board of Directors shall declare, and the Holders
shall be entitled to receive, a distribution in an amount equal to the
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<PAGE> 26
amount of such dividend or distribution received by a holder of the number of
Units into which the Securities are convertible on the record date for such
dividend or distribution. Any such amount shall be paid to the Holders at the
same time such dividend or distribution is made to holders of Units.
SECTION 4.04 Notice of Default.
The Company will, so long as any Securities are Outstanding, deliver to
the Trustee, within 10 days of becoming aware of any Default or Event of Default
in the performance of any covenant, agreement or condition in this Indenture, an
Officers' Certificate specifying such Default or Event of Default, the period of
existence thereof and what action the Company is taking or proposes to take with
respect thereto.
SECTION 4.05 Compliance Certificates.
The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year of the Company (which as of the date hereof is December 31),
a written statement signed by the principal executive officer, principal
financial officer or principal accounting officer of the Company, stating, as to
each signer thereof, that:
(1) a review of the activities of the Company during such year and of
performance under this Indenture has been made under his supervision;
(2) to the best of his knowledge, based on such review, the Company has
kept, observed, performed and fulfilled in all material respects each and every
condition and covenant contained in this Indenture throughout such year, or, if
there has been a default in the fulfillment of any such condition or covenant,
specifying each such default known to him and the nature and status thereof; and
(3) the conversion price then in effect.
The Company will give the Trustee written notice of a change in the
fiscal year of the Company, within a reasonable time after such change is
effected.
SECTION 4.06 Reserved.
SECTION 4.07 Additional Indebtedness.
The Company hereby covenants and agrees that, so long as any amount is
outstanding on any of the Securities, the Company will not, without the consent
of a majority in outstanding principal amount of the Securities, create, assume,
incur or in any manner become or remain liable in respect of any Indebtedness
other than Senior Indebtedness, that by its terms is expressly subordinate in
right
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of payment to the Senior Indebtedness unless by its terms such Indebtedness is
expressly junior to, or pari passu with, the Securities in right of payment.
SECTION 4.08 Preservation of Existence.
The Company shall, and shall cause each of its Subsidiaries to:
(a) preserve and maintain in full force and effect its
partnership or corporate existence and good standing under the laws of
its jurisdiction or organization except as permitted by Section 4.12;
(b) preserve and maintain in full force and effect all
material rights, privileges, qualifications, licenses and franchises
necessary in the normal conduct of its business; and
(c) use its reasonable efforts to preserve its business
organization.
SECTION 4.09 Payment of Obligations.
The Company shall, and shall cause its Subsidiaries to, pay and
discharge as the same shall become due and payable, all their respective
obligations and liabilities, including without limitation:
(a) all tax liabilities, assessments and governmental charges
or levies upon it or its properties or assets, unless the same are
being contested in good faith by appropriate proceedings and adequate
reserves in accordance with GAAP are being maintained by the Company or
such Subsidiary;
(b) all lawful claims which the Company and each of its
Subsidiaries is obligated to pay, which are due and which, if unpaid,
might by law become a lien upon its property; and
(c) all payments of principal and interest when due (giving
effect to any grace periods relating thereto) on Indebtedness.
SECTION 4.10 Compliance with Laws.
The Company shall comply, and shall cause each Subsidiary to comply, in
all material respects with all requirements of law and with the directions of
any governmental authority having jurisdiction over it or its business, except
such as to which such failure to comply would not have a material adverse effect
on the condition of the Company.
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SECTION 4.11 Registration and Listing.
The Company will in good faith endeavor to maintain the registration of
the Units reserved for conversion of the Securities under Federal Securities
Laws or state or other applicable law. So long as the Units are listed on the
American Stock Exchange or quoted or listed on any other national securities
exchange, the Company will, if permitted by the rules of such system or
exchange, quote or list and keep quoted or listed on such exchange, upon
official notice of issuance, all Units issuable or deliverable upon conversion
of the Securities.
SECTION 4.12 Transactions with Affiliates.
The Company shall not, and shall not permit any of its Subsidiaries to,
enter into any transaction with any Affiliate of the Company or of any such
Subsidiary, except in the ordinary course of business and pursuant to the
reasonable requirements of the business of the Company or such Subsidiary and on
terms no less favorable to the Company or such Subsidiary than those the Company
or such Subsidiary would obtain in a comparable arm's-length transaction with a
Person not an Affiliate of the Company or such Subsidiary; provided, however,
that National Health Investors, Inc. shall not be considered an Affiliate of the
Company or any of its Subsidiaries for purposes of this Section 4.12.
SECTION 4.13 No Inconsistent Agreements.
Neither the Company nor any of its Subsidiaries shall enter into any
loan or other agreement, or enter into any amendment or other modification to
any currently existing agreement, which by its terms restricts or prohibits the
ability of the Company to issue Units upon conversion of the Securities or to
pay interest on the Securities in accordance with this Indenture and terms of
the Securities; provided, however, that the foregoing shall not prevent the
Company from entering into loan or other agreements that contain, or any
amendment or other modification to any currently existing credit agreement to
provide, restrictions on the ability of the Company to optionally redeem or
prepay the Securities, following the occurrence of a default or event of default
under such agreements.
ARTICLE 5
SUCCESSOR CORPORATION
SECTION 5.01 When Company May Merge, etc.
The Company shall not merge, consolidate with or into, or convey,
transfer, lease or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets (whenever
acquired), and the Company shall not allow any of its Subsidiaries to merge or
consolidate with or into any other Person except another Subsidiary of the
Company, except that
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the Company may consolidate or merge with or into, or sell all or substantially
all of its assets to, any Person if: (i) the resulting, surviving or transferee
Person is a solvent corporation or partnership which assumes by supplemental
indenture all the obligations of the Company under the Securities and this
Indenture; (ii) such corporation or partnership is organized and existing under
the laws of the United States, a State thereof or the District of Columbia
although it in turn may be owned by a foreign entity; (iii) immediately after
giving effect to such transaction no Default or Event of Default shall have
happened and be continuing, and the Officers' Certificate referred to in the
following clause reflects that such Officers are not aware of any such Default
or Event of Default that shall have happened and be continuing, (iv) the
resulting, surviving or transferee Person shall have a consolidated net worth at
least equal to the consolidated net worth of the Company immediately prior to
such transaction and (v) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture comply with
this Indenture, and thereafter all obligations of the Company shall terminate.
SECTION 5.02 Successor Corporation or Trust Substituted.
Upon any consolidation or merger, or any transfer of all or
substantially all of the assets of the Company in accordance with Section 5.01,
the successor corporation or trust formed by such consolidation or into which
the Company is merged or to which such transfer is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such successor corporation or trust
has been named as the Company herein. The Company shall thereupon be relieved of
any further obligation or liability hereunder or upon the Securities; and the
Company as the predecessor corporation may thereupon or at any time thereafter
be dissolved, wound up or liquidated. Such successor corporation thereupon may
cause to be signed, and may issue either in its own name or in the name of
National HealthCare L.P., any or all of the Securities issuable hereunder which
theretofore shall not have been signed by the Company and delivered to the
Trustee; and, upon the order of such successor corporation, instead of the
Company, and subject to all the terms, conditions and limitations in this
Indenture prescribed, the Trustee shall authenticate and shall deliver any
Securities which previously shall have been signed and delivered by the Officers
to the Trustee for authentication, and any Securities which such successor
corporation thereafter shall cause to be signed and delivered to the Trustee for
that purpose. All the Securities so issued shall in all respects have the same
legal rank and benefit under this Indenture as the Securities theretofore or
thereafter issued in accordance with the terms of this Indenture as though all
such Securities had been issued at the date of the execution hereof.
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ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01 Events of Default.
An "Event of Default" shall occur if:
(1) the Company defaults in the payment of interest on the
Securities when the same becomes due and payable and such default continues for
a period of 15 Business Days, whether or not such payment shall be prohibited by
the provisions of Section 12 hereof;
(2) the Company defaults in the payment of principal of the
Securities when the same becomes due and payable at maturity, upon redemption
(including pursuant to Section 11.01) or otherwise, whether or not such payment
shall be prohibited by the provisions of Section 12 hereof;
(3) the Company fails to comply with any agreements or
covenants (other than those referred to in clauses 1 or 2 above) in this
Indenture or the Securities and, if such failure is capable of being remedied,
such failure continues unremedied for 30 days (or if, despite the Company's good
faith efforts to remedy such failure, such failure is not remedied within such
30 day period, then if such failure continues unremedied for an additional 60
days) after notice thereof by the Holders of a majority of the then outstanding
principal amount of the Securities;
(4) the Company or any of its Subsidiaries pursuant to or
within the meaning of any United States bankruptcy laws or any applicable
bankruptcy, insolvency or similar laws of any other country (a "Bankruptcy
Law"):
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief
against it in an involuntary case,
(iii) consents to the appointment of a Custodian of
it or for all or substantially all of its property, or
(iv) makes a general assignment for the benefit of
its creditors;
(5) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
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(i) is for relief against the Company or any of its
Subsidiaries in an involuntary case,
(ii) appoints a Custodian of the Company or any of
its Subsidiaries or for all or substantially all of its
property, or
(iii) orders the winding up or liquidation of the
Company or any of its Subsidiaries and the order or decree
remains unstayed and in effect for 60 days;
(6) the Company or any of its Subsidiaries defaults in the
payment of Indebtedness aggregating in excess of $10,000,000 when due, after any
grace periods with respect thereto shall have expired and upon non-waiver by the
holders of any such Indebtedness and such default continues unremedied for 30
days, or there has been an acceleration of in excess of $10,000,000 aggregate
principal amount of Indebtedness of the Company by the holder thereof following
an event of default as defined in any mortgage, indenture, agreement or
instrument under which there may be issued or by which there may be secured or
evidenced such Indebtedness of the Company, whether such Indebtedness now exists
or shall hereafter be created; or
(7) a judgment for the payment of money the uninsured portion
of which exceeds $10,000,000 shall be rendered against the Company or any of its
Subsidiaries and shall remain undischarged for a period (during which execution
shall not be effectively stayed) of 60 days after the date on which the judgment
has been rendered, unless (i) no proceeding for execution of such judgment has
been commenced or (ii) any such proceeding has been stayed.
SECTION 6.02 Acceleration.
If an Event of Default (other than an Event of Default specified in
Section 6.01(4) or 6.01(5)) occurs and is continuing with respect to any
Securities, the Trustee by notice to the Company, or the Holders of a majority
in principal amount of the Securities then Outstanding by notice to the Company
and the Trustee, may declare to be due and payable immediately the principal
amount of the Securities plus accrued interest to the date of acceleration. Upon
any such declaration, such amount shall be due and payable immediately, and upon
payment of such amount all of the Company's obligations with respect to the
Securities, other than obligations under Section 7.07, shall terminate. If an
Event of Default specified in Section 6.01(4) or 6.01(5) occurs, all unpaid
principal and accrued interest on the Securities then Outstanding shall become
and be immediately due and payable without any declaration on the act on the
part of the Trustee or any Holder. The Holders of a majority in principal amount
of the Outstanding Securities by written notice to the Trustee may rescind an
acceleration and its consequences if (x) all existing Events of Default with
respect to the Securities, other than the non-payment of the principal of the
Securities, which have become due solely by such declaration of acceleration,
have been cured or waived, (y) to the extent the payment of such interest is
lawful, interest on overdue installments of interest and overdue principal which
has become due otherwise than by such declaration of acceleration, has been
paid, and (z) the
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rescission would not conflict with any judgment or decree of a court of
competent jurisdiction. The Trustee may rely upon such notice of rescission
without any independent investigation as to the satisfaction of conditions (x),
(y) and (z).
SECTION 6.03 Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy by proceeding at law or in equity to collect the payment of
principal (and premium, if any) or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.04 Waiver of Defaults and Events of Default.
Subject to Section 9.02, the Holders of a majority in principal amount
of the Securities then Outstanding, on behalf of the Holders of the Securities,
by written notice to the Trustee may waive a Default or Event of Default with
respect to the Securities and its consequences. When a Default or Event of
Default is waived with respect to the Securities, it is cured and ceases; but no
such waiver shall extend to any subsequent or other Default or impair any right
consequent thereon.
SECTION 6.05 Control by Majority.
The Holders of a majority in principal amount of the Securities then
Outstanding may direct in writing the time, method and place of conducting any
proceeding for any remedy available to the Trustee or the Holders, or for
exercising any trust or power conferred on the Trustee. The Trustee, however,
may refuse to follow any direction that conflicts with law or this Indenture,
that the Trustee determines may be unduly prejudicial to the rights of other
Securityholders, it being understood that (subject to Section 7.01) the Trustee
shall have no duty to ascertain whether or not such actions or forebearances are
unduly prejudicial to such Securityholders or that may involve the Trustee in
personal liability or for which the Trustee does not have adequate
indemnification pursuant to Section 7.01(e); provided, that, the Trustee may
take any other action deemed proper by the Trustee which is not inconsistent
with such direction.
SECTION 6.06 Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Security to receive payment of principal of, premium, if any, and
interest on such Security, on or after the respective due dates expressed in
such Security, or to bring suit for the enforcement of any such
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payment on or after such respective dates, is absolute and unconditional and
shall not be impaired or affected without the consent of the Holder.
Notwithstanding any other provision of this Indenture (other than
Section 3.01), the right of any Holder of any Security to convert such Security
or to bring suit for the enforcement of such right shall not be impaired or
affected without the written consent of the Holder.
SECTION 6.07 Collection Suit by Trustee.
If an Event of Default with respect to any Securities in payment of
interest or principal (and premium, if any) specified in Section 6.01(1) or (2)
occurs and is continuing, the Trustee may recover judgment in its own name and
as trustee of an express trust against the Company or any other obligor on the
Securities for the whole amount of unpaid principal (and premium, if any) and
accrued interest remaining unpaid on the Securities, together with interest on
overdue principal (and premium, if any) and to the extent that payment of such
interest is lawful, interest on overdue installments of interest, in each case
at the rate borne by the Securities and 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,
its agents and counsel.
SECTION 6.08 Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel) and the Holders of
Securities allowed in any judicial proceedings relative to the Company (or any
other obligor upon the Securities), its creditors or its property and shall be
entitled and empowered to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same. Any
Custodian in any such judicial proceeding is hereby authorized by each
Securityholder to make such payments to the Trustee, and in the event that the
Trustee shall consent to the making of such payments directly to the Holders of
Securities, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Securityholder any
plan or reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof, or to authorize the Trustee to
vote in respect of the claim of any Securityholder in any such proceedings.
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SECTION 6.09 Priorities.
If the Trustee collects any money pursuant to this Article 6
with respect to the Securities, it shall pay out the money in the following
order:
FIRST: to the Trustee for payment of costs and expenses of
collection, including all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses and
disbursements of the Trustee, its agents and counsel and all
other amounts due under Section 7.07;
SECOND: to holders of any Senior Indebtedness as required by
Article 12; and
THIRD: to Holders of Securities for amounts due and unpaid on
the Securities for principal of (and premium, if any) and
interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the
Securities for principal (and premium, if any) and interest,
respectively; and
FOURTH: to the Company.
The Trustee may fix a record date and payment date for any payment to
Holders of Securities pursuant to this Section 6.09.
SECTION 6.10 Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorney's fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.10 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.06 or a suit by Holders of more than 25% in principal
amount of the Securities then Outstanding or a suit by any holder of Senior
Indebtedness.
SECTION 6.11 Limitations on Suits.
Subject to Section 6.06, a Holder of any Securities may not pursue any
remedy with respect to this Indenture or the Securities unless:
(1) the Holder has given the Trustee written notice of a continuing
Event of Default;
(2) the Holders of at least 25% in aggregate principal amount of the
Securities make a written request to the Trustee to pursue the remedy;
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(3) such Holder or Holders offer to the Trustee indemnity satisfactory
to the Trustee against any loss, liability or expenses;
(4) The Trustee does not comply with the request within 60 days after
receipt of the notice, request and offer of indemnity; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 60 day period by the Holders of a majority
in aggregate principal amount of the Securities then Outstanding.
A Holder of any Security may not use this Indenture to prejudice the
rights of another Securityholder or to obtain a preference or priority over
another Securityholder.
ARTICLE 7
TRUSTEE
SECTION 7.01 Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise its 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 his own affairs.
(b) Except during the continuance of an Event of Default and
after the curing or waiving of all such Events of Default which may have
occurred:
(1) The Trustee need perform only those duties that are
specifically set forth in this Indenture, and the Trustee
shall not be liable except for the performance of such
duties as are specifically set forth in this Indenture, and
no others, and no implied covenants or obligation shall be
read into this Indenture against the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any
statements certificates or opinions furnished to the Trustee
and conforming to the requirements of this Indenture. The
Trustee, however, shall examine the certificates and
opinions to determine whether or not they conform to the
requirements of this Indenture.
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(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b)
of this Section 7.01.
(2) The Trustee shall not be liable for any error in judgment
made in good faith by a Trust Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent
facts.
(3) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05.
(4) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties
hereunder or in the exercise of any of its rights or powers,
if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured to it.
(d) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01
and subject to Sections 315 and 316 of the TIA.
(e) Subject to subsection (c), the Trustee may refuse to
perform any duty or exercise any right or power unless, subject to the
provisions of the TIA, it receives indemnity satisfactory to it against any
loss, liability, expense or fee.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
SECTION 7.02 Rights of Trustee.
(1) The Trustee may rely on and shall be protected in acting
or refraining from acting upon any document believed by it to be
genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(2) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel, or both,
which shall conform to Section 13.05. The Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel.
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(3) The Trustee may act through agents or attorneys and shall
not be responsible for the misconduct or negligence of such agents or
attorneys appointed with due care and shall not be responsible for
their supervision.
(4) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or
within its rights or powers.
(5) The Trustee may consult with counsel and the written
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 the Trustee hereunder in good faith and reliance
thereon.
(6) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request
or direction of any of the Holders of Securities pursuant to this
Indenture, unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with such
request or direction.
SECTION 7.03 Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company or its
Affiliates with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights. The Trustee, however, is subject to Sections
7.10 and 7.11.
SECTION 7.04 Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, and it shall not be responsible for any
statement of the Company in the Indenture or any statement in the Securities
other than its certificate of authentication or in any document used in the sale
of the Securities other than any statement in writing provided by the Trustee
expressly for use in such document.
SECTION 7.05 Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it is
actually known to the Trustee with respect to the Securities, the Trustee shall
mail to each Holder of Securities notice of the Default or Event of Default
within 90 days after it occurs. Except in the case of a default in payment of
principal of, premium, if any, or interest on any Security, the Trustee may
withhold the notice if and so long as a committee of its Trust Officers in good
faith determines that withholding the notice is in the interests of Holders of
Securities. Notwithstanding anything to the contrary
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expressed in this Indenture, the Trustee shall not be deemed to have knowledge
of any Event of Default hereunder unless and until a Trust Officer shall have
actual knowledge thereof, or shall have received written notice thereof from the
Company at its principal Corporate Trust Office in Nashville, Tennessee. The
Trustee shall not be deemed to have actual knowledge of an Event of Default
hereunder, except in the case of an Event of Default under Sections 6.01(1) or
6.01(2) (provided that the Trustee is the Paying Agent), until a Trust Officer
receives written notice thereof from the Company or any Securityholder that such
an Event of Default has occurred.
SECTION 7.06 Reports by Trustee to Holders.
Within 60 days after each May 15 beginning with May 15, 1996, the
Trustee, if required by the provisions of TIA ss. 313(a), shall mail to each
Securityholder a brief report dated as of May 15 of such year that complies with
TIA ss. 313(a). The Trustee also shall comply with TIA ss. 313(b), ss. 313(c)
and ss. 313(d).
A copy of each report at the time of its mailing to Securityholders
shall be filed with the Commission and each stock exchange on which the
Securities are listed. The Company agrees to notify the Trustee in writing
whenever the Securities become listed or delisted on or from any stock exchange.
SECTION 7.07 Compensation and Indemnity.
The Company shall pay to the Trustee from time to time, and the Trustee
shall be entitled to, reasonable compensation for its services (which
compensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust). The Company shall reimburse the
Trustee upon request for all reasonable disbursements, expenses and advances
incurred or made by it. Such expenses may include, but shall not be limited to,
the reasonable compensation, disbursements and expenses of the Trustee's agents
and counsel.
The Company shall indemnify the Trustee for, and hold it harmless
against, any loss or liability incurred by it in connection with the acceptance
or administration of this trust, including the costs and expenses of defending
itself against any claim or liability in connection with the Securities or the
exercise or performance of any of its powers or duties hereunder. The Trustee
shall notify the Company promptly of any claim asserted against the Trustee for
which it may seek indemnity and the Company may elect by written notice to the
Trustee to assume the defense of any such claim at the Company's expense with
counsel reasonably satisfactory to the Trustee; provided, however, that if the
Trustee is advised by counsel that the interests of the Company and the Trustee
conflict, the Trustee shall have the right to retain separate counsel.
The Company need not reimburse the Trustee for any expense or indemnify
it against any loss or liability incurred by it through the Trustee's negligence
or willful misconduct. The Company shall not be liable for any settlement of any
claim or action effected without the Company's consent,
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which consent shall not be unreasonably withheld. To secure the Company's
payment obligations in this Section, the Trustee shall have a lien prior to the
Securities on all money or property held or collected by the Trustee.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01 occurs, the expenses and the compensation for
the services are intended to constitute expenses of administration under any
applicable bankruptcy or comparable law.
SECTION 7.08 Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.08.
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the Securities then Outstanding may remove the
Trustee by so notifying the Trustee and may appoint a successor Trustee with the
Company's written consent. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting with
respect to the Securities.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee.
If a successor Trustee does not take office within 45 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of a majority in principal amount of the Securities then Outstanding may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall, upon payment of its
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fees and expenses, transfer all property held by it as Trustee to the successor
Trustee, subject to the lien provided for in Section 7.07, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. Notwithstanding the replacement of the Trustee pursuant to this
Section 7.08, the Company's obligations under Section 7.07 shall continue for
the benefit of the retiring Trustee with respect to expenses and liabilities
incurred by it and compensation earned by it prior to such replacement or
otherwise. A successor Trustee shall mail notice of its succession to each
Holder of the Securities.
SECTION 7.09 Successor Trustee by Merger, etc.
If the Trustee consolidates with, merges or converts into, or transfers
all or substantially all of its corporate trust assets to, another corporation,
the successor corporation without any further act shall be the successor
Trustee.
SECTION 7.10 Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA ss.310(a)(1). The Trustee shall have a combined capital and
surplus of at least $100,000,000 as set forth in its most recent published
annual report of condition. The Trustee shall comply with TIA ss. 310(b),
including the optional provision permitted by the second sentence of TIA
ss. 310(b)(9).
SECTION 7.11 Preferential Collection of Claims Against Company.
The Trustee is subject to TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
ARTICLE 8
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 8.01 Satisfaction, Discharge and Defeasance of the Securities.
The Company shall be deemed to have paid and discharged the entire
indebtedness on the Securities after the date of the deposit referred to in
paragraph (a) below, the provisions of this Indenture shall no longer be in
effect in respect of the Securities, and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of such indebtedness; provided that the following conditions shall
have been satisfied:
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(a) the Company has deposited or caused to be deposited with
the Trustee irrevocably as trust funds in trust, specifically pledged
as security for, and dedicated solely to, the benefit of the Holders of
all Securities, with reference to this Section 8.01, (i) money or (ii)
U.S. Government Obligations or (iii) a combination thereof, sufficient,
in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to
the Trustee, to pay and discharge the entire indebtedness on all the
Securities for principal, premium, if any, and interest, if any, to the
maturity date of such Securities as such principal, premium, if any, or
interest becomes due and payable in accordance with the terms of this
Indenture and the Securities;
(b) the Company has paid or caused to be paid all other sums
payable hereunder by the Company in connection with all of the
Securities, including all fees and expenses of the Trustee; and
(c) the Company has delivered to the Trustee an Opinion of
Counsel stating that (i) the Company has received from, or there has
been published by, the Internal Revenue Service a ruling, or (ii) since
the date of this Indenture, there has been a change in the applicable
Federal Income Tax Law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders shall
not recognize income, gain or loss for Federal income tax purposes as a
result of such defeasance and shall be subject to Federal income tax on
the same amounts, in the same manner and at the same times as would
have been the case if such defeasance had not occurred;
(d) the Company has delivered to the Trustee an Opinion of
Counsel stating that the satisfaction, discharge and defeasance of the
Securities pursuant to this Section 8.01 will not cause the Securities
to be delisted from any national securities exchange on which the
Securities are then listed, if any.
(e) the Company has delivered to the Trustee an Officers'
Certificate stating that all conditions precedent herein provided for
relating to the satisfaction and discharge of the entire indebtedness
on the Securities and the discharge of this Indenture and the
termination of the Company's obligations hereunder have been complied
with.
"U.S. Government Obligations" means direct, non-callable obligations
of, or non-callable obligations guaranteed by, the United States of America for
the timely payment of which obligation or guarantee the full faith and credit of
the United States of America is pledged.
SECTION 8.02 Satisfaction and Discharge of Indenture.
In addition to its rights under Section 8.01, the Company may terminate
all of its obligations under this Indenture when:
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(a) All of the Securities theretofore authenticated and
delivered (other than (A) Securities which have been destroyed, lost or
stolen and which have been replaced or paid as provided in Section 2.07
hereof and (B) Securities for whose payment money has theretofore been
deposited with the Trustee or the Paying Agent in trust or segregated
and held in trust by the Company and thereafter repaid to the Company
or discharged from such trust, as provided in Section 2.05 and Section
8.06 hereof) have been delivered to the Trustee for cancellation; and
(b) the Company has paid or caused to be paid all other sums
payable hereunder by the Company in connection with the Outstanding
Securities, including all fees and expenses of the Trustee.
SECTION 8.03 Survival of Certain Obligations.
Notwithstanding the satisfaction and discharge of this Indenture
pursuant to Section 8.01, the respective obligations of the Company specified in
Sections 2.04, 2.05, 2.06, 2.07, 2.12, 7.07, 8.05, 8.06, 8.07 and in Article 10
shall survive until the Securities are no longer Outstanding, and after the
Securities are no longer Outstanding, or upon compliance with Section 8.02, only
the obligations of the Company in such Sections 7.07 and 8.06 shall survive.
Nothing contained in this Article Eight shall abrogate any of the obligations or
duties of the Trustee under this Indenture.
SECTION 8.04 Application of Trust Money.
(a) Subject to the provisions of Section 8.06, all money and U.S.
Government Obligations deposited with the Trustee for the Securities pursuant to
Section 8.01 or Section 8.02, and all money received by the Trustee in respect
of U.S. Government Obligations deposited with the Trustee for the Securities
pursuant to Section 8.01 or Section 8.02 shall be held in trust and reinvested
by the Trustee in U.S. Government Obligations in accordance with the Company's
written instructions and applied by the Trustee in accordance with the
provisions of the Securities and this Indenture, to the payment, either directly
or through any Paying Agent (including the Company acting as its own Paying
Agent) as the Trustee may determine, to the Persons entitled thereto, of the
principal, premium, if any, and interest, if any, on the Securities; but such
money need not be segregated from other funds except to the extent required by
law.
(b) The Trustee shall deliver or pay to the Company from time to time
upon the Company's written request any U.S. Government Obligations, or money
held by it as provided in Section 8.01 or Section 8.02 which, in the written
opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, are then
in excess of the amount thereof which then would have been required to be
deposited for the purpose for which such U.S. Government Obligations, or money
were deposited or received.
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SECTION 8.05 Paying Agent to Repay Monies Held.
Upon the satisfaction and discharge of this Indenture with respect to
the Securities, all monies then held by any Paying Agent for the benefit of
Securities under the provisions of this Indenture shall, upon written demand of
the Company, be repaid to it or paid to the Trustee, and thereupon such Paying
Agent shall be released from all further liability with respect to such monies.
SECTION 8.06 Return of Unclaimed Monies.
Any monies deposited with or paid to the Trustee or any Paying Agent
for the Securities, or then held by the Company in trust, for the payment of any
principal, premium, if any, and interest, if any, on the Securities and not
applied but remaining unclaimed by the Holders of the Securities for two years
after the date upon which the principal of and interest, if any, on the
Securities, as the case may be, shall have become due and payable, shall, unless
otherwise required by mandatory provisions of applicable escheat or abandoned or
unclaimed property law, be repaid to the Company by such Trustee or any Paying
Agent on written demand by the Company or (if then held by the Company) shall be
discharged from such trust; and the Holders of the Securities entitled to
receive such payment shall thereafter look only to the Company for the payment
thereof; provided, however, that, before being required to make any such
repayment, such Trustee may, or shall at the written request of the Company, at
the expense of the Company, cause to be published once in an authorized
newspaper in the same city in which the place of payment with respect to the
Securities shall be located and in an financial newspaper of general circulation
in the City of New York, or mail to each such Holder, a notice (in such form as
may be deemed appropriate by such Trustee) that said monies remain unclaimed and
that, after a date named therein, any unclaimed balance of said monies then
remaining will be returned to the Company.
SECTION 8.07 Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations with respect to the Securities in accordance with Section
8.01 by reason of any legal proceeding or by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, the Company's obligations under this Indenture and
the Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 8.01 until such time as the Trustee or Paying Agent is
permitted to apply all such money or U.S. Government Obligations in accordance
with Section 8.04; provided, however, that if the Company has made any payment
of interest on or principal of any Securities because of the reinstatement of
its obligations, the Company shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the money or U.S. Government
Obligations held by the Trustee or Paying Agent.
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ARTICLE 9
SUPPLEMENTAL INDENTURES
SECTION 9.01 Supplemental Indentures Without Consent of Holders.
The Company, when authorized by Board Resolution, and the Trustee at
any time and from time to time, may amend this Indenture or enter into one or
more indentures supplemental hereto, to be in a form satisfactory to the Trustee
without notice to or consent of any Securityholder for any of the following
purposes:
(1) to comply with Section 5.01; or
(2) to provide for uncertificated Securities in addition to or in
place of certificated Securities; or
(3) to add to the covenants of the Company, for the benefit of the
Holders of the Securities, or to surrender any right or power herein conferred
upon the Company; or
(4) to add any Events of Default; and
(5) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision herein,
or to make any other provisions with respect to matters or questions arising
under this Indenture which shall not be inconsistent with any provision of this
Indenture, provided such other provisions shall not adversely affect the
interests of the Holders in any material respect.
(6) as contemplated by Section 10.10.
The Trustee shall be entitled to receive upon request an Opinion of
Counsel to its satisfaction with respect to any supplement to this Indenture
without consent of the Holders that all conditions precedent have been
satisfied.
SECTION 9.02 Supplemental Indentures with Consent of Holders.
With the written consent of the Holders of not less than a majority in
aggregate principal amount of the Securities at the time Outstanding affected by
such supplemental indenture, the Company, when authorized by Board Resolution,
and the Trustee may amend this Indenture or from time to time and at any time
enter into an indenture or indentures supplemental hereto (which shall conform
to the provisions of the Trust Indenture Act of 1939 as in force at the date of
the execution thereof) for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of this Indenture or of any
supplemental indenture, except as otherwise permitted
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by Section 9.01, or of modifying in any manner the rights of the Holders.
Subject to Section 9.04, without the consent of each Holder of Securities
affected, however, an amendment, supplement or waiver, including a waiver
pursuant to Section 6.04, may not:
(1) extend the fixed maturity of any Securities, or reduce the
principal amount thereof or premium, if any, or reduce the rate or extend the
time of payment of interest thereon, without the consent of the Holder of each
Security so affected;
(2) reduce the aforesaid percentage of Securities, the consent of the
Holders of which is required for any such supplemental indenture, without the
consent of the Holders then Outstanding affected thereby;
(3) waive (except, unless theretofore cured) a default in the payment
of the principal of (and premium, if any on), interest on or redemption amounts
with respect to any Security;
(4) make any Security payable in money other than that stated in the
Security;
(5) make any change in Sections 6.04, 6.06 or 9.02 (this sentence);
(6) make any change that adversely affects the right to convert any
Security; or
(7) make any change in Article 12 that adversely affects the rights of
any Securityholder.
Upon the request of the Company, accompanied by a copy of a Board
Resolution certified by the Secretary or an Assistant Secretary of the Company
authorizing the execution of any such supplemental indenture, and upon the
filing with the Trustee of evidence of the consent of Securityholders as
aforesaid, the Trustee shall join with the Company in the execution of such
supplemental indenture unless such supplemental indenture affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may in its discretion, but shall not be obligated to, enter
into such supplemental indenture.
It shall not be necessary for the consent of the Securityholders under
this Section to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent shall approve
the substance thereof.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of this Section, the Company
shall mail a notice, setting forth in general terms the substance of such
supplemental indenture, to all Holders so affected as the names and addresses of
such Holders shall appear on the registry books. Any failure of the Company so
to mail such notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such supplemental indenture.
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SECTION 9.03 Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Securities shall
comply with the TIA as then in effect.
SECTION 9.04 Revocation and Effect of Consents.
Subject to this Indenture, each amendment, supplement or waiver
evidencing other action shall become effective in accordance with its terms.
Until an amendment, supplement or waiver becomes effective, a consent to it by a
Holder of a Security is a continuing consent by the Holder even if notation of
the consent is not made on any Security. Any such Holder or subsequent Holder,
however, may revoke the consent as to his Security or portion of a Security, if
the Trustee receives the notice of revocation before the date the amendment,
waiver or other action becomes effective.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then notwithstanding the
provisions of the immediately preceding paragraph, those Persons who were
Holders at such record date (or their duly designated proxies) and only those
Persons, shall be entitled to consent to such amendment, supplement or waiver or
to revoke any consent previously given, whether or not such Persons continue to
be Holders after such record date. No consent shall be valid or effective for
more than 90 days after such record date unless consent from Holders of the
principal amount of Securities then Outstanding required hereunder for such
amendment, supplement or waiver to be effective shall have also been given and
not revoked within such 90-day period.
After an amendment, supplement or waiver becomes effective, it shall
bind every Securityholder, unless it makes a change described in any of clauses
(1) through (6) of Section 9.02. In that case the amendment, supplement or
waiver shall only bind the Holders of a Security or portion of a Security.
SECTION 9.05 Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may request the Holder of the Security to deliver it to the Trustee.
The Trustee may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determine, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms the
cost and expense of which will be borne by the Company.
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SECTION 9.06 Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
theretofore or thereafter authenticated and delivered hereunder shall be bound
thereby.
SECTION 9.07 Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Board of Directors of the Company, to any such supplemental indenture may be
prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Securities.
ARTICLE 10
CONVERSION OF SECURITIES
SECTION 10.01 Right of Conversion; Conversion Price.
The Holder of any Security shall have the right, at his option, at any
time and from time to time (except that, with respect to any Security or portion
of a Security which shall be called for redemption, such right shall terminate
at the close of business on the date fixed for redemption of such Security or
portion of a Security unless the Company shall default in payment due upon
redemption thereof), to convert, subject to the terms and provisions of this
Article 10, the principal of any Security or Securities or any portion thereof
which is $1,000 principal amount or an integral multiple thereof into such
number of fully paid and non-assessable Units as is equal, subject to Section
10.08, to the quotient of the principal of the Securities being so converted
divided by the Conversion Price (as defined below) then in effect, upon
surrender of the Security or Securities, the principal of which is so to be
converted, accompanied by written notice of conversion duly executed, to the
Company, at any time during usual business hours at the office or agency
maintained by it for such purpose, and, if so required by the Conversion Agent
or Registrar, accompanied by a written instrument or instruments of transfer in
form satisfactory to the Conversion Agent or Registrar duly executed by the
Holder or his duly authorized representative in writing. The "Conversion Price"
shall be $15.2063, subject to adjustment as set forth in Section 10.04. For
convenience, the conversion of any portion of the principal of any Security or
Securities into Units or other Securities is hereinafter sometimes referred to
as the conversion of such Security or Securities.
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SECTION 10.02 Issuance of Units on Conversion.
As promptly as practicable after the surrender, as herein provided, of
any Security or Securities for conversion pursuant to Section 10.01, the Company
shall deliver or cause to be delivered at its said office or agency, to or upon
the written order of the Holder of the Security or Securities so surrendered,
certificates representing the number of fully paid and nonassessable Units into
which such Security or Securities may be converted in accordance with the
provisions of this Article 10. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date that such Security or
Securities shall have been surrendered for conversion by delivery thereof with a
written notice of conversion duly executed, so that the rights of the Holder of
such Security or Securities as a Securityholder shall cease at such time and,
subject to the following provisions of this paragraph, the Person or Persons
entitled to receive the Units upon conversion of such Security or Securities
shall be treated for all purposes as having become the record holder or holders
of such Units at such time and such conversion shall be at the Conversion Price
in effect at such time; provided, however, that with respect to the Company's
Units no such surrender on any date when the stock transfer books of the Company
shall be closed (but not for any period in excess of five days) shall be
effective to constitute the Person or Persons entitled to receive the Units upon
such conversion as the record holder or holders of such Units on such date, but
such surrender shall be effective to constitute the Person or Persons entitled
to receive such Units as the record holder or holders thereof for all purposes
immediately prior to the close of business on the next succeeding day on which
such stock transfer books are open; such conversion shall be deemed to have been
made, and shall be made at the Conversion Price in effect on the date that such
Security or Securities shall have been surrendered for conversion by delivery
thereof, as if the stock transfer books of the Company had not been closed. The
Company shall give or cause to be given to the Trustee written notice whenever
the stock transfer books of the Company shall be closed. If the last day for the
exercise of the conversion right shall not be a Business Day, then such
conversion right may be exercised on the next succeeding Business Day.
Upon Conversion of any Security which is converted in part only, the
Company shall execute and the Trustee shall authenticate and deliver to or on
the order of the Holder thereof, at the expense of the Company, a new Security
or Securities of authorized denominations in principal amount equal to the
unconverted portion of such Security.
SECTION 10.03 Payment of Interest.
When the Securities are converted, all interest accrued and unpaid
(whether or not currently payable) on the Securities to the date of conversion
shall be immediately due and payable, in cash or other immediately available
funds, and must accompany the Units issued upon such conversion.
SECTION 10.04 Adjustment of Conversion Price.
The Conversion Price shall be subject to adjustment as follows:
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(1) In case the Company shall at any time or from time to time
(i) pay a dividend or make a distribution (other than a dividend or distribution
paid or made to the Holders of the Securities in the manner provided in Section
4.03) on the outstanding Units in Units or other equity interests (which, for
purposes of this Section 10.04 shall include, without limitation, any dividends
or distributions in the form of options, warrants or other rights to acquire
Units or other equity interests) of the Company, (ii) subdivide the outstanding
Units into a larger number of Units, (iii) combine the outstanding Units into a
smaller number of Units, (iv) issue any equity interest in a reclassification of
the Units or (v) pay a dividend or make a distribution on the outstanding Units
in Units or other equity interests pursuant to a rights plan, "poison pill" or
similar arrangement, then, and in each such case, the Conversion Price in effect
immediately prior to such event shall be adjusted (and any other appropriate
actions shall be taken by the Company) so that the holder of Securities
thereafter surrendered for conversion shall be entitled to receive the number of
Units or other securities of the Company that such holder would have owned or
would have been entitled to receive upon or by reason of any of the events
described above, had the Securities been converted immediately prior to the
occurrence of such event. An adjustment made pursuant to this Section 10.04(1)
shall become effective retroactively (i) in the case of any such dividend or
distribution, to a date immediately following the close of business on the
record date for the determination of holders of Units entitled to receive such
dividend or distribution or (ii) in the case of any such subdivision,
combination or reclassification, to the close of business on the day upon which
such corporate action becomes effective.
(2) In case the Company shall at any time or from time to time
issue or sell Units (or securities convertible into or exchangeable for Units,
or any options, warrants or other rights to acquire Units) (other than options
to acquire Units granted pursuant to any stock option plan of the Company at an
exercise price per Unit equal to or greater than the fair market value per Unit
on the date of grant as determined pursuant to such stock option plan and other
than Units issued pursuant to the Company's Employee Unit Purchase Plan), at a
price per Unit less than the Current Market Price per Unit then in effect at the
record date referred to in the following sentence (treating the price per share
or unit of any security convertible or exchangeable or exercisable into Units as
equal to (i) the sum of the price for such security convertible, exchangeable or
exercisable into Units plus any additional consideration payable (without regard
to any anti-dilution adjustments) upon the conversion, exchange or exercise of
such security into Units divided by (ii) the number of Units initially
underlying such convertible, exchangeable or exercisable security), then, and in
each such case, the Conversion Price then in effect shall be adjusted by
dividing the Conversion Price in effect on the day immediately prior to such
record date by a fraction (x) the numerator of which shall be the sum of the
number of Units outstanding on such record date plus the number of additional
Units issued or to be issued (or the maximum number into which such convertible
or exchangeable securities initially may convert or exchange or for which such
options, warrants or other rights initially may be exercised) and (y) the
denominator of which shall be the sum of the number of Units outstanding on such
record date plus the number of Units which the aggregate consideration for the
total number of such additional Units so issued (or into which such convertible
or exchangeable securities may convert or exchange or for which such options,
warrants or other rights may be
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<PAGE> 50
exercised plus the aggregate amount of any additional consideration initially
payable upon conversion, exchange or exercise of such security) would purchase
at the Current Market Price per Unit on such record date. Such adjustment shall
be made whenever such Units, securities, options, warrants or other rights are
issued, and shall become effective retroactively to a date immediately following
the close of business on the record date for the determination of holders of
Units entitled to receive such Units, securities, options, warrants or other
rights; provided, however, that the determination as to whether an adjustment is
required to be made pursuant to this Section 10.04(2) shall only be made upon
the issuance of such Units or such convertible or exchangeable securities,
options, warrants or other rights, and not upon the issuance of the security
into which such convertible or exchangeable security converts or exchanges, or
the security underlying such option, warrants or other right; provided, further,
that if any convertible or exchangeable securities, options, warrants or other
rights (or any portions thereof) which shall have given rise to an adjustment
pursuant to this Section 10.04(2) shall have expired or terminated without the
exercise thereof and/or if by reason of the terms of such convertible or
exchangeable securities, options, warrants or other rights there shall have been
an increase or increases, with the passage of time or otherwise, in the price
payable upon the exercise or conversion thereof, then the Conversion Price
hereunder shall be readjusted (but to no greater extent than originally adjusted
with respect to the related event) on the basis of (x) eliminating from the
computation any additional Units corresponding to such convertible or
exchangeable securities, options, warrants or other rights as shall have expired
or terminated, (y) treating the additional Units, if any, actually issued or
issuable pursuant to the previous exercise of such convertible or exchangeable
securities, options, warrants or other rights as having been issued for the
consideration actually received and receivable therefor and (z) treating any of
such convertible or exchangeable securities, options, warrants or other rights
which remain outstanding as being subject to exercise or conversion on the basis
of such exercise or conversion price as shall be in effect at the time.
(3) In case the Company shall at any time or from time to time
issue or sell Units or securities convertible into or exchangeable for Units, or
any options, warrants or other rights to acquire Units (other than Units and
options to acquire Units, in each case issued pursuant to any stock option plan
of the Company or the Company's Employee Unit Purchase Plan), at a price per
Unit less than the Conversion Price then in effect at the record date referred
to in the following sentence (treating the price per share or unit of any
security convertible or exchangeable or exercisable into Units as equal to (A)
the sum of the price for such security convertible, exchangeable or exercisable
into Units plus any additional consideration payable (without regard to any
anti-dilution adjustments) upon the conversion, exchange or exercise of such
security into Units divided by (B) the number of Units initially underlying such
convertible, exchangeable or exercisable security), then, and in each such case,
the Conversion Price then in effect shall be adjusted, to the extent an
adjustment is not made for any such issuance or sale pursuant to Section
10.04(2), by dividing the Conversion Price in effect on the day immediately
prior to such record date by a fraction (x) the numerator of which shall be the
sum of the number of Units outstanding on such record date plus the number of
additional Units issued or to be issued (or the maximum number into which such
convertible or exchangeable securities initially may convert or exchange or for
which
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<PAGE> 51
such options, warrants or other rights initially may be exercised) and (y) the
denominator of which shall be the sum of the number of Units outstanding on such
record date plus the number of Units which the aggregate consideration for the
total number of such additional Units so issued (or into which such convertible
or exchangeable securities may convert or exchange or for which such options,
warrants or other rights may be exercised plus the aggregate amount of any
additional consideration initially payable upon conversion, exchange or exercise
of such security) would purchase at the Conversion Price on such record date.
Such adjustment shall be made whenever such Units, securities, options, warrants
or other rights are issued, and shall become effective retroactively to a date
immediately following the close of business on the record date for the
determination of holders of Units entitled to receive such Units, securities,
options, warrants or other rights; provided, however, that the determination as
to whether an adjustment is required to be made pursuant to this Section
10.04(3) shall be made upon the issuance of such Units or such convertible or
exchangeable securities, options, warrants or other rights; provided, further,
that if any convertible or exchangeable securities, options, warrants or other
rights (or any portion thereof) which shall have given rise to an adjustment
pursuant to this Section 10.04(3) shall have expired or terminated without the
exercise thereof and/or if by reason of the terms of such convertible or
exchangeable securities, options, warrants or other rights there shall have been
an increase or increases, with the passage of time or otherwise, in the price
payable upon the exercise or conversion thereof, then the Conversion Price
hereunder shall be readjusted (but to no greater extent than originally adjusted
with respect to the related event) on the basis of (x) eliminating from the
computation any additional Units corresponding to such convertible or
exchangeable securities, options, warrants or other rights as shall have expired
or terminated, (y) treating the additional Units, if any, actually issued or
issuable pursuant to the previous exercise of such convertible or exchangeable
securities, options, warrants or other rights as having been issued for the
consideration actually received and receivable therefor and (z) treating any of
such convertible or exchangeable securities, options, warrants or other rights
which remain outstanding as being subject to exercise or conversion on the basis
of such exercise or conversion price as shall be in effect at this time.
(4) In case the Company shall at any time or from time to time
distribute on or with respect to the Units (including any such distribution made
in connection with a consolidation or merger in which the Company is the
resulting or surviving corporation and the Units are not changed or exchanged)
cash, evidences of indebtedness of the Company or another issuer, securities of
the Company or another issuer or other assets (excluding (i) Regular
Distributions (as defined in Section 10.04(7)), (ii) dividends and distributions
paid or made in the manner provided in Section 4.03 and, (iii) dividends payable
in Units for which adjustment is made under Section 10.04(1)) or rights or
warrants to subscribe for or purchase securities of the Company (excluding those
referred to in Section 10.04(2) and 10.04(3)), then, and in each such case, the
Conversion Price then in effect shall be adjusted by dividing the Conversion
Price in effect immediately prior to the date of such distribution by a fraction
(x) the numerator of which shall be the Current Market Price of the Units on the
record date referred to below and (y) the denominator of which shall be such
Current Market Price of the Units less the amount that a willing buyer would pay
a willing seller in an arm's length transaction at such time (as determined by
the Board of Directors of the Managing General Partner)
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for the portion of the cash, evidences of indebtedness, securities or other
assets so distributed or of such subscription rights or warrants applicable to
one Unit (but such denominator not to be less than one); provided, however, that
no adjustment shall be made with respect to any distribution of rights to
purchase securities of the Company if the holder of the Securities would
otherwise be entitled to receive such rights upon conversion at any time of the
Securities into Units unless such rights are subsequently redeemed by the
Company, in which case such redemption shall be treated for purposes of this
Section 10.04(4) as a distribution on the Units. Such adjustment shall be made
whenever any such distribution is made; provided, however, that in the case of a
Cash Distribution such adjustment shall be calculated not later than 45 days
following the last day of the Calculation Period (as defined in Section 10.04(7)
or the Relevant Period, as the case may be. The adjustment shall become
effective retroactively to a date immediately following the close of business on
the record date for the determination of holders of Units entitled to receive
such distribution.
(5) In case the Company at any time or from time to time shall
take any action affecting the Units or its other equity interests, if any, other
than an action described in any of Section 10.04(1) through Section 10.04(5),
inclusive, or Section 10.10, then, and in each such case, the Conversion Price
shall be adjusted in such manner and at such time as the Board of Directors in
good faith determines to be equitable in the circumstances (such determination
to be evidenced in a resolution, a certified copy of which shall be mailed to
the holders of the Securities).
(6) Notwithstanding anything herein to the contrary, no
adjustment under this Section 10.04 need be made to the Conversion Price (i)
unless such adjustment would require an increase or decrease of at least 1% of
the Conversion Price then in effect or (ii) for issuances of Units to any or all
of the Managing General Partner, National Healthcare Corporation, a Tennessee
corporation (the "Administrative General Partner") and Mr. W. Andrew Adams
("Adams") solely for the purpose of maintaining their collective 1% interest in
the Company. Any lesser adjustment shall be carried forward and shall be made at
the time of and together with the next subsequent adjustment, which, together
with any adjustment or adjustments so carried forward, shall amount to an
increase or decrease of at least 1% of such Conversion Price. Any adjustment to
the Conversion Price carried forward and not theretofore made shall be made
immediately prior to the conversion of these Securities pursuant hereto.
(7) For purposes of Section 10.04(4), a "Regular Distribution"
shall mean a Cash Distribution in an amount that, when added to the amount of
all other Cash Distributions made during the 12-month period ending on the last
day of the fiscal quarter of the Company in which such Cash Distribution is made
(the "Calculation Period"), does not exceed sixty percent (60%) of the income of
the Company during the Calculation Period that, if the Calculation Period were a
calendar year, would be subject, in the hands of the holders of Units, to United
States federal income tax applicable to the Calculation Period.
(8) Notwithstanding anything herein to the contrary, if the
Company shall take a record of the holders of Units for the purpose of entitling
them to receive a dividend or other
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distribution, and shall thereafter and before the distribution to holders
thereof legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the Conversion Price then in
effect shall be required by reason of the taking of such record.
SECTION 10.05 Notice of Adjustment of Conversion Price.
Whenever the conversion price for the Securities is adjusted as herein
provided:
(a) the Company shall compute the adjusted conversion price in
accordance with Section 10.04 and shall prepare an Officers'
Certificate setting forth the adjusted conversion price and showing the
facts upon which such adjustment is based and the computation thereof,
and such certificate shall forthwith be filed at each office or agency
maintained for the purpose of conversion of Securities pursuant to
Section 2.04 and with the Trustee; and
(b) a notice stating that the conversion price has been
adjusted and setting forth the adjusted conversion price shall as soon
as practicable be mailed by the Company to all Holders at their last
addresses as they shall appear in the Security Register.
(c) If the conversion price is adjusted and the Company fails
to file an Officers' Certificate with the Trustee as provided by
Section 10.05(a) and the Trustee is acting as the Conversion Agent, the
Trustee shall be entitled to rely conclusively on the conversion price
set forth in the Officer's Certificate most recently received by the
Trustee (or as set forth in this Indenture if the conversion price
shall not have been adjusted).
SECTION 10.06 Notice of Certain Corporate Action.
(1) In case at any time or from time to time:
(a) the Company shall authorize the granting to holders of
Units or other equity interests, if any, of the Company of rights or
warrants entitling them to subscribe for or purchase any equity
interests of any class or of any other rights or warrants; or
(b) of any reclassification of the Units or other equity
interests, if any, of the Company, or of any consolidation or merger to
which the Company is a party and for which approval of any holders of
Units of the Company is required, or of the sale or transfer of all or
substantially all of the assets of the Company; or
(c) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company; or
(d) the Company shall declare a dividend (or any other
distribution) on the Units or other equity interests, if any, of the
Company;
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then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of Securities pursuant to Section 2.04 and shall cause
to be mailed to all Holders of Securities that are convertible into the
Company's Units at their last addresses as they shall appear in the Security
Register, as promptly as possible, but in any event at least 10 days prior to
the applicable record date hereinafter specified, a notice stating (x) the date
on which a record is to be taken for the purpose of such dividend, distribution,
rights or warrants, or, if a record is not to be taken, the date as of which the
holders of Units of record to be entitled to such dividend, distribution, rights
or warrants are to be determined, or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up is expected to become effective, and the date as of
which it is expected that holders of Units of record shall be entitled to
exchange their Units for securities, cash or other property deliverable upon
such reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up, provided that in the case of any event to which
Section 10.10 applies, the Company shall give at least 10 days prior notice as
aforesaid. Such notice shall also state whether such transaction will result in
any adjustment in the conversion price applicable to the Securities and, if so,
shall state what the adjusted conversion price will be and when it will become
effective. Neither the failure to give the notice required by this Section, nor
any defect therein, to any particular Holder shall affect the sufficiency of the
notice or the legality or validity of any such dividend, distribution, right,
warrant, reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution or winding-up, or the vote on any action authorizing such with
respect to the other holders.
(2) In case the Company or any Affiliate of the Company shall propose
to engage in a "Rule 13e-3 Transaction" as defined in the Commission's Rule
13e-3 under the Exchange Act, the Company shall, no later than the date on which
any information with respect to such Rule 13e-3 Transaction is first required to
be given to the Commission or any other Person pursuant to such Rule 13e-3,
cause to be mailed to all Holders at their last addresses as they shall appear
in the Security Register, a copy of all information required to be given to the
holders of the Company's Capital Stock pursuant to such Rule 13e-3. The
information required to be given under this paragraph shall be in addition to
and not in lieu of any other information required to be given by the Company
pursuant to this Section 10.06 or any other provision of the Securities or this
Indenture.
SECTION 10.07 Taxes on Conversions.
The issuance or delivery of certificates for Units upon the conversion
of Securities shall be made without charge to the converting Holder of
Securities for such certificates or for any tax in respect of the issuance or
delivery of such certificates or the securities represented thereby, and such
certificates shall be issued or delivered in the respective names of, or in such
names as may be directed by, the Holders of the Securities converted. The
Company shall not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issuance and delivery of Units in a name
other than that of the Holder of the Security or Securities to be converted, and
no such issuance or delivery shall be made unless and until the Person
requesting such issuance has paid
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to the Company the amount of any such tax, or has established to the
satisfaction of the Company that such tax has been paid.
SECTION 10.08 Fractional Units.
No fractional Units or scrip representing fractional Units shall be
issued upon any conversion of Securities. If any such conversion would otherwise
require the issuance of a fractional Unit an amount equal to such fraction
multiplied by the Current Market Price per Unit on the Business Day preceding
the day of conversion shall be paid to the Holder in cash by the Company.
SECTION 10.09 Cancellation of Converted Securities.
All Securities delivered for conversion shall be delivered to the
Trustee or the Conversion Agent to be canceled by or at the direction of the
Trustee or the Conversion Agent, which shall dispose of the same as provided in
Section 2.10.
SECTION 10.10 Provisions in Case of Consolidation, Merger or Sale of Assets.
(1) In case of any capital reorganization or reclassification or other
change of outstanding Units or other equity interests, if any, or in case of any
consolidation or merger of the Company with or into another Person (other than a
consolidation or merger in which the Company is the resulting or surviving
Person and which does not result in any reclassification or change of Units or
other outstanding equity interests, if any), or in case of any sale or other
disposition to another Person of all or substantially all of the assets of the
Company (any of the foregoing, a "Transaction"), the Company, or such successor
or purchasing Person, as the case may be, shall execute and deliver to the
Trustee and to each Holder, at least 10 Business Days prior to effecting any of
the foregoing Transactions, a supplemental indenture providing that each Holder
of Securities shall have the right thereafter to convert such Securities into
the kind and amount (estimating such amount to the extent necessary) of equity
securities or other securities (of the Company or another issuer) or property or
cash receivable upon such Transaction by a holder of the number of Units into
which such Securities could have been converted immediately prior to such
Transaction. Such supplemental indenture shall provide for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Article 10. If, in the case of any such Transaction, the equity
securities, other securities, cash or property receivable thereupon by a holder
of Units includes equity or other securities of a Person other than the
successor or purchasing Person and other than the Company, which controls or is
controlled by the successor or purchasing Person or which, in connection with
such Transaction, issues equity securities, other securities, other property or
cash to holders of Units, then such supplemental indenture, also shall be
executed by such Person, and such Person shall, in such supplemental indenture,
specifically acknowledge the obligations of such successor or purchasing person
and acknowledge its obligations to issue such equity securities, other
securities, other property or cash to the Holders upon conversion of the
Securities as provided above.
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The provisions of this Section 10.10 and any equivalent thereof in any such
supplemental indenture similarly shall apply to successive Transactions.
(2) The Trustee shall not be under any responsibility to determine the
correctness of any provisions contained in any such supplemental indenture
relating either to the kind or amount of shares of stock or securities or
property receivable by Holders upon the conversion of their Securities after any
such reclassification, change, consolidation, merger, sale or conveyance or to
any adjustment to be made with respect thereto.
SECTION 10.11 Disclaimer by Trustee of Responsibility for Certain Matters.
The Trustee shall not at any time be under any duty or responsibility
to any Holder of Securities to determine whether any facts exist which may
require any adjustment of the conversion price for such Securities, or with
respect to the nature or extent of any such adjustment when made, or with
respect to the method employed, or herein or in any supplemental indenture
provided to be employed, in making the same. The Trustee shall not be
accountable with respect to the validity, value, kind or amount of any Units, or
of any securities or property, which may at any time be issued or delivered upon
the conversion of any Security; and it makes no representation with respect
thereto. The Trustee shall not be responsible for any failure of the Company to
issue, transfer or deliver any Units or stock certificates or other securities
or property upon the surrender of any Security for the purpose of conversion or,
subject to Section 7.01, to comply with any of the covenants of the Company
contained in this Article.
SECTION 10.12 Covenant to Reserve Units.
The Company covenants that it will at all times reserve and keep
available, free from preemptive rights, out of its authorized number of Units,
solely for the purpose of issuance upon conversion of Securities as herein
provided, such number of Units as shall then be issuable upon the conversion of
all Outstanding Securities. The Company covenants that all Units which shall be
so issuable shall be, when issued, duly and validly issued and fully paid and
non-assessable. For purposes of this Section 10.12, the number of Units which
shall be deliverable upon the conversion of all Outstanding Securities shall be
computed as if at the time of computation all Outstanding Securities were held
by a single holder. The Company shall take all action required to increase the
authorized number of Units if at any time there shall be insufficient authorized
but unissued Units to permit the reservation referred to above or to permit the
conversion of all the then outstanding principal amount of the Securities.
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ARTICLE 11
CHANGE IN CONTROL
SECTION 11.01 Change of Control Offer.
In the event of a Change of Control (as defined below) that occurs
prior to the date upon which the Debentures may be redeemed in accordance with
Section 3.01 hereof, the Company shall within 15 Business Days thereafter offer
to redeem from each Holder (a "Change of Control Offer"), and upon receipt by
the Company of written notice of acceptance of such Change of Control Offer by a
Holder the Company shall thereafter redeem all (but not less than all)
Outstanding Securities owned by such Holder pursuant to such Change of Control
Offer at a redemption price of 125% of the principal amount of the Securities
Outstanding on the redemption date, plus accrued and unpaid interest to the
redemption date, whether or not currently payable, on a date to be specified in
a "Notice of Offer" (as hereinafter provided) not sooner than 30 days and not
later than 60 days after the date of such notice (subject to compliance with
applicable securities laws). Notwithstanding the foregoing, in the event of a
Change of Control of the types set forth in clauses (iii), (iv) and (vi) below,
the Company shall make the Change of Control Offer not later than ten Business
Days prior to the consummation of the transaction contemplated by clause (iii),
(iv) or (vi) below, as the case may be, and the Company shall not be required to
purchase any Securities unless such transaction shall be consummated, in which
case the Company shall be required to purchase such Securities immediately prior
to the consummation of such transaction.
SECTION 11.02 Definition of Change of Control.
A "Change of Control" of the Company shall be deemed to have occurred:
(i) At such time as any Person or "group" (within the
meaning of Section 13(d)(3) of the Exchange Act) not including
Adams, the Administrative General Partner, the Managing
General Partner and each of the shareholders of the Managing
General Partner (collectively "Current Management") is or
becomes the beneficial owner, directly or indirectly, of
outstanding Units of the Company or of shares of capital stock
of the Managing General Partner, as the case may be, entitling
such Person or Persons to exercise 50% or more of the total
votes entitled to be cast at a regular or special meeting, or
by action by written consent, of the Unit holders of the
Company or of the shareholders of the Managing General
Partner, as the case may be (the term "beneficial owner" shall
be determined in accordance with Rule 13d-3, as in effect on
May 12, 1992, promulgated by the Commission under the Exchange
Act);
(ii) If a majority of the Board of Directors of the
Managing General Partner shall consist of Persons other than
Continuing Directors. The term
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"Continuing Director" shall mean any member of the Board of
Directors of the Managing General Partner, on the Closing Date
and any other member of the Board of Directors who shall be
recommended or elected to succeed or become a Continuing
Director by a majority of Continuing Directors who are then
members of the Board of Directors of the Managing General
Partner.
(iii) At such time as the Unit holders of the Company
or holders of shares of capital stock of the Managing General
Partner, as the case may be, shall have approved a
reorganization, merger or consolidation, in each case, with
respect to which all or substantially all the Persons who were
the respective beneficial owners of the outstanding Units of
the Company or, of the outstanding shares of capital stock of
the Managing General Partner, as the case may be, immediately
prior to such reorganization, merger or consolidation,
beneficially own, directly or indirectly, less than 50% of the
combined voting power of the then outstanding shares of
capital stock of the Company or the Managing General Partner,
as the case may be, resulting from such reorganization, merger
or consolidation;
(iv) At the earlier of the approval by (A) the Unit
holders of the Company, (B) the holders of shares of capital
stock of the Managing General Partner or (C) the Board of
Directors of the Managing General Partner of the sale or other
disposition of all or substantially all the assets of the
Company or the Managing General Partner, as the case may be,
in one transaction or in a series of related transactions,
other than (1) a transaction or series of transactions
effected solely for the purpose of converting the form of the
Company to a corporation and in which Unit holders of the
Company prior to such conversion acquire, on a pro rata basis,
all of the capital stock of the Company following such
conversion or (2) a distribution of assets by the Company to
all of its Unit holders on a pro rata basis;
(v) If immediately after any merger, consolidation,
combination, reclassification or recapitalization, Current
Management (A) shall have increased the aggregate percentage
of the outstanding Units of the Company represented by the
Units they beneficially own, directly or indirectly, by 20% of
such outstanding Units or more (or if the entity surviving
such transaction is a corporation, the Current Management's
ownership in the new entity shall have increased by 20% or
more of the Current Management's aggregate percentage of
ownership of the Company immediately prior to the transaction)
and (B) shall be the beneficial owners directly or indirectly,
of outstanding Units or shares of stock of the Company (or any
Person surviving such transaction) entitling the Current
Management collectively to exercise 50% or more of the total
voting power of all Units and other voting equity interests,
if any, of the Company (or the surviving Person in such
transaction) and, in anticipation of, in connection with or as
a result of, such transaction, the Company (or such surviving
Person) shall have incurred or issued additional Indebtedness
such
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that the total Indebtedness so incurred or issued equals at
least 50% of the consideration payable in such transaction;
provided, however, that any such transaction shall not be
considered a Change of Control if the Holders shall have
participated therein on no less than a pari passu basis
(assuming conversion of all of the Holders' Securities into
Units) with Current Management collectively;
(vi) At the earlier of the approval by (A) the Unit
holders of the Company or (B) the Board of Directors of the
Managing General Partner of any transaction the result of
which is that the Units shall no longer be required to be
registered under Section 12 of the Exchange Act and that the
holders of Units do not receive common stock of the Person
surviving such transaction which is required to be registered
under Section 12 of the Exchange Act.
(vii) If any Person other than Adams shall become the
Special General Partner (as defined in the Amended and
Restated Agreement of Limited Partnership of the Company),
other than solely by reason of the death, disability or
personal bankruptcy of Adams.
SECTION 11.03 Notice of Offer.
The Change of Control Offer shall remain open from the time of mailing
until the redemption date set forth in the Notice of Offer. The Notice of Offer
shall be accompanied by a copy of the information most recently required to be
supplied under Section 4.02. The Notice of Offer shall contain all instruments
and material necessary to enable the Holders to tender the Securities pursuant
to the Change of Control Offer. The Notice of Offer, which shall govern the
terms of the Change of Control Offer, shall state:
(i) that the Change of Control Offer is being made
pursuant to Section 11.01 and that tendered Securities will be
redeemed;
(ii) the redemption price and the date for
redemption;
(iii) that the Change of Control Offer is being made
for all (but not less than all) Securities held by a Holder;
(iv) that the Securities redeemed pursuant to the
Change of Control Offer shall cease to accrue interest after
the designated date for purchase (unless the Company shall
default in the payment of the redemption price pursuant to the
Change of Control Offer, in which case the Securities shall
not cease to accrue interest after such date);
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(v) such other information respecting the procedures
for accepting the Change of Control Offer as the Company shall
include and such other information as may be required by law;
and
(vi) that (unless otherwise required by law) any
Holder will be entitled to withdraw his or her election if the
Company receives, not later than the close of business on the
third Business Day next preceding the date scheduled for
redemption, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of Securities such
Holder delivered for redemption and a statement that such
Holder is withdrawing election to have such Securities
redeemed.
ARTICLE 12
SUBORDINATION; SENIORITY
SECTION 12.01 Securities Subordinated to Senior Indebtedness.
(1) The Company agrees, and each Holder of the Securities by his
acceptance thereof likewise agrees, that the payment of the principal of,
premium, if any, and interest on the Securities (all of the foregoing, a
"Payment or Distribution") shall be subordinated and subject in right of
payment, to the extent and in the manner provided in this Article 12, except as
provided in Article 8, to the prior payment in full of all Senior Indebtedness,
whether outstanding on the date hereof or hereafter incurred.
A Payment or Distribution shall include any asset of any kind or
character, and may consist of cash, securities or other property, by set-off or
otherwise, and shall include, without limitation, any purchase, redemption or
other acquisition of Securities or the making of any deposit of funds or
securities pursuant to this Indenture (including, without limitation, any
deposit pursuant to Article 8 hereof).
(2) The Senior Indebtedness of the Company shall continue to be Senior
Indebtedness and entitled to the benefit of these subordination provisions
irrespective of any amendment, modification or waiver of any term of any
instrument relating to refinancing of the Senior Indebtedness.
(3) All the provisions of this Indenture and the Securities shall be
subject to the provisions of this Article 12 so far as they may be applicable
thereto, except that nothing in this Article 12 shall apply to claims for, or
payments to, the Trustee under or pursuant to Section 7.07.
(4) No right of any holder of any Senior Indebtedness to enforce
subordination as herein provided shall at any time or in any way be affected or
impaired by any failure to act on the part of the Company, any Paying Agent, the
Holders of the Securities, the Trustee or the holders of the Senior
Indebtedness, or by any noncompliance by the Company, any Paying Agent, the
Holders of
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the Securities or the Trustee with any of the terms, provisions and covenants of
the Securities or this Indenture, regardless of any knowledge thereof that any
such holder of Senior Indebtedness may have or be otherwise charged with.
(5) In the event that the Securities are declared due and payable
before their expressed maturity because of the occurrence of a default
hereunder, (i) the Company will give prompt notice in writing of such happening
to the holders of Senior Indebtedness and (ii) all Senior Indebtedness shall
forthwith become immediately due and payable upon demand, regardless of the
expressed maturity thereof.
SECTION 12.02 Company Not to Make Payments with Respect to Securities in
Certain Circumstances.
No payment shall be made by the Company of any subordinated amounts:
(a) in the event and during the continuation of any default in the payment (a
"Payment Default") of principal, premium, if any, interest or any other payment
due on any Senior Indebtedness under or in connection with the instrument,
agreement or lease evidencing such Senior Indebtedness and the holders of the
requisite principal amounts of such Senior Indebtedness or their agents shall
not have delivered to the Holders a notice of waiver of the benefits of this
clause (a) and a consent to the making of scheduled payments on or on account of
the Securities or taking any other prohibited action until further notice from
such holders or such agents; or (b) in the event of receipt of written notice by
the Holders from the holders of any Senior Institutional Indebtedness or their
representatives of a default (other than a Payment Default) permitting
acceleration of any Senior Institutional Indebtedness for a period (the
"Blockage Period") terminating on the earlier to occur of (i) the cure, waiver
or cessation of such default or (ii) 180 days from the date of receipt of
written notice thereof by the Holders. At the expiration of such Blockage
Period, and so long as there does not exist a Payment Default, the Company shall
promptly pay to the Holders all sums not paid during such Blockage Period as a
result of this paragraph. For all purposes of this paragraph, no event of
default which existed or was continuing with respect to the Senior Institutional
Indebtedness to which the Blockage Period relates on the date such Blockage
Period commenced shall be or be made the basis for the commencement of any
subsequent Blockage Period by the holder or holders of such Senior Institutional
Indebtedness (or their respective agents) unless such event of default is cured
or waived for a period of not less than 90 consecutive days. There shall be no
more than one Blockage Period initiated in any 360 day period.
Upon any payment by the Company, or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any dissolution or winding-up or liquidation or reorganization of
the Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all amounts due or to become due upon all
Senior Indebtedness shall first be paid in full, or payment thereof provided for
in money in accordance with its terms, before any payment (other than equity
securities or other securities of the Company or any other entity, the payment
of which is subordinated at least to the
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extent provided in this Article 12 to the payment of all Senior Indebtedness
that may at the time be outstanding) is made on account of the principal,
premium, if any, or interest on, or other amounts payable in respect of, the
Securities including, without limitation, any amount payable in connection with
the redemption of the Securities; and upon any such dissolution, winding-up or
liquidation or reorganization any payment by the Company, or distribution of
assets of the Company of any kind or character, whether in cash, property or
securities, to which the Holders would be entitled, except for the provisions of
this Article 12, shall be paid by the Company or by any receiver, trustee in
bankruptcy, liquidating trustee, agent or other person making such payment or
distribution, or by the Holders if received by them, directly to the holders of
Senior Indebtedness (pro rata to such holders on the basis of the respective
amounts of Senior Indebtedness held by such holders) or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any Senior Indebtedness may have been issued,
as their respective interests may appear, to the extent necessary to pay all
Senior Indebtedness in full, in money or money's worth, after giving effect to
any concurrent payment or distribution to or for the holders of Senior
Indebtedness, before any payment or distribution is made to the Holders.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, prohibited by the foregoing, shall be received by the
Holders before all Senior Indebtedness is paid in full, or provision is made for
such payment in money in accordance with its terms, such payment or distribution
shall be held in trust for the benefit of and shall be paid over or delivered to
the holders of Senior Indebtedness or their representative or representatives,
or to the trustee or trustees under any indenture pursuant to which any
instrument evidencing any Senior Indebtedness may have been issued, as their
respective interests may appear, for application to the payment of all Senior
Indebtedness remaining unpaid to the extent necessary to pay all Senior
Indebtedness in full in money in accordance with its terms, after giving effect
to any concurrent payment or distribution to or for the holders of such Senior
Indebtedness.
The consolidation of the Company with, or the merger of the Company
into, another Person or the liquidation or dissolution of the Company following
the conveyance or transfer of its property as an entirety, or substantially as
an entirety, to another corporation upon the terms and conditions provided in
Article 5 shall not be deemed a dissolution, winding up, liquidation or
reorganization for the purposes of this Section 12.02 if such other Person
shall, as a part of such consolidation, merger, conveyance or transfer, comply
with the conditions stated in Article 5. Nothing in this Section shall apply to
claims of, or payments to, the Trustee under or pursuant to Section 7.07.
SECTION 12.03 Subrogation of Securities.
Subject to the payment in full in cash of all amounts then due (whether
by acceleration of the maturity thereof or otherwise) on account of all Senior
Indebtedness at the time outstanding, the rights of the Holders of the
Securities shall be subrogated to the rights of the holders of Senior
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Indebtedness to receive payments or distributions of cash, property or
securities of the Company applicable to the Senior Indebtedness until the
principal of, premium, if any, and interest on the Securities shall be paid in
full; and, for the purposes of such subrogation, no payments or distributions to
the holders of Senior Indebtedness of any cash, property or securities to which
the Holders of the Securities or the Trustee would be entitled except for the
provisions of this Article 12, and no payments over pursuant to the provisions
of this Article 12 to the holders of Senior Indebtedness by Holders of the
Securities or the Trustee, shall, as between the Company, the Company's
creditors other than holders of Senior Indebtedness, and the Holders of the
Securities, be deemed to be a payment by the Company to or on account of the
Senior Indebtedness. It is understood that the provisions of this Article 12 are
and are intended solely for the purpose of defining the relative rights of the
Holders of the Securities, on the one hand, and the holders of Senior
Indebtedness, on the other hand.
If any payment or distribution to which the Holders would otherwise
have been entitled but for the provisions of this Article 12 shall have been
applied, pursuant to the provisions of this Article 12 to the payment of amounts
payable under Senior Indebtedness of the Company, then, and in such case, the
Holders shall be entitled to receive from the holders of Senior Indebtedness the
full amount of any such payments or distributions received by holders of Senior
Indebtedness in excess of the amount sufficient to pay in full all amounts
payable under or in respect of, the Senior Indebtedness of the Company.
Nothing contained in this Article 12 or elsewhere in this Indenture or
in the Securities is intended to or shall impair, as among the Company, its
creditors other than the holders of Senior Indebtedness, and the Holders of the
Securities, the obligation of the Company, which is absolute and unconditional,
to pay to the Holders of the Securities the principal of, premium, if any, and
interest on the Securities as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the Holders of the Securities and creditors of the Company other than
the holders of Senior Indebtedness, nor shall anything herein or therein prevent
the Trustee or the Holder of any Security from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture or the Securities,
subject to the rights, if any, under this Article 12 of the holders of Senior
Indebtedness in respect of cash, property or securities of the Company received
upon the exercise of any such remedy.
Upon any payment or distribution of assets of the Company referred to
in this Article 12, the Trustee, subject to the provisions of Section 7.01, and
the Holders of the Securities shall be entitled to rely upon any order or decree
made by any court of competent jurisdiction in which any dissolution, winding
up, liquidation or reorganization proceedings are pending, or certificate of the
receiver, trustee in bankruptcy, liquidating trustee, agent or other Person
making such payment or distribution, delivered to the Trustee or to the Holders
of the Securities, for the purpose of ascertaining the Persons entitled to
participate in such distribution, the holders of Senior Indebtedness and other
indebtedness of the Company, the amount thereof or payable thereon, the
58
<PAGE> 64
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article 12.
SECTION 12.04 Authorization by Holders of Securities.
Each Holder of a Security by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate, as between the Holder of the Security and the holders
of Senior Indebtedness, the subordination provided in this Article 12 and
appoints the Trustee his attorney-in-fact for any and all such purposes
including, without limitation, to execute, verify, deliver and file any proofs
of claim which any holder of Senior Indebtedness may at any time require in
order to prove and realize upon any rights or claims pertaining to the
Securities and to effectuate the full benefit of the subordination contained
herein. Upon failure of the Trustee so to do, any such holder of Senior
Indebtedness shall be deemed to be irrevocably appointed the agent and
attorney-in-fact of the Holder to execute, verify, deliver and file any such
proofs of claim.
SECTION 12.05 Notices to Trustee.
The Company shall give prompt written notice to the Trustee of any fact
known to it which would prohibit the making of any payment of moneys to or by
the Trustee in respect of the Securities. Notwithstanding the provisions of this
Article 12 or any other provision of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts which would prohibit the
making of any payment of moneys to or by the Trustee in respect of the
Securities pursuant to the provisions of this Article 12 unless and until a
Trust Officer of the Trustee shall have received at its Corporate Trust Office
written notice thereof from the Company or a holder or holders of Senior
Indebtedness or from any trustee or agent therefor; and, prior to the receipt of
any such written notice, the Trustee, subject to the provisions of Section 7.01,
shall be entitled in all respects to assume that no such facts exist; provided,
however, that if a Trust Officer of the Trustee shall not have received at least
three Business Days prior to the date upon which by the terms hereof any such
moneys may become payable for any purpose (including, without limitation, the
payment of the principal of, premium, if any, or interest on any Security) with
respect to such moneys the notice provided for in this Section 12.05, then,
anything herein contained to the contrary notwithstanding, the Trustee shall
have the full power and authority to receive such moneys and to apply the same
to the purpose for which they were received and shall not be affected by any
notice to the contrary which may be received by it within three Business Days
prior to such date.
The Trustee shall be entitled to rely conclusively on the delivery to
it of a written notice by a Person representing himself to be a holder of Senior
Indebtedness (or a trustee on behalf of such holder) to establish that such
notice has been given by a holder of Senior Indebtedness or a trustee or agent
on behalf of any such holder. In the event that the Trustee determines in good
faith that further evidence is required with respect to the right of any Person
as a holder of Senior Indebtedness to participate in any payment or distribution
pursuant to this Article 12, the Trustee may request such
59
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Person to furnish evidence to the reasonable satisfaction of the Trustee as to
the amount of Senior Indebtedness held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and any other
facts pertinent to the rights of such Person under this Article 12, and if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
SECTION 12.06 Trustee's Relation to Senior Indebtedness.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article 12 in respect of any Senior Indebtedness at any
time held by it, to the same extent as any other holder of Senior Indebtedness,
and nothing in Section 7.11 or elsewhere in this Indenture shall deprive the
Trustee of any of its rights as such holder.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article 12, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not owe any fiduciary
duty to the holders of Senior Indebtedness and shall not be liable to any such
holder if it shall mistakenly pay over or distribute to Holders of the
Securities or the Company or any other Person money or assets to which any
holder of Senior Indebtedness shall be entitled by virtue of this Article 12 or
otherwise.
SECTION 12.07 No Impairment of Subordination.
No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company,
the Trustee or the Holder of any of the Securities or by any act, or failure to
act, in good faith, by any such holder of Senior Indebtedness, or by any
noncompliance by the Company, the Trustee or the Holder of any of the Securities
with the terms, provisions and covenants of this Indenture, regardless of any
knowledge thereof which any such holder may have or otherwise be charged with.
SECTION 12.08 Article 12 Not To Prevent Events of Default.
The failure to make a payment on account of principal of, premium, if
any, or interest on the Securities by reason of any provision in this Article 12
shall not be construed as preventing the occurrence of an Event of Default with
respect to such Securities under Section 6.01.
SECTION 12.09 Paying Agents other than the Trustee.
In any case at any time any Paying Agent other than the Trustee shall
have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article 12 shall in such case (unless the context
shall otherwise require) be construed as extending to and including
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<PAGE> 66
such Paying Agent within its meaning as fully for all intents and purposes as if
such Paying Agent were named in this Article 12 in addition to or in place of
the Trustee.
SECTION 12.10 Securities Senior to Subordinated Indebtedness.
The indebtedness represented by the Securities will be senior and prior
in right of payment to all subordinated indebtedness, to the extent and in the
manner provided in such subordinated indebtedness.
SECTION 12.11 Holder's Relation to Senior Indebtedness.
The Holders shall be entitled to all the rights set forth in this
Article 12 in respect of any Senior Indebtedness at any time held by them, to
the extent as any other holder of Senior Indebtedness, and nothing in this
Indenture shall deprive the Holders of any of their rights as such Holder.
With respect to the holders of Senior Indebtedness, the Holders
undertake to perform or to observe only such of its covenants and obligations as
are specifically set forth in this Indenture, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Holders. The Holders shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness and the Holders shall
not be liable to any holder of Senior Indebtedness if they shall mistakenly pay
over or deliver to the Company or any other Person money or assets to which any
holder of Senior Indebtedness shall be entitled by virtue of this Article 12 or
otherwise.
ARTICLE 13
MISCELLANEOUS
SECTION 13.01 Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with
another provision which is required to be included in this Indenture by the TIA,
the required provisions shall control. The provisions of TIA Sections 310
through 317 that impose duties on any Person (including the provisions
automatically deemed included herein unless expressly excluded by this
Indenture) are a part of and govern this Indenture, whether or not physically
contained herein.
SECTION 13.02 Notices.
Any notices or other communications required or permitted hereunder
shall be in writing, and shall be sufficiently given if made by hand delivery,
or first class mail, postage prepaid (except that any notice by the Trustee to
the Company of a default or an Event of Default under this Indenture
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shall be by registered or certified mail, postage prepaid, return receipt
requested), or by a nationally-recognized overnight express courier service
(which notices or communications shall be deemed received the business day after
the receipt thereof by such service), addressed as follows:
if to the Company:
National HealthCare L.P.
100 Vine Street
Suite 1400
City Center
Murfreesboro, TN 37130
if to the Trustee:
First American National Bank
400 First American Center
Nashville, Tennessee 37237
The Company or the Trustee by notice to the other may designate additional or
different addresses as shall be furnished in writing by either party. Any notice
or communication to the Company or the Trustee shall be deemed to have been
given or made as of the date so delivered if personally delivered, and five (5)
calendar days after mailing if sent by registered or certified mail (except that
a notice of change of address shall not be deemed to have been given until
actually received by the addressee).
Any notice or communication mailed to a Securityholder shall be mailed
to the address of such Securityholder as it appears on the registration books of
the Registrar and shall be sufficiently given if so mailed within the time
prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
In case by reason of the suspension of regular mail service, or by
reason of any other cause, it shall be impossible to mail any notice, as
required by this Indenture, then such method of notification as shall be made
with the approval of the Trustee shall constitute a sufficient mailing of such
notice.
If the Company mails any notice or communication to Securityholders, it
shall mail a copy to the Trustee and all Agents at the same time.
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SECTION 13.03 Communications by Holders with Other Holders.
Securityholders may communicate pursuant to TIA ss. 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA ss. 312(c).
SECTION 13.04 Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate (which shall include the statements set
forth in Section 13.05) stating that, in the opinion of the signers, all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with; and
(2) an Opinion of Counsel (which shall include the statements set forth
in Section 13.05) stating that, in the opinion of such counsel, all such
conditions precedent have been complied with.
SECTION 13.05 Statements Required in Certificate and Opinion.
Each Certificate and Opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made such
examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of such Person,
such covenant or condition has been complied with.
SECTION 13.06 Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Securityholders. The Registrar, Paying Agent or Conversion Agent may make
reasonable rules for its functions.
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SECTION 13.07 Record Date.
Whenever the Company or the Trustee solicits an act of Securityholders,
the Company or the Trustee may fix in advance of the solicitation of such act a
date as the record date for determining Securityholders entitled to perform said
act. The record date shall be not more than 15 days prior to the date fixed for
the solicitation of said act.
SECTION 13.08 Legal Holidays.
A "Legal Holiday" is a Saturday, a Sunday or a day on which banks or
trust companies in the city in which either the Trustee or the Company is
located are not required to be open. If a payment date is a Legal Holiday at a
place of payment, payment may be made at that place on the next succeeding day
that is not a Legal Holiday, and no interest shall accrue for the intervening
period.
SECTION 13.09 Governing Law.
THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS INDENTURE AND THE
SECURITIES WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
SECTION 13.10 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or a Subsidiary. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
SECTION 13.11 No Recourse Against Others.
No shareholder, director or officer, as such, past, present or future,
of the Company or of any successor corporation or trust shall have any liability
for any obligation of the Company under the Securities or the Indenture or for
any claim based on, in respect of or by reason of, such obligations or their
creation. Each Holder of a Security by accepting a Security waives and releases
all such liability. The waiver and release are part of the consideration for the
issuance of the Securities.
SECTION 13.12 Successors.
All agreements of the Company in this Indenture and the Securities
shall bind its successor. All agreements of the Trustee in this Indenture shall
bind its successor.
SECTION 13.13 Multiple Counterparts.
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The parties may sign multiple counterparts of this Indenture. Each
signed counterpart shall be deemed an original, but all of them together
represent the same agreement.
SECTION 13.14 Table of Contents, Headings, etc.
The table of contents, cross-reference sheet and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
SECTION 13.15 Severability.
In case any provision in this Indenture or in the Securities 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,
and a Holder shall have no claim therefor against any party hereto.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the date first written above.
NATIONAL HEALTHCARE L.P.
By: /s/ Richard F. LaRoche, Jr.
----------------------------------------
Name: Richard F. LaRoche, Jr.
Title: Senior Vice President & Secretary
FIRST AMERICAN NATIONAL BANK,
as Trustee
By:
----------------------------------------
Authorized Officer
<PAGE> 1
Exhibit 4.2
================================================================================
NATIONAL HEALTHCORP L.P.
TO
BOATMEN'S TRUST COMPANY
Corporate Trustee
AND
H.E. BRADFORD
Individual Trustee
-------------------------
INDENTURE OF MORTGAGE
AND DEED OF TRUST
-------------------------
$20,000,000
___ % FIRST MORTGAGE BONDS
DUE JANUARY 15, 2005
Dated as of October 15, 1989
This Instrument Contains After-Acquired Property Provisions
================================================================================
<PAGE> 2
NATIONAL HEALTHCORP L.P.
___ % First Mortgage Bonds due January 15, 2005
CROSS REFERENCE SHEET
(Between Trust Indenture Act of 1939 and the Indenture)
<TABLE>
<CAPTION>
Trust Indenture
Act of 1939
Section Indenture Section
- ---------------- -----------------
<S> <C>
310(a)(1)(2)(3)........... 16.01 and 16.13
(a)(4)................. Not applicable
(b) ................... 16.10, 16.11
(c).................... Not applicable
311(a).................... 16.09(A), (C)
(b..................... 16.09(B)
(c).................... Not applicable
312(a).................... 7.01(A), (B)
(b).................... 7.01(C)
(c).................... 7.01(D)
313(a).................... 7.03(A)
(b).................... 7.03(B)
(c).................... 7.03(C)
(d).................... 7.03(D)
314(a).................... 7.02(A), (b) (C)
(b) ................... 6.12(C), (D)
(c).................... 5.01, 5.02, 5.03, 10.01, 10.02,
10.03, 10.04, 10.05 and 17.01
(d).................... 5.03(B), 10.02(B), 10.02(E),
10.03(B), (D), (F), 10.04(C) and 20.
(e).................... 20.04
315(a) ................... 16.02(A)
(b).................... 12.02
(c).................... 16.02(B)
(d).................... 16.02(C)
(e).................... 12.23
316(a)(1)................. 12.11 and 12.27
(a)(2)................. Not applicable
(b).................... 12.21 and 12.22
317(a).................... 12.18 and 12.20
(b) ................... 6.06(B), (C)
318(a).................... 20.07
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
PARTIES...............................
PRELIMINARY STATEMENT ................
FORM OF BOND .........................
GRANT IN TRUST........................
COVENANT CLAUSE.......................
ARTICLE 1.
DEFINITIONS.
SECTION 1.01. Explanatory statement.......................
Act.........................................
Affected....................................
Affiliate...................................
Application.................................
Authenticating Agent........................
Board of Directors or Board.................
Bond or Bonds...............................
Bond Co-Registrar...........................
Bond Register and Bond Registrar............
Bondable Cost ..............................
Bondholder, Holder, etc. ...................
business day ...............................
capital stock ..............................
Capitalized Cost ...........................
Certified Resolution........................
common stock ...............................
Company.....................................
Company Order and Company Request...........
Current ....................................
Daily Newspaper ............................
date of this Indenture .....................
Debt .......................................
Default ....................................
Defaulted Interest..........................
Deposited Cash .............................
Equipment ..................................
Event of Default ...........................
Executive Officer ..........................
Fundamental Structural Change ..............
General Partner ............................
Grant ......................................
Hazardous Substances .......................
Indenture ..................................
Independent ................................
Interest Payment Date.......................
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
lessor...............................
Lien of this Indenture ..............
MAI Appraisal........................
MAI Appraiser........................
main office..........................
maturity or mature...................
Mortgage.............................
Mortgaged and Pledged Property.......
Officers' Certificate................
Operating Subsidiary.................
Opinion of Counsel ..................
Original Issue Date .................
Outstanding .........................
paying agent ........................
Permitted Encumbrance................
person ..............................
place of payment ....................
predecessor Bond ....................
Proceeding ..........................
Property ............................
Redemption Date .....................
Regular Record Date..................
Responsible Officer..................
Special Record Date..................
Stated Maturity .....................
Subsidiary ..........................
supplemental indenture ..............
Trustees ............................
Trust Estate ........................
Trust Indenture Act .................
Unit ................................
ARTICLE 2.
DESCRIPTION, EXECUTION, REGISTRATION, TRANSFER
AND EXCHANGE OF BONDS.
SECTION 2.01. Issuable in series in fully
registered form without coupons,
date of Bonds, record date for
payment of interest place of
Payment of Bonds....................
SECTION 2.02 Provisions any series
may contain.........................
SECTION 2.03. Numbers, designations, legends,
etc. on Bonds.......................
SECTION 2.04. Execution of Bonds....................
</TABLE>
iv
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PAGE
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<TABLE>
<S> <C> <C>
SECTION 2.05. Registration of transfer of Bonds....
SECTION 2.06. Exchange and registration of
transfer of Bonds .................
SECTION 2.07. Temporary Bonds .....................
SECTION 2.08. Recognition of registered holders
of definitive Bonds and temporary
Bonds ...............................
SECTION 2.09. Mutilated, destroyed, lost or
stolen Bonds ......................
SECTION 2.10. Form and authentication of Bonds ....
SECTION 2.11. Surrender and Cancellation of
Bonds .............................
ARTICLE 3.
THE 1989 BONDS.
SECTION 3.01. Terms of initial series
of Bonds .........................
(A) Designation and Form ...........
(B) Limitation as to principal
amount..........................
(C) Date of maturity and interest
rate............................
(D) Denominations and Exchanges.....
(E) Optional redemption and
prepayment......................
(F) Mandatory redemption............
ARTICLE 4.
GENERAL PROVISIONS AS TO ISSUE OF BONDS.
SECTION 4.01. Aggregate amount of Bonds which
may be secured by Indenture........
SECTION 4.02. Company free to determine price,
etc. for Bonds ....................
SECTION 4.03. Additional Bonds issuable ...........
</TABLE>
v
<PAGE> 6
<TABLE>
<CAPTION>
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<S> <C> <C>
ARTICLE 5.
ISSUANCE OF BONDS AND APPLICATION OF DEPOSITED CASH.
SECTION 5.01. Issuance of Bonds for Cash....................
SECTION 5.02. Documents required for
authentication and delivery of Bonds........
SECTION 5.03 Withdrawal of Deposited Cash..................
ARTICLE 6.
PARTICULAR COVENANTS OF THE COMPANY.
SECTION 6.01. Will preserve partnership existence
and rights and comply with law
and agreements..............................
SECTION 6.02. Warranty of title.............................
SECTION 6.03. Will give further assurances..................
SECTION 6.04. Will punctually pay principal,
premium and interest on Bonds...............
SECTION 6.05. Will pay taxes and other charges)
permitted contests..........................
SECTION 6.06. (A) Office or agency..........................
(B) Appointment of Corporate Trustee
as paying agent; duty of paying agent
other than Corporate Trustee..............
(C) Duty of Company acting as
paying agent..............................
(D) Delivery to Corporate Trustee
of sums held by other paying agents.......
(E) All sums to be held subject to
Section 20.03.............................
SECTION 6.07. Will pay Debt.................................
SECTION 6.08. Will not
(A) Mortgage or otherwise encumber
Trust Estate, except as
permitted ................................
(B) Merge, consolidate or dispose
of certain properties,
except as permitted, or dispose
of any Mortgaged and Pledged
Property .................................
SECTION 6.09. Will remain and preserve properties ..........
SECTION 6.10. Will maintain insurance ......................
</TABLE>
vi
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<TABLE>
<CAPTION>
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<S> <C> <C>
SECTION 6.11. Will act to enforce payment under
instruments in Trust Estate............
SECTION 6.12. (A) Will record instruments to
extent required......................
(B) Will pay all taxes and other
expenses.............................
(C) Opinion of Counsel...................
(D) Will deliver annual recording
opinion..............................
SECTION 6.13. Will maintain office.....................
SECTION 6.14. Will keep, and permit examination
of, records and books of account
and will permit visitation of
property...............................
SECTION 6.15. Will furnish annual certificates.........
SECTION 6.16. Will furnish annual independent
accountants' letter...................
SECTION 6.17. Performance of covenants and
conditions............................
SECTION 6.18 Subordination of lessors'
interests.............................
SECTION 6.19 Environmental matters....................
ARTICLE 7.
BONDHOLDER LISTS AND REPORTS BY THE COMPANY
AND THE TRUSTEES.
SECTION 7.01. Bondholder lists, etc....................
SECTION 7.02. Reports by Company ......................
SECTION 7.03. Reports by Trustees......................
ARTICLE 8.
REDEMPTION OF 1989 BONDS AT COMPANY'S OPTION.
SECTION 8.01. Election by Company to
redeem bonds ..........................
SECTION 8.02. Redemption of part only of
Bonds .................................
SECTION 8.03. Notice of Redemption.....................
SECTION 8.04. Deposit of redemption price..............
SECTION 8.05. Date on which Bonds cease
to bear interest, etc. ................
SECTION 8.06. All Bonds delivered .....................
</TABLE>
vii
<PAGE> 8
<TABLE>
<CAPTION>
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<S> <C> <C>
ARTICLE 9.
REDEMPTION OF 1989 BONDS AT HOLDER'S OPTION.
SECTION 9.01. Redemption right at holder's
Option................................
SECTION 9.02. Redemption Procedure....................
SECTION 9.03. Withdrawal..............................
SECTION 9.04. Redemption Register.....................
SECTION 9.05. Redemption right upon Change
in Control............................
SECTION 9.06. Redemption of Bonds subject
to Article 8..........................
ARTICLE 10.
POSSESSION AND RELEASE OF MORTGAGED
AND PLEDGED PROPERTY.
SECTION 10.01. Generally...............................
SECTION 10.02. Requirements for Release ...............
SECTION 10.03. Requirements in case of eminent
domain or other forced sale ..........
SECTION 10.04. Certain documents required
for release ..........................
SECTION 10.05. Execution of disclaimer or
quitclaim by Trustees ................
SECTION 10.06. Release where mortgaged
property in possession of
receiver .............................
SECTION 10.07. Release where Event of
Default continuing ...................
SECTION 10.08 Provisions not in limitation
of one another .......................
ARTICLE 11.
PURCHASER IN GOOD FAITH.
ARTICLE 11.01. Purchaser in good faith not put on
inquiry..............................
</TABLE>
viii
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ARTICLE 12.
REMEDIES OF TRUSTEES AND BONDHOLDERS UPON DEFAULT.
SECTION 12.01. Definition of Default and Event of
Default.....................................
SECTION 12.02. Trustees to give Bondholders notice
of Defaults.................................
SECTION 12.03. Declaration of principal and accrued
interest due upon Default...................
Holders of specified percentage of
Bonds may waive Default
declaration.................................
SECTION 12.04. Trustees may take possession and
operate property on Default.................
SECTION 12.05. Power of Trustees to sell all the
mortgaged property..........................
SECTION 12.06. Publication of Notice of Sale.................
SECTION 12.07. Trustees may adjourn sale.....................
SECTION 12.08. Title upon sale vested in purchaser ..........
Trustees to execute necessary deeds...........
SECTION 12.09. Sale shall divest Company of right
of property.................................
SECTION 12.10. Remedies cumulative...........................
Delay, etc. not a waiver of rights............
Waiver of default not to extend to
subsequent defaults.........................
SECTION 12.11. Holders of specified percentage of
Bonds may direct judicial
proceedings by Trustees.....................
SECTION 12.12. Appointment of receiver.......................
SECTION 12.13. All Bonds to become due and payable
upon sale of property.......................
SECTION 12.14. Purchase by Bondholders at sale of
property....................................
SECTION 12.15. Receipt of Trustees or officer
making sale to be a discharge to
purchaser...................................
SECTION 12.16. Disposition of proceeds of sale...............
SECTION 12.17. Waiver by Company of advantage of
any appraisement, valuation, stay,
extension or redemption laws, and
of rights to marshal assets.................
SECTION 12.18. Payment of principal and interest to
Trustees upon occurrence of certain
defaults....................................
Judgment may be taken by Trustees.............
</TABLE>
ix
<PAGE> 10
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Enforcement of rights by Trustees
during the continuance of an
Event of Default............................
Lien of Indenture not to be
affected by judgment or levy of
execution by Trustees.......................
Application of moneys collected by
Trustees....................................
SECTION 12.19. Possession of Bonds unnecessary in
action by Trustees..........................
SECTION 12.20. Trustees may file necessary proofs............
SECTION 12.21. Limitation upon right of Bondholders
to institute certain legal proceedings......
SECTION 12.22. Right of Bondholders to receive and
enforce payment not impaired................
SECTION 12.23. Court may require undertaking to
pay costs...................................
SECTION 12.24. Unenforceable provision
inoperative.................................
SECTION 12.25. Company may waive period of grace.............
SECTION 12.26. If enforcement proceedings abandoned,
status quo is established...................
SECTION 12.27. Bondholders may waive certain
defaults....................................
ARTICLE 13.
EVIDENCE OF RIGHTS OF BONDHOLDERS
AND OWNERSHIP OF BONDS.
SECTION 13.01. Evidence of ownership of definitive
Bonds and temporary Bonds issued
hereunder in registered form................
ARTICLE 14.
IMMUNITY OF ORGANIZERS; SUBSCRIBERS TO THE UNITS,
LIMITED PARTNERS, OFFICERS AND DIRECTORS.
SECTION 14.01. Liability of officers, etc.,
released and waived ........................
</TABLE>
x
<PAGE> 11
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 15.
CONSOLIDATION, MERGER, CONVEYANCE AND LEASE.
SECTION 15.01. Company may merge, consolidate,
etc., upon certain terms.....................
SECTION 15.02. Right of successor partnership.................
Execution of supplemental indenture..........
Successor partnership to have all
rights of the Company......................
SECTION 15.03. Opinion of Counsel, Officers'
Certificate and supplemental
indenture required...........................
SECTION 15.04. Article 15 subject to provisions
of Section 9.05..............................
ARTICLE 16.
CONCERNING THE TRUSTEES.
SECTION 16.01. Requirement of Corporate
Trustee, eligibility.........................
SECTION 16.02. Acceptance of Trust............................
Duties.........................................
Extent of liability............................
SECTION 16.03. Disclaimer.....................................
SECTION 16.04. Trustees may own Bonds.........................
SECTION 16.05. Absence of personal liability..................
SECTION 16.06. Trustees may rely on certificates, etc. .......
SECTION 16.07. Money held in trust not required to
be segregated................................
SECTION 16.08. Compensation, Reimbursement,
Indemnity, Security..........................
SECTION 16.09. Rights of Trustees as creditor.................
SECTION 16.10. Conflict of Interest...........................
SECTION 16.11. Resignation, Removal, Appointment of
successor Trustees...........................
SECTION 16.12. Acceptance by successor Trustees...............
SECTION 16.13. (A) Note, etc. on behalf of Company
delivered to Corporate Trustee
deemed to be delivered to both
Trustees...................................
(B) Cash, securities, etc. to be
held by Corporate Trustee..................
Title to be in both Trustees ..............
</TABLE>
xi
<PAGE> 12
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
(C) Individual Trustee may act on
written request of and delegate
powers to Corporate Trustee ............
(D) Renewal of Individual Trustee
Exercise of duties by Corporate
Trustee in event of incapacity
of Individual Trustee ..................
SECTION 16.14. Appointments Of attorney-in-fact,
etc. .....................................
SECTION 16.15. Merger or consolidation of
Corporate Trustee ........................
SECTION 16.16. Authenticating agent .......................
ARTICLE 17.
DISCHARGE OF MORTGAGES.
SECTION 17.01 Acknowledgement of discharge................
SECTION 17.02. Money held in trust.........................
ARTICLE 18.
MEETINGS OF BONDHOLDERS.
SECTION 18.01. Purposes for which meetings may be
called....................................
SECTION 18.02. Call of meetings by Corporate
Trustee; generally........................
SECTION 18.03. Call of meetings by Corporate
Trustee; notice...........................
SECTION 18.04. Meetings; notice and entitlement to
be present................................
SECTION 18.05. Regulations may be made by Corporate
Trustee ..................................
Conduct of the meeting......................
Voting rights adjournment...................
SECTION 18.06. Manner of voting at meetings and
record to be kept.........................
SECTION 18.07. Evidence of action by Holders of
specified percentage of Bonds.............
SECTION 18.08. Exercise of right of Corporate
Trustee or Bondholders may not be
hindered or delayed by call of
meeting of Bondholders....................
</TABLE>
xii
<PAGE> 13
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 19.
SUPPLEMENTAL INDENTURES.
SECTION 19.01. Purposes for which supplemental
indentures may be executed by
Company and Trustees..........................
SECTION 19.02. Modification of Indenture by written
consent of Bondholders........................
SECTION 19.03. Requirements for execution......................
Duties and immunities of Trustees...............
SECTION 19.04. Supplemental indentures part of
Indenture ......................................
SECTION 19.05. Bonds executed after supplemental
indenture to be approved by
Corporate Trustee.............................
SECTION 19.06. Supplemental indentures required to
comply with Trust Indenture Act
of 1939.......................................
ARTICLE 20.
MISCELLANEOUS.
SECTION 20.01. Benefits restricted to parties and to
Holders of Bonds..............................
SECTION 20.02. Investment of cash by Corporate
Trustee in certain securities.................
Such securities held by Corporate
Trustee as part of mortgaged
property......................................
SECTION 20.03. Deposits for Bonds not claimed for
specified period to be returned to
Company on demand...............................
SECTION 20.04. Formal requirements of certificates
and opinions hereunder........................
SECTION 20.05. Evidence of Act of the Bondholders..............
SECTION 20.06. Parties to include successors and
assigns.......................................
SECTION 20.07. In event of conflict with Trust
Indenture Act of 1939, provisions
therein to control............................
SECTION 20.08. Company may limit and thereafter
decrease amount to be secured by
this Indenture................................
SECTION 20.09. Request, notices, etc. to Corporate
Trustee.......................................
SECTION 20.10. Manner of notice................................
SECTION 20.11 Severability....................................
</TABLE>
xiii
<PAGE> 14
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 20.12. Payments due on days when banks
closed .................................
SECTION 20.13. Backup Withholding Form ..................
SECTION 20.14. Titles of Articles of this Indenture
not part thereof........................
SECTION 20.15. Execution in counterparts.................
SECTION 20.16. Governing Law ............................
TESTIMONIUM .........................................................
SIGNATURES AND SEALS ................................................
ACKNOWLEDGEMENTS.....................................................
</TABLE>
xiv
<PAGE> 15
INDENTURE OF MORTGAGE AND DEED OF TRUST, dated as of ________________,
1989, between NATIONAL HEALTHCORP L.P., a Delaware limited partnership (herein
called the "Company") and BOATMEN'S TRUST COMPANY, a __________________(herein,
together with each successor as such trustee hereunder, called the "Corporate
Trustee"), and H.E. BRADFORD (herein, together with each successor as such
trustee hereunder, called the "Individual Trustee").
Preliminary Statement
The defined terms used in this Indenture and not hereinabove defined
have the meanings indicated in Article 1.
The Company deems it necessary to borrow money for its proper corporate
purposes, to issue a series of the Bonds as evidence of such indebtedness and to
Grant (or cause to be Granted) the property described in the Granting Clauses of
this Indenture as security for the payment of the Bonds. On the date of delivery
of this Indenture, the Company is duly authorized under all applicable
provisions of law and its Limited Partnership Agreement to issue the initial
issue hereunder of Bonds in one series, to be designated % First Mortgage
Bonds due January 15, 2005 (hereinafter called the "1989 Bonds" and,
collectively with any other series of Bonds to be issued hereunder at any time,
the "Bonds"), limited to a maximum aggregate principal amount of $20,000,000
and for the equal and ratable benefit of the Holders of the 1989 Bonds, to
execute and deliver this Indenture, and to Grant (or cause to be Granted) the
property described in the Granting Clauses of this Indenture to the Trustees;
and all partnership action (including any required limited partner and/or
general partner authorization) and all consents, approvals and other
authorization of or by courts, administrative agencies or other governmental
authorities required therefor have been duly taken or obtained or will be taken
or obtained prior to subjecting such property to the Lien of this Indenture.
The 1989 Bonds and the Corporate Trustee's authentication certificate
to be endorsed on all the 1989 Bonds, are to be in substantially the following
forms and Bonds of other series hereunder are to be in substantially similar
form (with appropriate insertions, omissions, substitutions and variations as
permitted by this Indenture, as hereinafter permitted and provided):
[FORM OF FACE OF 1989 BONDS]
NATIONAL HEALTHCORP L.P.
_ % FIRST MORTGAGE BOND DUE JANUARY 15, 2005
NO.
NATIONAL HEALTHCORP L.P., a limited partnership organized and existing
under the laws of the State of Delaware (hereinafter called the "Company", which
term shall include any successor limited partnership or corporation as defined
in the Indenture referred to on the reverse side hereof), for value received,
hereby promises to pay to ______________________, or registered assigns, the sum
of ________________ Dollars on or before January 15, 2005, in such coin or
1
<PAGE> 16
currency Of the United States of America as at the time of payment is legal
tender for public and private debts, and to pay interest on the unpaid principal
amount hereof in like coin or currency from the Interest Payment Date to which
interest hereon has been paid immediately preceding the date hereof (unless the
date hereof is an Interest Payment Date to which interest has been paid, in
which case from the date hereof) or, if no interest has been paid on this Bond
since the Original Issue Date hereof, as defined in the Indenture referred to on
the reverse side hereof, from such Original Issue Date at the rate of _ % per
annum, payable quarterly on January 15, April 15, July 15 and October 15 of each
year, commencing January 15, 1990, until the principal hereof shall have been
paid or duly provided for. The interest so payable on any Interest Payment Date
will be paid to the person in whose name this Bond is registered at the close of
business on the first day of the month immediately preceding such Interest
Payment Date (whether or not such first day shall be a regular business day),
unless the Company shall default in the payment of interest due on such Interest
Payment Date, in which case such defaulted interest shall be paid to the person
in whose name this Bond is registered at the close of business on a Special
Record Date for the payment of such defaulted interest established by notice to
the registered holders of Bonds given by mail to said holders as their names and
addresses appear in the Bond Register (as defined in the Indenture referred to
on the reverse side hereof) not less than 10 days preceding such Special Record
Date. The principal hereof and the interest hereon shall be payable at the main
office of Boatmen's Trust Company, Corporate Trustee under the Indenture
referred to on the reverse side hereof, in St. Louis, Missouri; provided,
however, that the interest on this Bond may be payable, at the option of the
Company, by check mailed to the person entitled thereto as such person's address
shall appear on the Bond Register (including the records of any Bond
Co-Registrar).
Reference is hereby made to the further provisions of this Bond set
forth on the reverse side hereof and such further provisions shall for all
purposes have the same effect as though fully set forth at this place.
This Bond shall not be secured by or entitled to any benefit under the
Indenture referred to on the reverse side hereof, or be or become valid or
obligatory for any purpose, until the authentication certificate endorsed hereon
shall have been signed by Boatmen's Trust Company, Corporate Trustee under such
Indenture, or a successor trustee thereto under such Indenture.
2
<PAGE> 17
IN WITNESS WHEREOF, NATIONAL HEALTHCORP L.P., has caused this Bond to
be signed in its name by NHC, Inc., a Tennessee corporation, its Managing
General Partner, by its Chairman of the Board or its President or one of its
Vice Presidents by his signature or a facsimile thereof, and the corporate seal
of NHC, Inc. to be affixed or printed or engraved hereon and attested by its
Secretary or one of its Assistant Secretaries by his signature or a facsimile
thereof.
Dated: NATIONAL HEALTHCORP L.P.
By: NHC, Inc., its Managing
General Partner
By:
-----------------------------
Title:
--------------------------
[CORPORATE SEAL]
Attest:
- ------------------------------------
Secretary
3
<PAGE> 18
[FORM OF CORPORATE TRUSTEE'S AUTHENTICATION CERTIFICATE]
CORPORATE TRUSTEE'S AUTHENTICATION CERTIFICATE
This Bond is one of the Bonds of the series designated, described or
provided for in the Indenture referred to on the reverse side hereof.
BOATMEN'S TRUST COMPANY
As Corporate Trustee
BY:
-----------------------------
Authorized Officer
[FORM OF REVERSE OF 1989 BOND]
NATIONAL HEALTHCORP L.P.
% FIRST MORTGAGE BOND DUE JANUARY 15, 2005
This Bond is one of a duly authorized issue of Bonds of the Company
designated as its % First Mortgage Bonds, due January 15, 2005 (herein called
the "1989 Bonds"), limited in aggregate principal amount of $20,000,000 (except
for 1989 Bonds authenticated and delivered upon transfer of, or in exchange for
or in lieu of other 1989 Bonds), all issued and to be issued only in fully
registered form without coupons under and equally and ratably secured by an
indenture of mortgage and deed of trust or deed to secure debt (herein, together
with any indenture supplemental thereto, called the "Indenture"), dated as of
October 15, 1989, duly executed and delivered by NATIONAL HEALTHCORP L.P. to
BOATMEN'S TRUST COMPANY, Corporate Trustee and H.E. BRADFORD, Individual Trustee
(the Corporate Trustee and the Individual Trustee, together with their
respective successors being herein called the "Trustees"), to which Indenture
(which is hereby made a part hereof and to all of which the holder by acceptance
hereof assents) reference is hereby made for a description of the nature and
extent of the security, the respective rights of and restrictions upon the
Company and the holders of the 1989 Bonds, the rights, limitations of rights,
duties and immunities of the Trustee in respect thereof, and the terms and
conditions upon which the 1989 Bonds are, and are to be, secured.
The 1989 Bonds are redeemable at the option of the Company as a whole
at any time, or in part from time to time, prior to maturity, commencing January
15, 1993, on not less than 30 nor more than 60 days' notice given as provided in
the Indenture, upon payment of the then applicable redemption price set forth
below under the heading "General Redemption Prices," together in each case with
accrued and unpaid interest to the date fixed for redemption, all subject to the
conditions more fully set forth in the Indenture. The General Redemption Prices
(expressed in percentages of the principal amount) applicable during the 12
months' period beginning January 1 in the years indicated below are as follows:
4
<PAGE> 19
General Redemption Prices
If redeemed during the 12 months' period beginning January 15,
<TABLE>
<S> <C> <C> <C> <C>
1993 ........... 105% 1996..................... 102%
1994 ........... 104% 1997..................... 101%
1995 ........... 103% 1998 & thereafter........ 101%
</TABLE>
Unless the 1989 Bonds have been declared due and payable prior to
maturity by reason of an Event of Default, the holder of this 1989 Bond has the
right to present it for payment prior to maturity, and the Company will redeem
the same (or any portion of the principal amount thereof which is $1,000 or an
integral multiple thereof, as the holder shall specify), subject to the
limitations that the Company will not be obligated to redeem any 1989 Bonds
during the period beginning with the original issuance of the 1989 Bonds and
ending January 15, 1993 and is not obligated to redeem during any 12 month
period ending January 15 thereafter, (i) the portion of a 1989 Bond or Bonds of
a holder exceeding an aggregate principal amount of 525,000 or (ii) 1989 Bonds
in an aggregate principal amount exceeding $700,000. Such $25,000 and $700,000
limitations are non-cumulative. If the Company, although not obligated to do so,
chooses to redeem 1989 Bonds of any holder in any such period in excess of the
$25,000 limitation, such redemption, to the extent that it exceeds the $25,000
limitation for any holder, shall not be included in the computation of the
$700,000 limitation for such period or any succeeding period.
Redemption of the 1989 Bonds presented for payment prior to December 1
next preceding the last day of each such 12 month period will be made on the
last day (January 15) of such period, beginning January 15, 1993. 1989 Bonds not
redeemed in any such period because they have not been presented prior to the
December 15, next preceding the last day (January 15) of that period or because
of the $25,000 or $700,000 limitations will be held in order of their receipt
for redemption during the following 12 month period(s) until redeemed, unless
sooner withdrawn by the holder. Subject to the $25,000 and $700,000 limitations,
the Company will upon the death of any holder, redeem 1989 Bonds within 60 days
following receipt by the Corporate Trustee of a written request therefor from
such holder's personal representative, or surviving joint tenant(s), tenant by
the entirety or tenant(s) in common. 1989 Bonds will be redeemed in order of
their receipt by the Trustee, except 1989 Bonds presented for payment in the
event of death of the holder, which will be given priority in order of their
receipt.
In the event that there shall occur a Fundamental Structural Change (as
defined in the Indenture) with respect to the Company and as a result of such
Fundamental Structural Change the Company's consolidated partners capital shall
be decreased to less than $10,000,000, then the holder of this 1989 Bond shall
have the right to present it for payment prior to maturity, and the Company will
redeem the same (or any portion of the principal amount thereof which is $1,000
or an integral multiple thereof, as the holder shall specify). The $25,000
individual and $700,000 aggregate redemption limitations shall not apply to any
such redemption. For purposes of determining consolidated partners capital after
such Fundamental Structural Change, consolidated partners capital shall be
5
<PAGE> 20
deemed to include up to $10,000,000 in fully subordinated convertible debt of
the Company then outstanding, if any, and which debt has been outstanding for at
least 12 months.
1989 Bonds may be presented for redemption by delivering to the
Corporate Trustee: (i) a written request for redemption, in form satisfactory to
the corporate Trustee, signed by the registered holder(s) or his duly authorized
representative, (ii) the 1989 Bond to be redeemed and (iii) in the case of a
request made by reason of the death of a holder, appropriate evidence of death
and, if made by a representative of a deceased holder, appropriate evidence of
authority to make such request. No particular forms of request for redemption or
authority to request redemption are necessary. The price to be paid by the
Company for all 1989 Bonds or portions thereof presented to it for redemption is
100% of the principal amount or respective portions thereof plus accrued but
unpaid interest to the date of payment. Any acquisition of 1989 Bonds by the
Company other than by redemption at the option of any holder shall not be
included in the computation of either the $25,000 or $700,000 limitation for any
period.
For purposes of a holder's request for redemption, a 1989 Bond held in
tenancy by the entirety, joint tenancy or tenancy in common will be deemed to be
held by a single holder and the death of a tenant by the entirety, joint tenant
or tenant in common will be deemed the death of a holder. The death of a person,
who, during his lifetime, was entitled to substantially all of the beneficial
ownership interests of a 1989 Bond will be deemed the death of the holder,
regardless of the registered holder, if such beneficial interest can be
established to the satisfaction of the Corporate Trustee. For purposes of a
holder's request for redemption and a request for redemption on behalf of a
deceased holder, a beneficial interest shall be deemed to exist in cases of
street name or nominee ownership, ownership under the Uniform Gifts to Minors
Act, community property or other joint ownership arrangements between a husband
and wife (including individual retirement accounts or Keogh [H.R. 10] plans
maintained solely by or for the holder or decedent or by or for the holder or
decedent and his spouse), and trusts and certain other arrangements where a
person has substantially all of the beneficial ownership interests in the 1989
Bonds during his lifetime. Beneficial ownership interests shall include the
power to sell, transfer or otherwise dispose of a 1989 Bond and the right to
receive the proceeds therefrom, as well as interest and principal payable with
respect thereto.
In the case of 1989 Bonds registered in the names of banks, trust
companies or broker-dealers who are members of a national securities exchange or
the National Association of Securities Dealers, Inc. ("Qualified Institutions"),
the $25,000 limitation shall apply to each beneficial owner of 1989 Bonds held
by a Qualified Institution and the death of such beneficial owner shall entitle
a Qualified Institution to seek redemption of such 1989 Bonds as if the deceased
beneficial owner were the record holder. Such Qualified Institution, in its
request for redemption on behalf of beneficial owners, must submit evidence,
satisfactory to the Corporate Trustee, that it holds 1989 Bonds on behalf of
such beneficial owners and must certify that the aggregate amount of requests
for redemption tendered by such Qualified Institution on behalf of such
beneficial owner in any such 12 month period does not exceed $25,000.
6
<PAGE> 21
In the case of any 1989 Bonds which are presented for redemption in
part only, upon redemption the Company shall execute and the Corporate Trustee
shall authenticate and deliver to or on the order of the holder of such 1989
Bonds, without service charge, a new 1989 Bond(s), of any authorized
denomination or denominations as requested by such holder, in aggregate
principal amount equal to the unredeemed portion of the principal of the 1989
Bonds so presented.
In the case of any 1989 Bonds or portion thereof which are presented
for redemption by a holder and which have not been redeemed at the time the
Company gives notice of its election to redeem 1989 Bonds at its option, such
1989 Bonds or portion thereof shall first be subject to redemption by the
Company at its option as described above and if any such 1989 Bonds or portion
thereof are not redeemed by the Company they shall remain subject to redemption
pursuant to presentment by the holder.
Any 1989 Bonds presented for redemption by the holder may be withdrawn
by the person(s) presenting the same upon delivery of a written request for such
withdrawal to the Corporate Trustee (a) in cases other than by reason of death
of a holder, prior to December 15, 1992, in the case of the initial period, or
prior to December 15 in the case of any subsequent 12 month period, or (b) prior
to the issuance of a check in payment thereof in the case of 1989 Bonds
presented by reason of the death of a holder.
If the Company shall deposit with the Corporate Trustee in trust funds
sufficient to pay the principal of all of the 1989 Bonds, or such of the 1989
Bonds as have been or are to be called for redemption, any premium, if any,
thereon, and all interest payable on such 1989 Bonds to the date on which they
become due and payable, at maturity or upon redemption or otherwise, and shall
comply with the other provisions of the Indenture in respect thereof, then from
and after said date (or prior thereto as provided in the Indenture), such 1989
Bonds shall no longer be entitled to any lien or benefit under the Indenture
and, as respects the Company's liability thereon, such 1989 Bonds shall be
deemed to have been paid.
To the extent permitted by, and as provided in, the Indenture, the
Company may, by entering into an indenture or indentures supplemental to the
Indenture, modify, alter, add to or eliminate in any manner any provisions of
the Indenture, or the rights of the Bondholders or the rights and obligations of
the Company, upon the consent, as in the Indenture provided, of the holders of
not less than 66 2/3% in principal amount of the 1989 Bonds then Outstanding.
Notwithstanding the foregoing, no supplemental indenture shall, without the
consent of the holder of each Outstanding 1989 Bond affected thereby, change the
Stated Maturity of the principal of, or any installment of interest on any 1989
Bond, or reduce the principal amount thereof or the rate of interest thereon,
permit the creation of any mortgage or other lien ranking prior to or on a
parity with the Lien of the Indenture, deprive the holder of any 1989 Bond of
the Lien of the Indenture, reduce the percentage of the aggregate principal
amount of Outstanding 1989 Bonds, the consent of the holders of which is
required for any supplemental indenture or for any waiver of compliance with
certain provisions of the Indenture, or modify any of the provisions of the
Indenture relating to the foregoing, all except as provided in the Indenture.
7
<PAGE> 22
Notwithstanding the foregoing, no consent of the Bondholders shall be required
in order for the Company to enter into any supplemental indentures for the
purpose of adding, releasing and/or substituting property subject to the Lien of
the Indenture pursuant to the terms of the Indenture.
If an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of and all interest accrued on all the
1989 Bonds at any such time Outstanding under the Indenture may be declared, and
upon such declaration shall become, immediately due and payable, in the manner,
with the effect and subject to the conditions provided in the Indenture. The
Indenture provides that such declaration and its consequence may be waived by
the holders of a majority in principal amount of the 1989 Bonds then
Outstanding.
The 1989 Bonds are issuable as registered Bonds without coupons in
denominations of integral multiples of $1,000. Subject to the provisions of the
Indenture, the transfer of this 1989 Bond is registerable by the registered
holder hereof, in person or by his attorney duly authorized in writing, at the
main office of Boatmen's Trust Company, in St. Louis, Missouri, on books of the
Company to be kept for that purpose at said office, upon surrender and
cancellation of this 1989 Bond duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Corporate
Trustee, and thereupon a new fully registered Bond of the same series, of the
same aggregate principal amount and in authorized denominations, will be issued
to the transferee or transferees in exchange herefor; and this Bond, with or
without others of the same series, may in like manner be exchanged for one or
more new fully registered Bonds of the same series of other authorized
denominations but of the same aggregate principal amount; all as provided in the
Indenture. No service charge shall be made for any such transfer, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge or expense that may be imposed in relation thereto.
Prior to due presentment for registration of transfer, the Company, the
Trustees, or either of them, any Bond Co-Registrar, or any agent of the Company,
the Trustees or either of them may deem and treat the person in whose name this
1989 Bond shall be registered at any given time upon the Bond Register as the
absolute owner of this 1989 Bond for the purpose of receiving any payment of, or
on account of, the principal and interest on this 1989 Bond and for all other
purposes whether or not this 1989 Bond be overdue; and neither the Company nor
the Trustees, nor either of them, nor any agent of the Company, the Trustees or
either of them shall be bound by any notice to the contrary.
No recourse under any obligation, covenant or agreement contained in
the Indenture or in any Bond, or because of the creation of the indebtedness
represented hereby, shall be had against any organizer, any past, present or
future subscriber to the limited partnership interests, any limited partner of
the Company, or any officer or director of any corporate general partner of the
Company, as such under any rule of law, statute or constitution.
In any case where the date fixed for the payment of principal or
interest on any of the 1989 Bonds or the date fixed for redemption thereof shall
not be a
8
<PAGE> 23
business day, then payment of such principal or interest need not be made on
such date, but may be made on the next succeeding business day with the same
force and effect as if made on the date fixed for such payment or redemption,
and no interest shall accrue for the period from or after such date.
This 1989 Bond shall be governed by the laws of the State of Tennessee as
to all matters, including but not limited to matters of validity, construction,
effect and performance.
All terms used in this 1989 Bond which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
[END OF FORM OF BONDS]
All acts and things necessary to make the Bonds, when executed by the
Company and authenticated and delivered by the Corporate Trustee as provided in
this Indenture, the valid, binding and legal obligations of the Company, and to
constitute these presents a valid indenture and agreement according to its
terms, have been done and performed, and the execution of this Indenture and
the issue hereunder of the Bonds have in all respects been duly authorized, and
the Company, in the exercise of the legal right and power in it vested,
executes this Indenture and proposes to make, execute, issue and deliver the
Bonds;
NOW, THEREFORE, THIS INDENTURE WITNESSETH: That the Company, in
consideration of the premises, the acceptance by the Trustees of the trusts
hereunder, the purchase and acceptance of the Bonds by the Holders thereof, and
of other good and valuable consideration, the receipt whereof is hereby
acknowledged, and in order to secure the payment of the principal of, premium,
if any, and interest and any other sums payable on, the Bonds, according to
their tenor and effect, and to declare the provisions upon and subject to which
the Bonds are to be issued and secured, has executed and delivered this
Indenture, and has Granted and by this Indenture does Grant unto the Trustees
(but in the case of the Corporate Trustee, only to the extent of its legal
qualification under the laws of the particular jurisdiction to receive and hold
property located therein for the purposes hereof), and to their successors in
the trusts hereunder and assigns forever, the following, and all of the
Company's estate, right, title, interest, claim and demand therein, thereto and
thereunder (including, without limitation, any and all rights of the Company or
with respect thereto to make claim for, collect, receive and receipt for any
and all income, revenues, issues and profits and other moneys payable or
receivable thereunder or with respect thereto (other than accounts receivable
and payments under third party reimbursement programs), to bring Proceedings
thereunder or for the specific or other enforcement thereof or with respect
thereto, in the name of the Company, or otherwise, and to do any and all things
which the Company is or may be or become entitled to do thereunder or with
respect thereto; provided, however, that no obligation of the Company under the
provisions thereof or with respect thereto shall be impaired or diminished by
virtue hereof, nor shall any such obligation be imposed upon the trustees):
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<PAGE> 24
GRANTING CLAUSE FIRST
DEPOSITED CASH
The Deposited Cash delivered to the Trustee contemporaneously with the
execution of this indenture as referred to in Section 5.01 hereof or at any
time and from time to time delivered to or held by the Trustee pursuant to this
Indenture.
GRANTING CLAUSE SECOND
Mortgaged and Pledged Property
All right, title and interest of the Company, whether now owned or
hereafter acquired, in and to real property described on Exhibit A to this
Indenture attached hereto, and any other property which may from time to time,
by delivery to the Trustees or by Mortgage or any other instrument, be
subjected to the Lien of this Indenture by the Company or any Operating
Subsidiary, or otherwise with the consent of the Company, or which may come
into the possession or become subject to the control of the Trustees and to be
subject to the Lien of the Indenture pursuant to Articles 5 and 10 hereof,
including without limitation any and all right, title and interest, under
leases or otherwise, in and to all buildings, structures, improvements and
appurtenances now standing, or at any time hereafter constructed or placed upon
said property or any part thereof, including all their right, title and
interest in and to all furniture, furnishings, equipment and fixtures of every
kind and nature whatsoever on said premises or in any building now or hereafter
standing on said property, or any part thereof, and the reversion or
reversions, remainder or remainders, in and to said property and each and every
part thereof, and together with the entire interest of the Company or any
Operating Subsidiary, in and to all and singular the tenements, hereditaments,
easements, rights, privileges and appurtenances to said property belonging or
in any wise appertaining thereto, and all their right, title and interest in
and to any streets, ways, alleys, or strips of land adjoining said property or
any part thereof, and all the estate, right, title, interest, claim or demand
whatsoever of the Company or any Operating Subsidiary either in law or in
equity, in possession or expectancy, of, in and to said property, it being the
intention of the parties hereto that so far as may be permitted by law, all
tangible property now owned or hereafter acquired by the Company or any
Operating Subsidiary, or in which either of same has an interest, and affixed
to, attached to, placed upon, or used in any way in connection with the
enjoyment, occupancy or operation of said property shall be deemed to be, and
shall be considered as fixtures and appurtenances to, such real property.
GRANTING CLAUSE THIRD
RENTS, ISSUES, PROFITS AND OTHER INCOME
All rents, issues, profits and other incomes (other than accounts
receivable and payments under third party reimbursement programs) from the
property and interests in property now or hereafter subject to the Lien of this
Indenture, or intended so to be.
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<PAGE> 25
GRANTING CLAUSE FOURTH
Other and After-Acquired Property
Any and all moneys and other property which may from time to time, by
delivery to the Trustees or by any instrument, be subjected to the Lien of this
Indenture by the Company or by anyone on its behalf or with its consent, or
which may come into the possession or be subject to the control of the Trustees
pursuant to this Indenture or any indenture supplemental hereto, it being the
intention of the Company and the Trustees and it being hereby agreed by them
that all property hereafter acquired by the Company and required to be
subjected to the Lien of this Indenture or intended so to be shall forthwith
upon the acquisition thereof by the Company be as fully embraced within the
Lien of this Indenture as if such property were now owned by the Company and
were specifically described in this Indenture and Granted hereby or pursuant
hereto; and the Trustees are hereby authorized to receive any and all such
property as and for additional security for the payment of the Bonds and all
other sums secured or intended to be secured hereby.
EXCEPTIONS AND RESERVATIONS
Notwithstanding any provision herein to the contrary, unless and until an
Event of Default shall have occurred and be continuing, it is not intended to
subject to the Lien of this Indenture, and such Grant shall not be deemed to
apply to any rents, issues, profits or other income from the Mortgaged and
Pledged Property; but, upon the happening and during the continuance of any
Event of Default, all such rents, issues, profits and other income (other than
accounts receivable and payments under third party reimbursement programs shall
immediately become subject to the Lien of this Indenture to the extent
permitted by law and the Trustees shall be entitled to receive and collect all
sums payable thereunder and to apply the net moneys so received as in Article
12 provided.
TO HAVE AND TO HOLD all and singular the Trust Estate, whether now owned
or held or hereafter acquired, unto the Trustees, their successors in the
trusts hereunder and assigns, forever;
SUBJECT, HOWEVER, to Permitted Encumbrances;
IN TRUST NEVERTHELESS, upon the terms and trusts herein set forth, for the
equal pro rata benefit and security of all and every of the Bonds issued and to
be issued hereunder, or any of them, in accordance with the terms of this
Indenture, without preference, priority or distinction as to lien of any of
said Bonds over any others thereof by reason of priority in the time of the
issue or negotiation thereof, or otherwise howsoever, it being intended that
the lien and security of all of said Bonds of all series issued or to be issued
hereunder shall take effect from the date of this Indenture, and that the lien
and security of this Indenture shall take effect from the date hereof as though
all of the Bonds of a series were actually authenticated and delivered and
issued upon such date.
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<PAGE> 26
PROVIDED, HOWEVER, and these presents are upon the condition that if the
Company, its successors or assigns, as more fully provided in this Indenture,
shall pay or cause to be paid, the principal of and the interest on said Bonds,
together with the premium, if any, payable on such of said Bonds as may have
been called for redemption prior to Stated Maturity, or shall provide, as
permitted hereby, for the payment thereof by depositing with the Corporate
Trustee the entire amount due or to become due thereon for principal, interest
and premium, if any, and if the Company shall also pay or cause to be paid all
other sums payable hereunder by it, then this Indenture and the estate and
rights hereby granted shall cease, determine and be void.
IT IS HEREBY COVENANTED, DECLARED AND AGREED by and between the parties
hereto that all Bonds to be authenticated, delivered and issued hereunder are,
and all moneys and other property subject or to become subject hereto is, to be
held subject to the further covenants, conditions, uses and trusts hereinafter
set forth, and the Company, for itself and its successors and assigns, does
hereby covenant and agree to and with the Trustees and their successor or
successors in such trust, for the equal and ratable benefit of those who shall
be the lawful Holders of the Bonds or any of them as follows:
ARTICLE 1.
DEFINITIONS
SECTION 1.01. The terms defined in this Article 1 shall except as herein
otherwise expressly provided) for all purposes of this Indenture, have the
respective meanings specified in this Article and include the plural as well as
the singular. Any term defined in the Trust Indenture Act of 1939, either
directly or by reference therein, and not defined in this Indenture, unless the
context otherwise specifies or requires, shall have the meaning assigned to
such term therein as in force on the date of this Indenture.
"Act" when used with respect to any Bondholder has the meaning specified
in Section 20.05.
"Affected" has the meaning specified in Section 19.02.
"Affiliate" means any General Partner of the Company and any other person
which directly or indirectly controls, is controlled by, or is under direct or
indirect common control with, the Company. A person shall be deemed to control
a corporation, partnership or other entity, for the purpose of this definition,
if such person possesses, directly or indirectly, the power to direct or cause
the direction of the management and policies of such corporation, partnership
or other entity, whether through the ownership of voting securities, by
contract, or otherwise.
"Application" means a written instrument requesting the Trustees, or one
of them, to take action under a section of this Indenture specified in such
instrument, and shall consist of, and not be deemed to be made or complete
until the Trustees, or one of them, as the case may be, shall have been
furnished with such funds, instruments, certificates and opinions as may be
required by this
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<PAGE> 27
Indenture to establish the right of the person making such Application to have
such action taken by the Trustees, or one of them, and shall be signed in the
name of the Company by its Managing General Partner, by the Chairman of the
Board, Vice Chairman of the Board, President or any Vice President of the
Managing General Partner and its Treasurer, Assistant Treasurer, Secretary or
Assistant Secretary and delivered to the Corporate Trustee.
"Authenticating Agent" means the agent of the Corporate Trustee which at
the time shall be appointed and acting pursuant to Section 16.16.
"Board of Directors" or "Board" mean either the Board of Directors of the
Managing General Partner of the Company or any committee of such Board of
Directors, however designated, authorized to exercise the powers of such Board
of Directors in respect of the matters in question.
"Bond" or "Bonds" mean one or more of the bonds comprising the Company's
issue of First Mortgage Bonds issued, authenticated and delivered under this
Indenture.
"Bond Co-Registrar" has the meaning specified in Section 2.05.
"Bond Register" and "Bond Registrar" have the respective meanings
specified in Section 2.05.
"Bondable Amount" means, with respect to the property described in an
Officers' Certificate delivered to the Corporate Trustee pursuant to Section
5.03, the amount so specified in such Officers' Certificate as the Bondable
Amount of such Property; provided, however, that (i) for purposes of property
upon which the Company shall construct all or substantially all of the
improvements within six (6) months prior to the time such property is to become
a Mortgaged and Pledged Property, and for purposes of improved property
purchased in an arm's length transaction by the Company or an Operating
Subsidiary after the date of this Indenture that is to become a Mortgaged and
Pledged Property within six (6) months after the date of such purchase, the
Bondable Amount so specified shall not be greater than an amount equal to the
greater of 80% of (A) the Capitalized Cost of such Property and (B) the Fair
Value of such Property; (ii) for purposes of the Mortgaged and Pledged Property
described on Exhibit A attached hereto, Bondable Amount so specified shall be
the value set forth on such Exhibit A with respect to each such Mortgaged and
Pledged Property; (iii) for purposes of property upon which the Company shall
construct improvements with a Capitalized Cost in excess of $400,000 after such
property becomes a Mortgaged and Pledged Property, the Bondable Amount of such
improvements so specified shall not be greater than an amount equal to the
greater of 80% of (A) the Capitalized Cost of such improvement and (B) the Fair
Value of such improvements; and (iv) for purposes of property that is not
described in subdivisions (i), (ii) or (iii) hereof, the Bondable Amount so
specified shall be an amount equal to 80% of the Fair Value of such property.
"Bondholder," "Holder of the Bonds," "Holder" or "holder" or other similar
terms mean any person in whose name, as of any particular date, a Bond is
registered on the Bond Register.
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"business day" means any day which is not a Saturday, Sunday or other day
on which banking institutions in the State in which the Corporate Trustee shall
maintain its principal office are authorized or obligated by law or required by
executive order to close.
"capital stock" includes any and all shares, interests, participations or
other equivalents (however designated) of corporate stock of any corporation.
"Capitalized Cost" means, with respect to the Mortgaged and Pledged
Property, the aggregate of the costs incurred (otherwise than by incurring, or
acquiring property subject to, obligations or indebtedness secured by purchase
money mortgages, other purchase money liens, purchase money security
agreements, chattel mortgages, conditional sale agreements or other title
retention agreements) by the owner of such Mortgaged and Pledged Property, for
and in connection with the acquisition, construction or development of such
Mortgaged and Pledged Property, and charged and properly chargeable to the
land, buildings and building improvements accounts of such owner in accordance
with generally accepted accounting principles, including, without limitation,
charges for labor, salaries, overhead, materials, supplies, machinery,
equipment, furniture, furnishings, apparatus, interest during construction and
commitment fees, taxes, engineering, accounting and legal expenses,
superintendence, insurance, casualty liabilities, rentals, start-up expenses,
financing charges and expenses and all other items in connection with such
acquisition, construction or development and so charged and properly so
chargeable, after deducting therefrom (A) all net amounts realized by such
owner as salvage on any items the cost of which shall have been included in
Capitalized Cost, (B) all net proceeds of insurance in respect of loss or
damage to any items the cost of which shall have been included in Capitalized
Cost and (C) all provisions for amortization recorded on the Company's books,
depreciation, depletion and obsolescence which shall have been included in
Capitalized Cost; provided, however, that in determining Capitalized Cost,
operating or maintenance expenses and interest on any indebtedness except
interest during construction shall not be included; and provided further, that
Capitalized Cost shall not include fees and expenses incurred in connection
with the offer and sale of Bonds and deducted from the proceeds from the sale
thereof pursuant to Section 5.01 hereof.
"Certified Resolution" means a copy of a resolution or resolutions
certified, by the Secretary or an Assistant Secretary of the corporation
referred to, as having been duly adopted by the Board of Directors of such
corporation or any committee of such Board of Directors, however designated,
authorized to exercise the powers of such Board of Directors in respect of the
matters in question and to be in full force and effect on the date of such
certification.
"common stock" means any capital stock of a corporation which is not
preferred as to the payment of dividends or the distribution of assets on any
voluntary or involuntary liquidation over shares of any other class of capital
stock of such corporation.
"Company" shall mean and include National HealthCorp L.P. and also any
limited partnership that shall have become a successor limited partnership in
compliance with Article 15.
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<PAGE> 29
"Company Order" and "Company Request" mean, respectively, a written order
or request signed in the name of the Company by its Managing General Partner,
by the Chairman of the Board, Vice-Chairman of the Board, President or any Vice
President of the Managing General Partner and its Treasurer, Assistant
Treasurer, Secretary or Assistant Secretary and delivered to the Corporate
Trustee.
"Current," when used with respect to an M.A.I. Appraisal or any
certificate or opinion relating to the value of any property, means an M.A.I.
Appraisal, certificate or opinion, as the case may be, dated as of a date not
more than 180 days (or not more than ten days in the case of any certificate or
opinion relating to the value of securities) prior to the delivery thereof
pursuant to any provision of this Indenture, which M.A.I. Appraisal,
certificate or opinion shall reflect the values reported therein as of its
date.
"Daily Newspaper" shall mean a newspaper in the English language of
general circulation in the relevant area and customarily published on each
business day of the year, whether or not such newspaper is published on
Saturdays, Sundays and legal holidays. Whenever successive weekly publications
in a Daily Newspaper are required hereunder, they may be made (unless otherwise
expressly provided herein) on the same or different days of the week and in the
same or different Daily Newspapers.
"date of this Indenture" means October 15, 1989.
"day" means a calendar day.
"Debt," with respect to any corporation or partnership, shall include all
obligations of such corporation or partnership, contingent and otherwise, which
is in accordance with generally accepted accounting principles would be
classified upon a balance sheet of such corporation or partnership as
liabilities of such corporation or partnership, other than deferred income
taxes.
"Default" means any act or occurrence of the character specified in
Section 12.01, but excluding any notice or lapse of time, or both, specified
therein.
"Defaulted Interest" has the meaning specified in Section 2.01.
"Deposited Cash" means cash deposited with, or paid to, the Corporate
Trustee under the provisions of Sections 5.01, 6.10, 10.02 and 10.03, but in
the absence of an Event of Default, shall not include the net income or profit
realized by the Corporate Trustee from investment of Deposited Cash pursuant to
Section 20.02.
"Event of Default" means any act or occurrence of the character specified
in Section 12.01.
"Executive Officer" means, with respect to any corporation or the Company,
the Chairman of the Board, the Vice Chairman of the Board, the President, the
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<PAGE> 30
Executive Vice President, any other Vice President or the Treasurer of such
corporation.
"Fair Value," when used with respect to any property or properties, means
the fair value of the parcel of land, buildings and improvements thereon, as
shown on a Current M.A.I. Appraisal.
"Fundamental Structural Change" means the occurrence of any one or more of
the following: (i) the Company or any other person (other than any person that
owns 5% or more of the Units as of the date of this Indenture) which owns,
directly or indirectly, a majority of the Units of the Company (each such
person being a "Holding Company") shall consolidate with or merge into any other
corporation or partnership, or convey, transfer or lease all or substantially
all of its assets to any person; (ii) any person shall consolidate with or
merge into the Company or any Holding Company pursuant to a transaction in
which at least a majority of the Units of the Company or the common stock or
partnership interests of such Holding Company then outstanding are changed or
exchanged; (iii) any person shall purchase or otherwise acquire in one or more
transactions beneficial ownership of 50% of more of the Units of the Company or
of the common stock or partnership interests of any Holding Company outstanding
on the date immediately prior to the last such purchase or other acquisition;
(iv) the Company or any Subsidiary shall purchase or otherwise acquire in one
or more transactions during the 12 month period preceding the date of the last
such purchase or other acquisition an aggregate of 30% or more of the Units of
the Company outstanding on the date immediately prior to the last such purchase
or acquisition; (v) any Holding Company or any Subsidiary of such Holding
Company (including the Company) shall purchase or otherwise acquire in one or
more transactions during the 12 month period preceding the date of the last
such purchase or other acquisition an aggregate of 30% or more of the common
stock of such Holding Company outstanding on the date immediately prior to the
last such purchase or other acquisition; or (vi) the Company or any Holding
Company shall make a distribution of cash, property or securities (other than
regular periodic cash distributions at a rate which is consistent with past
practice) to holders of Units or to holders of common stock of such person
(including by means of dividend, reclassification or recapitalization) which,
together with all other such distributions during such 12 month period
preceding the date of such distribution, has an aggregate fair market value in
excess of an amount equal to 30% of the fair market value of the Units of the
Company or the common stock of such person outstanding on the date immediately
prior to such distribution; provided, however, that notwithstanding the
foregoing, "Fundamental Structural Change" shall not include the
reincorporation of the Company as a corporation where all Unitholders become
shareholders on a pro rata basis and no other persons other than option holders
or holders of convertible securities of the Company become shareholders in such
transaction.
"General Partner" means each of NHC, Inc., a Tennessee corporation and the
Managing General Partner of the Company; National Health Corporation, a
Tennessee corporation and the Administrative General Partner of the Company;
and W. Andrew Adams, the Special General Partner of the Company.
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<PAGE> 31
"Grant" means grant, bargain, sell, alienate, mortgage, pledge, deposit,
grant a security interest in, convey, assign, transfer and set over and the
term "Granted" has the meaning correlative to the foregoing.
"Hazardous Substances" means any substance or material defined or
designated as hazardous or toxic waste, hazardous or toxic material, a
hazardous or toxic substance, or other similar term, by any federal, state or
local environmental statute, regulation or ordinance presently in effect or
that may be promulgated in the future, as such statutes, regulations or
ordinances may be amended from time to time, including, without limitation,
asbestos in friable form and petroleum products.
"Indenture" means this instrument as originally executed or as it may from
time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof.
"Independent," when applied to any described person, shall mean such
person who (1) is in fact independent, (2) does not have any substantial
interest, direct or indirect, in the Company, in an Operating Subsidiary, in
any other obligor upon the Bonds, or in any Affiliate of the Company, an
Operating Subsidiary or any such obligor, and (3) is not connected with the
Company, with an Operating Subsidiary, with any such other obligor, or with any
Affiliate of the Company, of an Operating Subsidiary or of any such other
obligor, as an officer, employee, promoter, underwriter, trustee, partner,
director or person performing similar functions. Whenever it is herein provided
that any such independent person's opinion or certificate shall be furnished to
the Corporate Trustee, such person shall be appointed by a Certified Resolution
and approved by the Corporate Trustee in the exercise of reasonable care and
such opinion or certificate shall state that the signer is "Independent" within
the meaning thereof.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Bonds.
"lessor" shall mean any lessor of a parcel or parcels of land which are
leased by the Company or a Subsidiary under a lease wherein such lessor agrees
to subordinate his interest therein to the Lien of this Indenture as security
for all the Bonds.
"Lien of this Indenture" and terms of like import mean the security title
or other interest or charge Granted to the Trustees by this Indenture or any
deed to secure debt (including the after-acquired property clauses hereof) or
by any subsequent Grant hereunder or pursuant hereto or by any deed to secure
debt to the Trustees (whether made by the Company, an Operating Subsidiary or
any other person) or otherwise created, constituting any property a part of the
security held by the Trustees for the equal and ratable benefit of the Holders
of the Bonds.
"M.A.I. Appraisal" shall mean a written report of an appraisal by an M.A.I.
Appraiser showing the Fair Value of the parcel of land, buildings and
improvements thereon. Each M.A.I. Appraisal shall include the statements
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<PAGE> 32
provided for in Section 20.04 hereof, if and to the extent required by the
provisions thereof.
"M.A.I. Appraiser" shall mean an Independent appraiser, selected by the
Company and approved by the Corporate Trustee, (a) who is a Member of the
American Institute of Real Estate Appraisers, or any successor of such
Institute or, in the event that such Institute or successor shall no longer
exist, any other comparable association of real estate appraisers satisfactory
to the Corporate Trustee, and (b) after July 1, 1991, who is certified as a
certified real estate appraiser under the laws of the state in which the
property is located (if such certification laws are in effect). The acceptance
by the Corporate Trustee of a report by an appraiser shall be sufficient
evidence of such approval.
"main office" with reference to the Corporate Trustee shall mean the
principal corporate trust office of the Trustee, which office is, on the date
of this Indenture, located at 510 Locust Street, St. Louis, Missouri.
"maturity" or "mature," when used with respect to any Bond, means the
date on which the principal of such Bond becomes due and payable as therein or
herein provided, whether at Stated Maturity or by declaration of acceleration,
call for redemption at the option of the Company pursuant to Section 3.01(E) or
presentment for repayment as provided in Section 3.01(F) hereof, or otherwise.
"Mortgage" means any mortgage, deed of trust, deed to secure debt,
security agreement or other similar instrument, as the same may be amended or
supplemented from time to time by a supplemental mortgage or any other
instrument supplemental thereto as permitted thereby and hereby, relating to a
Property, from the Company or an Operating Subsidiary, as the case may be, to
the Trustees and for the equal and ratable benefits of the holders of Bonds
pursuant to this Indenture.
"Mortgaged and Pledged Property" means as of any particular time all
moneys and other property which at said time is subject or intended to be
subject to the Lien of this Indenture whether such Lien be created by these
presents (including the after-acquired property clauses hereof) or by
subsequent conveyance or delivery to or pledge with the Trustees hereunder or
otherwise.
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, President or a Vice President and the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary of the Managing General
Partner of the Company, and delivered to the Corporate Trustee. Each such
certificate, to the extent required, shall comply with the provisions of
Section 20.04 hereof. Wherever this Indenture requires that an Officers'
Certificate be signed also by an engineer or an accountant or other expert,
such engineer, accountant or other expert (except as otherwise expressly
provided in this Indenture) may be in the employ of the Managing General
Partner of the Company and shall be acceptable to the Corporate Trustee.
"Operating Subsidiary" means any subsidiary of the Company which acquires
any part of the Trust Estate.
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<PAGE> 33
"Opinion of Counsel" means a written opinion of counsel who may be counsel
for the Company and shall be acceptable to the Corporate Trustee. Each such
opinion to the extent required, shall comply with the provisions of Section
20.04 hereof.
"Original Issue Date" with respect to any Bond (or portion thereof) means
the earlier of (a) the date of such Bond or (b) the date of any Bond (or
portion thereof) for which such Bond was issued (directly or indirectly) on
registration of transfer, exchange or substitution.
"Outstanding" means, as of the date of determination, all Bonds which
theretofore shall have been authenticated and delivered by the Corporate
Trustee under this Indenture, except (1) Bonds theretofore cancelled by the
Corporate Trustee or delivered to the Corporate Trustee for cancellation, (2)
Bonds or portions thereof for the payment or redemption of which money in the
necessary amount shall have been deposited with the Corporate Trustee or any
paying agent in trust for the Holders of the Bonds; provided, however, that in
the case of redemption, any notice required shall have been given or have been
provided for to the satisfaction of the Corporate Trustee, and (3) Bonds in
exchange or substitution for and/or in lieu of which other Bonds have been
authenticated and delivered under any of the provisions of this Indenture.
Notwithstanding the foregoing provision of this paragraph, Bonds in exchange or
substitution for and/or in lieu of which other Bonds have been authenticated
and delivered under Section 2.09 hereof and which have not been surrendered to
the Corporate Trustee for cancellation or the payment of which shall not have
been duly provided for, shall be deemed to be Outstanding, In determining
whether the Bondholders of the requisite principal amount of Bonds Outstanding
have given any request, demand, authorization, direction, notice, consent or
waiver hereunder, Bonds owned by the Company or any other obligor upon the
Bonds or any Affiliate of the Company, including any Subsidiary, or such other
obligor shall be disregarded and deemed not Outstanding, except that, in
determining whether the Corporate Trustee shall be protected in relying upon
any such request, demand, authorization, direction, notice, consent or waiver,
only Bonds which the Corporate Trustee knows to be so owned shall be
disregarded. Bonds so owned which have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Corporate Trustee the pledgee's right so to act with respect to such Bonds and
that the pledgee is not the Company or any other obligor upon the Bonds or any
Affiliate of the Company or a Subsidiary or such other obligor.
"paying agent" means any person authorized by the Company to pay the
principal or, premium, if any, and interest on any bonds on behalf of the
Company.
"Permitted Encumbrances" means, with respect to any property, but only to
the extent applicable to such property: (A) rights reserved to or vested in any
municipality or public authority by the terms of any right, power, franchise,
grant, license, permit or provision of law affecting such property to (1)
terminate such right, power, franchise, grant, license or permit, provided that
the exercise of such right would not materially impair the use of such property
or materially adversely affect the value thereof or (2) purchase, condemn or
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<PAGE> 34
appropriate such property; (B) any liens thereon for taxes, assessments and
other governmental charges and any liens of mechanics, materialmen and laborers
for work or services performed or materials furnished in connection with such
property, which are not due and payable or which are not delinquent or which,
or the amount or validity of which, are being contested in good faith by proper
Proceedings or otherwise preliminary to the institution of a Proceeding; (C)
easements, rights-of-way, servitudes, restrictions and other minor defects,
encumbrances and irregularities in the title to such property (including,
without limitation, leases in the ordinary course of business if, in the case
of any such lease of any portion of the Property which is subject to the Lien
of this Indenture (other than immaterial personal property leases), such lease
is subordinate to the Lien of this Indenture) which do not materially impair
the use of such property as a long-term health care center or materially
adversely affect the value thereof as a long-term health care center; (D)
rights reserved to or vested in any municipality or public authority to control
or regulate such property or to use property in any manner, which rights do not
materially impair the use of such property or materially adversely affect the
value thereof; (E) the Lien of this Indenture and of any Mortgage; (F) liens
which are by their terms made expressly junior to the Lien of this Indenture;
(G) Uniform Commercial Code financing statements with respect to furniture,
fixtures or equipment that encumber such property at the time such property
becomes subject to the Lien of this Indenture; and (H) any lien for the
satisfaction and discharge of which a sum of money deemed adequate by the
Corporate Trustee is on deposit with the Corporate Trustee.
"person" means any individual, partnership, corporation, trust,
unincorporated association, joint venture, government or any department or
agency thereof, or any other entity.
"place of payment" means such place as designated in Section 2.01 hereof.
"predecessor Bond" of any particular Bond means every previous Bond
evidencing all or a portion of the same debt as that evidenced by such
particular Bond; and, for the purposes of this definition, any Bond
authenticated and delivered under Section 2.09 in lieu of a lost, destroyed or
stolen Bond shall be deemed to evidence the same debt as the lost, destroyed or
stolen Bond.
"Proceeding" means any suit in equity, action at law or other legal,
equitable, administrative or similar proceeding.
"Redemption Date," when used with respect to any Bond to be redeemed,
means the date fixed for such redemption by or pursuant to this Indenture.
"Regular Record Date" has the meaning specified in Section 2.0.
"Responsible Officers" of the Corporate Trustee means the Chairman of the
Board of Directors, every Vice Chairman of the Board of Directors, the
President, the Chairman or any Vice Chairman of the Executive Committee of the
Board, the Chairman of the Trust Committee, every Vice President, every
Assistant Vice President, the Cashier, every Assistant Cashier, the Secretary,
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every Assistant Secretary, the Treasurer, every Assistant Treasurer, every
Trust officer, every Assistant Trust Officer, the Controller, every Assistant
Controller, and every other officer and assistant officer of the Corporate
Trustee customarily performing functions similar to those performed by the
persons who at the time shall be any such officers and also means, with respect
to a particular corporate trust matter, any other officer to whom such
corporate trust matter is referred because of his knowledge and familiarity
with a particular subject.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Corporate Trustee pursuant to Section 2.01.
"Stated Maturity," when used with respect to any Bond or any installment
of interest thereon, means the date specified in such Bond as the fixed date on
which the principal of such Bond or such installment of interest is due and
payable.
"Subsidiary" means any corporation or limited partnership more than 50% of
whose shares of stock or limited partnership units having general voting power
under ordinary circumstances to elect a majority of the board of directors,
managers or trustees of such corporation, or general partner in the case of a
limited partnership, irrespective of whether or not at the time stock or
limited partnership units of any other class or classes shall or might have
voting power by reason of the happening of any contingency, is owned or
controlled directly or indirectly by the Company.
"supplemental indenture" or "indenture supplemental hereto" mean any
indenture hereafter duly authorized and entered into in accordance with the
provisions of this Indenture.
"Trustees" means the Corporate Trustee and the Individual Trustee. Unless
otherwise expressly provided otherwise in this Indenture or unless the context
otherwise expressly requires, any reference to the Trustees shall refer to
either of them. The powers of the Individual Trustee are limited by Section
16.13(D) hereof.
"Trust Estate" means all moneys and other property subject or intended to
be subject to the Lien of this Indenture as of any particular time.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as in force
at the date of which this instrument was executed.
"Unit" means any limited partnership interest of the Company.
All accounting terms used in this indenture shall have the meanings
assigned to them in accordance with generally accepted accounting principles
and practices employed at the time by the Company.
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ARTICLE 2.
DESCRIPTION, EXECUTION, REGISTRATION, TRANSFER
AND EXCHANGE OF BONDS
SECTION 2.01. All Bonds shall be issued in definitive, fully registered
form without coupons. The Bonds, at the election of the Board of Directors as
authorized by a Certified Resolution, may be issued in one or more series,
shall be designated generally as _ % First Mortgage Bonds of the Company. With
respect to the Bonds of any particular series, the Company may incorporate in,
add to or delete from the general title of such Bonds any words, letters or
figures designed to distinguish that series, as the Board of Directors may
determine. Each Bond shall bear on the face thereof the designation so selected
for the series to which it belongs.
All Bonds shall be dated the date of authentication thereof by the
Corporate Trustee and shall bear interest, payable quarterly, from the Interest
Payment Date to which interest on the Bonds of the respective series being
authenticated has been paid next preceding the authentication date thereof,
unless such authentication date is an Interest Payment Date to which interest
has been paid, in which case they shall bear interest from such authentication
date, or if no interest has been paid on such Bonds of the respective series
being authenticated since the Original Issue Date of such Bonds, from such
Original Issue Date or such other date as shall be fixed for the respective
series of Bonds by this Indenture or any indenture supplemental hereto creating
a series of additional Bonds. Notwithstanding the foregoing, so long as there
is no existing default in the payment of interest on Bonds of a particular
series, all Bonds of such series authenticated by the Corporate Trustee between
the Regular Record Date (as hereinafter defined) for any Interest Payment Date
for such series and such Interest Payment Date shall bear interest from such
Interest Payment Date; provided, however, that if and to the extent that the
Company shall default in the payment of the interest due on such Interest
Payment Date, then any such Bond shall bear interest from the Interest Payment
Date next preceding the date of such Bond of such series to which interest on
the Bonds has been paid, or if no interest has been paid on such Bonds since
the Original Issue Date of such Bonds from such Original Issue Date or from
such other date as shall have been fixed for the respective series of Bonds by
this Indenture or any supplemental indenture hereto creating such series of
additional Bonds as aforesaid.
Interest on any Bond which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the person in whose
name that Bond (or one or more predecessor Bonds) is registered at the close of
business on the Regular Record Date for such interest as specified in this
Section 2.01. The term "Regular Record Date" with respect to (A) a regular
quarterly Interest Payment Date for the Bonds shall mean the close of business
on the first day of the month (whether or not a business day) next preceding
such Interest Payment Date and (B) a regular Interest Payment Date as shall be
established as such record date by the supplemental indenture creating such
series of additional Bonds; provided, however, that such date shall not be more
than 20 nor less than ten days preceding such Interest Payment Date.
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Any interest on any Bond which is payable, but is not punctually paid or
duly provided for, on any Interest Payment Date (herein called "Defaulted
Interest") shall forthwith cease to be payable to the registered Holder on the
relevant Regular Record Date by virtue of having been such Holder; and such
Defaulted Interest may be paid by the Company, at its election in each case, as
provided in clause (1) or clause (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the persons in whose names the Bonds (or their respective
predecessor Bonds) are registered at the close of business on a
special record date (the "Special Record Date") for the payment of
such Defaulted Interest, which shall be fixed in the following
manner. The Company shall notify the Corporate Trustee in writing of
the amount of Defaulted Interest proposed to be paid on each Bond and
the date of the proposed payment, and at the same time the Company
shall deposit with the Corporate Trustee an amount of money equal to
the aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Corporate
Trustee for such deposit prior to the date of the proposed payment,
such money when deposited to be held in trust for the benefit of the
persons entitled to such Defaulted Interest as in this clause
provided. Thereupon the Corporate Trustee shall fix a Special Record
Date for the payment of such Defaulted Interest which shall be not
more than 20 nor less than ten days prior to the date of the proposed
payment and not less than 35 days after the receipt by the Corporate
Trustee of the notice of the proposed payment. The Corporate Trustee
shall promptly notify the Company of such Special Record Date and, in
the name and at the expense of the Company, shall cause notice of the
proposed payment of such Defaulted Interest and the Special Record
Date therefor to be mailed, first class postage prepaid, to each
Bondholder as his address as it appears in the Bond Register, not
less than ten days prior to such Special Record Date. The Corporate
Trustee may, in its discretion, in the name and at the expense of the
Company, cause a similar notice to be published at least once in a
Daily Newspaper in each place of payment, but such publication shall
not be a condition precedent to the establishment of such Special
Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been mailed as
aforesaid, such Defaulted Interest shall be paid to the persons in
whose names the Bonds (or their respective predecessor Bonds) are
registered on such Special Record Date and shall no longer be payable
pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Bonds may be listed, and upon such
notice as may be required by such exchange, if, after notice given by
the Company to the Corporate Trustee of the proposed payment pursuant
to this clause, such payment shall be deemed practicable by the
Corporate Trustee.
Subject to the foregoing provisions of this Section, each Bond
delivered under this Indenture upon transfer of or in exchange for or in lieu
of any other Bond shall carry the rights to interest accrued and unpaid, and to
accrue, which were carried by such other Bond.
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The principal of and the premium, if any, and the interest on the Bonds
shall be paid at the office or agency of the Company which shall be located at
the main office of the Corporate Trustee (the "place of payment") in such coin
or currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts; provided, however,
that interest on any Bonds may be payable, at the option of the Company, by
check mailed to the person entitled thereto as such person's address shall
appear on the Bond Register.
SECTION 2.02. Subject to Section 2.01 and to the provisions of this
Indenture with respect to the Bonds, the Bonds of any series, as may be
determined by the Board of Directors in a Certified Resolution:
(A) Shall bear interest at such rate or rates and be payable as to
principal, premium, if any, and interest at such time or times, and at
such place or places, as may be so determined and expressed in such Bonds;
(B) Shall be in such denominations as may be so determined;
(C) May be limited as to the maximum principal amount thereof which
may be authenticated and delivered by the Corporate Trustee or which may
be at any one time Outstanding, and an appropriate insertion in respect of
such limitation may, but need not, be made in the Bonds of such series;
(D) May contain such other lawful provisions, if any, as so
determined with respect to the payment of principal or interest or both
thereby represented without deduction for or the reimbursement of such
taxes, assessments or governmental charges as may be specified therein or
in an indenture supplemental hereto creating such series, and otherwise
with respect to relieving the holder from payment of such taxes,
assessments or governmental charges;
(E) May contain such provisions, if any, for the redemption thereof,
at the option of the Company or holders thereof, at such redemption price
or prices, at such time or times, in such manner and upon such other terms
and conditions as may be so determined and expressed or referred to in
such Bonds;
(F) May be convertible into or exchangeable for, at the option of the
holders thereof, Units or capital stock of any class of the Company or of
any other limited partnership or corporation, as the case may be, at such
times, upon such terms and conditions and subject to such adjustments as
may be so determined and expressed or referred to in such Bonds or in an
endorsement thereon;
(G) May contain such provisions, if any, for the establishment of a
purchase, sinking, amortization, improvement, or analogous fund therefor,
in such amounts, at such time or times, in such manner and upon such other
terms and conditions, and for the retirement or redemption of such Bonds
by the operation of any such fund or otherwise, at such price
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or prices, in such amounts, at such time or times, in such manner and upon
such other terms and conditions, as may be so determined and expressed or
referred to in such Bonds;
(H) May contain such provisions, if any, with respect to serial
maturities, interest rate or rates (if they are of serial maturities),
payment of interest only in the event of specified contingencies or
events, anticipation of maturity on the happening of specified events, and
such other special terms and conditions, not contrary to the provisions
hereof, as may be so determined;
(I) Shall be in the form provided in the supplemental indenture
executed with respect to Bonds of such series, which form shall be in
substantially the same form as is set forth in the recitals hereto with
respect to the Bonds, with such omissions therefrom, variations therein
and additions thereto as shall be so determined;
(J) May have attached thereto or printed on the reverse side thereof
Unit purchase warrants, as and when directed by the Company and in such
form as the Company shall prescribe, and neither the Trustees nor any Bond
Registrar shall have any responsibility with respect to any such warrant
or the validity or execution or sufficiency thereof;
(K) May provide for the exchange of the Bonds of such series, at the
option of the Holders thereof and upon surrender thereof to the Corporate
Trustee, for or into new Bonds of a different series; and
(L) May provide for the exchanging of Bonds of such series, at the
option of the Holders thereof and upon surrender thereof to the Corporate
Trustee, for other Bonds of the same series of the same aggregate
principal amount of a different authorized kind or authorized denomination
or denominations.
SECTION 2.03. Bonds may bear such numbers, letters or other marks of
identification or designation, may be endorsed with or have incorporated in the
text thereof such legends or recitals with respect to transferability or in
respect of the Bond or Bonds for which they are exchangeable, and may contain
such provisions, specifications and descriptive words, not inconsistent with
the provision of this Indenture, as may be determined by the Company or as may
be required to comply with any law or with any rule or regulation made pursuant
thereto, or in order to comply with the rules and regulations of any stock
exchange upon which the Bonds are or to be listed or to conform with any usage
with respect thereto.
SECTION 2.04. Each Bond shall be signed in the name and on behalf of the
Company by its Managing General Partner. The signature of an officer of the
Managing General Partner may, if permitted by law, be in the form of a
facsimile signature and may be imprinted or otherwise reproduced on the Bonds.
In case any officer of the Managing General Partner of the Company who shall
have Signed, or whose facsimile signature shall be borne by, any of the Bonds
shall cease to be such officer of the Managing General Partner of the Company
before
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the Bonds so executed shall be actually authenticated and delivered by the
Corporate Trustee, such Bonds shall nevertheless bind the Company and may be
authenticated and delivered as though the person whose signature appears on
such Bonds had not ceased to be such officer of the Managing General Partner of
the Company.
SECTION 2.05. The Company shall keep or cause to be kept at the main
office of the Corporate Trustee books for the registration of transfer of Bonds
issued hereunder (herein sometimes referred to as the "Bond Register") and upon
presentation for such purpose at such office the Company will register or cause
to be registered the transfer therein, under such reasonable regulations as it
may prescribe, of such Bonds. The Corporate Trustee is hereby appointed "Bond
Registrar" for the purpose of registering Bonds and transfers of Bonds as
herein provided. The Company may appoint one or more "Bond Co-Registrars" for
such purpose as the Board of Directors may determine where Bonds may be
presented or surrendered for registration, registration of transfer or exchange
(which place or places may, but need not, be recited in the Bonds of the
relevant series) and such books, at all reasonable times, shall be open for
inspection by the Corporate Trustee.
SECTION 2.06. Whenever any Bond issue hereunder shall be surrendered to
the Company at an office or agency referred to in Section 6.06 hereof, for
registration of transfer or exchange, duly endorsed or accompanied by a proper
written instrument or instruments of assignment and transfer thereof or for
exchange in form satisfactory to the Company and the Corporate Trustee, or any
Bond Registrar or Bond Co-Registrar, duly executed by the Holder thereof or his
attorney duly authorized in writing, the Company shall execute, and the
Corporate Trustee shall authenticate and deliver, in exchange therefor, a Bond
or Bonds in the name of the designated transferee, as the case may require, of
the same series and with the same Stated Maturity and for a like aggregate
principal amount and of such authorized denomination or denominations as may be
requested. All Bonds issued upon any registration of transfer or exchange of
Bonds shall be the valid obligations of the Company, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Bonds
surrendered upon such registration of transfer or exchange.
The Company, at its option, may require the payment of a sum sufficient to
reimburse it for any stamp tax or other governmental charge or expense that may
be imposed in connection with any exchange or transfer of Bonds other than
exchanges pursuant to Section 2.07 or 19.05 not involving any transfer. No
service charge will be made for any such transaction.
The Company shall not be required to issue or to make registrations of
transfer or exchanges of Bonds for a period of 15 days next preceding the date
of any selection of Bonds to be redeemed. The Company shall not be required to
issue or to make registrations of transfer or exchanges of any Bonds which have
been selected for redemption in whole or in part, except in the case of any
Bond to be redeemed in part, for which the Company shall register transfers and
make exchanges of the portion thereof not so to be redeemed.
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Upon delivery by any Bond Co-Registrar of a Bond in exchange for a Bond
surrendered to it in accordance with the provisions of this Indenture, the Bond
so delivered shall, subject to the provisions of Section 2.10, for all purposes
of this Indenture be deemed -to be duly registered in the Bond Register;
provided, however, that in making any determination as to the identity of
persons who are Holders, the Trustees shall, subject to the provisions of
section 16.02, be fully protected in relying on the Bond Register kept at the
main office of the Corporate Trustee.
SECTION 2.07. Pending the preparation of definitive Bonds the Company may
execute and, upon Company Order, the Corporate Trustee shall authenticate and
deliver temporary Bonds which may be printed, lithographed, typewritten,
mimeographed or otherwise reproduced. Temporary Bonds shall be issuable in any
authorized denomination, and substantially of the tenor of the definitive Bonds
in lieu of which they are issued, but with such omissions, insertions and
variations as may be appropriate for temporary Bonds, all as may be determined
by the officers of the Company executing such Bonds as evidenced by their
execution of such Bonds. Every such temporary Bond shall be authenticated by
the Corporate Trustee upon the same conditions and in substantially the same
manner, and with the same effect, as the definitive Bonds. If temporary Bonds
are issued, without unreasonable delay, the Company will execute and deliver to
the Corporate Trustee definitive Bonds and thereupon any and all temporary
Bonds may be surrendered in exchange therefor, at the offices referred to in
Section 6.06, and the Corporate Trustee shall authenticate and deliver in
exchange for such temporary Bonds an equal aggregate principal amount of
definitive Bonds of authorized denominations. Such exchange shall be made by
the Company at its own expense and without any charge therefor. Until so
exchanged, the temporary Bonds shall in all respects be entitled to the same
benefits under this Indenture as definitive Bonds authenticated and delivered
hereunder.
SECTION 2.08. The Company, either Trustee or any agent of the Company or
either Trustee may deem and treat (A) the registered Holder of any temporary
Bond, and (B) the registered Holder of any definitive Bond, as the absolute
owner of such Bond in accordance with Section 13.01.
SECTION 2.09. In case any Bond shall become mutilated or be destroyed,
lost or stolen, then upon the satisfaction of the conditions hereinafter set
forth in this Section 2.09, the Company (i) shall, in the case of any mutilated
Bond, and (ii) shall, in the case of any destroyed, lost or stolen Bond, in the
absence of notice to the Company or the Corporate Trustee that such Bond has
been acquired by a bona fide purchaser, execute, and upon the written request
of the company, the Corporate trustee shall authenticate and deliver,
a new Bond (which may bear such notation as may be required by the rules of
any stock exchange upon which the Bonds are listed or are to be listed) of like
tenor, series, maturity and principal amount bearing a number not
contemporaneously outstanding, in exchange and substitution for and upon
surrender and cancellation of the mutilated Bond or in lieu of and substitution
for the Bond so destroyed, lost or stolen; provided, however, that if any such
mutilated, destroyed, lost or stolen Bond shall have become or shall be about
to become due and payable, or shall have been selected or called for
redemption, the Company may instead of issuing a substituted Bond, pay such
Bond without requiring the
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surrender thereof, except that such mutilated Bond shall be surrendered. The
applicant for such substituted Bond shall furnish to the Company and to the
Corporate Trustee evidence satisfactory to them, in their discretion, of the
ownership of and the destruction, loss or theft of such Bond and shall furnish
to the Company and to the Corporate Trustee and any Bond Registrar such
security or indemnity as may be required by them to save each of them harmless,
and, if required, shall reimburse the Company for all expenses (including any
tax or other governmental charge and the fees and expenses of the Corporate
Trustee) in connection with the preparation, authentication and delivery of
such substituted bond, and shall comply with such other reasonable regulations
as the Company, the Corporate Trustee, or either of them, may prescribe.
Every new Bond issued pursuant to this Section 2.09 in lieu of any
destroyed, lost or stolen Bond shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Bond shall be at any time enforceable by anyone, and shall be entitled
to all the benefits of this Indenture equally and proportionally with any and
all other Bonds duly issued hereunder.
The provisions of this Section 2.09 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 Bonds.
SECTION 2.10. Subject to the qualifications hereinbefore set forth, the
Bonds to be secured hereby shall be substantially of the tenor and effect set
forth in the recitals hereto, and no Bonds shall be secured hereby or entitled
to the benefit hereof, or shall be or become valid or obligatory for any
purpose unless there shall be endorsed thereon an authentication certificate,
substantially in the form set forth in the recitals hereto, executed by the
Corporate Trustee; and such certificate on any Bond issued by the Company shall
be conclusive evidence and the only competent evidence that it has been duly
authenticated and delivered hereunder.
SECTION 2.11. All Bonds surrendered for payment, redemption, transfer,
exchange or conversion shall, if surrendered to any person other than the
Corporate Trustee, be delivered to the Corporate Trustee and, if not already
cancelled, shall be promptly cancelled by it. The Company may at any time
deliver to the Corporate Trustee for cancellation any Bonds previously
authenticated and delivered hereunder, which the Company may have acquired in
any manner whatsoever, and all Bonds so delivered shall be promptly cancelled
by the Corporate Trustee. No Bonds shall be authenticated in lieu of or in
exchange for any Bonds cancelled as provided in this section 2.11, except as
expressly permitted by this Indenture. The Corporate Trustee shall deliver all
cancelled Bonds held by it to the Company at least annually.
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ARTICLE 3
THE 1989 BONDS
SECTION 3.01. The initial series of Bonds to be executed, authenticated
and delivered under and secured by this Indenture shall be the 1989 Bonds,
which shall have the following terms and provisions:
(A) The 1989 Bonds shall be designated as " % First Mortgage Bonds
due January 15, 2005" of the Company. The 1989 Bonds and the Corporate
Trustee's authentication certificate to be endorsed thereon shall be
substantially in the respective forms thereof set forth in the recitals
hereto. The 1989 Bonds shall be executed, authenticated and delivered in
accordance with the provisions of, and shall in all respects be subject to
all of the terms, conditions and covenants of, this Indenture.
(B) The aggregate principal amount of the 1989 Bonds which may be
executed by the Company and authenticated and delivered by the Corporate
Trustee hereunder shall be limited to $20,000,000 principal amount, except
as provided in Sections 2.06, 2.07, 2.09 and 8.05 hereof.
(C) The 1989 Bonds shall be dated the date of authentication thereof
by the Corporate Trustee; provided, however, that in the case of an
issuance under Section 5.01 hereof, such authentication date shall be the
date specified in a Company Order delivered to the Corporate Trustee
pursuant to Section 5.01 hereof. The Stated Maturity of the 1989 Bonds is
January 15, 2005. The 1989 Bonds shall bear interest annually at the rate
set forth in their titles, payable quarterly on January 15, April 15, July
15, and October 15 of each year, from the Interest Payment Date next
preceding the date of such Bond to which interest on the Bonds has been
paid (unless the date of such Bond is the date to which interest on the
Bonds has been paid, in which case from the date of such Bond), or, if no
interest has been paid on the Bonds since the Original Issue Date of such
Bond, from such Original Issue Date, until payment of the principal
thereof becomes due, and at the same rate per annum on any overdue
principal and (to the extent legally enforceable) on any overdue
installment of interest; and shall be payable as to principal and interest
at the main office of the Corporate Trustee and at such other office or
agency as provided in this Indenture.
(D) The definitive 1989 Bonds shall be fully registered bonds without
coupons in denominations of integral multiples of $1,000, bearing
appropriate serial numbers. Temporary 1989 Bonds may be issued in the same
denominations as hereinabove provided in respect of definitive 1989 Bonds
and shall be exchangeable as provided in Section 2.07 hereof.
(E) The 1989 Bonds are subject to redemption at the option of the
Company and in the manner and upon the notice hereinafter provided in
Article 8 hereof.
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(F) The 1989 Bonds may be presented by the Holder for payment prior
to maturity, and the Company will redeem the same, subject to the terms
and conditions hereinafter provided in Article 9 hereof.
ARTICLE 4
GENERAL PROVISIONS AS TO ISSUE OF BONDS
SECTION 4.01. The aggregate principal amount of Bonds which may be
executed by the Company and authenticated and delivered by the Corporate
Trustee and secured by the Lien of this Indenture and Outstanding at any one
time is limited as herein provided in Articles 3, 5 and 6 hereof. This
Indenture shall be and constitute a continuing lien to secure the full and
final payment of the principal of and the premium, if any, and the interest on
all Bonds which may, from time to time, be executed, authenticated and
delivered hereunder. Subject to the terms with respect to any purchase or
sinking fund or analogous provisions for any particular series of Bonds, all
Bonds issued hereunder shall in all respects be equally and ratably secured
hereby without preference, priority or distinction, as to lien or otherwise, on
account of the actual time or times of the authentication and delivery or
maturity of the Bonds, or any of them, so that all Bonds at any time
Outstanding hereunder shall have the same right, lien and preference under and
by virtue of this Indenture, and shall all be equally and ratably secured
hereby, with like effect as if they had all been executed, authenticated and
delivered simultaneously on the date hereof, whether the same or any of them
shall actually be sold or disposed of at such date, or whether they, or any of
them, shall be sold or disposed of at some future date, or whether they, or any
of them, shall have been authorized to be authenticated and delivered under
Section 5.01 hereof, or may be authorized to be authenticated and delivered
hereafter pursuant to other provisions of this Indenture.
SECTION 4.02. Nothing contained in this Indenture shall limit the power of
the Board of Directors of the Company to fix the price at which the Bonds
authenticated and delivered under any of the provisions of this Indenture may
be issued, exchanged, sold or disposed of, but any or all of said Bonds may be
issued, exchanged, sold or disposed of upon such terms and for such
considerations as the Board of Directors of the Company may deem appropriate.
SECTION 4.03. Registered Bonds, without coupons, in addition to the
$20,000,000 aggregate principal amount of the 1989 Bonds, and of one or more
series, may from time to time be issued under this Indenture subject to the
limitation that the aggregate principal amount of Bonds Outstanding at any time
under this Indenture, shall not exceed 40,000,000.
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ARTICLE 5
ISSUANCE OF BONDS AND APPLICATION OF DEPOSITED CASH
SECTION 5.01. Bonds may from time to time be executed by the Company and
delivered to the Corporate Trustee with an Application for Authentication
pursuant to this Section 5.01. The Corporate Trustee shall thereupon
authenticate and deliver to the Company such amount of Bonds as may be
specified in said Application upon simultaneous receipt by the Corporate
Trustee of (A) an amount equal to the proceeds from the sale of such Bonds
(after deduction of all fees and expenses, including underwriting discounts,
commissions and fees, payable by the Company and incurred in connection with
the offer, sale and/or placement of such Bonds), as received by the Company
from time to time, less any amount in respect of accrued interest on such
Bonds, payable to the order of the corporate Trustee to be held in trust under
this Indenture, which amount shall be specified in said Application, and (B)
delivery of the documents specified in Section 5.02. The funds so delivered to
the Corporate Trustee shall be held as Deposited Cash and retained by the
Trustees as part of the Mortgaged and Pledged Property.
The Corporate Trustee shall hold Deposited Cash or any portion thereof as
provided in this Article 5. In the event that Deposited Cash or any portion
thereof deposited with the Corporate Trustee which is permitted to be withdrawn
pursuant to Section 5.03 is not so withdrawn for any reason, the Company by
Company Order may instruct the Corporate Trustee to apply such unwithdrawn
Deposited Cash, or any portion thereof, to the redemption of Bonds to the
extent Bonds are redeemable.
SECTION 5.02. Whenever requesting the authentication and delivery of Bonds
under Section 5.01 the Company shall file with the Corporate Trustee:
(A) A Certified Resolution of the Board of Directors of the Company
authorizing the execution and requesting the authentication and delivery
of the Bonds applied for in the principal amount therein specified,
authorizing and designating such Bonds and specifying the officer or
officers of the Company to whom or upon whose order such Bonds shall be
delivered;
(B) An Opinion of Counsel stating that:
(l) No order, authorization, consent, approval of or
registration with any courts, administrative agencies, commissions or
other public or governmental authority is necessary in connection
with the issuance of such Bonds and the execution and delivery of the
supplemental indenture pertaining thereto, if any, except:
(a) such which shall have been obtained under the
Securities Act of 1933, as amended and the Trust Indenture Act;
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(b) such as may be required under the securities or blue
sky laws of any jurisdiction in connection with the purchase and
distribution of the Bonds by the underwriters of the Bonds; and
(c) such as may be required by healthcare authorities in
connection with encumbering the Mortgaged and Pledged Property
with the Lien of this Indenture,
all of which are sufficient for said purposes and are valid and in
full force and effect (subject to the matters set forth in
Section 20.04(E)) and shall be evidenced by an appropriate writing of
such authority, a copy of which shall accompany such Opinion of Counsel;
(2) The issuance of such Bonds and the execution and delivery of this
Indenture or any supplemental indenture pertaining thereto, if any, have
been duly authorized by all requisite legal and partnership action
(including any required limited partner authorization) on the part of the
Company and are authorized by this Indenture;
(3) The supplemental indenture has been duly executed, acknowledged
and delivered by the Company to the Corporate Trustee and is a valid and
binding legal obligation of the Company enforceable in accordance with all
of its terms (subject to the matters set forth in Section 20.04(E));
(4) The instruments delivered to the Corporate Trustee conform to the
requirements of this Indenture; and
(5) Such Bonds when issued will constitute a valid, binding and legal
obligation of the Company and will be secured by this Indenture (subject
to the matters set forth in Section 20.04(E));
(C) An Officers' Certificate (l) setting forth the amount referred to in
Section 5.01; (2) stating that no Default or Event of Default hereunder has
occurred and is continuing; (3) stating that the conditions specified in this
Article 5 have been complied with, and, if given in connection with a request
for authentication of Bonds authorized under Section 4.03 hereof, that the
conditions specified in Section 4.03 have been complied with; and
(D) Such other instruments (including, without limitation, any Opinion of
Counsel) as the Corporate Trustee may have reasonably requested.
SECTION 5.03. The corporate trustee from time to time shall pay to the
Company with respect to the Mortgaged and Pledged Property subject or to be
subject (as provided herein) to the Lien of this Indenture Deposited Cash in an
amount equal to the Bondable Amount (as set forth in the officers' certificate
as hereinafter provided) of the Mortgaged and Pledged Property. For purposes of
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this Section 5.03, Deposited Cash shall include securities held by the
Corporate Trustee in lieu of Deposited Cash pursuant to Section 20.02 of this
Indenture. Payment of such Deposited Cash shall be made by the Corporate
Trustee upon receipt of:
(A) An Application specifying the amount and the place of payment of
the Deposited Cash;
(B) An Officers' Certificate certifying as follows with respect to
the Mortgaged and Pledged Property as to which Deposited Cash is being
withdrawn:
(1) A description of such Mortgaged and Pledged Property,
including a metes and bounds description of the parcel or parcels of
land underlying such Mortgaged and Pledged Property;
(2) That construction of such Mortgaged and Pledged Property has
been fully completed (and if construction has been completed within
six months or after the date such property became a Mortgaged and
Pledged Property or if the property has been acquired in an arm's
length transaction within six months, a statement to that effect);
(3) A description of the owner of such Mortgaged and Pledged
Property, the owner of which shall be either (i) the Company, or (ii)
an Operating Subsidiary, or (iii) the Company or an Operating
Subsidiary together with a lessor;
(4) The Fair Value (if required pursuant to the terms of this
Indenture), the Capitalized Cost (if applicable) and, except as
provided in Section 10.03 hereof, the Bondable Amount of the
Mortgaged and Pledged Property (including, with respect to such
Bondable Amount, a brief description of the computation thereof
showing that such Bondable Amount was computed in accordance with the
definition of said term in Article 1 hereof), and certifying that no
portion of the Fair Value, the Capitalized Cost or the Bondable
Amount of the Mortgaged and Pledged Property so specified was
previously specified in any Application of the Company delivered to
the Corporate Trustee pursuant to this Section 5.03 unless such
property was released pursuant to Article 10 hereof prior to the date
of such Officers' Certificate;
(5) Whether the Mortgaged and Pledged Property has previously
been subjected to the Lien of this Indenture;
(6) That, to the best knowledge of the Company's officers, there
are no liens or encumbrances on the property other than Permitted
Encumbrances;
(7) That all authorizations, consents, approvals or licenses of
any Federal, state or local governmental or regulatory authority,
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including any health care agency, required in connection with the
acquisition, construction, equipping and operation of the Mortgaged
and Pledged Property have been obtained;
(8) That, to the best knowledge of the Company's officers, no
event has occurred and is continuing which would cause the actual
fair market value Of the Mortgaged and Pledged Property to be
materially less than the Fair Value upon which the Bondable Amount
set forth in Section 5.03(B)(4) was based;
(9) That no Default or Event of Default has occurred and is
continuing; and
(10) That, to the best knowledge of the Company's officers, the
Mortgaged and Pledged Property has not been used by the Company or
any other Person at any time to handle, treat, store or dispose of
any hazardous or toxic waste or substance, and is not contaminated
with any hazardous or toxic waste, pollutants or other substances,
which use or contamination may give rise to a clean-up and/or
remediation obligation under any federal, state or local law, rule,
regulation or ordinance;
(C) One or more standard ALTA mortgage title insurance policies,
issued by an insurer satisfactory to the Corporate Trustee, in an amount equal
in the aggregate to 100% of the Bondable Amount of the Mortgaged and Pledged
Property then subject to the Lien of this Indenture, naming the Corporate
Trustee as the insured, insuring fee simple title in the Company to the real
property on which the Mortgaged and Pledged Property is located, containing no
exceptions other than Permitted Encumbrances and with the survey exceptions
removed;
(D) Copies of all such documents referred to in subdivision (B)(7) of
this Section 5.03;
(E) In the case of Mortgaged and Pledged Property that becomes
subject to the Lien of this Indenture pursuant to Article 10 hereof, an Opinion
of Counsel that:
(1) Such Mortgaged and Pledged Property is subject to the Lien
of this Indenture or will become subject to such Lien upon the
delivery and recording or filing of a supplemental indenture or
instruments of further assurance, if any, as are specified in said
Opinion of Counsel, as security for all the Bonds, subject to no
lien, security interest or other encumbrance thereon, other than
those set forth in the mortgage title insurance policy described in
subdivision (C) of this Section 5.03 and the matters described in
subdivision (G) Of the definition of permitted encumbrances, and such
opinion of counsel shall also state that such supplemental indenture
or other instruments of further assurance are sufficient to permit
the Trustees to exercise their rights and remedies under Article 10
of this Indenture (except to the extent limited by laws
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affecting creditors' rights generally and except for matters
permitted by Section 20.04(E));
(2) This Indenture, including the supplemental indenture and
other instruments Of further assurance, if any, referred to in
subdivision (F) of this Section 5.03 have been duly filed or recorded
in all places necessary to Grant to the Trustees for the equal and
ratable benefit of all of the holders of the Bonds a first lien on
such Mortgaged and Pledged Property, subject only to liens, security
interests and other encumbrances set forth in the mortgage title
insurance policy described in subdivision (C) of this Section 5.03
and the matters described in subdivision (G) of the definition of
Permitted Encumbrances;
(F) A supplemental indenture, UCC-1 financing statements and/or UCC-3
financing statements and all instruments of further assurance, if any, as
in the Opinion of Counsel furnished pursuant to subdivision (E) of this
Section 5.03, may be specified as necessary or advisable to subject to the
Lien of this Indenture such Mortgaged and Pledged Property;
(G) With respect to any Mortgaged and Pledged Property upon which the
Company or an Operating Subsidiary has constructed additional beds within
six (6) months prior to the date such property is to become a Mortgaged
and Pledged Property, an architect's certificate, including the statements
provided in Section 20.04, if and to the extent required by the provisions
thereof, stating that the Mortgaged and Pledged Property, to the extent
completed, is substantially in accordance with the plans and
specifications relating thereto;
(H) Such affidavits and indemnities as may be required by the title
insurance company to delete all standard exceptions, other than any
environmental exception; and
(I) Such other instruments (including without limitation, any Opinion
of Counsel or environmental audit of the Mortgaged and Pledged Property)
as the Trustees may have reasonably requested.
The foregoing documents furnished pursuant to this Section 5.03 shall
constitute full authority to the Trustees for the payment of Deposited Cash to
the Company pursuant to this Section 5.03, and the Trustees in so doing shall
not be liable to the Company or to any of the Bondholders.
ARTICLE 6
PARTICULAR COVENANTS OF THE COMPANY
Anything in this Indenture or in any Bond to the contrary notwithstanding,
the Company, expressly for the equal and ratable benefit of the original and
future holders of the Bonds, represents and warrants the truth and correctness
of the information set forth in the Preliminary Statement, and covenants and
agrees as follows:
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SECTION 6.01. The Company will do or cause to be done all things necessary
to preserve and keep in full effect the existence, franchises, rights and
privileges as a limited partnership in good standing of the Company and each
operating Subsidiary, respectively, under the laws of its jurisdiction of
organization, and will do or cause to be done all things necessary to obtain,
preserve and keep in full effect the qualification of the Company and each
operating Subsidiary, respectively, as a foreign partnership to do business and
in good standing in each jurisdiction (other than the jurisdiction of its
organization) wherein the character of its assets or the nature of its business
makes such qualification necessary and in which any such failure to so qualify
would have a material adverse effect on the business or operations of the
Company and its Subsidiaries taken as a whole; provided, however, that, the
Company may sell any Subsidiary and any Subsidiary may be dissolved, merged
into or consolidated with or its assets transferred to, the Company or another
subsidiary, and except as further provided in Article 15 hereof. The Company
will comply with, or cause to be complied with, all requirements of each
instrument and all legal requirements, which are applicable to the Company, any
Subsidiary, the property of the Company or any Subsidiary, the Trust Estate or
any portion thereof.
SECTION 6.02. The Company has full power and lawful authority to Grant (or
cause to be Granted) the property described in the Granting Clauses of this
Indenture to the Trustees, and warrant that such property is free and clear of
all liens, charges and other encumbrances other than Permitted Encumbrances.
The Company and each Operating Subsidiary which is at the time an owner of any
Mortgaged and Pledged Property will have full power and lawful authority to
Grant the property Granted by it to the Trustees at the time of taking such
action. The Company will at all times protect or cause to be protected the
title to the Trust Estate, and will forever warrant and defend the same and the
rights of the Trustees therein and thereto against the claims and demands of
all persons, and will maintain the Lien of this Indenture so long as any Bond
remains outstanding.
SECTION 6.03. The Company will, at its expense and from time to time, and
will cause any Operating Subsidiary to, execute and deliver any and all such
instruments of further assurance and other instruments, and do any and all such
acts, or cause the same to be done, as the Trustees shall deem necessary or
advisable to better Grant and confirm to the Trustees the Trust Estate or to
carry out more effectively the purposes of this Indenture.
SECTION 6.04. The Company will punctually pay, or cause to be paid, the
principal, premium, if any, and interest to become due in respect of the Bonds
Outstanding according to the provisions hereof and thereof, and will not claim
any credit on the Bonds Outstanding or make any deduction from the payments
thereon by reason of the payment of any taxes levied at any time or from time
to time upon the Trust Estate or any portion thereof.
SECTION 6.05. The Company covenants and agrees that, except as otherwise
provided herein, this Indenture is and always will be kept a first lien upon
all of the Mortgaged and Pledged Property subject only to Permitted
encumbrances, and that it will not create, or suffer to be created or to arise,
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or allow to exist any other lien or charge {other than Permitted Encumbrances)
having priority to, preference over or parity with the Lien of this Indenture
upon the Mortgaged and Pledged Property, or any part thereof, or upon the
income therefrom. The Company will pay and discharge, or cause to be paid and
discharged, before they become delinquent, (i) all taxes (including income,
franchise and gross receipts taxes), assessments and other governmental and
similar charges levied upon or assessed against it, the Trustees as such, the
Trust Estate or any portion thereof, any other property of the Company or any
operating Subsidiary or any income therefrom, or the interest of the Trustees
in any thereof; and (ii) all claims for labor and supplies, which, if unpaid,
might by law become a lien upon any of the Mortgaged and Pledged Property.
Notwithstanding the foregoing, nothing in this Section 6.05 shall require the
payment or discharge of any such tax, assessment, charge or claim so long as
the Company or such Operating Subsidiary shall in good faith contest the
amount, the applicability or validity thereof by proper Proceedings which shall
operate, during the continuance thereof, to prevent the collection thereof and
the sale or forfeiture of such property to satisfy the same.
SECTION 6.06. (A) The Company will maintain an office or agency in the
place of payment where Bonds may be presented or surrendered for payment, where
Bonds may be surrendered for registration of transfer or exchange and where
notices and demands to or upon the Company in respect of the Bonds and this
Indenture may be served. The Company will give prompt written notice to the
Trustees of the location, and of any change in the location, of such office or
agency. If at any time the Company shall fail to maintain such office or agency
or shall fail to furnish the Trustees with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
main office of the Corporate Trustee, and the Company hereby appoints the
Corporate Trustee its agent to receive all such presentations, surrenders,
notices and demands.
The Company may also from time to time designate one or more other offices
or agencies where the Bonds may be presented or surrendered for any or all of
the purposes specified above in this Section 6.06(A) and may from time to time
rescind such designations, as the Company may deem desirable or expedient;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in each
place of payment for such purposes. The Company will give prompt written notice
to the Corporate Trustee of any such designation and any change in the location
of any such other office or agency.
(B) The Company hereby appoints the Corporate Trustee as paying agent and
the Company covenants that, if it shall appoint a paying agent other than the
Corporate Trustee, it will cause such paying agent to execute and deliver to
the Corporate Trustee an instrument in which such paying agent shall agree with
the Corporate Trustee, subject to the provisions of this Section 6.06,
(1) that such paying agent shall hold all sums held by it as such
agent for the payment of the principal of and the premium, if any, or the
interest on any of the Bonds in trust for the benefit of the holders of
such Bonds or the Trustees;
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(2) that such paying agent shall give the Corporate Trustee notice of
any Default of the Company in making any payment of the principal of and
the premium, if any, or the interest on the Bonds when the same shall be
due and payable; and
(3) at any time during the continuance of any such Default, upon the
written request of the Corporate Trustee, forthwith to pay to the
Corporate Trustee all sums so held in trust by such paying agent.
(C) The Company covenants and agrees that, if it should at any time act as
its own paying agent, it will, on or before each due date of the principal of
and the premium if any, or the interest on the Bonds set aside and segregate
and hold in trust for the benefit of the holders of the Bonds a sum sufficient
to pay such principal and premium, if any, or interest so becoming due until
such sums shall be paid to such holders or otherwise disposed of as herein
provided and will notify the Corporate Trustee of its action or of any failure
to take such action.
Whenever the Company shall have one or more paying agents, it will, prior
to each due date of the principal of, and premium, if any, or interest on, any
Bonds, deposit with one or more paying agents a sum sufficient to pay the
principal, and premium, if any, or interest, so becoming due, such sum to be
held in trust for the benefit of the Holders of Bonds entitled to such
principal, premium or interest, and (unless such paying agent is the Corporate
Trustee) the Company will promptly notify the Corporate Trustee of its action
or failure so to act.
(D) Anything in Section 6.06 to the contrary notwithstanding, the Company
may at any time, for the purposes of obtaining the satisfaction and discharge
of this Indenture or for any other reason, pay, or by Company Order direct any
paying agent to pay, to the Corporate Trustee all sums held in trust by the
Company or any paying agent as required by this Section 6.06, such sums to be
held by the Corporate Trustee upon the trusts contained in this Indenture. Upon
such payment by any paying agent to the Corporate Trustee, such paying agent
shall be released from all further liability with respect to such money.
(E) Anything in this Section 6.06 to the contrary notwithstanding, the
holding of sums in trust as provided in this Section 6.06 is subject to the
provision of Section 20.03 hereof.
SECTION 6.07. The Company will pay or cause to be paid all Debt of the
Company and of each Subsidiary (but, in the case of Debt of a Subsidiary on
which the Company is not liable, the Company shall be obligated so to do only
to the extent that such Subsidiary's assets shall be sufficient for the
purpose), as and when same shall become due and payable, and will observe,
perform and discharge in accordance with their terms all of the covenants,
conditions and obligations which are imposed on it by any and all mortgages,
indentures and Other agreements evidencing or securing Debt of the Company or
pursuant to which such Debt is issued, so as to prevent the occurrence of any
act or omission which is a default thereunder, and which remains uncured or is
not waived for a
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period of 30 days. The Company will notify the Corporate Trustee of any breach
Of the covenants contained in this Section 6.07 within ten days after the
Company has knowledge of such breach.
SECTION 6.08. As long as there are any Bonds Outstanding, the Company Will
not, and will not permit any Operating Subsidiary to:
(A) Create, assume, incur or suffer to be created, assumed or incurred or
to exist any mortgage, pledge, lien, charge or other encumbrance (other than
Permitted Encumbrances) upon the Trust Estate, except the Lien of this
Indenture; or
(B) Except after compliance with the provisions of Article 15 hereof,
merge or consolidate into or with any other person, or sell, transfer, lease or
otherwise dispose of (l) all or substantially all of its properties or (2) any
Mortgaged and Pledged Property subject to the Lien of this Indenture.
So long as there are any Bonds Outstanding, except as permitted pursuant
to the provisions of Article 15, the Company further covenants that it will not
permit any Operating Subsidiary to issue or otherwise dispose of 50% or more of
the outstanding shares of its capital stock to any person other than the
Company, unless the Company shall continue to manage the operations conducted
on the Mortgaged and Pledged Property by such Operating Subsidiary after any
such issuance or disposition of such shares of capital stock.
SECTION 6.09. The Company covenants that it will, and will cause each of
its Operating Subsidiaries to, at all times keep, maintain and preserve all the
property of the Company and of each such Subsidiary in good repair, working
order and condition, reasonable wear and tear excepted, and from time to time
make all needful and proper repairs, renewals, replacements, betterments and
improvements thereto, so that the business carried on in connection therewith
may be properly and advantageously conducted at all times.
SECTION 6.10. As long as there are any Bonds Outstanding, the Company, at
all times will, and will cause each Operating Subsidiary, to:
(A) Keep all of its Mortgaged and Pledged Property subject to the Lien Of
the Indenture insured against loss or damage by fire, lightning, windstorm,
explosion, aircraft, vehicle and smoke damage in amounts sufficient to prevent
the Company or such Subsidiary, as the case may be, from becoming a coinsurer
within the terms of the policies in question, and in any event in amounts not
less than the lesser of (i) 80% of the then full insurable value thereof or
(ii) the principal amount of the Bonds outstanding at any time;
(B) Maintain public liability and other insurance in such amounts and
against such risks and claims as are usually carried by persons operating
businesses and properties of the character at the time owned or operated by the
Company or such Subsidiary, as the case may be, including, without limitation,
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insurance against claims for malpractice, personal injury, death or property
damage suffered by others upon or in or about any premises occupied by it or
occurring as a result of its maintenance or operation of any automobiles,
trucks or other vehicles, except that the Company or a Subsidiary, as the case
may be, may itself carry the risk of such claims if the Company or such
Subsidiary shall maintain adequate reserves therefor in accordance with sound
actuarial or insurance principles or practices;
(C) Maintain all such worker's compensation or similar insurance (or
self-insurance, if permitted by law) as may be required under the laws of any
jurisdiction in which it may be engaged in business; and
(D) Keep all of its insurable properties adequately insured against all
other risks usually insured against by persons operating businesses and
properties of the character at the time owned or operated by the Company or
such Subsidiary, as the case may be.
All such insurance shall be effected with reputable and responsible
insurers of recognized national standing. All policies of such insurance on
the Mortgaged and Pledged Property subject to the Lien of this Indenture shall
be made payable to (without contribution by) the Trustees as their interests
may appear, under a standard mortgagee clause or other similar clause
acceptable to the Trustees, except that the loss payable clause may provide
that all amounts payable, as long as no Event of Default shall have occurred or
be continuing under this Indenture, as to any particular loss to the Mortgaged
and Pledged Property, if the aggregate amount to be paid in respect of such
loss is less than $500,000 shall be paid to the Company. The Company will cause
all proceeds of any insurance on the Mortgaged and Pledged Property which is
payable to such owner as aforesaid to be applied as promptly as practicable to
the repair or rebuilding of the buildings and improvements on the Mortgaged and
Pledged Property.
The insurer shall be entitled to assume conclusively that no such Event of
Default has occurred or is continuing if such insurer has not been notified in
writing by the Company or Corporate Trustee of the existence of such an Event
of Default. Each policy of insurance provided for in this Section 6.10 or
certificate therefore shall contain an agreement by the insurer that such
policy shall not be cancelled, materially altered or reduced in amount without
at least ten days' prior written notice to the Company and the Trustees, as
well as the of the Mortgaged and Pledged Property, if other than the Company.
Within 30 days after the obtaining of any of the aforesaid insurance on the
Mortgaged and Pledged Property, the Company will file with the Corporate
Trustee an Officers' Certificate containing a list of the insurance in force
upon the Mortgaged and Pledged Property, the names of the insurers with which
the policy or policies of insurance on the Mortgaged and Pledged Property are
carried, the numbers, amounts and expiration dates of such policies, and the
properties and hazards covered thereby, and stating that the insurance so
listed complies with this Section 6.10, and annually thereafter, within 120
days after the end of each fiscal year, commencing with the fiscal year ending
December 31, 1989, the Company will file with the Corporate Trustee an
Officers' Certificate as aforesaid, containing all such information as to the
Mortgaged and Pledged
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Property. The Trustees shall be entitled to rely upon such Officers' certificate
as satisfactory evidence of compliance by the Company with this Section 6.10.
All proceeds of insurance received by the Trustees under this Section
6.10, at the option of the Company, as set forth in a Company Order, shall be
applied to the restoration or repair of any of the buildings and improvements on
the Property in respect of which such proceeds of insurance have been paid to
the Trustees or shall be considered Deposited Cash which shall be paid out or
applied by the Corporate Trustee at any time or from time to time pursuant to
the provisions of Article 5. If such proceeds are to be applied other than as
Deposited Cash, the Company or an Operating Subsidiary shall proceed promptly to
repair, rebuild or restore the property damaged or destroyed, with such changes,
alterations and modifications as may be desired by the Company or such Operating
Subsidiary and the Corporate Trustee shall pay to the Company or such Operating
Subsidiary, as the case may be, upon the delivery, from time to time, of an
Officers' Certificate setting forth the costs theretofore incurred or paid, so
much as may be necessary of the proceeds of such insurance to pay the costs of
such repair, rebuilding or restoration, either on completion thereof or as the
work progresses. In the event said proceeds are not sufficient to pay in full
the costs of such repair, rebuilding or restoration, the Company will
nonetheless complete or cause to be completed the work thereof and will pay or
cause to be paid the portion of the costs thereof in excess of the amount of
said insurance proceeds.
In case of any loss in respect of any part of the Mortgaged and Pledged
Property covered by any policy or other contract of insurance, the Company or an
Operating Subsidiary shall have the exclusive right to seek any adjustment or
settlement, and any adjustment or settlement of such loss which shall be agreed
upon between the Company or an Operating Subsidiary and any insurer shall be
evidenced by an Officers' Certificate furnished to the Corporate Trustee.
SECTION 6.11. The Company will, at its expense, but subject to the
direction and control of the Corporate Trustee, take such action, or upon the
Corporate Trustee's request furnish the Corporate Trustee with funds sufficient
to enable the Trustees to take such action at the Company's expense, as the
Corporate Trustee may deem necessary or advisable for enforcing payment by any
and all persons of any moneys payable under or pursuant to the Trust Estate or
any instrument included therein.
SECTION 6.12. (A) The Company will promptly or will promptly cause each
instrument with respect to the Trust Estate including, without limitation, this
Indenture' any supplemental indenture, financing statements, continuation
statements or other instruments with respect to any thereof or the property
intended to be subject to any thereof or subject to the Lien of this Indenture,
to be filed, registered or recorded (and, when and if necessary, to be re-filed,
re-registered or re-recorded) in such manner and in such places as may be
required by any present or future law in order to, as the case may be, create or
protect the valid and enforceable first lien hereof and thereof, if any, upon
the property subject hereto or thereto or intended to be subject hereto or
thereto or to protect the validity hereof or thereof or to publish notice hereof
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or thereof or to entitle the Bondholders, directly or indirectly, to the
benefits and security intended to be provided hereby or thereby, or to protect
and maintain the estate, right, title, interest, claim and demand of the
Trustees in, to and under the Trust Estate.
(B) The Company will pay, or cause to be paid, all taxes and fees
incident to each filing, registration, recording, re-filing, re-registration and
re-recording required by this Indenture or any supplemental indentures, all
federal or state stamp taxes and all other taxes, duties, imposts, assessments
and charges and all other expenses arising out of or incident to the issuance of
the Bonds and the preparation, execution and delivery of the instruments
referred to in Section 6.12(A).
(C) The Company covenants and agrees that it will furnish to the
Corporate Trustee promptly after the execution and delivery of this Indenture,
of each supplemental indenture, of each Mortgage, and each other instrument
purporting to create and perfect a valid and enforceable first lien upon any of
the Mortgaged and Pledged Property, an Opinion of Counsel either stating that in
the opinion of such counsel this Indenture, such supplemental indenture, such
Mortgage or such other instrument has been properly recorded and filed so as to
make effective the lien intended to be created thereby, subject only to the
liens, security interests and encumbrances set forth in the mortgage title
insurance policy described in Section 5.03(C) and issued with respect to such
Mortgaged and Pledged Property and the matters described in subdivision (G) of
the definition of Permitted Encumbrances, and reciting the details of such
action, or stating that in the opinion or such counsel no such action is
necessary to make such Lien effective.
(D) Within the 120 days after the end of each fiscal year of the
Company commencing with the fiscal year ending December 31, 1989 while there are
any Bonds Outstanding, the Company will furnish to the Corporate Trustee a
favorable Opinion of Counsel either stating that in the opinion of such counsel
such action has been taken with respect to the recording, filing, re-recording
and re-filing of this Indenture, such supplemental indenture, such Mortgage or
such other instrument as is necessary to maintain the Lien of this Indenture,
and reciting the details of such action, or stating that in the opinion of such
counsel no such action is necessary to maintain such Lien. If this Indenture,
any supplemental indenture, any Mortgage and any other instrument purporting to
create and perfect the Lien of this Indenture have been filed, registered,
recorded, re-filed, re-registered or re-recorded during the preceding 12
calendar months, such opinion shall also state that each such instrument creates
and/or maintains a valid and enforceable first lien on the property, subject
only to Permitted Encumbrances.
SECTION 6.13. The Company will maintain an office of the Company, which
shall be and remain the principal place of business of the Company, in
Murfreesboro, Tennessee and shall keep its records concerning the Trust Estate
at such office; provided, however, that upon at least 30 days' prior written
notice to the corporate trustee, the Company may move such office and records TO
any other address as set forth in such notice.
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SECTION 6.14. The Company will (i) keep proper records and books of
account in accordance with generally accepted accounting principles consistently
applied, reflecting all financial transactions of the Company and each
Subsidiary, and (ii) permit or cause to permit the Trustee, personally or by its
agents, accountants and attorneys, to visit or inspect any of the properties,
examine the records and books of account and discuss the affairs, finances and
accounts, of the Company and each Subsidiary, with the officers of the Company
and Subsidiaries at such reasonable times as may be requested by the Trustees.
The Trustees shall be under no duty to make any such visit, inspection or
examination.
The Company covenants that books of record and account will be kept in
which full, true and correct entries will be made of all dealings or
transactions of, or in relation to, the properties, business and affairs of the
Company.
SECTION 6.15. The Company will file with the Corporate Trustee, within
120 days after the end of each fiscal year of the Company commencing with the
fiscal year ending December 31, 1989, an Officers' Certificate stating, as to
each signer thereof, that:
(1) a review of the activities of the Company during such year
and of performance under this Indenture has been made under his supervision; and
(2) to the best of his knowledge, based on such review, the
Company has fulfilled all of its obligations under this Indenture throughout
such year, or, if there has been a Default in the fulfillment of any such
obligation, specifying each such Default known to him and the nature and status
thereof.
SECTION 6.16. The Company covenants that it will file with the
Corporate Trustee, within 120 days after the end of each fiscal year commencing
with the fiscal year ending December 31, 1989, a letter or statement of the
independent certified public accountants who shall have certified the
consolidated financial statements of the Company for its preceding fiscal year
in connection with the annual report of the Company to its limited partners for
such year to the effect that in making the examination necessary for
certification of such financial statements, they have obtained no knowledge of
any Default by the Company in the performance or fulfillment of any covenant,
agreement or condition contained in this Indenture during such year or, if they
shall have obtained knowledge of any such Default, specifying in such letter or
statement such Default and the nature and status thereof, it being understood
that such accountants shall not be liable directly or indirectly for failure to
obtain knowledge of any such Default; provided, however, that until the
occurrence of a Fundamental Structural Change, such letter or statement may be
executed and delivered by the chief financial officer of the Company.
SECTION 6.17. The Company covenants that it will not issue, or permit
to be issued, any Bonds hereunder in any manner other than in accordance with
the provisions of this Indenture and that it will faithfully observe and perform
all the conditions, covenants and requirements of this Indenture and of the
Bonds issued hereunder.
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SECTION 6.18. The Company will, and will cause each Operating
Subsidiary to (i) cause each lessor of any property constituting, or intended to
constitute, part of the Trust Estate (other than immaterial personal property
leases) to execute any and all instruments necessary to subordinate such
lessor's interest in such property (and in the related lease or lease agreement)
to the Lien of this Indenture, (ii) observe and perform all of its obligations,
and pay and discharge all sums payable by it, under or by virtue of any such
lease or agreement constituting the Mortgaged and Pledged Property (other than
immaterial personal property leases) and (iii) not suffer or permit any default
for which such lease or agreement (other than immaterial personal property
leases) may be terminated, so that, subject to the provisions of Articles 10 and
15 hereof, the rights under such lease or agreement (other than immaterial
personal property leases) constituting part of the Mortgaged and Pledged
Property shall be preserved unimpaired as security for the Bonds hereby secured.
Nothing in this Section 6.18 shall require the Company or a Subsidiary
to make any such payments or to observe any such obligations so long as in good
faith the validity or amount of such payments or the duty to observe any such
obligations shall be contested and the Company or a Subsidiary is not
dispossessed, or if non-payment or failure to observe such obligations is not
prejudicial in any material respect to the Bondholders by reason of the
indemnification bond, guarantee or insurance of a person other than the Company
or a Subsidiary payable to or in favor of the Trustees.
SECTION 6.19. The Company and each Operating Subsidiary (i) will
refrain from handling, treating, storing, using, discharging, releasing,
spilling or disposing of any Hazardous Substances on any of the Mortgaged and
Pledged Property; and (ii) will conduct its or their operations on the Mortgaged
and Pledged Property at all times in compliance with all federal, state and
local statutes, rules, regulations, ordinances, permits, licenses,
authorizations and administrative or judicial orders relating to the generation,
recycling, reuse, sale, storage, handling, transport and disposal of any
Hazardous Substances.
ARTICLE 7.
BONDHOLDER LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEES
SECTION 7.01. (A) The Company will furnish or cause to be furnished to
the Corporate Trustee, quarterly, not more than 15 days after each Regular
Record Date a list, in such form as the Corporate Trustee may reasonably
require, of the names and addresses of the holders of Bonds as of such Regular
Record Date, and at such other times, as the Corporate Trustee may request in
writing, within 30 days after receipt by the Company of any such request, a list
Of similar form and content as of a date not more than 15 days prior to the time
such list is furnished; provided, however, that so long as the corporate trustee
is the sole Bond Registrar, no such list shall be required to be furnished.
(B) The Corporate Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of the holders of Bonds received
by the Corporate Trustee in its capacity as Bond Registrar contained in the most
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recent list furnished to it as provided in subdivision (A) of this Section 7.01.
The Corporate Trustee may destroy any list furnished to it as provided in
subdivision (A) of this Section 7.01, upon receipt of a new list so furnished.
(C) In case three or more holders of Bonds (hereinafter called
"Applicants") apply in writing to the Corporate Trustee, and furnish to the
Corporate Trustee reasonable proof that each such Applicant has owned a Bond for
a period of at least six months preceding the date of such application, and such
application states that the Applicants desire to communicate with other holders
of Bonds with respect to their rights under this Indenture or under the Bonds,
and is accompanied by a copy of the form of proxy or other communication which
such Applicants propose to transmit, then the Corporate Trustee shall, within
five business days after the receipt of such application, at its election,
either
(1) afford to such Applicants access to the information
preserved at the time by the Corporate Trustee in accordance with the
provisions of subdivision (B) of this Section 7.01; or
(2) inform such Applicants as to the approximate number of
holders of Bonds whose names and addresses appear in the information
preserved at the time by the Corporate Trustee, in accordance with the
provisions of subdivision (B) of this Section 7.01, and as to the
approximate cost of mailing to such Bondholders the form of proxy or
other communication, if any, specified in such application.
If the Corporate Trustee shall elect not to afford to such Applicants access to
such information, the Corporate Trustee shall, upon the written request of such
Applicants, mail to each Bondholder whose name and address appears in the
information preserved at the time by the Corporate Trustee in accordance with
the provisions of subdivision (B) of this Section 7.01, a copy of the form of
proxy or other communication which is specified in such request, with reasonable
promptness after a tender to the Corporate Trustee of the material to be mailed
and of payment or provision for the payment of the reasonable expenses of
mailing, unless within five days after such tender the Corporate Trustee shall
mail to such Applicants and file with the Securities and Exchange Commission
together with a copy of the material to be mailed, a written statement to the
effect that, in the opinion of the Corporate Trustee, such mailing would be
contrary to the best interests of the holders of Bonds, or would be in violation
of applicable law. Such written statement shall specify the basis of such
opinion. If said Commission, after opportunity for a hearing upon the objections
specified in the written statement so filed, shall enter an order refusing to
sustain any of such objections or if, after the entry of an order Sustaining one
or more of such objections, said Commission shall find, after notice and
opportunity for a hearing, that all the objections so sustained have been met
and shall enter an order so declaring, the Corporate Trustee shall mail copies
of such material to all such Bondholders with reasonable promptness after the
entry of such order and the renewal of such tender; otherwise the Corporate
Trustee shall be relieved of any obligation or duty to such Applicants
respecting their application.
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(D) Every holder of the Bonds, by receiving and holding the same,
agrees With the Company and the Trustees that neither the Company nor the
Trustees, nor any paying agent shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the holders
of Bonds in accordance with the provisions of subdivision (C) of this Section
7.01, regardless of the source from which such information was derived, and that
the Trustees shall not be held accountable by reason of mailing any material
pursuant to a request made under said subdivision (C).
SECTION 7.02. The Company covenants and agrees:
(A) To file with the Corporate Trustee within 15 days after the Company
is required to file the same with the Securities and Exchange Commission, copies
of the annual reports and of the information, documents, and other reports (or
copies of such portions of any of the foregoing as such Commission may from time
to time by rules and regulations prescribe) which the Company may be required to
file with such Commission pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934; or, if the Company is not required to file
information, documents, or reports pursuant to either of such Sections, then the
Company will file with the Corporate Trustee and the Securities and Exchange
Commission, in accordance with rules and regulations prescribed from time to
time by said Commission, such of the supplementary and periodic information,
documents, and reports which may be required pursuant to Section 13 of the
Securities Exchange Act of 1934 in respect of a security listed and registered
on a national securities exchange as may be prescribed from time to time in such
rules and regulations;
(B) To file with the Corporate Trustee and the Securities and Exchange
Commission, in accordance with the rules and regulations prescribed from time to
time by said Commission, such additional information, documents and reports with
respect to compliance by the Company with the conditions and covenants provided
for in this Indenture as may be required from time to time by such rules and
regulations, including, in the case of annual reports, if required by such rules
and regulations, certificates or opinions of independent public accountants,
conforming to the requirements, if any, of Section 20.04 hereof, as to
compliance with conditions or covenants, compliance with which is subject to
verification by accountants;
(C) To transmit by mail to the holders of Bonds in the manner and to
the extent provided in subdivision (C) of Section 7.03 hereof, with respect to
reports pursuant to subdivision (A) of Section 7.03 hereof, within 30 days after
the filing in accordance with subdivisions (A) and (B) hereof with the Corporate
trustee, such summaries of any information, documents and reports required to be
filed by the Company pursuant to subdivisions (A) and (B) of this Section 7.02
as may be required by the rules and regulations prescribed from time to time by
the Securities and Exchange Commission; and
(D) To furnish to the Corporate Trustee (1) with or as a part of each
annual report and each other document or report filed with the Corporate Trustee
pursuant to subdivision (A) or subdivision (B) of this Section 7.02, an
Officers' Certificate stating that in the opinion of each of the signers such
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annual report or other document or report complies with the requirements of such
Subdivision (A) or subdivision (B) and (2) after the Company shall have
transmitted to the holders of Bonds any summary of information, documents or
reports pursuant to subdivision (C) of this Section 7.02, an Officers'
Certificate stating that in the opinion of each of the signers such summary
complies with the requirements of such subdivision (C).
Each certificate furnished to the Corporate Trustee pursuant to the
provisions Of this Section 7.02 shall conform to the requirements of Section
20.04 hereof.
SECTION 7.03. (A) The Trustees shall transmit within 60 days after May
15 in each year, beginning with the year 1990, to the Bondholders a brief report
dated as of such May 15 (hereinafter the "reporting date") with respect to:
(1) their eligibility and qualifications under Sections 16.01
and 16.10 hereof, or in lieu thereof, if to the best of their knowledge
such Trustees have continued to be eligible and qualified under such
Sections, a written statement to such effect;
(2) the character and amount of any advances (and if the
Trustees elects so to state, the circumstances surrounding the making
thereof) made by the Trustees, as such, which remain unpaid on the
reporting date, and for the reimbursement of which the Trustees claim
or may claim a lien or charge, prior to that of the Bonds, on the Trust
Estate or on any property or funds held or collected by them as
Trustees, provided that the Trustees shall not be required (but may
elect) to state such advances, if such advances so remaining unpaid
aggregate not more than one-half of one per centum (1/2 of 1%) of the
principal amount of the Bonds Outstanding on the reporting date;
(3) the amount, interest rate, and maturity date of all other
indebtedness owing by the Company (or by any other obligor on the
Bonds) to the Trustees in their individual capacity on the reporting
date, with a brief description of any property held as collateral
security therefor, except an indebtedness based upon a creditor
relationship arising in any manner described in clauses (2), (3), (4)
or (6) of subdivision (B) of Section 16.09 hereof;
(4) the property and funds physically in the possession of the
Trustees, as Trustees, on the reporting date;
(5) any release, or release and substitution, of property
subject to the Lien of this Indenture (and the consideration therefor,
if any) which has not been previously reported; provided, however, that
to the extent that the aggregate value as shown by the release papers
of any or all of such released properties does not exceed an amount
equal to one per centm (1%) of the principal amount of Bonds then
Outstanding, the report need only indicate the number of such releases,
the total value of property released as shown by the release papers,
the aggregate amount of cash received and the aggregate value of
property received in substitution therefor as shown by the release
papers; and
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(6) any action taken by the Trustees in the performance of
their duties under this Indenture which it or he has not previously reported and
which in their opinion materially affects the Bonds or the Trust Estate, except
action in respect of a Default notice of which has been or is to be withheld in
accordance with the provisions of Section 12.02 hereof.
(B) The Trustees shall transmit to the Bondholders as hereinafter
provided a brief report with respect to:
(1) the release, or release and substitution, of property
subject to the Lien of this Indenture (and the consideration therefor,
if any) unless the Fair Value of such property, as set forth in the
certificate or opinion required by Section 10.04 is less than ten
percentum (10%) of the principal amount of Bonds Outstanding at the
time of such release, or such release and substitution, such report to
be so transmitted within 90 days after such time; and
(2) the character and amount of any advances (and if the
Trustees elect so to state, the circumstances surrounding the making
thereof) made by the Trustees, as such, since the date of the last
report transmitted pursuant to the provisions of subdivision (A) of
this Section 7.03 (or if no such report has yet been so transmitted
since the date of this Indenture) for the reimbursement of which they
claim or may claim a lien or charge, prior to that of the Bonds, on the
Trust Estate or on property or funds held or collected by them as
Trustees and which they have not previously reported pursuant to this
clause (2) if such advances remaining unpaid at any time aggregate not
more than ten PER CENTUM (10%) OF THE principal amount of Bonds
Outstanding at such time, such report to be transmitted within 90 days
after such time.
(C) Reports pursuant to this Section 7.03 shall be transmitted by mail:
(1) to all registered holders, as the names and addresses of
such holders appear on the Bond Register;
(2) to such holders as have, within two years preceding such
transmission, filed their names and addresses with the Corporate
Trustee for that purpose; and
(3) except in the case of reports pursuant to subdivision (B)
of this Section 7.03, to each Bondholder whose name and address are
preserved at the time by the Corporate Trustee, as provided in
subdivision (B) of Section 7.01 hereof.
(D) A copy of each such report shall, at the time of such transmission
to Bondholders, be filed by the Trustees with each stock exchange upon which the
Bonds are listed and also with the Securities and Exchange Commission. The
Company will notify the Trustees of the name and address of each stock exchange
on which the Bonds are listed.
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ARTICLE 8
REDEMPTION OF 1989 BONDS AT COMPANY'S OPTION
SECTION 8.01. The 1989 Bonds shall be redeemable at any time prior to
the stated Maturity thereof, upon notice as provided in this Article 8, as a
whole at any time, or in part from time to time (but only in principal amounts
of $1,000 or any integral multiple thereof), at the option of the Company;
provided, however, that the company may not redeem any 1989 Bonds pursuant to
such option prior to January 15, 1993. Any such redemption shall be at the
applicable redemption prices (expressed in percentages of the principal amount)
set forth in the 1989 Bonds together with accrued and unpaid interest on the
principal amount to be redeemed to the Redemption Date.
The election of the Company to redeem any 1989 Bonds shall be evidenced
by a Certified Resolution. Whenever any of the 1989 Bonds Outstanding are to be
redeemed pursuant to this Section 8.01, the Company shall give the Corporate
Trustee at least 60 days' written notice (or such shorter period of time as is
acceptable to the Corporate Trustee) prior to the Redemption Date (unless a
shorter notice shall be satisfactory to the Corporate Trustee) of such
Redemption Date and of the principal amount of 1989 Bonds to be redeemed.
SECTION 8.02. In case of the redemption of less than all of the
Outstanding 1989 Bonds, the 1989 Bonds to be redeemed shall be selected by the
Corporate Trustee by lot, not more than 60 days prior to the Redemption Date,
from the Outstanding 1989 Bonds not previously called for redemption, which
method may provide for the selection for redemption of portions (equal to $1,000
or any integral multiple thereof) of the principal amount of 1989 Bonds of a
principal amount larger than $1,000.
In the case of any partial redemption, the Corporate Trustee shall
promptly notify the Company in writing of the serial numbers (and, in the case
of any 1989 Bond which is to be redeemed in part only, the portion of the
principal amount thereof to be redeemed) of the 1989 Bonds selected for
redemption.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of 1989 Bonds shall relate,
in the case of any 1989 Bond redeemed or to be redeemed only in part, to the
portion of the principal of such 1989 Bond which has been or is to be redeemed.
SECTION 8.03. Notice of redemption shall be given by first-class mail,
postage prepaid, mailed not less than 30 nor more than 60 days prior to the
Redemption Date, to each Holder of 1989 Bonds to be redeemed, at his last
address appearing in the Bond Register.
All notices of redemption shall state:
(A) The Redemption Date;
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(B) The redemption price;
(C) If less than all Outstanding 1989 Bonds are to be
redeemed, the serial numbers (and, in the case of any 1989 Bond which
is to be redeemed in part only, the portion of the principal amount
thereof to be redeemed) of the 1989 Bonds to be redeemed;
(D) That on the Redemption Date the redemption price of each
of the 1989 Bonds to be redeemed will become due and payable, and that
interest thereon shall cease to accrue from and after said date;
(E) The place where such 1989 Bonds are to be surrendered for
payment of the redemption price, which shall be the office or agency of
the Company in the place of payment; and
(F) If it be the case, that such 1989 Bonds are to be redeemed
by the application of certain specified Deposited Cash.
Notice of redemption of 1989 Bonds to be redeemed shall be given by the
Company or, at the Company's request, by the Corporate Trustee in the name and
at the expense of the Company.
Failure to give notice of redemption, or any defect therein, to any
Holder of any 1989 Bond selected for redemption shall not impair or affect the
validity of the redemption of any other 1989 Bond.
SECTION 8.04. On or before the business day next preceding any
Redemption Date, the Company shall deposit with the Corporate Trustee or with a
paying agent (or, if the Company is acting as its own paying agent, segregate
and hold in trust as provided in Section 6.06(C) hereof) an amount of money
sufficient to pay the redemption price of all principal of, and (unless such
Redemption Date is an Interest Payment Date) accrued interest on, the 1989 Bonds
which are to be redeemed on that date.
SECTION 8.05. Notice of redemption having been given as aforesaid, the
1989 Bonds so to be redeemed shall, on the Redemption Date, become due and
payable at the redemption price therein specified and from and after such date
(unless the Company shall default in the payment of the redemption price) such
1989 Bonds shall cease to bear interest. Upon surrender of any such 1989 Bond
for redemption in accordance with said notice, such 1989 Bond shall be paid by
the Company at the redemption price together with accrued interest thereon to
the Redemption Date; provided, however, that installments of interest whose
Stated Maturity is on or prior to the Redemption Date shall be payable to the
Holders of such 1989 Bonds, or one or more predecessor 1989 Bonds, registered as
such on the relevant Regular Record Dates according to the terms and provisions
of Section 2.01 hereof.
If any 1989 Bond called for redemption shall not be so paid upon
surrender thereof for redemption, the principal, and premium, if any, shall,
until paid, bear interest from the Redemption Date at the rate borne by the 1989
Bond.
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Any 1989 Bond which is to be redeemed only in part shall be surrendered
at the office or agency designated pursuant to Section 6.06(A) hereof (with, if
the Company or the Corporate Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the Company and the
Corporate Trustee duly executed by, the Holder thereof or his attorney duly
authorized in writing) and the Company shall execute and the Corporate Trustee
shall authenticate and deliver to the Holder of such 1989 Bond, without service
charge, a new 1989 Bond or Bonds of any authorized denomination or denominations
as requested by such Holder in an aggregate principal amount equal to and in
exchange for the unredeemed portion of the principal of the 1989 Bond so
surrendered.
SECTION 8.06. All 1989 Bonds redeemed pursuant to Section 8.01 hereof
shall be forthwith cancelled and destroyed by the Corporate Trustee, and the
corporate Trustee shall deliver its certificate thereof to the Company.
ARTICLE 9.
REDEMPTION OF 1989 BONDS AT HOLDER'S OPTION
SECTION 9.01 Unless pursuant to the terms of Section 12.01, the 1989
Bonds have been declared due and payable prior to their maturity by reason of an
Event of Default and such Event of Default has not been waived and such
declaration has not been rescinded or annulled, a holder has the right to
present 1989 Bonds for payment prior to their maturity, and the Company will
redeem the same (or any portion of the principal amount thereof which is $1,000
or an integral multiple thereof, as the holder may specify) subject to the
limitations that the Company will not be obligated to redeem, during the period
beginning with the original issuance of the 1989 Bonds and ending January 15
1993, and during any 12 month period ending January 15 thereafter, (i) the
portion of a 1989 Bond or Bonds presented by a holder exceeding an aggregate
principal amount of $25,000 or (ii) 1989 Bonds in an aggregate principal amount
exceeding $700,000 Such $25,000 and $700,000 limitations are non-cumulative. If
the Company, although not obligated to do so, chooses to redeem 1989 Bonds of
any holder in any such period in excess of the $25,000 limitation, such
redemption, to the extent that it exceeds the $25,000 limitation for any holder,
shall not be included in the computation of the $700,000 limitation for such or
any succeeding period.
SECTION 9.02. Redemption of 1989 Bonds presented for payment prior to
December 15 immediately preceding the last day of each such 12 month period will
be made on the last day (January 15 of such period, beginning January 15 1993.
1989 Bonds not redeemed in any such period because they have not been presented
prior to the December 1 immediately preceding the last day (January 15 of that
period or because of the $25,000 or $700,000 limitations will be held in order
of their receipt for redemption during the following 12 month period(s) until
redeemed, unless sooner withdrawn by the holder. Subject to the $25,000 and
$700,000 limitations, the Company will, upon the death of any holder, redeem
1989 Bonds within 60 days following receipt by the Corporate Trustee of a
written request therefor from such holder's personal representative, or
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surviving joint tenant(s), tenant by the entirety or tenant(s) in common. 1989
Bonds will be redeemed in order of their receipt by the Corporate Trustee,
except 1989 Bonds presented for payment in the event of death of the holder,
which will be given priority in order of their receipt.
1989 Bonds may be presented for redemption by delivering to the
Corporate Trustee: (i) a written request for redemption, in form satisfactory to
the Corporate Trustee, signed by the registered holder(s) or his duly authorized
representative, (ii) the 1989 Bond to be redeemed, free and clear of any liens
or encumbrances of any kind, and (iii) in the case of a request made by reason
of the death of a holder, appropriate evidence of death and, if made by a
representative of a deceased holder, appropriate evidence of authority to make
such request. No particular forms of request for redemption or authority to
request redemption are necessary. The price to be paid by the Company for all
1989 Bonds or portions thereof presented to it pursuant to the provisions
described in this Section is 100% of the principal amount thereof or portion
thereof plus accrued but unpaid interest to the date of payment. Any acquisition
of 1989 Bonds by the Company other than by redemption at the option of any
holder pursuant to this Section shall not be included in the computation of
either the $25,000 or $700,000 limitation for any period.
For purposes of this Section 9.02, a 1989 Bond held in tenancy by the
entirety, joint tenancy or tenancy in common will be deemed to be held by a
single holder and the death of a tenant by the entirety, joint tenant or tenant
in common will be deemed the death of a holder. The death of a person, who,
during his lifetime, was entitled to substantially all of the beneficial
interests of ownership of a 1989 Bond will be deemed the death of the holder,
regardless of the registered holder, if such beneficial interest can be
established to the satisfaction of the Corporate Trustee. For purposes of a
holder's request for redemption and a request for redemption on behalf of a
deceased holder, such beneficial interest shall be deemed to exist in cases of
street name or nominee ownership, ownership under the Uniform Gifts to Minors
Act, community property or other joint ownership arrangements between a husband
and wife (including individual retirement accounts or Keogh [H.R. 10] plans
maintained solely by or for the holder or decedent or by or for the holder or
decedent and his spouse), and trusts and certain other arrangements where a
person has substantially all of the beneficial ownership interests in the 1989
Bonds during his lifetime. Beneficial interests shall include the power to sell,
transfer or otherwise dispose of a 1989 Bond and the right to receive the
proceeds therefrom, as well as interest and principal payable with respect
thereto.
In the case of 1989 Bonds registered in the names of banks, trust
companies or broker-dealers who are members of a national securities exchange or
the National Association of Securities Dealers, Inc. ("Qualified Institutions"),
the 525,000 limitation shall apply to each beneficial owner of 1989 Bonds held
by a Qualified Institution and the death of such beneficial owner shall entitle
a Qualified Institution to seek redemption of such 1989 Bonds as if the deceased
beneficial owner were the record holder. Such Qualified Institution, in its
request for redemption on behalf of such beneficial owners, must submit
evidence, satisfactory to the Corporate Trustee, that it holds 1989 Bonds on
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behalf of such beneficial owner and must certify that the aggregate amount of
requests for redemption tendered by such Qualified Institution on behalf of such
beneficial owner in any such 12 month period does not exceed $25,000
In the case of any 1989 Bonds which are presented for redemption in
part only, upon such redemption the Company shall execute and the Corporate
Trustee shall authenticate and deliver to or on the order of the holder of such
1989 Bonds, without service charge, a new 1989 Bond(s), of any authorized
denomination or denominations as requested by such holder, in aggregate
principal amount equal to the unredeemed portion of the principal of the 1989
Bonds so presented.
Nothing herein shall prohibit the Company from redeeming, in acceptance
of tenders made pursuant hereto, 1989 Bonds in excess of the principal amount
that the Company is obligated to redeem, nor from purchasing any 1989 Bonds in
the open market. However, the Company may not use any 1989 Bonds purchased in
the open market as a credit against its redemption obligation hereunder.
SECTION 9.03. Any 1989 Bonds presented for redemption at the option of
the holder may be withdrawn by the person(s) presenting the same upon delivery
of a written request for such withdrawal to the Corporate Trustee (a) in cases
other than by reason of death of a holder prior to December 15, 1992, in the
case of the initial period, or prior to December 1, in the case of any
subsequent 12 month period, or (b) prior to the issuance of a check in payment
thereof in the case of 1989 Bonds presented by reason of the death of a holder.
SECTION 9.04. The Corporate Trustee shall maintain at its main office a
register (the "Redemption Register") in which it shall record, in order of
receipt, all requests for redemption received by the Corporate Trustee under
Section 9.02. Unless withdrawn, all such requests shall remain in effect during
the period in which they are received and thereafter from period to period,
until the 1989 Bonds which are the subject of such request have been redeemed.
SECTION 9.05. In the event that there shall occur a Fundamental
Structural Change with respect to the Company and as a result of such
Fundamental Structural Change the Company's consolidated partners capital after
such Fundamental Structural Change shall be decreased to less than $10,000,000
then each holder shall have the right, at the holder's option, to require the
Company to redeem such holder's 1989 Bonds, including any portion thereof which
is $1,000 or any integral multiple thereof on the date (the "Repurchase Date")
that is 100 days after the occurrence of the Fundamental Structural Change at
the redemption price in cash of 100% of the principal amount thereof or portion
thereof plus accrued but unpaid interest to the date of payment. Exercise of
this redemption option by a holder is irrevocable. The Company's obligation to
redeem the 1989 Bonds pursuant to this Section 9.05 shall not be subject to the
$25,000 individual or $700,000 aggregate redemption limitations. For purposes of
this Section 9.05, consolidated partners capital shall be deemed to include up
to $10,000,000 in fully subordinated convertible debt of the Company then
outstanding, if any, and which debt has been outstanding for at least 12 months.
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Within 30 days after the occurrence of a Fundamental Structural Change
of the Company that triggers a holder's redemption right pursuant to this
Section 9.05, the Company shall give notice of the occurrence of such
Fundamental structural Change, of the date before which a holder must notify the
Corporate Trustee of such holder's intention to exercise the redemption option
and of the procedure which such holder must follow to exercise such right. To
exercise the redemption' the holder of a 1989 Bond or Bonds must deliver to the
Corporate Trustee on or before the 90th day after the occurrence of the
Fundamental Structural Change: (i) written notice of such holder's redemption,
in form satisfactory to the Corporate Trustee, signed by the registered
holder(s) or his duly authorized representative and (ii) the 1989 Bond or Bonds
to be redeemed, free and clear of any liens or encumbrances of any kind.
In the case of any 1989 Bonds which are presented for redemption in
part only, upon such redemption the Company shall execute and the Corporate
Trustee shall authenticate and deliver to or on the order of the holder of such
1989 Bonds, without service charge, a new 1989 Bond(s), of any authorized
denomination or denominations as requested by such holder, in aggregate
principal amount equal to the unredeemed portion of the principal of the 1989
Bonds so presented.
SECTION 9.06. In the case of any 1989 Bonds or portion thereof which
are presented for redemption pursuant to this Article 9 and which have not been
redeemed at the time the Company gives notice of its election to redeem 1989
Bonds pursuant to Article 8, such 1989 Bonds or portion thereof shall first be
subject to redemption pursuant to Article 8 and if any such 1989 Bonds or
portion thereof are not redeemed pursuant to Article 8 they shall remain subject
to redemption pursuant to Article 9.
ARTICLE 10.
POSSESSION AND RELEASE OF MORTGAGED AND PLEDGED PROPERTY
SECTION 10.01. Unless an Event of Default shall have occurred and be
continuing, the Company or an Operating Subsidiary, as the case may be,
(A) Shall have the right to remain in possession and retain
exclusive control of the Mortgaged and Pledged Property and every
portion thereof (except Deposited Cash and such securities, if any, as
are held by the Corporate Trustee in lieu of Deposited Cash pursuant to
Section 20.02 hereof) with full power, freely and without hindrance by
the Trustees, or by any one or more of the Bondholders, to operate,
manage, develop, use and enjoy the Mortgaged and Pledged Propery and
every portion thereof;
(B) May, without obtaining any release or consent from the
Trustees, or either of them, grant or convey rights of way or easements
over or in respect of any of the Mortgaged and Pledged Property;
provided, however, that any such grant or conveyance qualifies as a
permitted Encumbrance hereunder and the Company within 30 business days
of such grant or conveyance furnishes the Corporate Trustee with an
Opinion of Counsel to said effect; and
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(C) May, from time to time, obtain the release from the Lien
of this Indenture, and the Trustees shall release from the Lien of this
Indenture, any of the Mortgaged and Pledged Property or any interest
therein, upon compliance by the Company with the provisions of either
Section 10.02 or Section 10.03 hereof or, in the case of Deposited
Cash, Sections 5.03 or 6.10 hereof.
SECTION 10.02. The Company may procure the release of, and the Trustees
shall release, any of the Mortgaged and Pledged Property from the Lien of this
Indenture, upon compliance by the Company with all the conditions hereinafter
set forth in this Section 10.02. The Trustees shall forthwith release any such
property and enter into any indenture or indentures supplemental hereto if
required for the purpose of effecting such release, and do such other and
further acts as may be necessary, upon receipt by the Corporate Trustee of the
following:
(A) An Application for any such release specifying the
Mortgaged and Pledged Property, release of which is being sought;
(B) An Officers' Certificate, the signers of which shall
include an accountant, certifying:
(1) a description of such Mortgaged and Pledged
Property which is to be released complying with the provisions
of Section 5.03(B)(1) hereof and a statement of the Fair Value
thereof;
(2) if any property or properties are to be subjected
to the Lien of this Indenture in substitution for the
Mortgaged and Pledged Property release of which is being
sought, the matters set forth in subdivisions (B)(1) through
(10) of Section 5.03 hereof with respect to each such property
which is to be substituted for the Mortgaged and Pledged
Property and the Fair Value of each such property;
(3) if, pursuant to the proviso in subdivision (D) of
this Section 10.02, the Company does not deposit the
consideration specified in clause (i), (ii), or (iii) of such
subdivision (D), a statement demonstrating, in such reasonable
detail as shall be satisfactory to the Corporate Trustee,
compliance with the conditions set forth in such proviso;
(4) that, to the best knowledge of the Company's
officers signing such Officers' Certificate, no event has
occurred and is continuing which would substantially alter the
appraised values set forth in the Current M.A.I. Appraisal
referred to in subdivision (E) of this Section 10.02; and
(5) that no Event of Default has occurred and is
continuing under this Indenture;
(C) An Opinion of Counsel:
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(1) That the release of the Mortgaged and Pledged Property which
is the subject of the Application specified in subdivision (A) of
this Section 10.02 is authorized hereunder; and
(2) If a property or properties are to be substituted for the
Mortgaged and Pledged Property to be released, stating, with respect
to each such property being so substituted and matters relating
thereto, the matters set forth in Section 5.03(E) hereof, except
that the supplemental indenture, Mortgage or other instruments
referred to therein shall be the ones referred to in subdivision (F)
of this Section 10.02.
(D) (i) Cash, by certified or official bank check payable to the
order of the Corporate Trustee, to be held in trust under this Indenture
in an amount equal to either (a) the Fair Value of the Mortgaged and
Pledged Property release of which is sought or (b) such amount which,
when added to the remaining Mortgaged and Pledged Property, causes the
Fair Value of all the Mortgaged and Pledged Property to exceed the
lesser of (X) 150% of the principal amount of the then Outstanding
Bonds, and (Y) $27,000,000 plus 135% of the original principal amount
issued of any series of Bonds issued hereunder other than the 1989
Bonds, or (ii) a transfer and assignment of a property or properties
125% of the Bondable Amount of which is at least equal to either (a)
the Fair Value of the remaining Mortgaged and Pledged Property release
of which is sought or (b) such property or properties which, when added
to the remaining Mortgaged and Pledged Property, causes the Fair Value
of all the remaining Mortgaged and Pledged Property plus 125% of the
Bondable Amount of the property to be subjected to the Lien of this
Indenture to exceed the lesser of (X) 150% of the principal of the then
Outstanding Bonds, and (Y) $27,000,000 plus 135% of the original
principal amount issued of any series of Bonds issued hereunder other
than the 1989 Bonds, or (iii) any combination of the types of property
enumerated in (i) and (ii) above solely at the option of the Company,
and (iv) a supplemental indenture and a Mortgage subjecting to the Lien
of this Indenture any property which is to be substituted for the
Mortgaged and Pledged Property release of which is sought hereunder;
provided, however, that the Company shall not be required to deposit
with the Corporate Trustee or convey and transfer to the Trustees the
consideration or any portion thereof specified in (i), (ii), or (iii)
above if (a) the Fair Value of all of the Mortgaged and Pledged
Property exceeds the lesser of (i) 150% of the principal of the then
Outstanding Bonds, or (ii) 135% of the original principal amount of the
Outstanding Bonds, (b) the Company's consolidated partners capital,
shown on a consolidated balance sheet of the Company as of a date not
more than 90 days prior to the release being sought, prepared in
accordance with generally accepted accounting principles, is not less
than $39,000,000 and (c) the sum of the Company's consolidated net
income before income taxes shown on its consolidated statements of
income for the 12 months ended with the date of such consolidated
balance sheet, prepared in accordance with generally accepted
accounting principles, plus fixed charges (as defined below) reflected
therein for such period shall not be less than twice the amount of such
fixed charges; "fixed charges" shall
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mean the sum of interest and amortization of debt discount and expense
and premium on all indebtedness (including capital lease obligations) of
the Company and its Subsidiaries, plus one-third of their lease
requirements reported as rent expense, excluding in all cases items
eliminated in consolidation;
(E) If a determination of Fair Value is required pursuant to Section
10.02(D), a Current M.A.I. Appraisal of Mortgaged and Pledged Property
currently or to be subjected to the Lien of this Indenture pursuant to
this Section 10.02 as may be so required; provided, however, that the
Company shall not be required to obtain an M.A.I. Appraisal in
connection with the release and substitution of the property located on
Route 3 Kennedy Street in Lawrenceburg, Tennessee and the substitution
therefor of the property located on Route 1, Buffalo Road in
Lawrenceburg, Tennessee if the Fair Value of such substituted property
is at least equal to the Fair Value of the property release of which is
being sought;
(F) Such Mortgage and other instruments (including any referred to
in subdivision (D) of this Section 10.02), if any, as in the Opinion of
Counsel specified in subdivision (C) of this Section 10.02 may be
necessary or advisable to subject to the Lien of this Indenture any
property to be substituted for the Mortgaged and Pledged Property to be
released;
(G)(1) If an Operating Subsidiary is the owner of the property
described in such Application, an agreement in recordable form, dated as
of the date of such Application and executed in the name and on behalf
of, and by two Executive Officers of such Subsidiary pursuant to which
such Subsidiary shall enter into a supplemental indenture granting a
first priority lien on such property to the Trustees and shall agree to
observe and perform the obligations under this Indenture which relate to
such Property; (2) in respect of any instrument setting forth rights
mortgaged and pledged as part of the Trust Estate with respect to such
Property, an agreement in recordable form, dated as of the date of such
Application and executed in the name and on behalf of, and by the
Executive Officers of, the Company or Operating Subsidiary, as the case
may be, that is a party to such instrument, pursuant to which the
Company or such Subsidiary, as the case may be, shall agree to assume
and perform its obligations under such instrument; and (3) an Opinion of
Counsel stating that each such agreement is a legal, valid and binding
obligation of the Company or such Subsidiary whose name is signed
thereto, enforceable in accordance with its terms (except as to matters
permitted pursuant to Section 20.04(E)); and
(H) Such other instruments (including without limitation any Opinion
of Counsel) as the Corporate Trustee may reasonably request.
The foregoing documents and consideration, if any, furnished pursuant
to the respective paragraphs of this Section 10.02 shall constitute full
authority to the Trustees for executing any quitclaim deed or instrument of
release requested pursuant to this Section 10.02, and the Trustees in so doing
shall not be liable to the Company or any of the Bondholders.
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Any cash deposited under this Section 10.02 with the Corporate Trustee
shall be Deposited Cash and may be paid out or applied by the Corporate Trustee
at any time or from time to time pursuant to the provisions of Article S hereof.
SECTION 10.03. The Company may procure the release of, and the Trustees
shall release, any of the Mortgaged and Pledged Property which has been or is
about to be taken by, or under threat of, exercise of the power of eminent
domain, or which has been or is about to be taken by any governmental body or
agency in the exercise of any right which it may have to purchase any part of
such Mortgaged and Pledged Property, or which shall be required to be disposed
of by a valid order of any court or other governmental body, agency or
instrumentality. The Trustees shall forthwith release any such Mortgaged and
Pledged Property and enter into any indentures supplemental hereto, Mortgages
and other instruments if required for the purpose of effecting such release, and
do such other and further acts as may be necessary, upon receipt by the
Corporate Trustee of the following:
(A) An Application for any such release specifying the Mortgaged and
Pledged Property which has been or will be taken by exercise of the
power of eminent domain or has been or will be purchased by a
governmental body or agency in the exercise of a right which it had or
has to purchase such Mortgaged and Pledged Property, or is being
disposed of pursuant to a valid order of any court or other governmental
body, agency or instrumentality requiring the disposition of such
Mortgaged and Pledged Property, as the case may be:
(B) An Officers' Certificate certifying:
(i) a description of such Mortgaged and Pledged Property
complying with the provisions of Section 5.02(B)(1) hereof and, if
as a result of such taking, the Company will be unable to carry on
the operations of such Mortgaged and Pledged Property in
substantially the same manner as they are being conducted prior to
such exercise of the power of eminent domain or such purchase, a
statement of the Fair Value thereof;
(ii) a statement of the amount of any cash and the amount, value
and general nature of any other consideration received or to be
received by the Company as the proceeds of such Mortgaged and
Pledged Property; and
(iii) a statement that such release is authorized under this
Section 10.03;
(C) If the consideration received or to be received or the Fair
Value of the Mortgaged and Pledged Property to be released, as indicated
in the aforesaid Officers' Certificate, is in excess of $500,000, an
Opinion of Counsel:
(i) if any property is to be received in exchange for Mortgaged
and Pledged Property to be released, stating to the extent
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;
applicable (and if not applicable, stating that such particular
provision is inapplicable), with respect to such property so
received in exchange, the matters set forth in subdivision (E) of
Section 5.03 hereof, except that the supplemental indenture,
Mortgage and other instruments referred to therein shall be the ones
referred to in subdivision (E) of this Section 10.03; and
(ii) if, as a result of such taking, the Company will be unable
to carry on the operations of such Mortgaged and Pledged Property in
substantially the same manner as they are being conducted prior to
such exercise of the power of eminent domain or such purchase, an
opinion to the effect that the Mortgaged and Pledged Property to be
released has been or is being taken by, or under threat of, the
exercise of the power of eminent domain or has been or will be
purchased by a governmental body or agency in the exercise of a
right which it had or has to purchase the same, or is being disposed
of pursuant to a valid order of any court or other governmental
body, agency or instrumentality requiring the disposition of such
property, as the case may be, and that such release is authorized
under this Section 10.03;
(D) In the event that such taking is a partial taking of a Mortgaged
and Pledged Property which pursuant to an Officers' Certificate, does
not decrease the number of beds at such Mortgaged and Pledged Property
and does not decrease the Fair Value of such property below the Fair
Value immediately prior to such taking, then in such event the Company
may retain all proceeds and consideration received as a result of such
taking. In all other cases, the Company shall pay to the Trustee cash,
by certified or official bank check payable to the order of the Trustee,
to be held in trust under this Indenture in an amount equal to (1) any
cash proceeds received, and a transfer and assignment of any other
consideration received, as proceeds for such Mortgaged and Pledged
Property and (2) in the event that the Company will be unable to carry
on the operations of such Mortgaged and Pledged Property in
substantially the manner as they are being conducted prior to such
exercise of the power of eminent domain or such purchase, the greater of
(i) any cash proceeds received, and a transfer and assignment of any
other consideration received, as proceeds for such Mortgaged and Pledged
Property and (ii) the Bondable Amount of the Mortgaged and Pledged
Property release of which is sought, and in any event a supplemental
indenture and a Mortgage subjecting to the Lien of this Indenture any
property which is received in exchange for the Mortgaged and Pledged
Property to be released hereunder;
(E) Such Mortgage and other instruments (including any referred to
in subdivision (D) of this Section 10.03), if any, as in the Opinion of
Counsel specified in subdivision (C) of this Section 10.03 may be
necessary or advisable to subject to the Lien of this Indenture any
property received in exchange for the Mortgaged and Pledged Property to
be released;
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(F) The Current M.A.I. Appraisal, if any, upon which any statement
made in the aforesaid Officers' Certificate is based;
(G)(1) If an Operating Subsidiary is the owner of the property
described in such Application, an agreement in recordable form, dated as
of the date of such Application and executed in the name and on behalf
of, and by two Executive Officers of, such Subsidiary pursuant to which
such Subsidiary shall enter into a supplemental indenture granting a
first priority lien on such property to the Trustees and shall agree to
observe and perform the obligations under this Indenture which relate to
such property; (2) in respect of any instrument setting forth rights
mortgaged and pledged as part of the Trust Estate with respect to such
property, an agreement in recordable form, dated as of the date of such
Application and executed in the name and on behalf of, and by the
Executive Officers of, the Company or Operating Subsidiary, as the case
may be, that is a party to such instrument, pursuant to which the
Company or such Subsidiary, as the case may be, shall agree to assume
and perform its obligations under such instrument; and (3) an Opinion of
Counsel stating that each such agreement is a legal, valid and binding
obligation of the Company or such Subsidiary whose name is signed
thereto, enforceable in accordance with its terms (subject to the
matters set forth in Section 20.04(E)); and
(H) Such other instruments (including without limitation any Opinion
of Counsel) as the Corporate Trustee may have reasonably requested.
The Trustees shall, upon receipt of the foregoing documents, give their
consent in writing to the amount of any award or allowance of compensation for
any such Mortgaged and Pledged Property in connection with any proceeding for
the taking of any of the Mortgaged and Pledged Property through the exercise of
the power of eminent domain or any right to purchase or obligation to sell
referred to above.
The foregoing documents and consideration furnished pursuant to the
respective paragraphs of this Section 10.03 shall constitute full authority to
the Trustees for executing any quitclaim deed or instrument of release or giving
any consent requested pursuant to this Section 10.03, and the Trustees in so
doing shall not be liable to the Company, any Operating Subsidiary, any of the
Bondholders or any other person.
Any cash deposited under this Section 10.03 shall be held as Deposited
Cash and shall be paid out or applied by the Corporate Trustee at any time or
from time to time pursuant to the provisions of Article 5, except that any
Deposited Cash arising under this Section 10.03 by payment pursuant to
Subsection (D)(i) of this Section 10.03 may be withdrawn pursuant to Section
5.03 in respect of a Mortgaged and Pledged Property in an amount equal to the
Fair Value of such Mortgaged and Pledged Property without any limitation to the
amount of the Bondable Amount thereof.
SECTION 10.04. Wherever requesting the release of any of the Mortgaged
and Pledged Property, the Company covenants and agrees that it will furnish to
the Corporate Trustee:
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(A) An Officers' Certificate stating that the provisions in this
Article 10 relating to the release, or release and substitution, of any
of the Mortgaged and Pledged Property have been complied with;
(B) An Opinion of Counsel stating that in the opinion of said
counsel the provisions of this Article 10 relating to the release, or
the release and substitution, of any of the Mortgaged and Pledged
Property have been complied with;
(C) Except as provided in Sections 10.03 and 10.02(D), a Current
certificate or opinion of an engineer, appraiser, or other expert as to
the Fair Value of any property or any securities to be released from the
Lien of this Indenture, which certificate or opinion shall state that in
the opinion of the person making the same, the proposed release will not
impair the security under this Indenture in contravention of the
provisions hereof except as otherwise provided in this Indenture. If the
Current Fair Value of any such property or securities released since the
commencement of the current calendar year, as set forth in such
certificates or opinions required by this Section 10.04, is 10% or more
of the aggregate principal amount of the Outstanding Bonds, then such
certificate or opinion shall be made by an Independent engineer,
appraiser, or other expert. However, such a certificate or opinion of an
Independent engineer, appraiser, or other expert shall not be required,
except as otherwise provided in this Indenture, in the case of any
release of any property or securities, if the Fair Value thereof as set
forth in the Current certificate or opinion required by this Section
10.04 is less than $25,000 or less than 1% of the aggregate principal
amount of the Outstanding Bonds.
SECTION 10.05. If the Company has, or has caused to be, sold, exchanged
or otherwise disposed of any property not included under the Lien of this
Indenture, and the Company requests the Trustees to furnish a written disclaimer
or quitclaim of any interest in any such property under this Indenture, the
Trustees shall execute such instrument upon delivery to the Corporate Trustee of
the following:
(A) An Application informing the Trustees of the sale, exchange or
other disposition made or proposed to be made and describing in
reasonable detail the property affected thereby, stating that such
property is not included under the Lien of this Indenture; and
(B) An Opinion of Counsel stating that the property described in the
aforesaid Application is not subject to the Lien of this Indenture.
The foregoing documents furnished pursuant to this Section 10.05 shall
constitute full authority to the Trustees to execute such disclaimer or
quitclaim and the Trustees in so doing shall not be liable to the Company, any
Subsidiary, any of the bondholders or any other person.
SECTION 10.06. In case the Mortgaged and Pledged Property, or any
portion thereof, shall be in the possession of a receiver or trustee, lawfully
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appointed, the powers hereinbefore conferred upon the Company with respect to
the release of property subject to the Lien of this Indenture may, subject to
the satisfaction of the conditions herein set forth, be exercised by such
receiver or trustee, and an instrument, request or certificate signed by such
receiver or trustee shall be deemed the equivalent of an instrument, an
Application or an Officers' Certificate of the Company, when such is required by
the provisions of this Article; and if the Trustees, or either of them, shall be
in possession of the Mortgaged and Pledged Property, or any portion thereof,
under any provision of this Indenture, then such power may be exercised by the
Trustees, or either of them, in their, its or his discretion.
SECTION 10.07. The Trustees shall execute any release, consent,
disclaimer or quitclaim under the provisions of Section 10.02, Section 10.03 or
Section 10.05 hereof, notwithstanding the fact that a Default or an Event of
Default shall have occurred and be continuing, and the Trustees may in their
absolute discretion (but shall not be obligated to) execute any release or
consent under any of the other provisions of this Article 10, notwithstanding
that at the time a Default or an Event of Default shall have occurred and be
continuing.
SECTION 10.08. Sections 10.02 and 10.03 hereof shall not be construed
as being in limitation of one another, but as separate and independent methods
of releasing or disposing of properties subject to the Lien of this Indenture.
ARTICLE 11.
PURCHASER IN GOOD FAITH
SECTION 11.01. No purchaser in good faith of any property purporting to
be released by the Trustees under Article 10 hereof, shall be bound to ascertain
the authority of the Trustees to execute any release, disclaimer or quitclaim or
be bound to inquire as to any documents or consideration required by the
provisions hereof for the exercise of such authority, or to see to the
application of any consideration paid by such purchaser.
ARTICLE 12.
REMEDIES OF TRUSTEES AND BONDHOLDERS UPON DEFAULT
SECTION 12.01. The following events are hereby defined for all purposes
of this Indenture (except where the term is otherwise defined for specific
purposes) as "Events of Default" (whatever the reason for such Event of Default
and whether it shall be voluntary or involuntary or be effected by operation of
law pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(A) Failure to pay the principal of or the premium, if any, on any
Bond as and when the same shall become due and payable at maturity; or
(B) Failure to pay any installment of interest upon any Bond as and
when the same shall have become due and payable and continuance of such
default for a Period of 15 days; or
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(C) Default in the meeting or satisfaction of any redemption payment
with respect to any of the Bonds as and when the same shall become due
and payable, and continuance of such default for a period of 15 days; or
(D) The entry of a decree or order by a court having jurisdiction in
the premises adjudging the Company or any Operating Subsidiary a
bankrupt or insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect
of the Company under the Federal Bankruptcy Act or any other applicable
Federal or State law, or appointing a receiver, liquidator, assignee,
trustee or sequestrator (or other similar official) of the Company, any
Operating Subsidiary or any Subsidiary which is the owner of any
substantial part of the Company's or any Operating Subsidiary's
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
(E) The institution by the Company or any Operating Subsidiary of
proceedings to be adjudicated a bankrupt or insolvent, or the consent by
it to the institution of bankruptcy or insolvency proceedings against
it, or the filing by it of a petition or answer or consent seeking
reorganization or relief under the Federal Bankruptcy Act or any other
applicable Federal or State law, or the consent by it to the filing of
any such petition or to the appointment of a receiver, liquidator,
assignee, trustee or sequestrator (or other similar official) of the
Company, any Operating Subsidiary or any Subsidiary which is the owner
of any substantial part of the Company's or any Operating Subsidiary's
property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay its
debts generally as they become due, or the taking of action by the
Company or any Operating Subsidiary in furtherance of any such action;
or
(F) Default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere in
this Section 12.01 specifically dealt with, and other than a default in
the performance of Section 6.07 hereof, the breach of which is
specifically dealt with in Section 12.01(G) hereof), and continuance of
such default or breach for a period of 30 days after there has been
given, by registered or certified mail, to the Company by the Corporate
Trustee, or to the Corporate Trustee and the Company by the holders of
at least 10% in principal amount of the Outstanding Bonds affected (as
such term is defined in Section 19.02), a written notice specifying such
default or breach and requiring it to be remedied and stating that such
notice is a "Notice of Default" hereunder; or
(G) An event of default as defined in any mortgage, indenture or
instrument, under which there may be issued, or by which there may be
secured or evidenced, any indebtedness of the Company, whether such
indebtedness now exists or shall hereafter be created, shall happen and
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shall result in such indebtedness in excess of $4,000,000 in aggregate
principal amount in any consecutive 18 months becoming or being
declared due and payable prior to the date on which it would otherwise
become due and payable, and such acceleration shall not be rescinded
or annulled within ten days after written notice to the Company from
the Corporate Trustee, or to the Corporate Trustee and the Company
from the Holders of not less than 25% in aggregate principal amount of
the Bonds then Outstanding;
(H) The failure of the Company to continue to manage the operations
conducted on a Mortgaged and Pledged Property unless such mortgaged
and Pledged Property is released and/or substituted pursuant to
sections 10.02 or 10.03 hereof.
SECTION 12.02. The Trustees shall, within 90 days after the occurrence
thereof, give by mail to the Bondholders, as their names and addresses appear in
the Bond Register notice of all defaults known to the Trustees, unless such
defaults shall have been cured or waived before the giving of such notice (the
term "Defaults" for the purposes of this Section 12.02 being hereby defined to
be the events specified in subdivisions (A), (B), (C), (D), (E), (F), (G) and
(H) of Section 12.01 hereof, not including any periods of grace provided for in
said subdivisions and irrespective of the mailing of any written demand
specified in subdivisions (F) and (G) but in the case of any default as
specified in subdivisions (B) and (C) of Section 12.01 hereof, no such notice
shall be given until at least 15 days after the occurrence thereof, and in the
case of any default as specified in subdivisions (F) and (G) of Section 12.01
hereof, no such notice shall be given until at least 30 days after the
occurrence thereof); provided, however, that except in the case of default in
the payment of the principal of or the premium, if any, or the interest on any
of the Bonds, the Corporate Trustee shall be protected in withholding such
notice if and so long as the board of directors, board of trustees, executive
committee, or a trust committee of directors, trustee and/or Responsible
Officers, of the Corporate Trustee in good faith determines that the withholding
of such notice is in the interests of the Bondholders and the Individual Trustee
shall be protected in withholding such notice if and so long as the Individual
Trustee in good faith determines that the withholding of such notice is in the
interests of the Bondholders.
SECTION 12.03. If an Event of Default occurs and is continuing as
defined in Section 12.01 hereof, the Corporate Trustee may and the Holders of
not less than 25% in principal amount of the Bonds at the time Outstanding
hereunder may, by notice in writing given to the Company (and to the Corporate
Trustee if such notice be given by Bondholders) declare the principal of all of
the Bonds hereby secured and the interest accrued thereon immediately due and
payable, and such principal and interest shall thereupon become and be
immediately due and payable; subject, however, to the right of the Holders of a
majority in principal amount of all Outstanding Bonds, by written notice to the
Company and to the Trustees thereafter to consent to a waiver of such past
Default before any final judgment or decree for the payment of the moneys due
shall have been obtained or entered as hereinafter provided or any sale of
Mortgaged and Pledged Property or any material portion thereof shall have been
made and if before such
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judgment, decree or sale all covenants with respect to which Default shall have
been made shall be fully performed or made good to the reasonable satisfaction
Of the Corporate Trustee, and all arrears of interest with interest upon overdue
installments of interest (to the extent that payment of such interest is
enforceable under applicable law) at the interest rate per annum applicable to
the particular series of Bonds and the principal and premium, if any, of all
Outstanding Bonds which shall have become due otherwise than by acceleration
under this Section 12.03 and all sums paid or advanced by the Trustees hereunder
and the reasonable compensation, disbursements, expenses and advances of the
Trustees, their agents and attorneys, and all other indebtedness secured hereby,
except the principal of any Bonds not then due by their terms and except
interest accrued on such Bonds since the last Interest Payment Date, shall be
paid, or the amount thereof shall be paid to the Corporate Trustee for the
benefit of those entitled thereto. Such Default and its consequences shall
thereupon be deemed to have been cured and such declaration of the maturity of
the Bonds shall be void and of no further effect, but no such cure shall extend
to or affect any subsequent Default or impair any right consequent thereon.
SECTION 12.04. Upon the occurrence of one or more Events of Default, as
defined in Section 12.01 hereof, and only for as long as any such Event of
Default shall continue, the Trustees, or either of them, personally or by their,
its or his agents or attorneys, to the extent permitted by law, may, but, shall
not be obligated to, enter into and upon all or any part of the Mortgaged and
Pledged Property, and may exclude the Company and/or any Operating Subsidiary
and their respective agents, employees and other servants wholly therefrom; and
having and holding the same, use, control, operate and manage the Mortgaged and
Pledged Property or any part thereof, and conduct the business of the Company in
respect thereto, either personally, or by its agents or attorneys or by the
Company's and/or the Operating Subsidiary's superintendents, managers, agents,
servants, attorneys, receivers or trustees, in such manner as the Trustees, or
either of them may deem best. Upon every such entry the Trustees, or either
of them, at the expense of the Mortgaged and Pledged Property, if necessary
from time to time, either by purchase, repair or construction, may maintain and
restore the machinery, tools, fixtures, and other property, buildings, bridges
and structures erected upon or provided for use in connection with the
Mortgaged and Pledged Property whereof it shall become possessed as aforesaid;
and likewise, if necessary from time to time, at the expense of the Mortgaged
and Pledged Property, may make all necessary or proper repairs, renewals and
replacements and useful alterations, additions, betterments, and improvements
to and on the Mortgaged and Pledged Property, and purchase or otherwise secure
the use of additional machinery, tools, fixtures and other property for use
thereon, all to the extent permitted by law. To the extent permitted by law and
only for so long as such Event of Default shall continue, the Trustees, or
either of them, shall have the further right to manage the Mortgaged and
Pledged Property and to carry on the business and exercise all rights and
powers of the Company and/or the Operating Subsidiary with respect thereto,
either in the name of the Company and/or the Operating Subsidiary or otherwise,
as the Trustees, or either of them, shall deem best, and shall be entitled to
collect and receive all earnings, income, rents, issues, revenues and profits
of the same and every part thereof. After deducting the expenses of conducting
the business thereof, and of all necessary repairs, maintenance, renewals,
replacements, alterations,
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additions, betterments and improvements, and all payments which may be made for
taxes, assessments, insurance and other proper charges having liens on the
Mortgaged and Pledged Property, or any part thereof, prior to the Lien of this
Indenture, as well as reasonable compensation for its own services and for the
services of its counsel, agents, clerks, servants and other employees, the
Trustees, or either of them, shall apply the balance of the moneys derived from
the operation and management of the Mortgaged and Pledged Property and business
together with Deposited Cash, if any, subject to the Corporate Trustee's
discretion as to timing and the amount of funds to be disbursed, as follows:
(i) if the principal of the Outstanding Bonds shall not have become
due and be unpaid, to the payment of the interest due and unpaid on the
Outstanding Bonds, in the order of the maturity of the installments of
such interest, such payments to be made ratably to the persons entitled
thereto without discrimination or preference;
(ii) if the principal of the Outstanding Bonds shall have become
due by declaration or otherwise, and shall be unpaid, then to the
payment of such principal of and the premium, if any, and the interest
on the Outstanding Bonds, with interest on the overdue principal and (to
the extent that payment of such interest is enforceable under applicable
law) on overdue installments of interest at the interest rate per annum
applicable to the particular series of Bonds; and in case such proceeds
shall be insufficient to pay in full the amounts so due and unpaid, then
to the payment thereof ratably, according to the aggregate of such
principal, premium and interest, without preference or priority as to
any Outstanding Bond over any other Outstanding Bond or of principal,
premium, if any, or interest over principal, premium, if any, or
interest, or of any installment of interest over any other installment
of interest, upon presentation of such Bonds and their surrender if
fully paid, or for proper notation if only partially paid; and
(iii) to the payment of the surplus, if any, to the Company, its
successors or assigns, or to whomsoever may be lawfully entitled to
receive the same, or as a court of competent jurisdiction may direct.
In the event that the Trustees, or either of them, operates the
Mortgaged and Pledged Property pursuant to this Section 12.04, then the Company
shall indemnify and hold the Trustees and either of them harmless from and
against any and all claims, demands, damages, losses, liens, liabilities,
penalties, fines, lawsuits and other proceedings, costs and expenses (including
without limitation reasonable attorneys' fees), arising directly or indirectly
from or out of, or in any way connected with (a) the presence of any Hazardous
Substance on or about the Mortgaged and Pledged Property; or (b) any violation
or alleged violation of any local, state or federal environmental law,
regulation, ordinance or administrative or judicial order relating to Hazardous
Substances on or about or in the Mortgaged and Pledged Property, whether
attributable to events occurring before or after the Trustees', entry upon and
operation of the Mortgaged and Pledged Property. Such indemnification made
herein by the Company shall survive any termination of this Indenture.
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SECTION 12.05. Upon the occurrence of one or more Events of Default, as
defined in Section 12.01 hereof:
(a) At the direction of the Corporate Trustee, the Individual
Trustee, either himself or by such officer or agent as he may appoint in
his discretion, with or without entry if, and to the extent permitted by
law, may but shall not be obligated to sell, subject to any prior liens
thereon, to the highest bidder, all the Mortgaged and Pledged Property,
or any portion thereof, and all right, title and interest therein, in
one parcel or as separate parcels, as the Trustees, in their discretion,
deem in the best interests of the Holders of the Outstanding Bonds,
which sale or sales shall be made at public auction at such time and
place and upon such terms as the Trustees, or either of them, may fix
and briefly specify in the notice of sale to be given as hereinafter
provided in Section 12.06; and
(b) The Trustees, or either of them, by such officer or agent as
they may appoint in their, its or his discretion, with or without entry,
may proceed to protect and enforce their, its, or his rights and the
rights of holders of the Outstanding Bonds by a suit or suits in equity
or at law, whether for the specific performance of any covenant or
agreement contained herein, or in aid of the execution of any power
herein granted, or for the foreclosure of this Indenture, or for the
enforcement of any other appropriate legal or equitable remedy, as the
Trustees, or either of them, shall deem most effectual to protect and
enforce any of their, its or his rights or duties and the rights of
Holders of the Outstanding Bonds.
Upon the written request of the Holders of a majority in principal
amount of the then Outstanding Bonds, in case an Event of Default shall have
occurred and be continuing as aforesaid, subject to Sections 16.02 and 16.06, it
shall be the duty of the Trustees, or either of them, upon being indemnified as
provided in Section 12.21, to exercise such one or more of the remedies
available for the protection and enforcement of their rights and the rights of
the Bondholders (including the exercise of the powers of entry or sale herein
conferred, or the taking of appropriate judicial proceedings by action, suit or
otherwise) as the Trustees, or either of them, shall deem best.
SECTION 12.06. Notice of any sale pursuant to any provision of this
Indenture shall state the time and place of said sale, and shall contain a brief
general description of the property or properties to be sold, and shall be
sufficiently given if published once in each week for three successive weeks
prior to such sale in a Daily Newspaper in Nashville, Tennessee, New York, New
York and in the relevant area in which the parcel or parcels proposed to be sold
are situated, and in such other manner as may be required by law.
SECTION 12.07. The Trustees, or either of them, from time to time for
good cause may adjourn any sale to be made under the provisions of this
Indenture, by announcement at the time and place appointed for such sale, or for
such adjourned sale or sales, and without further notice or publication (unless
otherwise required by law), such sale may be made at any time or place to which
the same shall be so adjourned.
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SECTION 12.08. Upon the completion of any sale or sales under this
Indenture, the Trustees, or either of them, or the court officer conducting the
sales shall execute and deliver to the purchaser or purchasers a good and
sufficient bill or bills of sale and deed or deeds of conveyance of the property
sold. The Company agrees, and will cause the Operating Subsidiaries to agree,
that the Trustees, or either of them, and their, its or his successors (i) are
hereby irrevocably appointed the true and lawful attorneys of the Company and
the Operating Subsidiaries in its and their name and stead to execute and
deliver all necessary deeds, bills of sale and conveyances of the Mortgaged and
Pledged Property, and (ii) may substitute one or more persons with like power,
the Company and the Operating Subsidiaries hereby ratifying and confirming all
that their said attorney or attorneys or such substitute or substitutes, shall
lawfully do by virtue hereof. The Company further agrees, and will cause the
Operating Subsidiaries to agree, that the Company and the Operating
subsidiaries, if so requested by the Trustees, or either of them, shall ratify
such sale by executing and delivering such deeds of conveyance, bills of sale or
other instruments of assignment and transfer, as in the judgment of the
Trustees, or either of them, may be advisable.
SECTION 12.09. To the extent permitted by law, any such sale or sales
made under or by virtue of this Indenture, whether under the power of sale
hereby granted and conferred, or under or by virtue of any judicial proceedings,
shall operate to divest all right, title, interest, claim and demand whatsoever,
either at law or in equity, of the Compare and/or any of the Operating
Subsidiaries, of, in and to the premises and property sold, and shall be a
perpetual bar, both at law and in equity, against the Company and/or any of the
Operating Subsidiaries, its or their successors and assigns, and against any and
all persons claiming the premises and property sold, or any part thereof, from
through or under the Company and/or any of the Operating Subsidiaries, its or
their successors or assigns.
SECTION 12.10. No remedy herein conferred upon or reserved to the
Trustees, or either of them, or the Bondholders is intended to be exclusive of
any other right or remedy, but each and every such right or remedy shall be
cumulative, and shall be in addition to every other remedy given hereunder as
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
No delay or omission to exercise any right or power accruing upon any
Event of Default, as defined in Section 12.01 hereof, shall impair any such
right or power or shall be construed to be a waiver of any such Event of Default
or an acquiescence therein; and every such right and power may be exercised from
time to time and as often as may be deemed expedient.
No waiver of any Event of Default, as defined in Section 12.01 hereof,
whether by the Trustees or by the Bondholders, shall extend to or shall affect
any subsequent Event of Default or shall impair any rights or remedies
consequent thereon.
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SECTION 12.11. The holders of not less than a majority in principal
amount of the Bonds at the time Outstanding hereunder may direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustees, or either of them, or exercising any trust or power conferred upon the
Trustees, or either of them; provided, however, that such direction shall not be
otherwise than in accordance with the provisions of law and this Indenture and
the Trustees, or either of them, may take any other action deemed proper by
them, or either of them, which is not inconsistent with such direction.
SECTION 12.12. Upon application of the Trustees, or either of them, to
any court of competent jurisdiction, if an Event of Default shall have occurred
and so long as it shall be continuing, to the extent permitted by law, a
receiver may be appointed to take possession of, and to operate, maintain and
manage the Mortgaged and Pledged Property or any part thereof; and in every case
when a receiver of the whole or of any part of said property shall be appointed
under this Section 12.12, or otherwise, the net income and profits of the
Mortgaged and Pledged Property shall be paid over to, and shall be received by,
the Trustees, or either of them, for the benefit of the holders of the
Outstanding Bonds to be applied as provided in Section 12.04; provided, however,
that, notwithstanding the appointment of any such receiver, the Corporate
Trustee shall be entitled to retain control of, and to collect all interest and
dividends or earnings on, any shares of stock, cash, bonds and other obligations
which may have been pledged with it as security hereunder. The provisions of
this Section 12.12 are subject to the condition that, if at any time after the
appointment of a receiver, all accrued and unpaid interest upon all Outstanding
Bonds, and the principal and premium, if any, of any Outstanding Bonds which
shall have become due otherwise than by acceleration under Section 12.03, and
the reasonable charges and expenses of the Trustees and their agents and
attorneys and of any receiver shall either be paid by or on behalf of the
Company or be collected out of the income of the Mortgaged and Pledged Property,
or be provided for by the deposit with the Corporate Trustee of a sum sufficient
to pay the same, and all other Events of Default made good to the reasonable
satisfaction of the Corporate Trustee, then and in every such case to the extent
permitted by law such receiver of all or a portion of the Mortgaged and Pledged
Property shall cease to act as such and such appointment shall be of no further
force and effect and all Events of Default shall be deemed to be cured, but no
such cure or avoidance shall extend or affect any subsequent Default or impair
any right consequent thereon.
SECTION 12.13. Upon any sale being made either under the power of sale
hereby given or pursuant to any judicial proceedings for the foreclosure or
otherwise for the enforcement of this Indenture, the principal of all Bonds then
secured hereby, if not previously due, shall become and be immediately due and
payable.
SECTION 12.14. Upon any sale made either under the power of sale hereby
given or pursuant to any judicial proceedings for foreclosure or otherwise for
the enforcement of this Indenture, any Bondholder or Bondholders or the Trustees
may bid for and purchase the Mortgaged and Pledged Property or any part thereof
and upon compliance with the terms of sale may hold, retain and possess and
dispose of such property in his, their or its own absolute right without further
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accountability, and, for the purpose of making settlement or payment for the
property or properties purchased, any purchaser at any such sale may, in paying
the purchase money, apply any of the Bonds Outstanding hereunder and any matured
and unpaid interest obligations hereby secured, to the extent herein set forth;
such purchaser shall present such Bonds in order that there may be credited as
paid thereon the sums payable out of the net proceeds of such sale to the owner
of such Bonds as his proportionate share of such net proceeds; and such
purchaser shall be credited on account of the purchase price payable by him with
the sums payable out of such net proceeds which shall be applicable to the
payment of and which shall have been credited upon the Bonds so presented.
SECTION 12.15. Upon any sale made either under the power of sale hereby
given or pursuant to judicial proceedings for the foreclosure or otherwise for
the enforcement of this Indenture, the receipt of the Trustees or of the officer
making such sale shall be a sufficient discharge to the purchaser or purchasers
at any sale for his or their purchase money and such purchaser or purchasers,
his or their assigns or personal representatives, shall not, after paying such
purchase money and receiving such receipt of the Trustees or of such officer
therefor, be obliged to see to the application of such purchase money, or be in
any way answerable for any loss, misapplication or nonapplication thereof.
SECTION 12.16. The purchase money or proceeds of any sale made either
under the power of sale hereby given, or pursuant to judicial proceedings for
the foreclosure or otherwise for the enforcement of this Indenture, shall be
applied, as follows:
First. To the payment of all taxes, assessments, governmental
charges, Permitted Encumbrances and liens prior to the Lien of this
Indenture, except those subject to which such sale shall have been made,
and all of the costs and expenses of such sale, including reasonable
compensation to the Trustees, their agents and its attorneys, and of all
other sums payable to the Trustees hereunder by reason of any expenses
or liability incurred or advances made in connection with the management
or administration of the trusts hereby created;
Second. To the payment in full of the amounts then due and unpaid
for the principal of and the premium, if any, and the interest on the
Outstanding Bonds, with interest on the overdue principal and (to the
extent that payment of such interest is enforceable under applicable
law) on overdue installments of interest at the interest rate per annum
applicable to the particular series of Bonds; and in case such proceeds
shall be insufficient to pay in full the amounts so due and unpaid, then
to the payment thereof ratably, according to the aggregate of such
principal, premium and interest, without preference or priority as to
any Outstanding Bond over any other Outstanding Bond or of principal,
premium, if any, or interest over principal, premium, if any, or
interest, or of any installment of interest over any other installment
of interest, upon presentation of such Bonds and their surrender if
fully paid, or for proper notation if only partially paid; and
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Third. Any surplus thereof remaining to the Company, its successors
or assigns or to whosoever may be lawfully entitled to receive the same,
or as a court of competent jurisdiction may direct.
SECTION 12.17. To the extent that such rights may then lawfully be
waived, neither the Company nor any Operating Subsidiary nor any one claiming
through or under it or them shall or will insist upon, or plead, or in any
manner whatsoever, claim, or seek to take advantage of any appraisement,
valuation, stay, extension or redemption laws now or hereafter in force in any
locality where any of the Mortgaged and Pledged Property may be situated, in
order to prevent or hinder the enforcement of foreclosure of this Indenture, or
the absolute sale of the Mortgaged and Pledged Property, or the final and
absolute putting into possession thereof immediately after such sale, of the
purchaser or purchasers thereat, but the Company, for itself and all Operating
Subsidiaries and all who may claim through or under it or them, hereby waive, to
the extent that it or they lawfully may do so, the benefit of all such laws and
all right of appraisement and redemption (statutory or otherwise) or any equity
of redemption to which it or they may be entitled under the laws of any
jurisdiction where any of the Mortgaged and Pledged Property may be situated.
The Company, for itself and all Operating Subsidiaries and all who may claim
through or under it or them, waives to the extent that it or they lawfully made
do so, any and all right to have the estates comprised in the security intended
to be created hereby marshalled upon any foreclosure of the Lien of this
Indenture, and agrees that any court having jurisdiction to foreclose such Lien
may sell the Mortgaged and Pledged Property in part or as an entirety.
SECTION 12.18. (A) The Company covenants that (a) in case default shall
be made in the payment of any installment of interest upon any of the Bonds as
and when the same shall become due and payable, and such default shall have
continued for a period of 15 days, or (b) in case default shall be made in the
payment of the principal of, and premium, if any, on, any of the Bonds as and
when the same shall have become due and payable at maturity, then upon demand of
the Trustees, or either of them, the Company will pay to the Trustees, or either
of them, for the benefit of the Holders of the Bonds, the whole amount that then
shall have become due and payable on all such Bonds for principal, and premium,
if any, and interest, with interest upon the overdue principal, and premium, if
any, and (to the extent that payment of such interest is enforceable under
applicable law) upon the overdue installments of interest at the respective
applicable rates borne by the Bonds of the particular series; 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 Trustees, or either of them, their, its or
his agents and counsel.
In case the Company shall fail to pay the same forthwith upon such
demand, the Trustees, or either of them, in their, its or his own names or name
and as trustees or trustee of an express trust, may institute a judicial
proceeding for the collection of the sums so due and unpaid, and may prosecute
such proceeding to judgment or final decree, and may enforce the same against
the Company or any other obligor upon the Bonds and collect the moneys adjudged
or decreed to be payable in the manner provided by law out of the property of
the Company or any other obligor upon the Bonds, wherever situated.
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(B) If an Event of Default occurs and is continuing, the Trustees, or
either of them, may in the exercise of discretion proceed to protect and
enforce their, its or his rights and the rights of the Bondholders by such
appropriate judicial proceedings as deemed most effectual to protect and
enforce any such rights, whether for the specific enforcement of any covenant
or agreement in this Indenture or in aid of the exercise of any power granted
herein, or to enforce any other proper remedy.
(C) In case of a sale of the Mortgaged and Pledged Property or any part
thereof, the Trustees, or either of them, in their, its or his name and as
trustees or trustee of an express trust, shall be entitled to enforce payment
of, and to receive, all amounts then remaining due and unpaid upon any and all
of the Bonds, for the benefit of the Holders thereof, and shall be entitled to
institute and prosecute any action and enforce any judgment or final decree as
aforesaid for any portion of the said debt remaining unpaid, to the extent
permitted by law. No judgment or decree obtained by the Trustees, or either of
them, and no levy of any execution upon the Mortgaged and Pledged Property, or
upon any other property, shall in any manner, or to any extent, affect the Lien
of this Indenture upon the Mortgaged and Pledged Property, or any part thereof,
or any lien, rights, powers or remedies of the Trustees, or either of them,
hereunder, or any lien, rights, powers or remedies of the Bondholders, but such
lien, rights, powers and remedies shall continue unimpaired as before, except
as otherwise provided by law. Nothing in this paragraph herein contained shall
be construed as entitling the Trustees, or either of them, to recover more than
the amounts then due and unpaid upon the Outstanding Bonds, plus costs and
expenses reasonably incurred in the proceedings resulting in the collection of
moneys.
(D) Any moneys collected by the Trustees, or either of them, under this
Section 12.18 shall be applied by the Trustees:
FIRST. To the payment of the costs and expenses reasonably incurred
(including any sums due the Trustees) in the proceedings resulting in the
collection of such moneys.
SECOND. To the payment of the amounts then due and unpaid upon the
Outstanding Bonds for principal of and the premium, if any, and the
interest on the Outstanding Bonds, with interest on the overdue principal
and (to the extent that payment of such interest is enforceable under
applicable law) on overdue installments of interest at the interest rate
per annum applicable to the particular series of Bonds; and in case such
proceeds shall be insufficient to pay in full the amounts so due and
unpaid, then to the payment thereof ratably, according to the aggregate of
such principal, premium and interest, without preference or priority as to
any Outstanding Bond over any other Outstanding Bond or of principal,
premium, if any, or interest over principal, premium, if any, or interest,
or of any installment of interest over any other installment of interest,
upon presentation of such Bonds and their surrender if fully paid, or for
proper notation if only partially paid.
SECTION 12.19. All rights of action and claims under this Indenture or the
Bonds may be prosecuted and enforced by the Trustees, or either of them,
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without the possession of any of the Bonds or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the
Trustees, or either of them, shall be brought in their, its or his own name as
trustees or trustee of an express trust, and any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustees, or either of them, their, its or
his agents and counsel, be for the ratable benefit of the holders of the
Outstanding Bonds in respect of which such judgment has been recovered.
SECTION 12.20. The Trustees, or either of them (irrespective of whether
the principal of the Bonds shall then be due and payable as therein expressed
and irrespective of whether the Trustees, or either of them, shall have made
any demand for such payment), may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustees, or either of them, and of the Bondholders allowed in any judicial
proceedings relative to the Company and/or an Operating Subsidiary or their
respective creditors or property. In case of any receivership, insolvency,
bankruptcy, reorganization or other similar proceedings affecting the Company
and/or an Operating Subsidiary or their respective property, the Trustees, or
either of them, (irrespective of whether the principal of the Bonds shall then
be due and payable and irrespective of whether the Trustees, or either of them,
shall have made any demand for such payment) shall be entitled and empowered
either in their, its or his own name or as trustees or trustee of an express or
as attorney in fact for the Holders of the Bonds, or in any one or more of such
capacities, to file a proof of claim for the whole amount of principal and
interest (with interest upon such overdue principal and, to the extent that
payment of such interest is enforceable under applicable law, upon overdue
installments of interest at the interest rate per annum applicable to the
particular series of Bonds) and any premium which may be or become owing and
unpaid in respect of the Bonds and to file such other papers or documents as
may be necessary or advisable in order to have the claims of the Trustees, or
either of them (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustees, or either of them, their, its or
his agents and counsel) and of the Bondholders allowed in any such proceedings
and to collect and receive any moneys or other property payable or deliverable
on any such claims and to distribute the same; and any receiver, assignee,
trustee, liquidator, sequestrator (or other similar official) in any such
judicial proceeding is hereby authorized by each Bondholder to make such
payments to the Trustees, or either of them, and in the event that the Trustees
shall consent to the making of such payments directly to the Bondholders, to
pay to the Trustees, or either of them, any amount due the Trustees, or either
of them, for the reasonable compensation, expenses, disbursements and advances
of the Trustees, or either of them, their agents and counsel, and any other
amounts due the Trustees, or either of them, under Section 16.08.
Nothing herein contained shall be deemed to authorize the Trustees, or
either of them, to authorize or consent to or accept or adopt on behalf of any
Bondholder any plan of reorganization, arrangement, adjustment or composition
affecting the Bonds or the rights of any Holder thereof, or to authorize the
Trustees, or either of them, to vote in respect of the claim of any Bondholder
in any such proceeding.
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The Trustees, to the extent permitted by law, shall be entitled to sue and
recover judgment and/or to file and prove such claim as aforesaid either before
or after or during the pendency of any Proceedings for the enforcement of the
Lien of this Indenture upon the Mortgaged and Pledged Property.
SECTION 12.21. No Bondholder shall have any right to institute any suit,
action or proceeding in equity or at law for the foreclosure of this Indenture,
or for the execution of any trust hereunder, including the appointment of a
receiver or trustee, or for any other remedy hereunder, unless (a) such holder
previously shall have delivered to the Trustees written notice that one or more
Events of Default, which Events of Default shall be specified in such notice,
has occurred and is continuing, and (b) the holders of not less than 25% in
principal amount of the then Outstanding Bonds shall have requested the
Trustees in writing and shall have afforded to them reasonable opportunity
either to proceed to exercise the powers hereinbefore granted, or to institute
such action, suit or proceeding in its own name, and (c) one or more
Bondholders shall have offered to the Trustees adequate security and indemnity,
satisfactory to them, against the costs, expenses and liabilities to be
incurred therein or thereby and the Trustees, or either of them, shall have
refused or neglected to act on such notification, request and offer of
indemnity for at least 60 days and no direction inconsistent with such
notification shall have been given to the Trustees by holders of not less than
a majority in principal amount of the Outstanding Bonds; and such notification,
request and offer of indemnity are hereby declared, in every such case, at the
option of the Trustees, or either of them, to be conditions precedent to the
exercise of the powers and trusts of this Indenture and to any action or cause
of action for foreclosure, including the appointment of a receiver or trustee,
or for any other remedy hereunder; it being understood and intended that no
Bondholder shall have any right in any manner whatsoever by his action to
affect, disturb or prejudice the rights of any other Holder or the Lien of this
Indenture, or obtain or seek to obtain priority or preference over any other
holder, or to enforce any right hereunder, except in the manner herein provided
to the extent permitted by law, and that all proceedings at law or in equity
shall be instituted, had or maintained in the manner herein provided, and for
the equal and ratable benefit of all holders of the Outstanding Bonds.
SECTION 12.22. Notwithstanding any other provision of this Indenture, the
right of any holder of any Bond to receive payment of the principal of,
premium, if any, and interest on such Bond, on or after the respective Stated
Maturities expressed in such Bond, or to institute suit for the enforcement of
any such payment on or after such respective Stated Maturities, shall not be
impaired or affected without the consent of such holder, except that no
Bondholder may institute any such suit if and to the extent that the
institution or prosecution thereof or the entry of judgment therein would,
under applicable law, result in the surrender, impairment, waiver, or loss of
the Lien of this Indenture upon any property subject hereto.
SECTION 12.23. All parties to this Indenture agree, and each holder of any
Bond 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 Trustees, or
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either of them, for any action taken or omitted by them, it or him, 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 to the extent permitted by law the provisions of
this Section 12.23 shall not apply to any suit instituted by the Trustees, or
either of them, to any suit instituted by any Bondholder or group of
Bondholders holding in the aggregate more than 10% in aggregate principal
amount of the outstanding Bonds, or to any suit instituted by any Bondholder
for the enforcement of the payment of the principal of, premium, if any, or
interest on any Bond on or after the respective Stated Maturities expressed in
such Bond (or, in the case of redemption, on or after the Redemption Date).
SECTION 12.24. To the extent that any provision of this Article 12 may be
invalid or unenforceable under any applicable law with respect to any of the
Mortgaged and Pledged Property, such provision shall be deemed inoperative and
inapplicable and shall not be included in the terms of this Indenture.
SECTION 12.25 The Company and any Operating Subsidiary may waive any
period of grace provided for in this Article 12.
SECTION 12.26. In case the Trustees or any Bondholder shall have proceeded
to enforce any right or remedy under this Indenture by foreclosure, entry or
otherwise, and such proceedings shall have been discontinued or abandoned for
any reason, or shall have been determined adversely to the Trustees or to such
Bondholder, then and in every such case the Company, the Trustees and the
Bondholders, subject to any determination in such proceedings, shall be
restored severally and respectively to their former positions and rights
hereunder, and thereafter all rights, remedies and powers of the Trustees and
Bondholders shall continue as if no such proceedings had been instituted.
SECTION 12.27. The holders of not less than the required percentage in
principal amount of the Outstanding Bonds specified in Section 12.03 may on
behalf of the holders of all the Bonds waive any past Default hereunder and its
consequences, except a Default:
(1) in the payment of the principal of (or premium, if any) or
interest on any Bond, or
(2) in respect of a covenant or provision hereof which under Article
19 cannot be modified or amended without the consent of the holder of each
Outstanding Bond affected.
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
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ARTICLE 13.
EVIDENCE OF RIGHTS OF BONDHOLDERS AND OWNERSHIP OF BONDS
SECTION 13.01. Prior to due presentment for registration of transfer of
any Bond, the Company, the Trustees, or either of them, any Bond Registrar, or
any agent of the Company, the Trustees or of either of them may deem and treat
the person in whose name any Bond shall be registered at any given time upon
the Bond Register as the absolute owner of such Bond for the purpose of
receiving any payment of, or on account of, the principal, premium, if any, and
interest on such Bond and for all other purposes whether or not such Bond be
overdue; and neither the Company nor the Trustees, nor either of them, nor any
agent of the Company, the Trustee or either of them shall be bound by any
notice to the contrary. All such payments made in accordance with the
provisions of this Section 13.01 shall be valid, and, to the extent of the sum
or sums so paid, effectual to satisfy and discharge the liability for moneys
payable upon any such Bond.
ARTICLE 14.
IMMUNITY OF ORGANIZERS, SUBSCRIBERS TO THE UNITS,
LIMITED PARTNERS, OFFICERS AND DIRECTORS
SECTION 14.01. No recourse under or upon any obligation, covenant or
agreement contained in this Indenture (including any indenture supplemental
hereto) or in any Bond or because of the creation of any indebtedness hereby
secured, shall be had against any organizer, any past, present or future
subscriber to the Units, any limited partner, any officer or any director of
the Company or any Subsidiary or of any predecessor or successor corporation or
limited partnership, as such, either directly or through the Company or any
Subsidiary or any predecessor or successor corporation or limited partnership,
under any rule of law, statute or constitution or by the enforcement of any
assessment or by any legal or equitable proceeding or otherwise; it being
expressly agreed and understood that this Indenture and the obligations hereby
secured are solely partnership obligations, and that no such personal liability
shall attach to, or be incurred by, any such organizer, subscriber to the
Units, limited partner, officer or director of the Company or any Subsidiary or
of any predecessor or successor corporation or limited partnership, or any of
them, as such, because of the incurring of the indebtedness hereby authorized,
or under or by reason of any of the obligations, covenants or agreements
contained in this Indenture or in any of the Bonds or implied therefrom, and
that any and all such personal liability of every name and nature, and any and
all such rights and claims against every such organizer, subscriber to the
Units, limited partner, officer or director, as such, whether arising at common
law or in equity, or created by rule of law, statute, constitution or
otherwise, are expressly released and waived as a condition of, and as part of
the consideration for, the execution of this Indenture and the issue of the
Bonds and interest obligations secured hereby.
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ARTICLE 15.
CONSOLIDATION, MERGER, CONVEYANCE AND LEASE
SECTION 15.01. Notwithstanding the provisions of Section 6.08 or any other
provision of this Indenture, subject to the satisfaction of the conditions set
forth in this Article 15. and further subject to the provisions of Section
9.05, if applicable, nothing shall prevent the consolidation or merger of the
Company or any Subsidiary with or into any other limited partnership or limited
partnerships or corporations lawfully entitled to acquire and operate all of
the Mortgaged and Pledged Property, or shall prevent any sale, conveyance or
lease of all or substantially all of the property of the Company or any
Subsidiary to another person or persons, or shall prevent successive
consolidations, mergers, sales, conveyances or leases to which the Company or
any Subsidiary or any successor limited partnership or corporation shall be a
party; provided, however, (1) that upon any such consolidation or merger of the
Company and upon any such sale, conveyance or lease, the consolidated limited
partnership or the surviving or acquiring companies or limited partnerships, or
the transferee or lessee, as the case may be, shall execute prior to, or
contemporaneously with, such transaction such instruments as in the Opinion of
Counsel referred to in Section 15.03 are necessary or advisable to evidence the
assumption by such consolidated limited partnership or the surviving or
acquiring companies or limited partnerships, or transferee or lessee, as the
case may be, of the due and punctual payment of the principal of, premium, if
any, and interest on the Bonds and the due and punctual performance and
observance of all the covenants and obligations of the Company under this
Indenture; (2) that such transaction shall not disturb the continuance of the
Lien of this Indenture on all the Mortgaged and Pledged Property; and (3) that
immediately after giving effect to any such transaction, no Default or Event of
Default shall have occurred and be continuing.
SECTION 15.02. In case the Company pursuant to Section 15.01 shall be
consolidated or merged with any other limited partnership or corporation other
than where the Company is the survivor or the Company shall convey, transfer or
lease, subject to this Indenture, all or substantially all of its property, any
such successor limited partnership or corporation formed by such consolidation,
or into which the Company shall have been merged, or which shall have received
a conveyance, transfer or lease as aforesaid, upon executing, and causing to be
recorded, an indenture supplemental hereto, satisfactory to the Corporate
Trustee, whereby such successor limited partnership, limited partnerships,
corporation or corporations shall assume the due and punctual payment of the
principal of, premium, if any, and interest on, the Bonds and the performance
of all the covenants and conditions of this Indenture, shall succeed to all
rights, powers and privileges hereunder accruing to or vesting in, the Company,
with the same effect as if it or they had been named herein as the Company in
the first paragraph of this Indenture, and, if, after such conveyance or
transfer, the person named as the Company in the first paragraph of this
instrument or any Successor which shall theretofore have become such in the
manner prescribed in this Article 15, is to be voluntarily dissolved, such
person shall thereupon be released from all obligations hereunder and under the
Bonds. No such lease, however, shall have the effect of relieving the person
named as the Company in
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the first paragraph of this Indenture or any successor which shall theretofore
have become such in the manner prescribed in this Article 15, from its
liability under this Indenture or as obligor and maker of any of the Bonds.
Such successor limited partnership, limited partnerships, corporation or
corporations thereupon may cause to be signed and may issue, either in its or
their own name or in the name of the Company, any or all of the Bonds which
shall not theretofore have been signed on behalf of the Company and
authenticated by the Corporate Trustee; and, upon the request by two Executive
officers of said successor corporation, corporations, limited partnership or
limited partnerships in lieu of the Company, and subject to all the terms,
conditions and restrictions herein prescribed, the Corporate Trustee shall
authenticate and deliver any of such Bonds which shall have been previously
signed and delivered by the officers of the Company to the Corporate Trustee
for authentication and any of such Bonds which such successor limited
partnership or corporation shall thereafter cause to be signed and delivered to
the Corporate Trustee for that purpose.
Every such successor limited partnership or corporation shall possess and
from time to time may exercise each and every right and power hereunder of the
Company, in its name or otherwise.
SECTION 15.03. The Company covenants and agrees that no consolidation or
merger of the Company and no sale, conveyance or lease of the Company's
property as a whole or substantially as a whole, to which the Company or any
successor limited partnership or corporation shall be a party, shall be made or
effected, unless the provisions of this Article 15 shall have been complied
with, and unless there shall have been delivered to the Corporate Trustee an
Officers' Certificate and an Opinion of Counsel that such consolidation,
merger, sale, conveyance or lease as well as the supplemental indenture, and
any other document relating thereto complies in all respects with the
conditions precedent herein provided for relating to such transaction.
SECTION 15.04. Notwithstanding the foregoing, the transactions
contemplated by Article 15 are subject to the redemption provisions of Section
9.05, if applicable.
ARTICLE 16.
CONCERNING THE TRUSTEES
SECTION 16.01. There shall at all times be a Corporate Trustee hereunder
which shall be a banking 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 subject to supervision or examination by Federal or
State authority, or any affiliate of such a banking corporation, which also is
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 $10,000,000
subject to supervision or examination by Federal or State authority. If such
corporation
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publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purposes of this Section 16.01 the combined capital and surplus of the
Corporate Trustee 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
Corporate Trustee shall cease to be eligible in accordance with the provisions
of this Section 16.01, it shall resign immediately in the manner and with the
effect hereinafter specified in this Article 16.
Any individual Trustee appointed in succession to the original Individual
Trustee shall always be an individual or, to the extent permitted by law, 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 subject
to supervision or examination by Federal or State authority, or any affiliate
of such a banking corporation, which also is 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 $10,000,000 subject to supervision or
examination by Federal or State authority. If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of the aforesaid supervising or examining authority, then for the purposes of
this Section 16.01 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 a corporate Individual
Trustee shall cease to be eligible in accordance with the provisions of this
Section 16.01, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article 16.
SECTION 16.02. The Trustees, and each of them, accept the trusts hereby
created upon the terms and conditions in this Indenture specified, to all of
which the Company and the holders of Outstanding Bonds by their acceptance
thereof agree:
(A) Except during the continuance of an Event of Default,
(1) the Trustees; and each of them, undertake 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 Trustees, or either of them, and;
(2) in the absence of bad faith on its part, the Trustees, or
either of them, may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein,
upon certificates or opinions furnished to them, him or it, and
conforming to the requirements of this Indenture; but in the case of
any such certificates or opinions which by any provision hereof are
specifically required to be furnished to the Trustees, or either of
them, the Trustee to which the same is furnished shall be under a
duty to examine the same to determine whether or not they conform to
the requirements of this Indenture.
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(B) In case an Event of Default has occurred and is continuing,
the Trustees, or either of them, shall exercise such of the rights
and powers vested in them, it or him by this Indenture, and use the
same degree of care and skill in their exercise, as a prudent man
would exercise or use under the circumstances in the conduct of his
own affairs.
(C) No provision of this Indenture shall be construed to relieve
the Trustees, or either of them, from liability for their, its or his
own negligent action, their, its or his own negligent failure to act,
or their, its or his own willful misconduct, except that
(1) this subdivision shall not be construed to limit the
effect of subdivision (A) of this Section;
(2) the Corporate Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer and the
Individual Trustee shall not be liable for any error of judgment
made in good faith by him unless it shall be proved that the
Corporate Trustee or Individual Trustee, as the case may be, was
negligent in ascertaining pertinent facts;
(3) the Trustees, or either of them, shall not be liable
with respect to any action taken or omitted to be taken by them,
it or him in good faith in accordance with the direction of the
holders of not less than a majority in principal amount of the
Bonds at the time Outstanding relating to the time, method, and
place of conducting any proceeding for any remedy available to
the Trustees, or either of them, or exercising any trust or
power conferred upon the Trustees, or either of them, under this
Indenture; and
(4) none of the provisions contained in this Indenture
shall require the Trustees, or either of them, to expend or risk
their, its or his own funds or otherwise incur any financial
liability in the performance of any of their, its or his duties
hereunder or in the exercise of any of their, its or his rights
or powers, if there is reasonable ground for believing that the
repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to them, it or him, as
the case may be; and
(5) the permissive right of the Trustees to do things
enumerated in this Indenture shall not be construed as a duty,
and the Trustees shall not be answerable for other than their
negligence or willful default.
(D) Whether or not therein expressly so provided, every
provision of this Indenture relating to the conduct or affecting the
liability of or affording protection to the Trustees, or either of
them, shall be subject to the provisions of this Section.
(E) The Trustees shall not be required to take notice or be
deemed to have notice of any Event of Default hereunder except
failure by the
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Company to cause to be made any of the payments to the Corporate Trustee
required to be made to the Corporate Trustee by any provision hereof or
failure by the Company to file with the Corporate Trustee any document
required by this Indenture to be so filed subsequent to the issuance of
the Bonds, unless the Trustees shall be specifically notified in writing
of such Default by the Company or by the owners of at least 25% in
aggregate principal amount of Outstanding Bonds, and all notices or other
instruments required by this Indenture to be delivered to the Trustees,
must, in order to be effective, be delivered at the main office of the
Corporate Trustee, and in the absence of such notice so delivered the
Trustees may conclusively assume there is no Event of Default except as
aforesaid.
SECTION 16.03. The recitals contained herein and in the Bonds (except as
contained in the Corporate Trustee's certificate of authentication) shall be
taken as the statements of the Company, and the Trustees, or either of them,
assume no responsibility for the correctness of the same. The Trustees, or
either of them, make no representations as to the value of the Mortgaged and
Pledged Property or any part thereof, or as to the title of the Company
thereto, or as to the validity or adequacy of the security afforded thereby and
hereby, or as to the validity or sufficiency of this Indenture or of any
Mortgage or of the Bonds issued hereunder. The Trustees, or either of them,
shall be under no responsibility or duty with respect to the disposition of any
Bonds authenticated and delivered hereunder or the application or use of the
proceeds thereof or the application or use of any moneys paid to the Company
under any of the provisions hereof.
SECTION 16.04. Either of the Trustees, the paying agent, the Bond
Registrar or any Bond Co-Registrar or other agent of the Company or of the
Trustees in their, its or his individual or any other capacity, may become the
owner or pledgee of Bonds and, subject to Sections 16.09 and 16.10, if
operative, may otherwise deal with the Company with the same rights it or he
would have if it or he were not a Trustee, paying agent, Bond Registrar, Bond
Co-Registrar or other agent of the Company or of the Trustees.
SECTION 16.05. No Trustee hereunder shall be personally liable by reason
of any act or omission of any other Trustee hereunder.
Any notice, request or other writing, by or on behalf of the Holders of
the Bonds delivered to the Corporate Trustee, or its successor in the trust
hereunder, shall be deemed to have been delivered to all of the then Trustees
as effectually as if delivered to each of them.
SECTION 16.06. To the extent permitted by Section 16.02 hereof:
(A) The Trustees and each of them may rely and shall be protected in
acting upon any resolution, certificate, opinion, notice, request,
consent, order, appraisal, report, Bond or other paper or document
believed by them, it or him to be genuine and to have been signed or
presented by the proper party or parties;
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(B) The Trustees and each of them may consult with counsel, who may
be of counsel to the Company, and the written advice of such counsel or
any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken or suffered by them, it or him
hereunder in good faith and in reliance thereon;
(C) Any request or direction of the Company mentioned herein shall be
sufficiently evidenced by an Application or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Certified Resolution;
(D) Whenever in the administration of this Indenture the Trustees, or
either of them, shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting any action hereunder,
the Trustees and each of them (unless other evidence be herein
specifically prescribed) may, in the absence of bad faith, rely upon an
Officers' Certificate;
(E) The Trustees, or either of them, shall be under no obligation to
exercise any of the rights or powers vested in them, it or him by this
Indenture at the request or direction of any of the Holders pursuant to
this Indenture, unless such Holders shall have offered to the Trustees, or
either of them, as the case may be, reasonable security or indemnity
against the costs, expenses and liabilities which might be incurred, as
the case may be, in compliance with such request or direction;
(F) The Trustees, or either of them, shall not be bound to make any
investigation into the facts or matters stated in any such document set
forth in Section 16.06(A), but the Trustees, or either of them, in their
exercise of discretion, may make such further inquiry or investigation
into such facts or matters as may seem necessary, and, if the Trustees, or
either of them, shall determine to make such further inquiry or
investigation, the Trustees, or either of them, shall be entitled to
examine the books, records and premises of the Company, personally or by
agent or attorney;
(G) The Trustees, or either of them, 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 Trustees, or either of them, shall not
be responsible for any misconduct or negligence on the part of any agent
or attorney appointed with due care hereunder; and
(H) The Trustees shall not be required to give any bond or surety in
respect of the execution of the said trusts and powers or otherwise in
respect of the premises.
SECTION 16.07. Subject to the provisions of Section 20.02 and 20.03
hereof, all moneys received by the Trustees, or either of them, hereunder or in
respect of the Bonds shall, until used or applied as herein provided, be held
in trust for the purposes for which they were received, but need not be
segregated from other funds except to the extent required by law.
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Any interest allowed on or income or other return arising from any such
moneys shall be paid from time to time to the Company upon Company Order in
accordance with the provisions hereof; provided, however, that no such
interest, income or return shall be paid to the Company during any period
during which an Event of Default has occurred and is continuing.
SECTION 16.08. The Company covenants and agrees to pay to the Trustees
from time to time, and the Trustees shall be entitled to receive, reasonable
compensation for all services rendered by them in the execution of the trusts
hereby created and in the exercise and performance of all services rendered
hereunder, which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust, and except as
otherwise expressly provided herein, the Company will upon request of the
Trustees, or either of them, reimburse the Trustees, or either of them, for all
reasonable advances made or incurred by the Trustees, or either of them, in
accordance with any provision of this Indenture (including the reasonable
compensation and the expenses and disbursements of their, its or his agents and
counsel, except any such expense or disbursement as may be attributable to
negligence or bad faith). The Company also covenants to indemnify the Trustees
and each of them for, and to hold them and each of them harmless against, any
loss, liability or expense incurred without negligence or bad faith on the part
of the Trustees, or either of them, as the case may be, arising out of or in
connection with the acceptance or administration of this trust, including the
costs and expenses of defending against any claim or liability in connection
with the exercise or performance of any of the powers or duties hereunder.
As security for the performance of the obligations of the Company under
this Section 16.08, the Trustees and each of them shall have (in addition to
any other rights under this Indenture) a lien prior to the Bonds on the Trust
Estate, including all property and funds held or collected by the Trustees.
If, and to the extent that the Trustees or either of them and their, its
or his counsel and other agents do not receive compensation for services
rendered, reimbursements of their, its or his advances, expenses and
disbursements, or indemnity, as herein provided, as the result of allowances
made in any reorganization, bankruptcy, receivership, liquidation or other
proceeding or by any plan of reorganization or readjustment of obligations of
the Company, the Trustees, or either of them, shall be entitled, in priority to
the Holders of the Bonds, to receive any distributions of any securities,
dividends or other disbursements which would otherwise be made to the holders
of Bonds in any such proceeding or proceedings and the Corporate Trustee is
hereby constituted and appointed, irrevocably, the attorney in fact for the
holders of the Bonds and each of them to collect and receive, in their name,
place and stead, such distributions, dividends or other disbursements, to
deduct therefrom the amounts due to the Trustees, or either of them, their, its
or his counsel and other agents on account of services rendered, advances,
expenses, and disbursements made or incurred, or indemnity, and to pay and
distribute the balance, pro rata, to the Holders of the Bonds. The Trustees, or
either of them, shall have a lien upon any securities or other considerations
to which the holders of Bonds may become entitled pursuant to any such plan of
reorganization or readjustment of obligations, or in any such proceeding or
proceedings; and
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the court or judge in any such proceeding or proceedings may determine the
terms and conditions under which any such lien shall exist and be enforced.
SECTION 16.09. (A) Subject to the provisions of subdivision (B) of this
Section 16.09, if the Trustees, or either of them, shall be or shall become a
creditor, directly or indirectly, secured or unsecured, of the Company within
four months prior to a default (as defined in subdivision (C)(1) of this
Section 16.09), or subsequent to such a default, then, unless and until such
default shall be cured, the Trustees, or either of them, as the case may be,
shall set apart and hold in a special account for the benefit of Trustees, or
either of them, as the case may be, individually, the holders of the Bonds, and
the holders of other indenture securities (as defined in subdivision (C)(2) of
this Section 16.09)
(1) an amount equal to any and all reductions in the amount due and
owing upon any claim as such creditor in respect of principal or interest
effected after the beginning of such four months' period and valid as
against the Company and its other creditors, except any such reduction
resulting from the receipt or disposition of any property described in
clause (2) of this subdivision (A) or from the exercise of any right of
set-off which such Trustee could have exercised if a petition in
bankruptcy had been filed by or against the Company upon the date of o
such default; and
(2) all property received by the Trustees, or either of them, in
respect of any claim as such creditor, either as security therefor, or in
satisfaction or composition thereof, or otherwise, after the beginning of
such four months' period, or an amount equal to the proceeds of any such
property, if disposed of, subject, however, to the rights, if any, of the
Company and its other creditors in such property or such proceeds.
Nothing herein contained, however, shall affect the right of the Trustees
or either of them
(a) to retain for their, its or his own account (i) payments made on
account of any such claim by any person (other than the Company) who is
liable thereon, and (ii) the proceeds of the bona fide sale of any such
claim by the Trustees, or either of them, to a third person, and (iii)
distributions made in cash, securities, or other property in respect of
claims filed against the Company in bankruptcy or receivership or in
proceedings for reorganization pursuant to the Federal Bankruptcy Act or
applicable State law;
(b) to realize, for their, its or his own account, upon any property
held by them, it or him as security for any such claim, if such property
was so held prior to the beginning of such four months' period;
(c) to realize, for their, its or his own account, but only to the
extent of the claim hereinafter mentioned, upon any property held by them,
it or him as security for any such claim, if such claim was created after
the beginning of such four months' period and such property was received
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as security therefor simultaneously with the creation thereof, and if the
Trustees, or either of them, as the case may be, shall sustain the burden
of proving that at the time such property was so received the Trustees, or
either of them, as the case may be, had no reasonable cause to believe
that a default as defined in the last paragraph of this subdivision (A)
would occur within four months; or
(d) to receive payment on any claim referred to in clause (b) or
clause (c) above, against the release of any property held as security for
such claim as provided in clause (b) or clause (c) above, as the case may
be, to the extent of the fair value of such property.
For the purposes of clauses (b), (c) and (d) above, property substituted after
the beginning of such four months' period for property held as security at the
time of such substitution shall, to the extent of the fair value of the
property released, have the same status as the property released, and, to the
extent that any claim referred to in any of such clauses is created in renewal
of or in substitution for or for the purpose of repaying or refunding any
pre-existing claim of a Trustee as such creditor, such claim shall have the
same status as such pre-existing claim.
If the Trustees or either of them shall be required to account, the funds
and property held in such special account and the proceeds thereof shall be
apportioned among the Trustees, or either of them, the Bondholders and the
holders of other indenture securities in such manner that the Trustees, or
either of them, the Bondholders, and the holders of other indenture securities
realize, as a result of payments from such special account and payments of
dividends on claims filed against the Company in bankruptcy or receivership or
in proceedings for reorganization pursuant to the Federal Bankruptcy Act or
applicable State law, the same percentage of their respective claims, figured
before crediting to the claim of the Trustees, or either of them, anything on
account of the receipt by it from the Company of the funds and property in such
special account and before crediting to the respective claims of the Trustees,
or either of them, the Bondholders, and the holders of other indenture
securities dividends on claims filed against the Company in bankruptcy or
receivership or in proceedings for reorganization pursuant to the Federal
Bankruptcy Act or applicable State law, but after crediting thereon receipts on
account of the indebtedness represented by their respective claims from all
sources other than from such dividends and from the funds and property so held
in such special account. As used in this paragraph, with respect to any claim,
the term "dividends" shall include any distribution with respect to such claim,
in bankruptcy or receivership or in proceedings for reorganization pursuant to
the Federal Bankruptcy Act or applicable State law, whether such distribution
is made in cash, securities or other property, but shall not include any such
distribution with respect to the secured portion, if any, of such claim. The
court in which such bankruptcy, receivership or proceeding for reorganization
is pending shall have jurisdiction (i) to apportion among the Trustees, or
either of them, the Bondholders, and the holders of other indenture securities,
in accordance with the provisions of this paragraph, the funds and property
held in such special account and the proceeds thereof, or (ii) in lieu of such
apportionment, in whole or in part, to give to the provisions of this paragraph
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due consideration in determining the fairness of the distributions to be made
to the Trustees, or either of them, the Bondholders, and the holders of other
indenture securities, with respect to their respective claims, in which event
it shall not be necessary to liquidate or to appraise the value of any
securities or other property held in such special account or as security for
any such claim, or to make a specific allocation of such distributions as
between the secured and unsecured portions of such claims, or otherwise to
apply the provisions of this paragraph as a mathematical formula.
Any Trustee who has resigned or been removed after the beginning of such
four months' period shall be subject to the provisions of this subdivision (A)
as though such resignation or removal had not occurred. If any Trustee has
resigned or been removed prior to the beginning of such four months' period, it
shall be subject to the provisions of this subdivision (A) if and only if the
following conditions exist:
(i) the receipt of property or reduction of claim which would have
given rise to the obligation to account, if such Trustee had continued as
trustee, occurred after the beginning of such four months' period; and
(ii) such receipt of property or reduction of claim occurred within
four months after such resignation or removal.
(B) There shall be excluded from the operation of subdivision (A) of this
Section 16.09 a creditor relationship arising from:
(1) the ownership or acquisition of securities issued under any
indenture, or any security or securities having a maturity of one year or
more at the time of acquisition by such Trustee;
(2) advances authorized by a receivership or bankruptcy court of
competent jurisdiction or by this Indenture for the purpose of preserving
the property subject to the Lien of this Indenture or of discharging tax
liens or other prior liens or encumbrances on the Trust Estate, if notice
of such advance and of the circumstances surrounding the making thereof is
given to the Bondholders at the time and in the manner provided in this
Indenture;
(3) disbursements made in the ordinary course of business in the
capacity of trustee under an indenture, transfer agent, registrar,
custodian, paying agent, fiscal agent or depositary, or other similar
capacity;
(4) an indebtedness created as a result of services rendered or
premises rented; or an indebtedness created as a result of goods or
securities sold in a cash transaction as hereinafter defined in
subdivision (C)(3) of this Section 16.09;
(5) the ownership of stock or of other securities of a corporation
organized under the provisions of Section 25(a) of the Federal Reserve
Act, as amended, which is directly or indirectly a creditor of the
Company; or
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(6) the acquisition, ownership, acceptance or negotiation of any
drafts, bills of exchange, acceptances or obligations which fall
within the classification of self-liquidating paper as defined in
subdivision (C)(4) of this Section 16.09.
(C) As used in this Section 16.09:
(1) The term "default" means any failure to make payment in full of
the principal of or interest upon the Bonds or upon the other indenture
securities when and as such principal or interest becomes due and payable.
(2) The term "other indenture securities" means securities upon which
the Company is an obligor (as defined in the Trust Indenture Act)
outstanding under any other indenture (aa) under which such Trustee is also
trustee, (bb) which contains provisions substantially similar to the
provisions of this Section 16.09, and (cc) under which a default exists at
the time of the apportionment of the funds and property held in said special
account.
(3) The term "cash transaction" means any transaction in which full
payment for goods or securities sold is made within seven days after
delivery of the goods or securities in currency or in checks or other
orders drawn upon banks or bankers and payable upon demand.
(4) The term "self-liquidating paper" means any draft, bill of
exchange, acceptance or obligation which is made, drawn, negotiated or
incurred by the Company for the purpose of financing the purchase,
processing, manufacture, shipment, storage or sale of goods, wares or
merchandise and which is secured by documents evidencing title to,
possession of, or a lien upon, the goods, wares or merchandise or the
receivables or proceeds arising from the sale of the goods, wares or
merchandise previously constituting the security, provided the security is
received by the Trustees, or either of them, simultaneously with creation of
the creditor relationship with the Company arising from making, drawing,
negotiating or incurring of the draft, bill of exchange, acceptance or
obligation.
(5) The term "Company" means any obligor upon the Bonds.
SECTION 16.10. (A) If the Trustees, or either of them, has or shall acquire
any conflicting interest, as defined in this Section 16.10, the Trustees, or
either of them, as the case may be, shall within 90 days after ascertaining that
there is such conflicting interest, either eliminate such conflicting interest
or resign in the manner and with the effect hereinafter specified in this
Article 16.
(B) In the event that the Trustee shall fail to comply with the provisions
of the preceding subdivision (A) of this Section 16.10, the Trustee shall within
ten days after the expiration of such 90 day period transmit notice Of such
failure to the Bondholders, in the manner and to the extent provided in
subdivision (C) of Section 7.03 with respect to reports pursuant to subdivision
(A) of Section 7.03.
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(C) For the purposes of this Section, the Trustees, or either of them, as
the case may be, shall be deemed to have a conflicting interest if:
(l) the Trustees, or either of them, are, together individually, be
trustees under another indenture under which any other securities, or
certificates of interest or participation in any other securities, of the
Company, are outstanding unless such other indenture is a collateral trust
indenture under which the only collateral consists of Bonds issued under
this Indenture; provided, however, that there shall be excluded from the
operation of this clause (1) any indenture under which other securities, or
certificates of interest or participation in other securities, of the
Company are outstanding, if the Company shall have sustained the burden of
proving, on application to the Securities and Exchange Commission and after
opportunity for hearing thereon, that trusteeship under this Indenture and
such other indenture is not so likely to involve a material conflict of
interest as to make it necessary in the public interest or for the
protection of investors to disqualify the Trustees, or either of them, from
acting as such under this Indenture or such other indenture or indentures;
(2) the Trustees, or either of them, or any of the directors or
executive officers of the Trustees, or either of them, as the case may be,
are an obliger upon the Bonds or an underwriter for the Company;
(3) the Trustees, or either of them, directly or indirectly control or
are directly or indirectly controlled by or are under direct or indirect
common control with the Company or an underwriter for the Company;
(4) the Trustees, or either of them, or any of the directors or
executive officers of the Trustees, or either of them, are a director,
officer, partner, employee, appointee or representative of the Company, or
of an underwriter (other than the Trustees, or either of them, themselves or
himself) for the Company who is currently engaged in the business of
underwriting, except that (a) one individual may be a director or an
executive officer, or both, of the Trustees, or either of them, and a
director or an executive officer, or both, of the Company, but may not be at
the same time an executive officer of both the Trustees, or either of them,
and the Company; (b) if and so long as the number of directors of any
Trustee in office is more than nine, one additional individual may be a
director or an executive officer, or both, of such Trustee and a director of
the Company; and (c) the Trustees, or either of them, may be designated by
the Company or by an underwriter for the Company to act in the capacity of
transfer agent, registrar, custodian, paying agent, fiscal agent, escrow
agent or depositary or in any other similar capacity or, subject to the
provisions of paragraph (1) of this subdivision (C), to act as trustee,
whether under an indenture or otherwise;
(5) ten per centum (10%) or more of the voting securities of the
Trustees, or either of them, is beneficially owned either by the Company or
by any director, partner or executive officer thereof, or twenty per
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centum (20%) or more of such voting securities is beneficially owned,
collectively, by any two or more of such persons; or ten per centum (10%) or
more of the voting securities of the Trustees, or either of them, is
beneficially owned either by an underwriter for the Company or by any
director, partner or executive officer thereof, or is beneficially owned,
collectively, by any two or more such persons;
(6) the Trustees, or either of them, are the beneficial owners of or
hold as collateral security for an obligation which is in default (as
hereinafter in this subdivision (c) of this Section 16.09 defined), (a) five
per centum (5%) or more of the voting securities or ten per centum (10%) or
more of any other class of security of the Company, not including the Bonds
issued under this Indenture and securities issued under any other indenture
under which the Trustees, or either of them, are also trustee, or (b) ten
per centum (10%) or more of any class of security of an underwriter for the
Company;
(7) The Trustees, or either of them, are the beneficial owners of, or
hold as collateral security for an obligation which is in default (as
hereinafter in this subdivision (c) of this Section 16.09 defined), five per
centum (5%) or more of the voting securities of any person who, to the
knowledge of the Trustees, or either of them, owns ten per centum (10%) or
more of the voting securities of, or controls directly or indirectly or is
under direct or indirect common control with, the Company;
(8) the Trustees, or either of them, are the beneficial owners of or
hold as collateral security for an obligation which is in default (as
hereinafter in this subdivision (C) of this Section 16.10 defined), ten per
centum (10%) or more of any class of security of any person who, to the
knowledge of the Trustees, or either of them, owns fifty per centum (50%) or
more of the voting securities of the Company; or
(9) the Trustees, or either of them, owns on May 15 in any calendar year
in the capacity of executor, administrator, testamentary or inter vivos
trustee, guardian, committee or conservator, or in any other similar
capacity, an aggregate of twenty-five per centum (25%) or more of the voting
securities or of any class of security, of any person, the beneficial
ownership of a specified percentage of which would have constituted a
conflicting interest under clause (6), (7) or (8) of this subdivision (C).
As to any such securities of which the Trustees, or either of them, acquired
ownership through becoming executor, administrator or testamentary trustee
of an estate which included them, the provisions of the preceding sentence
shall not apply for a period of two (2) years from the date of such
acquisition, to the extent that such securities included in such estate do
not exceed twenty-five per centum (25%) of such voting securities or
twenty-five per centum (25%) of any such class of security. Promptly after
May 15, in each calendar year, each of the Trustees shall make a check of
its or his holdings of such securities in any of the above-mentioned
capacities as of May 15. If the Company fails to make payment in full of
principal or interest upon the Bonds when and as the same becomes due and
payable, and such failure
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continues for 30 days thereafter, each of the Trustees shall make a prompt
check of its or his holdings of such securities in any of the
above-mentioned capacities as of the date of the expiration of such
thirty-day period and after such date, notwithstanding the foregoing
provisions of this clause (9), all such securities so held by the Trustees,
or either of them, with sole or joint control over such securities vested in
them, it or him, shall, but only so long as such failure shall continue, be
considered as though beneficially owned by the Trustees, or either of them,
for the purposes of clauses (6), (7) and (8) of this subdivision (C).
The specifications of percentages in clauses (5) to (9), inclusive, of this
subdivision (C) shall not be construed as indicating that the ownership of such
percentages of the securities of a person is or is not necessary or sufficient
to constitute direct or indirect control for the purposes of clause (3) or (7)
of this subdivision (C).
For the purposes of clauses (6), (7), (8) and (9) of this subdivision (C)
only, (a) the terms "security" and "securities" shall include only such
securities as are generally known as corporate securities, but shall not include
any note or other evidence of indebtedness issued to evidence an obligation to
repay moneys lent to a person by one or more banks, trust companies or banking
firms or any certificate of interest or participation in any such note or
evidence of indebtedness, (b) an obligation shall be deemed to be in default
when a default in payment of principal shall have continued for 30 days or more
and shall not have been cured; and (c) the Trustees, or either of them, shall
not be deemed to be the owners or holders of (i) any security which they, it or
he holds as collateral security (as trustee or otherwise) for an obligation
which is not in default as above defined, or (ii) any security which they, it or
he holds as collateral security under this Indenture, irrespective of any
Default hereunder, or (iii) any security which they, it or he holds as agent for
collection, or as custodian, escrow agent or depositary, or in any similar
representative capacity.
(D) The percentages of voting securities and other securities specified in
this Section 16.10 shall be calculated in accordance with the following
provisions:
(aa) A specified percentage of the voting securities of a Trustee, the
Company or any other person referred to in this Section 16.10 (each of whom
is referred to as a "person" in this subdivision (D)) means such amount of
the outstanding voting securities of such person as entitles the holder or
holders thereof to cast such specified percentage of the aggregate votes
which the holders of all the outstanding voting securities of such person
are entitled to cast in the direction or management of the affairs of such
person.
(bb) A specified percentage of a class of securities of a person means
such percentage of the aggregate amount of securities of the class
outstanding.
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(cc) The term "amount", when used in regard to securities, means the
principal amount if relating to evidences of indebtedness, the number of
shares if relating to capital shares, and the number of units if relating
to any other kind of security.
(dd) The term "outstanding" means issued and not held by or for the
account of the issuer. The following securities shall not be deemed
outstanding within the meaning of this definition:
(1) securities of an issuer held in a sinking fund relating to
securities of the issuer of the same class;
(2) securities of an issuer held in a sinking fund relating to
another class of securities of the issuer, if the obligation evidenced
by such other class of securities is not in default as to principal or
interest or otherwise;
(3) securities pledged by the issuer thereof as security for an
obligation of the issuer not in default as to principal or interest or
otherwise; or
(4) securities held in escrow if placed in escrow by the issuer
thereof;
provided, however, that any voting securities of an issuer shall be deemed
outstanding if any person other than the issuer is entitled to exercise
the voting rights thereof.
(ee) A security shall be deemed to be of the same class as another
security if both securities confer upon the holder or holders thereof
substantially the same rights and privileges; provided, however, that, in
the case of secured evidences of indebtedness, all of which are issued under
a single indenture, differences in the interest rates or maturity dates of
various series thereof shall not be deemed sufficient to constitute such
series different classes; and provided, further, that, in the case of
unsecured evidences of indebtedness, differences in the interest rates or
maturity dates thereof shall not be deemed sufficient to constitute them
securities of different classes, whether or not they are issued under a
single indenture.
(E) For the purposes of this Section 16.10, unless otherwise provided:
(1) The term "underwriter" when used with reference to the Company
means every person, who, within three years prior to the time as of which the
determination is made, has purchased from the Company with a view to, or has
offered or has sold for the Company in connection with, the distribution of any
security of the Company outstanding at such time, or has participated or has had
a direct or indirect participation in any such undertaking, or has participated
or has had a participation in the direct or indirect underwriting of any such
undertaking, but such term shall not include a person whose interest was limited
to a commission from an
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underwriter or dealer not in excess of the usual and customary distributors'
or sellers' commission.
(2) The term "director" means any director of a corporation, or any
individual performing similar functions with respect to any organization
whether incorporated or unincorporated.
(3) The term "person" means an individual, a corporation, a partnership,
an association, a joint-stock company, a trust, an unincorporated
organization, or a government or political subdivision thereof. As used in
this clause, the term "trust" shall include only a trust where the interest
or interests of the beneficiary or beneficiaries are evidenced by a
security.
(4) The term "voting security" means any security presently entitling
the owner or holder thereof to vote in the direction or management of the
affairs of a person, or any security issued under or pursuant to any trust,
agreement or arrangement whereby a trustee or trustees or agent or agents
for the owner or holder of such security are presently entitled to vote in
the direction or management of the affairs of a person.
(5) The term "Company" means any obligor upon the Bonds.
(6) The term "executive officer" means the president, every vice
president, every trust officer, the cashier, the secretary, and the
treasurer of a corporation, and any individual customarily performing
similar functions with respect to any organization whether incorporated or
unincorporated, but shall not include the chairman of the board of
directors.
(F) If a separate trustee or co-trustee is appointed pursuant to Section
16.14, the provisions of this Section 16.10 which have been made specifically
applicable to the Trustees shall also apply to any separate trustee or
co-trustee.
SECTION 16.11. (A) No resignation or removal of the Trustees, or either of
them, and no appointment of a successor Trustee or Trustees pursuant to this
Article 16 shall become effective until the acceptance of appointment by the
successor Trustee under this Section 16.11 and Section 16.12.
(B) The Trustees, or either of them, may resign at any time by giving
written notice thereof to the Company. If an instrument of acceptance by a
successor Trustee or Trustees shall not have been delivered to the Trustees, or
either of them, within 30 days after the giving of such notice of resignation,
the resigning Trustee or Trustees may petition any court of competent
jurisdiction for the appointment of a successor Trustee or Trustees.
(C) The Trustees, or either of them, may be removed at any time by Act of
the holders of a majority in principal amount of the Outstanding Bonds,
delivered to the Trustees, or either of them, and to the Company.
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(D) If at any time:
(1) the Trustees, or either of them, shall fail to comply with Section
16.10 after written request therefor by the Company or by any Bondholder who
has been a bona fide holder of a Bond for at least six months, or
(2) the Trustees, or either of them, shall cease to be eligible under
Section 16.01 and shall fail to resign after written request therefor by the
Company or by any such Bondholder, or
(3) the Trustees, or either of them, shall become incapable of acting or
shall be adjudged a bankrupt or insolvent or a receiver of the Trustees, or
either of them, or of their, its or his property shall be appointed or any
public officer shall take charge or control of the Trustees, or either of
them or of their, its or his property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Certified Resolution may remove the
Trustees, or either of them, or (ii) subject to Section 12.23, any Bondholder
who has been a bona fide holder of a Bond for at least six months may, on behalf
of himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustees, or either of them, and the
appointment of a successor Trustee or Trustees.
(E) If the Trustees, or either of them, shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of any Trustee
for any cause, the Company, by a Certified Resolution, shall promptly appoint a
successor Trustee or Trustees. If, within one year after such resignation,
removal or incapability, or the occurrence of such vacancy, a successor Trustee
or Trustees shall be appointed by Act of the holders of a majority in principal
amount of the Outstanding Bonds delivered to the Company and the retiring
Trustee or Trustees, the successor Trustee or Trustees so appointed shall,
forthwith upon its or their acceptance of such appointment, become the successor
Trustee or Trustees and supersede the successor Trustee or Trustees appointed by
the Company. If no successor Trustee or Trustees shall have been so appointed by
the Company or the Bondholders and accepted appointment in the manner
hereinafter provided, any Bondholder who has been a bona fide holder of a Bond
for at least six months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the appointment of a
successor Trustee or Trustees.
Notwithstanding the foregoing, in the event of the Individual Trustee's
death, absence, inability or refusal to act at any time when action under the
terms of this Indenture may be required or contemplated, or for any other reason
at the option of the Corporate Trustee, the Corporate Trustee is hereby
authorized to name and appoint one or more successor Individual Trustee(s) to
execute the trust granted under this Indenture, and specifically is authorized
to appoint a separate successor Individual Trustee in each jurisdiction in which
Mortgaged and Pledged Property is located, and the title herein conveyed to the
above named Individual Trustee shall be vested in said successor(s) without the
necessity for any further conveyance.
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(F) The Company shall give notice of each resignation and each removal Of a
Trustee and each appointment of a successor Trustee by mailing written notice of
such event by first-class mail, postage prepaid, to the holders of Bonds in the
manner and to the extent provided in subdivision (C) of Section 7.03 with
respect to reports pursuant to subdivision (A) of Section 7.03. Each notice
shall include the name of the successor Trustee or Trustees and address Of the
main office of the successor Corporate Trustee.
SECTION 16.12. Every successor Trustee or Trustees appointed hereunder shall
execute, acknowledge and deliver to the Company and to the retiring Trustee or
Trustees an instrument accepting such appointment, and thereupon the resignation
or removal of the retiring Trustee or Trustees shall become effective and such
successor Trustee or Trustees, without any further act, deed or conveyance,
shall become vested with all the rights, powers, trusts and duties of the
retiring Trustee; but, on request of the Company or the respective successor
Trustee, the respective retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such respective successor
Trustee all the rights, powers and trusts of the retiring respective Trustee,
and shall duly assign, transfer and deliver to such respective successor Trustee
all property and money held by such respective retiring Trustee hereunder,
subject nevertheless to its lien, if any, provided for in Section 16.08. Upon
request of any such respective successor Trustee, the Company 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.
No successor Trustee shall accept its appointment unless at the time of such
acceptance such successor Trustee shall be qualified and eligible under this
Article 16 to the extent operative.
Any Trustee which has resigned or been removed shall nevertheless retain the
lien afforded to it or him by Section 16.08 hereof upon the Trust Estate,
including all property or funds held or collected by such Trustee, as such, to
secure the amounts due to such Trustee as compensation, reimbursement, expenses
and indemnity, and shall retain the rights afforded to it by said Section 16.08
hereof.
SECTION 16.13. (A) Except as herein expressly provided to the contrary, any
notice, request, or other writing by or on behalf of the Company delivered
solely to the Corporate Trustee shall be deemed to have been delivered to both
of the Trustees hereunder as effectually as if delivered to each of them.
(B) Notwithstanding anything herein contained to the contrary, all cash
collected by, or payable to, the Trustees or either of them pursuant to this
Indenture shall be paid to and deposited with, and all stocks, bonds and other
obligations or securities shall be held by, the Corporate Trustee, except as
otherwise required by law. Any moneys at any time coming into the hands of the
Individual Trustee pursuant to this Indenture shall be at once paid over to the
Corporate Trustee.
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Whenever any moneys, bonds, shares of stock or other obligations are, under
any provisions of this Indenture, paid or delivered to or deposited with the
Corporate Trustee, title to the same shall be deemed to be vested in both
Trustees hereunder, and the same shall be deemed for all purposes hereunder to
be part of the security for the Bonds issued hereunder, but nothing contained in
this Section 16.13 shall be deemed to affect or impair any power or right
conferred by any provision of this Indenture upon the Corporate Trustee to
apply, disburse or otherwise act or deal with respect to any moneys, bonds,
shares of stock or other obligations received or held by it as aforesaid.
(C) Except as may otherwise expressly be provided herein, any request in
writing by the Corporate Trustee to the Individual Trustee to take or refrain
from taking any action shall be a sufficient warrant (subject to the provisions
of Section 16.02 hereof) for the Individual Trustee to take, or refrain from
taking, any such action as may be so requested.
(D) The Individual Trustee has been joined as trustee in order to comply
with any legal requirements respecting trustees under indentures, mortgages,
deeds of trust and other security instruments with respect to property in the
jurisdictions, or some of them, in which the Mortgaged and Pledged Property or
part thereof are or may be situate, and shall as such trustee possess such
powers, and such powers only, as may be necessary to comply with such
requirements. If by reason of the repeal of such requirements, or for any other
reason, it shall not be necessary, in the opinion of counsel, that there shall
be an Individual Trustee and the Company shall file with the Corporate Trustee
and also with the Individual Trustee, an Opinion of Counsel to that effect and a
written request for the removal of the Individual Trustee, the Individual
Trustee named herein, or any successor, shall forthwith cease to be a Trustee
hereunder, and all powers of the Individual Trustee shall forthwith terminate,
as shall his right, title or interest in and to the Trust Estate; and unless and
until there shall be appointed a new Trustee or successor to the Individual
Trustee, all the right, title and powers of the Individual Trustee shall devolve
upon the Corporate Trustee and its successors alone. Upon such removal, the
Corporate Trustee shall execute such instrument or instruments as may be
desirable to effect the same and such instrument or instruments shall
conclusively establish that such removal has been effected.
Any rights, powers, duties and obligations by any provisions of this
Indenture conferred or imposed upon the Trustees or any of them shall, in so far
as permitted by law, be conferred or imposed upon and exercised or performed by
the Corporate Trustee alone without reference to the Individual Trustee, and the
Individual Trustee hereby irrevocably constitutes and appoints the Corporate
Trustee his true and lawful attorney in fact with full power and authority, in
so far as permitted by law, either in the name and on behalf of the Individual
Trustee or of the Trustees jointly, to exercise any and all rights or powers
conferred upon the Individual Trustee alone, or upon the Trustees jointly, by
any of the provisions of this Indenture, but subject to the duties imposed by
this Section 16.13 upon the Individual Trustee, hereby ratifying and confirming
all and singular the acts and things lawfully done by the Corporate Trustee by
virtue of this power of attorney, except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed the
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Corporate Trustee shall be incompetent or unqualified to perform such act or
acts, in which event such rights, power, duties and obligations shall be
exercised and performed by the Individual Trustee alone, notwithstanding any
Other provision of this Indenture naming the Corporate Trustee or both Trustees
as the person or persons to act.
In case the Individual Trustee shall die, become unqualified or incapable of
acting, resign or be removed, all rights of the Individual Trustee, and all
right, title and interest of the Individual Trustee in and to the Mortgaged and
Pledged Property, shall, so far as permitted by law, vest in and be exercised by
the Corporate Trustee, unless and until a successor Individual Trustee shall be
appointed in the manner provided in this Article 16.
SECTION 16.14. If at any time or times, for the purpose of conforming to any
legal requirements, restrictions or conditions in the state or jurisdiction in
which the Mortgaged and Pledged Property then or to become subject to the Lien
of this Indenture is located, or if the Corporate Trustee shall be advised by
counsel satisfactory to it, that it is necessary or prudent in the interest of
the Bondholders, or if the holders of a majority in principal amount of the then
Outstanding Bonds shall in writing reasonably request the Corporate Trustee and
the Company, the Company and the Trustees or the Corporate Trustee shall have
power to appoint, and, upon the request of the Trustees or the Corporate
Trustee, the Company shall for such purpose join with the Trustees or the
Corporate Trustee in the execution, delivery and performance of, all instruments
and agreements necessary or proper to appoint another corporation having the
qualifications specified in Section 16.01 or one or more persons approved by the
Trustees or the Corporate Trustee, either to act as separate trustee or trustees
jointly with the Trustees or Corporate Trustee, with respect to all or any of
the property subject to the Lien of this Indenture, or to act hereunder as
co-trustee or co-trustees with respect to any such property, with such power and
authority and for such term as may be necessary or prudent for such purpose and
as shall be specified in the instrument of appointment. In the event that the
Company shall not have joined in such appointment within 15 days after the
receipt by it of a request so to do, or in case an Event of Default shall have
occurred and be continuing, the Trustees or the Corporate Trustee alone may act
under the foregoing provisions of this Section 16.14 without the concurrence of
the Company; and the Company hereby fully empowers the Trustees, and each of
them, so to act and appoints the Trustees, and each of them, its agent and
attorney to act for it under the foregoing provision of this Section 16.14, in
either of such contingencies.
The Company, the Corporate Trustee and the Individual Trustee, at any time
by an instrument executed by them jointly, may accept the resignation or remove
any separate trustee or co-trustee appointed under this Section 16.14 or
otherwise, and, upon the request of the Corporate Trustee, the Company shall,
for such purpose, join with the Corporate Trustee and the Individual Trustee in
the execution, delivery and performance of all instruments and agreements
necessary or proper to make effective such resignation or removal. In the event
that the Company shall not have joined in such action within 15 days after the
receipt by it of a request so to do, the Corporate Trustee and the Individual
Trustee may act under the foregoing provision of this Section 16.14 without the
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concurrence of the Company; and the Company hereby fully empowers the Trustees,
and each of them, so to act and appoints the Trustees, and each of them, its
agent and attorney to act for it under the foregoing provision of this Section
16.14, in either of such contingencies. A successor to a separate trustee or
co-trustee so resigned or removed may be appointed in the manner provided in
this Article 16.
The rights, powers, duties and obligations conferred or imposed upon
Trustees hereunder shall be conferred or imposed upon and exercised or performed
by the Corporate Trustee, alone or jointly with such separate trustee or
separate trustees or co-trustee or co-trustees, as may be provided in the
supplemental indenture appointing such separate trustee or separate trustees or
co-trustee or co-trustees, except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed, the
corporate Trustee shall be incompetent or unqualified to perform such act or
acts, in which event such rights, powers, duties and obligations shall be
exercised and performed by such separate trustee or separate trustees or
co-trustee or co-trustees.
SECTION 16.15. Any corporation into which the Corporate Trustee may be
merged or with which it may be consolidated or any corporation resulting from
any merger, conversion, or consolidation to which the Corporate Trustee shall be
a party, or any corporation succeeding to all or substantially all the corporate
trust business of the Corporate Trustee shall be the successor of the Corporate
Trustee hereunder provided such corporation shall be otherwise qualified and
eligible under this Article 16, to the extent operative, without the execution
or filing of any paper or the performance of any further act on the part of any
other parties hereto, anything herein to the contrary notwithstanding. In case
any of the Bonds shall have been authenticated, but not delivered, by the
Corporate Trustee then in office, any such successor to the Corporate Trustee by
merger, conversion or consolidation may adopt such authentication and deliver
the said Bonds so authenticated with the same effect as if such successor
Corporate Trustee had itself authenticated such Bonds.
SECTION 16.16. As long as any of the Bonds remain Outstanding, upon a
Company Order there shall be an authenticating agent appointed by the Corporate
Trustee for such period as the Company shall elect, to act on behalf of the
Corporate Trustee and subject to its direction in connection with the
authentication of the Bonds as set forth in this Indenture. Such authenticating
agent shall at all times be a corporation organized and doing business under the
laws of the United States or any State, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at least
S100,000,000 subject to supervision or examination by Federal or State
authority. If such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section 16.16 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.
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Whenever reference is made in this Indenture to the authentication and
delivery of Bonds by the Corporate Trustee or the Corporate Trustee's
certificate of authentication, such reference shall be deemed to include
authentication and delivery on behalf of the Corporate Trustee by an
authenticating agent and a certificate of authentication executed on behalf of
the corporate Trustee by an authenticating agent.
Any corporation in which any authenticating agent may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which any authenticating agent shall be a
party, or any corporation succeeding to the corporate agency business of any
authenticating agent, shall continue to be the authenticating agent without the
execution or filing of any paper or any further act on the part of the Corporate
Trustee or the authenticating agent.
Any authenticating agent may at any time resign by giving written notice of
resignation to the Corporate Trustee and to the Company. The Corporate Trustee
may at any time terminate the agency of any authenticating agent by giving
written notice of termination to such authenticating agent and to the Company.
Upon receiving such a notice of resignation or upon such a termination, or in
case at any time any authenticating agent shall cease to be eligible in
accordance with the provisions of this Section 16.16, the Corporate Trustee
promptly shall appoint a successor authenticating agent, shall give written
notice of such appointment to the Company and shall mail notice of such
appointment to all holders of Bonds as the names and addresses of such holders
appear on the Bond Register. Any successor authenticating agent upon acceptance
of its appointment hereunder shall become vested with all the rights, powers,
duties and responsibilities of its predecessor hereunder. No successor
authenticating agent shall be appointed unless eligible under the provisions of
this Section 16.16.
The Corporate Trustee agrees to pay to the authenticating agent from time to
time reasonable compensation for its services, and the Corporate Trustee shall
be entitled to be reimbursed for such payments from the Company subject to the
provisions of Section 16.08. The provisions of Section 13.01, 16.03 and 16.04
shall be applicable to any authenticating agent.
ARTICLE 17.
DISCHARGE OF MORTGAGES.
SECTION 17.01. This Indenture shall cease to be of further effect (except as
to any surviving rights of registration of transfer or exchange of Bonds herein
expressly provided for and rights to receive payments of interest thereon), and
the Trustees, on demand of and at the expense of the Company, shall execute
proper instruments acknowledging satisfaction and discharge of this Indenture,
when
(1) either
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(A) all Bonds theretofore authenticated and delivered other than
(i) Bonds which have been destroyed, lost or stolen and which have
been replaced or paid as provided in Section 2.08, and (ii) Bonds for
whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to
the Company or discharged from such trust, as provided in Section
20.03 have been delivered to the Corporate Trustee for cancellation;
or
(B) all such Bonds not theretofore delivered to the Corporate
Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Corporate Trustee for the giving
of notice of redemption by the Corporate Trustee in the name, and
at the expense, of the Company,
and the Company, in the case of (i), (ii) or (iii) above, has deposited
or caused to be deposited with the Corporate Trustee, as trust funds in
trust for the purpose, an amount sufficient to pay and discharge the
entire indebtedness on such Bonds not theretofore delivered to the
Corporate Trustee for cancellation, for principal, and premium, if any,
and interest to the date of such deposit (in the case of Bonds which
have become due and payable), or to the Stated Maturity or Redemption
Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustees an Officers' Certificate
and an Opinion of Counsel each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture
have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture the
obligations of the Company to the Trustees under Section 16.08 shall survive.
SECTION 17.02. All money deposited with the Corporate Trustee pursuant to
Section 17.01 shall be held in trust and applied by it, in accordance with the
provisions of the Bonds and this Indenture, to the payment, either directly or
through any paying agent (including the Company acting as its own paying agent),
as the Corporate Trustee may determine, to the persons entitled thereto, of the
principal, and premium, if any, and interest for whose payment such money has
been deposited with the Corporate trustee; but such money need not be segregated
from other funds except to the extent required by law. The Corporate Trustee
shall give notice in the name and at the expense of the Company of the immediate
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availability of the money deposited with the Corporate Trustee pursuant to
Section 17.01 to the persons entitled to such money.
ARTICLE 18.
MEETING OF BONDHOLDERS.
SECTION 18.01. A meeting of the Bondholders may be called at any time
and from time to time pursuant to the provisions of this Article 18 for any of
the following purposes:
(A) To give any notice to the Company or to the Trustees, or to
give any directions to the Trustees, or to consent to the waiving of
any Event of Default hereunder and its consequences, or to take any
other action authorized to be taken by the Bondholders pursuant to any
of the provisions of Article 12;
(B) To remove either Trustee and appoint a successor trustee
pursuant to any of the provisions of Article 16;
(C) To consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Article 19; of
(D) To take any other action authorized to be taken by or on
behalf of Bondholders of any specified aggregate principal amount of
the Bonds under any other provisions of this Indenture, or authorized
or permitted by law.
SECTION 18.02. Meetings of Bondholders may be held at such place or
places and at such time or times in any place of payment as the Corporate
Trustee or, in case of its failure to act, the Company or the Bondholders
calling the meeting, shall from time to time determine.
SECTION 18.03. The Corporate Trustee may at any time call a meeting of
the Bondholders to take any action specified in Section 18.01, to be held at
such time and at such place designated in Section 18.02 as the Corporate Trustee
shall determine. Notice of every meeting of the Bondholders, setting forth the
time and place of such meeting and in general terms the action proposed to be
taken at such meeting, and specifying each series of Bonds which would be
affected by the proposed action, shall be mailed by the Corporate Trustee at the
expense of the Company, first class postage prepaid, to the Bondholders at their
last addresses as they shall appear upon the Bond Register, not less than 20
nor more than 120 days prior to the date fixed for the meeting. Any defect in
said notice shall not, however, in any way impair or affect the validity of any
such meeting.
The Corporate Trustee may in its discretion determine, subject to the
meaning of the term "affected" as set forth in Section 19.02, whether or not
Bonds of any particular series would be affected by action proposed to be taken
at a meeting and any such determination shall be conclusive upon the holders of
Bonds of such series and all other series. Subject to the provisions of Section
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16.02, the Corporate Trustee shall not be liable for any such determination made
in good faith.
Any meeting of the Bondholders shall be valid without notice if
Bondholders, holding all Bonds then Outstanding, which would be affected by the
action proposed to be undertaken, are present in person or by proxy or have
waived notice before or after the meeting by Bondholders, and if the Company and
the Trustees are either present by duly authorized representatives or have,
before or after the meeting, waived notice.
In case at any time the Company, pursuant to a Certified Resolution, or
Bondholders holding at least 10% in aggregate principal amount of the Bonds then
Outstanding, which would be affected by the action proposed to be undertaken,
shall have requested the Corporate Trustee to call a meeting of the Bondholders
to take any action authorized by Section 18.01, by written request setting forth
in reasonable detail the action proposed to be taken at the meeting, and the
Corporate Trustee shall not have mailed the notice of such meeting within 20
days after receipt of such request, then the Company or Bondholders holding the
amount above specified may determine the time and the place for such meeting and
may call such meeting for such purpose by giving notice thereof in the manner
provided in this Section 18.03.
SECTION 18.04. Only Bondholders holding Bonds, which would be affected
by the action proposed to be undertaken, and persons appointed by an instrument
in writing as proxy for such a Bondholder by such a Bondholder are entitled to
notice of and to vote at any meeting of the Bondholders. The only persons who
shall be entitled to be present or to speak at any meeting of the Bondholders
shall be the persons entitled to vote at such meeting and their counsel, any
representatives of the Trustees and their counsel, and any representatives of
the Company and its counsel.
SECTION 18.05. Notwithstanding any other provisions of this Indenture,
the Corporate Trustee may make such reasonable regulations as it may deem
advisable for any meeting of the Bondholders, in regard to proof of the holding
of Bonds and of the appointment of proxies, and in regard to the appointment and
duties of inspectors of votes, the submission and examination of proxies,
certificates and other evidence of the right to vote, and such other matters
concerning the conduct of the meeting as it shall deem appropriate.
Such regulations (A) may provide for the closing of the Bond Register
for such period as the Corporate Trustee may deem necessary or (B) may fix a
record and time for determining the record Bondholders of the Bonds entitled to
vote at such meeting. All Bondholders seeking to attend or vote at a meeting in
person or by proxy must, if required by any authorized representative of the
Corporate Trustee or the Company or by any other Bondholder, produce the Bonds
claimed to be owned or represented at such meeting, and every one seeking to
attend or vote shall, if required as aforesaid, produce such further proof of
Bond ownership or personal identity as shall be satisfactory to the authorized
representative of the Corporate Trustee, or if none be present then to the
inspectors of votes hereinafter provided for.
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The Corporate Trustee shall, by an instrument in writing, appoint a
temporary chairman of the meeting, unless the meeting shall have been called by
the Company or by the Bondholders as provided in Section 18.03, in which case
the Company or the Bondholders calling the meeting, as the case may be, shall in
like manner appoint a temporary chairman. A permanent chairman and a permanent
secretary Of the meeting may be elected by vote of Bondholders holding a
majority in principal amount of the Bonds represented at the meeting and
entitled to vote.
At any meeting each Bondholder or proxy shall be entitled to one vote
for each $1,000 principal amount of Bonds then Outstanding owned by such
Bondholder or represented by such proxy; provided, however, that no vote shall
be cast or counted at any meeting in respect of any Bonds challenged as not
Outstanding and ruled by the temporary or permanent chairman of the meeting to
be not Outstanding. The temporary or permanent chairman of the meeting shall
have no right to vote other than by virtue of Bonds held by him or instruments
in writing as aforesaid duly designating him as the person to vote on behalf of
other Bondholders.
At any meeting of Bondholders, the presence of persons holding or
representing Bonds in an aggregate principal amount sufficient under the
appropriate provision of this Indenture to take action upon the business for the
transaction of which such meeting was called shall constitute a quorum. Any
meeting of Holders duly called pursuant to Section 18.03 may be adjourned from
time to time by vote of the Holders (or proxies for the Holders) of a majority
in aggregate principal amount of the Bonds represented at the meeting and
entitled to vote, whether or not a quorum shall be present; and the meeting may
be held as so adjourned without further notice.
SECTION 18.06. The vote upon any resolution submitted to any meeting of
the Bondholders shall be by written ballots on which shall be subscribed the
signatures of the Bondholders or of their representatives by proxy and the
principal amount of the Bonds voted by the ballot. The temporary or permanent
chairman of the meeting shall appoint two inspectors of votes, who shall count
all votes cast at the meeting for or against any resolution and who shall make
and file with the secretary of the meeting their verified written reports in
duplicate of all votes cast at the meeting. A record at least in duplicate of
the proceedings of each meeting of the Bondholders shall be prepared by the
secretary of the meeting and there shall be attached to said record the original
reports of the inspectors of votes on any vote by ballot taken thereat and
affidavits by one or more persons having knowledge of the facts setting forth a
copy of the notice of the meeting and showing that said notice was mailed as
provided in Section 18.03. The record shall be signed and verified by the
affidavits of the permanent chairman and secretary of the meeting and one copy
thereof shall be delivered to the Company and another to the Corporate Trustee
to be preserved by the Corporate Trustee, the latter to have attached thereto
the ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
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SECTION 18.07. Whenever in this Indenture it is provided that the
Holders Of a specified percentage in aggregate principal amount of the Bonds of
any series may take any action (including the making of any demand or request,
the giving of any notice, consent, or waiver or the taking of any other action)
the fact that at the time of taking any such action the Holders of such
specified percentage have joined therein may be evidenced (a) by any instrument
or any number of instruments of similar tenor executed by Holders in person or
by agent or proxy appointed in writing, or (b) by the record of the Holders of
Bonds voting in favor thereof at any meeting of Holders duly called and held in
accordance with the provisions of this Article 18, or (c) by a combination of
such instrument or instruments and any such record of such a meeting of Holders.
SECTION 18.08. Nothing in this Article 18 contained shall be deemed or
construed to authorize or permit, by reason of any call of a meeting of the
Bondholders or any rights expressly or impliedly conferred hereunder to make
such call, any hindrance or delay in the exercise of any right or rights
conferred upon or reserved to the Corporate Trustee or to the Bondholders under
any of the provisions of this Indenture or of the Bonds.
ARTICLE 19.
SUPPLEMENTAL INDENTURES
SECTION 19.01. Without the consent of the holders of any Bonds, the
Company, when authorized by a Certified Resolution of its Board of Directors,
and the Trustees, or either of them, may at any time and from time to time,
enter into an indenture or indentures supplemental hereto, in form satisfactory
to the Corporate Trustee, for one or more of the following purposes:
(A) 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 Trustees, or either of them, 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 pursuant
to Section 5.03 hereof or to release any of the Mortgaged and Pledged
Properties pursuant to Sections 6.10, 10.02 or 10.03 hereof;
(B) To evidence the succession of another corporation or
limited partnership to the Company or an Operating Subsidiary or
successive successions, and the assumption by the successor limited
partnership or corporation of the covenants, agreements and obligations
of the Company or an Operating Subsidiary pursuant to Article 15
hereof;
(C) To add to the covenants of the Company such further
covenants for the protection of the Mortgaged and Pledged Property and
the Bondholders or to surrender any right or power herein conferred
upon the Company as the Board of Directors shall consider to be
necessary for the protection of the Bondholders, and to make the
occurrence and continuance of a default under any of such additional
covenants a Default permitting the enforcement of all or any of the
several remedies provided in this Indenture; provided, however, that in
respect of any such additional
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covenant, such supplemental indenture may provide for a particular
period of grace after default (which period may be shorter or longer
than that allowed in the case of other Defaults) or may provide for an
immediate enforcement of said remedy or remedies upon such default or
may limit the remedies available to the Trustees, or either of them,
upon such default or may authorize the holders of not less than a
majority in aggregate principal amount of the Outstanding Bonds to
waive such default and prescribe limitations on such rights of waiver;
(D) To cure any ambiguity or to correct or supplement any
provision contained in this Indenture which may be inconsistent with
any other provision contained herein or in any supplemental indenture,
or to make such other provisions in regard to matters or questions
arising under this Indenture as shall not be inconsistent with the
provisions and purposes of this Indenture, provided any such action
shall not adversely affect the interest of the Bondholders;
(E) To evidence the assumption by a lessee corporation of the
covenants, agreements and obligations of the Company or any successor
corporation or limited partnership upon the Bonds and under this
Indenture;
(F) To modify or eliminate any of the terms of this Indenture;
provided, however, that no such modification or elimination shall be or
become operative or effective which shall in any manner impair any of
the rights of the Bondholders or of the Trustees, while any Bonds of
any series created prior to the execution of such supplemental
indenture shall remain Outstanding;
(G) To add to the conditions, limitations and restrictions on
the authorized amount, terms or purposes of issue, authentication and
delivery of Bonds, or any series of Bonds, as herein set forth, other
conditions, limitations and restrictions thereafter to be observed;
(H) To provide for the creation of any series of Bonds (other
than the 1989 Bonds);
(I) To permit the exchange of Bonds of one series for Bonds of
another series, or the exchange of Bonds of one denomination or kind
for Bonds of another denomination or kind of the same series; or
(J) To appoint any separate trustee or separate trustees or
co-trustee or co-trustees pursuant to Article 16.
Nothing contained in this Article 19 shall affect or limit the right or
obligation of the Company to execute and deliver to the Trustees any instrument
Of further assurance or other instrument which elsewhere in this Indenture it is
provided shall be delivered to the Trustees.
The Trustees, or either of them, are hereby authorized and directed to
join with the Company in the execution of any such supplemental
indenture, to
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make any further appropriate agreements and stipulations which may be herein
contained and to accept the conveyance, transfer and assignment of any property
thereunder, but the Trustees, or either of them, shall not be obligated to enter
into any such supplemental indenture which, in their, its or his opinion, does
not afford adequate protection to the Trustees, or either of them, or adversely
affects the Trustees' own rights, duties or immunities under this Indenture of
otherwise or adversely affects the interests of the Bondholders.
SECTION 19 02. With the consent (evidenced as provided in Article 18)
of the holders of not less than 66 2/3% in aggregate principal amount of the
Bonds then Outstanding (or if less than all series of Bonds then Outstanding are
affected by such supplemental indenture, not less than 66 2/3% of the Bonds of
each series then Outstanding which are affected by such supplemental indenture),
by Act of said Holders delivered to the Company and the Trustees, the Company
(when authorized by a Certified Resolution) and the Trustees at any time and
from time to time, by entering into an indenture or indentures supplemental
hereto, may modify, alter, add to or eliminate in any manner (with the approval
of any governmental agency if required by law) any provisions of this Indenture
or the rights of the Bondholders or the rights and obligations of the Company;
provided, however, that no such supplemental indenture shall, without the
consent of the holder of each Outstanding Bond affected thereby:
(i) change the Stated Maturity of the principal of, or any
installment of interest on, any Bond, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable upon
redemption thereof, or the coin or currency in which, any Bond or the
interest thereon is payable, or impair the right to institute suit for
the enforcement of any such payment on or after the Stated Maturity
thereof (or, in the case of redemption, on or after the Redemption
Date), or
(ii) permit the creation of any mortgage or other lien
ranking prior to or on a parity with the Lien of this Indenture as to
any Mortgaged and Pledged Property, except as otherwise expressly
provided by this Indenture, or impair the Lien of this Indenture as to
any Mortgaged and Pledged Property, or
(iii) deprive the holder of any Bond then Outstanding of the
Lien of this Indenture on the Trust Estate, or
(iv) reduce the percentage(s) of the aggregate principal
amount of Outstanding Bonds, or any or all series thereof, the consent
of the holders of which is required for any such supplemental
indenture, or the consent of whose holders is required for any waiver
(of compliance with certain provisions of this Indenture or certain
Defaults hereunder and their consequences) provided for in this
Indenture, or
(v) modify any of the provisions of this Section 19.02 or
Section 12.27, except to increase any such percentage or to provide
that certain other provisions of this Indenture cannot be modified or
waived without the consent of the holder of each Bond affected thereby.
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Bonds or any series thereof shall be deemed to be "affected" by a
supplemental indenture, if such supplemental indenture adversely affects or
diminishes the rights of Holders thereof against the Company or an Operating
Subsidiary or against the property of the Company or an Operating Subsidiary.
The Trustees may in the exercise of discretion, subject to Section 16.02,
determine whether or not any Bonds would be affected by any supplemental
indenture and any such determination shall be conclusive upon the Holders of all
Bonds, whether theretofore or thereafter authenticated and delivered hereunder.
It shall not be necessary for any Act of Bondholders 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.
Any supplemental indenture authorized by the provisions of this Section
19.02 shall be executed by the Company and the Trustees, or either of them, in
accordance with the terms of Section 19.03.
Promptly after the execution by the Company and the Trustees of any
supplemental indenture pursuant to the provisions of Section 19.03, the Company
shall mail to the holders of the Bonds at their last addresses as they shall
appear on the Bond Register of the Company a notice setting forth in general
terms the substance of such supplemental indenture. Any failure of the Company
to mail such notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such supplemental indenture.
SECTION 19.03. Prior to the execution of any supplemental indenture,
the Corporate Trustee shall receive a Company Request, accompanied by a
Certified Resolution authorizing the execution of any supplemental indenture
pursuant to Section 19.01 or Section 19.02, and, if pursuant to Section 19.02,
evidence filed with the Corporate Trustee of the Act of Bondholders as
aforesaid.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustees shall be entitled to
receive, and subject to Section 16.02 shall be fully protected in relying upon,
an Opinion of Counsel stating that the execution of such supplemental indenture
is authorized or permitted by this Indenture and stating such other matters as
the Trustees may reasonably request. The Trustees may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustees, or either of their rights, duties or immunities under this Indenture
or otherwise.
SECTION 19.04. Upon the execution of any supplemental indenture
pursuant to the provisions of this Article 19, this Indenture shall be, and
shall be deemed to be, modified and amended in accordance therewith and the
respective rights, limitations, duties and obligations under this Indenture of
the Company, the Trustees, and each of them, and the Bondholders, and each of
them, 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 shall be deemed to
be, part of the terms and conditions of this Indenture for any and all purposes,
as if originally contained herein.
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SECTION 19.05. Bonds authenticated and delivered after the execution of
any supplemental indenture pursuant to the provisions of this Article 19 may,
and shall if required by the Corporate Trustee, bear a notation in form approved
by the Corporate Trustee, as to any matter provided for in such supplemental
indenture. If the Company and the Corporate Trustee shall so determine, new
Bonds modified so as to conform, in the opinion of the Corporate Trustee and the
Board of Directors of the Company, to any modification of this Indenture
contained in any such supplemental indenture, may be prepared by the Company,
authenticated by the Corporate Trustee and delivered without expense to the
holders of the Outstanding Bonds, upon surrender of such Bonds, the new Bonds so
issued to be in an aggregate principal amount equal to the aggregate principal
amount of those so surrendered.
SECTION 19.06. No supplemental indenture shall be entered into pursuant
to any authorization contained in this Indenture which shall not comply with the
provisions of the Trust Indenture Act of 1939 as then in effect.
ARTICLE 20.
MISCELLANEOUS
SECTION 20.01. Except as provided herein, nothing in this Indenture,
expressed or implied, is intended, or shall be construed, to confer upon, or to
give to, any person other than the parties hereto and the holders of the Bonds
outstanding hereunder any right, remedy, or claim under or by reason of this
Indenture or any covenant, condition, stipulation, promise or agreement hereof,
and all the covenants, conditions, stipulations, promises and agreements
contained in this Indenture by and on behalf of the Company shall be for the
sole and exclusive benefit of the parties hereto, and of the holders of the
Bonds Outstanding hereunder.
SECTION 20.02. Upon Application, and provided no Event of Default shall
have occurred and then be continuing, or if an Event of Default shall have
occurred and be continuing, in the sole discretion of the Corporate Trustee, any
moneys (excluding any moneys held for the payment of the principal of, premium,
if any, or interest on any of the Bonds) held by the Corporate Trustee under
this Indenture, including Deposited Cash and funds deposited pursuant to Section
17.01 (prior to the time such funds become due and payable provided that such
investments mature prior to the time that such moneys become due and payable)
shall be invested, in the manner specified in such Application, by the Corporate
Trustee in (i) marketable direct obligations of the United States of America or
obligations for which the faith of the United States is pledged to provide for
the payment of the interest and principal, (ii) readily marketable commercial
paper, rated "prime" by the the National Credit Office (or any similar
organization which rates commercial paper), of corporations (other than the
Company or any of its Subsidiaries or Affiliates) organized and existing under
the laws of the United States of America or any state thereof which have
substantial properties and assets and conduct substantial business in the United
States of America, (iii) bankers' acceptances or time certificates of deposit
issued by banks insured by the Federal Deposit Insurance Corporation Bank
Insurance Fund (including the Corporate Trustee) having capital, surplus and
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undivided profits aggregating at least $50,000,000 or time deposits with such
banks, or (iv) readily marketable investment grade securities rated one of the
four highest investment grades by Standard & Poor's or Moody's Investor
Services; provided, however, that prior to the making of any such investment,
the Corporate Trustee will obtain the written approval of the Company with
respect to the maturity of such investment. The Corporate Trustee shall not be
liable to the Company or the Bondholders for the results of any such
investments. Such obligations shall be held by the Corporate Trustee as part of
the Mortgaged and Pledged Property in lieu of the moneys invested therein
subject to the Company's right to liquidate such investments in such manner and
at such time or times as, in the exercise of the Company's discretion, it deems
to be just and advisable, provided no Event of Default shall have occurred and
be continuing. If an Event of Default shall have occurred and be continuing such
obligations shall be held by the Corporate Trustee subject to its right to
liquidate such investments in such manner and at such time or times as, in the
exercise of its discretion, it deems to be in the best interests of Bondholders.
The Corporate Trustee shall have the right and duty to receive all amounts paid
on account of any investment made by it as hereby contemplated, including all
interest payments. Unless an Event of Default shall have occurred or be
continuing, any net profit resulting from, or interest or income produced by,
such investment shall, when received by the Corporate Trustee, be promptly paid
by it to the Company.
The Company covenants that within 30 days of demand by the Corporate
Trustee, it will replace all moneys lost through any investment made and
liquidated as by this Section 20.02 contemplated, and will reimburse the
Corporate Trustee for all accrued interest, commissions and expenses paid or
incurred in connection with the acquisition or liquidation of any investment.
SECTION 20.03. Any moneys deposited with the Trustees or any paying
agent, or then held by the Company, in trust for the payment of the principal
of, and premium, if any, or interest on any Bond and remaining unclaimed for six
years after the date upon which the principal of and premium, if any, or
interest on such Bonds shall have become due and payable, shall be paid to the
Company upon Company Request, or, if then held by the Company, shall be
discharged from such trust; and the holder shall thereafter, as an unsecured
general creditor, be entitled to look only to the Company for payment thereof,
and all liability of the Trustees or any paying agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that, before being required to make any such payment
to the Company, the Trustees, or any paying agent, may, at the expense of the
Company, cause to be published once in a Daily Newspaper in such areas as the
Corporate Trustee, or any paying agent, as the case may be, may deem necessary a
notice that such moneys remain unclaimed and that, after a date named in said
notice, the balance of such moneys then unclaimed will be returned to the
Company.
SECTION 20.04. (A) Each certificate or opinion which is specifically
required by the provisions of this Indenture to be delivered to the Trustees, or
either of them, with respect to compliance with a condition or covenant herein
contained shall include (A) a statement that each person signing such
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certificate or opinion has read such covenant or condition; (B) 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 opinions are
based; (C) a statement that, in the opinion of each such person, he has made
such examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and (D) a statement as to whether or not in the opinion of each
such person such condition or covenant has been complied with.
(B) Every request or Application by the Company for action by the
Trustees, or either of them, shall be accompanied by an Officers' Certificate
stating that all conditions precedent, if any, to such action, provided for in
this Indenture (including any covenants compliance with which constitutes a
condition precedent) have been complied with and an Opinion of Counsel stating
that in the opinion of such counsel all conditions precedent, if any, to such
action, provided for in this Indenture (including any covenants compliance with
which constitutes a condition precedent) have been complied with, except that in
the case of any such request or Application as to which the furnishing of such
documents is specifically required by any provision of this Indenture relating
to such particular request or Application, no additional certificate or opinion
need be furnished.
(C) 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.
(D) Any certificate or opinion of an officer of the Company or of any
engineer, appraiser, accountant or other expert may be based, insofar as it
relates to legal matters, upon a certificate or opinion of, or representations
by, course, unless such officer or engineer or appraiser or accountant or other
expert 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 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 Company stating that the information with respect to such factual matters is
in the possession of the Company, 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.
(E) Any Opinion of Counsel relating to the binding effect or
enforceability in accordance with its terms of this Indenture, any supplemental
indenture, any Bond, or any other instrument relating thereto may state that
such opinion is subject to and qualified in all respects by (i) the effect of
applicable bankruptcy, insolvency, reorganization, moratorium and other laws
affecting creditors' rights and remedies generally, (ii) the discretion of the
courts in applying equitable principles and remedies (regardless of whether such
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enforceability is considered in a proceeding in equity or at law or otherwise),
(iii) the effect of fraudulent conveyance provisions of the Federal Bankruptcy
Code and applicable state law, (iv) the requirements that in the exercise of its
rights, the Trustees and Bondholders not act in bad faith, and (v) no opinion
need be expressed with respect to the validity, binding effect or enforceability
of the following provisions: indemnification and contribution provisions, grants
of powers of attorney, the appointment of receivers or custodians, waiver of
notice, designations of commercial reasonableness, and waiver of rights of and
submissions to judicial proceedings.
Any Opinion of Counsel given as to title to property may be based, in
whole or in part, upon a title policy or certified abstract or certificate
issued or rendered by any reputable person, firm or corporation engaged in the
business of insuring or guaranteeing titles to property or of making or issuing
certified abstract (provided that in such case such Opinion of Counsel shall
state that the signer believes such other person giving such policy, abstract or
certificate is reputable and one upon whom he may properly rely.
(F) 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.
SECTION 20.05. Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Bondholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Bondholders in person or by agent
duly appointed in writing; and, except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Trustees, and, where it is hereby expressly required, to the
Company. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the
Bondholders 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 16.02) conclusive in
favor of the Trustees and the Company, if made in the manner provided in this
Section.
The fact and date of the execution by any person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by
the certificate of any notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
an officer of a corporation or a member of a partnership, on behalf of such
corporation or partnership, or by a fiduciary, such certificate or affidavit
shall also constitute sufficient proof of his authority. The fact and date of
the execution of any such instrument or writing, or the authority of the person
executing the same, may also be proved in any other manner which the Corporate
Trustee deems sufficient.
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Any request, demand, authorization, direction, notice, consent, waiver
or other action by the holder of any Bond shall bind every future holder to the
same Bond and the holder of every Bond issued upon the transfer thereof or in
exchange therefor or in lieu thereof, in respect of anything done or suffered to
be done by the Trustees or the Company in reliance thereon, whether or not
notation of such action is made upon such Bond.
SECTION 20.06. Subject to the provisions of Articles 15 and 16 hereof,
whenever in this Indenture any of the parties hereto is named of referred to,
such name or reference shall be deemed to include the successors or assigns of
such party, and all the covenants and agreements in this Indenture contained by
or on behalf of the Company or by or on behalf of the Trustees shall bind and
inure to the benefit of the respective successors and assigns of such parties
whether so expressed or not.
SECTION 20.07. If any provision of this Indenture limits, qualifies, or
conflicts with another provision of this Indenture required to be included
herein by any of the provisions of the Trust Indenture Act of 1939 such required
provision shall control. Provisions required by said Trust Indenture Act to be
included herein which are not included herein are hereby incorporated herein by
reference to said Trust Indenture Act.
SECTION 20.08. Notwithstanding any other provisions of this Indenture,
the Company may, at any time and from time to time, amend this Indenture so as
to limit and thereafter to reduce (but not below the amount of Bonds at the time
Outstanding hereunder) the aggregate principal amount of Bonds at any one time
Outstanding which may be secured hereby by executing and delivering to the
Corporate Trustee, and thereafter appropriately recording or causing to be
recorded in all places where this Indenture is recorded, a supplemental
indenture specifying the aggregate principal amount of Bonds at any one time
Outstanding which may thereafter be secured hereby. Unless and until this
Indenture shall have been so amended, the aggregate principal amount of Bonds at
any one time Outstanding which may be secured hereby shall not be limited,
except as stated in Section 4.03 hereof. Any such amendment of this Indenture
and the execution and delivery of any such supplemental indenture as provided in
this Section 20.08 may be authorized by a Certified Resolution and no other or
further authorization or consent shall be required.
SECTION 20.09. Any request, demand, authorization, direction, notice,
consent, waiver or Act of the Bondholders or other document provided or
permitted by this Indenture to be made upon, given or furnished to, or filed
with:
(l) the Trustees, or either of them, by any Bondholder or by the
Company shall be sufficient for every purpose hereunder if
made, given, furnished or filed in writing to or with the
Corporate Trustee at its main office, or
(2) the Company by the Trustees, or either of them, or by any
Bondholders shall be sufficient for every purpose hereunder
(except as herein otherwise provided) if in writing and
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SECTION 20.13. The Company shall provide the Corporate Trustee with
Backup Withholding Forms prescribed by the Internal Revenue Service and shall
indemnify the Corporate Trustee for any penalties, expenses, costs and
liabilities assessed against the Corporate Trustee for using improper forms.
SECTION 20.14. The titles of the several Articles of this Indenture and
the table of contents shall not be deemed to be any part hereof.
SECTION 20.15. This Indenture is being executed in several
counterparts, each of which shall for all purposes be deemed to be an original,
and all such counterparts shall together constitute but one and the same
instrument.
SECTION 20.16. This Indenture and each Bond issued hereunder shall be
governed by the laws of the State of Tennessee as to all matters affecting the
duties, liabilities, privileges, rights and obligations of the Bondholders, the
Company and the Trustees and any agents of the foregoing, including but not
limited to, matters of validity, construction, effect and performance; provided
that the creation and the rank of the Lien of this Indenture and the foreclosure
thereof shall be governed by the law of the jurisdiction in which the property
in question is located at the relevant time or which otherwise provides for such
creation, rank and foreclosure.
IN WITNESS WHEREOF, NATIONAL HEALTHCORP L.P. has caused its name to be
hereunto affixed, and this instrument to be signed and attested by NHC, INC.,
its Managing General Partner for and in its behalf; and BOATMEN'S TRUST COMPANY,
in token of its acceptance of the trust hereby created, has caused its corporate
name to be hereunto affixed, and this instrument to be signed and sealed by one
of its Vice Presidents and its corporate seal to be attested by one of its
Assistant Secretaries, and H.E. BRADFORD, has for all like purposes hereunto set
his hand and affixed his seal, all in _____________, ____________, on the date
of their acknowledgments annexed hereto, but effective as of the 15th day of
October, 1989, which latter date shall be deemed to be the date hereof.
NATIONAL HEALTHCORP L.P., a Delaware
limited partnership
By: NHC, Inc., its Managing
General Partner
By:
-----------------------------------
Title:
-------------------------------
ATTEST:
- -----------------------------
Secretary
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BOATMEN'S TRUST COMPANY
By:
-----------------------------------
-----------------------------------
[CORPORATE SEAL]
ATTEST:
- -----------------------------
Secretary
-----------------------------------
H.E. BRADFORD
- -----------------------------
Witness
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STATE OF COUNTY OF ____________________)
COUNTY OF _____________________________)
Before me, the undersigned, a Notary Public of the State and County
aforesaid, personally appeared __________________ and ________________, with
whom I am personally acquainted, and who upon oath acknowledged themselves to
be President and Secretary, respectively, of NHC, Inc., the Managing General
Partner of NATIONAL HEALTHCORP L.P., a Delaware limited partnership, and they
as such officers, being authorized so to do, executed the foregoing instrument
for the purpose therein contained, by signing the name of the corporation on
behalf of the limited partnership by themselves as such officers.
Witness my hand and seal, at office in __________, Tennessee, this
____ day of ___________ , 1989.
Commission Expires:
_______________Notary Public
(SEAL)
STATE OF __________________)
COUNTY OF ________________ )
I, the undersigned, a Notary Public in and for the State and County
aforesaid, do hereby certify that _______________ and _______________, whose
names as President and Secretary of NHC, Inc., the Managing General Partner of
NATIONAL HEALTHCORP L.P., a Delaware limited partnership, are signed to the
foregoing indenture and who are known to me and known to be such officers,
acknowledged before me on this day, under oath, that, being informed of the
contents of the said Indenture they, as such officers, with full authority,
executed the same voluntarily for and as the act of NHC, Inc. on behalf of
NATIONAL HEALTHCORP L.P.
Given under my hand and seal of office this ____ day of ________, 1989.
Commission Expires:
_____________Notary Public
(SEAL)
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<PAGE> 1
Exhibit 4.3
INDENTURE OF TRUST AND SECURITY AGREEMENT
THIS INDENTURE OF TRUST AND SECURITY AGREEMENT (this "Indenture"),
dated as of December 1, 1990, by and among NATIONAL HEALTH CORPORATION
LEVERAGED STOCK OWNERSHIP TRUST, a trust organized under the laws of the State
of Tennessee (the "Issuer"), NATIONAL HEALTH CORPORATION, a Tennessee
corporation ("National"), NATIONAL HEALTHCORP L.P., a Delaware limited
partnership ("NHLP"), and STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION, a national banking association, as Indenture Trustee (the
"Indenture Trustee") having a corporate trust office at 100 Constitution Plaza,
Hartford, Connecticut 06103, Attention: Corporate Trust Department and BARNETT
BANKS TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association, as
Florida Co-Indenture Trustee (the "Florida Co-Trustee") having a corporate
office at 9000 Southside Boulevard, Building 100, Jacksonville, Florida 32256,
Attention: Corporate Trust Department.
RECITAL:
A. The Trust has entered into separate Note Purchase Agreements dated
as of December 1, 1990 (the "Note Purchase Agreements") with the Note Purchaser
named therein (the "Note Purchaser") providing for the issuance and sale of
$20,000,000 aggregate principal amount of the Series A Senior Secured ESOP
Notes due June 1, 2003 (the "Series A Notes") and $30,000,000 aggregate
principal amount of the Series B Senior Secured ESOP Notes due December 1, 2005
(the "Series B Notes" and collectively with the Senior A Notes, the "Notes") of
the Trust to the Note Purchasers.
B. The Notes will be secured by the Common Stock and by contributions
made by National to the Issuer to enable it to meet its obligations on the
Notes. The Notes will be further secured by the Mortgages, the Note and
Mortgage Assignments and the Construction Related Agreements and by the NHLP
Note.
C. Payment of the principal of and interest and premium, if any, on the
Notes will be unconditionally guaranteed on a joint and several basis by NHLP,
National and NHC, Inc. ("NHC"), a Tennessee corporation pursuant to a Guaranty
Agreement dated as of December 1, 1990 (the "Guaranty Agreement"),
substantially in the form of the Guaranty Agreement attached hereto as Exhibit
B.
D. NHLP and National expect to benefit from such purchase by the Note
Purchasers and wish to induce the Note Purchasers to purchase the Notes under
the Note Purchase Agreements.
E. The Notes and the principal thereof and interest and premium thereon
and all additional amounts and other sums at any time due and owing from or
required to be paid by the Issuer, NHLP or National, as the case may be, under
the terms of the Notes, this Indenture, the Mortgages, the Note and Mortgage
Assignments
<PAGE> 2
or the Note Purchase Agreement are hereinafter sometimes referred to as
"indebtedness hereby secured".
F. The terms which are capitalized herein shall have the meanings set
forth in Section 1 hereof unless the context shall otherwise require.
G. All of the requirements of law have been fully complied with and all
other acts and things necessary to make this Indenture a valid, binding and
legal instrument for the security of the indebtedness hereby secured have been
done and performed.
NOW, THEREFORE, in consideration of the premises, the acceptance by the
Indenture Trustee of the trusts created hereby, the purchase and acceptance of
Notes by the purchasers thereof, and other good and valuable consideration, the
receipt of which is hereby acknowledged, and in order to secure the payment of
the Notes according to the terms thereof and to secure the payment of all other
indebtedness hereby secured and the performance and observance of all the
covenants and conditions to be performed or complied with by the Issuer, NHLP
or National, as the case may be, in the Notes and in this Indenture and in the
Mortgages, the Note and Mortgage Assignments and the Note Purchase Agreement
contained and to declare the terms and conditions upon and subject to which the
Notes are to be secured, NHLP, National and the Issuer have executed and
delivered this Indenture and certain of the other agreements referred to herein
to which they are a party, and do hereby mortgage, assign, pledge and
hypothecate unto the Indenture Trustee, its successors in trust and assigns,
forever, and grant to the Indenture Trustee, its successors in trust and
assigns, forever a security interest in all of NHLP's, National's and the
Issuer's estate, right, title and interest in, to and under any and all of the
following described Property (but, with respect to the Issuer, only its estate,
right, title and interest in, to and under any and all of the Property
described in Granting Clause First and Granting Clause Seventh) (including,
without limitation, any and all extensions and modifications thereof, any and
all rights to make claim for, collect, receive and receipt for any and all
income, revenues, issues, profits, security and other moneys payable or
receivable thereunder or with respect thereto, to bring proceedings thereunder
or for the specific or other enforcement thereof or with respect thereto, in
the name of NHLP, National or the Issuer or otherwise, and the right to make
all waivers and agreements, to grant or refuse requests, to give or withhold
notices, and to execute and deliver, in the name and on behalf of NHLP,
National or the Issuer, as agent and attorney-in-fact, any and all instruments
in connection therewith, including deeds or other appropriate instruments of
conveyance, and to do any and all things which NHLP, National or the Issuer is
or may be entitled to do thereunder; provided that no obligation of NHLP,
National or the Issuer under the provisions thereof or with respect thereto
shall be impaired or diminished by virtue hereof, nor any such obligation be
imposed upon the Indenture Trustee), all of which Property has been delivered
to the Indenture Trustee on the date of the execution and delivery hereof:
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<PAGE> 3
GRANTING CLAUSE FIRST
The Common Stock, including without limitation, all proceeds, monies,
income, and benefits arising by virtue of the Issuer's ownership of the Common
Stock and all dividends, redemption proceeds, and other distributions on or
with respect to the Common Stock, payable in cash, stock or other Property, and
all subscription and other rights in connection therewith, which Pledge is
confirmed by the Stock Pledge Agreement, but only to the extent that the January
1988 Lenders, the December 1988 Lenders or any other Person that shall make a
loan to the Issuer have been or will be effectively conveyed a security
interest in proceeds, monies, income and benefits arising by virtue of the
Issuer's ownership of common stock of National and dividends, redemption
proceeds and other distributions on or with respect to such common stock of
National, payable in cash, stock or other Property, and subscription and other
rights in connection therewith.
GRANTING CLAUSE SECOND
The Guaranty Agreement, and any amendments, modifications, supplements
or renewals thereof.
GRANTING CLAUSE THIRD
The Myrtle Beach Facility, which Pledge is confirmed by the Myrtle
Beach Mortgage, the Greenville Facility, which Pledge is confirmed by the
Greenville Mortgage, the North Augusta Facility, which Pledge is confirmed by
the North Augusta Mortgage, the Stuart Facility, which Pledge is confirmed by
the Stuart Mortgage, the Merritt Island Facility, which Pledge is confirmed by
the Merritt Island Mortgage, the Greenwood Facility, which Pledge is confirmed
by the Greenwood Mortgage, the Knoxville Facility, which Pledge is confirmed by
the Knoxville Mortgage, the Pinellas Facility, which Pledge is confirmed by the
Pinellas Mortgage and the Pinellas Assignment, the Sun City Facility, which
Pledge is confirmed by the Sun City Mortgage and the Sun City Assignment, the
Sarasota Facility, which Pledge is confirmed by the Sarasota Mortgage and the
Sarasota Assignment and the Ocoee Facility, which Pledge is confirmed by the
Ocoee Mortgage and the Ocoee Assignment.
GRANTING CLAUSE FOURTH
The Construction Related Agreements.
GRANTING CLAUSE FIFTH
The NHLP Note, which Pledge is confirmed by the Assignment of NHLP
Note.
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<PAGE> 4
GRANTING CLAUSE SIXTH
All right, title and interest to and in any and all moneys, and other
Property at any time pledged or deposited with, or held by, the Indenture
Trustee pursuant to Section 7 or Section 9 of this Indenture, and any and all
moneys or Property of the type described in Granting Clauses First through
Fifth hereof or other security of whatsoever nature which may from time to time
become subject to the lien hereof or which may come into the possession or be
subject to the control of the Indenture Trustee pursuant to this Indenture, the
Mortgages or the Note and Mortgage Assignments or any instrument included in
the Trust Estate, it being the intention of NHLP, National and the Issuer and
it being hereby agreed that all Property hereafter acquired by NHLP, National
or, subject to any applicable limitations contained in the Code or in ERISA,
the Issuer and required to be subjected to the lien of this Indenture or the
Mortgages or the Note and Mortgage Assignments or intended so to be shall
forthwith upon the acquisition thereof by NHLP, National or the Issuer be
subject to the lien of this Indenture as if such Property were now owned by
NHLP, National or the Issuer and were specifically described in this Indenture
and pledged hereby or pursuant hereto; and the Indenture Trustee is hereby
authorized to receive any and all such Property as and for additional security
for the payment of the Notes and all other indebtedness hereby secured or
intended to be secured hereby.
GRANTING CLAUSE SEVENTH
All contributions relating to the Notes made by National to the Plan,
and all earnings on such amounts, but only to the extent that the January 1988
Lenders, the December 1988 Lenders or any other Person that shall make a loan
to the Issuer have been or will be effectively conveyed a security interest in
contributions relating to any such loan made by National to the Plan, and
earnings on such amounts.
TO HAVE AND TO HOLD all and singular the Mortgaged Property whether now
owned or held or hereafter acquired, unto the Indenture Trustee, its successors
in trust and assigns forever;
IN TRUST, NEVERTHELESS, for the equal and ratable benefit and security
of the Notes from time to time outstanding hereunder, without preference,
priority or distinction of any thereof over any other by reason of difference
in time of issuance, sale, authentication, delivery, series or otherwise, for
the enforcement of the payment of the principal of, premium, if any, and
interest on the Notes in accordance with their terms, and all other sums
payable under this Indenture or on the Notes, and the observance and
performance of the provisions of this Indenture, all as herein provided. The
Property subject to the Mortgages and the Note and Mortgage Assignments is
hereinafter called the "Mortgaged Property." The Mortgaged Property together
with the Construction Related Agreements, the Guaranty Agreement, the Common
Stock, the NHLP Note, the above-mentioned monies amounts and any other security
held by the Indenture Trustee pursuant to the foregoing provisions are
hereinafter collectively called the "Trust Estate".
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IT IS HEREBY COVENANTED, DECLARED AND AGREED, that the Indenture
Trustee will hold, as such Indenture Trustee, in trust, all right, title and
interest in and to the Mortgages and the Note and Mortgage Assignments to be
executed and delivered by NHLP to the Indenture Trustee, as mortgagee or as
assignee, as the case may be, and that the Notes are to be issued,
authenticated, delivered and secured, and that the Mortgaged Property is to be
held, dealt with and disposed of by the Indenture Trustee, upon and subject to
the provisions of this Indenture.
AND IT IS HEREBY COVENANTED AND DECLARED that all the Notes are to be
authenticated and delivered and the Trust Estate is to be held and applied by
the Indenture Trustee, subject to the further covenants, conditions and trusts
hereinafter set forth, and NHLP, National and the Issuer each does hereby
covenant and agree to and with the Indenture Trustee, for the equal and
proportionate benefit of all Noteholders of the Notes as follows:
SECTION 1. INTERPRETATION OF INDENTURE; DEFINITIONS.
1.1. Definitions. Unless the context otherwise requires, the terms
hereinafter set forth when used herein shall have the following meanings and
the following definitions shall be equally applicable to both the singular and
plural forms of any of the terms herein defined:
"Acquired Facility" shall mean each of the Stuart Facility, Merritt
Island Facility, Greenwood Facility, Knoxville Facility, Sarasota Facility and
Ocoee Facility.
"Acquisition Account" is defined in Section 9.1.
"Acquisition Payment Certificate" shall mean a certificate of NHLP in
the form attached hereto as Exhibit AA.
"Administrative General Partner" shall mean National Health
Corporation, a Tennessee corporation, and its successors as administrative
general partner of NHLP.
"Affiliate" shall mean a Person (other than a Subsidiary of NHLP,
National or NHC, as the case may be) (1) which, directly or indirectly through
one or more intermediaries, controls, or is controlled by, or is under common
control with, NHLP, National or NHC, as the case may be, (2) which beneficially
owns or holds 5% or more of the Voting Equity Interest of NHLP, National or
NHC, as the case may be, or (3) 5% or more of the Voting Equity Interest of
which is beneficially owned or held by NHLP, National or NHC, as the case may
be, or a Subsidiary. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
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"Americare Southeast" shall mean Americare Southeast, Inc., a South
Carolina corporation and a wholly-owned subsidiary of NHLP.
"Appraiser" shall mean an individual or firm selected by NHLP and
approved by the holders of not less than 64% in aggregate principal amount of
the Notes outstanding which is (1) experienced in the appraisal of property
substantially similar to the Financed Facility being appraised and (2) an
M.A.I. designated member of the American Institute of Real Estate Appraisers.
"Architect" shall mean Johnson & Bailey Architects, P.C.
"Assignment of NHLP Note" shall mean the Assignment of NHLP Note dated
as of December 1, 1990 from National to the Indenture Trustee.
"Business Day" shall mean any day other than a Saturday, a Sunday or a
day on which banks in the city in which the Indenture Trustee receives and
disburses funds are required or authorized to be closed.
"Capitalized Lease" shall mean any lease the obligation for Rentals
with respect to which is required to be capitalized on a balance sheet of the
lessee in accordance with GAAP.
"Capitalized Rentals" of any Person shall mean as of the date of any
determination the amount at which the aggregate Rentals due and to become due
under all Capitalized Leases under which such Person is a lessee would be
reflected as a liability on a consolidated balance sheet of such Person.
"Cash Flow" shall mean (a) the sum of the following amounts for the
immediately preceding 12 month period (all as determined without giving effect
to the proposed incurrence of additional Funded Debt) (i) Consolidated Net
Income, (ii) consolidated depreciation and amortization of assets of NHLP and
its Restricted Subsidiaries, (iii) Interest Charges of NHLP and its Restricted
Subsidiaries, (b) minus distributions paid to holders of Limited Partnership
Interests within the immediately preceding 12 month period.
"Change Order" shall mean any amendment or modification to the Plans,
the General Contracts or the Architect's Agreements with respect to any
Constructed Facility, including any acceptance or approval of any extra cost
alternative or option.
"Closing Date" shall mean the date on which the Senior Secured ESOP
Notes are originally issued.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Collateral Assignment of Management Agreement Fees" shall mean an
agreement in the form attached hereto as Exhibit BB, between NHLP and the
Indenture Trustee relating to the assignment of the earned but unpaid fees
payable under the Management Agreement for each Managed Facility.
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"Common Stock" shall mean shares of common stock of National purchased
by the Issuer pursuant to the Stock Purchase Agreement with the proceeds of the
Notes, provided that Common Stock shall not include Common Stock that has been
released pursuant to Section 8 of the Stock Pledge Agreement.
"Consolidated Adjusted Net Worth" shall mean, as of the date of any
determination thereof, total equity of NHLP and its Restricted Subsidiaries
plus Subordinated Funded Debt and plus Consolidated Deferred Income and minus
Minority Interests on a consolidated basis.
"Consolidated Current Assets" and "Consolidated Current Liabilities"
shall mean such assets and liabilities of NHLP and its Restricted Subsidiaries
as shall be determined in accordance with GAAP to constitute current assets and
current liabilities, respectively.
"Consolidated Current Debt" shall mean all Current Debt of NHLP and its
Restricted Subsidiaries, determined on a consolidated basis eliminating
intercompany items.
"Consolidated Deferred Income" shall mean deferred income of NHLP and
its Restricted Subsidiaries as shall be determined in accordance with GAAP and
as reflected as such on the balance sheets of NHLP.
"Consolidated Funded Debt" shall mean all Funded Debt of NHLP and its
Restricted Subsidiaries, determined on a consolidated basis eliminating
intercompany items.
"Consolidated Investment Net Worth" shall mean, as of the date of any
determination thereof, (i) total equity of NHLP and its Restricted Subsidiaries
plus (ii) Convertible Subordinated Funded Debt plus (iii) Consolidated Deferred
Income and minus (iv) Minority Interests on a consolidated basis.
"Consolidated Net Income" for any period shall mean the gross revenues
of NHLP and its Restricted Subsidiaries for such period less all expenses and
other proper charges (including taxes on income), determined on a consolidated
basis after eliminating earnings or losses attributable to outstanding Minority
Interests, but excluding in any event:
(a) any gains or losses on the sale or other disposition of investments
or fixed or capital assets, and any taxes on such excluded gains and any tax
deductions or credits on account of any such excluded losses;
(b) the proceeds of any life insurance policy;
(c) net earnings and losses of any Restricted Subsidiary accrued prior
to the date it became a Restricted Subsidiary;
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(d) net earnings and losses of any corporation (other than a Restricted
Subsidiary), substantially all the assets of which have been acquired in any
manner by NHLP or any Restricted Subsidiary, realized by such corporation
prior to the date of such acquisition;
(e) net earnings and losses of any corporation (other than a Restricted
Subsidiary) with which NHLP or a Restricted Subsidiary shall have
consolidated or which shall have merged into or with NHLP or a Restricted
Subsidiary prior to the date of such consolidation or merger;
(f) net earnings of any business entity (other than a Restricted
Subsidiary) in which NHLP or any Restricted Subsidiary has an ownership
interest unless either (i) the total net earnings from all of such business
entities do not exceed 10% of Consolidated Net Income for the period for
which Consolidated Net Income is being determined or (ii) such net earnings
shall have actually been received by NHLP or such Restricted Subsidiary in
the form of cash distributions;
(g) any portion of the net earnings of any Restricted Subsidiary which
for any reason is unavailable for payment of dividends to NHLP or any other
Restricted Subsidiary;
(h) earnings resulting from any reappraisal, revaluation or writeup of
assets;
(i) any deferred or other credit representing any excess of the equity
in any Subsidiary at the date of acquisition thereof over the amount
invested in such Subsidiary;
(j) any gain arising from the acquisition of any Securities of NHLP or
any Restricted Subsidiary; and
(k) any establishment or reversal of any contingency reserve, except
to the extent that provision for such contingency reserve shall have been
made from income arising during such period.
"Consolidated Net Worth" shall mean as of the date of any determination
thereof, total equity of NHLP and its Restricted Subsidiaries plus Subordinated
Funded Debt and minus Minority Interests on a consolidated basis.
"Consolidated Total Assets" shall mean as of the date of any
determination thereof, the total amount of all assets of NHLP and its
Restricted Subsidiaries (less depreciation, depletion, and other properly
deductible valuation reserves).
"Constructed Facility" shall mean each of the Myrtle Beach Facility,
the Greenville Facility, the North Augusta Facility, the Pinellas Facility and
the Sun City Facility.
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"Construction Account" is defined in Section 9.1.
"Construction Cost" with respect to any Constructed Facility shall mean
the costs of all labor and materials necessary to complete the physical
construction of such Constructed Facility in accordance with the Construction
Plans and any Change Orders permitted hereunder.
"Construction Payment Certificate" shall mean a certificate of NHLP in
the form attached as Exhibit B to the Construction Consultant Agreement.
"Construction Plans" shall mean the final plans and specifications for
the construction of the Constructed Facilities prepared by the Architect and
approved as required herein and all amendments and modifications thereof made
in accordance with this Indenture.
"Construction Related Agreements" shall mean each Construction
Contract, Collateral Assignment of General Contract, Architect's Agreement,
Collateral Assignment of Architect's Agreement and Plans and Specifications.
"Consultant" shall mean, with respect to the Myrtle Beach Facility, the
Greenville Facility and the North Augusta Facility, Clemons, Rutherford and
Associates, Inc., and with respect to the Pinellas Facility and the Sun City
Facility, Piedmont Olsen, Inc.
"Controlling General Partnership Interest" shall mean a General
Partnership Interest that permits the owner of such General Partnership
Interest to direct the management or administration of a general partnership or
a limited partnership.
"Convertible Subordinated Funded Debt" shall mean all unsecured Funded
Debt of NHLP which contains or has applicable thereto subordination provisions
substantially in the form set forth in Exhibit Z attached hereto (or such other
provisions as may be approved by the holders of at least 64% of the aggregate
principal amount of the Notes (evidenced by a written consent of such holders))
providing for the subordination thereof to other Funded Debt of NHLP, including
in Funded Debt, without limitation, the Guaranty Agreement, and which entitles
the holder thereof to convert the principal amount of such debt into an Equity
Interest of NHLP.
"Covenant Funded Debt" shall mean the sum of Senior Funded Debt plus
Non-Convertible Subordinated Funded Debt.
"Current Debt" of any Person as of the date of determination thereof
shall mean (i) all Indebtedness of such Person for money borrowed other than
Funded Debt of such Person and (ii) Guaranties by such Person of Current Debt
of others.
"Debt Service" of NHLP shall mean for the immediately preceding
12-month period the sum of (i) Interest Charges on all Indebtedness of NHLP
and its Restricted Subsidiaries plus (ii) Operating Lease payments of NHLP and
its Restricted
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Subsidiaries and plus (iii) current maturities of Funded Debt of NHLP and its
Restricted Subsidiaries.
"December 1988 Lenders" shall mean Third National Bank in Nashville,
Irving Trust Company, Sovran Bank/Central South and SouthTrust Bank of Alabama,
National Association, pursuant to that certain Loan and Security Agreement made
and centered into as of the 16th day of December, 1988 by and between the
Issuer, NHLP, National and such institutions, and their successor and assigns.
"Default" has the meaning set forth in the definition below of "Event
of Default".
"Disbursement Fund" is defined in Section 9.1.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" means any corporation, trade or business that is,
along with NHLP, National or NHC, as the case may be, a member of a controlled
group of corporations or a controlled group of trades or businesses, as
described in Section 414(b) and 414(c), respectively, of the Code or Section
4001 of ERISA.
"Environmental Audit" shall have the meaning given thereto in Section
9.4.
"Estimated Total Cost of Completion" shall mean as of any given date,
the then total unpaid cost of completing acquisition and construction of any
Constructed Facility pursuant to the Project Budget and the Construction Plans
and Change Orders with respect thereto, all as determined by the Consultant
therefor in good faith.
"Equity Interest" shall mean, in the case of a corporation, stock of
any class, and in the case of a partnership or a limited partnership, a General
Partnership Interest or a Limited Partnership Interest.
"Equity Subsidiary" means any Subsidiary of NHLP that is accounted for
on the financial statements of NHLP using the equity method of accounting as
required by GAAP.
"Event of Default" shall mean any of the events specified in Section 8
hereof, provided that there has been satisfied any requirement in connection
with such event for the giving of notice, or the lapse of time, or the
happening of any further condition, event or act, and "Default" shall mean any
of such events, whether or not any such requirement has been satisfied.
"Event of Loss" is defined in Section 7.1.
"Financed Facility" shall mean each nursing home described in Exhibit G
through Q hereof and any Substitute Financed Facility.
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"Fiscal Quarter" shall mean a quarter annual fiscal period of NHLP,
National or the Issuer, as the case may be, for each calendar year, which shall
be the periods commencing January 1 and ending March 31, beginning April 1 and
ending June 30, beginning July 1 and ending September 30 and beginning October 1
and ending December 31, provided that if NHLP, National or the Issuer shall at
any time change the beginning date of its Fiscal Year, the term "Fiscal Quarter"
shall (with respect to the intervening fiscal period, hereinafter referred to as
the "Interim Fiscal Quarter", commencing with the first day after the end of the
last full quarter annual period of the Company which began on a previously
designated quarter annual beginning date and ending on the last day prior to the
newly designated Fiscal Year beginning date) be deemed to refer to such Interim
Fiscal Quarter, provided, further, that any stated or determinable amount
expressed as a limitation with respect to any action or forbearance by the
Company for or during any fiscal quarter of the Company shall, with respect to
the application of such limitation to any Interim Fiscal Quarter, be deemed to
be the product of such so stated or determinable amount multiplied by a fraction
whose numerator shall be the number of days contained in such Interim Fiscal
Quarter and whose denominator shall be the figure 90 and provided further, that
NHLP or National, as the case may be, shall deliver financial statements as
described in Section 4.21(a) and Section 6.12(a), respectively, with respect to
the Interim Fiscal Quarter.
"Fiscal Year" shall mean the fiscal year of NHLP, National or the
Issuer, as the case may be, which shall be a period commencing January 1 of each
calendar year and ending December 31 of each calendar year, or, upon 60 days
prior written notice to the holders of the Notes, any other successive twelve
(12) month period designated by NHLP, National or the Issuer and used as such by
NHLP, National or the Issuer, as the case may be, for accounting purposes,
provided that in the event NHLP, National or the Issuer shall at any time change
the beginning date of its fiscal year, the term "Fiscal Year" shall, with
respect to the intervening fiscal period (hereinafter referred to as the
"Interim Fiscal Period") commencing with the first day after the end of the last
full twelve (12) month fiscal period of NHLP, National or the Issuer, as the
case may be, which began on the previously designated beginning date (such
previously designated beginning date, as of the Closing Date, being January 1)
and ending on the last day prior to the newly designated beginning date, be
deemed to refer to such Interim Fiscal Period, provided further, that any stated
or determinable amount expressed as a limitation with respect to any action or
forbearance by NHLP, National or the Issuer, as the case may be, for or during
any Fiscal Year of NHLP, National or the Issuer, as the case may be, shall, with
respect to the application of such limitation to any Interim Fiscal Period, be
deemed to be the product of such so stated or determinable amount multiplied by
a fraction whose numerator shall be the number of months contained in such
Interim Fiscal Period and whose denominator shall be the figure 12 and provided
further, that NHLP or National, as the case may be, shall deliver financial
statements as described in Section 4.21(a) and Section 6.12(a), respectively,
with respect to the Interim Fiscal Period.
"Florida Co-Indenture Trustee" shall mean Barnett Banks Trust Company,
National Association, a national banking association, or any successor under
this Indenture.
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"Four-Quarter Period" shall mean a period of four full consecutive
quarter annual fiscal periods, taken together as one accounting period.
"Funded Debt" of any Person shall mean (i) all Indebtedness for
borrowed money or which has been incurred in connection with the acquisition of
assets in each case having a final maturity of one or more than one year from
the date of origin thereof (or which is renewable or extendible at the option
of the obligor for a period or periods more than one year from the date of
origin), including all payments in respect thereof that are required to be made
within one year from the date of any determination of Funded Debt, whether or
not the obligations to make such payments shall constitute a current liability
of the obligor under GAAP, (ii) all Capitalized Rentals of such Person, and
(iii) all Guaranties by such Person of Funded Debt of others.
"GAAP" shall mean generally accepted accounting principles at the time.
"General Contractor" shall mean with respect to the Myrtle Beach
Facility, the contractor selected by NHLP, with respect to the Greenville
Facility, Triangle Construction Co., Inc., P.O. Box 6266, 2624 Laurens Road,
Greenville, SC 29607, with respect to the North Augusta Facility, A.L. Adams
Construction, P.O. Box 1179, Columbia, SC 29202, with respect to the Pinellas
Facility, G.H. Johnson Construction Company, 5300 W. Cypress Street, Suite 261,
Tampa, Florida 33607 and with respect to the Sun City Facility, G.H. Johnson
Construction Company, 5300 W. Cypress Street, Suite 261, Tampa, Florida 33607.
"General Partners" shall mean National, NHC and any other general
partner of NHLP pursuant to the Limited Partnership Agreement.
"General Partnership Interest" shall mean the interest of a general
partner in a general partnership and the interest of a general partner in a
limited partnership.
"Greenville Architect's Agreement" shall mean that certain agreement
between NHLP and the Architect dated April 2, 1990, together with all permitted
amendments, extensions and renewals thereof and all architectural drawings,
plans and specifications prepared in connection therewith.
"Greenville Collateral Assignment of Architect's Agreement" shall mean
that certain Collateral Assignment of Architect's Agreement substantially in
the form attached hereto as Exhibit X, between NHLP and the Indenture Trustee
relating to the Greenville Architect's Agreement.
"Greenville Collateral Assignment of General Contract" shall mean that
certain Collateral Assignment of General Contract substantially in the form
attached hereto as Exhibit W, between NHLP and the Indenture Trustee relating
to the Greenville Construction Contract.
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"Greenville Construction Consultant Agreement" shall mean that certain
Construction Consultant Agreement substantially in the form attached hereto as
Exhibit F, by and among the Consultant, Indenture Trustee and NHLP.
"Greenville Facility" shall mean the nursing home facility and real-
estate parcels described in Exhibit H hereto.
"Greenville General Contract" shall mean that certain Standard Form of
Agreement Between Owner and Contractor (A1A Document A101) between NHLP and
General Contractor, for construction of the Greenville Facility dated as of
September 5, 1990, together with all permitted amendments, extensions and
renewals thereof.
"Greenville Mortgage" shall mean a mortgage with respect to the
Greenville Facility in substantially the form of Exhibit C-2 hereto.
"Greenville Sub-Account" is defined in Section 9.5.
"Greenwood Facility" shall mean the nursing home facility and real
estate parcels described in Exhibit L hereto.
"Greenwood Mortgage" shall mean a mortgage with respect to the
Greenwood Facility in substantially the form of Exhibit C-1 hereto.
"Guaranties" by any Person shall mean all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing
any Indebtedness, dividend or other obligation, of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, all obligations incurred through an agreement, contingent
or otherwise, by such Person: (i) to purchase such Indebtedness or obligation
or any Property constituting security therefor, (ii) to advance or supply funds
(y) for the purchase or payment of such Indebtedness or obligation or (z) to
maintain working capital or other balance sheet condition or otherwise to
advance or make available funds for the purchase or payment of such
Indebtedness or obligation, or (iii) to lease Property or to purchase
Securities or other Property or services primarily for the purpose of assuring
the owner of such Indebtedness or obligation of the ability of the primary
obligor to make payment of the Indebtedness or obligation, or (iv) otherwise to
assure the owner of the Indebtedness or obligation of the primary obligor
against loss in respect thereof. For the purposes of all computations made
under this Indenture, a Guaranty Agreement in respect of any Indebtedness for
borrowed money shall be deemed to be Indebtedness equal to the principal amount
of such Indebtedness for borrowed money which has been guaranteed, and a
Guaranty Agreement in respect of any other obligation or liability or any
dividend shall be deemed to be Indebtedness equal to the maximum aggregate
amount of such obligation, liability or dividend.
"Guarantors" shall mean NHLP, National and NHC as guarantors under the
Guaranty Agreement.
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"Guaranty Agreement" is defined in paragraph C of the Recitals.
"Hazardous Substance" shall mean any hazardous or toxic material,
substance or waste pollutant or contaminant which is regulated as such under any
statute, law, ordinance, rule or regulation of any Federal, state, local or
regional authority having jurisdiction over the Mortgaged Property or its use,
including but not limited to any material, substance or waste which is: (a)
defined as a hazardous substance under Section 311 of the Federal Water
Pollution Control Act (33 U.S.C. Section 1317) as amended; (b) regulated as a
hazardous waste under Section 1004 of the Federal Resource Conservation and
Recovery Act (42 U.S.C. Section 6901 et seq.) as amended; (c) defined as a
hazardous substance under Section 101 of the Comprehensive Environmental
Response, Compensation and Liability Act, (42 U.S.C. Section 9601 et seq.) as
amended, or (d) defined or regulated as a hazardous substance or hazardous waste
under any rules or regulations promulgated under any of the foregoing statutes.
"Indebtedness" of any Person shall mean and include all obligations of
such Person which in accordance with GAAP shall be classified upon a balance
sheet of such Person as liabilities of such Person, and in any event shall
include without duplication all (i) obligations of such Person for borrowed
money or which has been incurred in connection with the acquisition of property
or assets, (ii) obligations secured by any Lien upon property or assets owned by
such Person, even though such Person has not assumed or become liable for the
payment of such obligations, (iii) obligations created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person, notwithstanding the fact that the rights and remedies
of the seller, lender or lessor under such agreement in the event of default are
limited to repossession or sale of property, and (iv) Capitalized Rentals under
any Capitalized Lease and Guaranties of Indebtedness of others (including,
without limitation, Guaranties by NHLP, NHC or National of amounts payable
pursuant to any loans or advances described in Section 4.19(d)).
"Indenture" shall mean this instrument as amended and supplemented from
time to time in accordance with the provisions hereof.
"Indenture Trustee" shall mean State Street Bank and Trust Company of
Connecticut, National Association, a national banking association, or any
successor under this Indenture.
"Institutional Holder" shall mean a Note Purchaser and any other holder
of a Note which is a bank, savings institution, trust company, national banking
association, charitable foundation, insurance company, a pension, retirement or
profit sharing trust or fund for which any bank, trust company, national
banking association or investment advisor registered under the Investment
Advisors Act of 1940, as amended or is acting as trustee or agent or any
investment company, as defined in the Investment Company Act of 1940, as
amended.
"Interest Charges" for any period shall mean all interest and
amortization of debt discount and expense on any particular Indebtedness for
which such calculations are being made.
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"Interest Payment Date" means June 1, 1991 and each June 1 and December
1 thereafter to and including, with respect to the Series A Notes, June 1, 2003
and with respect to the Series B Notes, December 1, 2005.
"Investments" shall mean all investments, in cash or by delivery of
Property, made, directly or indirectly in any Person, whether by acquisition of
shares of capital stock, indebtedness or other obligations or security or by
loan, advance, capital, contribution or otherwise, provided, however, that
"Investments" shall not mean or include routine investments in Property to be
used or consumed in the ordinary course of business or investments in accounts
receivable arising in the ordinary course of business.
"January 1988 Lenders" shall mean Sovran Bank/Central South, a
Tennessee banking corporation, pursuant to that certain Loan and Security
Agreement made and entered into as of the 20th day of January, 1988 by and
between the Issuer and such institution, and its successor and assigns.
"Joint Venture Investments" shall mean Investments in any Person by
Nutritional Support Services, L.P. for the providing of services by such person
of the type provided by Nutritional Support Services, L.P. on the date of this
Indenture.
"Knoxville Facility" shall mean the nursing home facility and real
estate parcels described in Exhibit M hereto.
"Knoxville Mortgage" shall mean a deed of trust and security agreement
with respect to the Knoxville Facility in substantially the form of Exhibit D
hereto.
"Land Acquisition Costs" with respect to any Financed Facility shall
mean the cost of the real estate parcels with respect to such Financed
Facility, including the cost of title insurance policies, environmental audits
and other normal closing expenses related to the acquisitions of the real
estate parcels with respect to any Financed Facility.
"Lien" shall mean any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute, lease or other contract, and
including but not limited to the security interest lien arising from a
mortgage, encumbrance, pledge, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes. For the purposes of this
Indenture, NHLP or a Subsidiary of NHLP shall be deemed to be the owner of any
Property which it has acquired or holds subject to a conditional sale
agreement, financing lease or other arrangement pursuant to which title to the
Property has been retained by or vested in some other Person for security
purposes.
"Limited Partnership Agreement" shall mean the Amended and Restated
Agreement of Limited Partnership of National HealthCorp L.P., dated as of the
31st day of October, 1986, as amended as of the date hereof.
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"Limited Partnership Interest" shall mean the interest of a limited
partner in a limited partnership.
"Loan Value" of any Financed Facility shall be an amount determined by
multiplying the aggregate unpaid principal amount of the Notes immediately
prior to the date on which the Loan Value is to be paid by a fraction in which
the numerator is the Total Cost of the Financed Facility and the denominator is
the Total Cost of all Financed Facilities subject to the lien of the Indenture
and the Mortgages.
"Long Term Lease" shall mean any lease of real or personal property
(other than a Capitalized Lease) which provides for an original term (including
any period for which the lease may be renewed or extended at the option of the
lessor) of more than three years.
"Loss Payment" is defined in Section 7.1.
"Loss Payment Notice Period" is defined in Section 7.1.
"Make-Whole Premium Amount" as at any date a payment thereof is due
(the "payment date") in connection with a payment or prepayment in respect of
the Notes shall mean the excess of (i) the present value as at the payment date
of the Prepaid Cash Flows, discounted semiannually at an annual rate which is
equal to the Treasury Rate plus 0.50% over (ii) the aggregate principal amount
of the Notes then to be paid or prepaid. To the extent that the Treasury Rate
plus 0.50% at the time of determination of the Make-Whole Premium Amount is
equal to or higher than, with respect to a payment or prepayment of the Series
A Notes, 10.69% and with respect to a payment or prepayment of the Series B
Notes, 10.87%, the Make-Whole Premium Amount shall be zero. For purposes of any
determination of the Make-Whole Premium Amount:
(a) "Prepaid Cash Flows" shall mean, for each date on which a payment of
principal or interest, or both, is scheduled to become due on the Notes, an
amount determined by subtracting (i) the amount of such payment scheduled to
become due on such date after giving effect to any prepayment pursuant to
Section 3.2 on the date as to which the determination is being made and the
application of such prepayment in accordance with the provisions of Section 3.1
from (ii) the amount of such payment which would have become due on such date
but for such prepayment, in each case assuming that the interest rate borne by
the Series A Notes is 10.69% and the interest rate borne by the Series B Notes
is 10.87%.
(b) The applicable "Treasury Rate" means the arithmetic mean of the
yields under the respective headings "This Week" and "Last Week" published in
the Statistical Release under the caption "Treasury Constant Maturities" for
the maturity (rounded to the nearest month) corresponding to the Weighted
Average Life to Maturity of the Prepaid Cash Flows. If no maturity exactly
corresponds to such Weighted Average Life to Maturity, yields for the two
published maturities most closely corresponding to such
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<PAGE> 17
Weighted Average Life to Maturity shall be calculated pursuant to the
immediately preceding sentence and the Treasury Rate shall be interpolated or
extrapolated from such yields on a straight-line basis, rounding in each of
such relevant periods to the nearest month. For the purposes of calculating the
Treasury Rate, the most recent Statistical Release published prior to the date
of determination of the Make-Whole Amount shall be used.
"Statistical Release" shall mean the then most recently published
statistical release designated "H.15(519)" or any successor publication which is
published weekly by the Federal Reserve System and which establishes yields on
actively traded U.S. Government Securities adjusted to constant maturities or,
if such statistical release is not published at the time of any determination
hereunder, then such other reasonably comparable index which shall be designated
by the holders of 64% in aggregate principal amount of the Notes outstanding.
(c) "Weighted Average Life to Maturity" with respect to the Prepaid Cash
Flows means, as at the payment date, the number of years obtained by dividing
the then Remaining Dollar-years of the Prepaid Cash Flows by the principal
amount of the prepayment. The term "Remaining Dollar-years" of the Prepaid Cash
Flows means the product obtained by (i) multiplying (A) the principal portion of
each Prepaid Cash Flow (including payment at final maturity), by (B) the number
of years (calculated to the nearest one-twelfth) between the time of
determination and the date of such Prepaid Cash Flow, and (ii) totaling all the
products obtained in the computations described in clause (i).
"Managed Facility" shall mean each of the Pinellas Facility, the Sun
City Facility, the Sarasota Facility and the Ocoee Facility, and each Financed
Facility substituted therefor in accordance with Section 10.
"Managed Facility Note" shall mean a note from the owner of a Managed
Facility to NHLP and secured by the Mortgage with respect to such Managed
Facility, which note (i) shall be in a principal amount not less than 111% of
the Total Cost of such Managed Facility, (ii) shall at all times have an
outstanding principal balance due (not taking into account any optional
prepayment in whole thereof) of not less than the Loan Value of the Managed
Facility to which it relates, and (iii) shall contain a provision prohibiting
any partial optional prepayments of principal thereof.
"Management Agreement" shall mean an agreement between NHLP and the
owner of a Managed Facility in substantially the form of Exhibit Y attached
hereto or otherwise (including, without limitation, with respect to the Ocoee
Facility and the Sarasota Facility) as agreed to by the holders of at least 64%
in aggregate principal amount of the Notes outstanding, providing for the
management and operation of such Managed Facility by NHLP.
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<PAGE> 18
"Managing General Partner" shall mean NHC, inc., a Tennessee
corporation, and its successors as managing general partner of NHLP.
"Merritt island Facility" shall mean the nursing home facility and
real estate parcels described in Exhibit K hereto.
"Merritt Island Mortgage" shall mean a mortgage with respect to the
Merritt Island Facility in substantially the form of Exhibit C-1 hereto.
"Minority Interests" shall mean any Equity Interest of any class of a
Restricted Subsidiary (other than directors' qualifying shares as required by
law) that is not owned by NHLP and/or one or more of its Restricted
Subsidiaries. Minority Interests shall be valued by valuing Minority Interests
constituting preferred stock at the voluntary or involuntary liquidating value
of such preferred stock, whichever is greater, and by valuing Minority
Interests constituting common stock at the book value of capital and surplus
applicable thereto adjusted, if necessary, to reflect any changes from the book
value of such common stock required by the foregoing method of valuing Minority
Interests in preferred stock.
"Mortgaged Property" shall have the meaning set forth on page 4 hereof.
"Mortgages" shall mean the mortgages and deeds of trust with respect
to the Financed Facilities.
"Multiemployer Plan" shall have the same meaning as in ERISA.
"Myrtle Beach Architect's Agreement" shall mean that certain agreement
between NHLP and the Architect dated April 2, 1990, together with all permitted
amendments, extensions and renewals thereof and all architectural drawings,
plans and specifications prepared in connection therewith.
"Myrtle Beach Collateral Assignment of Architect's Agreement" shall
mean that certain Collateral Assignment of Architect's Agreement in
substantially the form attached hereto as Exhibit X, between NHLP and the
Indenture Trustee relating to the Myrtle Beach Architect's Agreement.
"Myrtle Beach Collateral Assignment of General Contract" shall mean
that certain Collateral Assignment of Construction Contract in substantially
the form attached hereto as Exhibit W, between NHLP and the Indenture Trustee
relating to the Myrtle Beach Construction Contract.
"Myrtle Beach Construction Consultant Agreement" shall mean that
certain Construction Consultant Agreement in substantially the form attached
hereto as Exhibit F by and among the Consultant, Indenture Trustee and NHLP.
"Myrtle Beach General Contract" shall mean that certain Standard Form
of Agreement Between Owner and Contractor (A1A Document A101) between NHLP
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<PAGE> 19
and the General Contractor for construction of the Myrtle Beach Facility to be
entered into, together with all permitted amendments, extension and renewals
thereof.
"Myrtle Beach Facility" shall mean the nursing home facility and real
estate parcels described in Exhibit G hereto.
"Myrtle Beach Mortgage" shall mean a mortgage with respect to the
Myrtle Beach Facility in substantially the form of Exhibit C-2 hereto.
"Myrtle Beach Sub-Account" is defined in Section 9.5.
"NHC" is defined in paragraph B of the Recitals.
"NHLP" is defined in paragraph B of the Recitals.
"NHLP Loan Agreement" shall mean the Loan Agreement dated as of
December 1, 1990 by and between NHLP, as borrower, and National, as lender.
"NHLP Note" shall mean, collectively, the Series A Note and the Series
B Note executed by NHLP to National pursuant to the NHLP Loan Agreement.
"National" is defined in paragraph B of the Recitals.
"NHC" shall mean NHC, Inc., a Tennessee corporation, the Managing
General Partner of NHLP.
"Non-Convertible Subordinated Funded Debt" shall mean 75% of unsecured
Funded Debt of NHLP which contains or has applicable thereto subordination
provisions substantially in the form set forth in Exhibit Z attached hereto (or
such other provisions as may be approved by the holders of at least 64% of the
aggregate unpaid principal amount of the Notes (evidenced by a written consent
of such holders)) providing for the subordination thereof to other Funded Debt
of NHLP, including, without limitation, the Guaranty Agreement, and which does
not entitle the holder thereof to convert the principal amount of such debt
into an Equity Interest of NHLP.
"North Augusta Architect's Agreement" shall mean that certain
agreement between NHLP and the Architect dated April 2, 1990, together with all
permitted amendments, extensions and renewals thereof and all architectural
drawings, plans and specifications prepared in connection therewith.
"North Augusta Collateral Assignment of Architect's Agreement" shall
mean that certain Collateral Assignment of Architect's Agreement in
substantially the form attached hereto as Exhibit X between NHLP and the
Indenture Trustee relating to the North Augusta Architect's Agreement.
"North Augusta Collateral Assignment of General Contract" shall mean
that certain Collateral Assignment of Construction Contract in substantially
the form
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<PAGE> 20
attached hereto as Exhibit W between NHLP and the Indenture Trustee relating to
the North Augusta Construction Contract.
"North Augusta Construction Consultant Agreement" shall mean that
certain Construction Consultant Agreement in substantially the form attached
hereto as Exhibit F by and among the Consultant, the Indenture Trustee and
NHLP.
"North Augusta Facility" shall mean the nursing home facility and real
estate parcels described in Exhibit I hereto.
"North Augusta General Contract" shall mean that certain Standard Form
of Agreement Between Owner and Contractor (A1A Document 101) between NHLP and
the General Contractor, for construction of the North-Augusta Facility dated
as of August 1, 1990, together with all permitted amendments, extension and
renewals thereof.
"North Augusta Mortgage" shall mean a mortgage with respect to the
North Augusta Facility in substantially the form of Exhibit C-2 hereto.
"North Augusta Sub-Account" is defined in Section 9.5.
"Note" or "Notes" shall mean any Note or Notes, as the case may be,
authenticated and delivered under this Indenture.
"Noteholders" or "Holders of the Notes" or "Holders" or "holders"
shall mean the registered owners of the Notes.
"Note and Mortgage Assignment" shall mean an assignment from NHLP to
the Indenture Trustee of the Managed Facility Note and Mortgage with respect to
a Managed Facility, in substantially the form of Exhibit E attached hereto.
"Note Purchase Agreement" shall mean collectively, the separate Note
Purchase Agreements dated as of December 1, 1990 between the Issuer and the
Note Purchasers.
"Note Purchasers" shall mean the Persons named as purchasers of the
Series A Senior Secured ESOP Notes or Series B Senior Secured ESOP Notes under
the Note Purchase Agreement.
"Ocoee Assignment" shall mean an Assignment of Note and Mortgage
relating to the Ocoee Facility, in substantially the form of Exhibit E hereto.
"Ocoee Facility" shall mean the nursing home facility and real estate
parcels described in Exhibit Q hereto.
"Ocoee Mortgage" shall mean a mortgage and security agreement with
respect to the Ocoee Facility in substantially the form of Exhibit C-3 hereto.
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<PAGE> 21
"Offering Memorandum" shall mean the Offering Memorandum dated June
15, 1990, including appendices, prepared by SunTrust Corporate Finance.
"Officers, Certificate" shall mean a certificate, with respect to
National or NHC, signed by the President, a Vice President or Chief Financial
Officer of National or NHC, as the case may be, and with respect to NHLP,
signed on behalf of NHLP by the President, a Vice President or Chief Financial
Officer of the Administrative General Partner and the Managing General Partner.
"Operative Agreements" shall mean this Indenture, the Note Purchase
Agreements, the Mortgages, the Note and Mortgage Assignments, the Stock
Purchase Agreement, the Stock Pledge Agreement, the Assignment of NHLP Note,
the NHLP Loan Agreement, the Guaranty Agreement and the Construction Related
Agreements.
"Operating Lease" shall mean with respect to any Person any lease
which is not a Capitalized Lease pursuant to which such Person shall lease real
or personal property.
"Opinion of Counsel" shall mean an opinion of counsel reasonably
acceptable to the Indenture Trustee which opinion is in form, scope and content
reasonably satisfactory to the Indenture Trustee.
"Other Project Costs" shall mean and include all of the costs to be
incurred in connection with the construction of each of the Constructed
Facilities and which are identified with dollar amounts appearing opposite them
on the Project Budget, other than entries thereon identified as Construction
Costs.
"Outstanding" or "outstanding", when used with respect to Notes, shall
mean as of any particular time all Notes theretofore authenticated and
delivered under this Indenture, except:
(a) Notes theretofore cancelled by the Indenture Trustee or delivered
to the Indenture Trustee for cancellation;
(b) Notes in lieu of and in substitution for which other Notes shall
have been authenticated and delivered pursuant to the terms of Section 2.6; and
(c) Notes held or acquired by NHLP, National, NHC or the Issuer or
any of their Affiliates.
"Overdue Rate" shall mean a rate per annum equal to the rate of
interest then borne by the Series A Notes or the Series B Notes plus 2%.
"Owned Facility" shall mean each of the Myrtle Beach Facility, the
Greenville Facility, the North Augusta Facility, the Stuart Facility, the
Merritt Island Facility, the Greenwood Facility and the Knoxville Facility, and
each Financed Facility substituted therefor in accordance with Section 10.
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<PAGE> 22
"Permitted Encumbrances" shall have the meaning given thereto in the
Mortgages.
"Partnership Interests" shall mean Limited Partnership Interests and
General Partnership Interests.
"Pension Plan" means a "pension plan", as defined in ERISA.
"Permitted Investments" shall mean:
(a) Investments in commercial paper or time deposits maturing in 270
days or less from the date of issuance and issued by or deposited with
banks, the commercial paper of which, at the time of acquisition by NHLP or
any Restricted Subsidiary thereof, are rated A-1 or higher by Standard &
Poor's Corporation and/or P-1 or higher by Moody's Investors Services,
Inc.;
(b) Investments in direct obligations of the United States of America,
or any agency thereof which are backed by the full faith and credit of the
United States, maturing in twelve months or less from the date of
acquisition thereof; and
(c) Investments in certificates of deposit maturing within one year
from the date or origin, issued by a bank or trust company organized under
the laws of the United States or any state thereof, having capital, surplus
and undivided profits aggregating at least $250,000,000 and the long-term
certificates of deposit of which are rated AA or higher by Standard &
Poor's and/or Moody's Investors Services, Inc.
"Person" shall mean an individual, a corporation, a partnership, a
joint venture, an association, a trust or any other entity or organization,
including a government or political subdivision or any agency or
instrumentality thereof.
"Pinellas Assignment" shall mean an Assignment of Note and Mortgage
relating to the Pinellas Facility, in substantially the form of Exhibit E
hereto.
"Pinellas Collateral Assignment of General Contract" shall mean that
certain Collateral Assignment of General Contract dated as of December 1, 1990
between Florida Convalescent Centers, Inc. and the Indenture Trustee relating
to the Pinellas Construction Contract.
"Pinellas Construction Consultant Agreement" shall mean that certain
Construction Consultant Agreement in substantially the form attached hereto as
Exhibit F by and among the Consultant, the Indenture Trustee and NHLP.
"Pinellas Facility" shall mean the nursing home facility and real
estate parcels described in Exhibit N hereto.
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<PAGE> 23
"Pinellas General Contract" shall mean that certain Standard Form of
Agreement Between Owner and Design/Builder (A1A Document A191) between Florida
Convalescent Centers, Inc. and the General Contractor, as design/builder, for
design and construction of the Pinellas Facility dated as of May 2, 1990,
together with all permitted amendments, extension and renewals thereof.
"Pinellas Mortgage" shall mean a mortgage and security agreement with
respect to the Pinellas Facility in substantially the form of Exhibit C-4
hereto.
"Pinellas Sub Account" is defined in Section 9.5.
"Plan" shall mean the National Health Corporation Leveraged Employee
Stock Ownership Plan.
"Plan Trustee" shall mean Marine Midland Bank, N.A., a national
banking association, and any successor trustee under the Trust Agreement.
"Pledge" shall mean to create a security interest in, mortgage,
warrant, bargain, sell, release, convey, assign, transfer, pledge and
hypothecate.
"Project Budget" for each of the Myrtle Beach Property, Greenville
Property, North Augusta Property, Pinellas Property and Sun City Property shall
mean the budget for the construction of each of such facilities, attached to
this Indenture as Exhibits R through V, as each may be amended from time to
time in accordance with the terms hereof.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Rentals" shall mean and include all fixed rents (including as such
all payments which the lessee is obligated to make to the lessor on termination
of the lease or surrender of the property) payable by NHLP and its Restricted
Subsidiaries, as lessee or sublessee under a lease of real or personal
property, but shall be exclusive of any amounts required to be paid by NHLP and
its Restricted Subsidiaries (whether or not designated as rents or additional
rents) on account of maintenance, repairs, insurance, taxes and similar
charges. Fixed rents under any so-called, "percentage leases" shall be computed
solely on the basis of the minimum rents, if any, required to be paid by the
lessee regardless of sales volume, gross revenues or any other similar method
specified therein.
"Reportable Event" shall have the same meaning as in ERISA.
"Responsible Officer" (i) of National or NHC, shall mean the
President, any Vice-President or the Chief Financial Officer thereof and (ii)
of NHLP, shall mean a President, any Vice-President or the Chief Financial
Officer of NHC.
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<PAGE> 24
"Restricted Subsidiary" shall mean any Subsidiary (i) which is
organized under the laws of the United States or any State thereof; (ii) which
conducts substantially all of its business and has substantially all of its
assets within the United States; and (iii) which is more than 50% owned by
NHLP, National or NHC, as the context shall require, and/or one or more
Restricted Subsidiaries of NHLP, National or NHC, as the ease may be.
"Sarasota Assignment" shall mean an Assignment of Note and Mortgage
relating to the Sarasota Facility, in substantially the form of Exhibit E
hereto.
"Sarasota Facility" shall mean the nursing home facility and real
estate parcels described in Exhibit P hereto.
"Sarasota Mortgage" shall mean a mortgage and security agreement with
respect to the Sarasota Facility in substantially the form of Exhibit C-3
hereto.
"Section 1.2D Documents" shall mean the documents described in Section
1.2D of the Construction Consultant Agreement.
"Security" shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
"Senior Funded Debt" shall mean all Consolidated Funded Debt, other
than Subordinated Funded Debt.
"Series A Fixed Payment Date" has the meaning given thereto in Section
3.1 hereof.
"Series B Fixed Payment Date" has the meaning given thereto in Section
3.1. hereof.
"Stock Pledge Agreement" shall mean the Stock Pledge Agreement dated
as of December 1, 1990 between the Issuer and the Indenture Trustee.
"Stock Purchase Agreement" shall mean the Stock Purchase Agreement
dated as of December 1, 1990 by and among National, the Issuer and NHLP.
"Stuart Facility" shall mean the nursing home facility described in
Exhibit J hereto.
"Stuart Mortgage" shall mean a mortgage with respect to the Stuart
Facility in substantially the form of Exhibit C-1 hereto.
"Subordinated Funded Debt" shall mean the sum of Convertible
Subordinated Funded Debt plus Non-Convertible Subordinated Funded Debt.
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<PAGE> 25
The term "subsidiary" shall mean, as to any particular parent business
entity, any business entity of which such parent business entity and/or one or
more business entities that are themselves subsidiaries of such parent business
entity, (i) in the case of any corporation, own more than 20% (by number of
votes) of the Voting Stock, or (ii) in the case of any partnership, own a
Controlling General Partnership Interest or is entitled to more than 20% of the
net income and proceeds of distribution upon liquidation of such partnership,
or (iii) in the case of any limited partnership, own more than 20% of the
Limited Partnership Interests. The term "Subsidiary" shall mean a subsidiary of
NHLP, National or NHC, as the context shall require.
"Substitute Financed Facility" shall mean one or more nursing homes
owned or managed by NHLP and having a "fair market value" equal to the greater
of the "fair market value" or the Loan Value of a Financed Facility, and
substituted for such Financed Facility pursuant to Section 10. The term "fair
market value" shall mean (a) in the ease of any Substitute Financed Facility
the construction of which has not been completed or was completed less than
twelve months prior to the date the same is to be substituted for the Financed
Facility, the actual construction cost of the Substitute Financed Facility,
including the cost of land and buildings and architectural and engineering fees
and the cost of any improvements (including without limitation, all furniture,
fixtures and equipment) made thereto, and (b) in the case of the Financed
Facility for which such substitution is being made and any Substitute Financed
Facility the construction of which was completed more than twelve months prior
to such date the same is to be substituted for the Financed Facility, the
appraised value thereof as determined by an Appraiser.
"Sun City Assignment" shall mean an Assignment of Note and Mortgage
relating to the Sun City Facility, in substantially the form of Exhibit E
hereto.
"Sun City Collateral Assignment of General Contract" shall mean that
certain Collateral Assignment of General Contract in the form attached hereto
as Exhibit W. between Florida Convalescent Centers, Inc. and the Indenture
Trustee relating to the Sun City General Contract.
"Sun City Construction Consultant Agreement" shall mean that certain
Construction Consultant Agreement in the form attached hereto as Exhibit F by
and among the Consultant, Indenture Trustee and NHLP.
"Sun City Facility" shall mean the nursing home facility and real
estate parcels described in Exhibit O hereto.
"Sun City General Contract" shall mean that certain Standard Form of
Agreement Between Owner and Design/Builder (A1A Document A191) between Florida
Convalescent Centers, Inc. and the General Contractor, as design/builder, for
design and construction of the Sun City Facility dated as of October 16, 1990,
together with all permitted amendments, extension and renewals thereof.
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<PAGE> 26
"Sun City Mortgage" shall mean a mortgage and security agreement with
respect to the Sun City Facility in substantially the form of Exhibit C-4
hereto.
"Sun City Sub-Account" is defined in Section 9.5.
"Supplemental Indenture" or "Indenture Supplement" shall mean any
Indenture hereafter duly authorized and entered into in accordance with the
provisions of this Indenture.
"Total Cost" with respect to any Financed Facility shall mean not
greater than 90% of the cost to NHLP or the Owner of a Managed Facility of
acquiring or constructing such Financed Facility, and with respect to the
Myrtle Beach Facility is $5,042,310, with respect to the Greenville Facility is
$5,223,933, with respect to the North Augusta Facility is $4,008,337, with
respect to the Pinellas Facility is $4,437,497, with respect to the Sun City
Facility is $4,432,063, with respect to the Stuart Facility is $5,140,470, with
respect to the Merritt island Facility is $4,309,408, with respect to the
Greenwood Facility is $4,061,782, with respect to the Knoxville Facility is
$4,061,782, with respect to the Sarasota Facility is $4,828,710, and with
respect to the Ocoee Facility is $4,453,708.
"Trust Agreement" shall mean the NHESOP, Inc. Leveraged Employee Stock
Ownership Trust Agreement made and entered into effective January 20, 1988 by
and between NHESOP, Inc. (the predecessor of National) and the Plan Trustee, as
amended on April 1, 1988 by the First Amendment thereto, as the same may from
time to time be amended or modified.
"Trust Estate" shall have the meaning set forth on page 4 hereof.
"Unrestricted Subsidiary" shall mean any Subsidiary which is not a
Restricted Subsidiary.
"Voting Stock" shall mean Securities of any class or classes of a
corporation the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate directors (or
Persons performing similar functions).
"Wholly-owned" when used in connection with any Subsidiary shall mean
(i) in the case of any corporation, a Subsidiary of which all of the issued and
outstanding shares of stock (except shares required as directors' qualifying
shares) and all Funded Debt and Current Debt shall be owned by NHLP, National
or NHC and/or one or more of their Wholly-owned Subsidiaries, as the case may
be, and (ii) in the case of any partnership, shall mean a Subsidiary of which
all of the outstanding Partnership Interests and all Funded Debt and Current
Debt shall be owned by NHLP, National or NHC and/or one or more of their
Wholly-owned Subsidiaries, as the case may be.
"Working Capital" shall mean the remainder of (i) Current Assets, less
(ii) Current Liabilities.
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<PAGE> 27
1.2. Accounting Principles. Where the character or amount of any asset
or liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Indenture; the same shall be done in accordance with GAAP, to
the extent applicable, except where such principles are inconsistent with the
requirements of this Indenture.
1.3. Directly or Indirectly. Where any provision in this Indenture
refers to action to be taken by any Person, or action which such Person is
prohibited from taking, such provision shall be applicable whether such action
is taken directly or indirectly by such Person.
SECTION 2. TERMS OF THE NOTES.
2.1. Issuance in Two Series; Limitation of Principal Amount. (a) The
Notes shall be issuable in two series; one series entitled Series A Senior
Secured ESOP Notes due June 1, 2003 and limited to $20,000,000 in aggregate
principal amount (exclusive of Notes issued pursuant to Section 2.6 hereof) and
one series entitled Series B Senior Secured ESOP Notes due December 1, 2005 and
limited to $30,000,000 in aggregate principal amount (exclusive of Notes issued
pursuant to Section 2.6 hereof). All Notes shall be issuable as fully
registered Notes. The Series A Notes shall be substantially in the form
attached hereto as Exhibit A-1 and the Series B Notes shall be substantially in
the form attached hereto as Exhibit A-2 and shall be subject to required and
optional prepayment as provided in Section 3.
(b) The Indenture Trustee's Certificate of Authentication to be
borne by the Notes shall be substantially of the tenor and purport as set forth
in Exhibit A-1 and Exhibit A-2 hereto. The Notes may have such letters, numbers
or other marks of identification or designation and such legends or
endorsements thereon as the Issuer may deem appropriate and as are not
inconsistent with the provisions of this Indenture, or as may be required to
comply with any law or any rule or regulation made pursuant thereto, and in any
such event as are acceptable to the original Note Purchaser.
2.2. Denominations; Execution of Notes; Certificate of Authentication.
Each Note shall be in the denomination of $500,000 or any multiple of $1,000 in
excess of $500,000, except as may be necessary to reflect any principal amount
not evenly divisible by $1,000. The Notes shall be signed on behalf of the
Issuer by the Plan Trustee. In case any officer of the Plan Trustee who shall
have signed any Note shall cease to be such officer before such Note shall have
been authenticated by the Indenture Trustee or delivered by the Issuer, such
Notes may nevertheless be executed and delivered with the same force and effect
as though the Person or Persons who signed such Note had not ceased to be such
officer of the Plan Trustee; and any Note may be signed on behalf of the Plan
Trustee by a Person who, at the actual date of execution of such Note, shall be
a proper officer of the Plan Trustee, although at the date of such Note, such
Person was not then such officer of the Plan Trustee. Only such Notes as shall
bear thereon a certificate of authentication substantially in the
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form set forth in Exhibit A-1 or Exhibit A-2, hereto, as the case may be, shall
be entitled to the benefits of this Indenture or be valid or obligatory for any
purpose. SUCH certificate by the Indenture Trustee upon any Note executed by
the Plan Trustee shall be conclusive evidence that the Note so authenticated
has been duly authenticated and delivered hereunder and that the holder is
entitled to the benefits of this Indenture. The authentication by the Indenture
Trustee of any Note issued hereunder shall not be construed as a representation
or warranty by the Indenture Trustee as to the validity or security of this
Indenture or of such Note, and the Indenture Trustee shall in no respect be
liable or answerable for the use made of such Note or the proceeds thereof.
2.3. Payment of the Notes. (a) The principal of, premium, if any, and
interest on the Notes shall be payable at the principal office of the Indenture
Trustee, or such other office of the Indenture Trustee as the Indenture Trustee
may specify in writing to the holders of the Notes, in lawful money of the
United States of America. Payment of principal, premium, if any, and interest
on the Notes shall be made only upon presentation of such Notes to the
Indenture Trustee for notation thereon of the amount of such payment. Any
payment or prepayment of amounts due on the Notes in accordance with the terms
thereof and hereof which is due on a date which is not a Business Day shall be
payable on the next following Business Day without penalty or interest.
(b) Notwithstanding the provisions of the preceding paragraph (a),
if any Note is held by an Institutional Holder or its nominee and if such
Institutional Holder shall furnish written notice to the Indenture Trustee
requesting that the provisions of this Section 2.3(b) apply (and Section 6 of
the Note Purchase Agreement shall constitute such written request in the case of
the original Note Purchaser), the Indenture Trustee will cause all payments and
prepayments of the principal of, and interest and premium, if any, on the Notes
held by such Institutional Holder or its nominee to be made when due without
surrender or presentation of such Note and without any notation of such payment
or prepayment being made thereon, either (i) directly to such Holder by check,
duly mailed, by first-class mail, postage prepaid, at its address appearing on
the Note Register (defined in Section 2.4) or (ii) if a bank account in any bank
in the continental United States shall be specified in such notice and if such
notice shall have been given at least 15 days prior to the payment or prepayment
date, by wire transfer of immediately available Federal Reserve funds to such
bank account, on each such date such payment or prepayment is due, provided that
such bank has facilities for the receipt of a wire transfer. The Indenture
Trustee will deliver instructions for any such wire transfer from its office not
later than 12:00 noon, Hartford, Connecticut time on each SUCH DATE payment or
prepayment is due provided that no later than 10:00 a.m., Hartford, Connecticut
time on the date such payment or prepayment is due either (i) the Issuer has
deposited sufficient funds with the Indenture Trustee, or (ii) the Indenture
Trustee has received the Issuer's check in clearing house funds in a sufficient
amount. If the Issuer's funds are not received in a timely manner as above
described, Indenture Trustee shall wire transfer payments promptly following
receipt of the Issuer's funds. The Holder of any Notes to which this Section
2.3(b) applies agrees that (i) it will, before selling, transferring or
otherwise disposing of such Note, present such Note to the Indenture Trustee for
transfer and notation as provided in Sections 2.5 and 2.6 and (ii) it will,
within a
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reasonable period of time after the Note has been paid in full, surrender the
Note to the Indenture Trustee for cancellation and until any such Note is
presented for transfer hereunder, the Indenture Trustee shall assume that the
holder of such Note in the Note Register is, in fact, the holder thereof.
2.4. The Note Register. The Issuer shall cause to be kept at the
principal office of the Indenture Trustee a register for the registration and
transfer of Notes (herein called the "Note Register"). The names and addresses
of the holders of the Notes, the transfers of the Notes and the names and
addresses of the transferees of all Notes shall be registered in the Note
Register.
2.5. Transfers and Exchanges of Notes; Lost or Mutilated Notes. (a)
The holder of any Note may transfer such Note in compliance with applicable
security laws upon the surrender thereof at the principal office of the
Indenture Trustee. Thereupon, the Issuer shall execute in the name of the
transferee a new Note or Notes in aggregate principal amount equal to the
aggregate unpaid principal amount of the Note so surrendered, and the Indenture
Trustee shall authenticate and deliver such new Note or Notes to such
transferee.
(b) The holder of any Note may at any time surrender such Note at
the principal office of the Indenture Trustee in exchange for an equal
aggregate principal amount of Notes in any authorized denominations.
(c) All Notes presented or surrendered for exchange or transfer
shall be accompanied by a written instrument or instruments of assignment or
transfer, in form satisfactory to the Indenture Trustee, duly executed by the
holder or by his attorney duly authorized in writing. The Issuer and the
Indenture Trustee shall not be required to make a transfer or an exchange of
any Note for a period of ten days preceding any payment date with respect
thereto.
(d) In case any Note shall become mutilated or be destroyed, lost or
stolen, the Issuer, upon the written request of the holder thereof, shall
execute, and the Indenture Trustee shall authenticate and deliver, a new Note
in exchange and substitution for the mutilated Note, or in lieu of and
substitution for the Note so destroyed, lost or stolen. In every case the
applicant for a substituted Note shall furnish to the Issuer and to the
Indenture Trustee such security or indemnity as may be required by them to save
each of them harmless from all risks resulting from the authentication and
delivery of the substitute Note, and the applicant shall also furnish to the
Issuer and to the Indenture Trustee evidence to their satisfaction of the
mutilation, destruction, loss or theft of the applicant's Note and of the
ownership thereof. If an original Note Purchaser, or another Institutional
Holder, or either's nominee, is the owner of any mutilated, destroyed, lost or
stolen Note, then the affidavit of an authorized officer of the Note Purchaser
or such Institutional Holder, as the case may be, in form reasonably
satisfactory to the Issuer and the Indenture Trustee setting forth the fact of
mutilation, destruction, loss or theft and such holder's ownership of the Note
at the time of such mutilation, destruction, loss or theft shall be accepted as
satisfactory evidence thereof, and no indemnity shall be required as a
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condition to execution and delivery of a new Note other than the written
agreement of such Note Purchaser or Institutional Holder, as the case may be,
to indemnify the Issuer and the Indenture Trustee.
(e) No notarial acts shall be necessary for the transfer or exchange
of any Note pursuant to this Section 2.5, and the holder of any Note issued as
provided in this Section 2.5 shall be entitled to any and all rights and
privileges granted under this Indenture to a holder of the Note.
2.6. The New Notes. (a) Each new Note (herein in this Section 2.6
called a "New Note") issued pursuant to Section 2.5 in exchange for or in
substitution or in lieu of an outstanding Note (herein in this Section 2.6
called an "Old Note") shall be dated the date of such Old Note. The Indenture
Trustee shall mark on each New Note (i) the date to which interest and
principal have been paid on such Old Note, and (ii) all payments and
prepayments of principal previously made on such Old Note which are allocable
to such New Note. Interest shall be deemed to have been paid or earned, as the
case may be, on such New Note to the date on which interest shall have been
paid or earned, as the case may be, on such Old Note, and all payments and
prepayments of principal marked on such New Note, as provided in clause (ii)
above, shall be deemed to have been made thereon.
(b) Upon the issuance of a New Note pursuant to Section 2.5, the
Issuer may require the payment of a sum to reimburse it for, or to provide it
with funds for, the payment of any tax or other governmental charge connected
therewith but no other charge shall be made in connection with the transfer or
exchange.
(c) All New Notes issued pursuant to Section 2.5 in exchange for, in
substitution for or in lieu of Old Notes shall be valid obligations of the
Issuer evidencing the same outstanding debt as the Old Notes and shall be
entitled to the benefits and security of this Indenture to the same extent as
the Old Notes.
2.7. Cancellation of Notes. All Notes surrendered for the purpose of
payment, redemption, transfer or exchange shall be delivered to the Indenture
Trustee for cancellation or, if surrendered to the Indenture Trustee, shall be
cancelled by it, and no Notes shall be issued in lieu thereof except as
expressly required or permitted by any of the provisions of this Indenture. The
Indenture Trustee shall destroy such cancelled Notes and shall deliver a
certificate to the Issuer specifying that such destruction has been made. If
the Issuer shall acquire any of the Notes, however, such acquisition shall not
operate as a redemption or satisfaction of the Indebtedness represented by such
Notes unless and until the same are surrendered to the Indenture Trustee for
cancellation.
2.8. Indenture Trustee as Agent. Subject to the provisions of Section
11, the Indenture Trustee is hereby irrevocably appointed the agent of the
Issuer for the payment, registration, transfer and exchange of Notes. Subject
to the provisions of Section 2.3, Notes may be presented for payment at, and
notices or demands with respect to the Notes or this Indenture may be served or
made at, the principal office of
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the Indenture Trustee, provided that copies of all such notices or demands
shall be delivered to the Issuer.
2.9. Ownership. The Person in whose name any Note shall be registered
shall be deemed and treated as the owner thereof for all purposes of this
Indenture and, subject to Section 2.5 hereof, neither the Issuer nor the
Indenture Trustee shall be affected by any notice to the contrary. Payment of
or on account of the principal of, premium, if any, and interest, as the case
may be, on such Note shall be made only to or upon the order in writing of such
registered owner. For the purpose of any request, direction or consent
hereunder, the Issuer and the Indenture Trustee may deem and treat the
registered owner of any Note as the sole owner thereof without production of
such Note.
2.10. Interest Rate Adjustment; Taxability.
(a) Interest Rate Adjustment. In the event that at any time after
the date hereof there is for any reason a change in the Federal Tax Rate or the
Inclusion Rate (each as defined in this Section 2.10(a)), then in that event,
the interest rate on the Notes shall be automatically adjusted (but not higher
than the interest rate specified in Section 2.10(d) hereof), effective as of the
effective date of change for each such change, to the rate per annum determined
by multiplying the original interest rate on the Notes by the Adjustment
Fraction. Any Noteholder shall determine the adjusted interest rate on the Notes
held by it in accordance with the foregoing (which determination shall be
conclusive and binding on the Issuer absent manifest error). The Issuer agrees
to promptly notify the Indenture Trustee of such adjusted interest rate and
unconditionally promises to pay interest on such Notes from the date of each
such change at the rate as so adjusted from time to time. If for any reason
(e.g., a retroactive effective date) the effective date of change for any such
change is prior to one or more payment dates for which payments were due and
payable on the Notes, and such change results in an increase in the interest
rate for such prior periods, additional payments shall be due under this Section
2.10(a) and the Issuer (or, to the extent the Issuer cannot pay, the Guarantors)
shall promptly upon demand (but in no event more than 10 days after demand) by
any Noteholder pay to such Noteholder the amount by which interest computed at
such rate or rates exceeds the amount of interest actually theretofore paid by
the Issuer (excluding additional interest, if any, paid on overdue principal or
interest) on the Notes held by such Noteholder. If for any reason (e.g., a
retroactive effective date) the effective date of change for any such change is
prior to one or more payment dates for which payments were due and payable on
the Notes, and such change results in a decrease in the interest rate for such
prior periods, each Noteholder shall promptly (but in no event more than 10 days
after demand by the Issuer) pay to the Issuer the amount by which interest
computed at such rate or rates is less than the amount of interest actually
theretofore paid by the Issuer (excluding additional interest, if any, paid on
overdue principal or interest) on the Notes held by such Noteholder.
For the purposes of this Section 2.10, the following terms shall have
the meanings ascribed to them below:
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"Adjustment Fraction" shall mean the following fraction:
(l-XF)(l-Fn)/(l-F)(l-XnFn)
where Fn and Xn are the new Federal Tax Rate and Inclusion Rate, respectively,
expressed as a decimal (in the case of any change in only one such factor then
only such factor shall be changed and the remaining factor shall be the factor
then in effect) and where F and X are the original Federal Tax Rate and
Inclusion Rate, respectively, expressed as a decimal. The Adjustment Fraction
will be rounded to three decimal places with rounding up if the fourth decimal
place is .0005 or higher, and rounding down otherwise.
"Federal Tax Rate" shall mean, (i) in the case of a life insurance
company, the maximum incremental percentage rate from time to time applicable
to the taxable income of such company as determined under Section 801 of the
Code, or any successor thereto, (ii) in the case of any other insurance
company, the maximum incremental percentage rate from time to time applicable
to the taxable income of such company as determined under Section 831 of the
Code, or any successor thereto, and (iii) in the case of any other person, the
maximum incremental percentage rate from time to time applicable to the taxable
income of any ordinary business corporation imposed under Section 11 of the
Code, or any successor thereto. For purposes of calculations hereunder, the
original Federal Tax Rate expressed as a decimal is .34.
"Inclusion Rate" shall mean the percentage of interest income received
by the Noteholder on securities acquisition loans which is not excluded from
its gross income for Federal income tax purposes pursuant to Section 133 of the
Code, or any successor thereto. For purposes of calculations hereunder, the
original Inclusion Rate expressed as a decimal is .50.
(b) Tax Disallowances. In the event that at any time (whether before
or after payment of the Notes) a Change of Law (as defined below in this
Section 2.10) shall occur which, in the reasonable opinion of any Noteholder,
results in any Tax Disallowance (as defined below in this Section 2.10), the
Issuer shall pay to such Noteholder (at the time or times specified by the
Noteholder, which times may be specified by the Noteholder in a single written
notice from such Noteholder which shall identify specific dates on which
payment shall be made) in immediately available funds amounts that shall be
equal to the sum of (i) any tax, alternative minimum tax, levy or other cost,
including, but not limited to, penalties, additions to taxes or interest
related to any of the foregoing, related to the acquisition, purchase,
ownership, or disposition of any Note held by such Noteholder that arises
directly or indirectly, in whole or in part, as a result of such Change of Law
(all such taxes to be calculated assuming that such Noteholder is subject to
the maximum statutory rate in effect for the tax year or years in which the Tax
Disallowance occurs), plus (ii) an amount representing the time value of money
for the period commencing on the date such Noteholder paid any such tax, levy
or other cost (or the date a refund with respect to such tax, levy or other
cost is denied) listed in (i) above and ending on the date payment hereunder is
received by such Noteholder (using a factor of, with respect to the Series A
Notes, 10.69% per annum
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and, with respect to the Series B Notes, 10.87% per annum), plus (iii) an
amount which, after giving effect to all taxes attributable to the inclusion of
the amount specified in (i) above in the taxable income of such Noteholder for
federal, state and local tax purposes, shall equal all taxes due on the
payments set forth in (i). Except as provided in Section 2.10(c). The
determination of all amounts hereunder by such Noteholder shall be conclusive
and binding on the Issuer absent manifest error.
(c) Independent Verification. In the event that the Issuer objects
to the amount of any indemnification or amounts due calculated by any
Noteholder pursuant to Section 2.10(b), the Issuer, within 30 days after its
receipt of a notice under Section 2.10(b), shall notify such Noteholder in
writing of such objection and the reasonable basis therefor Thereafter, if the
Issuer and such Noteholder shall not have agreed upon the amount of such
indemnification, the Issuer, within 30 days after its delivery of its notice
under this Section 2.10(c) may request that the amount of such indemnification
be verified by a firm of independent public accountants of nationally
recognized standing (who may be such Noteholder's regular auditors) selected by
such Noteholder. Such firm of independent public accountants shall be requested
to either (i) confirm that the calculations of such Noteholder are correct and
in conformity with the provisions of this Indenture, or (ii) revise the amount
of the indemnification payable to such Noteholder in accordance with the
provisions of this Indenture and set forth in reasonable detail the basis for
such adjustment. The Issuer and such Noteholder agree that the determinations
made by such Noteholder and verified or adjusted by such accounting firm in
conformity with the provisions of this Indenture shall be conclusive and
binding on such Noteholder and the Issuer. In the event that the Issuer shall
seek verification pursuant to this Section 2.10(c) then notwithstanding the due
dates for payments set forth in Section 2.10(b) the Issuer shall pay to such
Noteholder the amount of the indemnity determined hereunder within 10 days
after such determination.
All expenses incurred in connection with any verification requested by
the Issuer pursuant to this Section 2.10(c) shall be borne by NHLP. As used in
this Section 2.10(c) "the amount of any indemnification" shall not include a
determination of the occurrence of any event which gives rise to (i)
indemnification pursuant to Section 2.10(b), or (ii) an obligation to make any
payment pursuant to Section 2.10(b) or Section 2.10(d).
For purposes of this Section 2.10, the following terms shall have the
meanings ascribed to them as follows:
"Change of Law" shall mean any amendment to the Code or other statute
enacted by the Congress of the United States of America, or any temporary,
proposed or final regulation or rule promulgated by any agency or department of
the United States government, or any official or judicial interpretation of any
of the foregoing or any change in official or judicial interpretation of
present law after the date of this Indenture, and for purposes hereof shall
include, but not limited to, any law or temporary, proposed or final regulation
enacted after the date of this Indenture, but having an effective date prior
thereto, except that a Change of Law shall not include (x) any change in the
Federal Tax Rate or the Inclusion Rate as defined in Section 2.10(a) or (y) any
event that would entitle any Noteholder to make a determination of taxability
under Section 2.10(d).
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"Tax Disallowance" shall mean (i) the reduction, directly or
indirectly, of any deduction (including, but not limited to, any deduction
under Section 265 of the Code), exclusion (including, but not limited to, the
exclusion provided in Section 812(g) of the Code), credit or other allowance
that would, but for the Change in Law, have been allowable in computing any
Noteholder's liability for any Federal tax, whether currently in existence or
not, including, but not limited to, the tax imposed under Section 11 of the
Code, or any successor thereto, (ii) the imposition of any Federal tax or levy
of any nature (including, but not limited to, preference, excise or alternative
minimum taxes), (iii) the increase in any rate of Federal tax (other than an
increase in the Federal Tax Rate), rate of inclusion (other than an increase in
the Inclusion Rate) of any item of adjustment to the alternative minimum
taxable income of the Noteholder or levy upon any Noteholder (including, but
not limited to, preference, excise or alternative minimum taxes) on some or all
of the payments on the Notes, or (iv) any reduction in the after-tax yield on
any Note to any Noteholder, based upon with respect to the Series A Notes, a
10.69% fully taxable Note, and with respect to the Series B Notes, a 10.87%
fully taxable Note using the then current Federal Tax Rate and Inclusion Rate
in Section 2.10(a).).
(d) Taxability. In the event that any Noteholder shall reasonably
determine that, for any reason whatsoever (other than the failure of such
Noteholder, solely and directly as a result of an act by such Noteholder, to be
a qualified lender under Section 133(a) of the Code or any successor thereto),
regardless of whether such cause or event occurred before, on or after the date
hereof or whether before or after payment of the Notes, the interest on any
Note is not entitled to the benefits of Section 133 or any successor thereto,
then, in that event, the Issuer agrees, anything contained in the Notes or
herein to the contrary notwithstanding, that the interest rate applicable to
the Notes held by such Noteholder shall be adjusted, retroactive to the Closing
Date (or if any Note was originally entitled to the benefits of Section 133 but
ceased to be so entitled, then retroactive to the date such Note ceased to be
entitled to the benefits of Section 133 or any successor thereto), to, in the
case of the Series A Notes, 10.69% per annum and in the case of the Series B
Notes, 10.87% per annum or, if applicable for either the Series A Notes or the
Series B Notes, the Overdue Rate after the maturity of any payment, and the
Issuer shall pay to such Noteholder, within 30 days following the receipt of
written notice from the Noteholder (i) the amount by which interest computed at
such rate or rates exceeds the amount of interest actually theretofore paid by
the Issuer (excluding additional interest, if any, paid on overdue principal or
interest) on the Notes from the date of issuance (or, if any Note was
originally entitled to the benefits of Section 133 but ceased to be so
entitled, then retroactive to the date such Note ceased to be entitled to the
benefits of Section 133 or any successor thereto), plus (ii) an amount
representing the excess, if any, of the Federal income tax liability of such
Noteholder resulting from the inclusion of the payments set forth in (i) in the
gross income of the Noteholder at the then current Federal Tax Rate over the
Federal income tax liability of such Noteholder that would have resulted from
the inclusion of the payments set forth in (i) using the Federal Tax Rate
applicable to the period to which such payments relate, plus (iii) all
penalties, additions to taxes, interest attributable to any deficiencies in the
Federal, state and local tax liability of such Noteholder, or other costs
resulting from the Note not being entitled to the benefits of
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Section 133 or any successor thereto, plus (iv) an amount representing the time
value of money for the period commencing on the date such Noteholder shall have
paid any amount set forth in (i), (ii) or (iii) above (or commencing on the date
a refund otherwise payable to the Noteholder with respect to other matters in an
amount equal to all or any portion of a payment set forth in (i), (ii) or (iii)
is denied) and ending with respect to each amount set forth in (i), (ii) or
(iii) hereof on the date each such payment is received by such Noteholder (using
a factor equal to with respect to the Series A Notes, 10.69% per annum and with
respect to the Series B Notes 10.87% per annum), plus (v) an amount which, after
giving effect to all taxes attributable to the inclusion of any amount set forth
in (ii) and (iii) above in the taxable income of the Noteholder for Federal,
state and local tax purposes, shall equal all taxes due on the payments set
forth in (ii) and (iii) above.
(e) Successors and Assigns. All parties at any time holding any Note
and any party purchasing any Note from any Noteholder shall be entitled to the
benefits of Section 2.10(a), 2.10(b), 2.10(c) and 2.10(d), other than a
subsequent holder of any Note which is not a qualified lender under Section
133(a) of the Code or any successor thereto without regard to any Change of Law
as of or after the date hereof. In the event that any Noteholder transfers any
Note, such Noteholder shall continue to have the benefits of the provisions of
Section 2.10(a), 2.10(b), 2.10(c) and 2.10(d), for the period during which such
Noteholder was the holder of a Note and each subsequent holder thereof shall
have all of the rights afforded the Noteholders hereunder with the same force
and effect as though the name of such holder were substituted for the name of
the Noteholders herein.
SECTION 3. PREPAYMENT AND PURCHASE OF NOTES.
Except to the extent provided for in this ss.3, the Notes shall not
be subject to prepayment or redemption in whole or in part at the option of the
Issuer prior to the expressed maturity dates thereof.
3.1. Required Prepayments. (a) The Issuer agrees that on the first
day of June and December in each year, commencing December 1, 1995 and ending
December 1, 2002, both inclusive (the "Series A Fixed Payment Dates"), it will
prepay and apply and there shall become due and payable $1,250,000 principal
amount of Series A Notes.
(b) The Issuer agrees that on the first day of June and December in
each year, commencing December 1, 1995 and ending June 1, 2005, both inclusive
(the "Series B Fixed Payment Dates"), it will prepay and apply and there shall
become due and payable $1,428,571 principal amount of Series B Notes.
(c) No premium shall be payable in connection with any required
prepayment made pursuant to this ss.3.1. For purposes of this Section 3.1, any
prepayment of less than all of the Notes pursuant to (i) Section 3.2 or Section
3.3 shall be deemed to be applied first, to the amount of principal scheduled to
remain unpaid on June 1, 2003 (with respect to
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the Series A Notes) and December 1, 2005 (with respect to the Series B Notes)
and then, to the remaining scheduled principal payments in inverse chronological
order, and (ii) ss.3.4 shall be applied to the payment in full of the Notes
held by the holders providing a Declaration Notice (as defined in ss.3.4).
3.2. Optional Prepayments at Make-Whole Premium Amount. In addition
to the prepayments required by ss.3.1 and upon compliance with ss.3.5, the
Issuer shall have the privilege at any time and from time to time of prepaying
the outstanding Notes either in whole or in part (but if in part then in units
in excess of $1,000,000) by payment of the principal amount of the Notes, or
portion thereof to be prepaid, and accrued interest thereon to the date of such
prepayment, together with a premium equal to the Make-Whole Premium Amount.
3.3. Prepayment in the Event of Casualty or Condemnation of a
Financed Facility or Prepayment in Whole of a Managed Facility Note. The Notes
shall be prepaid prior to maturity, in whole or in part, through the application
of moneys received by the indenture Trustee pursuant to the provisions of ss.7.2
ss.7.3, ss.7.4 and ss.7.5 hereof by payment of the principal amount of the Notes
to be so prepaid, together with accrued interest thereon to the date of such
prepayment, together with a premium equal to the Make-Whole Premium Amount.
3.4. Notice of Optional Prepayments. The Issuer will give notice of
any prepayment of the Notes (other than the prepayments required by ss.3.1) to
NHLP, National, the Indenture Trustee and to each holder thereof not less than
30 days nor more than 60 days before the date fixed for such optional prepayment
(the "Optional Prepayment Date") specifying (a) such date, (b) the Section of
this Indenture under which the prepayment is to be made, (c) the principal
amount of the holders' Notes to be prepaid on such Optional Prepayment Date, (d)
that a Make-Whole Premium Amount may be payable, (e) the date when such
Make-Whole Premium Amount will be calculated, (f) the estimated Make-Whole
Premium Amount and (g) the accrued interest applicable to the prepayment. Such
notice of prepayment shall also certify all facts which are conditions precedent
to any such prepayment. Notice of prepayment having been so given, the aggregate
principal amount of the Notes specified in such notice, together with the
premium, if any, and accrued interest thereon shall become due and payable on
the Optional Prepayment Date. Not more than two Business Days prior to the
Optional Prepayment Date specified in such notice, the Issuer shall provide each
holder of a Note written notice of the Make-Whole Premium Amount payable in
connection with such prepayment, whether or not any Make-Whole Premium Amount is
payable, together with a reasonably detailed computation thereof.
3.5. Allocation of Prepayments. All partial prepayments shall be
applied on all outstanding Notes ratably in accordance with the unpaid principal
amounts thereof.
3.6. Purchase in the Event of a Change of Control. In the event NHLP
has knowledge of a Change of Control or an impending Change of Control, NHLP
will give written notice (herein called a "Control Change Notice") of such fact
to all holders
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of the Notes then outstanding. Said Control Change Notice shall be delivered at
least 60 days prior to the occurrence of such Change of Control; provided,
however, that if NHLP shall not then have knowledge of such fact, such Control
Change Notice shall be delivered promptly upon receipt of such knowledge by
NHLP. In addition to notifying the holders of the Notes of a Change of Control
or a proposed Change of Control, the Control Change Notice shall state that the
occurrence of such Change of Control entitles said holders to tender the Notes
held thereby to NHLP for purchase pursuant to this ss.3.6 and the date by which
said holders must respond to such Control Change Notice pursuant to this ss.3.6
in order to make such election.
As used herein, the term "Change of Control" shall mean the
occurrence of (i) any event which results in any Person other than NHC acting as
Managing General Partner of NHLP, or (ii) any event which results in any Person,
or any group of Persons acting in concert, other than the Original Management
Group, beneficially owning or controlling, directly or indirectly, more than 50%
(by number of votes) of the Voting Stock of NHC or (ii) replacement or
elimination (in either case other than as a result of death or disability) of
more than half of the Current Directors of NHC, within a six-month period.
The term "Original Management Group shall mean Carl E. Adams, W.
Andrew Adams, Robert G. Adams, Ernest G. Burgess, Richard F. LaRoche, Jr., S.C.
Garrison, J.K. Twilla and Olin O. Williams, their respective spouses and
descendants and any executor, administrator, conservator, trustee or other
fiduciary holding Partnership Interests or shares of Voting Stock of NHLP for
the benefit of any of said Persons.
The term "Current Directors" shall mean Carl E. Adams, W. Andrew
Adams, S.C. Garrison, J.K. Twilla and Olin O. Williams.
Upon the receipt of such Control Change Notice or, if no Control
Change Notice is given, upon the occurrence of a Change of Control, the holder
or holders of any Notes shall have the privilege, upon written notice (the
"Tender Notice") to NHLP, of tendering all Notes held by such holder or holders
serving such Tender Notice to NHLP for purchase and thereupon NHLP shall be
obligated to purchase such Notes on such date (the "Payment Date") as NHLP shall
specify in a written notice delivered to such holder or holders, which notice
shall be delivered by NHLP to such holder or holders not later than 20 days
prior to the Payment Date. The Payment Date shall be not later than 20 days
after the consummation of such Change of Control, in the event that such Tender
Notice is served on or prior to the date of the consummation of such Change of
Control or 20 days after the date such Tender Notice is served, if such Tender
Notice is not served on or prior to the date of such Change of Control, and NHLP
covenants and agrees to purchase or cause to be purchased on the Payment Date
all Notes held by such holder or holders serving such Declaration Notice to
NHLP; provided, however, that in the event that a Control Change Notice has in
fact been given as hereinabove contemplated, such Tender Notice shall be served
prior to 60 days after receipt of such Control Change Notice. In the event that
a Control Change Notice is given and a holder of the Notes fails to provide a
Tender Notice within the time period set forth above, NHLP shall not be
obligated to purchase the Notes held by
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such holder as a result of such Change of Control. Any such declaration shall be
contingent upon completion of such Change of Control and, notwithstanding any of
the other provisions of this ss.3.6, NHLP shall not be required to purchase
any Notes pursuant to this ss.3.6 unless and until such Change of Control
shall be consummated.
In the event that any holder or holders of the Notes shall have
elected to tender for purchase all of the Notes held thereby pursuant to this
ss.3.6, then NHLP shall promptly, but in any event within 15 days after the
receipt of the Tender Notice, deliver written notice of such election to tender
to each other holder of the Notes and, notwithstanding the provisions of the
immediately preceding paragraph, the right of each such other holder to tender
for purchase all of the Notes held thereby pursuant to this ss.3.6 shall remain
in effect until the later to occur of (i) 60 days after receipt by such holders
of the Control Change Notice and (ii) 30 days after receipt by such holders of
the notice required to be delivered pursuant to this paragraph; provided,
however, that the provisions of this clause (ii) shall only apply with respect
to notices required to be delivered pursuant to this paragraph to the extent
that such notices relate to election to tender Notes made by holders of the
Notes prior to the expiration of the periods specified in the immediately
preceding paragraph.
All purchases of the Notes pursuant to this ss.3.6 shall be made by
NHLP by the payment of the aggregate principal amount remaining unpaid on such
Notes and accrued interest thereon to the date of such prepayment, but without
premium or Make-Whole Premium Amount. Any purchases of less than all of the
outstanding Notes made pursuant to this ss.3.6 shall be applied to the payment
in full of the Notes held by the holders providing a Tender Notice. The amounts
of the scheduled prepayments on all Notes shall be unchanged by such purchase.
SECTION 4. COVENANTS OF NHLP.
NHLP covenants, represents and warrants with the Indenture Trustee
for the benefit of the Indenture Trustee and the holders of the Notes as
follows:
4.1. Warranty of Title. NHLP has or will have good and marketable
title to, and is lawfully possessed of, all the Property constituting the
Acquired Facilities to be acquired on the Closing Date free of all liens,
charges and encumbrances other than Permitted Encumbrances. NHLP has full power
and lawful authority to pledge the Acquired Facilities to be acquired on the
Closing Date, and the Indenture Trustee has a valid and enforceable first and
prior lien and security interest therein. NHLP will at all times preserve,
warrant and defend the Indenture Trustee's title and right in and to the
Financed Facilities against the claims of all Persons.
4.2. NHLP Existence. NHLP will preserve and keep in full force and
effect and will cause each Restricted Subsidiary to preserve and keep in full
force and effect its legal existence as a limited partnership, general
partnership or corporation, as the case may be, and all licenses and permits
necessary to the proper conduct of its business, provided that the foregoing
provisions of this ss.4.2 shall not prevent any
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transaction permitted by ss.4.10 and provided further, that NHLP may cease its
existence as a limited partnership and commence doing business as a corporation
by giving 60 days prior written notice to the holders of the Notes outstanding,
which written notice shall contain (i) pro-forma financial statements as at the
end of the current (as of the date of such notice) Fiscal Year of NHLP, if the
date on which NHLP shall commence doing business as a corporation is on or prior
to the last day of the current (as of the date of such notice) Fiscal Year, or
(ii) pro-forma financial statements as at the end of the immediately succeeding
Fiscal Year of NHLP, if the date on which NHLP shall commence doing business as
a corporation is after the last day of the current (as of the date of such
notice) Fiscal Year and without taking into account any change in the
designation of the Fiscal Year of NHLP subsequent to the date of notice referred
to herein (in either case setting forth the information specified in ss.4.21(b)
for NHLP and its Restricted Subsidiaries) and, in the case of both clauses (i)
and (ii) above, (y) assuming NHLP would have maintained its existence as a
limited partnership through the end of such Fiscal Year, and (z) assuming NHLP
and its Restricted Subsidiaries had done business as corporation throughout such
Fiscal Year and which pro forma financial statements, in the case of both
clauses (i) and (ii) above, shall show that if NHLP would continue its existence
as a limited partnership through the period for which such pro-forma financial
statements are prepared, no Default or Event of Default would exist.
4.3. Performance of Operative Agreements; Further Assurances. NHLP
covenants and agrees, within its power and authority, to cause the Issuer to
perform, abide by and to be governed and restricted by each and all of the
terms, provisions, restrictions, covenants and agreements set forth in each
Operative Agreement to which it is a party, and NHLP covenants and agrees to
perform, abide by and to be governed and restricted by each and all of the
terms, provisions, restrictions, covenants and agreements set forth in each
Operative Agreement to which it is a party, and in each and every supplement
thereto or amendment thereof which may at any time or from time to time be
executed and delivered by the parties thereto or their successors and assigns,
to the same extent as though each and all of said terms, provisions,
restrictions, covenants and agreements were fully set out herein and as though
any amendments or supplements to each of such Operative Agreements were fully
set out in an amendment or supplement to this Indenture.
NHLP will at any time and from time to time, at its own expense, do,
execute, acknowledge and deliver to the Noteholders and/or the Indenture Trustee
such further act, deed, conveyance, transfer, instrument, document and assurance
and take such further action, if the Noteholders and/or the Indenture Trustee
may from time to time reasonably request, in order to further carry out the
intent and purpose of this Indenture and the Note Purchase Agreement and to
establish and protect the rights, intentions and remedies created, or intended
to be created, in favor of the Noteholders, including, without limitation, the
execution, delivery and recordation and filing of Mortgages, security agreements
and financing statements and continuation statements under the Uniform
Commercial Code required by applicable law to be so recorded or filed so as to
make effective of record the lien intended to be created thereby.
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4.4. Insurance. NHLP will maintain, and will cause each Restricted
Subsidiary to maintain insurance coverage by financially sound and reputable
insurers accorded a rating by A.M. Best Company, Inc. at the time of issuance of
any policy of in the case of professional liability and property insurance,
A:VII or higher, in the case of property insurance on boilers and machinery,
A:IX or higher, and in the case of all other policies, A:XII or higher, such
insurance coverage to be in such forms and amounts and against such risks as are
customary for business entities of established reputation engaged in the same or
a similar business and owning and operating similar properties; provided, that
NHLP will, on the date of renewal of any such policy, obtain such insurance
policy from a financially sound and reputable insurer accorded a rating by A.M.
Best Company, Inc. of A: XII or higher at the time of issuance of such policy.
4.5. Taxes, Claims for Labor and Materials, Compliance with Laws.
NHLP will promptly pay and discharge, and will cause each Restricted Subsidiary
promptly to pay and discharge, all lawful taxes, assessments and governmental
charges or levies imposed upon NHLP or such Restricted Subsidiary, respectively,
or upon or in respect of all or any part of the Property or business of NHLP or
such Restricted Subsidiary, all trade accounts payable in accordance with usual
and customary business terms, and all claims for work, labor or materials, which
if unpaid might become a Lien upon any property of NHLP or such Restricted
Subsidiary; provided NHLP or such Restricted Subsidiary shall not be required to
pay any such tax, assessment, charge, levy, account payable or claim if (i) the
validity, applicability or amount thereof is being contested in good faith by
appropriate actions or proceedings which will prevent the forfeiture or sale of
any Property of NHLP or such Restricted Subsidiary or any material interference
with the use thereof by NHLP or such Restricted Subsidiary, and (ii) NHLP or
such Restricted Subsidiary shall set aside on its books, reserves deemed by it
to be adequate with respect thereto. NHLP will promptly comply and will cause
each Subsidiary to comply with all laws, ordinances or governmental rules and
regulations to which it is subject, the violation of which could materially and
adversely affect the properties, business, prospects, profits or condition of
NHLP or NHLP and its Restricted Subsidiaries taken as a whole or would result in
any Lien except:
(a) Liens for property taxes and assessments or governmental charges
or levies and Liens securing claims or demands of mechanics and
materialmen, provided that payment thereof is not at the time required by
this ss.4.5;
(b) Liens of or resulting from any judgment or award, the time for
the appeal or petition for rehearing of which shall not have expired, or
in respect of which NHLP or a Restricted Subsidiary thereof shall at any
time in good faith be prosecuting an appeal or proceeding for a review and
in respect of which a stay of execution pending such appeal or proceeding
for review shall have been secured;
(c) Liens incidental to the conduct of business or the ownership of
properties and assets (including Liens in connection with worker's
compensation, unemployment insurance and other like laws, warehouse-
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men's and attorneys' liens and statutory landlords' liens) and Liens to
secure the performance of bids, tenders or trade contracts, or to secure
statutory obligations, surety or appeal bonds or other liens of like
general nature incurred in the ordinary course of business and not in
connection with the borrowing of money, provided in each case, the
obligation secured is not overdue or, if overdue, is being contested in
good faith by appropriate actions or proceedings; and
(d) minor survey exceptions or minor encumbrances, easements or
reservations, or rights of others for rights-of-way, utilities and other
similar purposes, or zoning or other restrictions as to the use of real
properties, which are necessary for the conduct of the activities of NHLP
and its Restricted Subsidiaries or which customarily exist on properties
of corporations engaged in similar activities and similarly situated and
which do not in any event materially impair their use in the operation of
the business of NHLP and its Restricted Subsidiaries.
4.6. Maintenance. NHLP, and each of its Restricted Subsidiaries,
will:
(a) maintain, preserve and keep, and will cause each Restricted
Subsidiary to maintain, preserve and keep, its properties which are used
or useful in the conduct of its business (whether owned in fee or a
leasehold interest) in good repair and working order and from time to time
will make all necessary repairs, replacements, renewals and additions so
that at all times the efficiency thereof shall be maintained; and
(b) without limiting the requirements set forth in clause (a),
maintain the Financed Facilities (i) in accordance with the Mortgages and
the Note and Mortgage Assignments, (ii) in compliance with all
requirements (other than the requirement of having a provider contract in
existence) necessary to allow the Financed Facilities to qualify at all
times as eligible providers for "Medicare" and "Medicaid" and, (iii) as
eligible providers of "Medicare" and maintain its other Property in good
condition, reasonable wear and tear excepted, and make all necessary
renewals, replacements, additions, betterments and improvements thereto
all in accordance with customary industry standards, provided that if NHLP
shall determine, as evidenced by a resolution of its Board of Directors,
that continued compliance with all requirements of "Medicare" and
"Medicaid" or continued participation as a "Medicare" provider is not in
the best interests of NHLP, the Financed Facilities shall not be required
to be so maintained.
4.7. Nature of Business. Neither NHLP nor any Restricted Subsidiary
will engage in any business if, as a result, the general nature of the business,
taken on a consolidated basis, which would then be engaged in by NHLP and its
Restricted Subsidiaries would be substantially changed from the general nature
of the business engaged in by NHLP and its Restricted Subsidiaries on the date
of this Indenture.
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4.8. Compliance with Environmental Laws. (a) NHLP shall carry on the
business and operations at its Properties and all Properties managed by it to
comply in all material respects, and will comply in all material respects with
all applicable Federal, state, regional, county or local laws, statutes, rules,
regulations or ordinances, concerning public health, safety or the environment
including without limitation, any such applicable law, statute, rule, regulation
or ordinance relating to releases, discharges or emissions of Hazardous
Substances to air, water, land or groundwater, to the withdrawal or use of
groundwater, to the use and handling of polychlorinated biphenyls or asbestos,
to the disposal, treatment, storage or management of hazardous or solid waste,
or Hazardous Substances or crude oil, fractious petroleum, petroleum derivatives
or by-products, or to exposure to toxic or hazardous materials, to the handling,
transportation, discharge or release of gaseous or liquid Hazardous Substances
and any regulation, order, notice or demand issued pursuant to such law, statute
or ordinance, in each case applicable to the property of NHLP and its
Subsidiaries and General Partners or the operation, construction or modification
of any thereof including, but not limited to the following, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. ss.9601 et
seq., the Solid Waste Disposal Act, as amended by the Resource Conservation and
Recovery Act of 1976, as amended by the Solid and Hazardous Waste Amendments of
1984, 42 U.S.C. ss.6901 et seq., the Federal Water Pollution Control Act, as
amended by the Clean Water Act of 1977, 33 U.S.C. ss.1251 et seq., the Toxic
Substances Control Act of 1976, 15 U.S.C. ss.2601 et seq., the Emergency
Planning and Community Right-to-Know Act of 1986, 42 U.S.C. ss.11001 et seq.,
the Clean Air Act of 1966, as amended, 42 U.S.C. ss.7401 et seq., the National
Environmental Policy Act of 1975, 42 U.S.C. ss.4321, the Rivers and Harbours Act
of 1899, 33 U.S.C. ss.401 et seq., the Endangered Species Act of 1973, as
amended, 16 U.S.C. ss.1531, et seq., the Occupational Safety and Health Act of
1970, as amended, 29 U.S.C. ss.651 et seq., the Safe Drinking Water Act of 1974,
as amended, 42 U.S.C. ss.300(f) et seq., ss.2601, et seq.); and all rules,
regulations and guidance documents promulgated or published thereunder.
(b) NHLP shall prevent the imposition of any liens or encumbrances
against the Properties for the costs of any response, removal, or remedial
action or clean up of Hazardous Substances.
4.9. Maintenance of Principal Office. NHLP will give advance written
notice to the Indenture Trustee of any proposed change in NHLP's name or
location of its principal office and will execute and deliver to the Indenture
Trustee at least 60 days prior to the occurrence of any such change, all
additional financing statements, as the Indenture Trustee may require, or as may
be required by law in order to publish notice of and to continue the lien and
security interest of this Indenture on and in respect of the Mortgaged Property.
4.10. Merger, Consolidation, Sale of Assets. (a) NHLP will not, and
will not permit any Restricted Subsidiary to consolidate with or be a party to a
merger with any other Person (other than a transaction in accordance with the
provisions of ss.4.2), provided, however, that:
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(1) any Restricted Subsidiary may merge or consolidate with or into
NHLP or another Wholly-owned Restricted Subsidiary so long as in any
merger or consolidation involving NHLP, NHLP shall be the surviving or
continuing entity; and
(2) NHLP may consolidate or merge with any other Person if: (i) NHLP
shall be the surviving or continuing entity; (ii) at the time of such
consolidation or merger, and after giving effect thereto no Default or
Event of Default shall have occurred and be continuing, and (iii) after
giving effect to such consolidation or merger, NHLP would be permitted by
the provisions of ss.4.11(a) to incur at least $1.00 of additional Funded
Debt.
(b) NHLP will not sell, lease, transfer, abandon or otherwise
dispose of, all or any substantial part of the assets of NHLP and its Restricted
Subsidiaries (other than in connection with a transaction in accordance with the
provisions of ss.4.2); provided that the foregoing restrictions do not apply to:
(1) the sale, lease, transfer or other disposition of assets of a
Restricted Subsidiary to NHLP or another Restricted Subsidiary; or
(2) the sale, lease or other disposition of any or all of the Owned
Facilities; provided that either (i) the Indenture Trustee retains a first
mortgage on such assets and NHLP continues to manage any Owned Facility so
transferred pursuant to a Management Agreement in accordance with the
provisions of ss.4.22 or (ii) NHLP provides a Substitute Financed Facility
pursuant to ss.10 with respect to each Owned Facility so transferred.
(c) NHLP will not permit any Restricted Subsidiary to issue or sell
any Equity Interest (including as "Equity Interest" for the purposes of this
ss.4.10, any warrants, rights or options to purchase or otherwise acquire any
Equity Interest or other Securities exchangeable for or convertible into any
Equity Interest) of such Restricted Subsidiary to any Person other than NHLP or
a Wholly-owned Restricted Subsidiary if (i) (if at the time of such issuance or
sale NHLP shall continue to be organized as a limited partnership) at the time
of such issuance or sale and after giving effect thereto the percentage of
Equity Interests of such Restricted Subsidiary beneficially owned, directly or
indirectly, by NHLP, shall be less than 51% or (ii) (if at the time of such
issuance or sale NHLP shall be organized as a corporation) at the time of such
issuance or sale and after giving effect thereto the percentage of Voting Stock
of such Restricted Subsidiary beneficially owned, directly or indirectly, by
NHLP, shall be less than 80% (by number of votes) of the outstanding Voting
Stock of such Restricted Subsidiary, except (A) for the purpose of qualifying
directors, or (B) in satisfaction of the validly pre-existing preemptive rights
of minority shareholders in connection with the simultaneous issuance of stock
to NHLP and/or a Restricted Subsidiary whereby NHLP and/or such Restricted
Subsidiary maintain their same proportionate interest in such Restricted
Subsidiary.
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(d) NHLP will not sell, transfer or otherwise dispose of any Equity
Interest in any Restricted Subsidiary (except to qualify directors), and will
not permit any Restricted Subsidiary to sell, transfer or otherwise dispose of
(except to NHLP or a Wholly-owned Restricted Subsidiary) any Equity Interest of
any other Restricted Subsidiary, unless:
(1) either (i) at the time of such sale, transfer or other
disposition and giving effect thereto, the Restricted Subsidiary whose
Equity Interest is being disposed of or any other Restricted Subsidiary in
which such Restricted Subsidiary directly or indirectly holds any Equity
Interest remains a Restricted Subsidiary or (ii) simultaneously with such
sale, transfer, or disposition, all Equity Interest of such Restricted
Subsidiary at the time owned by NHLP and by every other Restricted
Subsidiary shall be sold, transferred or disposed of as an entirety,
provided that notwithstanding the foregoing clauses (i) and (ii), NHLP may
not dispose of any Equity Interest in Americare Southeast,
(2) the Board of Directors of NHLP shall have determined, as
evidenced by a resolution thereof, that the proposed sale, transfer or
disposition of such Equity Interest is in the best interests of NHLP;
(3) such Equity Interest is sold, transferred or otherwise disposed
of to a Person, for a cash consideration and on terms reasonably deemed by
the Board of Directors of each of National and NHC to be adequate and
satisfactory;
(4) if all Equity Interests of such Restricted Subsidiary at the
time owned by NHLP and by every other Restricted Subsidiary are being
sold, transferred or disposed of, the Restricted Subsidiary being disposed
of shall not have any continuing investment in NHLP or any other
Restricted Subsidiary not being simultaneously disposed of; and
(5) such sale or other disposition does not involve a substantial
part (as hereinafter defined) of the assets of NHLP and its Restricted
Subsidiaries.
As used in this ss.4.10, a sale, lease or other disposition of
assets shall be deemed to be a "substantial part" of the assets of NHLP and its
Restricted Subsidiaries only if the the book value of such assets when added to
the book value of all other assets sold, leased or otherwise disposed of by NHLP
and its Restricted Subsidiaries during the immediately preceding Four-Quarter
Period of NHLP, exceeds 15% of Consolidated Total Assets determined as of the
end of the immediately preceding Fiscal Quarter.
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4.11. Limitations on Indebtedness. NHLP will not permit at any time
either:
(a) the ratio of Covenant Funded Debt to Consolidated Adjusted Net
Worth to exceed 3.5:1, provided that the ratio of Covenant Funded Debt to
Consolidated Adjusted Net Worth may increase to not more than 4.0:1 for
any number of nonconsecutive Four Quarter Periods; or
(b) the ratio of Consolidated Current Debt to Consolidated Adjusted
Net Worth to exceed 1.0:1.0.
For purposes of ss.4.11(b), Consolidated Current Debt shall not
include current maturities of Funded Debt.
4.12. Ratio of Cash Flow to Debt Service. NHLP will at all times
keep and maintain the ratio of Cash Flow to Debt Service at 1.30 to 1.00 or
greater.
4.13. Consolidated Net Worth. NHLP will at all times keep and
maintain Consolidated Net Worth at not less than the Minimum Net Worth.
For purposes of this ss.4.13, "Minimum Net Worth" shall mean, (i)
for the period from the Closing Date through December 31, 1990, $40,000,000,
(ii) for the period from January 1, 1991 through March 30, 1991, $41,400,000,
and (iii) for the period from the beginning of each subsequent Fiscal Quarter of
NHLP through the last day of such Fiscal Quarter, the Minimum Net Worth for the
immediately preceding Fiscal Quarter, plus $1,400,000.
4.14. Current Ratio. NHLP will at all times keep and maintain the
ratio of Consolidated Current Assets to Consolidated Current Liabilities at not
less than 1.5 to 1.0.
4.15. Indemnity. NHLP covenants and agrees to indemnify and hold
harmless the holders of the Notes (hereinafter collectively referred to as the
"indemnified parties") against any loss, liability, claim, damage or expense
(including, but not limited to, the reasonable cost of investigating and
defending against any such claim and reasonable counsel fees in connection
therewith) to which any indemnified party may become subject (including for this
purpose any subpoena duces tecum, subpoena for deposition or other similar writ
served upon any indemnified party in connection with any action brought by
holders of Equity Interests in NHLP involving NHLP or by shareholders of
National and involving National or such indemnified party) under any statute,
rule or regulation (including, without limitation, the Federal or state
securities laws) or under the common law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon the creation of the Issuer or the Plan by National or the purposes for
which the Plan or the Issuer were established by National or the Common Stock
was sold to the Issuer.
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4.16. Guaranties. The NHLP will not, and will not permit any
Restricted Subsidiary to, become or be liable in respect of any Guaranty except
the Guaranty Agreement and Guaranties of NHLP which are limited in amount to a
stated principal amount of Indebtedness thereby guaranteed and provided that the
Indebtedness represented thereby shall have been incurred within the applicable
limitations provided in ss.4.11.
4.17. Purchase of Notes by NHLP. Neither NHLP nor any Subsidiary or
Affiliate, directly or indirectly, may purchase or make any offer to purchase
any Notes unless an offer has been made to purchase Notes, pro rata, from all
holders of the Notes at the same time and upon the same terms. In case NHLP
purchases any Notes, such Notes shall thereafter be cancelled and no Notes shall
be issued in substitution therefor. Notwithstanding the foregoing, NHLP may
purchase and make offers to purchase Notes in accordance with ss.3.6 hereof and
any Notes so purchased shall not be required to be cancelled and new Notes may
be issued in substitution therefor.
4.18. Transactions with Affiliates. NHLP will not, and will not
permit any Restricted Subsidiary to, enter into or be a party to any transaction
or arrangement with any Affiliate or Subsidiary (including, without limitation,
the purchase from, sale to or exchange of property with, or the rendering of any
service by or for, any Affiliate or Subsidiary), except in the ordinary course
of and pursuant to the reasonable requirements of NHLP's or such Restricted
Subsidiary's business and upon fair and reasonable terms no less favorable to
NHLP or such Restricted Subsidiary than would obtain in a comparable
arm's-length transaction with a Person other than an Affiliate or a Subsidiary.
4.19. Investments. NHLP will not, and will not permit any Restricted
Subsidiary to, make any investments in or loans, advances or extensions of
credit to any Person, except:
(a) Investments, loans and advances by NHLP and its Restricted
Subsidiaries in and to Restricted Subsidiaries and Equity Subsidiaries,
including any investment in a corporation which, after giving effect to
such investment, will become a Restricted Subsidiary or an Equity
Subsidiary;
(b) loans or advances in the usual and ordinary course of business
to officers, directors and employees for expenses (including moving
expenses related to a transfer) incidental to carrying on the business of
NHLP or any Restricted Subsidiary and loans to officers, directors and
employees in connection with participation by such persons in the National
HealthCorp L.P. Unit Option Plan, as in existence on the date hereof or as
extended (which extension shall not amend any of the substantive
provisions thereof other than the termination date) by the vote of unit
holders thereunder pursuant to the terms thereof;
(c) receivables arising from the sale of services in the ordinary
course of business of NHLP and its Restricted Subsidiaries;
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(d) Loans or advances to third parties for construction or
acquisition financing or working capital requirements of nursing home
facilities that are managed by NHLP pursuant to Management Agreements,
provided that all such loans and advances shall be secured by liens on
such nursing home facilities and provided further that the aggregate
principal amount of such loans and advances shall not exceed 200% of
Consolidated Investment Net Worth;
(e) Investments in commercial paper or time deposits maturing in 270
days or less from the date of issuance, in each case issued by or
deposited with banks, the commercial paper of which, at the time of
acquisition by NHLP or any Restricted Subsidiary thereof, is rated at
least A-1 by Standard & Poor's Corporation ("S & P") and at least P-1 by
Moody's Investors Services, Inc. ("Moody's");
(f) Investments in direct obligations of the United States of
America, or obligations of any agency thereof which are backed by the
fully faith and credit of the United States, maturing in twelve months or
less from the date of acquisition thereof;
(g) Investments in certificates of deposit maturing within one year
from the date of origin, or in demand deposits, in each case issued by a
bank or trust company organized under the laws of the United States or any
state thereof, having capital, surplus and undivided profits aggregating
at least $100,000,000 and the long-term certificates of deposit of which
shall be rated at least A-1 by S & P and A+ by Moody's;
(h) Investments in equity securities that are traded on the New York
Stock Exchange or the American Stock Exchange;
(i) Investments in overnight repurchase agreements which are fully
secured by direct obligations of the United States of America (or
obligations of any agency thereof which are backed by the full faith and
credit of the United States) or overnight Eurodollar deposits, in each
case issued by a bank or trust company organized under the laws of the
United States or any state thereof, having capital, surplus and undivided
profits aggregating at least $100,000,000 and the long-term certificates
of deposit of which shall be rated at least A-1 by S & P and A+ by
Moody's, provided that amounts invested pursuant to this paragraph (i)
shall not at any time exceed 25% of Consolidated Investment Net Worth;
(j) Investments in demand deposits issued by any bank or trust
company organized under the laws of the United States or any state thereof
and located in any city or county in which NHLP shall own or manage a
nursing home, provided that amounts invested pursuant to this paragraph
(j) shall not at any time exceed 25% of Consolidated Investment Net Worth
in
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the aggregate and 5% of Consolidated Investment Net Worth in any one such
bank or trust company; and
(k) Joint Venture Investments, provided that amounts invested
pursuant to this paragraph (k) shall not at any time exceed 20% of
Consolidated Investment Net Worth.
In valuing any investments for the purpose of applying the
limitations set forth in this Agreement, such investments, loans and advances
shall be taken at the original cost thereof, without allowance for any
subsequent write-offs or appreciation or depreciation therein, but less any
amount repaid or recovered on account of capital or principal.
For purposes of this Indenture, at any time when any business entity
becomes a Restricted Subsidiary, all investments of such business entity at such
time shall be deemed to have been made by such business entity, as a Restricted
Subsidiary, at such time, provided that NHLP shall be deemed not to be in
violation of the provisions of this ss.4.19 solely by virtue of any entity
becoming a Restricted Subsidiary for a period of 90 days after such entity
becomes a Restricted Subsidiary.
4.20. ERISA Compliance.
(a) NHLP will not, and will not permit any Restricted Subsidiary to,
permit any Pension Plans at any time maintained by NHLP or any Restricted
Subsidiary to have any Unfunded Vested Pension Liabilities. As used herein
"Unfunded Vested Pension Liability" shall mean an excess of the actuarial
present value of accumulated vested Pension Plan benefits as at the end of the
immediately preceding Pension Plan year of such Pension Plans (or as of any more
recent valuation date) over the net assets allocated to such Pension Plans which
are available for benefits, all as determined and disclosed in the most recent
actuarial valuation report for such Pension Plans.
(b) All assumptions and methods used to determine the actuarial
valuation of vested employee benefits under all Pension Plans at any time
maintained by NHLP or any Restricted Subsidiary and the present value of assets
of such Pension Plans shall be reasonable in the good faith judgment of NHLP and
shall comply with all requirements of law.
(c) NHLP will not, and will not permit any Restricted Subsidiary to,
cause any Pension Plan which it maintains or in which it participates at any
time to:
(1) engage in any non-exempt, "prohibited transaction" (as such term
is defined in ERISA);
(2) incur any "accumulated funding deficiency" (as such term is
defined in ERISA), whether or not waived; or
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(3) terminate any such Pension Plan in a manner which could result
in the imposition of a lien on any property of the Company or any of its
Restricted Subsidiaries pursuant to ERISA.
(d) NHLP will not, and will not permit any Restricted Subsidiary to,
permit any condition to exist in connection with any Pension Plan which might
constitute grounds for the PBGC to institute proceedings to have such Pension
Plan terminated or a trustee appointed to administer such Pension Plan.
(e) NHLP will not, and will not permit any Restricted Subsidiary to,
withdraw from any Multiemployer Plan if such withdrawal shall subject NHLP or
any Restricted Subsidiary to withdrawal liability (as described under Part 1 of
Subtitle E of Title IV of ERISA).
4.21. Reports and Rights of Inspection. NHLP will keep, and will
cause each Restricted Subsidiary to keep, proper books of record and account in
which full and correct entries will be made of all dealings or transactions of
or in relation to the business and affairs of NHLP or such Restricted
Subsidiary, in accordance with GAAP consistently applied (except for changes
disclosed in the financial statements furnished to you pursuant to this ss.4.21
and concurred in by the independent public accountants referred to in ss.4.21(b)
hereof), and will furnish to the Indenture Trustee and each Institutional Holder
of the then outstanding Notes (in duplicate if so specified below or otherwise
requested):
(a) Quarterly Statements. As soon as available and in any event
within 45 days after the end of each Fiscal Quarter (except the last) of
each Fiscal Year, copies of:
(1) consolidated and consolidating balance sheets of NHLP and
its Restricted Subsidiaries as of the close of such Fiscal Quarter,
setting forth in comparative form the consolidated figures for the
Fiscal Year then most recently ended,
(2) consolidated and consolidating statements of operations of
NHLP and its Restricted Subsidiaries for such Fiscal Quarter and for
the portion of the Fiscal Year ending with such period, in each case
setting forth in comparative form the consolidated figures for the
corresponding periods of the preceding Fiscal Year, and
(3) consolidated and consolidating statements of cash flows of
NHLP and its Restricted Subsidiaries for the portion of the Fiscal
Year ending with such Fiscal Quarter, setting forth in comparative
form the consolidated figures for the corresponding period of the
preceding Fiscal Year,
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all in reasonable detail and certified as complete and correct by an
authorized financial officer of NHLP;
(b) Annual Statements. As soon as available and in any event within
90 days after the close of each Fiscal Year of NHLP, copies of:
(1) consolidated and consolidating balance sheets of NHLP and
its Restricted Subsidiaries as of the close of such Fiscal Year, and
(2) consolidated and consolidating statements of income and
retained earnings and cash flows of NHLP and its Restricted
Subsidiaries for such Fiscal Year,
in each case setting forth in comparative form the consolidated figures
for the preceding Fiscal Year, all in reasonable detail and accompanied by
a report thereon of a firm of independent public accountants of recognized
national standing selected by NHLP to the effect that the consolidated
financial statements have been prepared in conformity with GAAP and
present fairly, in all material respects, the financial condition of NHLP
and its Restricted Subsidiaries and that the examination of such
accountants in connection with such financial statements has been made in
accordance with generally accepted auditing standards;
(c) Audit Reports. Promptly upon receipt thereof, one copy of each
interim or special audit made by independent accountants of the books of
NHLP or any Restricted Subsidiary and any management letter received from
such accountants;
(d) SEC and Other Reports. Promptly upon their becoming available,
one copy of each financial statement, report, notice or proxy statement
sent by NHLP to public holders of Limited Partnership Interests generally
and of each regular or periodic report, and any registration statement or
prospectus filed by NHLP or any Subsidiary with any securities exchange or
the Securities and Exchange Commission or any successor agency, and copies
of any orders in any proceedings to which NHLP or any of its Subsidiaries
is a party, issued by any governmental agency, Federal or state, having
jurisdiction over NHLP or any of its Subsidiaries (other than routine
health care notices issued by federal or state agencies administering the
Medicare or Medicaid programs);
(e) ERISA Reports. Promptly upon the occurrence thereof, written
notice of (i) a Reportable Event with respect to any Pension Plan
described in Section 4043 of ERISA and the regulations issued thereunder
(other than a Reportable Event not subject to the provision for a 30-day
notice to the PBGC under such regulations); (ii) the institution of any
steps by NHLP, any ERISA Affiliate, the PBGC or any other person to
terminate
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any Pension Plan, which steps would subject NHLP to any liability to the
PBGC; (iii) the institution of any steps by NHLP or any ERISA Affiliate to
withdraw from any Pension Plan, which steps would subject NHLP or any
ERISA Affiliate to any withdrawal liability; (iv) a "prohibited
transaction" within the meaning of Section 406 of ERISA in connection with
any Pension Plan; (v) any material increase in the contingent liability of
NHLP or any Restricted Subsidiary with respect to any post-retirement
welfare liability; or (vi) the taking of any action by, or the threatening
of the taking of any action by, the Internal Revenue Service, the
Department of Labor or the PBGC with respect to any of the foregoing;
(f) Officers' Certificates. Within the periods provided in
paragraphs (a) and (b) above, a certificate of an authorized financial
officer of NHLP stating that such officer has reviewed the provisions of
this Agreement and setting forth: (i) the information and computations (in
sufficient detail) required in order to establish whether NHLP was in
compliance with the requirements of ss.4.11 through ss.4.14 at the end of
the period covered by the financial statements then being furnished, and
(ii) whether there existed as of the date of such financial statements and
whether, to the best of such officer's knowledge, there exists on the date
of the certificate or existed at any time during the period covered by
such financial statements any Default or Event of Default and, if any such
condition or event exists on the date of the certificate, specifying the
nature and period of existence thereof and the action NHLP is taking and
proposes to take with respect thereto;
(g) Accountant's Certificates. Within the period provided in
paragraph (b) above, a certificate of the accountants who render an
opinion with respect to such financial statements, stating that they have
reviewed this Indenture and stating further whether, in making their
audit, such accountants have become aware of any Default or Event of
Default under any of the terms or provisions of this Indenture insofar as
any such terms or provisions pertain to or involve accounting matters or
determinations, and if any such condition or event then exists, specifying
the nature and period of existence thereof;
(h) Within the respective periods provided in paragraph (b) above,
financial statements of the character and for the dates and periods as in
said paragraph (b) provided covering each Unrestricted Subsidiary that is
also a consolidated Subsidiary; and
(i) Requested Information. With reasonable promptness, such other
data and information as any Institutional Holder may reasonably request.
Without limiting the foregoing, NHLP will permit each Institutional Holder of
the then outstanding Notes (or such Persons as such Institutional Holder may
designate), to visit
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and inspect, under the NHLP's guidance, any of the properties of NHLP or any
Restricted Subsidiary, to examine all of their books of account, records,
reports and other papers, to make copies and extracts therefrom and to discuss
their respective affairs, finances and accounts with their respective officers,
employees, and independent public accountants (and by this provision NHLP
authorizes said accountants to discuss with each Institutional Holder the
finances and affairs of NHLP and its Restricted Subsidiaries) all at such
reasonable times and as often as may be reasonably requested. NHLP shall not be
required to pay or reimburse any such holder for expenses which any such holder
may incur in connection with any such visitation or inspection, provided that if
such visitation or inspection is made during any period when a Default or an
Event of Default shall have occurred and be continuing, NHLP agrees to reimburse
such holder for all such expenses promptly on demand.
4.22. Management Agreements. NHLP will at all times keep in force
and effect a Management Agreement with respect to each of the Managed
Facilities.
4.23. Covenants With Respect to Constructed Facilities. With respect
to the Constructed Facilities, NHLP will:
(a) Subcontractors. Submit or cause the General Contractor to submit
the names of any or all proposed subcontractors, subcontracts and
contracts with Persons who are to perform services or furnish labor and
materials or other items included in the Project Budget for the
Constructed Facilities, in any case having a value in excess of $100,000,
to the appropriate Consultant for its approval. The Consultant shall have
ten business days following receipt of (i) the contract or subcontract for
which approval is being requested and (ii) financial statements of the
proposed contractor or subcontractor (or, if additional information or
documentation is required by the Consultant in order to make such
determination, from the receipt by the Consultant of the last of such
requested information or documents) to grant or deny its approval. Such
grant or denial may be in writing or may be telephonically communicated to
NHLP. Failure of the Consultant to deny its approval within such ten
business day period shall be deemed to be approval by the Consultant.
(b) Diligent Prosecution of Construction. Cause the construction of
each Constructed Facility to be prosecuted with diligence and continuity
to completion on or before (i) with respect to the Myrtle Beach Facility,
December 31, 1991, (ii) with respect to the North Augusta Facility,
November 30, 1991, (iii) with respect to the Greenville Facility, December
31, 1991, (iv) with respect to the Pinellas Facility, December 31, 1991
and (v) with respect to the Sun City Facility, November 30, 1991, subject
to extensions for unavoidable delays which do not extend beyond 120 days
in the aggregate, free and clear of all Liens or claims for Liens, subject
to its right to contest the same in accordance with the provisions of the
Mortgages.
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(c) Change Orders. Not execute or authorize or permit the execution
of any Change Order for additional costs equal to or greater than $25,000
without the prior written approval of the Consultant; provided, that any
such Change Order may be made without such prior written consent if such
change (i) does not violate the terms of any contract previously approved
by the Consultant and (ii) will not result in a change in the size,
appearance or usefulness of any Constructed Facility for its intended
purposes or reduce the quality of any Constructed Facility or reduce the
net area of any Constructed Facility; and further provided that no Change
Order for additional costs in excess of $25,000 shall be executed without
the prior written approval of the Consultant. The authorization of any
such Change Order by or on behalf of NHLP shall constitute a
representation from NHLP to the Indenture Trustee and the holders of the
Notes that the foregoing conditions have been satisfied. The Consultant
shall have the right at any time to require receipt of evidence
satisfactory to it showing compliance with the conditions precedent to
Change Orders permitted by this ss.4.23(c) as a condition precedent to
making any such Change Order.
(d) Correction of Defects in Construction. Upon demand by any
Consultant, the Indenture Trustee or the holders of not less than 64% in
aggregate principal amount of the Notes then outstanding, pursue the
correction of any structural defect in any Constructed Facility or any
departure from the Plans not approved by the Consultant for any such
Constructed Facility or authorized by any other provisions of this
Indenture. The disbursement of funds under ss.9 shall not constitute a
waiver of the right of the Indenture Trustee or the holders of the Notes
to require compliance with this covenant with respect to any such defects
or departures from the Plans not previously objected to by such
Consultant.
(e) Other Contracts. With respect to any Constructed Facility if the
Consultant for such Facility so requests, provide such Consultant with
copies of any and all contracts and agreements for the performance of
work included within the Project Budget and not covered by the related
General Contract and will not enter into any contracts or agreements for
the performance of any such work if the contract price therefor would
cause the total cost for such work to exceed the amount budgeted therefor
in the Project Budget unless the amount of such excess shall have been
deposited in the Construction Fund Sub-Account.
(f) Myrtle Beach Facility. With respect to the Myrtle Beach
Facility, within 90 days after the final disbursement for such Facility is
made from the Myrtle Beach Facility Sub-Account (i) cause NHLP to acquire
Americare Southeast and cause American Southeast to cease to exist, and
(ii) cause the certificate of need, Medicare provider contract and all
licenses and permits necessary to operate the Myrtle Beach Facility to be
transferred to NHLP.
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4.24. Officers Certificate Regarding Managed Facilities. With
respect to each Managed Facility, NHLP will deliver to the Indenture Trustee, on
or before March 1 of each year after the year 1990, (i) an Officers' Certificate
setting forth, with respect to transactions during the preceding calendar year
pursuant to ss.3.2(a) of each of the Mortgages on the Managed Facilities, the
aggregate fair value at the date or dates of disposition of, the aggregate
amount realized from, and a general description of, any property disposed of
pursuant to ss.3.2(a) of each of the Mortgages on the Managed Facilities (and
stating that such property had become obsolete or unfit for use or no longer
useful, necessary or profitable in the conduct of the business of the owner
thereof) and the aggregate fair value of, the cost of, and a general description
of, any property acquired in substitution for such property sold or disposed of,
(ii) such supplemental mortgages, financing statements or other instruments as
may be necessary for the purpose of effectually subjecting such acquired
property to the lien of such Mortgage and (iii) an Opinion of Counsel that such
supplemental mortgages, financing statements, lease assignments or other
instruments have been duly executed and are sufficient for such purpose or that
no such supplemental mortgages, financing statements, lease assignments or
instruments are necessary.
SECTION 5. COVENANTS OF THE ISSUER.
The Issuer covenants, represents and warrants with the Indenture
Trustee for the benefit of the Indenture Trustee and the holders of the Notes as
follows:
5.1. Taxes, Compliance with Laws. The Issuer will promptly pay and
discharge all material taxes, assessments and governmental charges or levies
imposed upon the Issuer or upon or in respect of all or any part of the property
of the Issuer; provided the Issuer shall not be required to pay any such tax,
assessment, charge, levy, account payable or claim if the validity,
applicability or amount thereof is being contested in good faith by appropriate
actions or proceedings which will prevent the forfeiture or sale of any material
property of the Issuer or any material interference with the use thereof by the
Issuer. The Issuer will promptly comply with all laws, ordinances or
governmental rules and regulations to which it is subject, the violation of
which could materially and adversely affect its properties, prospects or
condition.
5.2. Purchase of Notes by the Issuer. The Issuer will not, directly
or indirectly, purchase or make any offer to purchase any Notes unless the offer
has been made to purchase Notes, pro rata, from all holders of the Notes at the
same time and upon the same terms. In ease the Issuer purchases any Notes, such
Notes shall thereafter be cancelled and no Notes shall be issued in substitution
therefor.
5.3. ERISA Covenants.
(a) Maintenance of Plan and Compliance. The Issuer will agree to any
amendments to the Trust Agreement requested by National so that (i) the Plan
will at all times remain qualified under Section 401(a) of the Code, (ii) the
Issuer will remain exempt from Federal taxes under Section 501(a) of the Code,
and (iii) the Plan's status
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as a qualified employee stock ownership plan which complies with the
requirements of Section 4975(e)(7) of the Code and the rules and regulations
promulgated thereunder will be maintained. Notwithstanding the foregoing, at all
times the Issuer will comply in all material respects with all requirements of
the Plan, the Code, ERISA and any other law, rule or regulation applicable to
the Issuer. In addition, upon the direction of National, the Issuer will comply
with any conditions imposed by the Internal Revenue Service to obtain a
favorable determination letter with respect to it, including any changes in the
Trust Agreement that may be required for the issuance of said determination
letter.
(b) Amendments of the Trust Agreement. The Issuer will not agree to
any amendment of the Trust Agreement which materially and adversely affects the
rights of the holders of the Notes unless such amendment, in the Opinion of
Counsel to the Issuer, is required for compliance with ERISA and/or the Plan to
remain qualified under Section 401(a) or Section 4975(e)(7) of the Code. The
Issuer will in any event give the Noteholders not less than 30 days prior
written notice of any amendment to the Trust Agreement which would materially
and adversely affect the rights of the holders of the Notes.
5.4. Reports and Rights of Inspection. The Issuer will keep proper
books of record and account in which full and correct entries will be made of
all dealings or transactions of or in relation to the business and affairs of
the Issuer, in accordance with GAAP consistently applied and will furnish to the
Indenture Trustee and to each Institutional Holder of the then outstanding
Notes, with reasonable promptness, such data and information regarding the
Issuer within the Issuer's possession (including a copy of any amendment to the
Plan or any determination letter with respect to the Issuer) as any
Institutional Holder may reasonably request, except to the extent disclosure of
such information by the Issuer to such Institutional Holder would be prohibited
by ERISA.
Without limiting the foregoing and except to the extent prohibited
by ERISA, the Issuer will permit each Institutional Holder of the outstanding
Notes (or such persons as such Institutional Holder may designate) to visit the
Plan Trustee and inspect, under the Plan Trustee's guidance, any of the
properties of the Issuer, and to discuss the affairs, finances and accounts of
the Issuer with officers and employees of the Plan Trustee and the independent
public accountants of the Issuer (and by this provision the Issuer authorizes
said accountants to discuss with you the finances and affairs of the Issuer) all
at such reasonable times and as often as may be reasonably requested. In
addition, the Issuer will permit each Institutional Holder, except to the extent
prohibited by ERISA, to examine all of their books of account, records, reports
and other papers, to make copies and extracts therefrom all at such reasonable
times and as often as may be reasonably requested. The Issuer shall not be
required to pay or reimburse any such holder for expenses which any such holder
may incur in connection with any such visitation or inspection, provided that if
such visitation or inspection is made during any period when a Default or an
Event of Default shall have occurred and be continuing, the Issuer agrees to
reimburse such holder for all such expenses promptly upon demand.
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5.5. Performance of Operative Agreements; Payment of Notes; Further
Assurances. Except to the extent prohibited by ERISA, the Issuer will perform,
abide by and to be governed and restricted by each and all of the terms,
provisions, restrictions, covenants and agreements applicable to it which are
set forth in each Operative Agreement to which it is a party, and, except to the
extent prohibited by ERISA, the Issuer covenants and agrees to perform, abide by
and to be governed and restricted by each and all of the terms, provisions,
restrictions, covenants and agreements applicable to it which are set forth in
each Operative Agreement to which it is a party, and in each and every
supplement thereto or amendment thereof which may at any time or from time to
time be executed and delivered by the parties thereto or their successors and
assigns, to the same extent as though each and all of said terms, provisions,
restrictions, covenants and agreements were fully set out herein and as though
any amendments or supplements to each of such Operative Agreements were fully
set out in an amendment or supplement to this Indenture.
The Issuer will, by 10:00 a.m., Hartford, Connecticut time, on the
due date for any payment of principal, premium or interest on any Note, deposit
or cause to be deposited with the Indenture Trustee in immediately available
funds a sum sufficient to pay the principal, premium, if any, or interest due on
such date, such sum to be held in trust for the benefit of the holder of such
Note.
The Issuer will at any time and from time to time, at NHLP's
expense, do, execute, acknowledge and deliver to the Noteholders and/or the
Indenture Trustee such further act, deed, conveyance, transfer, instrument,
document and assurance and take such further action, if the Noteholders and/or
the Indenture Trustee may from time to time reasonably request, in order to
further carry out the intent and purpose of this Indenture and the Note Purchase
Agreement and to establish and protect the rights, intentions and remedies
created, or intended to be created, in favor of the Noteholders, including,
without limitation, the execution, delivery and recordation and filing of
Mortgages, security agreements and financing statements and continuation
statements under the Uniform Commercial Code required by applicable law to be so
recorded or filed so as to make effective of record the lien intended to be
created thereby.
5.6. Use of Proceeds. The Issuer will use the proceeds from the sale
of the Notes exclusively for the purchase of shares of Common Stock of National
in accordance with the provisions of Section 133 of the Code and the Stock
Purchase Agreement.
SECTION 6. COVENANTS OF NATIONAL.
National covenants, represents and warrants with the Indenture
Trustee for the benefit of the Indenture Trustee and the holders of the Notes as
follows:
6.1. National Existence. National will preserve and keep in full
force and effect and will cause each Restricted Subsidiary to preserve and keep
in full force
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and effect, its corporate existence and all licenses and permits necessary to
the proper conduct of its business and National will at all times be and remain
the Administrative General Partner of NHLP provided that National shall not be
required to maintain its corporate existence or remain the Administrative
General Partner of NHLP if NHLP shall cease its existence as a limited
partnership in accordance with the provisions of ss.4.2.
6.2. Insurance. National will maintain and will cause each
Restricted Subsidiary to maintain, insurance coverage by financial sound and
reputable insurers accorded a rating by A.M. Best Company, Inc. at the time of
issuance of any policy of in the case of professional liability and property
insurance, A:VII or higher, in the case of property insurance on boilers and
machinery, A:IX or higher, and in the case of all other policies, A:XII or
higher, such insurance coverage to be in such forms and amounts and against such
risks as are customary for corporations of established reputation engaged in the
same or a similar business and owning and operating similar properties;
provided, that National will, on the date of renewal of any such policy, obtain
such insurance policy from a financially sound and reputable insurer accorded a
rating by A.M. Best Company, Inc. of A: XII or higher at the time of issuance of
such policy.
6.3. Takes, Claims for Labor and Materials, Compliance with Laws.
National will promptly pay and discharge and will cause each Restricted
Subsidiary to pay and discharge, all lawful taxes, assessments and governmental
charges or levies imposed upon National or such Restricted Subsidiary,
respectively, or upon or in respect of all or any part of the Property or
business of National or such Restricted Subsidiary, all trade accounts payable
in accordance with usual and customary business terms, and all claims for work,
labor or materials, which if unpaid might become a Lien upon any property of
National or such Restricted Subsidiary; provided National shall not be required
to pay any such tax, assessment, charge, levy, account payable or claim if (i)
the validity, applicability or amount thereof is being contested in good faith
by appropriate actions or proceedings which will prevent the forfeiture or sale
of any Property of National or such Restricted Subsidiary or any material
interference with the use thereof by National or such Restricted Subsidiary, and
(ii) National or such Restricted Subsidiary shall set aside on its books,
reserves deemed by it to be adequate with respect thereto. National will
promptly comply with all laws, ordinances or governmental rules and regulations
to which it is subject, the violation of which could materially and adversely
affect the properties, business, prospects, profits or condition of National or
National and its Restricted Subsidiaries taken as a whole or would result in any
Lien except:
(a) Liens for property taxes and assessments or governmental charges
or levies and Liens securing claims or demands of mechanics and
materialmen, provided that payment thereof is not at the time required by
this ss.6.3;
(b) Liens of or resulting from any judgment or award, the time for
the appeal or petition for rehearing of which shall not have expired, or
in respect of which National or a Restricted Subsidiary thereof shall at
any
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time in good faith be prosecuting an appeal or proceeding for a review and
in respect of which a stay of execution pending such appeal or proceeding
for review shall have been secured;
(c) Liens incidental to the conduct of business or the ownership of
properties and assets (including Liens in connection with worker's
compensation, unemployment insurance and other like laws, warehousemen's
and attorneys' liens and statutory landlords' liens) and Liens to secure
the performance of bids, tenders or trade contracts, or to secure
statutory obligations, surety or appeal bonds or other liens of like
general nature incurred in the ordinary course of business and not in
connection with the borrowing of money, provided in each case, the
obligation secured is not overdue or, if overdue, is being contested in
good faith by appropriate actions or proceedings; and
(d) minor survey exceptions or minor encumbrances, easements or
reservations, or rights of others for rights-of-way, utilities and other
similar purposes, or zoning or other restrictions as to the use of real
properties, which are necessary for the conduct of the activities of
National and its Restricted Subsidiaries or which customarily exist on
properties of corporations engaged in similar activities and similarly
situated and which do not in any event materially impair their use in the
operation of the business of National and its Restricted Subsidiaries.
6.4. Maintenance. National and each of its Restricted Subsidiaries,
will maintain, preserve and keep and will cause each Restricted Subsidiary to
maintain, preserve and keep, its properties which are used or useful in the
conduct of its business (whether owned in fee or a leasehold interest) in good
repair and working order and from time to time will make all necessary repairs,
replacements, renewals and additions so that at all times the efficiency thereof
shall be maintained.
6.5. Nature of Business. Neither National nor any Restricted
Subsidiary will engage in any business if, as a result, the general nature of
the business which would then be engaged in by National taken on a consolidated
basis, would be substantially changed from the general nature of the business
engaged in by National and its Restricted Subsidiaries on the date of this
Indenture.
6.6. Compliance with Environmental Laws. (i) National shall carry on
the business and operations at its Properties and all Properties managed by it
to comply in all material respects, and will comply in all material respects
with all applicable Federal, state, regional, county or local laws, statutes,
rules, regulations or ordinances, concerning public health, safety or the
environment including without limitation, any such applicable law, statute,
rule, regulation or ordinance relating to releases, discharges or emissions of
Hazardous Substances to air, water, land or groundwater, to the withdrawal or
use of groundwater, to the use and handling of polychlorinated biphenyls or
asbestos, to the disposal, treatment, storage or management of hazardous or
solid waste, or Hazardous Substances or crude oil, fractious petroleum,
petroleum
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derivatives or by-products, or to exposure to toxic or hazardous materials, to
the handling, transportation, discharge or release of gaseous or liquid
Hazardous Substances and any regulation, order, notice or demand issued pursuant
to such law, statute or ordinance, in each case applicable to the property of
National and its Subsidiaries or the operation, construction or modification of
any thereof, including, but not limited to the following, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. ss.9601 et
seq., the Solid Waste Disposal Act, as amended by the Resource Conservation and
Recovery Act of 1976, as amended by the Solid and Hazardous Waste Amendments of
1984, 42 U.S.C. ss.6901 et seq., the Federal Water Pollution Control Act, as
amended by the Clean Water Act of 1977, 33 U.S.C. ss.1251 et seq., the Toxic
Substances Control Act of 1976, 15 U.S.C. ss.2601 et seq., the Emergency
Planning and Community Right-to-Know Act of 1986, 42 U.S.C. ss.11001 et seq.,
the Clean Air Act of 1966, as amended, 42 U.S.C. ss.7401 et seq., the National
Environmental Policy Act of 1975, 42 U.S.C. ss.4321, the Rivers and Harbours Act
of 1899, 33 U.S.C. ss.401 et seq., the Endangered Species Act of 1973, as
amended, 16 U.S.C. ss.1531, et seq., the Occupational Safety and Health Act of
1970, as amended, 29 U.S.C. ss.651 et seq., the Safe Drinking Water Act of 1974,
as amended, 42 U.S.C. ss.300(f) et seq., ss.2601, et seq.); and all rules,
regulations and guidance documents promulgated or published thereunder.
(ii) National shall prevent the imposition of any liens or
encumbrances against the Properties for the costs of any response, removal, or
remedial action or clean up of Hazardous Substances.
6.7. Guaranties. National will not, and will not permit any
Restricted Subsidiary to, become or be liable in respect of any guaranty except
the Guaranty Agreement and except Guaranties of National of Indebtedness of the
Issuer which are limited in amount to a stated principal amount of Indebtedness
thereby guaranteed.
6.8. Purchase of Notes. Neither National nor any Subsidiary or any
Affiliate, directly or indirectly, may repurchase or make any offer to
repurchase any Notes unless an offer has been made to purchase Notes, pro rata,
from all holders of the Notes at the same time and upon the same terms. In case
National purchases any Notes, such Notes shall thereafter be cancelled and no
Notes shall be issued in substitution therefor.
6.9. Transactions with Affiliates. National will not and will not
permit any Restricted Subsidiary to, enter into or be a party to any transaction
or arrangement with any Affiliate or Subsidiary (including, without limitation,
the purchase from, sale to or exchange of property with, or the rendering of any
service by or for, any Affiliate or Subsidiary), except in the ordinary course
of and pursuant to the reasonable requirements of National's or such Restricted
Subsidiary's business and upon fair and reasonable terms no less favorable to
National or such Restricted Subsidiary than would obtain in a comparable
arm's-length transaction with a Person other than an Affiliate or Subsidiary.
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6.10. ERISA Compliance.
(a) Maintenance of Plan and Compliance. National will at all times
(i) cause the Plan to remain qualified under Section 401(a) of the Code, (ii)
cause the Issuer to remain exempt from Federal taxes under Section 501(a) of the
Code and (iii) maintain the status of the Plan as a qualified employee stock
ownership plan which complies with the requirements of Section 4975(e)(7) of the
Code and the rules and regulations promulgated thereunder. At all times National
will, and will cause the Issuer and the Plan to, comply in all material respects
with all requirements of the Code, ERISA and any other law, rule or regulation
applicable to the Issuer or the Plan. In addition, National will comply with any
conditions imposed by the Internal Revenue Service to obtain a favorable
determination letter regarding the Plan and the Trust Agreement, including any
changes in the Plan or the Trust Agreement that may be required for the issuance
of such determination letter.
(b) Amendments of the Plan. National will not agree to any amendment
of the Plan or the Trust Agreement which materially and adversely affects the
rights of the holders of the Notes unless such amendment, in the Opinion of
Counsel to the Issuer, is required for compliance with ERISA and/or the Plan to
remain qualified under Section 401(a) or Section 4975(e)(7) of the Code.
National will in any event give the Noteholders not less than 30 days prior
written notice of any amendment of the Plan or the Trust Agreement which would
materially and adversely affect the rights of the holders of the Notes.
(c) Determination Letters. As soon as the Internal Revenue Service
begins accepting applications for determination letters for employee stock
ownership plans with respect to the Tax Reform Act of 1986 and other applicable
laws, National will promptly apply for and use its best efforts to obtain a
determination letter from the Internal Revenue Service to the effect that the
Plan and the Issuer meet the requirements for qualification under Sections
401(a) and 4975(e)(7) of the Code and that the Issuer meets the requirements for
tax exemption under Section 501(a) of the Code.
(d) National will not, and will not permit any Restricted Subsidiary
to, cause any Pension Plan which it maintains or in which it participates at any
time to:
(i) engage in any non-exempt, "prohibited transaction" (as such
term is defined in ERISA);
(ii) incur any "accumulated funding deficiency" (as such term is
defined in ERISA), whether or not waived; or
(iii) terminate any such Pension Plan in a manner which could result
in the imposition of a lien on any property of the Company or any of its
Restricted Subsidiaries pursuant to ERISA.
(e) National will not, and will not permit any Restricted Subsidiary
to, permit any condition to exist in connection with any Pension Plan which
might
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constitute grounds for the PBGC to institute proceedings to have such Pension
Plan terminated or a trustee appointed to administer such Pension Plan.
(f) National will not, and will not permit any Restricted Subsidiary
to, withdraw from any Multiemployer Plan if such withdrawal shall subject
National or any Restricted Subsidiary to withdrawal liability (as described
under Part 1 of Subtitle E of Title IV of ERISA).
6.11. Contributions to the Issuer. National covenants that it will
and will cause its Subsidiaries to make contributions to the Issuer in amounts
sufficient to enable the Issuer to make payments of principal, premium, if any,
and interest on the Notes when due.
6.12. Reports and Rights of Inspection. National will keep, and will
cause each Restricted Subsidiary to keep, proper books of record and account in
which full and correct entries will be made of all dealings or transactions of
or in relation to the business and affairs of National or such Restricted
Subsidiary, in accordance with GAAP consistently applied (except for changes
disclosed in the financial statements furnished to you pursuant to this ss.6.12
and concurred in by the independent public accountants referred to in ss.6.12(b)
hereof), and will furnish to the Indenture Trustee and each Institutional Holder
of the then outstanding Notes (in duplicate if so specified below or otherwise
requested):
(a) Quarterly Statements. As soon as available and in any event
within 45 days after the end of each Fiscal Quarter (except the last) of
each Fiscal Year, copies of:
(1) consolidated and consolidating balance sheets of National
and its Restricted Subsidiaries as of the close of such Fiscal
Quarter setting forth in comparative form the consolidated figures
for the fiscal year then most recently ended,
(2) consolidated and consolidating statements of operations of
National and its Restricted Subsidiaries for such Fiscal Quarter and
for the portion of the Fiscal Year ending with such period, in each
case setting forth in comparative form the consolidated figures for
the corresponding periods of the preceding Fiscal Year, and
(3) consolidated and consolidating statements of cash flows of
National and its Restricted Subsidiaries for the portion of the
Fiscal Year ending with such Fiscal Quarter, setting forth in
comparative form the consolidated figures for the corresponding
period of the preceding Fiscal Year,
all in reasonable detail and certified as complete and correct by an
authorized financial officer of National;
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(b) Annual Statements. As soon as available and in any event
within 90 days after the close of each Fiscal Year of National,
copies of:
(1) consolidated and consolidating balance sheets of
National and its Restricted Subsidiaries as of the close of
such Fiscal Year, and
(2) consolidated and consolidating statements of income
and retained earnings and cash flows of National and its
Restricted Subsidiaries for such Fiscal Year,
in each case setting forth in comparative form the consolidated
figures for the preceding Fiscal Year, all in reasonable detail and
accompanied by a report thereon of a firm of independent public
accountants of recognized national standing selected by National to
the effect that the consolidated financial statements have been
prepared in conformity with GAAP and present fairly, in all material
respects, the financial condition of National and its Restricted
Subsidiaries and that the examination of such accountants in
connection with such financial statements has been made in
accordance with generally accepted auditing standards;
(c) Audit Reports. Promptly upon receipt thereof, one copy of
each interim or special audit made by independent accountants of the
books of National or any Restricted Subsidiary and any management
letter received from such accountants;
(d) SEC and Other Reports. Promptly upon their becoming
available, one copy of each financial statement, report, notice or
proxy statement sent by National to stockholders generally and of
each regular or periodic report, and any registration statement or
prospectus filed by National or any Subsidiary with any securities
exchange or the Securities and Exchange Commission or any successor
agency, and copies of any orders in any proceedings to which
National or any of its Subsidiaries is a party, issued by any
governmental agency, Federal or state, having jurisdiction over
National or any of its Subsidiaries (other than routine health care
notices issued by federal or state agencies administering the
Medicare or Medicaid programs);
(e) ERISA Reports. Promptly upon the occurrence thereof,
written notice of (i) a Reportable Event with respect to any Pension
Plan which requires notice to be given to the PBGC; (ii) the
institution of any steps by National, any ERISA Affiliate, the PBGC
or any other person to terminate any Pension Plan, which steps would
subject NHLP to any liability to the PBGC; (iii) the institution of
any steps by National or any ERISA Affiliate to withdraw from any
Pension Plan, which steps would subject NHLP or any ERISA Affiliate
to any withdrawal liability; (iv) a "prohibited
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transaction" within the meaning of Section 406 of ERISA in
connection with any Pension Plan; (v) any material increase in the
contingent liability of National or any Restricted Subsidiary with
respect to any post-retirement welfare liability; or (vi) the taking
of any action by, or the threatening of the taking of any action by,
the Internal Revenue Service, the Department of Labor or the PBGC
with respect to any of the foregoing;
(f) Accountant's Certificates. Within the period provided in
paragraph (b) above, a certificate of the accountants who render an
opinion with respect to such financial statements, stating that they
have reviewed this Indenture and stating further whether, in making
their audit, such accountants have become aware of any Default or
Event of Default under any of the terms or provisions of this
Indenture insofar as any such terms or provisions pertain to or
involve accounting matters or determinations, and if any such
condition or event then exists, specifying the nature and period of
existence thereof;
(g) Trust Agreement, Plan. Not more than 30 days after the
close of each Fiscal Year of the Issuer, a copy of any amendment or
modification to the Trust Agreement or the Plan made during such
Fiscal Year;
(h) Annual Report. Not more than 15 days after the filing
thereof, a copy of the Federal return/report (IRS Form 5500) of the
Issuer for each Fiscal Year;
(i) Copies of Determination Letters. As soon as available and
in any event within ten days after receipt thereof, a copy of (i)
the determination letter received from the Internal Revenue Service
in accordance with the requirements of ss.6.10(c) and (ii) each
other determination letter received from the Internal Revenue
Service with respect to the Plan or the Issuer; and
(j) Requested Information. With reasonable promptness, such
other data and information as any such Institutional Holder may
reasonably request.
Without limiting the foregoing, National will permit each Institutional Holder
of the then outstanding Notes (or such Persons as such Institutional Holder may
designate), to visit and inspect, under National's guidance, any of the
properties of National or any Restricted Subsidiary, to examine all of their
books of account, records, reports and other papers, to make copies and extracts
therefrom and to discuss their respective affairs, finances and accounts with
their respective officers, employees, and independent public accountants (and by
this provision National authorizes said accountants to discuss with each
Institutional Holder the finances and affairs of National and its Restricted
Subsidiaries) all at such reasonable times and as often as may be reasonably
requested. National shall not be required to pay or reimburse any such holder
for expenses which any such holder may incur in connection with any such
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visitation or inspection, provided that if such visitation or inspection is made
during any period when a Default or an Event of Default shall have occurred and
be continuing, National agrees to reimburse such holder for all such expenses
promptly on demand.
SECTION 7. APPLICATION OF CERTAIN MONEYS RECEIVED BY THE INDENTURE TRUSTEE,
SUBSTITUTION OF COLLATERAL, AND RELEASE OF MORTGAGED PROPERTY.
7.1. Application of Moneys. All amounts from time to time received
by the Indenture Trustee constituting (i) contributions relating to the Notes
which have been made by National to the Plan, (ii) payments of principal of,
premium, if any, and interest on the NHLP Note and (iii) any other amount
received with respect to regularly scheduled payments or prepayments of
principal of, premium, if any, and interest on the Notes shall be applied to the
payments and prepayments of principal of, premium, if any, and interest on the
Notes which have become due and payable or will become due and payable on or
before the date of receipt of any of the foregoing payments, and second, the
balance, if any, of any amounts received pursuant to clauses (i) and (ii) shall
be paid to or upon the order of National and the balance, if any, of any amounts
received pursuant to clause (iii) shall be paid to or upon the order of the
party to whom such amount is due.
7.2. Application of Insurance Proceeds-Owned Facility. (a) So long
as no Event of Default has occurred and is continuing, if the Indenture Trustee,
pursuant to the terms of any Mortgage relating to an Owned Facility, receives
insurance proceeds on account of the loss of any Owned Facility or other
proceeds from condemnation proceedings in respect of any Owned Facility by any
governmental authority ("Event of Loss") (the aggregate amount of payments of
any such proceeds received on any date by the Indenture Trustee being a "Loss
Payment") (except in cases where the Loss Payment is less than $250,000 and no
Default or Event of Default shall have occurred and be continuing, in which case
the Loss Payment may be received by NHLP, and if received by the Indenture
Trustee shall be paid over by the Indenture Trustee to NHLP for use by NHLP in
paying for replacement or repairs of or substitutes for the damaged or destroyed
property) the Loss Payment shall be held by the Indenture Trustee as part of the
Mortgaged Property during the period (the "Loss Payment Notice Period")
beginning on the date of the Indenture Trustee's receipt of such Loss Payment
and ending on and including the fifth day next following the date on which NHLP
shall have received written notice from the Indenture Trustee thereof and shall
be applied by the Indenture Trustee as follows: at the election of NHLP either
to the prepayment of the Notes in accordance with clause (i) of this ss.7.2(a)
or to the cost of repairing or replacing that part of the Financed Facility
which was the subject of such Event of Loss in accordance with clause (ii) of
this ss.7.2(a).
(i) In the event NHLP elects to prepay the Notes, such
proceeds, award or compensation, as the case may be, shall be
applied in payment and satisfaction of the Loan Value of the Owned
Facility with respect to which such proceeds, award or compensation
shall apply together with interest
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National Health Corporation Indenture of Trust and Security Agreement
accrued thereon to the date of payment and the Make-Whole Premium
Amount with respect thereto, upon the terms and in the manner provided
in Section 3.3 hereof and the balance, if any, of any such proceeds,
award or compensation shall be released to or upon the order of NHLP.
If for any reason such proceeds, award or compensation are less than
the Loan Value of the Owned Facility together with interest accrued
thereon to the date of payment and the Make-Whole Premium Amount with
respect thereto, NHLP or the Issuer shall promptly pay the difference
between such proceeds, award or compensation and the Loan Value plus
such interest and the Make-Whole Premium Amount to the Indenture
Trustee for application in accordance herewith. As a condition to the
payment or application of such proceeds, award or compensation under
this Section 7.1(a)(i), the Owned Facility with respect to which such
proceeds, award or compensation shall apply shall be released from the
mortgage and/or lien under this Indenture or the related Mortgage upon
receipt by the Indenture Trustee of an amount equal to the Loan Value
of the subject Owned Facility plus interest accrued thereon to the
date of payment and the Make-Whole Premium Amount with respect
thereto.
(ii) In the event NHLP elects to repair or replace the Owned
Facility, such proceeds, award or compensation shall be paid to NHLP
from time to time upon a written application signed by a Responsible
Officer of NHLP for the purpose of paying, or reimbursing NHLP for the
payment of, the reasonable cost, as shown by such certificate, of
repairing or replacing that part or all of the Owned Facility damaged
or destroyed, which application shall be accompanied by an approving
certificate of an architect or engineer selected by NHLP and approved
by the Indenture Trustee, as directed by the holders of not less than
64% in aggregate principal amount of the Notes then outstanding,
demonstrating that the portion of such proceeds, award or compensation
remaining on deposit with the Indenture Trustee, together with any
additional funds irrevocably allocated or otherwise provided for in a
manner satisfactory to the Indenture Trustee, as directed by the
holders of not less than 64% in aggregate principal amount of the Notes
then outstanding, for such purpose, shall be sufficient to complete
such repairs or replacements and restore the Owned Facility as nearly
as possible to the market value, utility and condition which existed
immediately prior to the Event of Loss, free from liens or encumbrances
except the related Mortgage and Permitted Encumbrances, and the
balance, if any, of any such proceeds, award or compensation shall be
released to or upon the order of NHLP. Every such application for the
payment of such proceeds, award or compensation shall state that no
Default or Event of Default has occurred and is continuing. NHLP shall
promptly complete such repairs or replacements in accordance with the
terms and provisions of Section 2.4 of the related Mortgage. The
Indenture Trustee shall receive a supplement hereto and to the related
Mortgage sufficient, as shown by an opinion of counsel, to grant a
valid first lien in any additions to or substitutions for the mortgaged
property to the Indenture Trustee, which
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National Health Corporation Indenture of Trust and Security Agreement
opinion shall also cover the filing and/or recording of such
supplements (or a financing statement or similar notice thereof if and
to the extent permitted or required by applicable law) so as to perfect
the lien and security interest in such additions or substitutions, or
in the alternative an opinion that no such supplement is required for
such purpose.
(b) Any appraisal or adjustment of such loss, or any
settlement or payment of indemnity therefor, shall be agreed upon between NHLP,
the relevant insurance company and (unless the loss being adjusted is $250,000
or less) the Indenture Trustee.
7.3. Mortgage Title Insurance. Any moneys received by the
mortgagees or beneficiaries under a Mortgage relating to an Owned Facility as
payment for any loss under any policy of mortgage title insurance which was
delivered by NHLP shall become part of the Mortgaged Property and shall be paid
and applied in the same manner contemplated by Section 3.3 hereof.
7.4. Application of Optional Prepayment in Whole of a Managed
Facility Note. Upon the receipt by the Indenture Trustee of any amount in
respect of an optional prepayment in whole of the outstanding principal amount
of any Managed Facility Note (the "Prepaid Amount") and the release of the
Mortgage on the Managed Facility to which such Managed Facility Note relates,
the Indenture Trustee shall hold the Prepaid Amount in a segregated account on
behalf of the holders of the Notes until such time as NHLP shall have
substituted a Substitute Financed Facility for the Financed Facility to which
the Managed Facility Note relates, but in any event for not longer than 180 days
after receipt thereof. Upon substitution of a Substitute Financed Facility for
such Financed Facility in accordance with Section 10, the Indenture Trustee
shall, without further notice or direction, pay over the Prepaid Amount to or
on the order of NHLP. If on such 180th day NHLP shall not have substituted a
Substitute Financed Facility for such Financed Facility, the Indenture Trustee
shall apply such moneys to the prepayment of Notes in an amount equal to the
Loan Value of the Financed Facility relating to such Managed Facility Note,
together with accrued interest thereon to the date of payment and the
Make-Whole Premium Amount with respect thereto, upon the terms and in the
manner provided in Section 3.3 hereof and the balance, if any, shall be
released to or upon the order of NHLP.
7.5. Application of Insurance Proceeds - Managed Facility. So
long as no Event of Default has occurred and is continuing, if the Indenture
Trustee receives insurance proceeds on account of the loss of any Managed
Facility or other proceeds from condemnation proceedings in respect of any
Managed Facility pursuant to the provisions of the Assignment of Note and
Mortgage and Section 4.l(a) of the Mortgage relating to such Managed Facility,
the Indenture Trustee shall apply such moneys to the prepayment of Notes in an
amount equal to the Loan Value of the Managed Facility, together with accrued
interest thereon to the date of payment and the Make-Whole Premium Amount with
respect thereto, upon the terms and in the manner provided in Section 3.3
hereof and the balance, if any, shall be released to or upon the order of NHLP.
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National Health Corporation Indenture of Trust and Security Agreement
7.6. Investment of Insurance Proceeds, Condemnation Awards or
Compensation; Prepaid Note Amounts. All insurance proceeds, condemnation awards
or compensation received by the Indenture Trustee as payment for any Event of
Loss under any policy of insurance or as an award or compensation for the taking
in condemnation or other eminent domain proceedings relating to any Owned
Facility or any Managed Facility or any part thereof and any amounts in respect
of the prepayment in whole of a Managed Facility Note shall, at the written
direction of NHLP, be invested or reinvested by the Indenture Trustee in
Permitted Investments, as specified in such written request. Upon a written
direction of NHLP in accordance with the terms of this Section 7, or at any time
when the Indenture Trustee shall determine that cash is required pursuant to
Section 7.2, 7.4 or 7.5 hereof, the Indenture Trustee shall sell all or any
designated part of such investments at the then market price therefor and shall
pay and apply the proceeds in accordance with the terms of said Section 7.2,
7.4 or 7.5, as the case may be.
7.7. Other Proceeds. Any other moneys received by the
Indenture Trustee in connection with a release of property shall be held by the
Indenture Trustee as part of the Mortgaged Property and shall be applied by the
Indenture Trustee upon the terms and in the manner provided in Section 3.2
hereof.
7.8. Application if Event of Default Exists. If an Event of
Default has occurred and is continuing to the knowledge of the Indenture
Trustee, all amounts received by the Indenture Trustee under this Section 7
(including any interest income on such amounts) shall be applied in the manner
provided for in Section 8.11 hereof in respect of proceeds and avails of the
Mortgaged Property.
7.9. interest Income. Upon receipt of any interest income
earned from Permitted Investments or earned from any other funds held by the
Indenture Trustee pursuant to this Section 7, and provided that no Event of
Default has occurred and is continuing to the knowledge of the Indenture
Trustee, the Indenture Trustee shall forthwith deliver such interest income to
NHLP provided further, that upon the liquidation of any Permitted Investments,
the Issuer shall make up any loss thereon prior to receiving any interest
income.
SECTION 8. DEFAULTS AND OTHER PROVISIONS.
8.1. Events of Default. Any one or more of the following shall
constitute an "Event of Default" as the term is used herein:
(a) Default shall occur in the payment of interest on any Note
when the same shall have become due and such default shall continue for
more than five days; or
(b) Default shall occur in the making of any required
prepayment on any of the Notes when the same shall have become due as
provided in Section 3.1; or
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National Health Corporation Indenture of Trust and Security Agreement
(c) Default shall occur in the making of any other payment of
the principal of any Note or the premium thereon at the expressed or
any accelerated maturity date or at any date fixed for prepayment on
the date any such payment shall have become due; or
(d) Default shall occur in the making of any payment required
to be made by the Issuer pursuant to Section 2.10 hereof and such
default shall continue for more than five days after notice thereof is
received by the Issuer from the holder of any Note; or
(e) Default shall be made in the payment of interest on the
NHLP Note when the same shall have become due and such default shall
continue for more than five days, or default shall occur in the making
of any other required payment on the NHLP Note when the same shall have
become due; or
(f) Default shall be made in the payment when due (whether by
lapse of time, by declaration, by call for redemption or otherwise) of
the principal of or interest on any Funded Debt or Current Debt in
excess of $100,000 in aggregate principal amount (other than the Funded
Debt evidenced by the Notes) of the Issuer, NHLP or National or any
Restricted Subsidiary of NHLP or National and such default shall
continue beyond the period of grace, if any, allowed with respect
thereto; or
(g) Default or the happening of any event shall occur under
any indenture, agreement, or other instrument under which Funded Debt
or Current Debt in excess of $100,000 in aggregate principal amount of
the Issuer, NHLP or National or any Restricted Subsidiary of NHLP or
National may be issued and such default or event shall continue for a
period of time sufficient to permit the acceleration of the maturity of
any Funded Debt or Current Debt of the Issuer, NHLP or National or any
Restricted Subsidiary of NHLP or National outstanding thereunder; or
(h) Default shall occur in the observance or performance of
any other provision of this Indenture and such default shall continue
for more than 30 days; or
(i) Default shall occur in the observance or performance of
any covenant or agreement contained in the Guaranty Agreement, the
Stock Purchase Agreement, the Stock Pledge Agreement, the NHLP Loan
Agreement or the Assignment of NHLP Note and such default shall
continue for more than 30 days; or
(j) If any representation or warranty made by the Issuer or
NHLP herein, or made by the Issuer in any written statement or
certificate furnished by the Issuer in connection with the consummation
of the issuance and delivery of the Notes or furnished by the Issuer
pursuant
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National Health Corporation Indenture of Trust and Security Agreement
thereto or hereto, is untrue in any material respect as of the date of
the issuance or making thereof; or
(k) If any representation or warranty made by National, NHLP
or NHC in the Guaranty Agreement, or in any written statement or
certificate furnished by National, NHLP or NHC pursuant thereto or
hereto, is untrue in any material respect as of the date of the
issuance or making thereof; or
(l) NHLP shall fail to comply in any respect with the
provisions of one or more Mortgages or the Note and Mortgage
Assignments and such failure continues for more than a period of 30
days; or
(m) The owner of any of the Managed Facilities shall fail to
comply in any respect with the Mortgage with respect to such Managed
Facility and such failure continues for more than a period of 30 days
or default shall occur in the payment of any required payment of
principal or interest or premium on the Managed Facility Note with
respect to such Managed Facility; or
(n) This Indenture, any Note Purchase Agreement or the
Guaranty Agreement shall cease to be in full force and effect for any
reason whatsoever, including, without limitation, a final
non-appealable determination by any governmental body or court of
competent jurisdiction that such agreement is invalid, void or
unenforceable or National shall contest or deny in writing the validity
or enforceability of any of its obligations under the Guaranty
Agreement; or
(o) Final judgment or judgments of a court or courts of
competent jurisdiction for the payment of money aggregating in excess
of $1,000,000 is or are outstanding against National, NHLP, NHC, Inc.
or the Issuer, as the case may be, or against any property or assets of
any thereof and any one of such judgments has remained unpaid,
unvacated, unbonded or unstayed by appeal or otherwise for a period of
90 days from the date of its entry; or
(p) A custodian, trustee or receiver is appointed for the
Issuer (excluding the appointment of a successor Plan Trustee or a
custodian in accordance with the terms of the Trust Agreement),
National, NHLP or NHC or for any material part of the property of any
of them and is not discharged within 30 days after such appointment; or
(q) The Issuer, National, NHLP or NHC becomes insolvent or
bankrupt, is generally not paying its debts as they become due or makes
an assignment for the benefit of creditors, or the Issuer, National,
NHLP or NHC causes an order for relief to be entered with respect to it
under applicable Federal bankruptcy law or applies for or consents to
the
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National Health Corporation Indenture of Trust and Security Agreement
appointment of a custodian, trustee or receiver for the Issuer,
National, NHLP or NHC or for any material part of the property of any
of them; or
(r) Bankruptcy, reorganization, arrangement or insolvency
proceedings, or other proceedings for relief under any bankruptcy or
similar law or laws for the relief of debtors, are instituted by or
against the Issuer, National, NHLP or NHC and, if instituted against
the Issuer, National, NHLP or NHC are not dismissed within 60 days
after such institution or are consented to.
8.2. Notice to Holders. When any Event of Default described in the
foregoing 8.1 has occurred, or if the holder of any Note or of any other
evidence of Indebtedness of the Issuer gives the Issuer any notice or takes any
other action with respect to a claimed default, the Issuer agrees to give notice
of such event, notice or action, as the case may be, to all holders of the Notes
then outstanding within three Business Days of such event, notice or action, as
the case may be, such notice to be in writing and sent in the manner provided in
Section 13.3 hereof.
8.3. Acceleration of Maturities. (a) When any Event of Default
described in paragraph (a), (b), (c), (d) or (n) of Section 8.1 has happened
and is continuing, any holder of any Note may, and when any Event of Default
described in paragraphs (e) through (m) and (o) through (p) has happened and is
continuing, the holder or holders of 25% or more of the principal amount of the
Notes at the time outstanding may, by notice in writing sent in the manner
provided in Section 14.3 hereof to the Issuer, declare the entire principal and
all interest accrued on all of the Notes to be, and all such Notes shall
thereupon become, forthwith due and payable, without any presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived
by the Issuer to the extent permitted by law. When any Event of Default
described in paragraphs (q) or (r) of Section 8.1 has occurred, then all
outstanding Notes shall immediately become due and payable without presentment,
demand, protest or notice of any kind, all of which are hereby expressly waived
by the Issuer to the extent permitted by law. Upon any Note becoming due and
payable as a result of any Event of Default as aforesaid, the Issuer will
forthwith pay to the holders of the Notes which have become due and payable the
entire principal and interest accrued on the Notes together with, to the extent
permitted by law, liquidated damages for the loss of the bargain evidenced
hereby (and not as a penalty) in an amount equal to the Make-Whole Premium
Amount which would be payable if the Issuer then had elected to prepay (and was
permitted to prepay) the Notes with the Make-Whole Premium Amount pursuant to
Section 3.2 (determined as of the date of declaration of an acceleration or, in
the case of an Event of Default described in paragraph (q) or (r) of Section
8.1, the date of acceleration). No course of dealing on the part of the holder
or holders of any Notes nor any delay or failure on the part of any Noteholder
to exercise any right shall operate as a waiver of such right or otherwise
prejudice such holder's rights, powers and remedies. The Issuer further agrees,
to the extent permitted by law, to pay to the holder or holders of the Notes
all costs and expenses incurred by them in the collection of any Notes upon any
default hereunder or thereon, including reasonable compensation to such
holder's or holders' attorneys for all services rendered in connection
therewith. No course of dealing on the
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National Health Corporation Indenture of Trust and Security Agreement
part of any Noteholder nor any delay or failure on the part of any holders of
Notes to exercise any right shall operate as a waiver of such right or otherwise
prejudice such holder's rights, powers and remedies. The Issuer further agrees,
to the extent permitted by law, to pay to the holder or holders of the Notes all
reasonable costs and expenses incurred by them in the collection of any Notes
upon any default hereunder or thereon or in any enforcement of this Indenture,
including reasonable compensation to such holder's or holders' attorneys for all
services rendered in connection therewith including, but not limited to,
reasonable attorneys fees at trial and on any appeal.
8.4. Completed Default; Acceleration of Maturity. Upon any acceleration
of maturity of the Notes in accordance with Section 8.3 (unless rescinded or
annulled pursuant to Section 8.15), then the Issuer shall pay to the Indenture
Trustee for the benefit of the holders of the Notes then outstanding, the
whole amount which then shall have become due on all such Notes for principal or
interest, as the case may be, together with, to the extent permitted by law, any
applicable Make-Whole Premium Amount. In case the Issuer shall fail to pay the
same forthwith, the Indenture Trustee, in their own names and as Indenture
Trustee of an express trust, shall be entitled to recover judgment for the whole
amount so due and unpaid against the Issuer and/or any other obliger on the
Notes. The right of the Indenture Trustee to recover such judgment shall not be
affected by the exercise of any other right, power or remedy for the enforcement
of the provisions of this Indenture. The Indenture Trustee in its discretion may
exercise in addition all other rights and powers described herein as it may deem
best for the protection and enforcement of the interest and rights of the
Indenture Trustee and of the holders of the Notes then outstanding.
8.5. Suits for Enforcement; Power of Sale. In case of the happening of
an Event of Default as defined in Section 8.1, the Indenture Trustee from time
to time in its discretion may exercise, in addition to all other rights and
powers described herein or permitted under applicable law, all or any of the
following powers as it may deem best for the protection and enforcement of the
interests and rights of the Indenture Trustee and of the holders of the Notes
then outstanding, subject to Section 8.21:
(a) the Indenture Trustee may in its own name and as trustee
of an express trust protect and enforce its rights and the rights of
the holders of the Notes by bringing such actions, at law or in equity
or before any administrative tribunal, as the Indenture Trustee, being
advised by counsel, shall deem appropriate, including, without
limitation, actions for the specific performance of any covenant
hereof, or of the Notes, and for the foreclosure of any one or all of
the Mortgages; and the Indenture Trustee shall be entitled, in its own
name and as trustee of an express trust, to recover judgment for any
and all sums then, or during any Default becoming due and payable by
the Issuer under any provisions hereof or of the Notes or the
Mortgages, including, without limitation, any deficiency in the payment
of all amounts due under the provisions hereof or of the Notes or the
Mortgages remaining after any sale of the Trust Estate in foreclosure
proceedings or by virtue of the Indenture Trustee's power of sale or
otherwise, and, in addition thereto, such amounts as shall be
sufficient to cover the costs
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and expenses of collection, including attorneys' fees, and of other
proceedings hereunder, and to collect out of the Property of the Issuer
in any manner provided by law all amounts adjudged or decreed to be
payable;
(b) the Indenture Trustee as a matter of contract right and
not as a penalty shall be entitled to the appointment of a receiver of,
or may enter upon and take possession of, all or any part of the Trust
Estate and such receiver or the Indenture Trustee shall thereupon be
entitled to operate all or any part of the Trust Estate and to make all
expenditures and to take all actions necessary or desirable therefor,
and to collect and retain all income and earnings arising from such
Property or business;
(c) the Indenture Trustee may, with or without entry as
aforesaid, sell all or any part of the Trust Estate at public or
private sale, upon such notice, in such manner, at such time or times,
and upon such terms consistent with the applicable laws of the
respective states wherein any portion of the Trust Estate is located,
as the Indenture Trustee may determine;
(d) the Indenture Trustee shall have any and all rights and
remedies provided for in the Mortgages; and
(e) the Indenture Trustee shall have any and all rights and
remedies provided to a secured party by the Uniform Commercial Code
with respect to all parts of the Trust Estate which are or which are
deemed to be governed by the Uniform Commercial Code.
Neither the Issuer, NHLP or National, to the extent permitted by law,
shall claim any rights under any stay, valuation, exemption or extension law,
and each such entity hereby waives any right of redemption which it may have in
respect of the Trust Estate.
8.6. Foreclosure and Sale of Trust Estate. In the event of any sale
made under or by virtue of this Indenture, whether made under the power of sale
herein granted or under or by virtue of judicial proceedings or decree of
foreclosure and sale, the whole of the Trust Estate may be sold in one parcel
and as an entirety, or in separate parcels or lots, as the Indenture Trustee may
reasonably determine, or as they may be directed by the written direction of the
holders of not less than a majority in principal amount of the Notes then
outstanding.
8.7. Adjournment of Sale. The Indenture Trustee may adjourn from time
to time any sale by them to be made under the provisions of this Indenture, by
announcement at the time and place appointed for such sale or for such adjourned
sale or sales; and, except as otherwise provided by law, the Indenture Trustee,
without further notice or publication, may make such sale at the time and place
to which the same shall be so adjourned.
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National Health Corporation Indenture of Trust and Security Agreement
8.8. Indenture Trustee May Execute Conveyances and Deliver Possession;
Sale a Bar. Upon the completion of any sale or sales made under or by virtue of
this Indenture, the Indenture Trustee shall execute and deliver to the accepted
purchaser or purchasers a good and sufficient deed, or good and sufficient
deeds, and other instruments conveying, assigning and transferring all their
estate, right, title and interest in and to the properties, privileges and
rights so sold. The Indenture Trustee is hereby irrevocably appointed the true
and lawful attorney-in-fact of the Issuer at all times when an Event of Default
shall be continuing hereunder, in its name and stead or in the name of the
Indenture Trustee, to make all necessary conveyances, assignments, transfers
and deliveries of the premises and the Trust Estate, privileges and rights so
sold and for that purpose the Indenture Trustee may execute all necessary deeds
and instruments of assignment and transfer, and may substitute one or more
Persons with like power, the Issuer hereby ratifying and confirming all that
its said attorneys or such substitute or substitutes shall lawfully do by
virtue hereof. Nevertheless, the Issuer, if so requested in writing by the
Indenture Trustee, shall ratify and confirm any such sale or sales by executing
and delivering to the Indenture Trustee or to such purchaser or purchasers all
such instruments as may be advisable, in the judgment of the Indenture Trustee,
for the purpose and as may be designated in such request.
Any such sale or sales made under or by virtue of this Indenture,
whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale, shall
operate to divest all estate, right, title, interest, claim or demand
whatsoever, whether at law or in equity, of the Issuer, in and to the premises,
property, privileges and rights so sold, and shall be a perpetual bar both at
law and in equity against the Issuer, its successors and assigns, and against
any and all Persons claiming or who may claim the same, or any part thereof
from, through or under the Issuer, its successors or assigns.
8.9. Receipt Sufficient Discharge for Purchaser. The receipt of the
Indenture Trustee or of the court officer conducting any such sale for the
purchase money paid at any such sale shall be a sufficient discharge therefor to
any purchaser of the Trust Estate, or any part thereof, sold as aforesaid; and
no such purchaser or his representatives, grantees or assigns, after paying such
purchase money and receiving such receipt, shall be bound to see the application
of such purchase money upon or for any trust or purpose of this Indenture, or
shall be answerable in any manner whatsoever for any loss, misapplication or
non-application of any such purchase money or any part thereof, nor shall any
such purchaser be bound to inquire as to the necessity or expediency of any such
sale.
8.10. Sale to Accelerate Notes. In the event of any sale made under or
by virtue of this Indenture, whether made under the power of sale herein granted
or under or by virtue of judicial proceedings or of a valid judgment or decree
of foreclosure and sale, the principal of the Notes, if not previously due,
immediately thereupon, to the extent permitted by law, shall become due and
payable, anything in the Notes or in this Indenture to the contrary
notwithstanding.
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8.11. Application of Proceeds of Sale. The purchase money proceeds or
avails of any such sale, together with any other sums which then may be held by
the Indenture Trustee under this Indenture as part of the Trust Estate or the
proceeds thereof, whether under the provisions of this Section 8 or otherwise,
shall be applied as follows:
First: To the payment pro rata of the costs and expenses of
foreclosure or suit, if any, and of such sale, and to the extent
permitted by applicable law, the reasonable compensation of the
Indenture Trustee, its agents, attorneys and counsel, and of all proper
expenses, liability and advances incurred or made hereunder by the
Indenture Trustee, and of all taxes, assessments or liens superior to
the lien of these presents, except any taxes, assessments or other
superior lien subject to which said sale may have been made;
Second: To the amount then owing or unpaid on the Notes for
principal, premium, if any, and interest; and in case such proceeds
shall be insufficient to pay in full the whole amount so due, owing or
unpaid upon the Notes, then ratably according to the aggregate of such
principal and the accrued and unpaid interest and premium, if any, with
application on each Note to be made, first, to the unpaid premium, if
any, thereon, second, to unpaid interest, thereon, and third, to unpaid
principal thereof;
Third: To the payment of any other sums required to be paid by
the Issuer, NHLP, National or NHC pursuant to any provision of this
Indenture, the Mortgages, the Guaranty Agreement, the Notes or any
other instrument given to secure the Notes; and
Fourth: To the payment of the surplus, if any, to the Issuer,
National, NHC or NHLP, as appropriate, its successors or assigns, upon
the written request of NHLP, the Issuer, National, NHC, as the case may
be, or to whomsoever may be lawfully entitled to receive the same.
8.12. Purchase of Trust Estate. Upon any sale made under or by virtue
of this Indenture, whether made under the power of sale herein granted or under
or by virtue of judicial proceedings or of a judgment or decree of foreclosure
and sale, the Indenture Trustee or any holder of an outstanding Note may bid for
and purchase the Trust Estate being sold, and upon compliance with the terms of
sale, may hold, retain and possess and dispose of such Property in his or their
own absolute right without further accountability; and any purchaser at any such
sale may, in paying the purchase price, turn in any of the Notes in lieu of cash
to the amount which shall, upon distribution of the net proceeds of such sale,
be payable thereon. Said Notes, in case the amounts so payable thereon shall be
less than the amount due thereon, shall be returned to the holders thereof after
a notation of such partial payment shall have been made thereon.
8.13. Indenture Trustee Entitled to Appointment of Receiver. The Issuer
further covenants that upon the happening of any Event of Default and thereafter
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during the continuance of such Event of Default unless the same shall have been
waived as hereinafter provided, the Indenture Trustee shall be entitled, as a
matter of right, if it shall so elect, (a) forthwith and without declaring the
principal of the Notes to be due and payable, or (b) after declaring the same to
be due and payable, or (c) upon the filing of a bill in equity to foreclose this
Indenture or to enforce the specific performance hereof or in aid thereof or
upon the commencement of any other judicial proceeding to enforce any right of
the Indenture Trustee or of the holders of the Notes, to the appointment of a
receiver or receivers of the Trust Estate and of all the earnings, revenues
rents, issues, profits and income thereof, with such powers as the court making
such appointment shall confer, which may comprise any or all of the powers which
the Indenture Trustee is authorized to exercise by the provisions of Section
8.4. The Issuer, if requested so to do by the Indenture Trustee, will consent to
the appointment of any such receiver as aforesaid.
8.14. Indenture Trustee May Enforce Rights Without Notes. All rights of
action under this Indenture or under any of the Notes may be enforced by the
Indenture Trustee without the possession of any of the Notes and without the
production thereof at any trial or other proceedings relative thereto. Any such
suit or proceedings instituted by the Indenture Trustee shall be brought in its
own name or as Indenture Trustee, and any recovery of judgment shall be, subject
to the rights of the Indenture Trustee, for the ratable benefit of the holders
of the Notes outstanding.
8.15. Notice of Event of Default; Waiver. The Indenture Trustee shall
promptly after obtaining actual knowledge of any Event of Default give notice
thereof by mail, first-class postage prepaid, to the holders of all Notes at the
time outstanding. The holders of at least 64% in principal amount of the Notes
at the time outstanding hereunder may (i) waive any Default or Event of Default
hereunder and its consequences which result from the failure of the Issuer, NHLP
or National to comply with any provisions of this Indenture, compliance with
which can be waived by such holders pursuant to Section 13 and (ii) by written
instrument filed with the Issuer, rescind and annul a declaration of
acceleration declared pursuant to Section 8.3; provided, however, that a Default
in the payment of principal of or premium, if any, on any Notes called for
prepayment or interest on the Notes may be so waived and any acceleration may be
so rescinded and annulled only if, prior to such waiver or rescission and
annulment, as the case may be, all arrears of principal, premium, if any, and
interest, and all expenses of the Indenture Trustee and of the holders of the
Notes shall be paid or shall be provided for by deposit with the Indenture
Trustee of a sum sufficient to pay the same and if no other Default or Event of
Default shall have occurred and then be continuing. In case of any such waiver,
or in case any proceedings taken on account of any such Default or Event of
Default shall be discontinued or abandoned or determined adversely to the
Indenture Trustee, then and in every such case, the Issuer, the Indenture
Trustee and the holders of the Notes shall be restored to their former positions
and rights hereunder respectively. No such waiver shall extend to any subsequent
or other Default or Event of Default or impair any right consequent thereon.
8.16. Limitation on Noteholders' Right to Sue. No holder of any Note
shall have any right to institute any suit, action or proceeding at law or in
equity
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National Health Corporation Indenture of Trust and Security Agreement
growing out of any provision of this Indenture, or for the foreclosure or
enforcement of this Indenture, unless and until an Event of Default shall have
happened and unless and until such holder shall have previously given to the
Indenture Trustee written notice of the happening of such Event of Default and
of the continuance thereof as hereinbefore provided, and also (except as
hereinafter provided) unless and until the holders of at least 25% in principal
amount of the Notes then outstanding shall have made written request upon the
Indenture Trustee and shall have afforded to it a reasonable opportunity to
institute such action, suit or proceeding in their own names, and unless also
the Indenture Trustee shall have been offered security and indemnity
satisfactory to it against the costs, expenses and liabilities to be incurred
therein or thereby, and the Indenture Trustee shall have neglected or refused to
institute any such action, suit or proceeding within a reasonable time after
receipt of such notification, request and offer of indemnity; and such
notification, request, offer of indemnity and refusal or neglect are hereby
declared in every such case to be conditions precedent to the institution by
such holder of the Notes of any such action, suit or proceeding; it being
understood and intended and being expressly covenanted by the holder of every
Note with every other holder and with the Indenture Trustee that no one or more
holders of the Notes shall be entitled to take any action or institute any such
suit to enforce the payment of his Notes if and to the extent that the taking of
such action or the institution or prosecution of any such suit or the entry of
judgment therein would under applicable law result in a surrender, impairment,
waiver or loss of the lien of this Indenture upon the Trust Estate, or any part
thereof, as security for Notes held by any other holder of the Notes, or shall
have any right in any manner whatever to affect, disturb or prejudice the rights
of the holders of any other of the Notes, or to enforce any right hereunder,
except in the manner herein provided, and for the equal, ratable and common
benefit of all holders of the Notes. Nothing in this Section 8 or elsewhere in
this Indenture or in the Notes contained, however, shall affect or impair the
obligation of the Issuer, which is unconditional and absolute, to pay the
principal of, and premium, if any, and the interest on, the Notes to the
respective holders of the Notes, in the manner and at the time and places
therein respectively expressed, nor shall it affect or impair the right of the
respective holders of the Notes, by an action at law upon the promises to pay
therein contained, to enforce such payment.
8.17. Remedies Cumulative. No remedy herein conferred upon or reserved
to the Indenture Trustee or to the holders of the Notes is intended to be
exclusive of any other remedy or remedies, and each and every such remedy shall
be cumulative, and shall be in addition to every other remedy given hereunder or
now or hereafter existing at law or in equity or by statute.
8.18. Delay or Omission Not a Waiver. No delay or omission of the
Indenture Trustee, or of any holder of the Notes, to exercise any right or power
accruing upon any Default or Event of Default, shall impair any such right or
power, or shall be construed to be a waiver of any such Default or Event of
Default or an acquiescence therein; and every power and remedy given by this
Indenture to the Indenture Trustee or to the holders of the Notes may be
exercised from time to time and as often as may be deemed expedient by the
Indenture Trustee or by the holders of the Notes.
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National Health Corporation Indenture of Trust and Security Agreement
8.19. Waiver of Extension, Appraisement, Stay, Laws. Neither the
Issuer, NHLP or National will at any time insist upon, or plead, or in any
manner whatever claim or take any benefit or advantage of, any stay or extension
law wherever enacted, now or at any time hereafter in force, which may affect
the covenants and terms of performance of this Indenture; nor claim, take or
insist upon any benefit or advantage of any law now or hereafter in force
providing for the valuation or appraisement of the Trust Estate, or any part
thereof, prior to any sale or sales thereof which may be made pursuant to any
provision herein contained, or pursuant to the decree, judgment or order of any
court of competent jurisdiction; nor after any such sale or sales, claim or
exercise any right under any statute heretofore or hereafter enacted by the
United States of America or by any state or territory, or otherwise, to redeem
the Property so sold or any part thereof; and the Issuer hereby expressly waives
all benefits or advantage of any such law or laws, and covenants not to hinder,
delay or impede the execution of any power herein granted or delegated to the
Indenture Trustee, but to suffer and permit the execution of every power as
though no such law or laws had been made or enacted.
8.20. Restoration of Positions. If the Indenture Trustee or any holder
of the Notes has instituted any proceeding to enforce any right or remedy under
this Indenture by foreclosure, entry or otherwise and such proceeding has been
discontinued or abandoned for any reason or has been determined adversely to the
Indenture Trustee or to such holder of the Notes, then and in every such case
the Issuer, the Indenture Trustee and the holders of the Notes shall, subject to
any determination in such proceeding, be restored to their former positions
hereunder, and thereafter all rights and remedies of the Indenture Trustee and
the holders of the Notes shall continue as though no such proceeding had been
instituted.
8.21. Control of Remedies by Noteholders. Notwithstanding any other
provision of this Section 8, the holders of at least 64% in principal amount of
the Notes from time to time outstanding shall have the right, by an instrument
in writing delivered to the Indenture Trustee, to determine which of the
remedies herein set forth shall be adopted and to direct the time, method and
place of conducting all proceedings to be taken under the provisions of this
Indenture for the enforcement thereof or of the Notes; provided, however, that
the Indenture Trustee shall have the right to decline to follow any such
direction if the Indenture Trustee shall be advised by counsel that the action
or proceeding so directed may not lawfully be taken or would be unjustly
prejudicial to holders of Notes not parties to such direction.
8.22. Indenture Trustee May File Proofs of Claims. The Indenture
Trustee is hereby appointed, and each and every holder of the Notes, by
receiving and holding the same, shall be conclusively deemed to have appointed
the Indenture Trustee the true and lawful attorney-in-fact of such holder, with
authority to make or file, in their own names as trustee of an express trust or
otherwise as they shall deem advisable, in any receivership, insolvency,
liquidation, bankruptcy, arrangement, reorganization or other judicial
proceedings relative to the Issuer or any other obligor upon the Notes or to
their respective creditors or Property, any and all claims, proofs of debt,
petitions, consents, other documents and amendments of any thereof, as may
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National Health Corporation Indenture of Trust and Security Agreement
be necessary or advisable in order to have the claims of the Indenture Trustee
and of the holders of the Notes allowed in any such proceeding, and to collect
and receive any moneys or other Property payable or deliverable on any such
claim, proof of debt, petition or other document and to distribute the same
after the deduction of the charges and expenses of the Indenture Trustee, and to
execute and deliver any and all other papers and documents and to do and perform
any and all other acts and things, as they may deem necessary or advisable in
order to enforce in any such proceedings any of the claims of the Indenture
Trustee and of any such holders in respect of any of the Notes; and any
receiver, assignee, trustee or debtor in any such proceedings is hereby
authorized, and each and every holder of the Notes, by receiving and holding the
same, shall be deemed to have authorized any such receiver, assignee, trustee or
debtor, to make any such payment or delivery to or on the order of the Indenture
Trustee, and in the event that the Indenture Trustee shall consent to the making
of such payments or deliveries directly to the holders of the Notes to pay to
the Indenture Trustee any amount due them for compensation and expenses,
including counsel fees, incurred by them down to the date of such payment or
delivery; provided, however, that nothing herein contained shall be deemed to
authorize or empower the Indenture Trustee to consent to or accept or adopt, on
behalf of any holder of Notes, any plan of reorganization or readjustment of the
Issuer affecting the Notes or the rights of any holder thereof, or to authorize
or empower the Indenture Trustee to vote in respect of the claim of any holder
of any Note in any such proceedings.
8.23. Right to Cure. Notwithstanding any other provision of this
Section 8 to the contrary, upon the occurrence of an Event of Default pursuant
to Section 8.1(m) and for the period ending on the date that is 180 days after
the occurrence of such Event of Default, the Indenture Trustee may not, solely
as a result of such Event of Default, exercise any remedy or remedies under this
Section 8 or under the Mortgage pursuant to which the owner of a Managed
Facility shall have defaulted, in either case involving the foreclosure of such
Mortgage, provided that if NHLP shall not have provided a Substitute Financed
Facility in accordance with the provisions of Section 10 on or prior to such
180th day, then on any date on or after such 180th day the Indenture Trustee may
exercise any and all remedies provided in this Section 8 and in such Mortgage.
Nothing in this Section 8.23 shall prohibit or limit the ability of the
Indenture Trustee to pursue any other remedies hereunder as a result of an Event
of Default (other than pursuant to Section 8.1(m)) that shall have occurred and
be continuing, or that shall occur during such 180 day period.
8.24. Remedies Subject to Provisions of Law. All rights, remedies and
powers provided by this Section 8 may be exercised only to the extent that the
exercise thereof does not violate any applicable provision of law in the
premises, and all the provisions of this Section 8 are intended to be subject to
all applicable mandatory provisions of law which may be controlling in the
premises and to be limited to the extent necessary so that they will not render
this Indenture invalid or unenforceable under the provisions of any applicable
law.
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SECTION 9. CREATION OF DISBURSEMENT FUND AND ACQUISITION AND CONSTRUCTION
ACCOUNTS, DEPOSIT OF MONEYS; DISBURSEMENT OF MONEYS.
9.1. Creation of Disbursement Fund. There is hereby created and
established with the Indenture Trustee a trust fund for the benefit of the
holders of the Notes to be designated the "National HealthCorp L.P. Disbursement
Fund" (the "Disbursement Fund"). There is hereby created and established within
the Disbursement Fund two accounts, the "National HealthCorp L.P. Acquisition
Account" (the "Acquisition Account") and the National HealthCorp L.P.
Construction Account (the Construction Account").
9.2. Deposit to Acquisition Account. On the Closing Date, the Indenture
Trustee shall deposit $26,855,860 in the Acquisition Account.
9.3. Disbursement from Acquisition Account. The Indenture Trustee, once
with respect to each Acquired Facility, will disburse moneys not in excess of
the Total Cost for such Acquired Facility from the Acquisition Account upon
satisfaction of the conditions specified in Section 9.4. NHLP covenants that the
Total Cost for each Acquired Facility (other than the Greenwood Facility and the
Knoxville Facility) (i) will be used by NHLP solely to pay for, or to reimburse
itself for the cost of, each Acquired Facility, and (ii) is not greater than 90%
of the actual amount then due or previously paid by NHLP to the seller of each
such Acquired Facility.
9.4. Conditions Precedent to Disbursement of Total Cost for Each
Acquired Facility. With respect to any request for payment or reimbursement by
NHLP for the Total Cost of any Acquired Facility, NHLP shall deliver or cause to
be delivered to the Indenture Trustee and special counsel for the Noteholders:
(a) At least 15 Business Days prior to the date of the request for
payment or reimbursement with respect to any Acquired Facility:
(i) a survey of each parcel of real estate upon which such
Acquired Facility is located, made by a registered civil engineer or
surveyor licensed in the state where such Acquired Facility is located
showing in reasonable detail the locations and dimensions of the site
on which such Acquired Facility is located, showing the location of the
improvements on such parcel of real estate and showing no encroachments
not approved by the holders of not less than 64% in aggregate principal
amount of the Notes outstanding upon such real estate parcels by
adjoining buildings or structures and no encroachments not approved by
the holders of not less than 64% in aggregate principal amount of the
Notes outstanding on adjoining premises by the building or improvements
created thereon. Each survey shall be prepared in accordance with the
standard detail requirements for land surveys adopted by the
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National Health Corporation Indenture of Trust and Security Agreement
American Land Title Association ("ALTA") and the American Congress on
Surveying and Mapping, as revised and in effect on the date of delivery
of such survey, and shall be certified to the Indenture Trustee and to
the title company issuing the title insurance policy with respect to
such Acquired Facility;
(ii) a title commitment with respect to such Acquired
Facility, issued in each case by a title insurance company qualified to
do business in the state in which the Acquired Facility for which such
commitment is being issued is located, designated by NHLP and not
objected to by any Noteholder, stating that it is prepared to issue its
standard form of ALTA Mortgagee Title Policy which will provide for
mortgage title insurance, in an amount not less than 100% of the Total
Cost of such Acquired Facility, covering the Acquired Facility for
which such commitment is being issued, showing marketable record title
thereto to be vested in NHLP, or, if the Acquired Facility is a Managed
Facility, showing NHLP as the holder of a first mortgage lien thereon
as the case may be, subject only to:
(A) the Liens, if any permitted by the related
Mortgage; and
(B) such other exceptions as shall be satisfactory to
the holders of not less than 64% in aggregate principal amount
of the Notes outstanding; and
insuring the Indenture Trustee and the holders of the Notes against
loss or damage sustained by reason of such Mortgage not being a first
and paramount Lien upon the Acquired Facility for which such title
insurance is being issued, subject only to the exceptions referred to
in the foregoing clauses (A) and (B) and containing all endorsements
required by the holders of not less than 64% in aggregate principal
amount of the Notes outstanding, including without limitation, a
comprehensive endorsement, a contiguity endorsement (if the holders of
not less than 64% in aggregate principal amount of the Notes
outstanding so require as a result of the nature of the legal
descriptions), a location endorsement, an ALTA 116 endorsement, an ALTA
116.1 endorsement and an ALTA 3.1 zoning endorsement and the title
insurance policy may contain a tie-in endorsement providing that loss
paid thereunder shall reduce the loss payable under any title insurance
policy for the other Financed Facilities; and
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(iii) a written report of a site assessment and environmental
audit with respect to the Acquired Facility for which such disbursement
is being requested, in scope, form and substance, and prepared by an
environmental consultant, satisfactory to the holders of not less than
64% in aggregate amount of the Notes outstanding (the "Environmental
Audit"), and dated not more than one hundred and eighty (180) days
prior to the date of such requested disbursement, provided that if such
Environmental Audit is dated more than 60 days prior to the date of
such requested disbursement, there shall be delivered therewith a
certificate of the environmental consultant stating that there has been
no change in the nature or character of the subject site or the use
thereof since the date of such Environmental Audit;
(b) At least 5 Business Days prior to the date of the request for
payment or reimbursement for any Acquired Facility:
(i) the report of insurance brokers regarding insurance
which is required by the provisions of Section 2.5 of the Mortgage for
such Acquired Facility;
(ii) a certificate of need issued by the state health care
regulatory agency for the state in which such Acquired Facility is
located, together with copies of all licenses and permits necessary to
operate such Acquired Facility as a nursing home, and an Officer's
Certificate of NHLP stating that the certificate of need and all
necessary licenses relating to the operation and use of such Acquired
Facility are held in the name of NHLP or, if the Acquired Facility is a
Managed Facility, in the name of the owner thereof, are in full force
and effect and that no further material licenses or permits are
required under any local, state or Federal law, ordinance, rule or
regulation in order to conduct the business of NHLP or, if the Acquired
Facility is a Managed Facility, the owner, at such Acquired Facility
and stating further that such Acquired Facility is an eligible provider
for "Medicare" and stating whether or not such Acquired Facility is an
eligible provider for "Medicaid"; and
(iii) with respect to the Greenwood Facility and the
Knoxville Facility, respectively, an appraisal from an Appraiser in
form and substance reasonably satisfactory to the holders of not less
than 64% in aggregate principal amount of the Notes outstanding
showing the fair market value of the Greenwood Facility to be at least
$4,560,000 and showing the fair market value of the Knoxville Facility
to be at least $4,560,000;
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National Health Corporation Indenture of Trust and Security Agreement
(c) On the date of the request for payment or reimbursement for any
Acquired Facility:
(i) with respect to the Stuart Facility, the Stuart
Mortgage, with respect to the Merritt Island Facility, the Merritt
Island Mortgage, with respect to the Greenwood Facility, the Greenwood
Mortgage, with respect to the Knoxville Facility, the Knoxville
Mortgage and financing statements with respect to each such Acquired
Facility and the equipment located thereon, which Mortgage and
financing statements shall be recorded or filed for record in each
public office in which such recording or filing is deemed necessary or
appropriate by the Note Purchasers or their special counsel to perfect
the liens thereof as against creditors of or purchasers from NHLP;
(ii) with respect to the Sarasota Facility, the Sarasota
Mortgage and a Managed Facility Note, a Note and Mortgage Assignment
(and a consent thereto), a Management Agreement and a Collateral
Assignment of Management Agreement Fees, each with respect to such
Facility, and with respect to the Ocoee Facility, the Ocoee Mortgage
and a Managed Facility Note, a Note and Mortgage Assignment (and a
consent thereto), a Management Agreement and a Collateral Assignment of
Management Agreement Fees, each with respect to such Facility, and
assignments of the financing statements with respect to each such
Acquired Facility and the equipment located thereon, which Mortgages
and financing statements and Note and Mortgage Assignment shall be
recorded or filed for record in each public office in which such
recording or filing is deemed necessary or appropriate by the Note
Purchasers or their special counsel to perfect the liens thereof as
against creditors of or purchasers from NHLP;
(iii) for any Acquired Facility which is also an Owned
Facility, an Opinion of Counsel for NHLP to the effect that: the
Mortgage with respect to such Acquired Facility has been duly
authorized, executed and delivered by NHLP and constitutes a legal,
valid and binding instrument enforceable in accordance with its terms,
subject to bankruptcy and equitable principles; any limitations on the
remedies provided for in the Mortgage will not materially interfere
with the practical realization of the security provided by such
Mortgage; no approval, consent or withholding of objection on the part
of, or filing registration or qualification with any governmental body,
Federal, state or local, is necessary in connection with the execution
and delivery by NHLP of such Mortgage or the
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National Health Corporation Indenture of Trust and Security Agreement
performance by NHLP of any of the matters required of NHLP thereunder;
and compliance by NHLP with all of the provisions of such Mortgage will
not conflict with or result in any breach of any of the provisions of
or constitute a default under or result in the creation or imposition
of any lien or encumbrances on any property of NHLP pursuant to the
provisions of the Limited Partnership Agreement or By-laws of NHLP or
any other agreement or instrument known to such counsel to which NHLP
is a party or by which NHLP may be bound and further to the effect that
the certificate of need, Medicare provider contract and all licenses
relating to the operation and use of such Acquired Facility are in full
force and effect in the name of NHLP and that no further licenses or
permits are required under any local, state or Federal law, ordinance,
rule or regulation in order to conduct the business of NHLP at such
Acquired Facility;
(iv) for any Acquired Facility which is also a Managed
Facility for which such first advance is being requested, (i) an
Opinion of Counsel for the owner thereof to the effect that: the
Mortgage, the Management Agreement, the Managed Facility Note and the
consent to the Note and Mortgage Assignment with respect to such
Acquired Facility have each been duly authorized, executed and
delivered by the owner thereof and each constitutes a legal, valid and
binding instrument enforceable in accordance with its terms, subject to
bankruptcy and equitable principles; any limitations on the remedies
provided for in the Mortgage will not materially interfere with the
practical realization of the security provided by such Mortgage; no
approval, consent or withholding of objection on the part of, or filing
registration or qualification with any governmental body, Federal,
state or local, is necessary in connection with the execution and
delivery by the owner thereof of such Mortgage, Management Agreement,
Managed Facility Note and consent to the Note and Mortgage Assignment
or the performance by the owner thereof of any of the matters required
of the owner thereof; and compliance by the owner thereof with all of
the provisions of such Mortgage, Management Agreement, Managed Facility
Note and consent to the Note and Mortgage Assignment will not conflict
with or result in any breach of any of the provisions of or constitute
a default under or result in the creation or imposition of any lien or
encumbrances on any property of the owner thereof pursuant to the
provisions of the organizational documents or By-laws of the owner
thereof or any other agreement or instrument known to such counsel to
which the owner thereof is a party or by which the owner thereof may be
bound, and (ii) an
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National Health Corporation Indenture of Trust and Security Agreement
Opinion of Counsel for NHLP to the effect that: the Note and Mortgage
Assignment and Management Agreement with respect to such Acquired
Facility have each been duly authorized, executed and delivered by NHLP
and each constitutes a legal, valid and binding instrument enforceable
in accordance with its terms subject to bankruptcy and equitable
principles; no approval, consent or withholding of objection on the
part of, or filing registration or qualification with any governmental
body, Federal, state or local, is necessary in connection with the
execution and delivery by NHLP of such Note and Mortgage Assignment and
Management Agreement or the performance by NHLP of any of the matters
required of NHLP thereunder; and compliance by NHLP with all of the
provisions of such Note and Mortgage Assignment and Management
Agreement will not conflict with or result in any breach of any of the
provisions of or constitute a default under or result in the creation
or imposition of any lien or encumbrances on any property of NHLP
pursuant to the provisions of the Limited Partnership Agreement or
By-laws of NHLP or any other agreement or instrument known to such
counsel to which NHLP is a party or by which NHLP may be bound and
further to the effect that the certificate of need, Medicare provider
contract and all licenses relating to the operation and use of such
Acquired Facility are in full force and effect in the name of the owner
of such Facility and that no further licenses or permits are required
under any local, state or Federal law, ordinance, rule or regulation in
order to conduct the business of the owner at such Acquired Facility;
(v) the title insurance policy or policies contemplated by
the title insurance commitment for such Acquired Facility in form and
substance satisfactory to the Indenture Trustee;
(vi) an Acquisition Payment Certificate with respect to the
Total Cost for such Acquired Facility for which payment or
reimbursement is then belong subject; and
(vii) for any Acquired Facility which is also a Managed
Facility for which such advance is being requested, copies of any
agreements between NHLP and the owner of such Managed Facility pursuant
to which NHLP shall have agreed to indemnify the owner in connection
with a default under the Mortgage for such Managed Facility caused by
an Event of Default hereunder, which indemnification shall be limited
to the owner's equity in such Managed Facility at the time of such
default;
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National Health Corporation Indenture of Trust and Security Agreement
(d) NHLP hereby covenants and agrees that if (i) the appraisal
for the Greenwood Facility reflects a fair market value therefor of
less than $4,560,000, it will prepay a principal amount of the Notes
pursuant to Section 3.2 equal to the difference between $4,560,000 and
the appraised fair market value of the Greenwood Facility, and (ii) the
appraisal for the Knoxville Facility reflects a fair market value
therefor of less than $4,560,000, it will prepay a principal amount of
the Notes pursuant to Section 3.2 equal to the difference between
$4,560,000 and the appraised fair market value of the Knoxville
Facility. Pending such prepayment, no funds shall be disbursed from the
Acquisition Account with respect to the Greenwood Facility or Knoxville
Facility, as the case may be. Upon such prepayment, and subject to the
satisfaction of the other applicable conditions specified in this
Section 9.4, the Total Cost of the Greenwood Facility and the Knoxville
Facility may be disbursed from the Acquisition Account to acquire the
Greenwood Facility or the Knoxville Facility, as the case may be, and
any amount in excess of the amount actually needed to acquire such
facility may be used for any business purpose of NHLP.
9.5. Creation of Construction Account and Sub Accounts. There
is hereby created and established with the Indenture Trustee a trust fund for
the benefit of the holders of the Notes to be designated the "National
HealthCorp L.P. Construction Account" (the "Construction Account").
On the Closing Date, the Indenture Trustee shall deposit (i)
in the Myrtle Beach Facility Sub-Account, the Total Cost with respect to such
Facility (ii) in the Greenville Facility Sub-Account, the Total Cost with
respect to such Facility, (iii) in the North Augusta Facility Sub-Account, the
Total Cost with respect to such Facility, (iv) in the Pinellas Facility
Sub-Account, the Total Cost with respect to such Facility and (v) in the Sun
City Facility Sub-Account, the Total Cost with respect to such Facility.
9.6. Amount of Advances. The Indenture Trustee will from time
to time (but not more often than twice per month for each Constructed Facility),
disburse moneys to pay Land Acquisition Costs, Construction Costs and Other
Project Costs of the Myrtle Beach Facility, Greenville Facility, North Augusta
Facility, Pinellas Facility and Sun City Facility in accordance with the Project
Budget for each such Facility and from the Construction Fund Sub-Account with
respect to such Facility, upon compliance with the terms and conditions set
forth in the Construction Consultant Agreement for such Constructed Facility.
NHLP covenants that (a) each disbursement to pay Land
Acquisition Costs of such Constructed Facility shall be in an amount not
exceeding the amount then due or previously paid the seller of the real estate,
(b) each disbursement to pay Construction Costs of such Constructed Facility
shall be in an amount not exceeding the amount then due contractors for work
completed and in place plus materials stored on site in which the Indenture
Trustee has a perfected first security interest (subject to
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National Health Corporation Indenture of Trust and Security Agreement
the conditions set forth below), less a 10% retainage, which retainage shall not
be paid until completion of all work by the contractor responsible therefor, (c)
the amount of each disbursement for Other Project Costs with respect to any such
Facility shall in no event exceed the amount of Other Project Costs with respect
to such Constructed Facility then due and unpaid, and (d) no disbursement for
any Construction Cost or other Project Cost item shall be made which will cause
the total disbursements for that item to exceed the amount shown therefor on the
Project Budget (together with any Change Orders) for such Constructed Facility.
9.7. Insufficient Moneys to Complete. If at any time on or
after the first request for payment or reimbursement of Construction Costs with
respect to any Constructed Facility, the Consultant reasonably determines, and
shall have notified the Indenture Trustee in writing, that the then Estimated
Total Cost of Completion with respect to such Constructed Facility is more than
the sum of the undisbursed portion of the Total Cost then on deposit in the
Construction Sub-Account with respect to such Facility plus (ii) the amount of
any funds of NHLP then on deposit in such Construction Sub-Account, or that the
then cost of completing any item in the Project Budget with respect to any
Constructed Facility is greater than the undisbursed amount remaining therefor
in the Construction Sub-Account with respect to such Facility, the Indenture
Trustee shall not, without the prior written consent of the holders of at least
64% of the Notes outstanding, make any further disbursements hereunder until and
unless NHLP deposits or causes to be deposited in such Construction Sub-Account
an amount equal to the deficiency. All amounts so deposited in such Construction
Sub-Account shall be disbursed for the payment of costs for which disbursement
may be requested under this Section 9.7 prior to the disbursement of any
additional portion of such Total Cost.
NHLP covenants that it shall pay to the Indenture Trustee for
deposit in the appropriate Construction Sub-Account amounts equal to any
deficiency therein within five days following the mailing of written notice by
the Indenture Trustee of the existence of such deficiency.
9.8. Conditions Precedent to First Advance of Total Cost for
Each Constructed Facility. (a) With respect to the first request for payment or
reimbursement of Construction Costs or other Project Costs of any Constructed
Facility, NHLP shall deliver or cause to be delivered to the Indenture Trustee
and special counsel for the Noteholders:
(i) At least 15 Business Days prior to the date of the first
request for payment or reimbursement for any Constructed Facility:
(A) a physical survey of such Constructed Facility
for which such first advance is being requested complying with
the requirements of Section 9.4(a)(i) but with respect to the
Constructed Facility and also certified to the title insurance
company issuing the title insurance policy with respect to
such Constructed Facility;
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National Health Corporation Indenture of Trust and Security Agreement
(B) a title commitment with respect to such
Constructed Facility, issued in each case by a title insurance
company qualified to do business in the state in which the
Constructed Facility for which such first advance is being
requested is located, designated by NHLP and not objected to
by any Noteholder, stating that it is prepared to issue its
standard form of ALTA Mortgagee Title Policy which will
provide for mortgage title insurance in an amount not less
than 100% of the Total Cost of such Constructed Facility,
covering the Constructed Facility for which such first advance
is being requested and showing marketable record title thereto
to be vested in NHLP, or showing NHLP as the holder of a first
mortgage lien thereon, as the case may be, subject only to:
(i) the Liens, if any, permitted by the
related Mortgage; and
(ii) such other exceptions as shall be
satisfactory to the holders of not less than 64% in
aggregate principal amount of the Notes outstanding;
and
insuring the Indenture Trustees and the holders of the Notes
against loss or damage sustained by reason of such Mortgage
not being a first Lien upon such Facility for which such first
advance is being requested, subject only to the exceptions
referred to in the foregoing clauses (i) and (ii) and
containing all endorsements required by the holders of the
Notes outstanding, including without limitation, a
comprehensive endorsement, a contiguity endorsement (if the
holders of not less than 64% in aggregate principal amount of
the Notes outstanding so require as a result of the legal
descriptions), an ALTA 116 endorsement, an ALTA 116.1
endorsement and an ALTA 3.0 endorsement, together with a
statement by the title insurance company that it has reviewed
the Construction Plans for such Constructed Facility and that
upon construction of such Constructed Facility in accordance
with such Construction Plans, it will issue its 3.1 zoning
endorsement, and the title insurance policy may contain a
tie-in endorsement providing that loss paid thereunder shall
reduce the loss payable under any title insurance policy for
the other Financed Facilities; and
(C) an Environmental Audit for the real property upon
which such Constructed Facility is to be built dated as
provided in and otherwise complying with the requirements of
Section 9.4(a)(iii);
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National Health Corporation Indenture of Trust and Security Agreement
(ii) At least 10 Business Days prior to the date of the first
request for payment or reimbursement for any Constructed Facility:
(A) an executed counterpart of a contract by and
among the Indenture Trustee, NHLP and the Consultant for such
Constructed Facility substantially in the form of Exhibit F
attached to this Indenture, together with an insurance
broker's certificate showing liability insurance coverage for
the Consultant reasonably satisfactory to the Indenture
Trustee;
(B) one copy of the Construction Plans and any Change
Orders for such Constructed Facility executed prior to the
date of such disbursement (certified by the Architect that the
Construction Plans conform to all applicable building and
zoning laws and with the requirements of any covenants,
conditions or restrictions of record);
(C) an executed copy of the General Contract, and the
Architect's Agreement for such Constructed Facility;
(D) a soil test report and a certification of the
Architect or a registered land surveyor that the portion of
such Constructed Facility on which any of the improvements
consisting of buildings or deck parking structures are to be
situated (or which are so close to such improvements as to
imperil them, in the Consultant's determination) are not in a
flood plain or designated as flood prone by any Governmental
Body or, alternatively, evidence of appropriate flood
insurance; and
(E) a report from the Consultant as to the general
viability of such Constructed Facility and the accuracy of the
Project Budget and project schedule;
(iii) At least 5 Business Days prior to the date of the first
request for payment or reimbursement for any Constructed Facility:
(A) a certificate of insurance complying with the
requirements of Section 2.5 of the Mortgage for such
Constructed Facility or a builder's risk policy provided by
the contractor for such construction showing that the same
coverage as is required in Section 2.5 of the Mortgage for
such Constructed Facility is being carried by such contractor
and adequately protects the interests of the Indenture
Trustees, as Mortgagee, NHLP and the holders of the Notes with
respect to such Facility and a certificate of insurance with
respect to the Construction
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National Health Corporation Indenture of Trust and Security Agreement
Consultant for such Constructed Facility, showing insurance as
required by the Construction Consultant Agreement;
(B) for such Constructed Facility, an Officers'
Certificate to the effect that:
(1) The Construction Plans for such
Constructed Facility have been approved to the extent
required by applicable law or any restrictive
covenant on such Constructed Facility, by all
governmental bodies exercising jurisdiction over such
Constructed Facility, construction thereon, the use
of improvements thereon (a "Governmental Body") and
the beneficiary of any such covenant, respectively;
(2) All construction, if any, performed on
such Constructed Facility prior to the date of such
Officer's Certificate has been performed in a fit and
workmanlike manner and in accordance with the Plans,
all such construction is free from structural defects
and no violation of any law, ordinance, order, rule
or regulation of any Governmental Body (a
"Governmental Requirement") exists with respect
thereto;
(3) The construction of such Constructed
Facility in accordance with the Plans and such
Constructed Facility itself when so constructed will
not violate any Governmental Requirement with respect
thereto and the anticipated use of such Constructed
Facility complies with all applicable ordinances,
regulations and restrictive covenants affecting the
real property on which such Constructed Facility is
located and all requirements of such use which can be
satisfied prior to completion of construction have
been satisfied;
(4) All permits, consents, approvals or
authorizations by, or registrations, declarations,
withholdings of objection or filings with any
Governmental Body necessary in connection with the
valid execution, delivery and performance of the
Mortgage and the Mortgage Assignment (if a Managed
Facility), and the Construction Related Agreements or
presently necessary for such
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National Health Corporation Indenture of Trust and Security Agreement
Constructed Facility have been obtained, are valid,
adequate and in full force and effect;
(5) All utility services necessary for
construction and for the operation of such
Constructed Facility for its intended purpose are
available at the boundaries of the real property on
which such Constructed Facility is located which abut
on a public way, including water supply, storm and
sanitary sewer facilities, gas and/or electric and
telephone facilities; and the providing of all such
utility services necessary for the construction and
operation of such Constructed Facility are not
subject to the consent or withholding of objection of
any Governmental Body or, if so subject, all such
consents or withholdings of objection have been
obtained; and
(6) All roads, easements and other necessary
modes of ingress or egress to such Constructed
Facility necessary for the construction and the full
use of such Constructed Facility for its intended
purpose have been completed or obtained or the
necessary rights of way therefor have been acquired
and all necessary steps have been taken by NHLP or
the appropriate Governmental Body to insure the
complete construction and installation thereof; and
(iv) on the date of the first request for payment or
reimbursement:
(A) with respect to the Myrtle Beach Facility, the
Myrtle Beach Mortgage, with respect to the Greenville
Facility, the Greenville Mortgage, with respect to the North
Augusta Facility, the North Augusta Mortgage, and financing
statements with respect to each such Constructed Facility and
the equipment located thereon, which Mortgage and financing
statements shall be recorded or filed for record in each
public office in which such recording or filing is deemed
necessary or appropriate by the Note Purchasers or their
special counsel to perfect the liens thereof as against
creditors of or purchasers from NHLP;
(B) with respect to the Pinellas Facility, (x)
evidence satisfactory to the Note Holders or their special
counsel that the Mortgage between Florida Convalescent
Centers, Inc.
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National Health Corporation Indenture of Trust and Security Agreement
("FCC") and NHLP made on October 16, 1990 and recorded in Book
6111 at Page 389 of the Official Records of Hillsborough
County, Florida shall be released and terminated of record and
that the mortgage note from FCC to NHLP in the principal
amount of $5,250,000 shall be satisfied in full and released
and discharged by NHLP and (y) the Pinellas Mortgage and a
Managed Facility Note, a Note and Mortgage Assignment (and a
consent thereto), a Management Agreement and a Collateral
Assignment of Management Agreement Fees, each with respect to
such Facility; and with respect to the Sun City Facility, (x)
evidence satisfactory to the Note Holders or their special
counsel that the Mortgage between FCC and NHLP made on
November 1, 1990 and recorded in Book 7418 at Page 1120 of the
Official Records of Pinellas County, Florida shall be
satisfied in full and released and terminated of record and
that the mortgage note from FCC to NHLP in the principal
amount of $5,500,000 shall be released and discharged by NHLP
and (y) the Sun City Mortgage and a Managed Facility Note, a
Note and Mortgage Assignment (and a consent thereto), a
Management Agreement and a Collateral Assignment of Management
Agreement Fees, each with respect to such Facility, and
assignments of the financing statements with respect to each
such Constructed Facility and the equipment located thereon,
which Mortgage and financing statements and Note and Mortgage
Assignment shall be recorded or filed for record in each
public office in which such recording or filing is deemed
necessary or appropriate by the Note Purchasers or their
special counsel to perfect the liens thereof as against
creditors of or purchasers from NHLP;
(C) for any Constructed Facility which is also an
Owned Facility, an Opinion of Counsel for NHLP to the effect
that: the Mortgage for such Constructed Facility has been duly
authorized, executed and delivered by NHLP and, in the case of
the Myrtle Beach Mortgage, by Americare Southeast and
constitutes a legal, valid and binding instrument enforceable
in accordance with its terms subject to bankruptcy and
equitable principles; any limitations on the remedies provided
for in the Mortgage will not materially interfere with the
practical realization of the security provided by such
Mortgage; no approval, consent or withholding of objection on
the part of, or filing registration or qualification with any
governmental body, Federal, state or local, is necessary in
connection with the execution and delivery by NHLP and, in the
case of the Myrtle Beach Mortgage, by Americare Southeast of
such Mortgage or the performance by NHLP and, in the case of
the Myrtle Beach Mortgage, by Americare Southeast of
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National Health Corporation Indenture of Trust and Security Agreement
any of the matters required of NHLP and, in the case of the
Myrtle Beach Mortgage, by Americare Southeast thereunder; and
compliance by NHLP and, in the case of the Myrtle Beach
Mortgage, by Americare Southeast, with all of the provisions
of such Mortgage will not conflict with or result in any
breach of any of the provisions of or constitute a default
under or result in the creation or imposition of any lien or
encumbrances on any property of NHLP pursuant to the
provisions of the Limited Partnership Agreement or By-laws of
NHLP or any other agreement or instrument known to such
counsel to which NHLP is a party or by which NHLP may be bound
Americare Southeast pursuant to the provisions of the Articles
of Incorporation or By-laws of Americare Southeast or any
other agreement or instrument known to such counsel to which
Americare Southeast is a party or by which Americare Southeast
may be bound;
(D) for any Constructed Facility which is also a
Managed Facility for which such first advance is being
requested, (i) an Opinion of Counsel for the owner thereof to
the effect that: the Mortgage, the Management Agreement, the
Managed Facility Note and the consent to the Note and Mortgage
Assignment for such Constructed Facility have each been duly
authorized, executed and delivered by the owner thereof and
each constitutes a legal, valid and binding instrument
enforceable in accordance with its terms subject to bankruptcy
and equitable principles; any limitations on the remedies
provided for in the Mortgage will not materially interfere
with the practical realization of the security provided by
such Mortgage; no approval, consent or withholding of
objection on the part of, or filing registration or
qualification with any governmental body, Federal, state or
local, is necessary in connection with the execution and
delivery by the owner thereof of such Mortgage, Management
Agreement, Managed Facility Note and consent to Note and
Mortgage Assignment or the performance by the owner thereof of
any of the matters required of the owner thereof; and
compliance by the owner thereof with all of the provisions of
such Mortgage, Management Agreement, Managed Facility Note and
consent to Note and Mortgage Assignment will not conflict with
or result in any breach of any of the provisions of or
constitute a default under or result in the creation or
imposition of any lien or encumbrances on any property of the
owner thereof pursuant to the provisions of the organizational
documents or By-laws of the owner thereof or any other
agreement or instrument known to such counsel to which the
owner thereof is a party or by which the owner thereof may be
bound,
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National Health Corporation Indenture of Trust and Security Agreement
and (ii) an Opinion of Counsel for NHLP to the effect that:
the Note and Mortgage Assignment and Management Agreement for
such Constructed Facility have each been duly authorized,
executed and delivered by NHLP and each constitutes a legal,
valid and binding instrument enforceable in accordance with
its terms subject to bankruptcy and equitable principles; no
approval, consent or withholding of objection on the part of,
or filing registration or qualification with any governmental
body, Federal, state or local, is necessary in connection with
the execution and delivery by NHLP of such Note and Mortgage
Assignment or the performance by NHLP of any of the matters
required of NHLP thereunder; and compliance by NHLP with all
of the provisions of such Note and Mortgage Assignment will
not conflict with or result in any breach of any of the
provisions of or constitute a default under or result in the
creation or imposition of any lien or encumbrances on any
property of NHLP pursuant to the provisions of the Limited
Partnership Agreement or By-laws of NHLP or any other
agreement or instrument known to such counsel to which NHLP is
a party or by which NHLP may be bound;
(E) for any Constructed Facility, the title insurance
policy or policies contemplated by the title insurance
commitment for such Constructed Facility, in form and
substance satisfactory to the Indenture Trustee;
(F) for any Constructed Facility, executed
counterparts of an assignment of all construction related
licenses, permits and approvals; an assignment of the
Construction Plans; the Collateral Assignment of the
Architect's Contract (and a consent to such assignment
executed by the Architect) and the Collateral Assignment of
General Contract (and a consent to such assignment executed by
the General Contractor) for such Constructed Facility, each
naming the Indenture Trustee as assignee and reasonably
satisfactory in form and substance to the holders of not less
than 64% in aggregate principal amount of the Notes
outstanding and the Indenture Trustee;
(G) a Construction Payment Certificate with respect
to the Construction Cost or Other Project Cost for which
payment or reimbursement is then being sought;
(H) for any Constructed Facility which is also a
Managed Facility for which such first advance is being
requested, copies of any agreements between NHLP and the owner
of such Managed Facility pursuant to which NHLP shall
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National Health Corporation Indenture of Trust and Security Agreement
have agreed to indemnify the owner in connection with a
default under the Mortgage for such Managed Facility caused by
an Event of Default hereunder, which indemnification shall be
limited to the owner's equity in such Managed Facility at the
time of such default; and
(I) such other opinions, certificates and other
instruments as the Indenture Trustee or the holders of not
less than 64% in aggregate principal amount of the Notes
outstanding may reasonably request.
(b) With respect to the first request for payment or
reimbursement of Construction Costs or other Project Costs of any
Constructed Facility, the Trustee shall receive:
(i) from the Consultant an executed counterpart of
each of the Section 1.2D Documents, together with a
certificate of the Consultant stating that such documents
comply with and satisfy the requirements of Section 1.2D of
the Construction Consultant Agreement with respect to such
Constructed Facility;
(ii) the written notice from the Title Company
required by Section 1.2F of the Construction Consultant
Agreement with respect to such Constructed Facility;
(iii) from NHLP (A) a certificate complying with the
requirements of the second paragraph of Section 9.6 and (B) an
opinion of counsel that all conditions precedent to the
disbursement of funds specified in this Section 9.8 have been
met and that the documents furnished to the Indenture Trustee
properly authorize the Indenture Trustee to make the first
disbursement from the appropriate Construction Sub-Account.
9.9. Conditions Precedent to Subsequent Advances.
(a) Concurrently with each subsequent request for
payment or reimbursement for any Constructed Facility, the Indenture
Trustee shall receive with respect to such Constructed Facility:
(i) an executed counterpart of each of the
applicable Section 1.2D Documents, together with a
certificate of the Consultant stating that such documents
comply with and satisfy the requirements of Section 1.2D of
the Construction Consultant Agreement;
(ii) a monthly compliance inspection report
substantially as described in Section 1.2A of the Construction
Consultant Agreement (the "Monthly Compliance Report") and a
payment verification report as described in Section 1.2E of
the Construction Consultant Agreement (the
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National Health Corporation Indenture of Trust and Security Agreement
"Payment Verifications") from the Consultant covering the
matters described in Section 1.2A of the Construction
Consultant Agreement; and
(iii) an endorsement to the title insurance policy
furnished pursuant to Section 9.8(a)(iv)(B) issued by the
title insurance company insuring that there has been no change
in the state of title and no defects, liens, encumbrances or
survey exceptions not appearing on such Title Policy which
shall have the effect of increasing the amount of the Mortgage
Title Policy by the amount of the payment then being made.
(b) Concurrently with the final request for payment
or reimbursement for any Constructed Facility, the Indenture Trustee
shall receive with respect to such Constructed Facility together with a
certificate of the Consultant stating that each item (except for item
(vi)) complies with and satisfies the requirements of this Section
9.9(b):
(i) each of the items described in Section 9.9(a);
(ii) an Officer's Certificate which shall contain all
statements required to be made in a Construction Payment Certificate
and in addition shall state that such Certificate is the final
Construction Payment Certificate and shall indicate the total advances
made from the related Construction Sub-Account, including the amount
being requested in such final request for payment (the "Final Payment
Certificate");
(iii) an "as-built" physical survey of the real property upon
which such Facility is built complying with the requirements of Section
9.4(a)(i);
(iv) a certificate of need issued by the state health care
regulatory agency for the state in which such Facility is located,
together with copies of all licenses necessary to operate such Facility
as a nursing home, and an Officer's Certificate in accordance with
Section 9.4(b)(ii) but with respect to the Constructed Facility;
(v) a certificate of insurance with respect to the Facility
complying with the requirements of Section 2.5 of the Mortgage with
respect to such Constructed Facility; provided that such certificate
of insurance shall not be required if a certificate of insurance
complying with the requirements of Section 9.8(a)(iii)(B) was
furnished at or prior to the initial request for payment under Section
9.8(a)(iii)(B);
(vi) for any Constructed Facility which is also an Owned
Facility, an Opinion of Counsel for NHLP to the effect that the
certificate of need, Medicare provider contract and all licenses
relating to the operation and use of such Constructed Facility are in
full force and effect in the name of NHLP (other than with respect to
the Myrtle Beach Facility, for which the certificate of need, Medicare
provider contract and all licenses relating to the operation and use of
such Constructed Facility may be in the name of
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Americare Southeast) and that no further licenses or permits are
required under any local, state or Federal law, ordinance, rule or
regulation in order to conduct the business of NHLP at such Constructed
Facility; and
(vii) for any Constructed Facility which is also a Managed
Facility, an Opinion of Counsel for NHLP to the effect that the
certificate of need, Medicare provider contract and all licenses
relating to the operation and use of such Constructed Facility are in
full force and effect in the name of the owner of such Constructed
Facility and that no further licenses or permits are required under any
local, state or Federal law, ordinance, rule or regulation in order to
conduct the business of the owner at such Constructed Facility.
(c) The Indenture Trustee shall not be required to disburse any
Construction Fund amounts prior to three business days after it shall have
received all items required as a condition to any disbursement.
9.10. Removal of Consultant. The holders of at least 64% in
principle amount of the Notes outstanding, by notice in writing to the
Consultant, the Indenture Trustee and to NHLP may terminate all of the rights
and obligations of the Consultant under this Indenture and the Construction
Consultant Agreement. On and after the giving of such written notice, all
authority and power of the Consultant under this Indenture and the Construction
Consultant Agreement shall cease. A successor Consultant shall be appointed by
(a) NHLP and approved by the holders of at least 64% in principal amount of the
Notes outstanding or, (b) if an Event of Default shall have occurred and be
continuing, by the the holders of at least 64% in principal amount of the Notes
outstanding.
9.11. Application of Urgent Moneys. (a) At the option of NHLP
and subject to paragraph (b) below, any moneys in the Acquisition Account or in
any sub-account of the Construction Account not disbursed after the final
disbursement request from such sub-account has been honored shall be (i)
transferred to such other subaccounts of the Acquisition Account or
Construction Account for Financed Facilities for which the final disbursement
request has not been made or (ii) applied to the prepayment of Notes in
accordance with the provisions of ss3.2.
(b) Any moneys in the Acquisition Account not disbursed prior
to December 1, 1991 and any moneys in any sub-account of the Construction
Account not disbursed prior to the date that is 120 days after the date
specified in ss4.23(b) with respect to the Constructed Facility related to such
sub-account shall be applied to the prepayment of the Notes in accordance with
the provisions of ss3.2.
9.12. Investment of Disbursement Fund Moneys. Any moneys held
in the Disbursement Fund shall be invested or reinvested by the Indenture
Trustee at the direction of NHLP expressed in an Officer's Certificate in
Permitted Investments selected by NHLP so long as no Default or Event of
Default shall exist hereunder and the interest earned on monies on deposit in
the Disbursement fund shall be disbursed to
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or upon the order of NHLP provided that upon the liquidation of any Permitted
Investments, NHLP shall make up any loss thereon prior to receiving any
interest earnings. So long as any Default or Event of Default shall have
occurred and shall be continuing hereunder, all such interest shall be retained
by the Trustee and applied in accordance with the provisions of ss9.13.
9.13. Application of Moneys Upon Event of Default. Upon
declaration by the Indenture Trustee or the holders of the Notes of the
acceleration of maturity of the Notes in accordance with ss98.3 (unless
rescinded or annulled pursuant to ss98.9) then the Indenture Trustee shall
immediately apply all amounts in the Construction Fund to the payment of the
principal of and interest on all Notes then outstanding.
9.14. Indenture Trustee's Limited Role. The Indenture Trustee
shall have no obligation to examine the contents, form or sufficiency of any
item required to be furnished to it in accordance with the provisions of ss9.4,
ss9.8 or ss9.9 (other than the duty to examine the forms of certificates of the
Consultant and the form of Officer's Certificate described therein) and the
Indenture Trustee shall be entitled to conclusively rely on the certificate of
the Consultant as to the sufficiency thereof. The receipt of the documents
described in ss9.4, ss9.8 or ss9.9, together with the certificate of NHLP
described in ss9.8(b)(iii) shall constitute sufficient authorization to the
Indenture Trustee to disburse the amounts set forth in such request for
payment. The Indenture Trustee shall not have any duty to perform any of the
duties of the Consultant, to remove the Consultant or to find or appoint a
successor to the Consultant nor shall the Indenture Trustee be required to
perform any duty or take any action which requires, contemplates or is
dependent upon receipt of prior certification, cooperation or other action by
the Consultant where the Consultant has failed to provide such certification,
render such cooperation or take such action.
SECTION 10. SUBSTITUTION OF FINANCED FACILITY.
(a) At its option, upon compliance with the provisions of this
Section 10, NHLP may substitute a Substitute Financed Facility for any Financed
Facility, provided that only a Substitute Financed Facility that is owned by
NHLP may be substituted for an Owned Facility.
(b) NHLP shall give the Indenture Trustee and the holders of
the Notes, not less than 120 days prior to the date on which (i) NHLP proposes
to transfer an Owned Facility, which transfer, except for the proviso in clause
(ii) of paragraph (b)(2) of ss4.10, would be prohibited by ss4.10 and (ii) the
owner of any Managed Facility proposes to transfer such Managed Facility,
written notice of any such proposed transfer and of its election to substitute
a Substitute Financed Facility for such Financed Facility. Unless a Default or
Event of Default has occurred and is continuing, the Indenture Trustee shall
execute a release in respect of the Financed Facility on the date of
substitution upon compliance by NHLP with the requirements of paragraph (c)
hereof.
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(c) In the event that NHLP has elected to substitute a
Substitute Financed Facility for a Financed Facility pursuant to paragraph (a)
hereof, then in such event, prior to any release of such Financed Facility, the
Indenture Trustee shall have received the following:
(1) If such Substitute Financed Facility is an Owned Facility
or a Managed Facility, a mortgage or deed of trust with respect to the
Substitute Financed Facility substantially in the form of the mortgage
or deed of trust for the Financed Facility (except that the Loan Value
of the Substitute Financed Facility shall be the Loan Value of the
Mortgaged Facility) duly executed, acknowledged and delivered by NHLP
(if such Substitute Financed Facility is an Owned Facility) or by the
owner of such Substitute Financed Facility (if such Substitute Financed
Facility is a Managed Facility), in either case in full force and
effect and recorded or filed for record, together with all necessary
financing statements and similar notices if and to the extent permitted
or required by applicable law, in each public office wherein such
recording or filing is deemed necessary or appropriate by the Indenture
Trustee and its counsel to perfect the lien thereof as a valid first
mortgage lien on the Substitute Financed Facility as against creditors
of or purchasers from NHLP and, in addition, if such Substitute
Financed Facility is a Managed Facility, a Management Agreement with
respect thereto and a Note Assignment with respect thereto, each duly
executed, acknowledged and delivered by the parties thereto and, in the
case of the Management Agreement, such Management Agreement (or a
memorandum thereof) shall have been recorded in each public office
wherein such recording is deemed necessary by the Indenture Trustee and
its counsel to preserve and protect such Management Agreement as an
agreement running with the land;
(2) A survey, a mortgage title insurance policy, a report of
insurance brokers, an Environmental Audit, a report of insurance
brokers, a list of licenses and permits, an appraisal, in each such
case in the form and to the effect contemplated by SS9.4(a)(ii),
9.4(c)(v), 9.4(a)(iii), 9.4(b)(i), 9.4(f), 9.4(b)(ii) and 9.4(b)(iii),
respectively, but with respect to the Substitute Financed Facility;
(3) A certificate dated the date of the release of the Financed
Facility, executed by a Responsible Officer of NHLP, the truth and
accuracy of which shall be a condition to the release of the Financed
Facility, to the effect that: no Default or Event of Default has
occurred and is continuing; the date on which construction of the
Substitute Financed Facility was completed and the appraised value of
the Substitute Financed Facility is equal to or greater than the
greater of the Loan Value and the fair market value of the Financed
Facility;
(4) If the Substitute Financed Facility is owned by NHLP, an
opinion in form and substance as described in ss9.4(c)(iii), but with respect
to such Substitute Financed Facility, and if the Substitute Financed
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Facility is managed by NHLP, opinions in form and substance as described in
ss9.4(c)(iv), but with respect to such Substitute Finance Facility; and
(5) Such other opinions, certificates, and other instruments as
the Indenture Trustee or the holders of not less than 64% in aggregate
principal amount of the Notes outstanding may reasonably request.
NHLP shall pay all reasonable costs, charges and expenses in any way relating
to or incurred in connection with the mortgage of the Substitute Financed
Facility, including reasonable attorneys' fees and expenses, recording fees,
premiums covering title insurance and all applicable taxes which may be
incurred or imposed by reason of such transactions. Anything herein to the
contrary notwithstanding, this Indenture shall remain in full force and effect
until such time as the substitution of a Substitute Financed Facility and
execution and delivery of a new mortgage or deed of trust is consummated as
contemplated by this ss10.
SECTION 11. THE INDENTURE TRUSTEE; FLORIDA CO-INDENTURE TRUSTEE.
11.1. Acceptance of Trust. The Indenture Trustee hereby accepts the
trusts of the Indenture and agrees to perform the same upon the terms and
conditions hereof.
11.2. Eligibility of Indenture Trustee. The Indenture Trustee shall at
all times be a bank or trust company in good standing, organized under the laws
of the United States of America or of any State, having a capital, surplus and
undivided profits aggregating at least $250,000,000 and the long-term
certificates of deposit of which shall have a credit rating of A (without
regard to any gradations within such rating) by Standard & Poor's Corporation
and/or Moody's Investors Services, Inc.; provided, that such minimum capital,
surplus and undivided profits and rating requirement need not be met if the
obligations of any Indenture Trustee shall be fully and unconditionally
guaranteed pursuant to a guaranty agreement (in form and substance satisfactory
to the holders of not less than 64% of the principal amount of the Notes then
outstanding) by any Person that meets such minimum capital, surplus and
undivided profits and rating requirement and that owns, directly or indirectly,
100% of the capital stock of such Indenture Trustee.
11.3. Rights and Duties of Indenture Trustee. (a) Except as to recital
by the Indenture Trustee relating to the Indenture Trustee, the Indenture
Trustee shall not be responsible for the correctness of the recitals in this
Indenture, the Mortgages or in the Notes, all of which recitals are statements
made by the Issuer.
(b) The Indenture Trustee shall not be responsible as to the validity,
execution or sufficiency of this Indenture, the Mortgages or the Notes, for the
title of NHLP to the Mortgaged Property, or for the security afforded by the
Mortgages or this Indenture or for any representations or warranties as to the
value or condition of the Mortgaged Property.
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(c) During the continuance of any Event of Default of which the
Indenture Trustee shall have actual knowledge, the Indenture Trustee shall
exercise such of the rights and powers vested in it by this Indenture, and use
the same degree of care and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(d) Except during the continuance of an Event of Default, the
Indenture Trustee shall perform such duties and only such duties as are
specifically set forth in this indenture or as it may be requested to perform
pursuant to the terms hereof or at the request of 64% or more in aggregate
principal amount of the Notes at the time outstanding, subject to the
provisions of subsection (J) of this Section and within the rights and powers
vested in it by this Indenture, and no implied duties or obligations shall be
read into this Indenture against the Indenture Trustee.
(e) The Indenture Trustee shall not be personally liable for any
action taken or omitted to be taken except for its own negligent action, its
own negligent failure to act or its own willful misconduct; provided that:
(i) In the absence of bad faith on the part of the Indenture
Trustee, the Indenture Trustee may conclusively rely upon certificates
or opinions as to the truth of the statements and the correctness of
the opinions expressed therein, provided that any such certificate or
opinion shall conform to all express provisions of this Indenture
applicable thereto;
(ii) The Indenture Trustee shall not be liable for any error of
judgment made in good faith by the Indenture Trustee unless it shall be
proved that the Indenture Trustee was negligent in ascertaining the
pertinent facts; and
(iii) The Indenture Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in
accordance with the direction of holders of Notes with which the
Indenture Trustee is authorized to comply by the terms of this
Indenture and the Indenture Trustee shall be deemed to be authorized if
the holders of 64% or more in the aggregate principal amount of the
Notes at the time outstanding so request or direct.
(f) The Indenture Trustee shall be under a duty to examine
certificates and opinions required by this Indenture to be furnished to it to
determine whether or not they conform to the express requirements of this
Indenture applicable thereto.
(g) In the absence of bad faith on the part of the Indenture
Trustee, the Indenture Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, opinion, notice,
request, consent, order, appraisal, report, bond or other paper or document
believed by it to be genuine, to have been signed by the proper party or
parties and to be in conformity with the provisions of
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this Indenture, provided that, any of the foregoing instruments shall conform
to all express provisions of this Indenture applicable thereto.
(h) The Indenture Trustee may consult with counsel and the
advice or opinion of such counsel shall be full and complete authorization and
protection in respect of any action taken or suffered by it hereunder in good
faith and in accordance with such an opinion.
(i) Whenever it is provided that the Indenture Trustee shall
take any action or refrain from taking any action upon the happening or
continuation of a specified event (including an Event of Default) or upon the
fulfillment of any condition or upon the request of the Issuer or of the
holders of the Notes, the Indenture Trustee (1) shall have no liability for
failure to take such action or for failure to refrain from taking such action
unless and until an officer of the Indenture Trustee has actual knowledge of
such event or continuation thereof or the fulfillment of such condition or
shall have received such request, and (2) in taking such action shall have full
power to give any and all notices and to do any and all acts and things
incidental to such action.
(j) The Indenture Trustee shall not be under any obligation to
exercise any of the trusts or powers hereof at the request, order or direction
of one or more holders of the Notes, unless such holders shall have offered to
the Indenture Trustee security or indemnity satisfactory to it against the
costs, expenses and liabilities to be incurred thereby.
(k) None of the provisions of this Indenture shall require the
Indenture Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the exercise
of any of its rights or powers if there is reasonable ground for believing that
the repayment of such funds or the liability is not assured to it.
(l) Whether or not therein expressly so provided, every
provision of this Indenture relating to the conduct so affecting the liability
of or affording protection to the Indenture Trustee shall be subject to the
provisions of this Section.
(m) Subject to subsection (c) of this Section, the Indenture
Trustee shall not be bound to make any investigation into the facts or matters
stated in any statement, instrument, notice, request, direction or other paper
or document referred to in subsection (g) above.
(n) The Indenture Trustee may exercise any of the duties or
powers hereunder or perform any duties hereunder either directly or by or
through agents or attorneys.
(o) The Indenture Trustee shall not be liable for any action
taken or omitted by it in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this Indenture.
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11.4. Compensation of Indenture Trustee. NHLP shall (i) pay
reasonable compensation to the Indenture Trustee (which shall not be limited by
any provision of law in regard to the compensation of the Indenture Trustee of
an expressed trust) and reimburse it for its reasonable expenses and
disbursements (including fees and disbursements of its counsel and of all other
persons employed or consulted by it in connection with the subject matter of
this Indenture but who are not regularly in the employ of the Indenture
Trustee), and (ii) indemnify the Indenture Trustee, its directors, officers,
employees and agents for, and hold it and them harmless against, any loss,
liability or expense which it or they may incur or suffer in acting or failing
to act in connection with this Indenture or the Mortgages, including the cost
and expense of defending itself or themselves against any claim of liability in
connection herewith, except to the extent that any such loss, liability or
expense is caused by the negligence or bad faith of the Indenture Trustee or
its directors, officers, employees or agents, as the case may be. To the extent
not paid by NHLP, the Indenture Trustee shall have a lien prior to the Notes on
all moneys held by the Indenture Trustee hereunder. The obligations of the
Issuer under this ss11.4 shall survive termination and discharge of this
Indenture.
11.5. Resignation and Removal of indenture Trustee. (a) The
Indenture Trustee may at any time resign, by giving written notice, by
first-class mail postage prepaid, to the Issuer and all holders of the Notes at
the time outstanding, specifying a date (not earlier than 60 days after the
date of such notice) when such resignation shall take effect (subject to
paragraph (c) below).
(b) The Indenture Trustee may at any time be removed by written
notice to the Indenture Trustee and the Issuer by the holders of a majority in
aggregate principal amount of the outstanding Notes.
(c) Any resignation or removal of the Indenture Trustee shall
be effective only upon appointment of a successor Indenture Trustee and the
latter's acceptance.
11.6. Appointment of Successor Indenture Trustee. If the
Indenture Trustee shall have given notice of Designation to the Issuer and all
holders of the Notes pursuant to ss11.5(a) or if notice of removal shall have
been given to the Indenture Trustee and the Issuer pursuant to ss11.5(b) (the
date such notice shall be given shall be the "Indenture Trustee Termination
Notice Date"), a successor Indenture Trustee shall be appointed within 30 days
after such indenture Trustee Termination Notice Date by the holders of at least
51% in aggregate principal amount of the Notes then outstanding by an
instrument or instruments in writing executed by such holders and delivered to
such successor Indenture Trustee and the Issuer. If such successor Indenture
Trustee shall not have been so appointed or shall not have accepted such
appointment within the time limits provided in the preceding sentence, such
successor Indenture Trustee may be appointed by the Issuer, the holder of any
outstanding Note or, upon application of the retiring Indenture Trustee, by any
court of competent jurisdiction, provided that such Indenture Trustee shall
continue to act only until such time as a successor Indenture Trustee shall
have been appointed pursuant to the preceding sentence. In any event, the
Indenture Trustee shall continue to act until such time as a successor
Indenture Trustee shall have accepted the position of Indenture Trustee.
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11.7. Effect of Appointment of Successor Indenture Trustee.
Upon written appointment and acceptance as Indenture Trustee, each successor
Indenture Trustee shall forthwith, without further act or deed, succeed to all
the estate, property, rights and duties of its predecessor in trust under this
Indenture. Such predecessor shall promptly deliver to such successor Indenture
Trustee all property and sums held hereunder, together with all records and
other documents necessary or appropriate in connection with the performance of
the duties of the successor Indenture Trustee hereunder. Upon the written
request of the successor Indenture Trustee, the Issuer and upon payment of all
amounts due to such predecessor under this Indenture, such predecessor shall
transfer, deliver, assign and confirm to the successor Indenture Trustee,
without recourse, all its estate, property and rights hereunder by executing
and delivering from time to time to the successor Indenture Trustee such
further instruments and by taking such other action as may reasonably be deemed
by such successor Indenture Trustee or the Issuer to be necessary or
appropriate in connection therewith.
11.8. Merger or Consolidation of Indenture Trustee. In the
event of any merger or consolidation of the Indenture Trustee with or into any
other corporation or in the event of the sale of all or substantially all the
Indenture Trustee's corporate trust business, the corporation resulting from
such merger or consolidation, or the transferee in the case of any such sale,
shall take all action necessary as a consequence of such merger, consolidation
or sale to preserve the lien of the Mortgages unimpaired and shall forthwith
notify the Issuer and, subject to ss11.2 hereof, shall be the Indenture Trustee
under the Indenture without further act or deed.
11.9. Status of Moneys Received. All moneys received by the
Indenture Trustee shall, until used or applied as herein provided, be held in
trust for the purposes for which they were received, and, if required pursuant
to the provisions hereof, shall be held in the Acquisition Account and in the
appropriate sub-account of the Construction Account, but otherwise need not be
segregated in any manner from any other moneys, except to the extent required
by law, and may be deposited by the Indenture Trustee under such general
conditions as may be prescribed by law at the Indenture Trustee, and the
Indenture Trustee shall be under no liability for interest on any moneys
received by it hereunder. The Indenture Trustee and any affiliated corporation
may become the owner of any Note secured hereby and be interested in any
financial transaction with the Issuer or any affiliated corporation, or the
Indenture Trustee may act as depositary or otherwise in respect to other
Securities of the Issuer or any affiliated corporation, all with the same
rights which it would have if not the Indenture Trustee.
11.10. Florida Co-Indenture Trustee. (a) Notwithstanding
anything herein to the contrary, the Indenture Trustee agrees not to exercise
any power or take any action that is required under the laws of the State of
Florida to be exercised or taken only by a bank or trust company having trust
powers and located in the State of Florida (hereinafter referred to as "Florida
Trustee Action"). In the event that the Indenture Trustee receives an Opinion
of Counsel or otherwise receives notice that Florida Trustee Action is
necessary or required under this Indenture or the Construction Related
Agreements, it shall immediately notify the Florida Co-Indenture Trustee
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which, after receipt of such notice and assurances of compensation as provided
for the Indenture Trustee in ss11.4 and satisfactory to the Florida Co-Indenture
Trustee, shall at the written direction of the Indenture Trustee take such
Florida Trustee Action. In the event that the Florida Co-Indenture Trustee is
required to undertake Florida Trustee Action hereunder, each and every
indemnity, remedy, power, right, claim, demand, cause of action, immunity,
estate, title, interest and lien expressed or intended by this Indenture or
the Construction Related Agreements to be exercised by or vested in or conveyed
to the Indenture Trustee with respect thereto shall be ipso facto exercisable
by and vest in and be conveyed to the Florida Co-Indenture Trustee, but only to
the extent necessary to enable the Florida Co-Indenture Trustee, to exercise
such powers, rights and remedies, and every covenant and obligation necessary
to undertake or take such Florida Trustee Action. Except as is specifically
required under the laws of the State of Florida, any duty or required action
under this Indenture shall be the responsibility of, and shall be undertaken by
the Indenture Trustee. The Indenture Trustee shall execute such assignments or
other documents as may be necessary for the Co-Indenture Trustee to perform its
duties, exercise its powers and take any actions under this Indenture.
(b) Resignation and Removal of Florida Co-Indenture Trustee.
The Florida Co-Indenture Trustee may at any time and for any reason resign or
be removed as provided in ss11.5 with respect to the Indenture Trustee.
(c) Appointment of Successor Florida Co-Indenture Trustee. In
case at any time the Florida Co-Indenture Trustee shall resign or shall be
removed, a successor Florida Co-Indenture Trustee shall be appointed as
provided in ss11.6 with respect to the Indenture Trustee.
(d) Resignation; Removal; Appointment of Successor Co-Indenture
Trustee. No resignation or removal of the Florida Co-Indenture Trustee and no
appointment of a successor Florida Co-Indenture Trustee pursuant to this Section
11 shall become effective until the acceptance of appointment by the successor
Florida Co-Indenture Trustee as provided in ss11.6 with respect to a successor
Indenture Trustee.
11.11. Co-trustees and Separate Indenture Trustees. At any time
or times, for the purpose of meeting the legal requirements of any jurisdiction
in which any of the Mortgaged Property may at the time be located, the
Indenture Trustee upon the direction of the holders of not less than 64% in the
aggregate principal amount of the Notes shall have power to appoint, and the
Issuer shall for such purpose join with the Indenture Trustee in the execution,
delivery and performance of all instruments and agreements necessary or proper
to appoint, one or more Persons approved by the Indenture Trustee and the
holders of 64% in the aggregate principal amount of the Notes than outstanding
either to act as co-trustee, jointly with the Indenture Trustee, of all or any
part of such Mortgaged Property, 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 ss11.11.
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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:
(a) the 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 Indenture Trustee
hereunder, shall be exercised solely by the Indenture Trustee;
(b) the rights, powers, duties and obligations hereby conferred
or imposed upon the Indenture Trustee in respect of any Property
covered by such appointment shall be conferred or imposed upon and
exercised or performed by the Indenture Trustee or by the Indenture
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 Indenture 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;
(c) the Indenture Trustee at any time, by an instrument in
writing executed by it, may accept the resignation of or remove any
co-trustee or separate trustee appointed under this ss11.11. Upon the
written request of the Indenture Trustee, the Issuer shall join with
the Indenture 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 that has resigned or been removed may be appointed in the
manner provided in this Section;
(d) no co-trustee or separate trustee hereunder shall be
personally liable by reason of any act or omission of the Indenture
Trustee, or any other such trustee hereunder nor shall the Indenture
Trustee be liable by reason of any act or omission of any co-trustee or
separate trustee hereunder; and
(e) any written direction of the Noteholders delivered to the
Indenture Trustee shall be deemed to have been delivered to each
co-trustee and separate trustee.
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SECTION 12. NOTIFICATION OF PAYMENT; DISCHARGE OF INDENTURE.
The Indenture Trustee shall release this Indenture and the lien
granted hereby by proper instrument or instruments upon presentation of
satisfactory evidence that all indebtedness hereby secured has been fully paid
or discharged.
SECTION 13. SUPPLEMENTAL MORTGAGES AND INDENTURES; WAIVERS.
Any term, covenant or agreement of this Indenture or the
Mortgages may, with the consent of the Issuer and the holders of not less than
64% in aggregate principal amount of the Notes at the time outstanding, be
amended or compliance therewith may be waived (either generally or in a
particular instance and either retroactively or prospectively) and, if the
Issuer shall have obtained such consents and filed or caused the same to be
filed with the Indenture Trustee, the Indenture Trustee may from time to time
and at any time execute and deliver a waiver or consent or enter into a
supplemental mortgage or supplemental indenture which in each case shall be
binding upon all holders of the Notes, for the purpose of modifying, altering,
amending, deleting, waiving, consenting to or adding to, in any particular, any
of the terms or provisions contained in the Mortgages or this Indenture or in
any supplemental indenture or instrument or in the Notes; provided, however,
that no such waiver, consent, modification, alteration, amendment, deletion or
addition shall be made which would (a) affect the obligations of the Issuer to
pay the principal of and interest and premium, if any, on the Notes as and when
set forth therein and as provided herein and in the Mortgages, which
obligations are unconditional and absolute, without the consent of the holder
of each Note so affected, or (b) permit the creation by the Issuer of any lien
on the property subjected to the lien of this Indenture or the Mortgages prior
to or on a parity with the lien of this Indenture or the Mortgages without the
consent of the holder or holders of all of the Notes, or (c) release any of the
Mortgaged Property except pursuant to the terms which govern the release
thereof in the Mortgages, or (d) affect any of the rights or duties of the
Indenture Trustee without its written assent thereto; provided farther,
however, that this ss13 may not be amended and that the aforesaid percentage
shall not be reduced without the consent of the holders of all Notes then
outstanding. Such consent and approval may be evidenced by any number of
instruments of similar tenor executed by the holders of the Notes, in person or
by agent or proxy appointed in writing. For the purpose of calculating the
percentage of outstanding Notes which have consented to any amendment of this
Indenture or waived any provision hereof and for the purpose of calculating
whether the holders of the requisite percentage of the outstanding Notes have
requested any action hereunder or undertaken any other-action with respect to
this Indenture or the Notes, Notes held by National, NHLP, NHC or the Issuer
shall be excluded.
SECTION 14. MISCELLANEOUS.
14.1. Successors and Assigns. Whenever any of the parties hereto
is referred to, such reference shall be deemed to include the successors and
assigns of
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such party; and all the covenants, premises and agreements in this Indenture
contained by or on behalf of the Issuer or by or on behalf of the Indenture
Trustee, shall bind and inure to the benefit of the respective successors and
assigns of such parties whether so expressed or not.
14.2. Severability. In case any one or more of the provisions
contained in this Indenture or the Notes shall be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
effected or impaired thereby.
14.3. Notices. All communications provided for herein shall be
in writing and shall be deemed to have been given (unless otherwise required by
the specific provisions hereof in respect of any matter) when delivered
personally or when deposited in the United States mail, registered, postage
prepaid or when delivered to an overnight courier, addressed as follows,
provided that the failure of the Indenture Trustee or the holder of any Note to
send a copy of any notice duly sent to NHLP or National to such partys' counsel
as indicated below shall not, in and of itself, constitute a failure to give
proper notice to such party:
If to NHLP or National: National HealthCorp L.P.
City Center
100 Vine Street
Murfreesboro, Tennessee 37130
Attention: Senior Vice President/
General Counsel
with a copy to: Keck, Mahin & Cate
8300 Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606-6589
Attention: Jared Kaplan
If the Issuer: Marine Midland Bank, N.A.
Employee Benefit Trust Services
250 Park Avenue
New York, New York 10177
Attention: Stephen J. Hartman, Jr.
If to the Indenture Trustee: State Street Bank and Trust Company
of Connecticut, National Association
100 Constitution Plaza
Hartford, Connecticut 06103
Attention: Corporate Trust Department
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<PAGE> 108
If to the Florida Barnett Banks Trust Company,
Co-Indenture Trustee: National Association
9000 Southside Boulevard
Building 100
Jacksonville, Florida 32256
Attention: Corporate Trust Department
If to a Note Purchaser: To such Note Purchaser at its address
appearing on Schedule I of the Note
Purchase Agreement
or to the Issuer, the Indenture Trustee or the Note Purchaser at such other
address as the Issuer, the Indenture Trustee or the Note Purchaser may
designate by notice duly given in accordance with this Section.
If any subsequent holder of any Note shall have presented the
same to the Indenture Trustee for inspection accompanied by a written
designation of the address to which notice in respect of such Note is to be
given, then wherever herein it is provided that notice shall be given to the
holder or holders of the Notes, the notice shall be addressed to such holder at
the address so given but unless and until such subsequent holder or holders
shall so present a Note to the Indenture Trustee and designate such address,
all communications herein provided to be made or given to the holder or holders
of the Notes shall be sufficiently given if addressed to the holders at their
last known respective addresses.
14.4. Counterparts. This Indenture may be executed,
acknowledged and delivered in any number of counterparts, each of such
counterparts constituting an original but all together only one instrument.
14.5. Environmental Indemnity. NHLP agrees to indemnify and
hold harmless the Indenture Trustee and each holder of the Notes, each Person
claiming by, through, under or on account of any of the foregoing and the
respective directors, officers, counsel and employees of each of the foregoing
Persons (the "Indemnified Parties") from and against any and all losses,
claims, damages and liabilities to which any such Indemnified Party may become
subject under any law, statute, regulation or ordinance referred to in ss4.8
applicable to NHLP or any of the Financed Facilities, including without
limitation those losses, claims, damages and liabilities resulting from the
treatment or disposal of Hazardous Substances on any of the Financed
Facilities, or as a result of the breach of or non-compliance by NHLP with ss4.8
with respect to any of the Financed Facilities. The provisions of this ss14.5
shall survive the foreclosure by the Indenture Trustee on any one or all of the
Financed Facilities under this Indenture or the Mortgages.
14.6. Law Governing. This Indenture and the Notes shall be
construed in accordance with, and governed by, the laws of the State of
Illinois.
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<PAGE> 109
14.7. Concerning the Plan Trustee. The term "Issuer" as used
herein shall mean and include the trustees of the Issuer and their successors
in trust not individually but solely as Trustees under the Trust Agreement, and
this Agreement shall be binding upon the trustees of the Issuer and their
successors and assigns and upon the trust and the trust estate. Marine Midland
Bank, N.A., and any successor trustee under the Trust Agreement shall not
assume and shall have no personal liability or responsibility for payment of
the indebtedness evidenced by the Notes or for observance or performance of the
covenants and agreements herein contained or for the truthfulness of the
representations and warranties herein contained (except for the representations
and warranties set forth in paragraphs 6(a) and 11(c) of Exhibit B to the Note
Purchase Agreements, the Plan Trustee having executed this Indenture and the
Notes not individually but solely as Trustee under the Trust Agreement to bind
the Issuer and the trust estate.
14.8. Limited Liability. Anything contained herein or in the
Notes to the contrary notwithstanding, each holder of the Notes agrees that the
Notes are without recourse to the Issuer and that the payment of the
obligations of the Issuer hereunder and under the Notes shall be made solely
from the Trust Estate. In addition to the foregoing, each holder of the Notes
acknowledges that payment on the Notes by the Issuer during any year shall not
exceed an amount equal to the sum of contributions to the Issuer and earnings
and dividends on the Issuer's property for that year and all prior years
reduced by the amount of all prior payments on the Notes and that, without
limiting the foregoing, during any period during which such holder shall be a
"disqualified person" (as defined in Section 4975(e)(2) of the Code), assets of
the Issuer, upon the occurrence of an Event of Default, may be transferred to
such holder only upon and to the extent of the failure of the Issuer to make
regularly scheduled payments of principal and interest on the Notes. The
foregoing limitations shall not affect the rights of any holders of the Notes,
which are unconditional and absolute, to declare the indebtedness evidenced by
the Notes to be immediately due and payable upon the occurrence of any Event of
Default as provided in ss8.3, or to proceed against NHLP, National or NHC under
the Guaranty Agreement as therein provided or to foreclose or pursue any other
remedies with respect to the Financed Facilities under the NHLP Mortgages or
the Note and Mortgage Assignments or to proceed against NHLP under the NHLP
Loan Agreement or on the NHLP Note. As more fully provided in ss14.7, anything
contained or in the Notes to the contrary notwithstanding, the Plan Trustee
shall have no personal liability in connection with the Notes or the
transactions contemplated hereby. Subject to the provisions of this ss14.8, the
obligations of the Issuer for the payment of principal, interest and premium,
if any, on the Notes shall at all times rank pari passu with all other senior
obligations of the Issuer.
14.9. Expenses, Stamp Tax Indemnity. Whether or not the
transactions herein contemplated shall be consummated, the NHLP agrees to pay
all expenses relating to the subject matter of this Indenture, including but
not limited to:
(a) the cost of reproducing this Indenture, the Note Purchase
Agreements, the Notes, the Guaranty Agreement, the Mortgages, the Note
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<PAGE> 110
and Mortgage Assignments, all other Operative Agreements and all other
documents required or contemplated hereunder;
(b) the reasonable fees and disbursements of Chapman and
Cutler, special counsel to the Note Purchasers (including but not
limited to reasonable fees and disbursements in connection with
disbursements from the Disbursement Fund after the Closing Date) and
Keck, Mahin & Cate, counsel to the Issuer;
(c) the reasonable out-of-pocket expenses of the Note
Purchasers;
(d) the cost of delivering to the home office of the Note
Purchasers, insured to your satisfaction, the Notes purchased by you on
the Closing Date;
(e) all initial and ongoing fees, costs and other expenses
(including but not limited to reasonable attorney's fees) of the
Indenture Trustee and the Florida Co-Indenture Trustee hereunder and
under the Construction Consultant Agreements, including fees and
expenses incurred in connection with the enforcement of the obligations
of the Issuer, NHLP and National hereunder;
(f) all recording, filing fees and stamp taxes in connection
with the recordation or filing and rerecordation or refiling of this
Indenture, the Mortgages, the Note and Mortgage Assignments, the
Management Agreements and any related documents and other notices
thereof;
(g) all expenses (including but not limited to reasonable
attorney's fees, which shall include but not be limited to the
allocable costs and expenses incurred by in-house counsel to each of
the Note Purchasers) in connection with any amendments, waivers or
consents requested by any party in connection with any of the Operative
Agreements (whether or not the same are actually executed and
delivered); and
(h) the cost of obtaining a private placement number for the
Notes from Standard & Poor's Corporation.
The obligations of NHLP under this ss14.9 shall survive the payment or
prepayment of the Notes and the termination of this Indenture.
14.10. Application of ERISA. Notwithstanding anything herein to the
contrary, the parties to this Indenture agree that any security granted
hereunder shall only be enforceable to the extent permitted under ERISA and the
Code, including without limitation, ss 408(b)(3) of ERISA and Section
4975(d)(3) of the Code, together with the applicable regulations thereunder.
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<PAGE> 111
IN WITNESS WHEREOF, NHLP, National and the Issuer have each
caused this Indenture to be executed, and State Street Bank and Trust Company
of Connecticut, National Association, as Indenture Trustee, in evidence of its
acceptance of the trusts hereby created, and Barnett Banks Trust Company,
National Association, as Florida Co-Indenture Trustee has caused this
Indenture to be executed, all as of the day and year first above written.
NATIONAL HEALTHCORP L.P.
By NHC, Inc.,
Its Managing General Partner
By /s/
---------------------------------
Its President
------------------------------
By National Health Corporation,
Its Administrative General Partner
By /s/
---------------------------------
Its Senior Vice President
--------------------------
NATIONAL HEALTH CORPORATION
By /s/
--------------------------------------
Its Senior Vice President
-----------------------------------
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<PAGE> 112
NATIONAL HEALTH CORPORATION
LEVERAGED EMPLOYEE MOCK
OWNERSHIP TRUST
By Marine Midland Bank, N.A., not
in its individual or corporate
capacity but solely as Trustee
under the Trust Agreement made and
entered into effective January 20,
1988 by and between National Health
Corporation, a Tennessee
corporation, and Marine Midland
Bank, N.A., as trustee, as amended
on April 1, 1988 by a First
Amendment thereto, as the same may
from time to time be amended or
modified.
By /s/
-------------------------------------
Its Director
----------------------------------
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION,
as Indenture Trustee
By /s/
-------------------------------------
Its Vice President
----------------------------------
BARNETT BANKS TRUST COMPANY,
NATIONAL ASSOCIATION, as Florida
Co-Indenture Trustee
By /s/
-------------------------------------
Its Assistant Vice President
----------------------------------
<PAGE> 1
Exhibit 4.4
================================================================================
FIRST SUPPLEMENTAL
INDENTURE OF TRUST AND SECURITY AGREEMENT
Dated as of November 1, 1991
BY AND AMONG
NATIONAL HEALTH CORPORATION
LEVERAGED EMPLOYEE STOCK OWNERSHIP TRUST,
NATIONAL HEALTH CORPORATION,
NATIONAL HEALTH INVESTORS, INC.
AND
NATIONAL HEALTHCORP L.P.
TO
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION, as Indenture Trustee
AND
BARNETT BANKS TRUST COMPANY, NATIONAL ASSOCIATION,
as Florida Co-Indenture Trustee
================================================================================
EXHIBIT B
(to First Amendment to Note Agreement)
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
SECTION HEADING PAGE
<S> <C>
Recitals.............................................................................. 1
SECTION 1. AMENDMENT OF THE GRANTING CLAUSES OF THE INDENTURE.................... 2
SECTION 2. EXCHANGE OF NOTES..................................................... 2
SECTION 3. AMENDMENT OF SECTION 1 OF THE ORIGINAL INDENTURE...................... 3
Section 3.1. Amendment of Section 1.1 of the Original Indenture................ 3
Section 3.2. Definitions....................................................... 12
SECTION 4. AMENDMENT OF SECTION 2 OF THE INDENTURE............................... 12
Section 4.1. Amendment of Section 2.1 of the Indenture......................... 12
Section 4.2. Amendment of Section 2.10 of the Indenture........................ 12
SECTION 5. AMENDMENT OF SECTION 3 OF THE INDENTURE............................... 12
SECTION 6. AMENDMENT OF SECTION 4 OF THE ORIGINAL INDENTURE...................... 14
Section 6.1. Amendment of Heading and First Sentence of Section 4.............. 14
Section 6.2. Amendment of Section 4.1 of the Original Indenture................ 14
Section 6.3. Amendment of Section 4.2 of the Original Indenture................ 14
Section 6.4. Amendment of Section 4.3 of the Original Indenture................ 14
Section 6.5. Amendment of Section 4.4 of the Original Indenture................ 15
Section 6.6. Amendment of Section 4.5 of the Original Indenture................ 16
Section 6.7. Amendment of Section 4.6 of the Original Indenture................ 17
Section 6.8. Amendment of Section 4.7 of the Original Indenture................ 18
Section 6.9. Amendment of Section 4.8 of the Original Indenture................ 19
Section 6.10. Amendment of Section 4.9 of the Original Indenture................ 20
Section 6.11. Amendment of Section 4.10 of the Original Indenture............... 20
Section 6.12. Amendment of Section 4.11 of the Original Indenture............... 22
Section 6.13. Amendment of Section 4.12......................................... 24
Section 6.14. Amendment of Section 4.14......................................... 24
Section 6.15. Amendment of Section 4.16 of the Original Indenture............... 25
Section 6.16. Amendment of Section 4.17 of the Original Indenture............... 25
Section 6.17. Amendment of Section 4.18 of the Original Indenture............... 25
Section 6.18. Amendment of Section 4.19 of the Original Indenture............... 26
Section 6.19. Amendment of Section 4.20 of the Original Indenture............... 26
Section 6.20. Amendment of Section 4.21 of the Original Indenture............... 28
Section 6.21. Amendment of Section 4.22 of the Original Indenture............... 32
Section 6.22. Amendment of Section 4 of the Original Indenture.................. 32
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 7. AMENDMENT OF SECTION 7 OF THE INDENTURE................................ 38
Section 7.1. Amendment of Section 7.1 of the Original Indenture................. 38
SECTION 8. AMENDMENT OF SECTION 8 OF THE INDENTURE................................ 38
Section 8.1. Amendment of Section 8.1 of the Original Indenture................. 38
SECTION 9. AMENDMENT OF SECTION 9 OF INDENTURE.................................... 41
Section 9.1. Amendment of Section 9.4(c)(ii) of the Original Indenture......... 41
SECTION 10. MISCELLANEOUS........................................................... 41
Section 10.1. Successors and Assigns.............................................. 41
Section 10.2. Severability........................................................ 41
Section 10.3. Notices............................................................. 41
Section 10.4. Counterparts........................................................ 42
Section 10.5. Law Governing....................................................... 42
Section 10.6. Expenses, Stamp Tax Indemnity....................................... 42
Section 10.7. Modification Not To Effect Liability of Parties Under Original
Indenture........................................................... 42
Section 10.8. Ratification........................................................ 43
Section 10.9. References to Indenture............................................. 43
Signature.............................................................................. 44
Exhibit A -- Form of Substitute Series A Note
Exhibit B -- Form of Substitute Series B Note
</TABLE>
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<PAGE> 4
FIRST SUPPLEMENTAL
INDENTURE OF TRUST AND SECURITY AGREEMENT
THIS FIRST SUPPLEMENTAL INDENTURE OF TRUST AND SECURITY AGREEMENT (this
"First Supplemental Indenture"), dated as of November 1, 1991, by and among
NATIONAL HEALTH CORPORATION LEVERAGED STOCK OWNERSHIP TRUST, a trust organized
under the laws of the State of Tennessee (the "Issuer"), NATIONAL HEALTH
INVESTORS, INC., a Maryland corporation (the "REIT"), NATIoNAL HEALTH
CORPORATION, a Tennessee corporation ("National"), NATIONAL HEALTHCORP L.P., a
Delaware limited partnership ("NHLP"), and STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association,
as Indenture Trustee (the "Indenture Trustee") having a corporate trust office
at 750 Main Street, Hartford, Connecticut 06103, Attention: Corporate Trust
Department and BARNETT BANKS TRUST COMPANY, NATIONAL ASSOCIATION, a national
banking association, as Florida Co-Indenture Trustee (the "Florida Co-Indenture
Trustee") having a corporate office at 9000 Southside Boulevard, Building 100,
Jacksonville, Florida 32256, Attention: Corporate Trust Department.
RECITALS:
A. The Issuer, National, NHLP, the Indenture Trustee and the Florida Co-
Trustee entered into that certain Indenture of Trust and Security Agreement
dated as of October 1, 1990 (the "Original Indenture" and, together with this
First Supplemental Indenture, the "Indenture"), setting forth the terms and
provisions of the Issuer's $20,000,000 aggregate principal amount of the Series
A Senior Secured ESOP Notes due June 1, 2003 (the "Series A Notes") and
$30,000,000 aggregate principal amount of the Series B Senior Secured ESOP
Notes due December 1, 2005 (the "Series B Notes" and collectively with the
Senior A Notes, the "Notes").
B. NHLP and the REIT have entered into that certain Contribution and
Assumption Agreement dated October 17, 1991 (the "Contribution Agreement")
pursuant to which NHLP has transferred certain assets, including its interest
in a portion of the Mortgaged Premises (the "Transferred Premises") to the
REIT. In connection with the transfer of the Transferred Premises, NHLP, the
REIT, the Indenture Trustee and the Florida Co-Indenture Trustee have entered
into those certain Assumption Agreements each dated as of November 1, 1991
pursuant to which (i) the REIT has acknowledged that it is accepting the
Transferred Premises subject to the lien of the respective Mortgages, (ii) the
REIT has assumed the obligation to perform the covenants contained in the
respective Mortgages and in the Indenture, as supplemented hereby and as may be
further supplemented and amended, and (iii) NHLP has acknowledged that it has
retained all of its liabilities for the obligations secured by each Mortgage.
C. The transfer of the Transferred Premises pursuant to the Contribution
Agreement resulted in a violation of certain covenants contained in the
Original Indenture and the parties have requested that the Holders of the Notes
waive such violations and consent to the transfer contemplated by the
Contribution Agreement. The Holders of the Notes have granted their temporary
consent by letters dated October 18, 1991,
<PAGE> 5
November 15, 1991 and November 27, 1991, subject to execution and delivery of
final, documentation. The Holders of the Notes have agreed to formalize their
consent in accordance with the terms and conditions contained in those certain
First Amendments to Note Agreement (the "First Amendment") dated as of November
1, 1991 between the Issuer and each Holder. As one of the conditions precedent
to granting their consent and waiver under the First Amendment, the Holders
have required, as a condition precedent to the effectiveness of their waiver
and consent that the Issuer, National, NHLP and the REIT enter into this
Supplemental Indenture and the Issuer, National, NHLP and the REIT, in
consideration for such waivers and in order to induce the Purchasers into
entering into the First Amendment, have agreed to do so.
Now, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt of which is hereby acknowledged, NHLP, the
REIT, National and the Issuer have executed and delivered this First
Supplemental Indenture and certain of the other agreements referred to herein
to which they are a party.
SECTION 1. AMENDMENT OF THE GRANTING CLAUSES OF THE INDENTURE.
Granting Clause Sixth of the Indenture is hereby amended by deleting the
words "or ss.9" in the third line thereof and inserting in lieu thereof ", ss.9
or ss.4.25".
SECTION 2. EXCHANGE OF NOTES.
On a date to be mutually agreed upon between the Holders and the Issuer
(but in any event not later than December 20, 1991), the Issuer shall execute
and deliver substitute Series A Notes in the form attached hereto as Exhibit P
(the "Substitute Series A Notes"), in an aggregate principal amount of and
registered in the name of the Holders of the outstanding Series A Notes (the
"Old Series A Notes") and substitute Series B Notes in the form attached hereto
as Exhibit Q (the "Substitute Series B Notes"), in an aggregate principal
amount of and registered in the name of the Holders of the outstanding Series B
Notes (the "Old Series B Notes"). The Substitute Series A Notes and the
Substitute Series B Notes are hereinafter collectively referred to as the
"Substitute Notes". The Old Series A Notes and the Old Series B Notes are
hereinafter collectively referred to as the "Old Notes". The Substitute Notes
shall be dated the date of the Old Notes, and the Indenture Trustee shall mark
on each Substitute Note (i) the date to which interest and principal have been
paid on such Old Note, and (ii) all payments and prepayments of principal
previously made on such Old Note that are allocable to such Substitute Note. On
the Recording Date, the Indenture Trustee shall duly authenticate the
Substitute Notes and deliver such Substitute Notes to Chapman and Cutler, 111
West Monroe Street, Chicago, Illinois 60603, upon surrender to the Indenture
Trustee of the Old Series A Notes and Old Series B Notes. Upon receipt of such
Old Notes, the Indenture Trustee shall mark the Old Notes "Cancelled" and shall
destroy the Old Notes, and shall deliver a certificate to the Issuer specifying
that such destruction has been made.
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<PAGE> 6
SECTION 3. AMENDMENT OF SECTION 1 OF THE ORIGINAL INDENTURE.
Section 3.1. Amendment of Section 1.1 of the Original Indenture. Section
1.1 of the Original Indenture is hereby amended as follows:
(a) The definitions of "Affiliate", "Cash Flow", "Consolidated Adjusted
Net Worth", "Consolidated Current Assets", "Consolidated Current Liabilities",
"Consolidated Current Debt", "Consolidated Deferred Income", "Consolidated
Funded Debt", "Consolidated Investment Net Worth", "Consolidated Net Income",
"Consolidated Net Worth", "Consolidated Total Assets", "Convertible
Subordinated Funded Debt", "Covenant Funded Debt", "Debt Service", "Interest
Charges", "Minority Interests", "Non-Convertible Subordinated Funded Debt" and
"Subsidiary" are hereby amended to read in their entirety as follows:
"Affiliate" shall mean a Person (other than a Subsidiary of
NHLP, National, NHC or the REIT, as the case may be) (1) which,
directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with,
NHLP, National, NHC or the REIT, as the case may be, (2) which
beneficially owns or holds 5% or more of the Voting Equity Interest
of NHLP, National, NHC, or the REIT, as the case may be, or (3) 5%
or more of the Voting Equity Interest of which is beneficially
owned or held by NHLP, National, NHC, or the REIT, as the case may
be, or a Subsidiary. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or
otherwise.
"Cash Flow" shall mean the sum of the following amounts for the
immediately preceding 12 month period (all as determined without giving effect
to any proposed incurrence of additional Funded Debt): (i) Consolidated Net
Income, (ii) depreciation and amortization of assets, (iii) Interest Charges
and (iv) Operating Lease Payments. In the case of a determination of Cash Flow
for NHLP, such calculation shall be made for NHLP and its Restricted
Subsidiaries. In the case of a determination of Cash Flow for the REIT, such
calculation shall be made for the REIT and its consolidated Subsidiaries on a
consolidated basis. In the case of a determination of Cash Flow for the
Constituent Companies, such calculation shall be made for the REIT and its
consolidated Subsidiaries and NHLP and its Restricted Subsidiaries on a
combined basis, without duplication and eliminating intercompany items.
-3-
<PAGE> 7
"Consolidated Adjusted Net Worth" shall mean, as of the
date of any determination thereof, (a) with respect to NHLP
and its Restricted Subsidiaries, (i) total equity of
NHLP and its Restricted Subsidiaries plus (ii) Subordinated
Funded Debt of NHLP and its Restricted Subsidiaries plus
(iii) of NHLP and its Restricted Subsidiaries and minus (iv)
Minority Interests of NHLP and its Restricted Subsidiaries,
all on a consolidated basis and (b) with respect to the REIT
and its consolidated Subsidiaries, (i) total equity of the
REIT and its consolidated Subsidiaries plus (ii) Subordinated
Funded Debt of the REIT and its consolidated Subsidiaries
minus (iii) Minority Interests of the REIT and its
consolidated Subsidiaries, all on a consolidated basis.
"Consolidated Current Assets" and "Consolidated Current
Liabilities" shall mean such assets and liabilities of, as
the case may be, (i) NHLP and its Restricted Subsidiaries,
(ii) the REIT and its consolidated Subsidiaries and (iii)
without duplication, the Constituent Companies, in each case
as shall be determined in accordance with GAAP to constitute
current assets and current liabilities, respectively.
"Consolidated Current Debt" shall mean with respect to
NHLP and its Restricted Subsidiaries, all Current Debt of
NHLP and its Restricted Subsidiaries, determined on a
consolidated basis eliminating intercompany items and (b)
with respect to the REIT and its consolidated Subsidiaries,
all Current Debt of the REIT and its consolidated
Subsidiaries, determined on a consolidated basis eliminating
intercompany items.
"Consolidated Deferred Income" shall mean with respect
to NHLP and its Restricted Subsidiaries, deferred income of
NHLP and its Restricted Subsidiaries as shall be determined
in accordance with GAAP and as reflected as such on the
balance sheets of NHLP.
"Consolidated Funded Debt" shall mean (a) with respect
to NHLP and its Restricted Subsidiaries, all Funded Debt of
NHLP and its Restricted Subsidiaries, determined on a
consolidated basis eliminating intercompany items and (b)
with respect to the REIT and its consolidated Subsidiaries,
all Funded Debt of the REIT and its consolidated
Subsidiaries, determined on a consolidated basis eliminating
intercompany items.
"Consolidated Investment Net Worth" shall mean, as of
the date of any determination thereof, (a) with respect to
NHLP and its Restricted Subsidiaries, (i) total equity of
NHLP and its Restricted
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<PAGE> 8
Subsidiaries plus (ii) Convertible Subordinated Funded Debt
of NHLP and its Restricted Subsidiaries plus (iii)
Consolidated Deferred Income of NHLP and its Restricted
Subsidiaries and minus (iv) Minority Interests of NHLP and
its Restricted Subsidiaries on a consolidated basis and (b)
with respect to the REIT and its consolidated Subsidiaries,
(i) total equity of the REIT and its consolidated
Subsidiaries plus (ii) Convertible Subordinated Funded Debt
of the REIT and its consolidated Subsidiaries and minus (iii)
Minority Interests of the REIT and its consolidated
Subsidiaries, all on a consolidated basis.
"Consolidated Net Income" for any period shall mean (a)
with respect to NHLP and its Restricted Subsidiaries, the
gross revenues of NHLP and its Restricted Subsidiaries for
such period less all expenses and other proper charges
(including taxes on income), determined on a consolidated
basis after eliminating earnings or losses attributable to
outstanding Minority Interests of NHLP and its Restricted
Subsidiaries, but excluding in any event:
(i) any gains or losses on the sale or other
disposition of investments or fixed or capital assets, and
any taxes on such excluded gains and any tax deductions or
credits on account of any such excluded losses;
(ii) the proceeds of any life insurance policy;
(iii) net earnings and losses of any Restricted
Subsidiary accrued prior to the date it became a
Restricted Subsidiary;
(iv) net earnings and losses of any corporation
(other than a Restricted Subsidiary), substantially all the
assets of which have been acquired in any manner by NHLP or
any Restricted Subsidiary, realized by such corporation prior
to the date of such acquisition;
(v) net earnings and losses of any corporation
(other than a Restricted Subsidiary) with which NHLP or a
Restricted Subsidiary shall have consolidated or which shall
have merged into or with NHLP or a Restricted Subsidiary prior
to the date of such consolidation or merger;
(vi) net earnings of any business entity (other
than a Restricted Subsidiary) in which NHLP or any Restricted
Subsidiary has an ownership interest unless either (A) the
total net earnings from all of such business entities do not
exceed 10% of Consolidated Net Income for the period for
which Consolidated
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<PAGE> 9
Net Income is being determined or (B) such net earnings shall
have, actually been received by NHLP or such Restricted
Subsidiary in the form of cash distributions;
(vii) any portion of the net earnings of any
Restricted Subsidiary which for any reason is unavailable
for payment of dividends to NHLP or any other Restricted
Subsidiary;
(viii) earnings resulting from any reappraisal,
revaluation or write-up of assets;
(ix) any deferred or other credit representing
any excess of the equity in any Subsidiary at the date of
acquisition thereof over the amount invested in such
Subsidiary;
(x) any gain arising from the acquisition of any
Securities of the Constituent Companies; and
(xi) any establishment or reversal of any
contingency reserve, except to the extent that provision for
such contingency reserve shall have been made from income
arising during such period; and
(b) with respect to the REIT and its consolidated
Subsidiaries, the gross revenues of the the REIT and its
consolidated Subsidiaries for such period less all expenses
and other proper charges (including taxes on income),
determined on a consolidated basis after eliminating earnings
or losses attributable to outstanding Minority Interests of
the the REIT and its consolidated Subsidiaries, but excluding
in any event:
(i) any gains or losses on the sale or other
disposition of investments or fixed or capital assets, and
any taxes on such excluded gains and any tax deductions or
credits on account of any such excluded losses;
(ii) the proceeds of any life insurance policy;
(iii) net earnings and losses of any consolidated
Subsidiary accrued prior to the date it became a consolidated
Subsidiary;
(iv) net earnings and losses of any corporation
(other than a consolidated Subsidiary of the REIT),
substantially all the assets of which have been acquired in
any manner by the REIT or
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<PAGE> 10
any consolidated Subsidiary of the REIT, realized by such
corporation prior to the date of such acquisition;
(v) net earnings and losses of any corporation
(other than a consolidated Subsidiary) with which the REIT or
a consolidated Subsidiary of the REIT shall have consolidated
or which shall have merged into or with the REIT or a
consolidated Subsidiary of the REIT prior to the date of such
consolidation or merger;
(vi) net earnings of any business entity (other
than a consolidated Subsidiary of the REIT) in which the REIT
or any consolidated Subsidiary of the REIT has an ownership
interest unless either (A) the total net earnings from all of
such business entities do not exceed 10% of Consolidated Net
Income for the period for which Consolidated Net Income is
being determined or (B) such net earnings shall have actually
been received by the REIT or such consolidated Subsidiary
in the form of cash distributions;
(vii) any portion of the net earnings of any
consolidated Subsidiary of the REIT which for any reason is
unavailable for payment of dividends to the REIT or any other
consolidated Subsidiary of the REIT;
(viii) earnings resulting from any reappraisal,
revaluation or write-up of assets;
(ix) any deferred or other credit representing
any excess of the equity in any Subsidiary of the REIT at the date
of acquisition thereof over the amount invested in such Subsidiary;
(x) any gain arising from the acquisition of any
Securities of the Constituent Companies; and
(xi) any establishment or reversal of any
contingency reserve, except to the extent that provision for such
contingency reserve shall have been made from income arising during
such period.
"Consolidated Net Worth" shall mean as of the date of any
determination thereof without duplication and eliminating
intercompany items, total equity of the Constituent Companies plus
Subordinated Funded Debt of NHLP and its Restricted Subsidiaries
and the REIT and its consolidated Subsidiaries, and minus Minority
Interests of NHLP and its Restricted Subsidiaries and the REIT and
its consolidated Subsidiaries, all on a combined basis.
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<PAGE> 11
"Consolidated Total Assets" shall mean, as of the date of any
determination thereof, (a) with respect to NHLP and its Restricted
Subsidiaries, the total amount of all assets of NHLP and its
Restricted Subsidiaries (less depreciation, depletion, and other
properly deductible valuation reserves) and (b) with respect to
the REIT and its consolidated Subsidiaries, the total amount of all
assets of the REIT and its consolidated Subsidiaries (less
depreciation, depletion, and other properly deductible valuation
reserves).
"Convertible Subordinated Funded Debt" shall mean (a) with
respect to NHLP and its Restricted Subsidiaries, all unsecured
Funded Debt of NHLP which contains or has applicable thereto
subordination provisions substantially in the form set forth in
Exhibit Z attached hereto (or such other provisions as may be
approved by the holders of at least 64% of the aggregate principal
amount of the Notes (evidenced by a written consent of such
holders)) providing for the subordination thereof to other Funded
Debt of NHLP, including in Funded Debt of NHLP, without limitation,
the Guaranty Agreement, and which entitles the holder thereof to
convert the principal amount of such debt into an Equity Interest
of NHLP and (b) with respect to the REIT and its consolidated
Subsidiaries, all unsecured Funded Debt of the REIT which contains
or has applicable thereto subordination provisions substantially in
the form set forth in Exhibit Z attached hereto (or such other
provisions as may be approved by the holders of at least 64% of the
aggregate principal amount of the Notes (evidenced by a written
consent of such holders)) providing for the subordination thereof
to other Funded Debt of the REIT, including in Funded Debt of the
REIT, without limitation, the REIT Guaranty, and which entitles the
holder thereof to convert the principal amount of such debt into an
Equity Interest of the REIT.
"Covenant Funded Debt" shall mean (a) with respect to NHLP
and its Restricted Subsidiaries, the sum of Senior Funded Debt of
NHLP plus Non-Convertible Subordinated Funded Debt of NHLP and (b)
with respect to the REIT and its consolidated Subsidiaries, the sum
of Senior Funded Debt of the REIT plus NonConvertible Subordinated
Funded Debt of the REIT.
"Debt Service" for any period shall mean the sum of (i)
Interest Charges for such period plus (ii) Operating Lease payments
for such period and plus (iii) principal of Funded Debt payable
during such period, in each case without duplication and
eliminating intercompany items.
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<PAGE> 12
"Interest Charges" for any period shall mean all interest and
amortization of debt discount and expense on any particular
Indebtedness for which such calculations are being made. 12
Computations of Interest Charges on a pro forma basis for
Indebtedness having a variable interest rate shall be calculated at
the rate in effect on the date of any determination.
"Minority Interests" shall mean (a) with respect to NHLP and
its Restricted Subsidiaries, any Equity Interest of any class of a
Restricted Subsidiary (other than directors' qualifying shares as
required by law) that is not owned by NHLP and/or one or more of
its Restricted Subsidiaries and (b) with respect to the REIT and
its consolidated Subsidiaries, any Equity Interest' of any class of
a consolidated Subsidiary of the REIT (other than directors'
qualifying shares as required by law) that is not owned by the REIT
and/or one or more of its consolidated Subsidiaries. Minority
Interests shall be valued by valuing Minority Interests
constituting preferred stock at the voluntary or involuntary
liquidating value of such preferred stock, whichever is greater,
and by valuing Minority Interests constituting common stock at the
book value of capital and surplus applicable thereto adjusted, if
necessary, to reflect any changes from the book value of such
common stock required by the foregoing method of valuing Minority
Interests in preferred stock.
"Non-Convertible Subordinated Funded Debt" shall mean (a)
with respect to NHLP and its Restricted Subsidiaries, 75% of
unsecured Funded Debt of NHLP which contains or has applicable
thereto subordination provisions substantially in the form set
forth in Exhibit Z attached hereto (or such other provisions as may
be approved by the holders of at least 64% of the aggregate unpaid
principal amount of the Notes (evidenced by a written consent of
such holders)) providing for the subordination thereof to other
Funded Debt of NHLP, including, without limitation, the Guaranty
Agreement, and which does not entitle the holder thereof to convert
the principal amount of such debt into an Equity Interest of NHLP
and (b) with respect to the REIT and its consolidated Subsidiaries,
75% of unsecured Funded Debt of the REIT which contains or has
applicable thereto subordination provisions substantially in the
form set forth in Exhibit Z attached hereto (or such other
provisions as may be approved by the holders of at least 64% of the
aggregate unpaid principal amount of the Notes (evidenced by a
written consent of such holders)) providing for the subordination
thereof to other Funded Debt of the REIT, including, without
limitation, the REIT Guaranty, and which does not entitle
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<PAGE> 13
the holder thereof to convert the principal amount of such debt into an Equity
Interest of the REIT.
"Subordinated Funded Debt" shall mean (a) with respect to
NHLP and its Restricted Subsidiaries, the sum of Convertible i 6
Subordinated Funded Debt of NHLP and its Restricted Subsidiaries
plus Non-Convertible Subordinated Funded Debt of NHLP and its
Restricted Subsidiaries, and (b) with respect to the REIT and its
consolidated Subsidiaries, the sum of Convertible Subordinated
Funded Debt of the REIT and its consolidated Subsidiaries plus
Non-Convertible Subordinated Funded Debt of the REIT and its
consolidated Subsidiaries.
(b) Section 1.1 of the Original Indenture is hereby further amended by
amending the definition of "Fiscal Year" by adding after the word National in
the first line thereof ", the REIT" and by adding at the end thereof "provided
further, that the Fiscal Year of NHLP and the REIT shall in any event end on
the same day."
(c) Section 1.1 of the Original Indenture is hereby further amended by
amending the first sentence of the definition of "Make-Whole Premium Amount" to
read in its entirety as follows:
"Make-Whole Premium Amount" as at any date a payment thereof is due
(the "payment date") in connection with a payment or prepayment in
respect of the Notes shall mean the excess of (i) the present value
as at the payment date of the Prepaid Cash Flows, discounted
semiannually at an annual rate which is equal to the Treasury Rate
plus (A) in the case of any payment pursuant to ss.3.7 hereof,
1.50% and (B) in the case of any other payment hereunder pursuant
to which a premium is expressed to be due and payable, 0.50% over,
in each case, (ii) the aggregate principal amount of the Notes then
to be paid or prepaid.
(d) Section 1.1 of the Original Indenture is hereby further amended by
amending the last sentence of the definition of "Subsidiary" to read in its
entirety as follows:
The term "Subsidiary" shall mean a subsidiary of NHLP, National,
NHC, or the REIT, as the context shall require.
(e) Section 1.1 of the Indenture is hereby further amended by adding
thereto the following new definitions in alphabetical order:
"Assumption Agreements" shall mean the separate Assumption
Agreements, each dated as of November 1, 1991 among NHLP, the REIT,
the Indenture Trustee and the Florida Co-Indenture Trustee.
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<PAGE> 14
"Combined Subordinated Funded Debt" shall mean all unsecured Funded Debt
of NHLP and all unsecured Funded Debt of the REIT, in each case which contains
or has applicable thereto subordination provisions substantially in the form set
forth in Exhibit Z attached hereto (or such other provisions as may be approved
by the holders of at least 64% of the aggregate principal amount of the Notes
(evidenced by a written consent of such holders)) providing for the
subordination thereof to other Funded Debt of NHLP and the REIT, respectively.
"Constituent Companies" shall mean NHLP, its Restricted Subsidiaries and
the REIT and its consolidated Subsidiaries, taken as a whole.
"Current Assets" and "Current Liabilities" shall mean such assets and
liabilities as shall be determined in accordance with GAAP to constitute current
assets and current liabilities, respectively.
"First Amendments" means the separate First Amendments to Note Agreement
each dated as of November 1, 1991 between the Issuer and each Holder.
"Homewood Facility" shall mean the Homewood Health Care Center in Glasgow,
Kentucky.
"Pro Forma Debt Service" shall mean for the 12-month period immediately
succeeding the date of determination thereof, the maximum aggregate amount of
Debt Service which would have become payable in such period determined on a pro
forma basis giving effect as of the beginning of such period to the incurrence
of any Indebtedness and Operating Leases and any concurrent retirement of
outstanding Indebtedness or termination of any Operating Leases. In the case of
a determination of Pro Forma Debt Service for NHLP, such calculation shall be
made for NHLP and its Restricted Subsidiaries on a consolidated basis. In the
case of a determination of Pro Forma Debt Service for the REIT, such calculation
shall be made for the and its consolidated Subsidiaries on a consolidated basis.
In the case of a determination of Pro Forma Debt Service for the Constituent
Companies, such calculation shall be made for the REIT and its consolidated
Subsidiaries and NHLP and its Restricted Subsidiaries on a combined basis,
without duplication and eliminating intercompany items.
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<PAGE> 15
"Prospectus" shall mean the Prospectus dated October 9, 1991
in connection with the issuance and sale of the REIT's Senior
Subordinated Convertible Debentures Due 2006.
"REIT" shall mean National Health Investors, Inc., a Maryland
corporation.
"REIT Debentures" shall mean the Senior Subordinated
Convertible Debentures Due 2006 of the REIT, as described in the
Prospectus, in an aggregate principal amount of not less than
$50,000,000 and not more than $110,000,000.
Section 3.2. Definitions. Unless otherwise defined herein, other
capitalized terms used herein shall have the meanings given thereto in the
Original Indenture.
SECTION 4. AMENDMENT OF SECTION 2 OF THE INDENTURE.
Section 4.1. Amendment of Section 2.1 of the Indenture. The last sentence
of Section 2.1(a) of the Indenture is hereby amended to read in its entirety as
follows:
The Series A Notes shall be substantially in the form attached to
the First Supplemental Indenture as Exhibit A and the Series B Notes
shall be substantially in the form attached to the First
Supplemental Indenture as Exhibit B and shall be subject to required
and optional prepayment as provided in ss.3.
Section 4.2. Amendment of Section 2.10 of the Indenture. Section 2.10 of
the Indenture is hereby amended by changing the percentage "10.69%" to "10.50%"
each place it appears therein and by changing the percentage "10.87%" to
"10.68%" each place it appears therein.
SECTION 5. AMENDMENT OF SECTION 3 OF THE INDENTURE.
Section 3 of the Indenture is hereby amended by adding thereto the
following new Section 3.7.
Section 3.7. Purchase Upon a Debt Downgrade. If, on December
31, 1992, the Notes are not rated "2" (or an NAIC equivalent rating)
or higher by the National Association of Insurance Commissioners
(the "NAIC"), each Holder of any Notes shall be entitled to tender
the Notes held thereby to NHLP for purchase pursuant to this ss.3.7.
The Holder may tender the Notes held by it at any time from and
after December 31, 1992 through the later to occur of (a) April 1,
1993 and (b) if a request for a
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<PAGE> 16
reconsideration of the downgrading has been submitted by any Holder,
the later of (i) the day prior to the date on which the NAIC has
responded to such request, if such response results in the Notes
being rated "2" (or on NAIC equivalent rating) or higher; provided,
however, that if the Notes are not rated "2" (or a NAIC equivalent
rating) or higher on December 31, 1992 and thereafter (but prior to
April 1, 1993) the Notes are rated "2" (or an NAIC equivalent
rating) or higher, the Holders' right to tender shall continue
through April 1, 1993 and (ii) 90 days after the day prior to the
date on which the NAIC has responded to such request if such
response results in the Notes being rated lower than "2" (or an NAIC
equivalent rating) (such period, the "Downgrade Tender Period").
NHLP hereby agrees that if any holder of the Notes shall have
requested NHLP to consent to any request for a rating on the Notes
as provided in Section 4.1 of the First Amendment, it will not
unreasonably withhold its consent to any such request.
At any time during the Downgrade Tender Period, the holder or
holders of any Notes shall have the privilege, upon written notice
(the "Downgrade Tender Notice") to NHLP, of tendering all Notes held
by such holder or holders serving such Downgrade Tender Notice to
NHLP for purchase and thereupon NHLP shall be obligated to purchase
such Notes on the thirtieth Business Day after receipt of such
Downgrade Tender Notice, and NHLP covenants and agrees to purchase
or cause to be purchased on such day all Notes held by such holder
or holders serving such Downgrade Tender Notice to NHLP.
In the event that any holder or holders of the Notes shall have
elected to tender for purchase all of the Notes held thereby
pursuant to this ss.3.7, then NHLP shall promptly, but in any event
within five days after the receipt of any Downgrade Tender Notice,
deliver written notice of such election to tender to each other
holder of the Notes and, notwithstanding the provisions of the
immediately preceding paragraph, the right of each such other holder
to tender for purchase (by delivery of a Downgrade Tender Notice)
all of the Notes had thereby pursuant to this ss.3.7 shall remain in
effect until 25 days after receipt by such holders of the notice
from NHLP required to be delivered pursuant to this paragraph;
provided, however, that the provisions of this sentence shall only
apply with respect to notices required to be delivered pursuant to
this paragraph to the extent that such notices redate to Downgrade
Tender Notices made by holders of the Notes prior to the expiration
of the Downgrade Tender Period.
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<PAGE> 17
All purchases of the Notes pursuant to this ss.3.7 shall be made by
NHLP by the payment of the aggregate principal amount remaining
unpaid on such Notes and accrued interest thereon to the date of the
prepayment of such Notes, together with the Make-Whole Premium
Amount. Any purchases of less than all of the outstanding Notes made
pursuant to this ss.3.7 shall be applied to the payment in full of
the Notes held by the holders providing a Downgrade Tender Notice.
The amounts of the scheduled prepayments on all Notes not purchased
shall be unchanged by such purchase.
SECTION 6. AMENDMENT OF SECTION 4 OF THE ORIGINAL INDENTURE.
Section 6.1. Amendment of Heading and First Sentence of Section 4. The
heading and first sentence of Section 4 are hereby amended to read in their
entirety as follows:
SECTION 4 COVENANTS OF NHLP AND THE REIT
NHLP and the REIT, as the case may be, hereby covenant,
represent and warrant with the Indenture Trustee for the benefit of the
Indenture Trustee and the holders of the Notes as follows:
Section 6.2. Amendment of Section 4.1 of the Original Indenture. Section
4.1 of the Original Indenture is hereby amended by adding thereto the following
new sentence at the end thereof:
The REIT will at all times preserve, warrant and defend the
Indenture Trustee's title and right in and to the Facilities to be
Transferred against the claims of all Persons.
Section 6.3. Amendment of Section 4.2 of the Original Indenture. The text
of Section 4.2 of the Original Indenture through the word "business" occurring
immediately prior to the first proviso therein is hereby amended to read in its
entirety as follows:
Section 4.2. Existence. NHLP and the REIT each will preserve
and keep in full force and effect, NHLP will cause each Restricted
Subsidiary to preserve and keep in full force and effect and the
REIT will cause each of its consolidated Subsidiaries to preserve
and keep in full force and effect its legal existence as a limited
partnership, general partnership or corporation, as the case may be,
and all licenses and permits necessary to the proper conduct of its
business,
Section 6.4. Amendment of Section 43 of the Original Indenture. Section
4.3 of the Original Indenture is hereby amended by adding thereto the following
new paragraphs at the end thereof:
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<PAGE> 18
The REIT covenants and agrees to perform, abide by and to be
governed and restricted by each and all of the terms, provisions,
restrictions, covenants and agreements set forth in each Operative
Agreement to which it is a party, and in each and every supplement
thereto or amendment thereof which may at any time or from time to
time be executed and delivered by the parties thereto or their
successors and assigns, to the same extent as though each and all of
said terms, provisions, restrictions, covenants and agreements were
fully set out herein and as though any amendments or supplements to
each of such Operative Agreements were fully set out in an amendment
or supplement to this Indenture.
The REIT will at any time and from time to time, at its own
expense, do, execute, acknowledge and deliver to the Noteholders
and/or the Indenture Trustee such further act, deed, conveyance,
transfer, instrument, document and assurance and take such further
action, if the Noteholders and/or the Indenture Trustee may from
time to time reasonably request, in order to further carry out the
intent and purpose of this Indenture and to establish and protect
the rights, intentions and remedies created, or intended to be
created, in favor of the Noteholders, including, without limitation,
the execution, delivery and recordation and filing of mortgages,
security agreements and financing statements and continuation
statements under the Uniform Commercial Code required by applicable
law to be so recorded or filed so as to make effective of record the
lien intended to be created thereby.
Section 6.5. Amendment of Section 4.4 of the Original Indenture. Section
4.4 of the Original Indenture is hereby amended to read in its entirety as
follows:
Section 4.4. Insurance. NHLP and the REIT each will maintain,
NHLP will cause each Restricted Subsidiary to maintain and the REIT
will cause each of its consolidated Subsidiaries to maintain
insurance coverage by financially sound and reputable insurers
accorded a rating by A.M. Best Company, Inc. at the time of issuance
of any policy of in the case of professional liability and property
insurance, A:VII or higher, in the case of property insurance on
boilers and machinery, A:1X or higher, and in the case of all other
policies, A:XII or higher, such insurance coverage to be in such
forms and amounts and against such risks as are customary for
business entities of established reputation engaged in the same or a
similar business and owning and operating similar properties;
provided, that NHLP or the REIT, as the case may be, will, on the
date of renewal of any such policy, obtain such insurance policy
from a financially sound and reputable insurer
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<PAGE> 19
accorded a rating by A.M. Best Company, Inc. of A:XII or higher at
the time of issuance of such policy.
Section 6.6. Amendment of Section 4.5 of the Original Indenture. Section
4.5 of the Original Indenture is hereby amended to read in its entirety as
follows:
Section 4.5. Taxes, Claims for Labor and Materials, Compliance
with Laws. NHLP and the REIT each will promptly pay and discharge,
NHLP will cause each Restricted Subsidiary promptly to pay and
discharge and the REIT will cause each of its consolidated
Subsidiaries promptly to pay and discharge, all lawful taxes,
assessments and governmental charges or levies imposed (upon NHLP,
the REIT, such Restricted Subsidiary or such consolidated
Subsidiary, respectively, or upon or in respect of all or any part
of the Property or business of NHLP, the REIT, such Restricted
Subsidiary or such consolidated Subsidiary, all trade accounts
payable in accordance with usual and customary business terms, and
all claims for work, labor or materials, which if unpaid might
become a Lien upon any property of NHLP, the REIT, such Restricted
Subsidiary or such consolidated Subsidiary; provided NHLP, the REIT,
such Restricted Subsidiary or such consolidated Subsidiary shall not
be required to pay any such tax, assessment, charge, levy, account
payable or claim if (i) the validity, applicability or amount
thereof is being contested in good faith by appropriate actions or
proceedings which will prevent the forfeiture or sale of any
Property of NHLP, the REIT, such Restricted Subsidiary or such
consolidated Subsidiary or any material interference with the use
thereof by NHLP, the REIT, such Restricted Subsidiary or such
consolidated Subsidiary, and (ii) NHLP, the REIT, such Restricted
Subsidiary or such consolidated Subsidiary shall set aside on its
books, reserves deemed by it to be adequate with respect thereto.
NHLP and the REIT will promptly comply, NHLP will cause each
Subsidiary to comply and the REIT will cause each of its
consolidated Subsidiaries to comply with all laws, ordinances or
governmental rules and regulations to which it is subject, the
violation of which could materially and adversely affect the
properties, business, prospects, profits or condition of NHLP, the
REIT or the Constituent Companies taken as a whole or would result
in any Lien except:
(a) Liens for property taxes and assessments or
governmental charges or levies and Liens securing claims or
demands of mechanics and materialmen, provided that payment
thereof is not at the time required by this ss.4.5;
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<PAGE> 20
(b) Liens of or resulting from any judgment or award,
the time for the appeal or petition for rehearing of which
shall not have expired, or in respect of which NHLP, the REIT,
a Restricted Subsidiary or any consolidated Subsidiary of the
REIT shall at any time in good faith be prosecuting an appeal
or proceeding for a review and in respect of which a stay of
execution pending such appeal or proceeding for review shall
have been secured;
(c) Liens incidental to the conduct of business or the
ownership of properties and assets (including Liens in
connection with worker's compensation, unemployment insurance
and other like laws, warehousemen's and attorneys' liens and
statutory landlords' liens) and Liens to secure the
performance of bids, tenders or trade contracts, or to secure
statutory obligations, surety or appeal bonds or other liens
of like general nature incurred in the ordinary course of
business and not in connection with the borrowing of money,
provided in each case, the obligation secured is not overdue
or, if overdue, is being contested in good faith by
appropriate actions or proceedings; and
(d) minor survey exceptions or minor encumbrances,
easements or reservations, or rights of others for
rights-of-way, utilities and other similar purposes, or zoning
or other restrictions as to the use of real properties, which
are necessary for the conduct of the activities of NHLP, the
REIT, NHLP's Restricted Subsidiaries and the REIT's
consolidated Subsidiaries or which customarily exist on
properties of corporations engaged in similar activities and
similarly situated and which do not in any event materially
impair their use in the operation of the business of NHLP, the
REIT, NHLP's Restricted Subsidiaries and the REIT's
consolidated Subsidiaries.
Section 6.7. Amendment of Section 4.6 of the Original Indenture. Section
4.6 of the Original Indenture is hereby amended to read in its entirety as
follows:
Section 4.6. Maintenance. NHLP and the REIT will:
(a) maintain, preserve and keep, and NHLP will cause each
Restricted Subsidiary to maintain, preserve and keep and the REIT
will cause each of its consolidated Subsidiaries to maintain,
preserve and keep, its properties which are used or useful in the
conduct of its business (whether owned in fee or a leasehold
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<PAGE> 21
interest) in good repair and working order and from time to time
will make all necessary repairs, replacements, renewals and
additions so that at all times the efficiency thereof shall be
maintained; and
(b) without limiting the requirements set forth in clause (a),
maintain the Financed Facilities (i) in accordance with the
Mortgages and the Note and Mortgage Assignments, (ii) in compliance
with all requirements (other than the requirement of having a
provider contract in existence) necessary to allow the Financed
Facilities to qualify at all times as eligible providers for
"Medicare" and "Medicaid" and, (iii) as eligible providers of
"Medicare" and maintain its other Property in good condition,
reasonable wear and tear excepted, and make all necessary renewals,
replacements, additions, betterments and improvements thereto all in
accordance with customary industry standards, provided that if NHLP
shall determine, as evidenced by a resolution of its Board of
Directors, that continued compliance with all requirements of
"Medicare" and "Medicaid" or continued participation as a "Medicare"
provider is not in the best interests of NHLP, the Financed
Facilities shall not be required to be so maintained.
Section 6.8. Amendment of Section 4.7 of the Original Indenture. Section
4.7 of the Original Indenture is hereby amended to read in its entirety as
follows:
Section 4.7. Nature of Business. (a) Neither NHLP nor any
Restricted Subsidiary will engage in any business if, as a result,
the general nature of the business, taken on a consolidated basis,
which would then be engaged in by NHLP and its Restricted
Subsidiaries would be substantially changed from the general nature
of the business engaged in by NHLP and its Restricted Subsidiaries
on the date of this Indenture; provided, however, that NHLP may
establish the REIT and may transfer certain of its nursing home
facilities described in the Prospectus under the heading "The
Healthcare Facilities" (including the Financed Facilities in
accordance with and subject to the Assumption Agreements) to the
REIT, in accordance with and as provided in the Prospectus.
(b) Neither the REIT nor any of its consolidated Subsidiaries
will engage in any business if, as a result, the general nature of
the business, taken on a consolidated basis, which would then be
engaged in by the REIT and its consolidated Subsidiaries would be
substantially changed from the general nature of the business to be
engaged in by the REIT and its consolidated Subsidiaries as
described in the Prospectus, and the REIT will at all times conduct
its business so as to qualify for taxation as a Real
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Estate Investment Trust under Sections 856 through 860 of the
Internal Revenue Code of 1986, as amended.
Section 6.9. Amendment of Section 4.8 of the Original Indenture. Section
4.8 of the Original Indenture is hereby amended to read in its entirety as
follows:
Section 4.8. Compliance with Environmental Laws. (a) NHLP
shall, and shall cause its Restricted Subsidiaries to, and the REIT
shall, and shall cause its consolidated Subsidiaries to, carry on
the business and operations at its Properties and all Properties
managed by it to comply in all material respects, and will comply in
all material respects with all applicable Federal, state, regional,
county or local laws, statutes, rules, regulations or ordinances,
concerning public health, safety or the environment including
without limitation, any such applicable law, statute, rule,
regulation or ordinance relating to releases, discharges or.
emissions of Hazardous Substances to air, water, land or
groundwater, to the withdrawal or use of groundwater, to the use and
handling of polychlorinated biphenyls or asbestos, to the disposal,
treatment, storage or management of hazardous or solid waste, or
Hazardous Substances or crude oil, fractious petroleum, petroleum
derivatives or by-products, or to exposure to toxic or hazardous
materials, to the handling, transportation, discharge or release of
gaseous or liquid Hazardous Substances and any regulation, order,
notice or demand issued pursuant to such law, statute or ordinance,
in each case applicable to the property of the REIT and its
Subsidiaries and NHLP and its Subsidiaries and General Partners or
the operation, construction or modification of any thereof,
including, but not limited to the following, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Act of 1986,
42 U.S.C. ss.9601 et seq., the Solid Waste Disposal Act, as amended
by the Resource Conservation and Recovery Act of 1976, as amended by
the Solid and Hazardous Waste Amendments of 1984, 42 U.S.C. ss.6901
et seq., the Federal Water Pollution Control Act, as amended by the
Clean Water Act of 1977, 33 U.S.C. ss.1251 et seq., the Toxic
Substances Control Act of 1976, 15 U.S.C. ss.2601 et seq., the
Emergency Planning and Community Right-to-Know Act of 1986, 42
U.S.C. ss.11001 et seq., the Clean Air Act of 1966, as amended, 42
U.S.C. ss.7401 et seq., the National Environmental Policy Act of
1975, 42 U.S.C. ss.4321, the Rivers and Harbours Act of 1899, 33
U.S.C. ss.401 et seq., the Endangered Species Act of 1973, as
amended, 16 U.S.C. ss.1531, et seq., the Occupational Safety and
Health Act of 1970, as amended, 29 U.S.C. ss.651 et seq., the Safe
Drinking Water Act of 1974, as amended, 42 U.S.C. Section 300(f) et
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<PAGE> 23
seq., ss.2601, et seq., and all rules, regulations and guidance
documents promulgated or published thereunder.
(b) NHLP shall, and shall cause its Restricted Subsidiaries
to, and the REIT shall, and shall cause its consolidated
Subsidiaries to, prevent the imposition of any liens or encumbrances
against the Properties for the costs of any response, removal, or
remedial action or clean up of Hazardous Substances.
Section 6.10. Amendment of Section 4.9 of the Original Indenture. Section
4.9 of the Original Indenture is hereby amended by adding thereto the following
new sentence at the end thereof:
The REIT will give advance written notice to the Indenture
Trustee of any proposed change in the REIT's name or location of its
principal office and will execute and deliver to the Indenture
Trustee at least 60 days prior to the occurrence of any such change,
all additional financing statements, as the Indenture Trustee may
require, or as may be required by law in order to publish notice of
and to continue the lien and security interest of this Indenture on
and in respect of the Mortgaged Property.
Section 6.11. Amendment of Section 4.10 of the Original Indenture. (a)
Paragraphs (a) and (b) of Section 4.10 of the Original Indenture are hereby
amended to read in their entirety as follows:
(a) NHLP and the REIT each will not, and NHLP will not permit
any Restricted Subsidiary and the REIT will not permit any
consolidated Subsidiary to, consolidate with or be a party to a
merger with any other Person (other than a transaction in accordance
with the provisions of ss.4.2); provided, however, that:
(1) any Restricted Subsidiary may merge or consolidate
with or into NHLP or another Wholly-owned Restricted
Subsidiary so long as in any merger or consolidation involving
NHLP, NHLP shall be the surviving or continuing entity; and
(2) NHLP may consolidate or merge with any other Person
if: (i) NHLP shall be the surviving or continuing entity and
(ii) at the time of such consolidation or merger, and after
giving effect thereto no Default or Event of Default shall
have occurred and be continuing.
(3) any consolidated Subsidiary of the REIT may merge or
consolidate with or into the REIT or another
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Wholly-owned consolidated Subsidiary of the REIT so long as in
any merger or consolidation involving the REIT, the REIT shall
be the surviving or continuing entity; and
(4) The REIT may consolidate or merge with any other
Person if: (i) the REIT shall be the surviving or continuing
entity; and (ii) at the time of such consolidation or merger,
and after giving effect thereto no Default or Event of Default
shall have occurred and be continuing.
(b) NHLP will not, and will not permit any Restricted
Subsidiary to sell, lease, transfer, abandon or otherwise dispose of
any Financed Facility or all or any substantial part of the assets
of NHLP and its Restricted Subsidiaries and the REIT will not and
will not permit any of its consolidated Subsidiaries to sell, lease,
transfer, abandon or otherwise dispose of any Financed Facility or
all or any substantial part of the assets of the REIT and its
consolidated subsidiaries (in each case other than in connection
with a transaction in accordance with the provisions of ss.4.2);
provided that the foregoing restrictions do not apply to:
(1) the sale, lease, transfer or other disposition of
assets of a Restricted Subsidiary to NHLP or another
Restricted Subsidiary or the sale, lease, transfer or other
disposition of assets of a consolidated Subsidiary of the REIT
to the REIT or another consolidated Subsidiary thereof;
(2) the sale, lease or other disposition of any or all
of the Owned Facilities (including, without limitation, the
Facilities to be Transferred); provided, however, that either
(i) the Indenture Trustee retains a first mortgage on such
assets and NHLP continues to either manage any Owned Facility
so transferred pursuant to a Management Agreement in
accordance with the provisions of ss.4.22 or operate as lessee
any Owned Facility so transferred pursuant to a lease
agreement in form and substance satisfactory to the Holders of
the Notes or (ii) NHLP provides a Substitute Financed Facility
pursuant to ss.10 with respect to each Owned Facility so
transferred; or
(3) the transfer of those nursing home facilities
described under "The Healthcare Facilities" in the Prospectus
but, with respect to such facilities that are Financed
Facilities, only in accordance with the First Amendment and
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the Assumption Agreements and subject to the limitations set
forth in paragraph 2 above.
(b) The last paragraph of Section 4.10 of the Original Indenture is
hereby amended by adding at the end thereof the following new sentence:
As used in this ss.4.10, a sale, lease or other disposition of
assets shall be deemed to be a "substantial part" of the assets of
the REIT and its consolidated Subsidiaries only if the book value of
such assets when added to the book value of all other assets sold,
leased or otherwise disposed of by the REIT and its consolidated
Subsidiaries during the immediately preceding Four-Quarter Period of
the REIT exceeds 15% of Consolidated Total Assets determined as of
the end of the immediately preceding Fiscal Quarter.
Section 6.12. Amendment of Section 4.11 of the Original Indenture. Section
4.11 of the Original Indenture is hereby amended to read in its entirety as
follows:
(a) NHLP will not permit at any time either:
(i) the ratio of Covenant Funded Debt of NHLP and its
Restricted Subsidiaries to Consolidated Adjusted Net Worth of
NHLP and its Restricted Subsidiaries to exceed 3.5:1;
provided, however, that the ratio of Covenant Funded Debt of
NHLP and its Restricted Subsidiaries to Consolidated Adjusted
Net Worth of NHLP and its Restricted Subsidiaries may increase
to not more than 4.0:1.0 for any number of nonconsecutive Four
Quarter Periods; or
(ii) the ratio of Consolidated Current Debt of NHLP and
its Restricted Subsidiaries to Consolidated Adjusted Net Worth
of NHLP and its Restricted Subsidiaries to exceed 1.0:1.0;
provided, however, that for purposes of this ss.4.11(a)(ii),
Consolidated Current Debt of NHLP and its Restricted
Subsidiaries shall not include current maturities of Funded
Debt of NHLP and its Restricted Subsidiaries.
(b) The REIT will not permit at any time either:
(i) the ratio of Covenant Funded Debt of the REIT and
its consolidated Subsidiaries to Consolidated Adjusted Net
Worth of the REIT and its consolidated Subsidiaries to exceed
3.5:1; provided, however, that the
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ratio of Covenant Funded Debt of the REIT and its consolidated
Subsidiaries to Consolidated Adjusted Net Worth of the REIT
and its consolidated Subsidiaries may increase to not more
than 4.0:1.0 for any number of nonconsecutive Four Quarter
Periods; or
(ii) the ratio of Consolidated Current Debt to
Consolidated Adjusted Net Worth of the REIT and its
consolidated Subsidiaries to exceed 1.0:1.0; provided,
however, that for purposes of this ss.4.11(b)(ii),
Consolidated Current Debt of the REIT and its consolidated
Subsidiaries shall not include current maturities of Funded
Debt of the REIT and its consolidated Subsidiaries.
(c) Neither NHLP or the REIT will permit at any time either:
(i) the ratio of (A) the sum of Covenant Funded Debt
of NHLP and its Restricted Subsidiaries plus Covenant Funded
Debt of the REIT and its consolidated Subsidiaries to (B) the
sum of Consolidated Adjusted Net Worth of NHLP and its
Restricted Subsidiaries plus Consolidated Adjusted Net Worth
of the REIT and its consolidated Subsidiaries to exceed 3.5:1;
provided, however, that the ratio of (A) the sum of Covenant
Funded Debt of NHLP and its Restricted Subsidiaries plus
Covenant Funded Debt of the REIT and its consolidated
Subsidiaries to (B) the sum of Consolidated Adjusted Net Worth
of NHLP and its Restricted Subsidiaries plus Consolidated
Adjusted Net Worth of the REIT and its consolidated
Subsidiaries may increase to not more than 4.0:1.0 for any
number of nonconsecutive Four Quarter Periods; or
(ii) the ratio of (A) the sum of Consolidated Current
Debt of NHLP and its Restricted Subsidiaries plus Consolidated
Current Debt of the REIT and its consolidated Subsidiaries to
(B) Consolidated Adjusted Net Worth of NHLP and its Restricted
Subsidiaries plus Consolidated Adjusted Net Worth of the REIT
and its consolidated Subsidiaries to exceed 1.0:1.0; provided,
however, that for purposes of this ss.5.12(c)(ii),
Consolidated Current Debt of NHLP and its Restricted
Subsidiaries shall not include current maturities of Funded
Debt of NHLP and its Restricted Subsidiaries
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and Consolidated Current Debt of the REIT and its consolidated
Subsidiaries shall not include current maturities of Funded
Debt of the REIT and its consolidated Subsidiaries.
(d) Neither NHLP nor the REIT shall incur any additional
Combined Subordinated Funded Debt if, after giving effect to the
issuance of such Indebtedness, the aggregate unpaid principal amount
of Combined Subordinated Funded Debt would exceed $150,000,000.
Section 6.13. Amendment of Section 4.12. Section 4.12 of the Original
Indenture is hereby amended to read in its entirety as follows:
Section 4.12. Ratio of Cash Flow to Pro Forma Debt Service.
(a) NHLP will at all times keep and maintain the ratio of Cash
Flow to Pro-Forma Debt Service at 1.30 to 1.00 or greater.
(b) The Constituent Companies will at all times keep and
maintain the ratio of Cash Flow to Pro Forma Debt Service at 1.30 to
1.00 or greater.
(c) The REIT and its consolidated Subsidiaries (i) will at all
times after the release of the Additional Collateral keep and
maintain and (ii) shall have attained prior to and as a condition to
the incurrence of any indebtedness (other than the REIT Debentures)
the ratio of Cash Plow to Pro Forma Debt Service at 1.20 to 1.00 or
greater.
Section 6.14. Amendment of Section 4.14. Section 4.14 of the Original
Indenture is hereby amended to read in its entirety as follows:
Section 4.14. Current Ratio.
(a) NHLP will at all times keep and maintain the ratio of
Consolidated Current Assets of NHLP and its Restricted Subsidiaries
to Consolidated Current Liabilities of NHLP and its Restricted
Subsidiaries at not less than 1.5 to 1.0.
(b) The Constituent Companies will at all times keep and
maintain the ratio of without duplication, the sum of (i)
Consolidated Current Assets of NHLP and its Restricted Subsidiaries
plus Consolidated Current Assets of the REIT and its consolidated
Subsidiaries to without duplication, the sum of (ii)
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Consolidated Current Liabilities of NHLP and its Restricted
Subsidiaries plus Consolidated Current Assets of the REIT and
its consolidated Subsidiaries at not less than 1.3 to 1.0.
(c) The REIT and its consolidated subsidiaries will at all
times keep and maintain the ratio of Consolidated Current Assets of
the REIT and its consolidated Subsidiaries to Consolidated Current
Liabilities of the REIT and its consolidated Subsidiaries at not
less than 1.0 to 1.0.
Section 6.15. Amendment of Section 4.16 of the Original Indenture. Section
4.16 of the Original Indenture is hereby amended by adding thereto the following
new sentence at the end thereof:
The REIT will not, and will not permit any of its consolidated
Subsidiaries to, become or be liable in respect of any Guaranty
except the REIT Guaranty and Guaranties of the REIT which are
limited in amount to a stated principal amount of Indebtedness
thereby guaranteed and provided that the Indebtedness represented
thereby shall have been incurred within the applicable limitations
provided in ss.4.11.
Section 6.16. Amendment of Section 4.17 of the Original Indenture. Section
4.17 of the Original Indenture is hereby amended to read in its entirety as
follows:
Section 4.17. Purchase of Notes by NHLP or the REIT. Neither
NHLP nor any of its Subsidiaries or Affiliates nor the REIT nor any
of its Subsidiaries or Affiliates, directly or indirectly, may
purchase or make any offer to purchase any Notes unless an offer has
been made to purchase Notes, pro rata, from all holders of the Notes
at the same time and upon the same terms. In case NHLP or any of its
Subsidiaries or Affiliates or the REIT or any of its Subsidiaries or
Affiliates purchases any Notes, such Notes shall thereafter be
cancelled and no Notes shall be issued in substitution therefor.
Notwithstanding the foregoing, NHLP may purchase and make offers to
purchase Notes in accordance with ss.3.6 hereof and any Notes so
purchased shall not be required to be cancelled and new Notes may be
issued in substitution therefor.
Section 6.17. Amendment of Section 4.18 of the Original Indenture. Section
4.18 of the Original Indenture is hereby amended to read in its entirety as
follows:
Section 4.18. Transactions with Affiliates. NHLP will not, and
will not permit any Restricted Subsidiary to, and the REIT will not,
and will not permit any consolidated Subsidiary to, enter into or be
a party to any transaction or arrangement with any Affiliate
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<PAGE> 29
or Subsidiary (including, without limitation, the purchase
from, sale to or exchange of property with, or the rendering
of any service by or for, any Affiliate or Subsidiary), except
(i) in the ordinary course of and pursuant to the reasonable
requirements of NHLP's, such Restricted Subsidiary's, the
REIT's or such consolidated Subsidiary's business and upon
fair and reasonable terms no less favorable to NHLP, such
Restricted Subsidiary, the REIT or such consolidated
Subsidiary than would obtain in a comparable arm's-length
transaction with a Person other than an Affiliate or a
Subsidiary and (ii) except for transactions between NHLP and
the REIT pursuant to which NHLP may transfer certain of its
nursing home facilities described in the Prospectus under the
heading "The Healthcare Facilities" (including certain of the
Financed Facilities in accordance with and subject to the
Assumption Agreements) to the REIT in accordance with and as
provided in the Prospectus.
Section 6.18. Amendment of Section 4.19 of the Original Indenture.
Paragraph (a) of Section 4.19 of the Original Indenture is hereby amended to
read in its entirety as follows:
(a) Investments, loans and advances by NHLP and its
Restricted Subsidiaries in and to Restricted Subsidiaries,
Equity Subsidiaries and the REIT, including any investment in
a corporation which, after giving effect to such investment,
will become a Restricted Subsidiary or an Equity Subsidiary;
provided, however, that additional investments, loans and
advances by NHLP and its Restricted Subsidiaries in the REIT
shall not be allowed at any time if and when more than 10% of
Consolidated Total Assets of the REIT shall be invested in
non-health care related property.
Section 6.19. Amendment of Section 4.20 of the Original Indenture. Section
4.20 of the Original Indenture is hereby amended to read in its entirety as
follows:
Section 4.20. ERISA Compliance.
(a) NHLP will not, and will not permit any Restricted
Subsidiary to, permit any Pension Plans at any time maintained
by NHLP (or any Restricted Subsidiary) to have any Unfunded
Vested Pension Liabilities and the REIT will not, and will not
permit any of its consolidated Subsidiaries to, permit any
Pension Plans at any time maintained by the REIT or any
consolidated Subsidiary to have any Unfunded Vested Pension
Liabilities. As used herein "Unfunded Vested Pension
Liability" shall mean an excess of the actuarial present value
of accumulated vested Pension Plan benefits as at the end of
the immediately preceding Pension Plan year of
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such Pension Plans (or as of any more recent valuation date)
over the net assets allocated to such Pension Plans which are
available for benefits, all as determined and disclosed in the
most recent actuarial valuation report for such Pension Plans
(b) All assumptions and methods used to determine the
actuarial valuation of vested employee benefits under all
Pension Plans at any time maintained by NHLP or any Restricted
Subsidiary, or the REIT or any consolidated Subsidiary and the
present value of assets of such Pension Plans shall be
reasonable in the good faith judgment of NHLP or the REIT, as
the case may be, and shall comply with all requirements of
law.
(c) NHLP will not, and will not permit any Restricted
Subsidiary to, and the REIT will not, and will not permit any
of its consolidated Subsidiaries to, cause any Pension Plan
which it maintains or in which it participates at any time to:
(1) engage in any non-exempt, "prohibited
transaction" (as such term is defined in ERISA);
(2) incur any "accumulated funding deficiency" (as
such term is defined in ERISA), whether or not waived;
or
(3) terminate any such Pension Plan in a manner
which could result in the imposition of a lien on any
property of the NHLP or any of its Restricted
Subsidiaries or the REIT or any of its consolidated
Subsidiaries, as the case may be, pursuant to ERISA.
(d) NHLP will not, and will not permit any Restricted
Subsidiary to, and the REIT will not, and will not permit any
of its consolidated Subsidiaries to, permit any condition to
exist in connection with any Pension Plan which might
constitute grounds for the PBGC to institute proceedings to
have such Pension Plan terminated or a trustee appointed to
administer such Pension Plan.
(e) NHLP will not, and will not permit any Restricted
Subsidiary to, and the REIT will not, and will not permit any
of its consolidated Subsidiaries to, withdraw from any
Multiemployer Plan if such withdrawal shall subject NHLP or
any Restricted Subsidiary or the REIT or any of its
consolidated Subsidiaries to withdrawal liability (as
described under Part 1 of Subtitle E of Title IV of ERISA).
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Section 6.20. Amendment of Section 4.21 of the Original Indenture. Section
4.21 of the Original Indenture is hereby amended to read in its entirety as
follows:
Section 4.21. Reports and Rights of Inspection. NHLP will
keep, and will cause each Restricted Subsidiary to keep, and the
REIT will keep, and will cause each of its consolidated Subsidiaries
to keep proper books of record and account in which full and correct
entries will be made of all dealings or transactions of or in
relation to the business and affairs of NHLP or such Restricted
Subsidiary and the REIT or such consolidated Subsidiary, as the case
may be, in accordance with GAAP consistently applied (except for
changes disclosed in the financial statements furnished to you
pursuant to this ss.4.21 and concurred in by the independent public
accountants referred to in ss.4.21(b) hereof), and will furnish to
the Indenture Trustee and each Institutional Holder of the then
outstanding Notes (in duplicate if so specified below or otherwise
requested):
(a) Quarterly Statements. As soon as available and in any
event within 45 days after the end of each Fiscal Quarter (except
the last) of each Fiscal Year, copies of:
(1) consolidated and consolidating balance sheets of
(A) NHLP and its Restricted Subsidiaries and (B) the REIT and its
consolidated Subsidiaries, in each case as of the close of such
Fiscal Quarter, setting forth in comparative form the consolidated
figures for the Fiscal Year then most recently ended,
(2) consolidated and consolidating statements of
operations of (A) NHLP and its Restricted Subsidiaries and (B) the
REIT and its consolidated Subsidiaries, in each case for such Fiscal
Quarter and for the portion of the Fiscal Year ending with such
period, in each case setting forth in comparative form the
consolidated figures for the corresponding periods of the preceding
Fiscal Year,
(3) consolidated and consolidating statements of cash
flows of (A) NHLP and its Restricted Subsidiaries and (B) the REIT
and its consolidated Subsidiaries, in each case for the portion of
the Fiscal Year ending with such Fiscal Quarter, setting forth in
comparative form the consolidated figures for the corresponding
period of the preceding Fiscal Year,
(4) combined balance sheets of the Constituent Companies
as of the close of such Fiscal Quarter, setting forth in
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comparative form the consolidated figures for the Fiscal Year then
most recently ended,
(5) combined statements of operations of the Constituent
Companies for such Fiscal Quarter and for the portion of the Fiscal
Year ending with such period, in each case setting forth in
comparative form the consolidated figures for the corresponding
periods of the preceding Fiscal Year, and
(6) combined statements of cash flows of the Constituent
Companies for the portion of the Fiscal Year ending with such Fiscal
Quarter, setting forth in comparative form the consolidated figures
for the corresponding period of the preceding Fiscal Year,
all in reasonable detail and certified as complete and correct by an
authorized financial officer of NHLP;
(b) Annual Statements. As soon as available and in any event
within 90 days after the close of each Fiscal Year of NHLP and the
REIT, copies of:
(1) consolidated and consolidating balance sheets of
(A) NHLP and its Restricted Subsidiaries and (13) the REIT and its
consolidated subsidiaries, in each case as of the close of such
Fiscal Year, and
(2) consolidated and consolidating statements of income
and retained earnings and cash flows of (A) NHLP and its Restricted
Subsidiaries for such Fiscal Year and (B) the REIT and its
consolidated subsidiaries, in each case setting forth in comparative
form the consolidated figures for the preceding Fiscal Year, all in
reasonable detail and accompanied by a report thereon of a firm of
independent public accountants of recognized national standing
selected by NHLP to the effect that the consolidated financial
statements have been prepared in conformity with GAAP and present
fairly, in all material respects, the financial condition of NHLP
and its Restricted Subsidiaries and the REIT and its consolidated
Subsidiaries, as the case may be and that the examination of such
accountants in connection with such financial statements has been
made in accordance with generally accepted auditing standards; and
(3) combined balance sheets of the Constituent
Companies, in each case as of the close of such Fiscal Year, and
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(4) combined statements of income and retained earnings
and cash flows of the Constituent Companies,
in each case setting forth in comparative form the combined figures
for the preceding Fiscal Year, all reasonable detail and certified
as complete and correct by an authorized financial officer of NHLP
and the REIT;
(c) Audit Reports. Promptly upon receipt thereof, one copy of
each interim or special audit made by independent accountants of the
books of NHLP or any Restricted Subsidiary or the REIT or any
consolidated Subsidiary and any management letter received from such
accountants;
(d) SEC and Other Reports. Promptly upon their becoming
available, one copy of each financial statement, report, notice or
proxy statement sent by (i) NHLP to public holders of Limited
Partnership Interests generally and (ii) the REIT to any holders of
any of its debt or equity securities, and of each regular or
periodic report, and any registration statement or prospectus filed
by NHLP or any Subsidiary thereof or the REIT or any Subsidiary
thereof with any securities exchange or the Securities and Exchange
Commission or any successor agency, and copies of any orders in any
proceedings to which NHLP or any of its Subsidiaries or the REIT or
any of its Subsidiaries is a party, issued by any governmental
agency, Federal or state, having jurisdiction over NHLP or any of
its Subsidiaries or the REIT (other than routine health care notices
issued by Federal or state agencies administering the Medicare or
Medicaid programs);
(e) ERISA Reports. Promptly upon the occurrence thereof,
written notice of (i) a Reportable Event with respect to any Pension
Plan described in Section 4043 of ERISA and the regulations issued
thereunder (other than a Reportable Event not subject to the
provision for a 30-day notice to the PBGC under such regulations),
(ii) the institution of any steps by NHLP, the REIT, any ERISA
Affiliate, the PBGC or any other person to terminate any Pension
Plan, which steps would subject NHLP or the REIT to any liability to
the PBGC; (iii) the institution of any steps by NHLP, the REIT or
any ERISA Affiliate to withdraw from any Pension Plan, which steps
would subject NHLP or any ERISA Affiliate to any withdrawal
liability; (iv) a "prohibited transaction" within the meaning of
Section 406 of ERISA in connection with any Pension Plan; (v) any
material increase in the contingent liability of NHLP or any
Restricted Subsidiary or the
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<PAGE> 34
REIT or any consolidated Subsidiary with respect to any post
retirement welfare liability; or (vi) the taking of any action by,
or the threatening of the taking of any action by, the Internal
Revenue Service, the Department of Labor or the PBGC with respect to
any of the foregoing;
(f) Officers' Certificates. Within the periods provided in
paragraphs (a) and (b) above, certificates of an authorized
financial officer of (i) NHLP, (ii) the REIT and (iii) NHLP and the
REIT, each stating that such officer has reviewed the provisions of
this Agreement and setting forth: (i) the information and
computations (in sufficient detail) required in order to establish
whether NHLP, the REIT, and the Constituent Companies, as the case
may be, were in compliance with the requirements of ss.4.11 through
ss.4.14 at the end of the period covered by the financial statements
then being furnished, and (ii) whether there existed as of the date
of such financial statements and whether, to the best of such
officer's knowledge, there exists on the date of the certificate or
existed at any time during the period covered by such financial
statements any Default or Event of Default and, if any such
condition or event exists on the date of the certificate, specifying
the nature and period of existence thereof and the action NHLP, the
REIT or the Constituent Companies, as the case may be, is taking and
proposes to take with respect thereto;
(g) Accountant's Certificates. Within the period provided in
paragraph (b) above, a certificate of the accountants who render an
opinion with respect to such financial statements, stating that they
have reviewed this Indenture and stating further whether, in making
their audit, such accountants have become aware of any Default or
Event of Default under any of the terms or provisions of this
Indenture insofar as any such teens or provisions pertain to or
involve accounting matters or determinations, and if any such
condition or event then exists, specifying the nature and period of
existence thereof;
(h) Unrestricted Subsidiaries. Within the respective periods
provided in paragraph (b) above, financial statements of the
character and for the dates and periods as in said paragraph (b)
provided covering each Unrestricted Subsidiary of NHLP that is also
a consolidated Subsidiary of NHLP; and
(i) Requested Information. With reasonable promptness, such
other data and information as any Institutional Holder may
reasonably request, including, without limitation, a report on the
value of the Additional Collateral.
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Without limiting the foregoing, NHLP and the REIT will permit each
Institutional Holder of the then outstanding Notes (or such Persons
as such Institutional Holder may designate), to visit and inspect,
under NHLP's or the REIT's (as the case may be) guidance, any of the
properties of NHLP or any Restricted Subsidiary or the REIT or any
consolidated Subsidiary thereof, to examine all of their books of
account, records, reports and other papers, to make copies and
extracts therefrom and to discuss their respective affairs, finances
and accounts with their respective officers, employees, and
independent public accountants (and by this provision NHLP and the
REIT authorizes said accountants to discuss with each Institutional
Holder the finances and affairs of NHLP and its Restricted
Subsidiaries and the REIT and its consolidated Subsidiaries) all at
such reasonable times and as often as may be reasonably requested.
NHLP and the REIT shall not be required to pay or reimburse any such
holder for expenses which any such holder may incur in connection
with any such visitation or inspection, provided that if such
visitation or inspection is made during any period when a Default or
an Event of Default shall have occurred and be continuing, NHLP and
the REIT each agrees to reimburse such holder for all such expenses
promptly on demand.
Section 6.21. Amendment of Section 4.22 of the Original Indenture. Section
4.22 of the Original Indenture is hereby amended to read in its entirety as
follows:
Section 4.22. Management Agreements. NHLP will at all times
keep in force and effect a Management Agreement with respect to each
of the Managed Facilities.
Section 6.22. Amendment of Section 4 of the Original Indenture. Section 4
of the Original Indenture is hereby further amended by adding thereto after
Section 4.24 the following new Sections 4.25 and 4.26:
Section 4.25. Pledge of Additional Collateral by the REIT. (a)
The REIT hereby covenants and agrees that on the Transfer Date it
shall deposit and pledge with the Indenture Trustee, as additional
collateral under this Indenture, Permitted Investments, cash and,
subject to the limitations set forth below, mortgages on facilities
owned by the REIT and assignments of mortgages from the REIT, in the
aggregate having a book value on such date of not less than
$20,000,000 (the "Additional Collateral"). The Trustee shall hold
such Additional Collateral in a separate and segregated account
under this Indenture to be designated the "Additional Collateral
Account", and all such Additional Collateral and any Permitted
Investments from time to
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time constituting a part thereof are hereby pledged and assigned to
the Indenture Trustee and the Florida Co-Indenture Trustee and shall
at all times constitute additional security for the Notes and all
other indebtedness hereby secured. If a Default or Event of Default
has occurred and is continuing to the knowledge of the Indenture
Trustee, all moneys and Permitted Investments on deposit as part of
the Additional Collateral Account shall be applied to the repayment
of the Notes in the manner provided for in ss.8.11 in respect of the
proceeds and avails of the collateral.
(b) If no Default or Event of Default shall exist, any
interest, investment earnings or other distribution on any part of
the Additional Collateral shall be paid over to or upon the order of
the REIT not more frequently than quarterly, provided that the book
value of Additional Collateral on deposit in the Additional
Collateral Account shall at such times equal or exceed $20,000,000.
If a Default or Event of Default shall exist, all interest,
investment earnings or other distributions on any part of the
Additional Collateral shall be held by the Trustee as part of the
Trust Estate.
(c) So long as no Default or Event of Default shall have
occurred and be continuing, the REIT may substitute new Additional
Collateral for any or all of the Additional Collateral from time to
time on deposit in the Additional Collateral Account and may
otherwise direct the investment of the Additional Collateral. The
REIT shall give the Indenture Trustee and the holders of the Notes
written notice not less than 120 days prior to the date on which the
REIT proposes to pledge any Additional Collateral consisting of
property other than Permitted Investments in substitution for any
Additional Collateral then had pursuant to this Indenture. Unless a
Default or Event of Default has occurred and is continuing, the
Indenture Trustee shall execute a release in respect of the
Additional Collateral then held pursuant to this Indenture on the
date of substitution upon compliance by the REIT with the following
requirements:
(i) In the event that the REIT has elected to pledge a
facility owned by the REIT, then in such event, prior to any
release of such Additional Collateral, the Indenture Trustee
shall have received:
(A) a mortgage or deed of trust with respect to
such facility in form and substance satisfactory to the
Indenture Trustee, duly executed, acknowledged and
delivered by the REIT, in full force and effect and
recorded or filed for record, together with all
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necessary financing statements and similar notices if
and to the extent permitted or required by applicable
law, in each public office wherein such recording or
filing is deemed necessary or appropriate by the
Indenture Trustee and its counsel to perfect the lien
thereof as a valid first mortgage lien on such facility
as against creditors of or purchasers from the REIT; and
(B) an Opinion of Counsel for the REIT to the
effect that the Mortgage with respect to such facility
has been duly authorized, executed and delivered by the
REIT and constitutes a legal, valid and binding
instrument enforceable in accordance with its terms,
subject to bankruptcy and equitable principles, no
approval, consent or withholding of objection on the
part of, or filing registration or qualification with
any governmental body, Federal, state or local, is
necessary in connection with the execution and delivery
by the REIT of such mortgage or the performance by the
REIT of any of the matters required of the REIT
thereunder and compliance by the REIT with all of the
provisions of such mortgage will not conflict with or
result in any breach of any of the provisions of or
constitute a default under or result in the creation or
imposition of any lien or encumbrances on any property
of the REIT pursuant to the provisions of the Articles
of Incorporation or By-laws of the REIT or any other
agreement or instrument to which the REIT is a party or
by which the REIT may be bound and further to the effect
that all licenses relating to the operation and use of
such facility are in full force and effect in the name
of the REIT and that no further licenses or permits are
required under any local, state or Federal law,
ordinance, rule or regulation in order to conduct the
business of the REIT at such facility.
(ii) In the event that the REIT has elected to pledge a
mortgage held by it as mortgagee, then in such event, prior to
any release of such Additional Collateral, the Indenture
Trustee shall have received:
(A) an assignment of such mortgage, duly executed,
acknowledged and delivered by the REIT (and consented to
by the owner of such facility) in full force and effect
and recorded or filed for record,
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<PAGE> 38
together with all necessary financing statements and
similar notices if and to the extent permitted or
required by applicable law, in each public office
wherein such recording or filing is deemed necessary or
appropriate by the Indenture Trustee and its counsel to
perfect the lien thereof as a valid first mortgage lien
on such facility as against creditors of or purchasers
from the REIT; and
(B) an Opinion of Counsel for the owner of such
facility to the effect that the mortgage and the consent
to the assignment thereof have each been duly
authorized, executed and delivered by the owner thereof
and each constitutes a legal, valid and binding
instrument enforceable in accordance with its terms,
subject to bankruptcy and equitable principles, no
approval, consent or withholding of objection on the
part of, or filing registration or qualification with
any governmental body, Federal, state or local, is
necessary in connection with the execution and delivery
by the owner thereof of such mortgage and the consent to
the assignment thereof or the performance by the owner
thereof of any of the matters required of the owner
thereof, and compliance by the owner thereof with all of
the provisions of such mortgage and consent to the
assignment thereof will not conflict with or result in
any breach of any of the provisions of or constitute a
default under or result in the creation or imposition of
any lien or encumbrances on any property of the owner
thereof pursuant to the provisions of the organizational
documents or By-laws of the owner thereof or any other
agreement or instrument of which the owner thereof is a
party or by which the owner thereof may be bound, and
(ii) an Opinion of Counsel for the REIT to the effect
that the mortgage assignment with respect to such
facility has each been duly authorized, executed and
delivered by the REIT and constitutes a legal, valid and
binding instrument enforceable in accordance with its
terms subject to bankruptcy and equitable principles,
no approval, consent or withholding of objection on the
part of, or filing registration or qualification with
any governmental body, Federal, state or local, is
necessary in connection with the execution and delivery
by the REIT of such assignment or the performance by the
REIT of any of the matters
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<PAGE> 39
required of the REIT thereunder, and compliance by the
REIT with all of the provisions of such assignment will
not conflict with or result in any breach of any of the
provisions of or constitute a default under or result in
the creation or imposition of any lien or encumbrances
on any property of the REIT pursuant to the provisions
of the Articles of Incorporation or By-laws of the REIT
or any other agreement or instrument to which the REIT
is a party or by which the REIT may be bound and further
to the effect that all licenses relating to the
operation and use of such facility are in full force and
effect in the name of the owner of such Facility and
that no further licenses or permits are required under
any local, state or Federal law, ordinance, rule or
regulation in order to conduct the business of the owner
at such Acquired Facility.
(iii) In the case of both (i) and (ii) above, a survey,
a mortgage title insurance policy, a report of insurance
brokers, an Environmental Audit and a list of licenses and
permits in form and substance satisfactory to the Indenture
Trustee.
(iv) Such other opinions, certificates, and other
instruments as the Indenture Trustee or the holders of not
less than 64% in aggregate principal amount of the Notes
outstanding may reasonably request.
(v) the REIT shall pay all reasonable costs, charges
and expenses in any way relating to or incurred in connection
with the substitution of Additional Collateral and transfers
into and out of the Additional Collateral Account, including
reasonable attorneys' fees and expenses, recording fees,
premiums covering title insurance and all applicable taxes
which may be incurred or imposed by reason of such
transactions.
(d) The REIT hereby covenants and agrees to maintain
Additional Collateral on deposit in the Additional Collateral
Account having a book value of not less than $20,000,000 and, each
fiscal quarter, to provide to each Holder of a Note a written report
listing the investments constituting the Additional Collateral (and
showing the issuer thereof, the interest rate thereon and the
maturity date thereof, if applicable) then on deposit in the
Additional Collateral Account. Mortgages on facilities not owned by
the REIT and pledged hereunder shall be valued at the book
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<PAGE> 40
value of the outstanding indebtedness secured thereby;
provided, however, that if such mortgage is in default, such
mortgage shall be valued at the fair market value of the
underlying property, as determined by an Appraiser; provided
further, however, that the book value of the outstanding
indebtedness secured by a mortgage cannot exceed the fair
market value of the underlying property, whether or not such
indebtedness is in default. Any facility owned by the REIT and
pledged hereunder and the underlying property securing any
mortgage pledged by the REIT hereunder shall be appraised by
an Appraiser initially upon the pledge thereof hereunder and
thereafter at each three-year anniversary of such pledge
hereunder; provided, however, that any holder of any Notes may
request such an appraisal or appraisals of any such Facility
or property at any time or from time to time. The REIT hereby
covenants and agrees to pay all costs and expenses of all such
appraisals required or requested pursuant hereto.
(e) The Indenture Trustee shall use its best efforts to
release the Additional Collateral to or upon the order of the
REIT within five Business Days after receipt of evidence
satisfactory to the Holders of the first to occur of (i) at
least 75% of the original aggregate principal amount of the
REIT Debentures having been converted to common stock, (ii)
the REIT shall have attained a ratio of Cash Flow to Pro Forma
Debt Service of 1.50 to 1.00 or greater or (iii) the release
of the lien of the Indenture.
Section 4.26. Limitation on Optional Redemption of REIT
Debentures. The REIT will not exercise any option to redeem
any of the REIT Debentures if at the time of such action a
Default or Event of Default shall exist and be continuing or
would exist immediately after giving effect to such action.
Section 4.27. Prepayment of Notes in Connection with
Lack of Consent on Homewood Facility. If, on or before April
1, 1992, the Holders have not received evidence satisfactory
to them that the United States Department of Housing and Urban
Development shall have consented to the transfer of the
Homewood Facility to the REIT, a principal amount of Notes
equal to the principal amount of indebtedness then secured by
the HUD-mortgage on the Homewood Facility shall be prepaid
pursuant to ss.3.2.
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SECTION 7. AMENDMENT OF SECTION 7 OF THE INDENTURE.
Section 7.1. Amendment of Section 7.1 of the Original Indenture. Section
7.1 of the Original Indenture is hereby amended by adding thereto the following
new sentence at the end thereof:
All amounts received from time to time by the Indenture Trustee from
NHLP with respect to the Assignments shall beheld held by the
Indenture Trustee and applied to the payments and prepayments of
principal of, premium, if any, and interest on the allocable portion
of the Notes to which such payments relate which have become due and
payable or will become due and payable on the date of receipt of any
of the foregoing payments or prior to the first day of the month
next succeeding the date of any such receipt, and the balance
thereof shall be paid to the REIT.
SECTION 8. (f)AMENDMENT OF SECTION 8 OF THE INDENTURE.
Section 8.1. Amendment of Section 8.1 of the Original Indenture. (a)
Sections 8.1(f) and 8.1(g) of the Original Indenture are hereby amended to read
in their entirety as follows:
(f) Default shall be made in the payment when due (whether by
lapse of time, by declaration, by call for redemption or otherwise)
of the principal of or interest on any Funded Debt or Current Debt
in excess of $100,000 in aggregate principal amount (other than the
Funded Debt evidenced by the Notes) of the Issuer, NHLP, National or
the REIT or any Restricted Subsidiary of NHLP or National or any
consolidated Subsidiary of the REIT and such default shall continue
beyond the period of grace, if any, allowed with respect thereto; or
(g) Default or the happening of any event shall occur under
any indenture, agreement, or other instrument under which Funded
Debt or Current Debt in excess of $100,000 in aggregate principal
amount of the Issuer, NHLP, National or the REIT or any Restricted
Subsidiary of NHLP or National or any consolidated Subsidiary of the
REIT may be issued and such default or event shall continue for a
period of time sufficient to permit the acceleration of the maturity
of any Funded Debt or Current Debt of the Issuer, NHLP, National or
the REIT or any Restricted Subsidiary of NHLP or National or any
consolidated Subsidiary of the REIT outstanding thereunder; or
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<PAGE> 42
(b) Section 8.1(i) of the Original Indenture is hereby amended to
read in its entirety as follows:
(i) Any default shall occur under any lease agreement between
the REIT and NHLP under which any Facility to be Transferred is
being leased or any default shall occur in the observance or
performance of any covenant or agreement contained in the REIT
Guaranty, the Guaranty Agreement, the Stock Purchase Agreement, the
Stock Pledge Agreement, the NHLP Loan Agreement, the Assignment of
NHLP Note or the Assumption Agreements and such default shall
continue for more than 30 days; or
(b) Sections 8.1(k) and 8.1(1) of the Original Indenture are hereby
amended to read in their entirety as follows:
(k) If any representation or warranty made by National, NHLP,
NHC or the REIT in the Guaranty Agreement or the REIT Guaranty, or
in any written statement or certificate furnished by National, NHLP,
NHC or the REIT pursuant thereto or hereto, is untrue in any
material respect as of the date of the issuance or making thereof;
or
(1) NHLP or the REIT shall fail to comply in any respect with
the provisions of one or more Mortgages or the Note and Mortgage
Assignments to which it is a party or by which it may be bound, and
such failure continues for more than a period of 30 days; or
(c) Sections 8.1(n), 8.1(o), 8.1(p), 8.1(q) and 8.1(r) of the Original
Indenture are hereby amended to read in their entirety as follows:
(n) This Indenture, any Note Purchase Agreement, the Guaranty
Agreement, the REIT Guaranty or any Assumption Agreement shall cease
to be in full force and effect for any reason whatsoever, including,
without limitation, a final non-appealable determination by any
governmental body or court of competent jurisdiction that such
agreement is invalid, void or unenforceable or National, NHC or NHLP
shall contest or deny in writing the validity or enforceability of
any of its obligations under the Guaranty Agreement or the REIT
shall contest or deny in writing the validity or enforceability of
any of its obligations under the REIT Guaranty; or
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<PAGE> 43
(o) Final judgment or judgments of a court or courts of
competent jurisdiction for the payment of money aggregating in
excess of $1,00O,000 is or are outstanding against National, NHLP or
any Restricted Subsidiary of NHLP, NHC, the Issuer or the REIT or
any consolidated Subsidiary of the REIT, as the case may be, or
against any property or assets of any thereof and any one of such
judgments has remained unpaid, unvacated, unhanded or unstayed by
appeal or otherwise for a period of 90 days from the date of its
entry; or
(p) A custodian, trustee or receiver is appointed for the
Issuer (excluding the appointment of a successor Plan Trustee or a
custodian in accordance with the terms of the Trust Agreement),
National, NHLP, NHC or any Restricted Subsidiary of any thereof or
the REIT or any consolidated Subsidiary thereof or for any material
part of the property of any of them and is not discharged within 30
days after such appointment, or
(q) The Issuer, National, NHLP, NHC or any Restricted
Subsidiary of any thereof or the REIT or any consolidated Subsidiary
thereof becomes insolvent or bankrupt, is generally not paying its
debts as they become due or makes an assignment for the benefit of
creditors, or the Issuer, National, NHLP, NHC or any Restricted
Subsidiary of any thereof or the REIT or any consolidated Subsidiary
thereof causes an order for relief to be entered with respect to it
under applicable Federal bankruptcy law or applies for or consents
to the appointment of a custodian, trustee or receiver for the
Issuer, National, NHLP, NHC or any Restricted Subsidiary of any
thereof or the REIT or any consolidated Subsidiary thereof or for
any material part of the property of any of them; or
(r) Bankruptcy, reorganization, arrangement or insolvency
proceedings, or other proceedings for relief under any bankruptcy or
similar law or laws for the relief of debtors, are instituted by or
against the Issuer, National, NHLP, NHC or any Restricted Subsidiary
of any thereof or the REIT or any consolidated Subsidiary thereof
and, if instituted against the Issuer, National, NHLP, NHC or any
Restricted Subsidiary of any thereof or the REIT or any consolidated
Subsidiary thereof are not dismissed within 60 days after such
institution or are consented to.
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SECTION 9. AMENDMENT OF SECTION 9 OF THE INDENTURE.
Section 9.1. Amendment of Section 9.4(c)(ii) of the Original Indenture.
Section 9.4(c)(ii) of the Indenture is hereby amended by adding thereto the
following new text:
and with respect to each of the Sun City Facility and the Pinellas
Facility, a Mortgage in substantially the form attached hereto as
Exhibit C-3 except that the mortgagee thereunder shall be the REIT
and NHLP, a Managed Facility Note, a Note and Mortgage Assignment
(and a consent thereto) from the REIT and NHLP, a Management
Agreement and a Collateral Assignment of Management Agreement Fees
and financing statements or assignments of the financing statements
with respect to each such Facility and the equipment located
thereon, which Mortgages and financing statements and Note and
Mortgage Assignment shall be recorded or filed for record in each
public office in which such recording or fling is deemed necessary
or appropriate by the Note Purchasers or their special counsel.
SECTION 10. MISCELLANEOUS.
Section 10.1. Successors and Assigns. Whenever any of the parties hereto
is referred to, such reference shall be deemed to include the successors and
assigns of such party; and all the covenants, premises and agreements in this
First Supplemental Indenture contained shall bind and inure to the benefit of
the respective successors and assigns of the parties whether so expressed or
not.
Section 10.2. Severability. In case any one or more of the provisions
contained in this First Supplemental Indenture shall be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
effected or impaired thereby.
Section 10.3. Notices. All communications provided for herein shall be
given as provided for in Section 14.3 of the Original Indenture; provided,
however, that notice to the REIT shall be addressed as follows:
National Health Investors, Inc.
Suite 1402, City Center
100 Vine Street
Murfreesboro, Tennessee 37130
Attention: Secretary
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<PAGE> 45
Section 10.4. Counterparts. This First Supplemental Indenture may be
executed, acknowledged and delivered in any number of counterparts, each of such
counterparts constituting an original but all together only one instrument.
Section 10.5. Law Governing. This First Supplemental Indenture shall be
construed in accordance with, and governed by, the laws of the State of
Illinois.
Section 10.6. Expenses, Stamp Tax Indemnity. Whether or not the
transactions herein contemplated shall be consummated, NHLP agrees to pay all
expenses relating to the subject matter of this First Supplemental Indenture,
including but not limited to:
(a) the cost of reproducing this First Supplemental Indenture, the
First Amendments, the Assumption Agreements and the REIT and all other
documents required or contemplated hereunder;
(b) the reasonable fees and disbursements of Chapman and Cutler,
special counsel to the Holders and Day, Berry & Howard, special counsel to
the Indenture Trustee;
(c) the reasonable out-of-pocket expenses of the Note Holders, the
Indenture Trustee and the Florida Co-Indenture Trustee; and
(d) all recording, filing fees and stamp taxes in connection with
the recordation or filing and rerecordation or refiling of Assumption
Agreements and any related documents and other notices thereof.
The obligations of NHLP under this ss.7.6 shall survive the payment or
prepayment of the Notes and the termination of the Indenture.
Section 10.7. Modification Not To Effect Liability of Parties Under
Original Indenture. The Issuer, NHLP, National and the REIT each hereby consents
to the execution of this First Supplemental Indenture, the Assumption Agreements
and the REIT Guaranty by the parties thereto and hereby acknowledge that such
documents shall in no way limit the liabilities of the parties under the
Mortgages, the Indenture, the Guaranty, any other Operative Agreement or any
other document or instrument executed and delivered in connection with the
issuance of the Notes. Upon an Event of Default under the Indenture, the
Noteholders may proceed to enforce their rights under the Guaranty and the
liability of the Guarantors under the Guaranty shall continue to be absolute and
unconditional and shall not in any manner be affected or impaired by the
acceptance of the Noteholders of the REIT Guaranty or by any failure, neglect or
omission on the part of the Noteholders to proceed first to collect under the
REIT Guaranty. There shall be no obligation on the part of the Noteholders at
any time to first resort for payment under the REIT Guaranty or any of the
property held as collateral therefor, nor any requirement to exhaust its
remedies under the REIT Guaranty, before making a claim under the Notes, the
Indenture, the Mortgages or the
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<PAGE> 46
Guaranty or resorting to any collateral, security, property or liens for any
rights whatsoever securing the obligations under any thereof.
Section 10.8. Ratification. Except to the extent hereby modified, amended
or waived, the Original Indenture is in all respects hereby ratified, confirmed
and approved by the parties hereto.
Section 10.9. References to Indenture. Any and all notices, requests,
certificates and other instruments executed and delivered concurrently with or
after the execution of the Supplemental Indenture may refer to the Indenture
without making specific reference to this Supplemental Indenture, but
nevertheless all such references shall be deemed to include this Supplemental
Indenture unless the context shall otherwise require.
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<PAGE> 47
IN WITNESS WHEREOF, NHLP, National, the Issuer and the REIT have each
caused this First Supplemental Indenture to be executed, and State Street Bank
and Trust Company of Connecticut, National Association, as Indenture Trustee, in
evidence of its acceptance of the trusts hereby created, and Barnett Banks Trust
Company, National Association, as Florida Co-Indenture Trustee has caused this
Indenture to be executed, all as of the day and year first above written.
NATIONAL HEALTHCORP L.P.
By NHC, Inc.,
Its Managing General Partner
By
-----------------------------------------
Its
By National Health Corporation,
Its Administrative General Partner
By
-----------------------------------------
Its
NATIONAL HEALTH CORPORATION
By
-----------------------------------------
Its
NATIONAL HEALTH INVESTORS, INC.
By
-----------------------------------------
Its
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<PAGE> 48
NATIONAL HEALTH CORPORATION
LEVERAGED EMPLOYEE STOCK
OWNERSHIP TRUST
By
------------------------------------
As Co-Trustee of the Issuer
By
------------------------------------
As Co-Trustee of the Issuer
STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, NATIONAL
ASSOCIATION, as Indenture Trustee
By
------------------------------------
Its
BARNETT BANKS TRUST COMPANY,
NATIONAL ASSOCIATION, as Florida
Co-Indenture Trustee
By
------------------------------------
Its
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<PAGE> 1
Exhibit 5
October 2, 1997
National HealthCare Corporation
100 Vine Street
City Center
Murfreesboro, Tennessee 37130
Gentlemen:
We have acted as special counsel to National HealthCare Corporation
(the "Company), a Delaware corporation, in connection with the registration of
10,819,400 shares of its common stock to be issued in a public offering pursuant
to Registration Statement No. ________ on Form S-4, as filed with the Securities
and Exchange Commission (the "Registration Statement"). This firm hereby
consents to the filing of this opinion as an exhibit to the Registration
Statement and with agencies of such states and other jurisdictions as may be
necessary in the course of complying with the laws of such states and
jurisdictions regarding the offering and sale of the common stock in accordance
with the Registration Statement. We further consent to the use of our name in
the Registration Statement under the section of the prospectus entitled "Legal
Matters".
This Opinion is governed by, and shall be interpreted in accordance
with the Legal Opinion Accord (the "Accord") of the ABA Section of Business Law
(1991). As a consequence, it is subject to a number of qualifications,
assumptions, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord, and this Opinion
should be read in conjunction therewith. The Opining Jurisdiction covered by the
opinions expressed herein is limited to the law of the State of Tennessee and
the corporate law of the State of Delaware.
We have examined copies of the Company's Certificate of Incorporation
and Bylaws, such records of proceedings of the Company's Board of Directors as
we consider appropriate, and the Registration Statement.
In stating our opinion, we have assumed: (i) that all signatures are
genuine, all documents submitted to us as originals are authentic, and all
documents submitted to us as copies conform to authentic original documents; and
(ii) that the parties to such documents have the legal right and power under all
applicable laws, regulations and agreements to enter into, execute, deliver and
perform their respective obligations thereunder.
<PAGE> 2
National HealthCare Corporation
October 2, 1997
Page 2
On the basis of such review, subject to the limitations expressed
herein, we are of the opinion, as of the date hereof, that the securities being
registered by the Registration Statement when issued, sold, and delivered in
accordance with the terms set forth in the Registration Statement will be
validly issued, fully paid and non-assessable.
In rendering the opinion set forth herein, we have relied upon the
documents referenced above and such other information as we have deemed
necessary, but we have made no independent verification or investigation of
factual matters pertaining thereto or to the Company. In addition to the
qualifications, assumptions, exceptions, definitions, limitations on coverage
and other limitations, all as more particularly described in the Accord, the
opinion expressed herein is subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws now or
thereafter in effect relating to or affecting the rights of creditors generally,
judicial discretion, and equitable principles whether applied pursuant to a
proceeding at law or in equity; and no opinion is expressed with respect to the
availability of equitable remedies.
Sincerely,
HARWELL HOWARD HYNE
GABBERT & MANNER, P.C.
<PAGE> 1
Exhibit 10.1
MASTER AGREEMENT TO LEASE
between
NATIONAL HEALTH INVESTORS, INC., Landlord
and
NATIONAL HEALTHCORP L.P., Tenant
Dated: October 17, 1991
<PAGE> 2
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I: SEPARATE LEASE AGREEMENTS; PREMISES AND TERM.............. 1
1.01 Separate Lease Agreements................................. 1
1.02 Leased Property........................................... 2
1.03 Term...................................................... 2
1.05 Holding Over.............................................. 3
1.06 Surrender................................................. 3
ARTICLE II: RENT...................................................... 3
2.01 Base Rent................................................. 3
2.02 Additional Rent........................................... 4
2.03 Place(s) of Payment of Rent; Direct
Payment of Additional Rent................................ 4
2.04 Net Lease................................................. 5
2.05 No Termination, Abatement, Etc............................ 5
2.06 Percentage Rent........................................... 6
ARTICLE III: IMPOSITIONS AND UTILITIES................................. 7
3.0l Payment of Impositions.................................... 7
3.02 Definition of Impositions................................. 9
3.03 Escrow of Impositions..................................... 9
3.04 Utilities................................................. 10
3.05 Discontinuance of Utilities............................... 11
ARTICLE IV: INSURANCE................................................. 11
4.01 Property Insurance........................................ 11
4.02 Liability Insurance....................................... 12
4.03 Insurance Requirements.................................... 12
4.04 Replacement Cost.......................................... 13
4.05 Blanket Policy............................................ 13
4.06 No Separate Insurance..................................... 13
4.07 Waiver of Subrogation..................................... 14
4.08 Mortgages................................................. 14
4.09 Escrows................................................... 14
ARTICLE V: INDEMNITY; HAZARDOUS SUBSTANCES........................... 14
5.01 Tenant's Indemnification.................................. 14
5.02 Hazardous Substances or Materials......................... 15
5.03 Limitation of Landlord's Liability........................ 16
ARTICLE VI: USE AND ACCEPTANCE OF PREMISES............................ 16
6.01 Use of Leased Property.................................... 16
6.02 Acceptance of Leased Property............................. 16
6.03 Conditions of Use and Occupancy........................... 17
6.04 Financial Statements...................................... 17
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE VII: REPAIRS, COMPLIANCE WITH LAWS,
AND MECHANICS' LIENS...................................... 17
7.01 Maintenance............................................... 17
7.02 Compliance With Laws...................................... 18
7.03 Required Alterations...................................... 18
7.04 Mechanic's Liens.......................................... 18
7.05 Replacements of Fixtures.................................. 19
ARTICLE VIII: ALTERATIONS AND SIGNS..................................... 19
8.01 Prohibition on Alterations and Improvements............... 19
8.02 Requirements for Permitted Alterations.................... 20
8.03 Ownership and Removal of Permitted Alterations............ 21
8.04 Signs..................................................... 21
ARTICLE IX: DEFAULTS AND REMEDIES..................................... 21
9.01 Events of Default......................................... 21
9.02 Remedies.................................................. 23
9.03 Right of Set-Off.......................................... 26
9.04 Performance of Tenant's Covenants......................... 26
9.05 Late Charge............................................... 26
9.06 Litigation; Attorneys' Fees............................... 26
9.07 Remedies Cumulative....................................... 27
9.08 Escrows and Application of Payments....................... 27
9.09 Power of Attorney......................................... 27
ARTICLE X: DAMAGE AND DESTRUCTION.................................... 27
10.01 General................................................... 27
10.02 Landlord's Inspection..................................... 28
10.03 Landlord's Costs.......................................... 29
10.04 Rent Abatement............................................ 29
10.05 Substantial Damage During Lease Term...................... 29
ARTICLE XI: CONDEMNATION.............................................. 30
11.01 Total Taking.............................................. 30
11.02 Partial Taking............................................ 30
ARTICLE XII: TENANT'S PROPERTY......................................... 31
12.01 Tenant's Property......................................... 31
12.02 Requirements for Tenant's Property........................ 31
ARTICLE XIII: TENANT'S RIGHTS OF FIRST REFUSAL.......................... 32
13.01 Rights of First Refusal................................... 32
ARTICLE XIV: ASSIGNMENT AND SUBLETTING; ATTORNMENT..................... 34
14.01 Subletting and Assignment; Attornment..................... 34
14.02 Attornment................................................ 34
14.03 Sublease Limitation....................................... 35
ARTICLE XV: LIMITED RIGHT OF SUBSTITUTION............................. 35
15.01 Substitution Upon Condemnation............................ 35
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE XVI: ARBITRATION............................................... 35
16.01 Arbitration............................................... 35
16.02 Appointment of Arbitrators................................ 35
16.03 Third Arbitrator.......................................... 36
16.04 Arbitration Procedure..................................... 36
16.05 Expenses.................................................. 36
ARTICLE XVII: QUIET ENJOYMENT, SUBORDINATION, ATTORNMENT,
BOND FINANCING AND ESTOPPEL CERTIFICATES.................. 36
17.01 Quiet Enjoyment........................................... 36
17.02 Subordination............................................. 36
17.03 Attornment; Non-Disturbance............................... 37
17.04 Estoppel Certificates..................................... 37
ARTICLE XVIII: MISCELLANEOUS............................................. 38
18.01 Notices................................................... 38
18.02 Advertisement of Leased Property.......................... 39
18.03 Entire Agreement.......................................... 39
18.04 Severability.............................................. 39
18.05 Captions and Headings..................................... 40
18.06 Governing Law............................................. 40
18.07 Recording of Lease........................................ 40
18.08 Waiver.................................................... 40
18.09 Binding Effect............................................ 40
18.10 Authority................................................. 40
18.11 Transfer of Permits, Etc.................................. 40
18.12 Modification.............................................. 41
18.13 Incorporation by Reference................................ 41
18.14 No Merger................................................. 41
18.15 Laches.................................................... 41
18.16 Waiver of Jury Trial...................................... 41
18.18 Permitted Contests........................................ 42
18.19 Construction of Lease..................................... 43
18.20 Counterparts.............................................. 43
18.21 Relationship of Landlord and Tenant....................... 43
18.22 Custody of Escrow Funds................................... 43
18.23 Landlord's Status as a REIT............................... 43
18.24 Sale of Real Estate Assets................................ 43
18.25 Use of Tenant's Name...................................... 44
</TABLE>
iii
<PAGE> 5
MASTER AGREEMENT TO LEASE
AGREEMENT dated as of the ___ day of ________, 1991 by and between
NATIONAL HEALTH INVESTORS, INC., a Maryland corporation, ("Landlord") and
NATIONAL HEALTHCORP L.P., a Delaware limited partnership ("Tenant").
RECITALS
WHEREAS, Tenant has concurrently conveyed to Landlord various
properties upon which Tenant engages in the business of operating nursing homes
and healthcare facilities, which properties are listed on Schedule A attached
hereto (the "Real Estate Conveyance"), and Landlord and Tenant desire to provide
for the lease by Landlord back to the Tenant of such properties; and
WHEREAS, Landlord may from time to time lease additional properties
that Landlord may acquire to Tenant; and
WHEREAS, Landlord and Tenant desire that each of the properties
listed on Schedule A and each additional property that Landlord may lease to
Tenant shall be the subject of a separate and individual Lease Agreement
describing said property, the rent and various other terms of said lease (each
such Lease Agreement referred to individually as a "Lease" and the property that
is the subject of an individual Lease being referred to as "Leased Property");
and
WHEREAS, Landlord and Tenant desire to set forth in this Agreement
certain terms and conditions applicable to all Leases of all Leased Properties,
except as any individual Lease with respect to a particular Leased Property may
otherwise provide;
NOW, THEREFORE, in consideration of the premises and of their
respective agreements and undertakings herein and in each Lease, Landlord and
Tenant agree as follows:
ARTICLE I: SEPARATE LEASE AGREEMENTS; PREMISES AND TERM
1.01 Separate Lease Agreements. Landlord and Tenant are
concurrently entering into a separate Lease for each of the Leased Properties
referred to in Schedule A hereto, and may in the future enter into one or more
additional separate Leases for one or more additional Leased Properties. Except
as specifically set forth in a separate Lease, or any amendment, supplement,
schedule or exhibit thereto, all of the provisions of this Agreement shall be
deemed to be incorporated into and made a part of each such separate Lease made
between the Landlord as landlord (or lessor) and the Tenant as tenant (or
Lessee) during the Term of such separate Lease.
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<PAGE> 6
1.02 Leased Property. Except as set forth in an individual Lease
(including any schedule or exhibit thereto), the property that is the subject of
each Lease and that shall be considered as leased by the Landlord to the Tenant
thereunder shall consist of:
(a) The land described in the Lease ("Land");
(b) All buildings, structures, and other improvements,
including without limitation sidewalks, alleys, utility pipes,
conduits, and lines, parking areas, and roadways, now or hereafter
situated upon the Land ("Improvements");
(c) All easements, rights and other appurtenances relating
to the Land and Improvements ("Appurtenances");
(d) All permanently affixed equipment, machinery, fixtures,
and other items of real property, including all components thereof,
located in, or used in connection with, and permanently affixed to or
incorporated into the Improvements, including without limitation, all
furnaces, boilers, heaters, electrical equipment, heating, plumbing,
lighting, ventilating, refrigerating (but not movable refrigerators),
incineration, air and water pollution control, waste disposal
air-cooling and air-conditioning systems and apparatus, sprinkler
systems and fire and theft protection equipment, and built-in oxygen
and vacuum systems, all of which, to the greatest extent permitted by
law, are hereby deemed by the parties hereto to constitute real estate,
together with all replacements, modifications, alterations and
additions thereto, but specifically excluding items within the category
of "Tenant's Property" defined in Section 12.01 hereof (collectively
the "Fixtures").
The Land, Improvements, Appurtenances and Fixtures are hereinafter referred to
as the "Leased Property".
SUBJECT, HOWEVER, to the easements, liens, encumbrances, restrictions,
agreements, and other title matters listed or specifically referred to in any
individual Lease ("Permitted Exceptions").
1.03 Term. To have and to hold, unless otherwise provided in an
individual Lease, the initial term (the "Initial Term") of each Lease is ten
(10) years and three (3) months commencing on October 1, 1991, (the
"Commencement Date") and expiring on December 31, 2001. Provided that no Event
of Default has occurred and that Tenant gives Landlord notice on or before
December 31, 2000, Tenant shall have the option to renew all (but except as
Landlord shall otherwise specifically agree in writing not less than all) Leases
for one (1) additional five (5) year term commencing January 1, 2002 (the "First
Renewal Term") on the same terms (other than with respect to renewal) as the
Initial Term; and provided that no Event
2
<PAGE> 7
of Default has occurred and that Tenant gives Landlord notice on or before
December 31, 2005, Tenant shall have the option to renew all (but except as
Landlord shall otherwise specifically agree in writing not less than all) Leases
for one (1) further five (5) year term commencing January 1, 2007 (the "Second
Renewal Term") on the same terms (other than with respect to renewal and except
that Base Rent shall be determined in accordance with Section 2.01.01). The term
"Term" means the Initial Term and each Renewal Term as appropriate. The term
"Lease Year" means each twelve (12) month period during the Term commencing on
January 1 and ending on December 31, except the first Lease Year shall be the
period from the Commencement Date through the following December 31, and the
last Lease Year shall end on the date of termination of the Lease if a day other
than December 31.
1.05 Holding Over. Should Tenant, without the express consent of
Landlord, continue to hold and occupy the Leased Property after the expiration
of the Term, such holding over beyond the Term and the acceptance or collection
of Rent by the Landlord shall operate and be construed as creating a tenancy
from month-to-month and not for any other term whatsoever. During any such
holdover period Tenant shall pay to Landlord for each month Tenant remains in
the Leased Property one hundred fifty (150%) percent of the Base Rent in effect
on the expiration date. Said month-to-month tenancy may be terminated by
Landlord by giving Tenant ten (10) days written notice, and at any time
thereafter Landlord may re-enter and take possession of the Leased Property.
1.06 Surrender. Except for (i) Permitted Alterations; (ii) normal and
reasonable wear and tear (subject to the obligation of Tenant to maintain the
Leased Property in good order and repair during the Term); and (iii) casualty,
taking or other damage and destruction not required to be repaired by Tenant,
Tenant shall surrender and deliver up the Leased Property at the expiration or
termination of the Term broom clean, free of all Tenant's equipment and personal
property, and in as good order and condition as of the Commencement Date.
ARTICLE II: RENT
2.01 Base Rent. Unless otherwise provided in an individual Lease and
subject to the provisions of Section 2.01.01 with respect to Base Rent in the
Second Renewal Term (if any), Tenant shall pay Landlord base rent for each
Property that is the subject of a Lease in the amount specified therein (the
"Base Rent") for the Term in consecutive monthly installments payable in advance
on the Commencement Date of each Lease and thereafter on the first day of each
month during the Term, in accordance with the Base Rent Schedule set forth in or
attached to each individual Lease.
2.01.01 Base Rent During Second Renewal Term. The Base Rent for each
Leased Property during the Second Renewal Term shall be
3
<PAGE> 8
the then fair rental value of such Leased Property as negotiated between the
parties and determined without including any value attributable to improvements
to the Leased Property voluntarily made by Tenant at its expense.
2.02 Additional Rent. The Tenant shall pay Additional Rent
consisting of the Assumed Mortgage Debt Service Rent and Other
Additional Debt described in this Section 2.02.
2.02.01 Assumed Mortgage Debt Service Rent. Landlord and Tenant
acknowledge that, in connection with the Real Estate Conveyance, Landlord has
purchased the Leased Property subject to all existing mortgages, deeds of trust
and other debt instruments which were incurred by Tenant or on behalf of Tenant
on or prior to the closing of the Real Estate Conveyance (or through any
refinancing of the same) as more specifically described in the Permitted
Exceptions (hereinafter collectively referred to as "Assumed Mortgage Debt"). In
connection with the Assumed Mortgage Debt, arrangements have been made with the
various holders of the Assumed Mortgage Debt with respect to the continuing
payment of the same directly by Tenant, and the amount so payable from time to
time is herein called "Assumed Mortgage Debt Service Rent." "Assumed Mortgage
Debt" also includes the amount of any Assumed Mortgage Debt secured by a Leased
Property that is refinanced because such Assumed Mortgage Debt matures or the
maker of such Debt is required to pay it in its entirety during the Term of a
Lease. In the event that Landlord shall for any reason itself discharge
(including by prepayment) any Assumed Mortgage Debt, Tenant shall thereafter pay
the relevant Assumed Mortgage Debt Service Rent directly to Landlord in
accordance with the original payment terms of the Assumed Mortgage Debt so
discharged.
2.02.02 Other Additional Rent. In addition to Base Rent, Assumed
Mortgage Service Debt Rent and Percentage Rent (as hereinafter defined in
Section 2.06), Tenant shall pay all other amounts, liabilities, obligations and
Impositions (as hereinafter defined) which Tenant assumes or agrees to pay under
this Agreement or any Lease and any fine, penalty, interest, charge and cost
which may be added for nonpayment or late payment of such items (collectively
the "Other Additional Rent").
2.03 Place(s) of Payment of Rent; Direct Payment of Additional Rent.
The Base Rent, Percentage Rent, and Additional Rent are hereinafter referred to
as "Rent". Landlord shall have all legal, equitable and contractual rights,
powers and remedies provided either in this Agreement, in any Lease or by
statute or otherwise in the case of nonpayment of the Rent. Tenant shall make
all payments of Base Rent and of Percentage Rent at Landlord's principal place
of business or as Landlord may otherwise from time to time direct in writing,
and all payments of Assumed Mortgage Debt Service Rent and of Other Additional
Rent directly to the person or persons to whom such amount is owing at the time
and
4
<PAGE> 9
times when such payments are due, and shall give to Landlord such evidence of
such direct payments as Landlord shall reasonably request.
2.04 Net Lease. This Lease shall be deemed and construed to be an
"absolute net lease" or "triple net lease", and Tenant shall pay all Rent and
other charges and expenses in connection with the Leased Property throughout the
Term, without abatement, deduction or set-off.
2.05 No Termination, Abatement, Etc. Except as otherwise specifically
provided in this Agreement or a particular Lease, Tenant shall remain bound by
this Agreement or such Lease in accordance with its terms. Except as otherwise
specifically provided in the Agreement or a particular Lease, Tenant shall not,
without the prior written consent of Landlord modify, surrender or terminate the
Agreement or such Lease, nor seek nor be entitled to any abatement, deduction,
deferment or reduction of Rent, or set-off against the Rent. Except as
specifically provided in this Agreement or a particular Lease, the obligations
of Landlord and Tenant shall not be affected by reason of [i] the lawful or
unlawful prohibition of, or restriction upon, Tenant's use of the Leased
Property, or any part thereof, the interference with such use by any person,
corporation, partnership or other entity, or by reason of eviction by paramount
title; [ii] any claim which Tenant has or might have against Landlord or by
reason of any default or breach of any warranty by Landlord under this Agreement
or a particular Lease or any other agreement between Landlord and Tenant, or to
which Landlord and Tenant are parties; [iii] any bankruptcy, insolvency,
reorganization, composition, readjustment, liquidation, dissolution, winding up
or other proceeding affecting Landlord or any assignee or transferee of
Landlord; or [iv] any other cause, whether similar or dissimilar to any of the
foregoing, other than a discharge of Tenant from any such obligations as a
matter of law. Except as otherwise specifically provided in this Agreement or a
particular Lease, and to the maximum extent permitted by law, Tenant hereby
specifically waives all rights, including but not limited to any rights under
any statute relating to rights of tenants in any state in which any Leased
Property is located, arising from any occurrence whatsoever, which may now or
hereafter be conferred upon it by law [a] to modify, surrender or terminate this
Lease or quit or surrender the Leased Property or any portion thereof; or [b]
entitling Tenant to any abatement, reduction, suspension or deferment of the
Rent or other sums payable by Tenant hereunder. The obligations of Landlord and
Tenant hereunder shall be separate and independent covenants and agreements and
the Rent and all other sums payable by Tenant hereunder shall continue to be
payable in all events unless the obligations to pay the same shall be terminated
pursuant to the express provisions of this Agreement or a particular Lease or by
termination of this Agreement or a particular Lease other than by reason of an
Event of Default.
5
<PAGE> 10
2.06 Percentage Rent. In addition to the Base Rent, with respect to
each Lease Year after 1992 Tenant shall pay Landlord percentage rent
("Percentage Rent") in accordance with this Section 2.06 equal to three percent
(3%) of the amount by which the Gross Revenues (as defined in Section 2.06.01)
of each Leased Property in the applicable Lease Year exceed the Gross Revenues
of each Leased Property during 1992.
2.06.01 "Gross Revenues" means all revenues received or receivable by
the Tenant from or by reason of the operation of the Leased Property, or any
other use of the Leased Property, as calculated in accordance with generally
accepted accounting principles and as adjusted as set forth in this Section
2.06.01. Gross Revenues shall not include non-operating revenues such as
interest income or income from the sale of assets other than in the ordinary
course of business. Gross Revenues shall be adjusted by the following items: [i]
contractual allowances (difference between customary charges and amounts
receivable based on contract) relating to any period during the Term of the
Lease; [ii] all proper patient billing credits and adjustments (including
adjustments for bad debts) according to generally accepted accounting principles
relating to health care accounting; and [iii] federal, state or local excise
taxes and any tax based upon or measured by said revenues which is added to or
made a part of the amount billed to the patient or other recipient of such
services or goods, whether included in the billing or stated separately. To the
extent that the Leased Property is subleased by Tenant, Gross Revenues shall be
calculated for purposes of the Lease by including the rent received or
receivable by the Tenant if the space rental does not replace an operating bed
and is for not more than 10% of the square footage of the Leased Property.
Otherwise, Gross Revenues shall be calculated by including the Gross Revenues of
such sub-lessees with respect to the subleased property, i.e., the Gross
Revenues generated from the operations conducted on such subleased portion of
the Leased Property shall be included directly in the Gross Revenues for the
purpose of determining percentage rent payable under this Lease and the rent
received or receivable by Tenant under such subleases shall be excluded from
Gross Revenues for such purpose.
2.06.02 On or before March 31, 1993 with respect to the year ended
December 31, 1992 and on or before each following March 31 with respect to each
Lease Year thereafter, Tenant shall deliver to Landlord a notarized, sworn
statement (the "Tenant's Certification") setting forth the Gross Revenues for
the prior year. Annually a certificate from a nationally reputable accounting
firm satisfactory to Landlord shall be delivered to Landlord which certificate
shall state that, in the course of the regular audit of Tenant's financial
statements, such firm has reviewed Tenant's calculations of the amount of Gross
Revenues for each of the Leased Properties as set forth in Tenant's
6
<PAGE> 11
Certification and that nothing has come to its attention to make such firm
believe the Tenant's Certification is incorrect in any material respect (and/or
stating, if applicable, any proposed audit adjustments with respect to Gross
Revenue which Tenant elected not to record and set forth in Tenant's
Certification). In addition to the Tenant's Certification and upon the request
of Landlord, Tenant shall deliver the following: [i] any reports sent to any
reimbursement agency, including, but not limited to Medicaid Cost Reports; [ii]
copies of Medicare Cost Reports; [iii] copies of interim or final cost
settlements with Medicare authorities concerning Medicare receivables with a
debit or credit balance; [iv] patient census data by type of patient on a
quarterly basis within thirty (30) days after the end of each calendar quarter
beginning January 31, 1991; [v] copies of changes in rates for Medicare,
Medicaid, private payor or any other provider paying for patients in the Leased
Property; and [vi] Tenant's calculation supporting any estimated contractual
allowances in the Financial Statements.
2.06.03 In each Lease Year commencing 1994, Tenant shall for such Lease
Year make anticipated payments of Percentage Rent monthly at the time of paying
installments of Base Rent, which payments shall be equal to one-twelfth (1/12th)
of the Percentage Rent determined for the preceding Lease Year, subject to final
determination and adjustment in payment by March 31 of the following year.
2.06.04 Landlord or its duly authorized representatives may, upon
reasonable notice and on any business day and during reasonable office hours,
inspect Tenant's records of Gross Revenues, either at the Leased Property or
elsewhere as reasonably designated by Tenant, provided such inspection is made
within twelve months after a Tenant's Certification is furnished to Landlord by
Tenant. Any claim by Landlord for a revision of any Tenant's Certification must
be made in writing to Tenant within twelve (12) months after the date such
Tenant's Certification is furnished to Landlord; otherwise it shall be deemed
waived by Landlord. If Landlord inspects Tenant's records and such inspection
shows an error(s) in the Tenant's Certification which results in an
understatement of Gross Revenues of five percent (5%) or more for any Leased
Property, then in addition to paying the additional Percentage Rent on demand,
Tenant shall pay Landlord, on demand, the reasonable cost of such inspection as
Additional Rent.
ARTICLE III: IMPOSITIONS AND UTILITIES
3.0l Payment of Impositions. Subject to the adjustments set forth
herein, Tenant shall pay, as Additional Rent, all Impositions (as hereinafter
defined) that may be levied or become a lien on the Leased Property or any part
thereof at any time (whether prior to or during the Term), without regard to
prior ownership of said
7
<PAGE> 12
Leased Property, before any fine, penalty, interest, or cost is incurred. Tenant
shall, upon request from Landlord, promptly furnish to Landlord copies of
official receipts or other satisfactory proof evidencing such payments. Tenant's
obligation to pay such Impositions shall be deemed absolutely fixed upon the
date such Impositions become a lien upon the Leased Property or any part
thereof. Tenant, at its expense, shall prepare and file all tax returns and
reports in respect of any Imposition as may be required by governmental
authorities. Tenant shall be entitled to any refund due from any taxing
authority if no Event of Default (as hereinafter defined) shall have occurred
hereunder and be continuing. Landlord shall be entitled to any refund from any
taxing authority if an Event of Default has occurred and is continuing. Any
refunds retained by Landlord due to an Event of Default shall be applied as
provided in Section 9.08. Landlord and Tenant shall, upon request of the other,
provide such data as is maintained by the party to whom the request is made with
respect to the Leased Property as may be necessary to prepare any required
returns and reports. In the event governmental authorities classify any property
covered by this Lease as personal property, Tenant shall file all personal
property tax returns in such jurisdictions where it may legally so file.
Landlord, to the extent it possesses the same, and Tenant, to the extent it
possesses the same, will provide the other party, upon request, with cost and
depreciation records necessary for filing returns for any property so classified
as personal property. Where Landlord is legally required to file personal
property tax returns, Tenant will be provided with copies of assessment notices
indicating a value in excess of the reported value in sufficient time for Tenant
to file a protest. Tenant may, upon notice to Landlord, at Tenant's option and
at Tenant's sole cost and expense, protest, appeal, or institute such other
proceedings as Tenant may deem appropriate to effect a reduction of real estate
or personal property assessments and Landlord, at Tenant's expense as aforesaid,
shall fully cooperate with Tenant in such protest, appeal, or other action.
Tenant shall promptly reimburse Landlord for all personal property taxes paid by
Landlord upon receipt of billings accompanied by copies of a bill therefor and
payments thereof which identify the personal property with respect to which such
payments are made. Impositions imposed in respect to the tax-fiscal period
during which the Term commences and terminates shall be adjusted and prorated
between Landlord and Tenant on a per diem basis, with Tenant being obligated to
pay its pro rata share from and including the Commencement Date to and including
the expiration or termination date of the Term, whether or not such Imposition
is imposed before or after such commencement or termination, and Tenant's
obligation to pay its prorated share thereof shall survive such termination.
Tenant shall also pay to Landlord a sum equal to the amount which Landlord may
be caused to pay of any privilege tax, sales tax, gross receipts tax, rent tax,
occupancy tax or like tax (excluding any tax based on net income), hereinafter
levied, assessed, or imposed by any federal, state,
8
<PAGE> 13
county or municipal governmental authority, or any subdivision thereof, upon or
measured by or rent or other consideration required to be paid by Tenant under
this Lease.
3.02 Definition of Impositions. "Impositions" means, collectively, [i]
taxes (including without limitation, all real estate and personal property ad
valorem (whether assessed as part of the real estate or separately assessed as
unsecured personal property, sales and use, business or occupation, single
business, gross receipts, transaction privilege, rent or similar taxes, but not
including income or franchise or excise taxes payable with respect to Landlord's
receipt of Rent); [ii] assessments (including without limitation, all
assessments for public improvements or benefits, whether or not commenced or
completed prior to the date hereof and whether or not to be completed with the
Term); [iii] ground rents, water, sewer or other rents and charges, excises, tax
levies, and fees (including without limitation, license, permit, inspection,
authorization and similar fees); [iv] to the extent they may become a lien on
the Leased Property all taxes imposed on Tenant's operations of the Leased
Property including without limitation, employee withholding taxes, income taxes
and intangible taxes; and [v] all other governmental charges, in each case
whether general or special, ordinary or extraordinary, or foreseen or
unforeseen, of every character in respect of the Leased Property or any part
thereof and/or the Rent (including all interest and penalties thereon due to any
failure in payment by Tenant), which at any time prior to, during or in respect
of the Term hereof may be assessed or imposed on or in respect of or be a lien
upon [a] Landlord or Landlord's interest in the Leased Property or any part
thereof; [b] the Leased Property or any part thereof or any rent therefrom or
any estate, right, title or interest therein; or [c] any occupancy, operation,
use or possession of, or sales from, or activity conducted on, or in connection
with the Leased Property or the leasing or use of the Leased Property or any
part thereof. Tenant shall not, however, be required to pay [i] any tax based on
net income (whether denominated as a franchise or capital stock or other tax)
imposed on Landlord; or [ii] except as provided in Section 13.01, any tax
imposed with respect to the sale, exchange or other disposition by Landlord of
any Leased Property or the proceeds thereof; provided, however, that if any tax,
assessment, tax levy or charge which Tenant is obligated to pay pursuant to the
first sentence of this definition and which is in effect at any time during the
Term hereof is totally or partially repealed, and a tax, assessment, tax levy or
charge set forth in clause [i] or [ii] immediately above is levied, assessed or
imposed expressly in lieu thereof Tenant shall then pay such tax, levy, or
charge set forth in said clause [i] or [ii].
3.03 Escrow of Impositions. If Landlord's lender requires Landlord to
escrow real property taxes or other Impositions on a periodic basis during the
Term, Tenant, on notice from Landlord indicating this requirement, shall pay a
sum of money toward its
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liability under this Article to lender on a periodic basis in accordance with
the lender's requirements. Landlord shall escrow the payments received from
Tenant in accordance with the requirements of its lender, and shall furnish
Tenant with a copy of the lender's requirements for escrow. Further, if an Event
of Default occurs hereunder which is not cured within any applicable grace
period, Tenant shall thereafter, at Landlord's election, deposit with Landlord
on the first day of each month during the remaining Term hereof and any extended
Term, a sum equal to one-twelfth (1/12th) of the Impositions assessed against
the Leased Property for the preceding tax year, which sums shall be used by
Landlord toward payment of such Impositions. If, at the end of any applicable
tax year, any such funds held by Landlord are insufficient to make full payment
of taxes or other Impositions for which such funds are held, Tenant, on demand,
shall pay to Landlord any additional funds necessary to pay and discharge the
obligations of Tenant pursuant to the provisions of this section. If, however,
at the end of any applicable tax year, such funds held by Landlord are in excess
of the total payment required to satisfy taxes or other Impositions for which
such funds are held, Landlord shall apply such excess amounts to Tenant's tax
and Imposition escrow fund for the next tax year. If any such excess of funds
occurs at the end of the final Lease Year, and subject to Section 9.08 below,
Landlord shall promptly refund such excess amounts to Tenant. The receipt by
Landlord of the payment of such Impositions by and from Tenant shall only be as
an accommodation to Tenant, the mortgagees, and the taxing authorities, and
shall not be construed as rent or income to Landlord, Landlord serving, if at
all, only as a conduit for delivery purposes.
3.04 Utilities. Tenant shall pay, as Additional Rent all taxes,
assessments, charges/deposits, and bills for utilities, including without
limitation charges for water, gas, oil, sanitary and storm sewer, electricity,
telephone service, and trash collection, which may be charged against the
occupant of the Improvements during the Term. If an Event of Default occurs
hereunder and is not cured within any applicable grace period, Tenant shall
thereafter, at Landlord's election, deposit with Landlord on the first day of
each month during the remaining Term, a sum equal to one-twelfth (1/12th) of the
amount of the annual utility expenses for the preceding Lease Year, which sums
shall be used by Landlord to pay such utilities. If, at any time during the
Lease Year, such funds held by Landlord are insufficient to cover monthly,
annual, or other periodic charges for utilities, Tenant shall, on demand pay to
Landlord any additional amount needed to pay such utilities. Landlord's receipt
of such payments shall only be an accommodation to Tenant and the utility
companies and shall not constitute rent or income to Landlord. If, at any time
during the Lease Year, such funds held by Landlord are in excess of the total
monthly, annual or other periodic payment necessary to satisfy utility costs,
such excess amounts shall be applied to Tenant's escrow fund for the next
payment of such utilities. If
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any such excess exists following the expiration or earlier termination of the
Lease and after all utility bills and accounts have been settled, Landlord
shall, subject to Section 9.08 below, promptly refund such amounts to Tenant.
Tenant shall at all times maintain that amount of heat necessary to ensure
against the freezing of water lines. Tenant hereby agrees to indemnify and hold
Landlord harmless from and against any liability or damages to the utility
systems and the Leased Property that may result from Tenant's failure to
maintain sufficient heat in the Improvements.
3.05 Discontinuance of Utilities. Landlord will not be liable for
damages to person or property or for injury to, or interruption of, business for
any discontinuance of utilities nor will such discontinuance in any way be
construed as an eviction of Tenant or cause an abatement of Rent or operate to
release Tenant from any of Tenant's obligations under this Lease.
ARTICLE IV: INSURANCE
4.01 Property Insurance. Tenant shall, at Tenant's expense, keep the
Improvements, Fixtures, and other components of the Leased Property insured
against the following risks:
(a) Loss or damage by fire, vandalism and malicious
mischief, sprinkler leakage and all other physical loss perils commonly
covered by "All Risk" insurance in an amount not less than one hundred
percent (100%) of the then full replacement cost thereof (as
hereinafter defined). Such policy shall include an agreed amount
endorsement if available at a reasonable cost. Such policy shall also
include endorsements for contingent liability for operation of building
laws, demolition costs, and increased cost of construction.
(b) Loss or damage by explosion of steam boilers, pressure
vessels, or similar apparatus, now or hereafter installed on the Leased
Property, in commercially reasonable amounts acceptable to Landlord.
(c) Loss of rent under a rental value insurance policy
covering risk of loss during the first nine (9) months of
reconstruction necessitated by the occurrence of any hazards described
in Sections 4.01(a) or 4.01(b) above, in an amount sufficient to
prevent Landlord or Tenant from becoming a co-insurer, containing
endorsements for extended period of indemnity and premium adjustment,
and written with an agreed amount clause, if the insurance provided for
in this clause (c) is available at a reasonable cost.
(d) If the Land is located in whole or in part within a
designated flood plain area, loss or damage caused by flood in
commercially reasonable amounts acceptable to Landlord.
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(e) Loss or damage commonly covered by blanket crime
insurance including employee dishonesty, loss of money orders or paper
currency, depositor's forgery, and loss of property of patients
accepted by Tenant for safekeeping, in commercially reasonable amounts
acceptable to the Landlord.
4.02 Liability Insurance. Tenant shall, at Tenant's expense, maintain
liability insurance against the following:
(a) Claims for personal injury or property damage commonly
covered by comprehensive general liability insurance with endorsements
for nursing home or comparable professional malpractice, blanket
contractual, personal injury, owner's protective liability, real
property fire damage legal liability, voluntary medical payments,
products and completed operations, broad form property damage, and
extended bodily injury, with commercially reasonable amounts for bodily
injury, property damage, and voluntary medical payments acceptable to
Landlord, but with a combined single limit of not less than One Million
Dollars ($1,000,000.00) per occurrence, One Million Dollars
($1,000,000.00) per location. If malpractice insurance coverage is
unavailable generally or is unreasonably expensive, Landlord and Tenant
will consult in good faith regarding an alternative.
(b) Claims for personal injury and property damage commonly
covered by comprehensive automobile liability insurance, covering all
owned and nonowned automobiles, with commercially reasonable amounts
for bodily injury, property damage, and for automobile medical payments
acceptable to Landlord, but with a combined single limit of not less
than One Million Dollars ($1,000,000.00) per occurrence, Three Million
Dollars ($3,000,000.00) aggregate.
(c) Claims commonly covered by worker's compensation
insurance for all persons employed by Tenant on the Leased Property.
Such worker's compensation insurance shall be in accordance with the
requirements of all applicable local, state, and federal law.
4.03 Insurance Requirements. The following provisions shall apply to
all insurance coverages required hereunder:
(a) The form and substance of all policies shall be subject
to the approval of Landlord, which approval will not be unreasonably
withheld.
(b) The carriers of all policies shall have a Best's Rating
of "A-" or better and a Best's Financial Category of XII or larger and
shall be authorized to do insurance business in the state in which the
Leased Property is located.
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(c) Tenant shall be the "named insured" and Landlord shall
be an "additional named insured" on each policy.
(d) Tenant shall deliver to Landlord certificates or
policies showing the required coverages and endorsements. The policies
of insurance shall provide that the policy may not be cancelled or not
renewed, and no material change or reduction in coverage may be made,
without at least thirty (30) days' prior written notice to Landlord.
(e) The policies shall contain a severability of interest
and/or cross-liability endorsement, provide that the acts or omissions
of Tenant will not invalidate the Landlord's coverage, and provide that
Landlord shall not be responsible for payment of premiums.
(f) All loss adjustment shall require the written consent of
Landlord and Tenant, as their interests may appear.
(g) At least thirty (30) days prior to the expiration of
each policy, Tenant shall deliver to Landlord a certificate showing
renewal of such policy and payment of the annual premium therefor.
4.04 Replacement Cost. The term "full replacement cost" means the
actual replacement cost thereof from time to time including increased cost of
construction, with no reductions or deductions. Tenant shall, not later than
thirty (30) days after the anniversary of each Lease Year of the Term, increase
the amount of the replacement cost endorsement for the Improvements. If Tenant
makes any Permitted Alterations (as hereinafter defined) to the Leased Property,
Landlord may have such full replacement cost redetermined at any time after such
Permitted Alterations are made, regardless of when the full replacement cost was
last determined.
4.05 Blanket Policy. Tenant may carry the insurance required by this
Article under a blanket policy of insurance, provided that the coverage afforded
Tenant will not be reduced or diminished or otherwise be different from that
which would exist under a separate policy meeting all of the requirements of
this Agreement.
4.06 No Separate Insurance. Tenant shall not take out separate
insurance concurrent in form or contributing in the event of loss with that
required in this Article, or increase the amounts of any then existing insurance
by securing an additional policy or additional policies, unless all parties
having an insurable interest in the subject matter of the insurance, including
Landlord and any mortgagees, are included therein as additional named insureds
or loss payees, the loss is payable under said insurance in the same manner as
losses are payable under this Agreement, and such additional insurance is not
prohibited by the existing policies of insurance. Tenant shall immediately
notify Landlord
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of the taking out of such separate insurance or the increasing of any of the
amounts of the existing insurance by securing an additional policy or additional
policies. The term "mortgages" as used in this Agreement includes Deeds of Trust
and the term "mortgagees" includes trustees and beneficiaries under a Deed of
Trust.
4.07 Waiver of Subrogation. Each party hereto hereby waives any and
every claim which arises or may arise in its favor and against the other party
hereto during the Term or any extension or renewal thereof, for any and all loss
of, or damage to, any of its property located within or upon, or constituting a
part of, the Leased Property, which loss or damage is covered by valid and
collectible insurance policies, to the extent that such loss or damage is
recoverable under such policies. Said mutual waiver shall be in addition to, and
not in limitation or derogation of, any other waiver or release contained in
this Lease with respect to any loss or damage to property of the parties hereto.
Inasmuch as the said waivers will preclude the assignment of any aforesaid claim
by way of subrogation (or otherwise) to an insurance company (or any other
person), each party hereto agrees immediately to give each insurance company
which has issued to it policies of insurance, written notice of the terms of
said mutual waivers, and to have such insurance policies properly endorsed, if
necessary, to prevent the invalidation of said insurance coverage by reason of
said waivers, so long as such endorsement is available at a reasonable cost.
4.08 Mortgages. The following provisions shall apply if Landlord now or
hereafter places a mortgage on the Leased Property or any part thereof: [i]
Tenant shall obtain a standard form of mortgage clause insuring the interest of
the mortgagee; [ii] Tenant shall deliver evidence of insurance to such
mortgagee; [iii] loss adjustment shall require the consent of the mortgagee; and
[iv] Tenant shall obtain such other coverages and provide such other information
and documents as may be reasonably required by the mortgagee.
4.09 Escrows. If Landlord's lender requires the Landlord to escrow
insurance premiums on a periodic basis, or if an Event of Default occurs
hereunder, Tenant, after notice from Landlord, shall make such periodic payments
in accordance with the lender's or Landlord's requirements.
ARTICLE V: INDEMNITY; HAZARDOUS SUBSTANCES
5.01 Tenant's Indemnification. Subject to Section 4.07, Tenant hereby
agrees to indemnify and hold harmless Landlord, its agents, and employees from
and against any and all demands, claims, causes of action, fines, penalties,
damages (including consequential damages), losses, liabilities (including strict
liability), judgments, and expenses (including, without limitation,
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attorneys' fees, court costs, and the costs set forth in Section 9.07) incurred
in connection with or arising from: [i] the use or occupancy of each Leased
Property by Tenant or any persons claiming under Tenant; [ii] any activity,
work, or thing done, or permitted or suffered by Tenant in or about the Leased
Property; [iii] any acts, omissions, or negligence of Tenant or any person
claiming under Tenant, or the contractors, agents, employees, invitees, or
visitors of Tenant or any such person; [iv] any breach, violation, or
nonperformance by Tenant or any person claiming under Tenant or the employees,
agents, contractors, invitees, or visitors of Tenant or of any such person, of
any term, covenant, or provision of this Agreement or any Lease or any law,
ordinance, or governmental requirement of any kind; and [v] any injury or damage
to the person, property or business of Tenant, its employees, agents,
contractors, invitees, visitors, or any other person entering upon the Leased
Property under the express or implied invitation of Tenant. If any action or
proceeding is brought against Landlord, its employees, or agents by reason of
any such claim, Tenant, upon notice from Landlord, will defend the claim at
Tenant's expense with counsel reasonably satisfactory to Landlord.
5.02 Hazardous Substances or Materials. Tenant shall not, either with
or without negligence, injure, overload, deface, damage or otherwise harm any
Leased Property or any part or component thereof; commit any nuisance; permit
the emission of any hazardous agents or substances; allow the release or other
escape of any biologically or chemically active or other hazardous substances or
materials so as to impregnate, impair or in any manner affect, even temporarily,
any element or part of any Leased Property, or allow the storage or use of such
substances or materials in any manner not sanctioned by law or by the highest
standards prevailing in the industry for the storage and use of such substances
or materials; nor shall Tenant bring onto any Leased Property any such materials
or substances; permit the occurrence of objectionable noise or odors; or make,
allow or suffer any waste whatsoever to any Leased Property. Landlord may
inspect the Leased Property from time to time, and Tenant will cooperate with
such inspections. Without limitation, "hazardous substances" for the purposes of
this Section 5.02 shall include such substances described in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. 9601 et seq. and the regulations adopted thereunder, and hazardous
materials shall include such materials as are described in the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. 6901 et seq.; and hazardous
substances or hazardous materials shall also include any substance or material
described in any applicable statute of any state in which Leased Properties are
located, and in any regulations adopted under any of these acts. Upon request by
Landlord, Tenant shall submit to Landlord quarterly reports regarding Tenant's
use, storage, and disposal of any of the foregoing materials, said reports to
include information regarding continued hazardous materials inspections,
personal interviews, and federal, state and local agency listings.
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In addition, Tenant shall execute affidavits, representations and the like from
time to time at Landlord's request concerning Tenant's best knowledge and belief
regarding the presence or absence of hazardous materials on the Leased Property.
In all events, Tenant shall indemnify Landlord and all mortgagees of any Leased
Property from any release of hazardous materials on the Leased Property
occurring while Tenant is in possession, all costs and expenses and claims
arising from the release of, or discovery of the existence of, or need to clean
up or remove, or arising from any prior release or removal of any hazardous
substances or materials on or from any Leased Property, whether such release,
discovery or removal occurs during the Term or occurred prior to the
commencement of the Term. (At the request of Landlord, Tenant will from time to
time confirm such indemnity to mortgagees directly with such mortgagees.)
5.03 Limitation of Landlord's Liability. Landlord, its agents, and
employees, will not be liable for any loss, injury, death, or damage (including
consequential damages) to persons, property, or Tenant's business occasioned by
theft, act of God, public enemy, injunction, riot, strike, insurrection, war,
court order, requisition, order of governmental body or authority, fire,
explosion, falling objects, steam, water, rain or snow, leak or flow of water
(including water from the elevator system), rain or snow from any Leased
Property or into the Leased Property or from the roof, street, subsurface or
from any other place, or by dampness or from the breakage, leakage, obstruction,
or other defects of the pipes, sprinklers, wires, appliances, plumbing, air
conditioning, or lighting fixtures of the Leased Property, or from construction,
repair, or alteration of the Leased Property or from any acts or omissions of
any other occupant or visitor of the Leased Property, or from the presence or
release of any hazardous substance or material on or from the Leased Property or
from any other cause beyond Landlord's control.
ARTICLE VI: USE AND ACCEPTANCE OF PREMISES
6.01 Use of Leased Property. Tenant shall use and occupy each Leased
Property exclusively as a nursing home, healthcare facility or other purpose for
which the Leased Property is being used at the Commencement Date of the Term,
and for no other purpose without the prior written consent of the Landlord,
which consent will not be unreasonably withheld. Tenant shall obtain and
maintain all approvals, licenses, and consents needed to use and operate each
Leased Property for such purposes. Tenant shall promptly deliver to Landlord
complete copies of surveys, examinations, certification and licensure
inspections, compliance certificates, and other similar reports issued to Tenant
by any governmental agency.
6.02 Acceptance of Leased Property. Except as otherwise specifically
provided in this Agreement or in any individual Lease,
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Tenant acknowledges that [i] Tenant and its agents have had an opportunity to
inspect the Leased Property; [ii] Tenant has found the Leased Property fit for
Tenant's use; [iii] delivery of the Leased Property to Tenant is in "as-is"
condition; [iv] Landlord is not obligated to make any improvements or repairs to
the Leased Property; and [v] the roof, walls, foundation, heating, ventilating,
air conditioning, telephone, sewer, electrical, mechanical, utility, plumbing,
and other portions of the Leased Property are in good working order. Tenant
waives any claim or action against Landlord with respect to the condition of the
Leased Property. LANDLORD MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR
IMPLIED, IN RESPECT OF THE LEASED PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS
FITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR
OTHERWISE, AS TO QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR
PATENT, IT BEING AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY TENANT.
6.03 Conditions of Use and Occupancy. Tenant agrees that during the
Term it shall use and keep the Leased Property in a careful, safe and proper
manner; not commit or suffer waste thereon; not use or occupy the Leased
Property for any unlawful purposes; not use or occupy the Leased Property or
permit the same to be used or occupied, for any purpose or business deemed extra
hazardous on account of fire or otherwise; keep the Leased Property in such
repair and condition as may be required by the local board of health, or other
city, state or federal authorities, free of all cost to Landlord; not permit any
acts to be done which will cause the cancellation, invalidation, or suspension
of any insurance policy; and permit Landlord and its agents to enter upon the
Leased Property at all reasonable times after notice to Tenant to examine the
condition thereof.
6.04 Financial Statements. Within one hundred twenty (120) days after
the end of each fiscal year, Tenant shall deliver to Landlord audited
consolidated financial statements of Tenant, certified by a nationally
recognized accounting firm. The financial statements shall include a complete
schedule of contingent liabilities and transactions with affiliates. Within
forty-five (45) days after the end of each calendar quarter, Tenant shall
deliver to Landlord unaudited profit and loss statements.
ARTICLE VII: REPAIRS, COMPLIANCE WITH LAWS,
AND MECHANICS' LIENS
7.01 Maintenance. Tenant shall maintain, repair, and replace each
Leased Property, including without limitation, all structural and nonstructural
repairs and replacements to the roof, foundations, exterior walls, building
systems, HVAC systems, parking areas, sidewalks, water, sewer, and gas
connections, pipes, and mains. Tenant shall pay as Additional Rent, the full
cost of maintenance, repairs, and replacements. Tenant shall maintain all
drives, sidewalks, parking areas, and lawns on or about the Leased
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Property in a clean and orderly condition, free of accumulations of dirt,
rubbish, snow and ice. Tenant shall permit Landlord to inspect the Leased
Property at all reasonable times, and shall implement all reasonable suggestions
of the Landlord as to the maintenance and replacement of the Leased Property.
7.02 Compliance With Laws. Tenant shall comply with all laws,
ordinances, orders, rules, regulations, and other governmental requirements
relating to the use, condition, or occupancy of each Leased Property, including
without limitation, [i] licensure requirements for operation as a nursing home
or medical facility, [ii] certification requirements needed to obtain
reimbursement under the Medicare and state Medicaid programs unless Tenant,
after notice to Landlord, determines to discontinue participation in such
programs; [iii] requirements of the board of fire insurance underwriters or
insurance service office or any other similar body having jurisdiction over the
Leased Property, and [iv] all zoning and building codes and Environmental Laws.
At Landlord's request, from time to time, Tenant shall deliver to Landlord
copies of certificates or permits evidencing compliance with such laws,
including without limitation, copies of the nursing home or health care facility
license, provider agreements, certificates of occupancy and building permits.
Tenant hereby agrees to defend, indemnify and hold Landlord harmless from and
against any loss, liability (including strict liability), claim, damage
(including consequential damages), cost and expense (including attorneys' fees)
resulting from any failure by Tenant to comply with any laws, ordinances, rules,
regulations, and other governmental requirements.
7.03 Required Alterations. Tenant shall, at Tenant's sole cost and
expense, make any additions, changes, improvements or alterations to each Leased
Property, including structural alterations, which may be required by any
governmental authorities, including those required to continue certification
under the Medicare and Medicaid programs (unless Tenant has elected not to
participate in such programs), whether such changes are required by Tenant's
use, changes in the law, ordinances, or governmental regulations, defects
existing as of the date of this Lease, or any other cause whatever. All such
additions, changes, improvements or alterations shall be deemed to be Permitted
Alterations and shall comply with all laws requiring such alterations and with
the provisions of Section 8.02.
7.04 Mechanic's Liens. Tenant shall have no authority to permit or
create a lien against Landlord's interest in the Leased Property, and Tenant
shall post notices or file such documents as may be required to protect
Landlord's interest in the Leased Property against liens. Tenant hereby agrees
to defend, indemnify, and hold Landlord harmless from and against any mechanic's
liens against the Leased Property by reason of work, labor services or materials
supplied or claimed to have been supplied on or to the
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Leased Property. Tenant shall immediately remove, bond-off, or otherwise obtain
the release of any mechanic's lien filed against the Leased Property. Tenant
shall pay all expenses in connection therewith, including without limitation,
damages, interest, court costs and reasonable attorneys' fees.
7.05 Replacements of Fixtures. Tenant shall not remove Fixtures from
any Leased Property except to replace the Fixtures by other similar items of
equal quality and value. Items being replaced by Tenant may be removed and shall
become the property of Tenant and items replacing the same shall be and remain
the property of Landlord. Tenant shall execute, upon written request from
Landlord, any and all documents necessary to evidence Landlord's ownership of
the Fixtures and replacements therefor. Tenant may finance replacements for the
Fixtures by equipment lease or by a security agreement and financing statement;
provided, however, that for any item of Fixtures or Personal Property having a
cost greater than or equal to Ten Thousand Dollars ($10,000.00), Tenant may not
finance replacements by security agreement or equipment lease unless [i]
Landlord has consented to the terms and conditions of the equipment lease or
security agreement; [ii] the equipment lessor or lender has entered into a
nondisturbance agreement with Landlord upon terms and conditions acceptable to
Landlord, including without limitation, the following: [a] Landlord shall have
the right (but not the obligation) to assume such security agreement or
equipment lease upon the occurrence of an Event of Default by Tenant under this
Lease; [b] the equipment lessor or lender shall notify Landlord of any default
by Tenant under the equipment lease or security agreement and give Landlord a
reasonable opportunity to cure such default; and [c] Landlord shall have the
right to assign its rights under the equipment lease, security agreement, or
nondisturbance agreement; and [iii] Tenant shall, within thirty (30) days after
receipt of an invoice from Landlord, reimburse Landlord for all costs and
expenses incurred in reviewing and approving the equipment lease, security
agreement, and nondisturbance agreement, including without limitation,
reasonable attorneys' fees and costs.
ARTICLE VIII: ALTERATIONS AND SIGNS
8.01 Prohibition on Alterations and Improvements. Except for [i]
alterations required by Section 7.03; [ii] replacements of Fixtures provided for
in Section 7.05; and [iii] alterations at any Leased Property having an
aggregate cost of less than One hundred fifty thousand dollars ($150,000.00) in
any Lease Year, Tenant shall not make any structural or nonstructural changes,
alterations, additions and/or improvements (hereinafter collectively referred to
as "Alterations") to the Leased Property without the prior written consent of
Landlord which consent will not be unreasonably withheld. If Tenant desires to
perform any Alterations, Tenant shall deliver to Landlord plans, specifications,
drawings, and such other information as may be
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reasonably requested by Landlord (collectively the "Plans and Specifications")
showing the Alterations that Tenant desires to perform. Landlord agrees not to
unreasonably delay its review of the Plans and Specifications. Tenant shall
comply with the requirements of Section 8.02 in making any Alterations approved
by Landlord (the "Permitted Alterations").
8.02 Requirements for Permitted Alterations. Tenant shall comply with
all of the following requirements in connection with any Permitted Alterations:
(a) The Permitted Alterations shall be made in accordance
with the approved Plans and Specifications.
(b) The Permitted Alterations and the installation thereof
shall comply with all applicable legal requirements and insurance
requirements.
(c) The Permitted Alterations shall be done in a good and
workmanlike manner, shall not impair the value or the structural
integrity of the Leased Property, and shall be free and clear of all
mechanic's liens.
(d) Tenant shall deliver to Landlord a payment and
performance bond, with a surety acceptable to Landlord, in an amount
equal to the estimated cost of the Permitted Alterations, guaranteeing
the completion of the work free and clear of liens and in accordance
with the approved Plans and Specifications, and naming Landlord and any
mortgagee of Landlord as joint obligees on such bond.
(e) Tenant shall, at Tenant's expense, obtain a builder's
completed value risk policy of insurance insuring against all risks of
physical loss, including collapse and transit coverage, in a
nonreporting form, covering the total value of the work performed, and
equipment, supplies, and materials, and insuring initial occupancy.
Landlord and any mortgagee of Landlord shall be additional named
insureds of such policy. Landlord shall have the right to approve the
form and substance of such policy, which approval shall not be
unreasonably withheld or delayed.
(f) Tenant shall pay the premiums required to increase the
amount of the insurance coverages required by Article IV to reflect the
increased value of the Improvements resulting from installation of the
Permitted Alterations, and shall deliver to Landlord a certificate
evidencing the increase in coverage.
(g) If the alterations are structural or additions, Tenant
shall, not later than sixty (60) days after completion of the Permitted
Alterations, deliver to Landlord a
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certificate of substantial completion, certified by Tenant's architect
or engineer, in the form of AIA-G704, or in any other form reasonably
satisfactory to Landlord.
(h) Tenant shall not later than thirty (30) days after
completion of the Permitted Alterations, reimburse Landlord for any
costs and expenses, including attorneys' fees and architects' and
engineers' fees, reasonably incurred in connection with reviewing and
approving the Permitted Alterations and ensuring Tenant's compliance
with the requirements of this Section.
8.03 Ownership and Removal of Permitted Alterations. The Permitted
Alterations shall become a part of the Leased Property, owned by Landlord, and
leased to Tenant subject to the terms and conditions of this Agreement and the
Lease. Tenant shall not be required or permitted to remove any Permitted
Alterations.
8.04 Signs. Tenant may, at its own expense, erect and maintain
identification signs at the Leased Property, provided such signs comply with all
laws, ordinances, and regulations. Upon the occurrence of an Event of Default or
the termination or expiration of this Lease, Tenant shall, within thirty (30)
days after notice from Landlord, remove the signs and restore the Leased
Property to its original condition.
ARTICLE IX: DEFAULTS AND REMEDIES
9.01 Events of Default. The occurrence of any one or more of the
following shall be an an event of default ("Event of Default") hereunder:
(a) Tenant fails to pay in full any installment of Rent, or
any other monetary obligation payable by Tenant to Landlord (or to the
holder of any Assumed Mortgage Debt Service, as applicable) under this
Lease, within ten (10) business days after notice of nonpayment from
Landlord.
(b) Landlord gives three (3) or more notices of nonpayment
of Rent to Tenant in any Lease Year; provided, however, that such shall
not be an Event of Default if Landlord fails to exercise its remedies
under Section 9.02 within sixty (60) days after the last of such
notices. Notice of the same default with respect to more than one Lease
or Leased Property shall constitute only one notice for purposes of
this Section 9.01(b).
(c) Tenant fails to observe and perform any other covenant,
condition or agreement under this Agreement or the Lease to be
performed by Tenant (except those described in Section 9.01(a) and
9.01(b) of this Agreement) and [i] such failure continues for a period
of thirty (30) days after
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written notice thereof is given to Tenant by Landlord; or [ii] if, by
reason of the nature of such default, the same cannot be remedied
within said thirty (30) days, Tenant fails to proceed with reasonable
diligence (satisfactory to Landlord) after receipt of the notice to
cure the same.
(d) Tenant ceases operations at any Leased Property for a
period in excess of one-hundred eighty (180) days during the Term
except pursuant to damage described in Section 10.05 or condemnation
pursuant to Article XI (other than Section 11.02) of this Agreement.
(e) [i] The filing by Tenant of a petition under 11 U.S.C.
or the commencement of a bankruptcy or similar proceeding by Tenant;
[ii] the failure by Tenant within ninety (90) days to dismiss an
involuntary bankruptcy petition or other commencement of a bankruptcy,
reorganization or similar proceeding against Tenant, or to lift or stay
any execution, garnishment or attachment of such consequence as will
impair its ability to carry on its operation at the Leased Property;
[iii] the entry of an order for relief under 11 U.S.C. in respect of
Tenant; [iv] any assignment by Tenant for the benefit of its creditors;
[v] the entry by Tenant into an agreement of composition with its
creditors; [vi] the approval by a court of competent jurisdiction of a
petition applicable to Tenant in any proceeding for its reorganization
instituted under the provisions of any state or federal bankruptcy,
insolvency, or similar laws; [vii] appointment by final order,
judgement, or decree of a court of competent jurisdiction of a receiver
of a whole or any substantial part of the properties of Tenant
(provided such receiver shall not have been removed or discharged
within sixty (60) days of the date of his qualification).
(f) [i] any administrator, custodian, trustee or other
legally authorized person takes possession or control of any Leased
Property or part thereof and continues in possession for ninety (90)
days; [ii] any writ against any of the Leased Property is not released
or bonded off within ninety (90) days; [iii] any judgment is rendered
or proceedings are instituted against any Leased Property or Tenant
which affect any Leased Property or any part thereof (other than a
condemnation proceeding) which is not dismissed for ninety (90) days
(except as otherwise provided in this Section); [iv] all or a
substantial part of the assets of Tenant are attached, seized,
subjected to a writ or distress warrant, or are levied upon, or come
into the possession of any receiver, trustee, custodian, or assignee
for the benefit of creditors and is not dismissed within sixty (60)
days; [v] Tenant is enjoined, restrained, or in any way prevented by
court order, or any proceeding is filed or commenced seeking to enjoin,
restrain or in any way prevent Tenant from conducting all or
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a substantial part of its business or affairs and is not dismissed
within sixty (60) days; or [vi] except as permitted by Section 18.18, a
notice of lien, levy or assessment is filed of record with respect to
all or any part of the property of Tenant and is not dismissed or
bonded off within sixty (60) days.
(g) Tenant or any Affiliate defaults on any material
obligation to Landlord, Tenant defaults on any material obligation
under any debt associated with the Leased Properties or any debt
co-guaranteed by Landlord and Tenant. As used herein, "Affiliate" means
any person, corporation, partnership, trust, or other legal entity
that, directly or indirectly, controls or is controlled by, or is under
common control with, Tenant. "Control" (and the correlative meanings of
the terms "controlled by" and "under common control with") means the
possession, directly or indirectly, of the power to direct or cause a
direction of the management and policies of such entity.
9.02 Remedies. Landlord may exercise any one or more of the following
remedies upon the occurrence of an Event of Default:
(a) Landlord may terminate the applicable Lease, exclude
Tenant from possession of the Leased Property and use reasonable
efforts to lease the Leased Property to others. If any Lease is
terminated pursuant to the provisions of this subparagraph (a), Tenant
will remain liable to Landlord for damages in an amount equal to the
Rent and other sums which would have been owing by Tenant under the
Lease for the balance of the Term if the Lease had not been terminated,
less the net proceeds, if any, of any re-letting of the Leased Property
by Landlord subsequent to such termination, after deducting all
Landlord's expenses in connection with such reletting, including
without limitation, the expenses set forth in Section 9.02(b)(2) below.
Landlord will be entitled to collect such damages from Tenant monthly
on the days on which the Rent and other amounts would have been payable
under the Lease if the Lease had not been terminated and Landlord will
be entitled to receive such damages from Tenant on each such day.
Alternatively, at the option of Landlord, if the Lease is terminated,
Landlord will be entitled to recover from Tenant (A) the worth at the
time of award of the unpaid Rent which had been earned at the time of
termination; (B) the worth at the time of award of the amount by which
the unpaid Rent which would have been earned after termination until
the time of awards exceeds the amount of such Rent loss that Tenant
proves could reasonably have been avoided; (C) the worth at the time of
award of the amount by which the unpaid Rent for the balance of the
Term of the Lease after the time of award exceeds the amount of such
Rent loss that Tenant proves could reasonably be avoided; and (D) any
other amount
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necessary to compensate Landlord for all the detriment proximately
caused by Tenant's failure to perform its obligations under the Lease
or which in the ordinary course of things would be likely to result
from such failure. The "worth at the time of award" of the amount
referred to in clauses (A) and (B) is computed at "present value" using
New York Prime Rate. For purposes of this Agreement, "New York Prime
Rate" shall mean that rate of interest identified as prime or national
prime by the Wall Street Journal, or if not published or found, then
the rate of interest charged by the American bank with the greatest
number of assets on ninety (90) day unsecured notes to its preferred
customers. The worth at the time of award of the amount referred to in
clause (C) is computed by discounting such amount at the discount rate
of the Federal Reserve Bank of New York at the time of award. For the
purpose of determining unpaid Rent under clause (C), the Rent reserved
in the Lease will be deemed to be the sum of the following: [i] the
Base Rent computed pursuant to Section 2.01; [ii] the then outstanding
full balance of the Assumed Mortgage Debt; [iii] the Other Additional
Rent pursuant to Section 2.02.02 based upon the amount of such Other
Additional Rent for the month preceding the date of termination; and
[iv] the Percentage Rent pursuant to Section 2.06 based upon the amount
of the annualized Gross Revenues for the then Lease Year increased by
three percent (3%) per annum, to the date on which the Lease would have
expired if Landlord had not terminated the Lease, but not to exceed the
product of one (1%) percent of the initial Base Rent multiplied by the
number of years since 1992.
(b) (1) Without demand or notice, Landlord may re-enter and
take possession of the Leased Property or any part of the Leased
Property; and repossess the Leased Property as of the Landlord's former
estate; and expel the Tenant and those claiming through or under Tenant
from the Leased Property; and, remove the effects of both or either,
without being deemed guilty of any manner of trespass and without
prejudice to any remedies for arrears of Rent or preceding breach of
covenants or conditions. If Landlord elects to re-enter, as provided in
this paragraph (b) or if Landlord takes possession of the Leased
Property pursuant to legal proceedings or pursuant to any notice
provided by law, Landlord may, from time to time, without terminating
this Lease, re-let the Leased Property or any part of the Leased
Property, either alone or in conjunction with other portions of the
Improvements of which the Leased Property are a part, in Landlord's
name but for the account of Tenant, for such term or terms (which may
be greater or less than the period which would otherwise have
constituted the balance of the Term of this Lease) and on such terms
and conditions (which may include concessions of free rent, and the
alteration and repair of the Leased Property) as Landlord, in its
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uncontrolled discretion, may determine. Landlord may collect and
receive the Rents for the Leased Property. Landlord will not be
responsible or liable for any failure to re-let the Leased Property, or
any part of the Leased Property, or for any failure to collect any Rent
due upon such re-letting. No such re-entry or taking Possession of the
Leased Property by Landlord will be construed as an election on
Landlord's part to terminate this Lease unless a written notice of such
intention is given to Tenant. No notice from Landlord under this Lease
or under a forcible entry and detainer statute or similar law will
constitute an election by Landlord to terminate this Lease unless such
notice specifically says so. Landlord reserves the right following any
such re-entry or re-letting, or both, to exercise its right to
terminate this Lease by giving Tenant such written notice, and, in that
event the Lease will terminate as specified in such notice.
(b) (2) If Landlord elects to take possession of the Leased
Property according to this subparagraph (b) without terminating the
Lease, Tenant will pay Landlord (i) the Rent and other sums which would
be payable under the Lease if such repossession had not occurred, less
(ii) the net proceeds, if any, of any re-letting of the Leased Property
after deducting all of Landlord's expenses incurred in connection with
such re-letting, including without limitation, all repossession costs,
brokerage commissions, legal expenses, attorneys' fees, expenses of
employees, alteration, remodeling, repair costs, and expenses of
preparation for such re-letting. If, in connection with any reletting,
the new Lease term extends beyond the existing Term or the Leased
Property covered by such re-letting include areas which are not part of
the Lease Property, a fair apportionment of the Rent received from such
re-letting and the expenses incurred in connection with such re-letting
will be made in determining the net proceeds received from such
re-letting. In addition, in determining the net proceeds from such
re-letting, any rent concessions will be apportioned over the term of
the new Lease. Tenant will pay such amounts to Landlord monthly on the
days on which the Rent and all other amounts owing under this Agreement
or the Lease would have been payable if possession had not been
retaken, and Landlord will be entitled to receive the rent and other
amounts from Tenant on each such day.
(c) Landlord may re-enter the Leased Property and have,
repossess and enjoy the Leased Property as if the Lease had not been
made, and in such event, Tenant and its successors and assigns shall
remain liable for any contingent or unliquidated obligations or sums
owing at the time of such repossession.
(d) Landlord may have access to and inspect, examine and
make copies of the books and records and any and all
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accounts, data and income tax and other returns of Tenant insofar as
they pertain to the Leased Property.
(e) Landlord may take whatever action at law or in equity as
may appear necessary or desirable to collect the Rent and other amounts
payable under the Lease then due and thereafter to become due, or to
enforce performance and observance of any obligations, agreements or
covenants of Tenant under this Lease.
9.03 Right of Set-Off. Landlord may, and is hereby authorized by
Tenant, at any time and from time to time, after advance notice to Tenant, to
set-off and apply any and all sums held by Landlord, any indebtedness of
Landlord to Tenant, and any claims by Tenant against Landlord, against any
obligations of Tenant under this Agreement or any Lease and against any claims
by Landlord against Tenant, whether or not Landlord has exercised any other
remedies hereunder. The rights of Landlord under this Section are in addition to
any other rights and remedies Landlord may have against Tenant.
9.04 Performance of Tenant's Covenants. Landlord may perform any
obligation of Tenant which Tenant has failed to perform within two (2) days
after Landlord has sent a written notice to Tenant informing it of its specific
failure. Tenant shall reimburse Landlord on demand, as Additional Rent, for any
expenditures thus incurred by Landlord and shall pay interest thereon at the
overdue Rate (as hereinafter defined).
9.05 Late Charge. Any payment not made by Tenant for more than ten (10)
days after the due date shall be subject to a late charge payable by tenant as
Rent of three percent (3%) of the amount of such overdue payment.
9.06 Litigation; Attorneys' Fees. Within ten (10) days after Tenant has
knowledge of any litigation or other proceeding that may be instituted against
Tenant, against the Leased Property to secure or recover possession thereof, or
that may affect the title to or the interest of Landlord in the Leased Property,
Tenant shall give written notice thereof to Landlord. Tenant shall pay all
reasonable costs and expenses incurred by Landlord in enforcing or preserving
Landlord's rights under this Agreement and each Lease, whether or not an Event
of Default has actually occurred or has been declared and thereafter cured,
including without limitation, [i] the fees, expenses, and costs of any
litigation, receivership, administrative, bankruptcy, insolvency or other
similar proceeding; [ii] reasonable attorney, paralegal, consulting and witness
fees and disbursements; and [iii] the expenses, including without limitation,
lodging, meals, and transportation, of Landlord and its employees, agents.
attorneys, and witnesses in preparing for litigation, administrative,
bankruptcy, insolvency or other similar proceedings and attendance at hearings,
depositions, and trials in
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connection therewith. All such costs, charges and fees as incurred shall be
deemed to be Additional Rent under this Lease.
9.07 Remedies Cumulative. The remedies of Landlord herein are
cumulative to and not in lieu of any other remedies available to Landlord at law
or in equity. The use of any one remedy shall not be taken to exclude or waive
the right to use any other remedy.
9.08 Escrows and Application of Payments. As security for the
performance of its obligations hereunder Tenant hereby assigns to Landlord all
its right, title, and interest in and to all monies escrowed with Landlord under
this Agreement or under any Lease and all deposits with utility companies,
taxing authorities, and insurance companies; provided, however, that Landlord
shall not exercise its rights hereunder until an Event of Default has occurred.
Any payments received by Landlord under any provisions of this Agreement or
under any Lease during the existence, or continuance of an Event of Default
shall be applied to Tenant's obligations in the order which Landlord may
determine.
9.09 Power of Attorney. Tenant hereby irrevocably and unconditionally
appoints Landlord, or Landlord's authorized officer, agent, employee or
designee, as Tenant's true and lawful attorney-in-fact, to act, after an Event
of Default, for Tenant in Tenant's name, place, and stead, and for Tenant's and
Landlord's use and benefit, to execute, deliver and file all applications and
any and all other necessary documents or things, to effect a transfer,
reinstatement, renewal and/or extension of any and all licenses and other
governmental authorizations issued to Tenant in connection with Tenant's
operation of the Leased Property, and to do any and all other acts incidental to
any of the foregoing. Tenant irrevocably and unconditionally grants to Landlord
as its attorney-in-fact full power and authority to do and perform every act
necessary and proper to be done in the exercise of any of the foregoing powers
as fully as Tenant might or could do if personally present or acting, with full
power of substitution, hereby ratifying and confirming all that said attorney
shall lawfully do or cause to be done by virtue hereof. This power of attorney
is coupled with an interest and is irrevocable prior to the full performance of
the Tenant's obligations under this Agreement and each Lease.
ARTICLE X: DAMAGE AND DESTRUCTION
10.01 General. Tenant shall notify Landlord if any of the Leased Property is
damaged or destroyed by reason of fire or any other cause. Tenant shall promptly
repair, rebuild, or restore the Leased Property, at Tenant's expense, so as to
make the Leased Property at least equal in value to the Leased Property existing
immediately prior to such occurrence and as nearly similar to it in character as
is practicable and reasonable. Before beginning such repairs or rebuilding, or
letting any contracts in connection
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with such repairs or rebuilding, Tenant will submit for Landlord's approval,
which approval Landlord will not unreasonably withhold or delay, complete and
detailed plans and specifications for such repairs or rebuilding. Promptly after
receiving Landlord's approval of the plans and specifications, Tenant will begin
such repairs or rebuilding and will prosecute the repairs and rebuilding to
completion with diligence, subject, however, to strikes, lockouts, acts of God,
embargoes, governmental restrictions, and other causes beyond Tenant's
reasonable control. Landlord will make available to Tenant the net proceeds of
any fire or other casualty insurance paid to Landlord for such repair or
rebuilding as the same progresses, after deduction of any costs of collection,
including attorneys' fees. Payments will be made against properly certified
vouchers of a competent architect in charge of the work and approved by
Landlord. Prior to commencing the repairing or rebuilding, Tenant shall deliver
to Landlord for Landlord's approval a schedule setting forth the estimated
monthly draws for such work. Landlord will contribute to such payments out of
the insurance proceeds an amount equal to the proportion that the total net
amount received by Landlord from insurers bears to the total estimated cost of
the rebuilding or repairing, multiplied by the payment by Tenant on account of
such work. Landlord may, however, withhold ten percent (10%) from each payment
until the work of repairing or rebuilding is completed and proof has been
furnished to Landlord that no lien or liability has attached or will attach to
the Leased Property or to Landlord in connection with such repairing or
rebuilding. Upon the completion of rebuilding and the furnishing of such proof,
the balance of the net proceeds of such insurance payable to Tenant on account
of such repairing or rebuilding will be paid to Tenant. Tenant will obtain and
deliver to Landlord a temporary or final certificate of occupancy before the
Leased Property is reoccupied for any purpose. Tenant shall complete such
repairs or rebuilding free and clear of mechanic's or other liens, and in
accordance with the building codes and all applicable laws, ordinances,
regulations, or orders of any state, municipal, or other public authority
affecting the repairs or rebuilding, and also in accordance with all
requirements of the insurance rating organization, or similar body. Any
remaining proceeds of insurance after such restoration will be Tenant's
property.
10.02 Landlord's Inspection. During the progress of such repairs or
rebuilding, Landlord and its architects and engineers may, from time to time,
inspect the Leased Property and will be furnished, if required by them, with
copies of all plans, shop drawings, and specifications relating to such repairs
or rebuilding. Tenant will keep all plans, shop drawings, and specifications at
the building, and Landlord and its architects and engineers may examine them at
all reasonable times. If, during such repairs or rebuilding, Landlord and its
architects and engineers determine that the repairs or rebuilding are not being
done in accordance with the approved plans and specifications,
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Landlord will give prompt notice in writing to Tenant, specifying in detail the
particular deficiency, omission, or other respect in which Landlord claims such
repairs or rebuilding do not accord with the approved plans and specifications.
Upon the receipt of any such notice, Tenant will cause corrections to be made to
any deficiencies, omissions, or such other respect. Tenant's obligations to
supply insurance, according to Article IV, will be applicable to any repairs or
rebuilding under this Section.
10.03 Landlord's Costs. Tenant shall, within thirty (30) days after receipt
of an invoice from Landlord, pay the reasonable costs, expenses, and fees of any
architect or engineer employed by Landlord to review any plans and
specifications and to supervise and approve any construction, or for any
services rendered by such architect or engineer to Landlord as contemplated by
any of the provisions of this Lease, or for any services performed by Landlord's
attorneys in connection therewith; provided, however, that Landlord will consult
with Tenant and notify Tenant of the estimated amount of such expenses.
10.04 Rent Abatement. In the event that the provisions of Section 10.01 above
shall become applicable, the Base Rent, real estate taxes and other Impositions
shall be abated or reduced proportionately during any period in which, by reason
of such damage or destruction, there is substantial interference with the
operation of the business of Tenant in the Leased Property, having regard to the
extent to which Tenant may be required to discontinue its business in the Leased
Property, and such abatement or reduction shall continue for the period
commencing with such destruction or damage and ending with the substantial
completion (defined below) by Tenant of such work or repair and/or
reconstruction. Nothing in this section shall be construed to abate or reduce
Percentage Rent. In the event that only a portion of the Leased Property is
rendered untenantable or incapable of such use, the Base Rent and all real
estate taxes and other Impositions payable hereunder shall be reduced on a pro
rata basis for the number of licensed nursing home beds which were rendered
incapable of occupancy because of such damage or destruction in proportion to
the total amount of licensed nursing home beds available for occupancy in the
Leased Property prior to such damage or destruction. For purposes of this
paragraph, substantial completion shall occur upon the earlier of (i) nine (9)
months from the date of the first disbursement of insurance proceeds, or (ii)
the issuance of a certificate of occupancy for the Leased Property.
10.05 Substantial Damage During Lease Term. Provided Tenant has fully
complied with Section 4.01 hereof (including actually maintaining in effect
rental value insurance provided for in clause (c) thereof), if, at any time
during the Term of the Lease, the Leased Property is so damaged by fire or
otherwise that more than fifty (50%) percent of the licensed nursing home beds
at the Leased
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Property are rendered unusable, Tenant may, within thirty (30) days after such
damage, give notice of its election to terminate the Lease subject to the
particular Leased Property and, subject to the further provisions of this
Section, such Lease will cease on the tenth (lOth) day after the delivery of
such notice. If the Lease is so terminated, Tenant will have no obligation to
repair, rebuild or replace the Leased Property, and the entire insurance
proceeds will belong to Landlord. If the Lease is not so terminated, Tenant
shall rebuild the Leased Property in accordance with Section 10.01.
ARTICLE XI: CONDEMNATION
11.01 Total Taking. If, by exercise of the right of eminent domain or by
conveyance made in response to the threat of the exercise of such right
("Taking"), the entire Leased Property that is the subject of any Lease is
taken, or so much of the Leased Property is taken that the Leased Property
cannot be used by Tenant for the purposes for which it was used immediately
before the Taking, then the Lease will terminate on the earlier of the vesting
of title to the Leased Property in the condemning authority or the taking of
possession of the Leased Property by the condemning authority. All damages
awarded for such Taking under the power of eminent domain shall be the property
of the Landlord, except for damages awarded as compensation for diminution in
value of the leasehold in contrast to diminution in the value of the fee of the
Leased Property. Tenant shall also be entitled to any specific award made for
loss of business or the relocation thereof.
11.02 Partial Taking. If, after a Taking, so much of the Leased Property that
is the subject of any Lease remains that the Leased Property can be used for
substantially the same purposes for which it was used immediately before the
Taking, then [i] the Lease will end as to the part taken on the earlier of the
vesting of title to the Leased Property in the condemning authority or the
taking of possession of the Leased Property by the condemning authority; [ii]
Base Rent for so much of the Leased Property as remains will be reduced on a pro
rata basis by an amount equal to the difference between the number of available
nursing beds remaining after the Taking and the number of available nursing beds
before the Taking; [iii] at its cost, Tenant shall restore so much of the Leased
Property as remains to a sound architectural unit substantially suitable for the
purposes for which it was used immediately before the Taking, using good
workmanship and new, first-class materials; [iv] upon completion of the
restoration, or upon Tenant's request at intervals during the restoration
process, in accordance with the procedure set forth in Section 10.01, Landlord
will pay Tenant the lesser of the net award made to Landlord on the account of
the Taking (after deducting from the total award, attorneys', appraisers', and
other fees and costs incurred in connection with the obtaining of the award and
amounts paid to the holders of mortgages secured by the Leased Property), or
Tenant's actual out-of-pocket costs of restoring the Leased
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Property; and [v] Landlord shall be entitled to the balance of the net award.
ARTICLE XII: TENANT'S PROPERTY
12.01 Tenant's Property. Tenant shall install, place, and use on the Leased
Property such fixtures, furniture, equipment, inventory and other personal
property in addition to the Fixtures as may be required or as Tenant may, from
time to time, deem necessary or useful to operate the Leased Property as a
nursing home or assisted living medical care facility. All fixtures, furniture,
equipment, inventory, and other personal property installed, placed, or used on
the Leased Property which is owned by Tenant or leased by Tenant from third
parties is hereinafter referred to as "Tenant's Property".
12.02 Requirements for Tenant's Property. Tenant shall comply with all of
the following requirements in connection with Tenant's Property:
(a) Tenant shall notify Landlord within one hundred twenty
(120) days after each anniversary of any Lease of any additions,
substitutions, or replacements of any item of Tenant's Property which
individually has a cost of more than $10,000.00 and shall furnish
Landlord with such other information as Landlord may reasonably request
from time to time.
(b) Tenant's Property shall be installed in a good and
workmanlike manner, in compliance with all governmental laws,
ordinances, rules, and regulations and all insurance requirements, and
be installed free and clear of any mechanic's liens.
(c) Tenant shall, at Tenant's sole cost and expense,
maintain, repair, and replace Tenant's Property.
(d) Tenant shall, at Tenant's sole cost and expense, keep
Tenant's Property insured against loss or damage by fire, vandalism and
malicious mischief, sprinkler leakage, and other physical loss perils
commonly covered by fire and extended coverage, boiler and machinery,
and difference in conditions insurance in an amount not less than
ninety percent (90%) of the then full replacement cost thereof. Tenant
shall use the proceeds from any such policy for the repair and
replacement of Tenant's Property. The insurance shall meet the
requirements of Section 4.03.
(e) Tenant shall pay all taxes applicable to Tenant's
Property.
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(f) If Tenant's Property is damaged or destroyed by fire or
any other cause, Tenant shall promptly repair or replace Tenant's
Property unless Tenant is entitled to and elects to terminate the Lease
pursuant to Section 10.05.
(g) Unless an Event of Default (or any event which, with the
giving of notice or lapse of time, or both, would constitute an Event
of Default) has occurred and remains uncured beyond any applicable
grace period, Tenant may remove Tenant's property from the Leased
Property from time to time provided that [i] the items removed are not
required to operate the Leased Property as a licensed nursing home
facility (unless such items are being replaced by Tenant); and [ii)
Tenant repairs any damage to the Leased Property resulting from the
removal of Tenant's Property.
(h) Tenant shall remove Tenant's Property upon the
termination or expiration of the Lease and shall repair any damage to
the Leased Property resulting from the removal of Tenant's Property. If
Tenant fails to remove Tenant's Property within ninety (90) days after
the termination or expiration of the Lease, then Tenant shall be deemed
to have abandoned Tenant's Property, Tenant's Property shall become the
property of Landlord, and Landlord may remove, store and dispose of
Tenant's Property. In such event, Tenant shall have no claim or right
against Landlord for such property or the value thereof regardless of
the disposition thereof by Landlord. Tenant shall pay Landlord, upon
demand, all expenses incurred by Landlord in removing, storing, and
disposing of Tenant's Property and repairing any damage caused by such
removal. Tenant's obligations hereunder shall survive the termination
or expiration of the Lease.
(i) Tenant shall perform its obligations under any equipment
lease or security agreement for Tenant's Property.
ARTICLE XIII: TENANT'S RIGHTS OF FIRST REFUSAL
13.01 Rights of First Refusal.
(a) Subject to the terms and conditions set forth in this
Section 13.01, Tenant shall have a right of first refusal to purchase
any Leased Property (the "Purchase Refusal Right"). If during the Term
or for a period of six (6) months following termination of the Lease,
Landlord receives a bona fide third party offer to purchase any Leased
Property, Landlord shall, prior to accepting such third party offer,
send written notice thereof to Tenant ("Landlord's Notice") along with
a copy of such offer, and further setting forth in detail all of the
terms and conditions of such third party offer, including the price,
time for closing, and any contingencies. Tenant shall have fifteen (15)
days after
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receipt of Landlord's Notice to exercise Tenant's Purchase Refusal
Right, by giving Landlord written notice thereof. Failure of Tenant to
exercise the Purchase Refusal Right within such time period set forth
above shall be deemed to extinguish the Purchase Refusal Right.
Thereafter, Landlord may sell such Leased Property to such third party
on the same terms and conditions as set forth in the Landlord's Notice.
Tenant's Purchase Refusal Right shall revive in the event that Landlord
fails to close such third party offer. In the event that Tenant elects
to exercise the Purchase Refusal Right and to purchase the Leased
Property thereby, (a) Tenant shall purchase such Leased Property on the
same terms and conditions and subject to all time periods and other
limitations as provided in Landlord's Notice, and (b) concurrently with
such purchase, the Lease of such Leased Property shall terminate (but
Tenant shall remain liable to pay any unpaid Rent with respect to such
Leased Property and all indemnifications and other provisions that
survive the expiration of any Lease or of this Agreement shall continue
in effect), and this Agreement shall be appropriately amended to
reflect the termination of such Lease.
(b) Subject to the terms and conditions set forth in this
Section 13.01, Tenant shall have a right of first refusal to lease any
Leased Property (the "Lease Refusal Right"). If during the Term or
within six (6) months thereafter Landlord receives a bona fide third
party offer to lease any Leased Property after expiration of the Lease
to Tenant, Landlord shall, prior to accepting such third party offer,
send written notice thereof to Tenant ("Landlord's Notice") along with
a copy of such offer, and further setting forth in detail all of the
terms and conditions of such third party offer, including the rent.
Tenant shall thereafter have thirty (30) days after the date of
Landlord's Notice to exercise Tenant's Lease Refusal Right, by giving
Landlord written notice thereof. Failure of Tenant to exercise the
Lease Refusal Right within such time period set forth above shall be
deemed to extinguish the Lease Refusal Right. Thereafter, Landlord may
lease such Leased Property to such third party on the same terms and
conditions as set forth in the Landlord's Notice. Tenant's Lease
Refusal Right shall revive in the event that Landlord fails to close
such third party offer. In the event that Tenant elects to exercise the
Lease Refusal Right and to lease the Leased Property thereby, Tenant
shall lease such Leased Property on the same terms and conditions and
subject to all time periods and other limitations as provided in
Landlord's Notice.
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ARTICLE XIV: ASSIGNMENT AND SUBLETTING; ATTORNMENT
14.01 Subletting and Assignment; Attornment. Subject to the provisions of
Section 14.03 below and any other express conditions or limitations set forth
herein, Tenant may, without the consent of Landlord, (i) assign this Agreement
or any Lease or sublet all or any part of the Leased Property to any Affiliate
of Tenant, or (ii) sublet all or any part of the Leased Property (a) in the
normal course of the conduct of Tenant's business on the Leased Property (such
as but not limited to leasing of space for major moveable equipment or
functional departments such as pathology, pharmacy and radiology), or (b) as to
less than an aggregate of 20% of the rentable square footage of the buildings on
any Leased Property, to concessionaires or other third party users or operators
of portions of the Leased Property which are reasonably related to the
health-care industry or which provide direct services for patients or employees
of the Leased Property. Landlord shall not unreasonably withhold its consent to
any other or further subletting or assignment, provided that (a) in the case of
a subletting, the sublessee shall comply with the provisions of Section 14.02,
(b) in the case of an assignment, the assignee shall assume in writing and agree
to keep and perform all of the terms of this Lease on the part of Tenant to be
kept and performed and shall be, and become, jointly and severally liable with
Tenant for the performance thereof, (c) an original counterpart of each such
sublease and assignment and assumption, duly executed by Tenant and such
sublessee or assignee, as the case may be, in form and substance satisfactory to
the Landlord, shall be delivered promptly to Landlord, and (d) in case of either
an assignment or subletting, Tenant shall remain primarily liable, as principal
rather than as surety, for the prompt payment of the Rent and for the
performance and observance of all of the covenants and conditions to be
performed by Tenant hereunder.
14.02 Attornment. Tenant shall insert in each sublease permitted under
Section 14.01 provisions to the effect that (a) such sublease is subject and
subordinate to all of the terms and provisions of the Lease (including this
Agreement) and to the rights of Landlord hereunder, (b) in the event the Lease
shall terminate before the expiration of such sublease, the sublessee thereunder
will, at Landlord's option, attorn to Landlord and waive any right the sublessee
may have to terminate the sublease or to surrender possession thereunder, as a
result of the termination of the Lease, and (c) in the event the sublessee
receives a written notice from Landlord or Landlord's assignees, if any, stating
that Tenant is in Default under the Lease, the sublessee shall thereafter be
obligated to pay all rentals accruing under said sublease directly to the party
giving such notice, or as such party may direct. All rentals received from the
sublessee by Landlord or Landlord's assignees, if any, as the case may be, shall
be credited against the amounts owing by Tenant under the Lease.
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14.03 Sublease Limitation. Anything contained in this Agreement or any
Lease to the contrary notwithstanding, Tenant shall not sublet the Leased
Property on any basis such that the rental to be paid by the sublessee
thereunder would be based, in whole or in part, on either (i) the income or
profits derived by the business activities of the sublessee, or (ii) any other
manner such that any portion of the sublease rental received by Landlord would
fail to qualify as "rents from real property" within the meaning of Section
856(d) of the Internal Revenue Code of 1986 as amended (the "Code"), or any
similar or successor provisions thereto.
ARTICLE XV: LIMITED RIGHT OF SUBSTITUTION
15.01 Substitution Upon Condemnation. With respect to any Leased Property or
Leased Properties whose Base Rent does not exceed in the aggregate five percent
(5%) of the Base Rent for all Leased Properties listed on Schedule A hereto
that, following notice received from any governmental authority not later than
December 31, 1994, is taken in its entirety by eminent domain or conveyed in its
entirety to such governmental authority in response to the threat of the
exercise of such governmental authority's right of eminent domain ("Condemned
Property"), Tenant shall have an option to acquire such Leased Property in
exchange for a reasonably satisfactory new Leased Property ("Substituted
Property") on terms reasonably acceptable to Landlord. Such terms with respect
to the Substituted Property shall include comparable fair rental value, a
tax-free exchange opinion and an opinion that the transaction will not
disqualify Landlord as a real estate investment trust for tax purposes.
ARTICLE XVI: ARBITRATION
16.01 Arbitration. Except with respect to the payment of Base Rent hereunder,
in case any controversy shall arise between the parties hereto as to any of the
requirements of this Lease or the performance thereof, which the parties shall
be unable to settle by agreement or as otherwise provided herein, such
controversy shall be determined by arbitration to be initiated and conducted as
provisions of this Article XVI.
16.02 Appointment of Arbitrators. The party or parties requesting arbitration
shall serve upon the other a demand therefor, in writing, specifying the matter
to be submitted to arbitration, and nominating some competent disinterested
person to act as an arbitrator; within twenty (20) days after receipt of such
written demand and notification, the other party shall, in writing, nominate a
competent disinterested person and the two (2) arbitrators so designated shall,
within ten (10) days thereafter, select a third arbitrator and give immediate
written notice of such
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selection to the parties and shall fix in said notice a time and place for the
first meeting of the arbitrators, which meeting shall be held as soon as
conveniently possible after the selection of all arbitrators at which time and
place the parties to the controversy may appear and be heard.
16.03 Third Arbitrator. In case the notified party or parties shall fail to
make a selection upon notice, as aforesaid, or in case the first two (2)
arbitrators selected shall fail to agree upon a third arbitrator within ten (10)
days after their selection, then such arbitrator or arbitrators, may, upon
application made by either of the parties to the controversy, after twenty (20)
days' written notice thereof to the other party or parties, be appointed by the
Senior Judge of the United States District Court having jurisdiction of
controversies litigated in Nashville Tennessee.
16.04 Arbitration Procedure. Said arbitrators shall give each of the parties
not less than ten (10) days' written notice of the time and place of each
meeting at which the parties or any of them may appear and be heard and after
hearing the parties in regard to the matter in dispute and taking such other
testimony and making such other examinations and investigations as justice shall
require and as the arbitrators may deem necessary, they shall decide the
question submitted to them; and the decision of said arbitrators in writing
signed by a majority of them shall be final and binding upon the parties to such
controversy. In rendering such decision and award, the arbitrators shall not add
to, subtract from or otherwise modify the provisions of this Agreement or of any
applicable Lease.
16.05 Expenses. The expenses of such arbitration shall be divided between
Landlord and Tenant unless otherwise specified in award. Each party in interest
shall pay the fees and expenses of its own counsel.
ARTICLE XVII: QUIET ENJOYMENT, SUBORDINATION, ATTORNMENT,
BOND FINANCING AND ESTOPPEL CERTIFICATES
17.01 Quiet Enjoyment. So long as Tenant performs all of its obligations
under this Agreement and each Lease, Tenant's possession of the Leased Property
will not be disturbed by or through Landlord.
17.02 Subordination. This Agreement and each Lease and Tenant's rights under
this Agreement and each Lease are subordinate to any ground lease or underlying
lease, first mortgage, first deed of trust, or other first lien against the
Leased Property, together with any renewal, consolidation, extension,
modification or replacement thereof, which now or at any subsequent time affects
the Leased Property or any interest of Landlord in the Leased Property, except
to the extent that any such instrument expressly provides that this Agreement
and each Lease is superior. This
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provision will be self-operative, and no further instrument or subordination
will be required in order to effect it. However, Tenant shall execute,
acknowledge and deliver to Landlord, at any time and from time to time upon
demand by Landlord, such documents as may be requested by Landlord or any
mortgagee or any holder of any mortgage or other instrument described in this
Section, to confirm or effect any such subordination. If Tenant fails or refuses
to execute, acknowledge, and deliver any such document within twenty (20) days
after written demand, Landlord may execute, acknowledge and deliver any such
document on behalf of Tenant as Tenant's attorney-in-fact. Tenant hereby
constitutes and irrevocably appoints Landlord, its successors and assigns, as
Tenant's attorney-in-fact to execute, acknowledge, and deliver on behalf of
Tenant any documents described in this Section. This power of attorney is
coupled with an interest and is irrevocable.
17.03 Attornment; Non-Disturbance. If any holder of any mortgage, indenture,
deed of trust, or other similar instrument described in Section 17.02 succeeds
to Landlord's interest in the Leased Property, Tenant will pay to such holder
all Rent subsequently payable under this Lease. Tenant shall, upon request of
anyone succeeding to the interest of Landlord, automatically become the tenant
of, and attorn to, such successor in interest without changing this Lease. The
successor in interest will not be bound by [i] any payment of Rent for more than
one (1) month in advance; [ii] any amendment or modification of this Lease made
without its written consent; [iii] any claim against Landlord arising prior to
the date on which the successor succeeded to Landlord's interest; or [iv] any
claim or offset of Rent against the Landlord. Upon request by Landlord or such
successor in interest and without cost to Landlord or such successor in
interest, Tenant will execute, acknowledge and deliver an instrument or
instruments confirming the attornment. If Tenant fails or refuses to execute,
acknowledge, and deliver any such instrument within twenty (20) days after
written demand, then Landlord or such successor in interest will be entitled to
execute, acknowledge, and deliver any document on behalf of Tenant as Tenant's
attorney-in-fact. Tenant hereby constitutes and irrevocably appoints Landlord,
its successors and assigns, as Tenant's attorney-in-fact to execute,
acknowledge, and deliver on behalf of Tenant any such document. This power of
attorney is coupled with an interest and is irrevocable.
Landlord shall use reasonable efforts to obtain a non-disturbance
agreement from any such party referred to above which provides that in the event
such party succeeds to Landlord's interest under the Lease and provided that no
Event of Default by Tenant exists, such party will not disturb Tenant's
possession, use or occupancy of the Leased Property.
17.04 Estoppel Certificates. At the request of Landlord or any mortgagee or
purchaser of the Leased Property, Tenant shall
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execute, acknowledge, and deliver an estoppel certificate, in recordable form,
in favor of Landlord or any mortgagee or purchaser of the Leased Property
certifying the following: [i] that the Lease is unmodified and in full force and
effect, or if there have been modifications that the same is in full force and
effect as modified and stating the modifications; [ii] the date to which Rent
and other charges have been paid; [iii] that neither Tenant nor Landlord is in
default nor is there any fact or condition which, with notice or lapse of time,
or both, would constitute a default, if that be the case, or specifying any
existing default; [iv] that Tenant has accepted and occupies the Leased
Property; [v] that Tenant has no defenses, set-offs, deductions, credits, or
counterclaims against Landlord, if that be the case, or specifying such that
exist; [vi] that the Landlord has no outstanding construction or repair
obligations; and [vii] such other information as may reasonably be requested by
Landlord or any mortgagee or purchaser. Any purchaser or mortgagee may rely on
this estoppel certificate. If Tenant fails to deliver the estoppel certificates
to Landlord within ten (10) days after the request of the Landlord, then Tenant
shall be deemed to have certified that [a] the Lease is in full force and effect
and has not been modified, or that the Lease has been modified as set forth in
the certificate delivered to Tenant; [b] Tenant has not prepaid any Rent or
other charges except for the current month; [c] Tenant has accepted and occupies
the Leased Property; [d] neither Tenant nor Landlord is in default nor is there
any fact or condition which, with notice or lapse of time, or both, would
constitute a default; [e] Landlord has no outstanding construction or repair
obligation, and [f] Tenant has no defenses, set-offs, deductions, credits, or
counterclaims against Landlord. Tenant hereby irrevocably appoints Landlord as
Tenant's attorney-in-fact to execute, acknowledge and deliver on Tenant's behalf
any estoppel certificate which Tenant does not object to within twenty (20) days
after Landlord sends the certificate to Tenant. This power of attorney is
coupled with an interest and is irrevocable.
ARTICLE XVIII: MISCELLANEOUS
18.01 Notices. Landlord and Tenant hereby agree that all notices, demands,
requests, and consents (hereinafter "notices") required to be given pursuant to
the terms of this Lease shall be in writing shall be addressed as follows:
If to Tenant: National HealthCorp L.P.
100 Vine Street
Suite 1400, City Center
Murfreesboro, Tennessee 37130
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With a copy to: Richard F. LaRoche, Jr.
Senior Vice President and Secretary
National HealthCorp L.P.
100 Vine Street
Suite 1400, City Center
Murfreesboro, Tennessee 37130
If to Landlord: National Health Investors, Inc.
100 Vine Street
Suite 1400, City Center
Murfreesboro, Tennessee 37130
With a copy to: Ernest E. Hyne, II, Esq.
Harwell Martin & Stegall, P.C.
P.O. Box 2960
Nashville, Tennessee 37219;
and shall be served by [i] personal delivery, [ii] certified mail, return
receipt requested, postage prepaid, or [iii] nationally recognized overnight
courier. All notices shall be deemed to be given upon the earlier of actual
receipt or three (3) days after mailing, or one (1) business day after deposit
with the overnight courier. Any notices meeting the requirements of this Section
shall be effective, regardless of whether or not actually received. Landlord or
Tenant may change its notice address at any time by giving the other party
notice of such change.
18.02 Advertisement of Leased Property. In the event the parties hereto have
not executed a renewal lease of any Leased Property within ninety (90) days
prior to the expiration of the Term, then Landlord or its agent shall have the
right to enter such Leased Property at all reasonable times for the purpose of
exhibiting the Leased Property to others and to place upon the Leased Property
for and during the period commencing one hundred eighty (180) days prior to the
expiration of the Term "for sale" or "for rent" notices or signs.
18.03 Entire Agreement. This Agreement and the individual Leases contain the
entire agreement between Landlord and Tenant with respect to the subject matter
hereof and thereof. No representations, warranties, and agreements have been
made by Landlord except as set forth in this Lease.
18.04 Severability. If any term or provision of this Agreement or any Lease
is held or deemed by Landlord to be invalid or unenforceable, such holding shall
not affect the remainder of this Agreement or any Lease and the same shall
remain in full force and effect, unless such holding substantially deprives
Tenant of the use of the Leased Property or Landlord of the Rents therefor, in
which event the Lease for such Leased Property shall forthwith terminate as if
by expiration of the Term.
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18.05 Captions and Headings. The captions and headings are inserted only as a
matter of convenience and for reference and in no way define, limit or describe
the scope of this Agreement or the intent of any provision hereof.
18.06 Governing Law. This Lease shall be construed under the laws of the
State of Tennessee.
18.07 Recording of Lease. Tenant shall not record this Agreement. Tenant may,
however, record the Lease approved by Landlord with respect to each Leased
Property; provided, however, such lease shall not disclose the Base Rent of
other economic terms of the Lease.
18.08 Waiver. No waiver by Landlord of any condition or covenant herein
contained, or of any breach of any such condition or covenant, shall be held or
taken to be a waiver of any subsequent breach of such covenant or condition, or
to permit or excuse its continuance or any future breach thereof or of any
condition or covenant, nor shall the acceptance of Rent by Landlord at any time
when Tenant is in default in the performance or observance of any condition or
covenant herein be construed as a waiver of such default, or of Landlord's right
to terminate this Agreement or any Lease or exercise any other remedy granted
herein on account of such existing default.
18.09 Binding Effect. This Agreement and each Lease will be binding upon and
inure to the benefit of the heirs, successors, personal representatives, and
permitted assigns of Landlord and Tenant.
18.10 Authority. The persons executing this Agreement or any Lease on behalf
of Tenant warrant that [i] Tenant has the power and authority to enter into this
Agreement or such Lease; [ii] Tenant is qualified to do business in the state in
which the Leased Property is located; and [iii] they are authorized to execute
this Lease on behalf of Tenant. Tenant shall, at the request of Landlord,
provide evidence satisfactory to Landlord confirming these representations.
18.11 Transfer of Permits, Etc. Upon the expiration or earlier termination of
the Term of any Lease (whether pursuant to the provisions of this Agreement of
such Lease), Tenant shall to transfer and relinquish to Landlord or Landlord's
nominee and to cooperate with Landlord or Landlord's nominee in connection with
the processing by Landlord or such nominee of all licenses, operating permits,
certificates of need and other governmental authorization and all contracts,
including without limitation, a Certificate of Need, the nursing home and/or
health care facility license, and any other contracts with governmental or
quasi-governmental entities which may be necessary or appropriate for the
operation by Landlord or such nominee of the Leased
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Property for the purposes of operating a nursing home and health care facility;
provided that the costs and expenses of any such transfer or the processing of
any such application shall be paid by Landlord or Landlord's nominee. Any such
permits, licenses, certificates and contracts which are held in Landlord's name
now or at the termination of the Lease shall remain the property of Landlord. To
the extent permitted by law, Tenant hereby irrevocably appoints Landlord, its
successors and assigns and any nominee or nominees specifically designated by
Landlord or any successor or assign as Tenant's attorney-in-fact to execute,
acknowledge, deliver and file all documents appropriate to such transfer or
processing of any such application on behalf of Tenant; this power of attorney
is coupled with an interest and is irrevocable.
18.12 Modification. This Agreement and any Lease may only be modified by a
writing signed by both Landlord and Tenant.
18.13 Incorporation by Reference. All schedules and exhibits referred to in
this Agreement are incorporated into this Agreement, and all schedules and
exhibits referred to in any Lease (as well as the provisions of this Agreement,
except to the extent specifically excluded from or inconsistent with the terms
of such Lease) are incorporated into such Lease.
18.14 No Merger. The surrender of this Agreement or of any Lease by Tenant or
the cancellation of this Agreement or of any Lease by agreement of Tenant and
Landlord or the termination of this Agreement or of any Lease on account of
Tenant's default will not work a merger, and will, at Landlord's option,
terminate any subleases or operate as an assignment to Landlord of any
subleases. Landlord's option under this paragraph will be exercised by notice to
Tenant and all known subtenants of any applicable Leased Property.
18.15 Laches. No delay or omission by either party hereto to exercise any
right or power accruing upon any noncompliance or default by the other party
with respect to any of the terms hereof shall impair any such right or power or
be construed to be a waiver thereof.
18.16 Waiver of Jury Trial. To the extent that there is any claim by one
party against the other that is not to be settled by arbitration as provided in
Article XVI hereof, Landlord and Tenant waive trial by jury in any action,
proceeding or counterclaim brought by either of them against the other on all
matters arising out of this Lease or the use and occupancy of the Leased
Property (except claims for personal injury or property damage). If Landlord
commences any summary proceeding for nonpayment of Rent, Tenant will not
interpose, and waives the right to interpose, any counterclaim in any such
proceeding.
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18.17 Guarantee Fee Credit. Provided that no claim has been made against
Landlord under its subordinated guarantee of any letter of credit outstanding as
of the date of this Agreement (together with any renewal or replacement of such
letter of credit, "LOC") guaranteed primarily by Tenant, which LOC was issued to
secure indebtedness in connection with healthcare facilities managed by Tenant
and not constituting any of the Leased Properties, and which guarantee by
Landlord ("Managed Facility LOC Guarantee") is issued concurrently with and as
provided in the Contribution and Assumption Agreement of even date between
Tenant and Landlord (which provides among other things for the Real Estate
Conveyance), Tenant shall be entitled to a credit against the aggregate Base
Rent payable pursuant to Section 2.01 of this Agreement in an amount equal to
the full amount of any fees actually received by Landlord in consideration of
Landlord's Managed Facility LOC Guarantees. However, no portion of credit
provided for in this Section 18.17 shall be considered as a set-off or credit
against any rent payable under any individual Lease of any Leased Property, and
this Section 18.17 shall not be incorporated into or deemed to be a part of any
such Lease.
18.18 Permitted Contests. Tenant, on its own or on Landlord's behalf (or in
Landlord's name), but at Tenant's expense, may contest, by appropriate legal
proceedings conducted in good faith and with due diligence, the amount or
validity or application, in whole or in part, of any Imposition or any legal
requirement or insurance requirement or any lien, attachment, levy, encumbrance,
charge or claim provided that [i] in the case of an unpaid Imposition, lien,
attachment, levy, encumbrance, charge or claim, the commencement and
continuation of such proceedings shall suspend the collection thereof from
Landlord and from the Leased Property; [ii] neither the Leased Property nor any
Rent therefrom nor any part thereof or interest therein would be in any
immediate danger of being sold, forfeited, attached or lost; [iii] in the case
of a legal requirement, Landlord would not be in any immediate danger of civil
or criminal liability for failure to comply therewith pending the outcome of
such Proceedings; [iv] in the event that any such contest shall involve a sum of
money or potential loss in excess of Fifty Thousand Dollars ($50,000.00), Tenant
shall deliver to Landlord and its counsel an opinion of Tenant's counsel to the
effect set forth in clauses [i], [ii] and [iii], to the extent applicable; [v]
in the case of a legal requirement and/or an Imposition, lien, encumbrance, or
charge, Tenant shall give such reasonable security as may be demanded by
Landlord to insure ultimate payment of the same and to prevent any sale or
forfeiture of the affected Leased Property or the Rent by reason of such
nonpayment or noncompliance; provided, however, the provisions of this Section
shall not be construed to permit Tenant to contest the payment of Rent (except
as to contests concerning the method of computation or the basis of levy of any
Imposition or the basis for the assertion of any other claim) or any other sums
payable by Tenant to Landlord hereunder; [vi] in the case of an insurance
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requirement, the coverage required by Article IV shall be maintained: and [vii]
if such contest be finally resolved against Landlord or Tenant, Tenant shall, as
Additional Rent due hereunder, promptly pay the amount required to be paid,
together with all interest and penalties accrued thereon, or comply with the
applicable legal requirement or insurance requirement. Landlord, at Tenant's
expense, shall execute and deliver to Tenant such authorizations and other
documents as may be reasonably required in any such contest, and, if reasonably
requested by Tenant or if Landlord so desires, Landlord shall join as a party
therein. Tenant hereby agrees to indemnify and save Landlord harmless from and
against any liability, cost or expense of any kind that may be imposed upon
Landlord in connection with any such contest and any loss resulting therefrom.
18.19 Construction of Lease. This Agreement and each of the Leases for Leased
Properties described on Schedule A hereto have been prepared by Landlord and its
professional advisors and reviewed by Tenant and its professional advisors.
Landlord, Tenant, and their advisors believe that this Agreement and such Leases
are the product of all their efforts, that they express their agreement, and
agree that they shall not be interpreted in favor of either Landlord or Tenant
or against either Landlord or Tenant merely because of their efforts in
preparing such documents.
18.20 Counterparts. This Agreement and each Lease may be executed in
duplicate counterparts, each of which shall be deemed an original hereof or
thereof.
18.21 Relationship of Landlord and Tenant. The relationship of Landlord and
Tenant is the relationship of lessor and lessee. Landlord and Tenant are not
partners, joint venturers, or associates.
18.22 Custody of Escrow Funds. Any funds paid to Landlord in escrow hereunder
may be held by Landlord or, at Landlord's election, by a financial institution,
the deposits or accounts of which are insured or guaranteed by a federal or
state agency. The funds shall not be deemed to be held in trust, may be
commingled with the general funds of Landlord or such other institution, and
shall not bear interest.
18.23 Landlord's Status as a REIT. Tenant acknowledges that Landlord intends
to elect to be taxed as a real estate investment trust ("REIT") under the Code.
Tenant shall not do anything which would adversely affect Landlord's status as a
REIT. Tenant hereby agrees to modifications of this Lease which do not
materially adversely affect Tenant's rights and liabilities if such
modifications are required to retain or clarify Landlord's status as a REIT.
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18.24 Sale of Real Estate Assets. Notwithstanding any other provision of this
Agreement or of any Lease, Landlord shall not be required to sell or transfer
Leased Property, or any portion thereof, which is a real estate asset as defined
in Section 856(c)(6) of the Code, to Tenant if Landlord's counsel advises
Landlord that such sale or transfer may not be a sale of property described in
Section 857(b)(6)(C) of the Code. If Landlord determines not to sell such
property pursuant to the above sentence, Tenant's right, if any, to purchase the
Leased Property shall continue and be exercisable at such time as the
transaction, upon the advice of Landlord's counsel, would be a sale of property
described in Section 857(b)(6)(C) of the Code.
18.25 Use of Tenant's Name. Following the expiration or earlier termination
of this Agreement and of all of the Leases, Landlord shall use its best efforts,
if requested by Tenant within 12 months of such expiration or termination, to
cause its name to be changed to a name that does not include the word "National"
or any variation thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Lease or
caused the same to be executed by their respective duly authorized officers as
of the date first set forth above.
NATIONAL HEALTH INVESTORS, INC.
By:
-----------------------------
Title: Secretary
NATIONAL HEALTHCORP L.P.
By its Managing General Partner,
NHC, Inc.
By:
-----------------------------
Title: President
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EXHIBIT 10.2
MASTER OPERATING LEASE
between
NHR/OP, L.P., LANDLORD
and
NATIONAL HEALTHCARE CORPORATION, TENANT
Dated: October 1, 1997
Effective: 12:01 AM, January 1, 1998
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Table of Contents
Page
ARTICLE I: SEPARATE LEASE AGREEMENTS; PREMISES AND TERM............ 1
1.01 Separate Lease Agreements............................... 1
1.02 Leased Property......................................... 1
1.03 Term.................................................... 2
1.04 Holding Over............................................ 2
1.05 Surrender............................................... 2
ARTICLE II: RENT ................................................... 3
2.01 Base Rent............................................... 3
2.02 Additional Rent......................................... 3
2.03 Place(s) of Payment of Rent; Direct Payment of
AdditionaL Rent ........................................ 3
2.04 Net Lease............................................... 3
2.05 No Termination, Abatement, Etc.......................... 4
2.06 Percentage Rent......................................... 4
ARTICLE III: IMPOSITIONS AND UTILITIES............................... 6
3.01 Payment of Impositions.................................. 6
3.02 Definition of Impositions............................... 7
3.03 Escrow of Impositions................................... 8
3.04 Utilities............................................... 8
3.05 Discontinuance of Utilities............................. 9
ARTICLE IV: INSURANCE .............................................. 9
4.01 Property Insurance...................................... 9
4.02 Liability Insurance..................................... 10
4.03 Insurance Requirements.................................. 10
4.04 Replacement Cost........................................ 11
4.05 Blanket Policy.......................................... 11
4.06 No Separate Insurance................................... 11
4.07 Waiver of Subrogation................................... 11
4.08 Mortgages............................................... 12
4.09 Escrows................................................. 12
ARTICLE V: INDEMNITY; HAZARDOUS SUBSTANCES......................... 12
5.01 Tenant's Indemnification................................ 12
5.02 Hazardous Substances or Materials....................... 13
5.03 Limitation of Landlord's Liability...................... 13
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ARTICLE VI: USE AND ACCEPTANCE OF PREMISES.......................... 14
6.01 Use of Leased Property.................................. 14
6.02 Acceptance of Leased Property........................... 14
6.03 Conditions of Use and Occupancy......................... 14
6.04 Financial Statements.................................... 14
ARTICLE VII: REPAIRS, COMPLIANCE WITH LAWS,
AND MECHANICS' LIENS.................................... 15
7.01 Maintenance............................................. 15
7.02 Compliance With Laws.................................... 15
7.03 Required Alterations.................................... 15
7.04 Mechanic's Liens........................................ 16
7.05 Replacements of Fixtures................................ 16
ARTICLE VIII: ALTERATIONS AND SIGNS................................... 16
8.01 Prohibition on Alterations and Improvements............. 16
8.02 Requirements for Permitted Alterations.................. 17
8.03 Ownership and Removal of Permitted Alterations.......... 18
8.04 Signs................................................... 18
ARTICLE IX: DEFAULTS AND REMEDIES................................... 18
9.01 Events of Default....................................... 18
9.02 Remedies................................................ 20
9.03 Right of Set-Off........................................ 22
9.04 Performance of Tenant's Covenants....................... 22
9.05 Late Charge............................................. 22
9.06 Litigation; Attorneys' Fees............................. 22
9.07 Remedies Cumulative..................................... 23
9.08 Escrows and Application of Payments..................... 23
9.09 Power of Attorney....................................... 23
ARTICLE X: DAMAGE AND DESTRUCTION.................................. 24
10.01 General................................................. 24
10.02 Landlord's Inspection................................... 24
10.03 Landlord's Costs........................................ 25
10.04 Rent Abatement.......................................... 25
10.05 Substantial Damage During Lease Term.................... 25
ARTICLE XI: CONDEMNATION ........................................... 26
11.01 Total Taking............................................ 26
11.02 Partial Taking.......................................... 26
ARTICLE XII: TENANT'S PROPERTY ...................................... 26
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12.01 Tenant's Property....................................... 27
12.02 Requirements for Tenant's Property...................... 27
ARTICLE XIII: TENANT'S RIGHTS OF FIRST REFUSAL........................ 28
13.01 Rights of First Refusal................................. 28
ARTICLE XIV: ASSIGNMENT AND SUBLETTING; ATTORNMENT................... 29
14.01 Subletting and Assignment; Attornment................... 29
14.02 Attornment.............................................. 29
14.03 Sublease Limitation..................................... 30
ARTICLE XV: ARBITRATION ............................................ 30
15.01 Arbitration............................................. 30
15.02 Appointment of Arbitrators.............................. 30
15.03 Third Arbitrator........................................ 30
15.04 Arbitration Procedure................................... 30
15.05 Expenses................................................ 31
ARTICLE XVI: QUIET ENJOYMENT, SUBORDINATION, ATTORNMENT,
BOND FINANCING AND ESTOPPEL CERTIFICATES................ 31
16.01 Quiet Enjoyment......................................... 31
16.02 Subordination........................................... 31
16.03 Attornment; Non-Disturbance............................. 31
16.04 Estoppel Certificates................................... 32
ARTICLE XVII: MISCELLANEOUS........................................... 33
17.01 Notices................................................. 33
17.02 Advertisement of Leased Property........................ 33
17.03 Entire Agreement........................................ 34
17.04 Severability............................................ 34
17.05 Captions and Headings................................... 34
17.06 Governing Law........................................... 34
17.07 Recording of Lease...................................... 34
17.08 Waiver.................................................. 34
17.09 Binding Effect.......................................... 34
17.10 Authority............................................... 34
17.11 Transfer of Permits, Etc................................ 34
17.12 Modification............................................ 35
17.13 Incorporation by Reference.............................. 35
17.14 No Merger............................................... 35
17.15 Laches.................................................. 35
17.16 Waiver of Jury Trial.................................... 35
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17.17 Permitted Contests...................................... 36
17.18 Construction of Lease................................... 36
17.19 Counterparts............................................ 36
17.20 Relationship of Landlord and Tenant..................... 37
17.21 Custody of Escrow Funds................................. 37
17.22 Sale of Real Estate Assets.............................. 37
17.23 Use of Tenant's Name.................................... 37
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MASTER OPERATING LEASE
AGREEMENT dated as of the 1st day of October, 1997, but effective
12:01 a.m., January 1, 1998, by and between NHR/OP, L.P., a Maryland limited
partnership, with NATIONAL HEALTH REALTY, INC. as general partner, ("Landlord")
and NATIONAL HEALTHCARE CORPORATION, or any wholly owned subsidiary to whom it
is assigned, a Delaware corporation (collectively "Tenant").
RECITALS
WHEREAS, Tenant desires to lease from Landlord various properties
upon which Landlord engages in the business of operating nursing homes and
healthcare facilities, which properties are listed on Schedule A attached hereto
(the "Real Estate Conveyance"); and
WHEREAS, Landlord and Tenant desire that each of the properties
listed on Schedule A shall be the subject of a separate and individual Short
Form Lease Agreement describing said property, the rent and various other terms
of said lease (each such Short Form Lease Agreement referred to individually as
a "Lease" and the property that is the subject of an individual Lease being
referred to as "Leased Property"); and
WHEREAS, Landlord and Tenant desire to set forth in this Agreement
certain terms and conditions applicable to all Leases of all Leased Properties,
except as any individual Lease with respect to a particular Leased Property may
otherwise provide;
NOW, THEREFORE, in consideration of the premises and of their
respective agreements and undertakings herein and in each Lease, Landlord and
Tenant agree as follows:
ARTICLE I: SEPARATE LEASE AGREEMENTS; PREMISES AND TERM
1.01 Separate Lease Agreements. Landlord and Tenant are concurrently
entering into a separate Lease for each of the Leased Properties referred to in
Schedule A hereto. Except as specifically set forth in a separate Lease, or any
amendment, supplement, schedule or exhibit thereto, all of the provisions of
this Agreement shall be deemed to be incorporated into and made a part of each
such separate Lease made between the Landlord as landlord (or lessor) and the
Tenant as tenant (or Lessee) during the Term of such separate Lease.
1.02 Leased Property. Except as set forth in an individual Lease
(including any schedule or exhibit thereto), the property that is the subject of
each Lease and that shall be considered as leased by the Landlord to the Tenant
thereunder shall consist of:
(a) The land described in the Lease ("Land");
(b) All buildings, structures, and other improvements,
including without
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limitation sidewalks, alleys, utility pipes, conduits, and lines,
parking areas, and roadways, now or hereafter situated upon the Land
("Improvements");
(c) All easements, rights and other appurtenances relating to
the Land and Improvements ("Appurtenances");
(d) All permanently affixed equipment, machinery, fixtures,
and other items of real property, including all components thereof,
located in, or used in connection with, and permanently affixed to or
incorporated into the Improvements, including without limitation, all
furnaces, boilers, heaters, electrical equipment, heating, plumbing,
lighting, ventilating, refrigerating (but not movable refrigerators),
incineration, air and water pollution control, waste disposal
air-cooling and air-conditioning systems and apparatus, sprinkler
systems and fire and theft protection equipment, and built-in oxygen
and vacuum systems, all of which, to the greatest extent permitted by
law, are hereby deemed by the parties hereto to constitute real estate,
together with all replacements, modifications, alterations and
additions thereto, but specifically excluding items within the category
of "Tenant's Property" defined in Section 12.01 hereof (collectively
the "Fixtures").
The Land, Improvements, Appurtenances and Fixtures are hereinafter referred to
as the "Leased Property".
SUBJECT, HOWEVER, to the easements, liens, encumbrances, restrictions,
agreements, and other title matters listed or specifically referred to in any
individual Lease ("Permitted Exceptions").
1.03 Term. To have and to hold, unless otherwise provided in an
individual Lease, the initial term (the "Initial Term") of each Lease is ten
(10) years commencing on January 1, 1998, (the "Commencement Date") and expiring
on December 31, 2007. Provided that no Event of Default has occurred and that
Tenant has not given Landlord a six (6) month notice of termination on or before
December 31, 2007, Tenant shall have been deemed to renew all (but except as
Landlord shall otherwise specifically agree in writing not less than all) Leases
for one (1) additional five (5) year term commencing January 1, 2008 (the "First
Renewal Term") on the same terms (other than with respect to renewal) as the
Initial Term; and provided that no Event of Default has occurred and that Tenant
has not given Landlord a six (6) month notice of termination on or before
December 31, 2012, Tenant shall have been deemed to renew all (but except as
Landlord shall otherwise specifically agree in writing not less than all) Leases
for one (1) further five (5) year term commencing January 1, 2013 (the "Second
Renewal Term") on the same terms as the First Renewal Term. The term "Term"
means the Initial Term and each Renewal Term as appropriate. The term "Lease
Year" means each twelve (12) month period during the Term commencing on January
1 and ending on December 31.
1.04 Holding Over. Should Tenant, without the express consent of
Landlord,
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continue to hold and occupy the Leased Property after the expiration of the
Term, such holding over beyond the Term and the acceptance or collection of Rent
by the Landlord shall operate and be construed as creating a tenancy from
month-to-month and not for any other term whatsoever. During any such holdover
period Tenant shall pay to Landlord for each month Tenant remains in the Leased
Property one hundred fifty (150%) percent of the Base Rent in effect on the
expiration date. Said month-to-month tenancy may be terminated by Landlord by
giving Tenant ten (10) days written notice, and at any time thereafter Landlord
may re-enter and take possession of the Leased Property.
1.05 Surrender. Except for (i) Permitted Alterations; (ii) normal and
reasonable wear and tear (subject to the obligation of Tenant to maintain the
Leased Property in good order and repair during the Term); and (iii) casualty,
taking or other damage and destruction not required to be repaired by Tenant,
Tenant shall surrender and deliver up the Leased Property (including the
Certificate of Need and/or license to operate the Leased Property) at the
expiration or termination of the Term broom clean, free of all Tenant's
equipment and personal property, and in as good order and condition as of the
Commencement Date.
ARTICLE II: RENT
2.01 Base Rent. Unless otherwise provided in an individual Lease,
Tenant shall pay Landlord base rent for each Property that is the subject of a
Lease in the amount specified therein (the "Base Rent") for the Term in
consecutive monthly installments payable in advance on the Commencement Date of
each Lease and thereafter on the first day of each month during the Term, in
accordance with the Base Rent Schedule set forth in or attached to each
individual Lease.
2.02 Additional Rent. In addition to Base Rent and Percentage Rent (as
hereinafter defined in Section 2.06), Tenant shall pay all other amounts,
liabilities, obligations and Impositions (as hereinafter defined) which Tenant
assumes or agrees to pay under this Agreement or any Lease and any fine,
penalty, interest, charge and cost which may be added for nonpayment or late
payment of such items (collectively the "Other Additional Rent").
2.03 Place(s) of Payment of Rent; Direct Payment of Additional Rent.
The Base Rent, Percentage Rent, and Additional Rent are hereinafter referred to
as "Rent". Landlord shall have all legal, equitable and contractual rights,
powers and remedies provided either in this Agreement, in any Lease or by
statute or otherwise in the case of nonpayment of the Rent. Tenant shall make
all payments of Base Rent and of Percentage Rent at Landlord's principal place
of business or as Landlord may otherwise from time to time direct in writing,
and all payments of Other Additional Rent directly to the person or persons to
whom such amount is owing at the time and times when such payments are due, and
shall give to Landlord such evidence of such direct payments as Landlord shall
reasonably request.
2.04 Net Lease. This Lease shall be deemed and construed to be an
"absolute net
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lease" or "triple net lease", and Tenant shall pay all Rent and other charges
and expenses in connection with the Leased Property throughout the Term, without
abatement, deduction or set-off.
2.05 No Termination Abatement, Etc. Except as otherwise specifically
provided in this Agreement or a particular Lease, Tenant shall remain bound by
this Agreement or such Lease in accordance with its terms. Except as otherwise
specifically provided in the Agreement or a particular Lease, Tenant shall not,
without the prior written consent of Landlord modify, surrender or terminate the
Agreement or such Lease, nor seek nor be entitled to any abatement, deduction,
deferment or reduction of Rent, or set-off against the Rent. Except as
specifically provided in this Agreement or a particular Lease, the obligations
of Landlord and Tenant shall not be affected by reason of [i] the lawful or
unlawful prohibition of, or restriction upon, Tenant's use of the Leased
Property, or any part thereof, the interference with such use by any person,
corporation, partnership or other entity, or by reason of eviction by paramount
title; [ii] any claim which Tenant has or might have against Landlord or by
reason of any default or breach of any warranty by Landlord under this Agreement
or a particular Lease or any other agreement between Landlord and Tenant, or to
which Landlord and Tenant are parties; [iii] any bankruptcy, insolvency,
reorganization, composition, readjustment, liquidation, dissolution, winding up
or other proceeding affecting Landlord or any assignee or transferee of
Landlord; or [iv] any other cause, whether similar or dissimilar to any of the
foregoing, other than a discharge of Tenant from any such obligations as a
matter of law. Except as otherwise specifically provided in this Agreement or a
particular Lease, and to the maximum extent permitted by law, Tenant hereby
specifically waives all rights, including but not limited to any rights under
any statute relating to rights of tenants in any state in which any Leased
Property is located, arising from any occurrence whatsoever, which may now or
hereafter be conferred upon it by law [a] to modify, surrender or terminate this
Lease or quit or surrender the Leased Property or any portion thereof; or [b]
entitling Tenant to any abatement, reduction, suspension or deferment of the
Rent or other sums payable by Tenant hereunder. The obligations of Landlord and
Tenant hereunder shall be separate and independent covenants and agreements and
the Rent and all other sums payable by Tenant hereunder shall continue to be
payable in all events unless the obligations to pay the same shall be terminated
pursuant to the express provisions of this Agreement or a particular Lease or by
termination of this Agreement or a particular Lease other than by reason of an
Event of Default.
2.06 Percentage Rent. In addition to the Base Rent, with respect to
each Lease Year after 1999 Tenant shall pay Landlord percentage rent
("Percentage Rent") in accordance with this Section 2.06 equal to three percent
(3%) of the amount by which the Gross Revenues (as defined in Section 2.06.01)
of each Leased Property in the applicable Lease Year exceed the Gross Revenues
of each Leased Property during 1999.
2.06.01 "Gross Revenues" means all revenues received or receivable by
the Tenant from or by reason of the operation of the Leased Property, or any
other use of the Leased Property, as calculated in accordance with generally
accepted accounting principles and as adjusted as set
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forth in this Section 2.06.01. Gross Revenues shall not include non-operating
revenues such as interest income or income from the sale of assets other than in
the ordinary course of business. Gross Revenues shall be adjusted by the
following items: [i] contractual allowances (difference between customary
charges and amounts receivable based on contract) relating to any period during
the Term of the Lease; [ii] all proper patient billing credits and adjustments
(including adjustments for bad debts) according to generally accepted accounting
principles relating to health care accounting; and [iii] federal, state or local
excise taxes and any tax based upon or measured by said revenues which is added
to or made a part of the amount billed to the patient or other recipient of such
services or goods, whether included in the billing or stated separately. To the
extent that the Leased Property is subleased by Tenant, Gross Revenues shall be
calculated for purposes of the Lease by including the rent received or
receivable by the Tenant if the space rental does not replace an operating bed
and is for not more than 10% of the square footage of the Leased Property.
Otherwise, Gross Revenues shall be calculated by including the Gross Revenues of
such sub-lessees with respect to the subleased property, i.e., the Gross
Revenues generated from the operations conducted on such subleased portion of
the Leased Property shall be included directly in the Gross Revenues for the
purpose of determining percentage rent payable under this Lease and the rent
received or receivable by Tenant under such subleases shall be excluded from
Gross Revenues for such purpose.
2.06.02 On or before March 31, 2000 with respect to the year ended
December 31, 1999 and on or before each following March 31 with respect to each
Lease Year thereafter, Tenant shall deliver to Landlord a notarized, sworn
statement (the "Tenant's Certification") setting forth the Gross Revenues for
the prior year. Annually a certificate from a nationally reputable accounting
firm satisfactory to Landlord shall be delivered to Landlord which certificate
shall state that, in the course of the regular audit of Tenant's financial
statements, such firm has reviewed Tenant's calculations of the amount of Gross
Revenues for each of the Leased Properties as set forth in Tenant's
Certification and that nothing has come to its attention to make such firm
believe the Tenant's Certification is incorrect in any material respect (and/or
stating, if applicable, any proposed audit adjustments with respect to Gross
Revenue which Tenant elected not to record and set forth in Tenant's
Certification). In addition to the Tenant's Certification and upon the request
of Landlord, Tenant shall deliver the following: [i] any reports sent to any
reimbursement agency, including, but not limited to Medicaid Cost Reports; [ii]
copies of Medicare Cost Reports; [iii] copies of interim or final cost
settlements with Medicare authorities concerning Medicare receivables with a
debit or credit balance; [iv] patient census data by type of patient on a
quarterly basis within thirty (30) days after the end of each calendar quarter
beginning January 31, 1999; [v] copies of changes in rates for Medicare,
Medicaid, private payor or any other provider paying for patients in the Leased
Property; and [vi] Tenant's calculation supporting any estimated contractual
allowances in the Financial Statements.
2.06.03 In each Lease Year commencing 2000, Tenant shall for such Lease
Year make anticipated payments of Percentage Rent monthly at the time of paying
installments of Base Rent, which payments shall be equal to one-twelfth (1/12th)
of the Percentage Rent determined for the preceding Lease Year, subject to final
determination and adjustment in payment by March
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31 of the following year.
2.06.04 Landlord or its duly authorized representatives may, upon
reasonable notice and on any business day and during reasonable office hours,
inspect Tenant's records of Gross Revenues, either at the Leased Property or
elsewhere as reasonably designated by Tenant, provided such inspection is made
within twelve months after a Tenant's Certification is furnished to Landlord by
Tenant. Any claim by Landlord for a revision of any Tenant's Certification must
be made in writing to Tenant within twelve (12) months after the date such
Tenant's Certification is furnished to Landlord; otherwise it shall be deemed
waived by Landlord. If Landlord inspects Tenant's records and such inspection
shows an error(s) in the Tenant's Certification which results in an
understatement of Gross Revenues of five percent (5%) or more for any Leased
Property, then in addition to paying the additional Percentage Rent on demand,
Tenant shall pay Landlord, on demand, the reasonable cost of such inspection as
Additional Rent.
ARTICLE III: IMPOSITIONS AND UTILITIES
3.01 Payment of Impositions. Subject to the adjustments set forth
herein, Tenant shall pay, as Additional Rent, all Impositions (as hereinafter
defined) that may be levied or become a lien on the Leased Property or any part
thereof at any time (whether prior to or during the Term), without regard to
prior ownership of said Leased Property, before any fine, penalty, interest, or
cost is incurred. Tenant shall, upon request from Landlord, promptly furnish to
Landlord copies of official receipts or other satisfactory proof evidencing such
payments. Tenant's obligation to pay such Impositions shall be deemed absolutely
fixed upon the date such Impositions become a lien upon the Leased Property or
any part thereof. Tenant, at its expense, shall prepare and file all tax returns
and reports in respect of any Imposition as may be required by governmental
authorities. Tenant shall be entitled to any refund due from any taxing
authority if no Event of Default (as hereinafter defined) shall have occurred
hereunder and be continuing. Landlord shall be entitled to any refund from any
taxing authority if an Event of Default has occurred and is continuing. Any
refunds retained by Landlord due to an Event of Default shall be applied as
provided in Section 9.08. Landlord and Tenant shall, upon request of the other,
provide such data as is maintained by the party to whom the request is made with
respect to the Leased Property as may be necessary to prepare any required
returns and reports. In the event governmental authorities classify any property
covered by this Lease as personal property, Tenant shall file all personal
property tax returns in such jurisdictions where it may legally so file.
Landlord, to the extent it possesses the same, and Tenant, to the extent it
possesses the same, will provide the other party, upon request, with cost and
depreciation records necessary for filing returns for any property so classified
as personal property. Where Landlord is legally required to file personal
property tax returns, Tenant will be provided with copies of assessment notices
indicating a value in excess of the reported value in sufficient time for Tenant
to file a protest. Tenant may, upon notice to Landlord, at Tenant's option and
at Tenant's sole cost and expense, protest, appeal, or institute such other
proceedings as Tenant may deem appropriate to effect a reduction of real estate
or personal property assessments and Landlord, at Tenant's expense as aforesaid,
shall fully cooperate with Tenant in such protest, appeal, or other
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action. Tenant shall promptly reimburse Landlord for all personal property taxes
paid by Landlord upon receipt of billings accompanied by copies of a bill
therefor and payments thereof which identify the personal property with respect
to which such payments are made. Impositions imposed in respect to the
tax-fiscal period during which the Term commences and terminates shall be
adjusted and prorated between Landlord and Tenant on a per diem basis, with
Tenant being obligated to pay its pro rata share from and including the
Commencement Date to and including the expiration or termination date of the
Term, whether or not such Imposition is imposed before or after such
commencement or termination, and Tenant's obligation to pay its prorated share
thereof shall survive such termination. Tenant shall also pay to Landlord a sum
equal to the amount which Landlord may be caused to pay of any privilege tax,
sales tax, gross receipts tax, rent tax, occupancy tax or like tax (excluding
any tax based on net income), hereinafter levied, assessed, or imposed by any
federal, state, county or municipal governmental authority, or any subdivision
thereof, upon or measured by or rent or other consideration required to be paid
by Tenant under this Lease.
3.02 Definition of Impositions. "Impositions" means, collectively, [i]
taxes (including without limitation, all real estate and personal property ad
valorem (whether assessed as part of the real estate or separately assessed as
unsecured personal property, sales and use, business or occupation, single
business, gross receipts, transaction privilege, rent or similar taxes, but not
including income or franchise or excise taxes payable with respect to Landlord's
receipt of Rent); [ii] assessments (including without limitation, all
assessments for public improvements or benefits, whether or not commenced or
completed prior to the date hereof and whether or not to be completed with the
Term); [iii] ground rents, water, sewer or other rents and charges, excises, tax
levies, and fees (including without limitation, license, permit, inspection,
authorization and similar fees); [iv] to the extent they may become a lien on
the Leased Property all taxes imposed on Tenant's operations of the Leased
Property including without limitation, employee withholding taxes, income taxes
and intangible taxes; and [v] all other governmental charges, in each case
whether general or special, ordinary or extraordinary, or foreseen or
unforeseen, of every character in respect of the Leased Property or any part
thereof and/or the Rent (including all interest and penalties thereon due to any
failure in payment by Tenant), which at any time prior to, during or in respect
of the Term hereof may be assessed or imposed on or in respect of or be a lien
upon [a] Landlord or Landlord's interest in the Leased Property or any part
thereof; [b] the Leased Property or any part thereof or any rent therefrom or
any estate, right, title or interest therein; or [c] any occupancy, operation,
use or possession of, or sales from, or activity conducted on, or in connection
with the Leased Property or the leasing or use of the Leased Property or any
part thereof. Tenant shall not, however, be required to pay [i] any tax based on
net income (whether denominated as a franchise or capital stock or other tax)
imposed on Landlord; or [ii] except as provided in Section 13.01, any tax
imposed with respect to the sale, exchange or other disposition by Landlord of
any Leased Property or the proceeds thereof; provided, however, that if any tax,
assessment, tax levy or charge which Tenant is obligated to pay pursuant to the
first sentence of this definition and which is in effect at any time during the
Term hereof is totally or partially repealed, and a tax, assessment, tax levy or
charge set forth in clause [i] or [ii] immediately above is levied, assessed or
imposed expressly in lieu thereof
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Tenant shall then pay such tax, levy, or charge set forth in said clause [i] or
[ii].
3.03 Escrow of Impositions. If Landlord's lender requires Landlord to
escrow real property taxes or other Impositions on a periodic basis during the
Term, Tenant, on notice from Landlord indicating this requirement, shall pay a
sum of money toward its liability under this Article to lender on a periodic
basis in accordance with the lender's requirements. Landlord shall escrow the
payments received from Tenant in accordance with the requirements of its lender,
and shall furnish Tenant with a copy of the lender's requirements for escrow.
Further, if an Event of Default occurs hereunder which is not cured within any
applicable grace period, Tenant shall thereafter, at Landlord's election,
deposit with Landlord on the first day of each month during the remaining Term
hereof and any extended Term, a sum equal to one-twelfth (1/12th) of the
Impositions assessed against the Leased Property for the preceding tax year,
which sums shall be used by Landlord toward payment of such Impositions. If, at
the end of any applicable tax year, any such funds held by Landlord are
insufficient to make full payment of taxes or other Impositions for which such
funds are held, Tenant, on demand, shall pay to Landlord any additional funds
necessary to pay and discharge the obligations of Tenant pursuant to the
provisions of this section. If, however, at the end of any applicable tax year,
such funds held by Landlord are in excess of the total payment required to
satisfy taxes or other Impositions for which such funds are held, Landlord shall
apply such excess amounts to Tenant's tax and Imposition escrow fund for the
next tax year. If any such excess of funds occurs at the end of the final Lease
Year, and subject to Section 9.08 below, Landlord shall promptly refund such
excess amounts to Tenant. The receipt by Landlord of the payment of such
Impositions by and from Tenant shall only be as an accommodation to Tenant, the
mortgagees, and the taxing authorities, and shall not be construed as rent or
income to Landlord, Landlord serving, if at all, only as a conduit for delivery
purposes.
3.04 Utilities. Tenant shall pay, as Additional Rent all taxes,
assessments, charges/deposits, and bills for utilities, including without
limitation charges for water, gas, oil, sanitary and storm sewer, electricity,
telephone service, and trash collection, which may be charged against the
occupant of the Improvements during the Term. If an Event of Default occurs
hereunder and is not cured within any applicable grace period, Tenant shall
thereafter, at Landlord's election, deposit with Landlord on the first day of
each month during the remaining Term, a sum equal to one-twelfth (1/12th) of the
amount of the annual utility expenses for the preceding Lease Year, which sums
shall be used by Landlord to pay such utilities. If, at any time during the
Lease Year, such funds held by Landlord are insufficient to cover monthly,
annual, or other periodic charges for utilities, Tenant shall, on demand pay to
Landlord any additional amount needed to pay such utilities. Landlord's receipt
of such payments shall only be an accommodation to Tenant and the utility
companies and shall not constitute rent or income to Landlord. If, at any time
during the Lease Year, such funds held by Landlord are in excess of the total
monthly, annual or other periodic payment necessary to satisfy utility costs,
such excess amounts shall be applied to Tenant's escrow fund for the next
payment of such utilities. If any such excess exists following the expiration or
earlier termination of the Lease and after all utility bills and accounts have
been settled, Landlord shall, subject to Section 9.08 below, promptly
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refund such amounts to Tenant. Tenant shall at all times maintain that amount of
heat necessary to ensure against the freezing of water lines. Tenant hereby
agrees to indemnify and hold Landlord harmless from and against any liability or
damages to the utility systems and the Leased Property that may result from
Tenant's failure to maintain sufficient heat in the Improvements.
3.05 Discontinuance of Utilities. Landlord will not be liable for
damages to person or property or for injury to, or interruption of, business for
any discontinuance of utilities nor will such discontinuance in any way be
construed as an eviction of Tenant or cause an abatement of Rent or operate to
release Tenant from any of Tenant's obligations under this Lease.
ARTICLE IV: INSURANCE
4.01 Property Insurance. Tenant shall, at Tenant's expense, keep the
Improvements, Fixtures, and other components of the Leased Property insured
against the following risks:
(a) Loss or damage by fire, vandalism and malicious
mischief, sprinkler leakage and all other physical loss perils commonly
covered by "All Risk" insurance in an amount not less than one hundred
percent (100%) of the then full replacement cost thereof (as
hereinafter defined). Such policy shall include an agreed amount
endorsement if available at a reasonable cost. Such policy shall also
include endorsements for contingent liability for operation of building
laws, demolition costs, and increased cost of construction.
(b) Loss or damage by explosion of steam boilers, pressure
vessels, or similar apparatus, now or hereafter installed on the Leased
Property, in commercially reasonable amounts acceptable to Landlord.
(c) Loss of rent under a rental value insurance policy
covering risk of loss during the first nine (9) months of
reconstruction necessitated by the occurrence of any hazards described
in Sections 4.01(a) or 4.01(b) above, in an amount sufficient to
prevent Landlord or Tenant from becoming a co-insurer, containing
endorsements for extended period of indemnity and premium adjustment,
and written with an agreed amount clause, if the insurance provided for
in this clause (c) is available at a reasonable cost.
(d) If the Land is located in whole or in part within a
designated flood plain area, loss or damage caused by flood in
commercially reasonable amounts acceptable to Landlord.
(e) Loss or damage commonly covered by blanket crime
insurance including employee dishonesty, loss of money orders or paper
currency, depositor's forgery, and loss of property of patients
accepted by Tenant for safekeeping, in commercially reasonable amounts
acceptable to the Landlord.
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4.02 Liability Insurance. Tenant shall, at Tenant's expense, maintain
liability insurance against the following:
(a) Claims for personal injury or property damage commonly
covered by comprehensive general liability insurance with endorsements
for nursing home or comparable professional malpractice, blanket
contractual, personal injury, owner's protective liability, real
property fire damage legal liability, voluntary medical payments,
products and completed operations, broad form property damage, and
extended bodily injury, with commercially reasonable amounts for bodily
injury, property damage, and voluntary medical payments acceptable to
Landlord, but with a combined single limit of not less than One Million
Dollars ($1,000,000.00) per occurrence, One Million Dollars
($1,000,000.00) per location. If malpractice insurance coverage is
unavailable generally or is unreasonably expensive, Landlord and Tenant
will consult in good faith regarding an alternative.
(b) Claims for personal injury and property damage commonly
covered by comprehensive automobile liability insurance, covering all
owned and nonowned automobiles, with commercially reasonable amounts
for bodily injury, property damage, and for automobile medical payments
acceptable to Landlord, but with a combined single limit of not less
than One Million Dollars ($1,000,000.00) per occurrence, Three Million
Dollars ($3,000,000.00) aggregate.
(c) Claims commonly covered by worker's compensation
insurance for all persons employed by Tenant on the Leased Property.
Such worker's compensation insurance shall be in accordance with the
requirements of all applicable local, state, and federal law.
4.03 Insurance Requirements. The following provisions shall apply to
all insurance coverages required hereunder:
(a) The form and substance of all policies shall be subject
to the approval of Landlord, which approval will not be unreasonably
withheld.
(b) The carriers of all policies shall have a Best's Rating
of "A-" or better and a Best's Financial Category of XII or larger and
shall be authorized to do insurance business in the state in which the
Leased Property is located.
(c) Tenant shall be the "named insured" and Landlord shall
be an "additional named insured" on each policy.
(d) Tenant shall deliver to Landlord certificates or
policies showing the required coverages and endorsements. The policies
of insurance shall provide that the policy may
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not be canceled or not renewed, and no material change or reduction in
coverage may be made, without at least thirty (30) days' prior written
notice to Landlord.
(e) The policies shall contain a severability of interest
and/or cross-liability endorsement, provide that the acts or omissions
of Tenant will not invalidate the Landlord's coverage, and provide that
Landlord shall not be responsible for payment of premiums.
(f) All loss adjustment shall require the written consent of
Landlord and Tenant, as their interests may appear.
(g) At least thirty (30) days prior to the expiration of
each policy, Tenant shall deliver to Landlord a certificate showing
renewal of such policy and payment of the annual premium therefor.
4.04 Replacement Cost. The term "full replacement cost" means the
actual replacement cost thereof from time to time including increased cost of
construction, with no reductions or deductions. Tenant shall, not later than
thirty (30) days after the anniversary of each Lease Year of the Term, increase
the amount of the replacement cost endorsement for the Improvements. If Tenant
makes any Permitted Alterations (as hereinafter defined) to the Leased Property,
Landlord may have such full replacement cost redetermined at any time after such
Permitted Alterations are made, regardless of when the full replacement cost was
last determined.
4.05 Blanket Policy. Tenant may carry the insurance required by this
Article under a blanket policy of insurance, provided that the coverage afforded
Tenant will not be reduced or diminished or otherwise be different from that
which would exist under a separate policy meeting all of the requirements of
this Agreement.
4.06 No Separate Insurance. Tenant shall not take out separate
insurance concurrent in form or contributing in the event of loss with that
required in this Article, or increase the amounts of any then existing insurance
by securing an additional policy or additional policies, unless all parties
having an insurable interest in the subject matter of the insurance, including
Landlord and any mortgagees, are included therein as additional named insureds
or loss payees, the loss is payable under said insurance in the same manner as
losses are payable under this Agreement, and such additional insurance is not
prohibited by the existing policies of insurance. Tenant shall immediately
notify Landlord of the taking out of such separate insurance or the increasing
of any of the amounts of the existing insurance by securing an additional policy
or additional policies. The term "mortgages" as used in this Agreement includes
Deeds of Trust and the term "mortgagees" includes trustees and beneficiaries
under a Deed of Trust.
4.07 Waiver of Subrogation. Each party hereto hereby waives any and
every claim which arises or may arise in its favor and against the other party
hereto during the Term or any extension or renewal thereof, for any and all loss
of, or damage to, any of its property located
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within or upon, or constituting a part of, the Leased Property, which loss or
damage is covered by valid and collectible insurance policies, to the extent
that such loss or damage is recoverable under such policies. Said mutual waiver
shall be in addition to, and not in limitation or derogation of, any other
waiver or release contained in this Lease with respect to any loss or damage to
property of the parties hereto. Inasmuch as the said waivers will preclude the
assignment of any aforesaid claim by way of subrogation (or otherwise) to an
insurance company (or any other person), each party hereto agrees immediately to
give each insurance company which has issued to it policies of insurance,
written notice of the terms of said mutual waivers, and to have such insurance
policies properly endorsed, if necessary, to prevent the invalidation of said
insurance coverage by reason of said waivers, so long as such endorsement is
available at a reasonable cost.
4.08 Mortgages. The following provisions shall apply if Landlord now or
hereafter places a mortgage on the Leased Property or any part thereof: [i]
Tenant shall obtain a standard form of mortgage clause insuring the interest of
the mortgagee; [ii] Tenant shall deliver evidence of insurance to such
mortgagee; [iii] loss adjustment shall require the consent of the mortgagee; and
[iv] Tenant shall obtain such other coverages and provide such other information
and documents as may be reasonably required by the mortgagee.
4.09 Escrows. If Landlord's lender requires the Landlord to escrow
insurance premiums on a periodic basis, or if an Event of Default occurs
hereunder, Tenant, after notice from Landlord, shall make such periodic payments
in accordance with the lender's or Landlord's requirements.
ARTICLE V: INDEMNITY; HAZARDOUS SUBSTANCES
5.01 Tenant's Indemnification. Subject to Section 4.07, Tenant hereby
agrees to indemnify and hold harmless Landlord, its agents, and employees from
and against any and all demands, claims, causes of action, fines, penalties,
damages (including consequential damages), losses, liabilities (including strict
liability), judgments, and expenses (including, without limitation, attorneys'
fees, court costs, and the costs set forth in Section 9.07) incurred in
connection with or arising from: [i] the use or occupancy of each Leased
Property by Tenant or any persons claiming under Tenant; [ii] any activity,
work, or thing done, or permitted or suffered by Tenant in or about the Leased
Property; [iii] any acts, omissions, or negligence of Tenant or any person
claiming under Tenant, or the contractors, agents, employees, invitees, or
visitors of Tenant or any such person; [iv] any breach, violation, or
nonperformance by Tenant or any person claiming under Tenant or the employees,
agents, contractors, invitees, or visitors of Tenant or of any such person, of
any term, covenant, or provision of this Agreement or any Lease or any law,
ordinance, or governmental requirement of any kind; and [v] any injury or damage
to the person, property or business of Tenant, its employees, agents,
contractors, invitees, visitors, or any other person entering upon the Leased
Property under the express or implied invitation of Tenant. If any action or
proceeding is brought against Landlord, its employees, or agents by reason of
any such claim, Tenant, upon notice from Landlord, will defend the claim at
Tenant's
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expense with counsel reasonably satisfactory to Landlord.
5.02 Hazardous Substances or Materials. Tenant shall not, either with
or without negligence, injure, overload, deface, damage or otherwise harm any
Leased Property or any part or component thereof; commit any nuisance; permit
the emission of any hazardous agents or substances; allow the release or other
escape of any biologically or chemically active or other hazardous substances or
materials so as to impregnate, impair or in any manner affect, even temporarily,
any element or part of any Leased Property, or allow the storage or use of such
substances or materials in any manner not sanctioned by law or by the highest
standards prevailing in the industry for the storage and use of such substances
or materials; nor shall Tenant bring onto any Leased Property any such materials
or substances; permit the occurrence of objectionable noise or odors; or make,
allow or suffer any waste whatsoever to any Leased Property. Landlord may
inspect the Leased Property from time to time, and Tenant will cooperate with
such inspections. Without limitation, "hazardous substances" for the purposes of
this Section 5.02 shall include such substances described in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. 9601 et seq. and the regulations adopted thereunder, and hazardous
materials shall include such materials as are described in the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. 6901 et seq.; and hazardous
substances or hazardous materials shall also include any substance or material
described in any applicable statute of any state in which Leased Properties are
located, and in any regulations adopted under any of these acts. Upon request by
Landlord, Tenant shall submit to Landlord quarterly reports regarding Tenant's
use, storage, and disposal of any of the foregoing materials, said reports to
include information regarding continued hazardous materials inspections,
personal interviews, and federal, state and local agency listings. In addition,
Tenant shall execute affidavits, representations and the like from time to time
at Landlord's request concerning Tenant's best knowledge and belief regarding
the presence or absence of hazardous materials on the Leased Property. In all
events, Tenant shall indemnify Landlord and all mortgagees of any Leased
Property from any release of hazardous materials on the Leased Property
occurring while Tenant is in possession, all costs and expenses and claims
arising from the release of, or discovery of the existence of, or need to clean
up or remove, or arising from any prior release or removal of any hazardous
substances or materials on or from any Leased Property, whether such release,
discovery or removal occurs during the Term or occurred prior to the
commencement of the Term. (At the request of Landlord, Tenant will from time to
time confirm such indemnity to mortgagees directly with such mortgagees.)
5.03 Limitation of Landlord's Liability. Landlord, its agents, and
employees, will not be liable for any loss, injury, death, or damage (including
consequential damages) to persons, property, or Tenant's business occasioned by
theft, act of God, public enemy, injunction, riot, strike, insurrection, war,
court order, requisition, order of governmental body or authority, fire,
explosion, falling objects, steam, water, rain or snow, leak or flow of water
(including water from the elevator system), rain or snow from any Leased
Property or into the Leased Property or from the roof, street, subsurface or
from any other place, or by dampness or from the breakage, leakage, obstruction,
or other defects of the pipes, sprinklers, wires, appliances, plumbing, air
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conditioning, or lighting fixtures of the Leased Property, or from construction,
repair, or alteration of the Leased Property or from any acts or omissions of
any other occupant or visitor of the Leased Property, or from the presence or
release of any hazardous substance or material on or from the Leased Property or
from any other cause beyond Landlord's control.
ARTICLE VI: USE AND ACCEPTANCE OF PREMISES
6.01 Use of Leased Property. Tenant shall use and occupy each Leased
Property exclusively as a nursing home, healthcare facility or other purpose for
which the Leased Property is being used at the Commencement Date of the Term,
and for no other purpose without the prior written consent of the Landlord,
which consent will not be unreasonably withheld. Tenant shall obtain and
maintain all approvals, licenses, and consents needed to use and operate each
Leased Property for such purposes. Tenant shall promptly deliver to Landlord
complete copies of surveys, examinations, certification and licensure
inspections, compliance certificates, and other similar reports issued to Tenant
by any governmental agency.
6.02 Acceptance of Leased Property. Except as otherwise specifically
provided in this Agreement or in any individual Lease, Tenant acknowledges that
[i] Tenant and its agents have had an opportunity to inspect the Leased
Property; [ii] Tenant has found the Leased Property fit for Tenant's use; [iii]
delivery of the Leased Property to Tenant is in "as-is" condition; [iv] Landlord
is not obligated to make any improvements or repairs to the Leased Property; and
[v] the roof, walls, foundation, heating, ventilating, air conditioning,
telephone, sewer, electrical, mechanical, utility, plumbing, and other portions
of the Leased Property are in good working order. Tenant waives any claim or
action against Landlord with respect to the condition of the Leased Property.
LANDLORD MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF
THE LEASED PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE,
DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, AS TO
QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING
AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY TENANT.
6.03 Conditions of Use and Occupancy. Tenant agrees that during the
Term it shall use and keep the Leased Property in a careful, safe and proper
manner; not commit or suffer waste thereon; not use or occupy the Leased
Property for any unlawful purposes; not use or occupy the Leased Property or
permit the same to be used or occupied, for any purpose or business deemed extra
hazardous on account of fire or otherwise; keep the Leased Property in such
repair and condition as may be required by the local board of health, or other
city, state or federal authorities, free of all cost to Landlord; not permit any
acts to be done which will cause the cancellation, invalidation, or suspension
of any insurance policy; and permit Landlord and its agents to enter upon the
Leased Property at all reasonable times after notice to Tenant to examine the
condition thereof.
6.04 Financial Statements. Within one hundred twenty (120) days after
the end of
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each fiscal year, Tenant shall deliver to Landlord audited consolidated
financial statements of Tenant, certified by a nationally recognized accounting
firm. The financial statements shall include a complete schedule of contingent
liabilities and transactions with affiliates. Within forty-five (45) days after
the end of each calendar quarter, Tenant shall deliver to Landlord unaudited
profit and loss statements.
ARTICLE VII: REPAIRS, COMPLIANCE WITH LAWS,
AND MECHANICS' LIENS
7.01 Maintenance. Tenant shall maintain, repair, and replace each
Leased Property, including without limitation, all structural and nonstructural
repairs and replacements to the roof, foundations, exterior walls, building
systems, HVAC systems, parking areas, sidewalks, water, sewer, and gas
connections, pipes, and mains. Tenant shall pay as Additional Rent, the full
cost of maintenance, repairs, and replacements. Tenant shall maintain all
drives, sidewalks, parking areas, and lawns on or about the Leased Property in a
clean and orderly condition, free of accumulations of dirt, rubbish, snow and
ice. Tenant shall permit Landlord to inspect the Leased Property at all
reasonable times, and shall implement all reasonable suggestions of the Landlord
as to the maintenance and replacement of the Leased Property.
7.02 Compliance With Laws. Tenant shall comply with all laws,
ordinances, orders, rules, regulations, and other governmental requirements
relating to the use, condition, or occupancy of each Leased Property, including
without limitation, [i] licensure requirements for operation as a nursing home
or medical facility, [ii] certification requirements needed to obtain
reimbursement under the Medicare and state Medicaid programs unless Tenant,
after notice to Landlord, determines to discontinue participation in such
programs; [iii] requirements of the board of fire insurance underwriters or
insurance service office or any other similar body having jurisdiction over the
Leased Property, and [iv] all zoning and building codes and Environmental Laws.
At Landlord's request, from time to time, Tenant shall deliver to Landlord
copies of certificates or permits evidencing compliance with such laws,
including without limitation, copies of the nursing home or health care facility
license, provider agreements, certificates of occupancy and building permits.
Tenant hereby agrees to defend, indemnify and hold Landlord harmless from and
against any loss, liability (including strict liability), claim, damage
(including consequential damages), cost and expense (including attorneys' fees)
resulting from any failure by Tenant to comply with any laws, ordinances, rules,
regulations, and other governmental requirements.
7.03 Required Alterations. Tenant shall, at Tenant's sole cost and
expense, make any additions, changes, improvements or alterations to each Leased
Property, including structural alterations, which may be required by any
governmental authorities, including those required to continue certification
under the Medicare and Medicaid programs (unless Tenant has elected not to
participate in such programs), whether such changes are required by Tenant's
use, changes in the law, ordinances, or governmental regulations, defects
existing as of the date of this Lease, or any other cause whatever. All such
additions, changes, improvements or alterations shall be
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deemed to be Permitted Alterations and shall comply with all laws requiring such
alterations and with the provisions of Section 8.02.
7.04 Mechanic's Liens. Tenant shall have no authority to permit or
create a lien against Landlord's interest in the Leased Property, and Tenant
shall post notices or file such documents as may be required to protect
Landlord's interest in the Leased Property against liens. Tenant hereby agrees
to defend, indemnify, and hold Landlord harmless from and against any mechanic's
liens against the Leased Property by reason of work, labor services or materials
supplied or claimed to have been supplied on or to the Leased Property. Tenant
shall immediately remove, bond-off, or otherwise obtain the release of any
mechanic's lien filed against the Leased Property. Tenant shall pay all expenses
in connection therewith, including without limitation, damages, interest, court
costs and reasonable attorneys' fees.
7.05 Replacement of Fixtures. Tenant shall not remove Fixtures from any
Leased Property except to replace the Fixtures by other similar items of equal
quality and value. Items being replaced by Tenant may be removed and shall
become the property of Tenant and items replacing the same shall be and remain
the property of Landlord. Tenant shall execute, upon written request from
Landlord, any and all documents necessary to evidence Landlord's ownership of
the Fixtures and replacements therefor. Tenant may finance replacements for the
Fixtures by equipment lease or by a security agreement and financing statement;
provided, however, that for any item of Fixtures or Personal Property having a
cost greater than or equal to Ten Thousand Dollars ($10,000.00), Tenant may not
finance replacements by security agreement or equipment lease unless [i]
Landlord has consented to the terms and conditions of the equipment lease or
security agreement; [ii] the equipment lessor or lender has entered into a
nondisturbance agreement with Landlord upon terms and conditions acceptable to
Landlord, including without limitation, the following: [a] Landlord shall have
the right (but not the obligation) to assume such security agreement or
equipment lease upon the occurrence of an Event of Default by Tenant under this
Lease; [b] the equipment lessor or lender shall notify Landlord of any default
by Tenant under the equipment lease or security agreement and give Landlord a
reasonable opportunity to cure such default; and [c] Landlord shall have the
right to assign its rights under the equipment lease, security agreement, or
nondisturbance agreement; and [iii] Tenant shall, within thirty (30) days after
receipt of an invoice from Landlord, reimburse Landlord for all costs and
expenses incurred in reviewing and approving the equipment lease, security
agreement, and nondisturbance agreement, including without limitation,
reasonable attorneys' fees and costs.
ARTICLE VIII: ALTERATIONS AND SIGNS
8.01 Prohibition on Alterations and Improvements. Except for [i]
alterations required by Section 7.03; [ii] replacements of Fixtures provided for
in Section 7.05; and [iii] alterations at any Leased Property having an
aggregate cost of less than One hundred fifty thousand dollars ($150,000.00) in
any Lease Year, Tenant shall not make any structural or nonstructural changes,
alterations, additions and/or improvements (hereinafter collectively referred to
as "Alterations")
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to the Leased Property without the prior written consent of Landlord which
consent will not be unreasonably withheld. If Tenant desires to perform any
Alterations, Tenant shall deliver to Landlord plans, specifications, drawings,
and such other information as may be reasonably requested by Landlord
(collectively the "Plans and Specifications") showing the Alterations that
Tenant desires to perform. Landlord agrees not to unreasonably delay its review
of the Plans and Specifications. Tenant shall comply with the requirements of
Section 8.02 in making any Alterations approved by Landlord (the "Permitted
Alterations").
8.02 Requirements for Permitted Alterations. Tenant shall comply with
all of the following requirements in connection with any Permitted Alterations:
(a) The Permitted Alterations shall be made in accordance
with the approved Plans and Specifications.
(b) The Permitted Alterations and the installation thereof
shall comply with all applicable legal requirements and insurance
requirements.
(c) The Permitted Alterations shall be done in a good and
workmanlike manner, shall not impair the value or the structural
integrity of the Leased Property, and shall be free and clear of all
mechanic's liens.
(d) Tenant shall deliver to Landlord a payment and
performance bond, with a surety acceptable to Landlord, in an amount
equal to the estimated cost of the Permitted Alterations, guaranteeing
the completion of the work free and clear of liens and in accordance
with the approved Plans and Specifications, and naming Landlord and any
mortgagee of Landlord as joint obligees on such bond.
(e) Tenant shall, at Tenant's expense, obtain a builder's
completed value risk policy of insurance insuring against all risks of
physical loss, including collapse and transit coverage, in a
nonreporting form, covering the total value of the work performed, and
equipment, supplies, and materials, and insuring initial occupancy.
Landlord and any mortgagee of Landlord shall be additional named
insureds of such policy. Landlord shall have the right to approve the
form and substance of such policy, which approval shall not be
unreasonably withheld or delayed.
(f) Tenant shall pay the premiums required to increase the
amount of the insurance coverages required by Article IV to reflect the
increased value of the Improvements resulting from installation of the
Permitted Alterations, and shall deliver to Landlord a certificate
evidencing the increase in coverage.
(g) If the alterations are structural or additions, Tenant
shall, not later than sixty (60) days after completion of the Permitted
Alterations, deliver to Landlord a certificate of substantial
completion, certified by Tenant's architect or engineer, in the form of
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AIA-G704, or in any other form reasonably satisfactory to Landlord.
(h) Tenant shall not later than thirty (30) days after
completion of the Permitted Alterations, reimburse Landlord for any
costs and expenses, including attorneys' fees and architects' and
engineers' fees, reasonably incurred in connection with reviewing and
approving the Permitted Alterations and ensuring Tenant's compliance
with the requirements of this Section.
8.03 Ownership and Removal of Permitted Alterations. The Permitted
Alterations shall become a part of the Leased Property, owned by Landlord, and
leased to Tenant subject to the terms and conditions of this Agreement and the
Lease. Tenant shall not be required or permitted to remove any Permitted
Alterations.
8.04 Signs. Tenant may, at its own expense, erect and maintain
identification signs at the Leased Property, provided such signs comply with all
laws, ordinances, and regulations. Upon the occurrence of an Event of Default or
the termination or expiration of this Lease, Tenant shall, within thirty (30)
days after notice from Landlord, remove the signs and restore the Leased
Property to its original condition.
ARTICLE IX: DEFAULTS AND REMEDIES
9.01 Events of Default. The occurrence of any one or more of the
following shall be an event of default ("Event of Default") hereunder:
(a) Tenant fails to pay in full any installment of Rent, or
any other monetary obligation payable by Tenant to Landlord (or to the
holder of any Assumed Mortgage Debt Service, as applicable) under this
Lease, within ten (10) business days after notice of nonpayment from
Landlord.
(b) Landlord gives three (3) or more notices of nonpayment
of Rent to Tenant in any Lease Year; provided, however, that such shall
not be an Event of Default if Landlord fails to exercise its remedies
under Section 9.02 within sixty (60) days after the last of such
notices. Notice of the same default with respect to more than one Lease
or Leased Property shall constitute only one notice for purposes of
this Section 9.01(b).
(c) Tenant fails to observe and perform any other covenant,
condition or agreement under this Agreement or the Lease to be
performed by Tenant (except those described in Section 9.01(a) and
9.01(b) of this Agreement) and [i] such failure continues for a period
of thirty (30) days after written notice thereof is given to Tenant by
Landlord; or [ii] if, by reason of the nature of such default, the same
cannot be remedied within said thirty (30) days, Tenant fails to
proceed with reasonable diligence (satisfactory to Landlord) after
receipt of the notice to cure the same.
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(d) Tenant ceases operations at any Leased Property for a
period in excess of one-hundred eighty (180) days during the Term
except pursuant to damage described in Section 10.05 or condemnation
pursuant to Article XI (other than Section 11.02) of this Agreement.
(e) [i] The filing by Tenant of a petition under 11 U.S.C.
or the commencement of a bankruptcy or similar proceeding by Tenant;
[ii] the failure by Tenant within ninety (90) days to dismiss an
involuntary bankruptcy petition or other commencement of a bankruptcy,
reorganization or similar proceeding against Tenant, or to lift or stay
any execution, garnishment or attachment of such consequence as will
impair its ability to carry on its operation at the Leased Property;
[iii] the entry of an order for relief under 11 U.S.C. in respect of
Tenant; [iv] any assignment by Tenant for the benefit of its creditors;
[v] the entry by Tenant into an agreement of composition with its
creditors; [vi] the approval by a court of competent jurisdiction of a
petition applicable to Tenant in any proceeding for its reorganization
instituted under the provisions of any state or federal bankruptcy,
insolvency, or similar laws; [vii] appointment by final order,
judgment, or decree of a court of competent jurisdiction of a receiver
of a whole or any substantial part of the properties of Tenant
(provided such receiver shall not have been removed or discharged
within sixty (60) days of the date of his qualification).
(f) [i] any administrator, custodian, trustee or other
legally authorized person takes possession or control of any Leased
Property or part thereof and continues in possession for ninety (90)
days; [ii] any writ against any of the Leased Property is not released
or bonded off within ninety (90) days; [iii] any judgment is rendered
or proceedings are instituted against any Leased Property or Tenant
which affect any Leased Property or any part thereof (other than a
condemnation proceeding) which is not dismissed for ninety (90) days
(except as otherwise provided in this Section); [iv] all or a
substantial part of the assets of Tenant are attached, seized,
subjected to a writ or distress warrant, or are levied upon, or come
into the possession of any receiver, trustee, custodian, or assignee
for the benefit of creditors and is not dismissed within sixty (60)
days; [v] Tenant is enjoined, restrained, or in any way prevented by
court order, or any proceeding is filed or commenced seeking to enjoin,
restrain or in any way prevent Tenant from conducting all or a
substantial part of its business or affairs and is not dismissed within
sixty (60) days; or [vi] except as permitted by Section 18.18, a notice
of lien, levy or assessment is filed of record with respect to all or
any part of the property of Tenant and is not dismissed or bonded off
within sixty (60) days.
(g) Tenant or any Affiliate defaults on any material
obligation to Landlord, Tenant defaults on any material obligation
under any debt associated with the Leased Properties or any debt
co-guaranteed by Landlord and Tenant. As used herein, "Affiliate" means
any person, corporation, partnership, trust, or other legal entity
that, directly or indirectly, controls or is controlled by, or is under
common control with, Tenant. "Control" (and the correlative meanings
of the terms "controlled by" and "under common
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control with") means the possession, directly or indirectly, of the
power to direct or cause a direction of the management and policies of
such entity.
9.02 Remedies. Landlord may exercise any one or more of the following
remedies upon the occurrence of an Event of Default:
(a) Landlord may terminate the applicable Lease, exclude
Tenant from possession of the Leased Property and use reasonable
efforts to lease the Leased Property to others. If any Lease is
terminated pursuant to the provisions of this subparagraph (a), Tenant
will remain liable to Landlord for damages in an amount equal to the
Rent and other sums which would have been owing by Tenant under the
Lease for the balance of the Term if the Lease had not been terminated,
less the net proceeds, if any, of any re-letting of the Leased Property
by Landlord subsequent to such termination, after deducting all
Landlord's expenses in connection with such reletting, including
without limitation, the expenses set forth in Section 9.02(b)(2) below.
Landlord will be entitled to collect such damages from Tenant monthly
on the days on which the Rent and other amounts would have been payable
under the Lease if the Lease had not been terminated and Landlord will
be entitled to receive such damages from Tenant on each such day.
Alternatively, at the option of Landlord, if the Lease is terminated,
Landlord will be entitled to recover from Tenant (A) the worth at the
time of award of the unpaid Rent which had been earned at the time of
termination; (B) the worth at the time of award of the amount by which
the unpaid Rent which would have been earned after termination until
the time of awards exceeds the amount of such Rent loss that Tenant
proves could reasonably have been avoided; (C) the worth at the time of
award of the amount by which the unpaid Rent for the balance of the
Term of the Lease after the time of award exceeds the amount of such
Rent loss that Tenant proves could reasonably be avoided; and (D) any
other amount necessary to compensate Landlord for all the detriment
proximately caused by Tenant's failure to perform its obligations under
the Lease or which in the ordinary course of things would be likely to
result from such failure. The "worth at the time of award" of the
amount referred to in clauses (A) and (B) is computed at "present
value" using New York Prime Rate. For purposes of this Agreement, "New
York Prime Rate" shall mean that rate of interest identified as prime
or national prime by the Wall Street Journal, or if not published or
found, then the rate of interest charged by the American bank with the
greatest number of assets on ninety (90) day unsecured notes to its
preferred customers. The worth at the time of award of the amount
referred to in clause (C) is computed by discounting such amount at the
discount rate of the Federal Reserve Bank of New York at the time of
award. For the purpose of determining unpaid Rent under clause (C), the
Rent reserved in the Lease will be deemed to be the sum of the
following: [i] the Base Rent computed pursuant to Section 2.01; [ii]
the Additional Rent pursuant to Section 2.02 based upon the amount of
such Additional Rent for the month preceding the date of termination;
and [iii] the Percentage Rent pursuant to Section 2.06 based upon the
amount of the annualized Gross Revenues for the then Lease Year
increased by three percent (3%) per annum, to the date on which the
Lease would have
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expired if Landlord had not terminated the Lease, but not to exceed the
product of one (1%) percent of the initial Base Rent multiplied by the
number of years since 1999.
(b) (1) Without demand or notice, Landlord may re-enter and
take possession of the Leased Property or any part of the Leased
Property; and repossess the Leased Property as of the Landlord's former
estate; and expel the Tenant and those claiming through or under Tenant
from the Leased Property; and, remove the effects of both or either,
without being deemed guilty of any manner of trespass and without
prejudice to any remedies for arrears of Rent or preceding breach of
covenants or conditions. If Landlord elects to re-enter, as provided in
this paragraph (b) or if Landlord takes possession of the Leased
Property pursuant to legal proceedings or pursuant to any notice
provided by law, Landlord may, from time to time, without terminating
this Lease, re-let the Leased Property or any part of the Leased
Property, either alone or in conjunction with other portions of the
Improvements of which the Leased Property are a part, in Landlord's
name but for the account of Tenant, for such term or terms (which may
be greater or less than the period which would otherwise have
constituted the balance of the Term of this Lease) and on such terms
and conditions (which may include concessions of free rent, and the
alteration and repair of the Leased Property) as Landlord, in its
uncontrolled discretion, may determine. Landlord may collect and
receive the Rents for the Leased Property. Landlord will not be
responsible or liable for any failure to re-let the Leased Property, or
any part of the Leased Property, or for any failure to collect any Rent
due upon such re-letting. No such re-entry or taking Possession of the
Leased Property by Landlord will be construed as an election on
Landlord's part to terminate this Lease unless a written notice of such
intention is given to Tenant. No notice from Landlord under this Lease
or under a forcible entry and detainer statute or similar law will
constitute an election by Landlord to terminate this Lease unless such
notice specifically says so. Landlord reserves the right following any
such re-entry or re-letting, or both, to exercise its right to
terminate this Lease by giving Tenant such written notice, and, in that
event the Lease will terminate as specified in such notice.
(b) (2) If Landlord elects to take possession of the Leased
Property according to this subparagraph (b) without terminating the
Lease, Tenant will pay Landlord (i) the Rent and other sums which would
be payable under the Lease if such repossession had not occurred, less
(ii) the net proceeds, if any, of any re-letting of the Leased Property
after deducting all of Landlord's expenses incurred in connection with
such re-letting, including without limitation, all repossession costs,
brokerage commissions, legal expenses, attorneys' fees, expenses of
employees, alteration, remodeling, repair costs, and expenses of
preparation for such re-letting. If, in connection with any reletting,
the new Lease term extends beyond the existing Term or the Leased
Property covered by such re-letting include areas which are not part of
the Lease Property, a fair apportionment of the Rent received from such
re-letting and the expenses incurred in connection with such re-letting
will be made in determining the net proceeds received from such
re-letting. In addition, in determining the net proceeds from such
re-letting, any rent concessions will
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be apportioned over the term of the new Lease. Tenant will pay such
amounts to Landlord monthly on the days on which the Rent and all other
amounts owing under this Agreement or the Lease would have been payable
if possession had not been retaken, and Landlord will be entitled to
receive the rent and other amounts from Tenant on each such day.
(c) Landlord may re-enter the Leased Property and have,
repossess and enjoy the Leased Property as if the Lease had not been
made, and in such event, Tenant and its successors and assigns shall
remain liable for any contingent or unliquidated obligations or sums
owing at the time of such repossession.
(d) Landlord may have access to and inspect, examine and
make copies of the books and records and any and all accounts, data and
income tax and other returns of Tenant insofar as they pertain to the
Leased Property.
(e) Landlord may take whatever action at law or in equity as
may appear necessary or desirable to collect the Rent and other amounts
payable under the Lease then due and thereafter to become due, or to
enforce performance and observance of any obligations, agreements or
covenants of Tenant under this Lease.
9.03 Right of Set-Off. Landlord may, and is hereby authorized by
Tenant, at any time and from time to time, after advance notice to Tenant, to
set-off and apply any and all sums held by Landlord, any indebtedness of
Landlord to Tenant, and any claims by Tenant against Landlord, against any
obligations of Tenant under this Agreement or any Lease and against any claims
by Landlord against Tenant, whether or not Landlord has exercised any other
remedies hereunder. The rights of Landlord under this Section are in addition to
any other rights and remedies Landlord may have against Tenant.
9.04 Performance of Tenant's Covenants. Landlord may perform any
obligation of Tenant which Tenant has failed to perform within two (2) days
after Landlord has sent a written notice to Tenant informing it of its specific
failure. Tenant shall reimburse Landlord on demand, as Additional Rent, for any
expenditures thus incurred by Landlord and shall pay interest thereon at the
overdue Rate (as hereinafter defined).
9.05 Late Charge. Any payment not made by Tenant for more than ten (10)
days after the due date shall be subject to a late charge payable by tenant as
Rent of three percent (3%) of the amount of such overdue payment.
9.06 Litigation; Attorneys' Fees. Within ten (10) days after Tenant has
knowledge of any litigation or other proceeding that may be instituted against
Tenant, against the Leased Property to secure or recover possession thereof, or
that may affect the title to or the interest of Landlord in the Leased Property,
Tenant shall give written notice thereof to Landlord. Tenant shall pay all
reasonable costs and expenses incurred by Landlord in enforcing or preserving
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Landlord's rights under this Agreement and each Lease, whether or not an Event
of Default has actually occurred or has been declared and thereafter cured,
including without limitation, [i] the fees, expenses, and costs of any
litigation, receivership, administrative, bankruptcy, insolvency or other
similar proceeding; [ii] reasonable attorney, paralegal, consulting and witness
fees and disbursements; and [iii] the expenses, including without limitation,
lodging, meals, and transportation, of Landlord and its employees, agents.
attorneys, and witnesses in preparing for litigation, administrative,
bankruptcy, insolvency or other similar proceedings and attendance at hearings,
depositions, and trials in connection therewith. All such costs, charges and
fees as incurred shall be deemed to be Additional Rent under this Lease.
9.07 Remedies Cumulative. The remedies of Landlord herein are
cumulative to and not in lieu of any other remedies available to Landlord at law
or in equity. The use of any one remedy shall not be taken to exclude or waive
the right to use any other remedy.
9.08 Escrows and Application of Payments. As security for the
performance of its obligations hereunder Tenant hereby assigns to Landlord all
its right, title, and interest in and to all monies escrowed with Landlord under
this Agreement or under any Lease and all deposits with utility companies,
taxing authorities, and insurance companies; provided, however, that Landlord
shall not exercise its rights hereunder until an Event of Default has occurred.
Any payments received by Landlord under any provisions of this Agreement or
under any Lease during the existence, or continuance of an Event of Default
shall be applied to Tenant's obligations in the order which Landlord may
determine.
9.09 Power of Attorney. Tenant hereby irrevocably and unconditionally
appoints Landlord, or Landlord's authorized officer, agent, employee or
designee, as Tenant's true and lawful attorney-in-fact, to act, after an Event
of Default, for Tenant in Tenant's name, place, and stead, and for Tenant's and
Landlord's use and benefit, to execute, deliver and file all applications and
any and all other necessary documents or things, to effect a transfer,
reinstatement, renewal and/or extension of any and all licenses and other
governmental authorizations issued to Tenant in connection with Tenant's
operation of the Leased Property, and to do any and all other acts incidental to
any of the foregoing. Tenant irrevocably and unconditionally grants to Landlord
as its attorney-in-fact full power and authority to do and perform every act
necessary and proper to be done in the exercise of any of the foregoing powers
as fully as Tenant might or could do if personally present or acting, with full
power of substitution, hereby ratifying and confirming all that said attorney
shall lawfully do or cause to be done by virtue hereof. This power of attorney
is coupled with an interest and is irrevocable prior to the full performance of
the Tenant's obligations under this Agreement and each Lease.
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ARTICLE X: DAMAGE AND DESTRUCTION
10.01 General. Tenant shall notify Landlord if any of the Leased
Property is damaged or destroyed by reason of fire or any other cause. Tenant
shall promptly repair, rebuild, or restore the Leased Property, at Tenant's
expense, so as to make the Leased Property at least equal in value to the Leased
Property existing immediately prior to such occurrence and as nearly similar to
it in character as is practicable and reasonable. Before beginning such repairs
or rebuilding, or letting any contracts in connection with such repairs or
rebuilding, Tenant will submit for Landlord's approval, which approval Landlord
will not unreasonably withhold or delay, complete and detailed plans and
specifications for such repairs or rebuilding. Promptly after receiving
Landlord's approval of the plans and specifications, Tenant will begin such
repairs or rebuilding and will prosecute the repairs and rebuilding to
completion with diligence, subject, however, to strikes, lockouts, acts of God,
embargoes, governmental restrictions, and other causes beyond Tenant's
reasonable control. Landlord will make available to Tenant the net proceeds of
any fire or other casualty insurance paid to Landlord for such repair or
rebuilding as the same progresses, after deduction of any costs of collection,
including attorneys' fees. Payments will be made against properly certified
vouchers of a competent architect in charge of the work and approved by
Landlord. Prior to commencing the repairing or rebuilding, Tenant shall deliver
to Landlord for Landlord's approval a schedule setting forth the estimated
monthly draws for such work. Landlord will contribute to such payments out of
the insurance proceeds an amount equal to the proportion that the total net
amount received by Landlord from insurers bears to the total estimated cost of
the rebuilding or repairing, multiplied by the payment by Tenant on account of
such work. Landlord may, however, withhold ten percent (10%) from each payment
until the work of repairing or rebuilding is completed and proof has been
furnished to Landlord that no lien or liability has attached or will attach to
the Leased Property or to Landlord in connection with such repairing or
rebuilding. Upon the completion of rebuilding and the furnishing of such proof,
the balance of the net proceeds of such insurance payable to Tenant on account
of such repairing or rebuilding will be paid to Tenant. Tenant will obtain and
deliver to Landlord a temporary or final certificate of occupancy before the
Leased Property is reoccupied for any purpose. Tenant shall complete such
repairs or rebuilding free and clear of mechanic's or other liens, and in
accordance with the building codes and all applicable laws, ordinances,
regulations, or orders of any state, municipal, or other public authority
affecting the repairs or rebuilding, and also in accordance with all
requirements of the insurance rating organization, or similar body. Any
remaining proceeds of insurance after such restoration will be Tenant's
property.
10.02 Landlord's Inspection. During the progress of such repairs or
rebuilding, Landlord and its architects and engineers may, from time to time,
inspect the Leased Property and will be furnished, if required by them, with
copies of all plans, shop drawings, and specifications relating to such repairs
or rebuilding. Tenant will keep all plans, shop drawings, and specifications at
the building, and Landlord and its architects and engineers may examine them at
all reasonable times. If, during such repairs or rebuilding, Landlord and its
architects and engineers determine that the repairs or rebuilding are not being
done in accordance with the
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approved plans and specifications, Landlord will give prompt notice in writing
to Tenant, specifying in detail the particular deficiency, omission, or other
respect in which Landlord claims such repairs or rebuilding do not accord with
the approved plans and specifications. Upon the receipt of any such notice,
Tenant will cause corrections to be made to any deficiencies, omissions, or such
other respect. Tenant's obligations to supply insurance, according to Article
IV, will be applicable to any repairs or rebuilding under this Section.
10.03 Landlord's Costs. Tenant shall, within thirty (30) days after
receipt of an invoice from Landlord, pay the reasonable costs, expenses, and
fees of any architect or engineer employed by Landlord to review any plans and
specifications and to supervise and approve any construction, or for any
services rendered by such architect or engineer to Landlord as contemplated by
any of the provisions of this Lease, or for any services performed by Landlord's
attorneys in connection therewith; provided, however, that Landlord will consult
with Tenant and notify Tenant of the estimated amount of such expenses.
10.04 Rent Abatement. In the event that the provisions of Section 10.01
above shall become applicable, the Base Rent, real estate taxes and other
Impositions shall be abated or reduced proportionately during any period in
which, by reason of such damage or destruction, there is substantial
interference with the operation of the business of Tenant in the Leased
Property, having regard to the extent to which Tenant may be required to
discontinue its business in the Leased Property, and such abatement or reduction
shall continue for the period commencing with such destruction or damage and
ending with the substantial completion (defined below) by Tenant of such work or
repair and/or reconstruction. Nothing in this section shall be construed to
abate or reduce Percentage Rent. In the event that only a portion of the Leased
Property is rendered untenantable or incapable of such use, the Base Rent and
all real estate taxes and other Impositions payable hereunder shall be reduced
on a pro rata basis for the number of licensed nursing home beds which were
rendered incapable of occupancy because of such damage or destruction in
proportion to the total amount of licensed nursing home beds available for
occupancy in the Leased Property prior to such damage or destruction. For
purposes of this paragraph, substantial completion shall occur upon the earlier
of (i) nine (9) months from the date of the first disbursement of insurance
proceeds, or (ii) the issuance of a certificate of occupancy for the Leased
Property.
10.05 Substantial Damage During Lease Term. Provided Tenant has fully
complied with Section 4.01 hereof (including actually maintaining in effect
rental value insurance provided for in clause (c) thereof), if, at any time
during the Term of the Lease, the Leased Property is so damaged by fire or
otherwise that more than fifty (50%) percent of the licensed nursing home beds
at the Leased Property are rendered unusable, Tenant may, within thirty (30)
days after such damage, give notice of its election to terminate the Lease
subject to the particular Leased Property and, subject to the further provisions
of this Section, such Lease will cease on the tenth (10th) day after the
delivery of such notice. If the Lease is so terminated, Tenant will have no
obligation to repair, rebuild or replace the Leased Property, and the entire
insurance proceeds will belong to Landlord. If the Lease is not so terminated,
Tenant shall rebuild the Leased
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Property in accordance with Section 10.01.
ARTICLE XI: CONDEMNATION
11.01 Total Taking. If, by exercise of the right of eminent domain or
by conveyance made in response to the threat of the exercise of such right
("Taking"), the entire Leased Property that is the subject of any Lease is
taken, or so much of the Leased Property is taken that the Leased Property
cannot be used by Tenant for the purposes for which it was used immediately
before the Taking, then the Lease will terminate on the earlier of the vesting
of title to the Leased Property in the condemning authority or the taking of
possession of the Leased Property by the condemning authority. All damages
awarded for such Taking under the power of eminent domain shall be the property
of the Landlord, except for damages awarded as compensation for diminution in
value of the leasehold in contrast to diminution in the value of the fee of the
Leased Property. Tenant shall also be entitled to any specific award made for
loss of business or the relocation thereof.
11.02 Partial Taking. If, after a Taking, so much of the Leased
Property that is the subject of any Lease remains that the Leased Property can
be used for substantially the same purposes for which it was used immediately
before the Taking, then [i] the Lease will end as to the part taken on the
earlier of the vesting of title to the Leased Property in the condemning
authority or the taking of possession of the Leased Property by the condemning
authority; [ii] Base Rent for so much of the Leased Property as remains will be
reduced on a pro rata basis by an amount equal to the difference between the
number of available nursing beds remaining after the Taking and the number of
available nursing beds before the Taking; [iii] at its cost, Tenant shall
restore so much of the Leased Property as remains to a sound architectural unit
substantially suitable for the purposes for which it was used immediately before
the Taking, using good workmanship and new, first-class materials; [iv] upon
completion of the restoration, or upon Tenant's request at intervals during the
restoration process, in accordance with the procedure set forth in Section
10.01, Landlord will pay Tenant the lesser of the net award made to Landlord on
the account of the Taking (after deducting from the total award, attorneys',
appraisers', and other fees and costs incurred in connection with the obtaining
of the award and amounts paid to the holders of mortgages secured by the Leased
Property), or Tenant's actual out-of-pocket costs of restoring the Leased
Property; and [v] Landlord shall be entitled to the balance of the net award.
ARTICLE XII: TENANT'S PROPERTY
12.01 Tenant's Property. Tenant shall install, place, and use on the
Leased Property such fixtures, furniture, equipment, inventory and other
personal property in addition to the Fixtures as may be required or as Tenant
may, from time to time, deem necessary or useful to operate the Leased Property
as a nursing home or assisted living facility. All fixtures, furniture,
equipment, inventory, and other personal property installed, placed, or used on
the Leased Property which is owned by Tenant or leased by Tenant from third
parties is hereinafter referred to as "Tenant's Property".
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12.02 Requirements for Tenant's Property. Tenant shall comply with all
of the following requirements in connection with Tenant's Property:
(a) Tenant shall notify Landlord within one hundred twenty
(120) days after each anniversary of any Lease of any additions,
substitutions, or replacements of any item of Tenant's Property which
individually has a cost of more than $10,000.00 and shall furnish
Landlord with such other information as Landlord may reasonably request
from time to time.
(b) Tenant's Property shall be installed in a good and
workmanlike manner, in compliance with all governmental laws,
ordinances, rules, and regulations and all insurance requirements, and
be installed free and clear of any mechanic's liens.
(c) Tenant shall, at Tenant's sole cost and expense, maintain,
repair, and replace Tenant's Property.
(d) Tenant shall, at Tenant's sole cost and expense, keep
Tenant's Property insured against loss or damage by fire, vandalism and
malicious mischief, sprinkler leakage, and other physical loss perils
commonly covered by fire and extended coverage, boiler and machinery,
and difference in conditions insurance in an amount not less than
ninety percent (90%) of the then full replacement cost thereof. Tenant
shall use the proceeds from any such policy for the repair and
replacement of Tenant's Property. The insurance shall meet the
requirements of Section 4.03.
(e) Tenant shall pay all taxes applicable to Tenant's
Property.
(f) If Tenant's Property is damaged or destroyed by fire or
any other cause, Tenant shall promptly repair or replace Tenant's
Property unless Tenant is entitled to and elects to terminate the Lease
pursuant to Section 10.05.
(g) Unless an Event of Default (or any event which, with the
giving of notice or lapse of time, or both, would constitute an Event
of Default) has occurred and remains uncured beyond any applicable
grace period, Tenant may remove Tenant's property from the Leased
Property from time to time provided that [i] the items removed are not
required to operate the Leased Property as a licensed nursing home
facility (unless such items are being replaced by Tenant); and [ii)
Tenant repairs any damage to the Leased Property resulting from the
removal of Tenant's Property.
(h) Tenant shall remove Tenant's Property upon the termination
or expiration of the Lease and shall repair any damage to the Leased
Property resulting from the removal of Tenant's Property. If Tenant
fails to remove Tenant's Property within ninety (90) days after the
termination or expiration of the Lease, then Tenant shall be deemed to
have
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abandoned Tenant's Property, Tenant's Property shall become the
property of Landlord, and Landlord may remove, store and dispose of
Tenant's Property. In such event, Tenant shall have no claim or right
against Landlord for such property or the value thereof regardless of
the disposition thereof by Landlord. Tenant shall pay Landlord, upon
demand, all expenses incurred by Landlord in removing, storing, and
disposing of Tenant's Property and repairing any damage caused by such
removal. Tenant's obligations hereunder shall survive the termination
or expiration of the Lease.
(i) Tenant shall perform its obligations under any equipment
lease or security agreement for Tenant's Property.
ARTICLE XIII: TENANT'S RIGHTS OF FIRST REFUSAL
13.01 Rights of First Refusal
(a) Subject to the terms and conditions set forth in this
Section 13.01, Tenant shall have a right of first refusal to purchase
any Leased Property (the "Purchase Refusal Right"). If during the Term
or for a period of six (6) months following termination of the Lease,
Landlord receives a bona fide third party offer to purchase any Leased
Property, Landlord shall, prior to accepting such third party offer,
send written notice thereof to Tenant ("Landlord's Notice") along with
a copy of such offer, and further setting forth in detail all of the
terms and conditions of such third party offer, including the price,
time for closing, and any contingencies. Tenant shall have fifteen (15)
days after receipt of Landlord's Notice to exercise Tenant's Purchase
Refusal Right, by giving Landlord written notice thereof. Failure of
Tenant to exercise the Purchase Refusal Right within such time period
set forth above shall be deemed to extinguish the Purchase Refusal
Right. Thereafter, Landlord may sell such Leased Property to such third
party on the same terms and conditions as set forth in the Landlord's
Notice. Tenant's Purchase Refusal Right shall revive in the event that
Landlord fails to close such third party offer. In the event that
Tenant elects to exercise the Purchase Refusal Right and to purchase
the Leased Property thereby, (a) Tenant shall purchase such Leased
Property on the same terms and conditions and subject to all time
periods and other limitations as provided in Landlord's Notice, and (b)
concurrently with such purchase, the Lease of such Leased Property
shall terminate (but Tenant shall remain liable to pay any unpaid Rent
with respect to such Leased Property and all indemnifications and other
provisions that survive the expiration of any Lease or of this
Agreement shall continue in effect), and this Agreement shall be
appropriately amended to reflect the termination of such Lease.
(b) Subject to the terms and conditions set forth in this
Section 13.01, Tenant shall have a right of first refusal to lease any
Leased Property (the "Lease Refusal Right"). If during the Term or
within six (6) months thereafter Landlord receives a bona fide third
party offer to lease any Leased Property after expiration of the Lease
to Tenant, Landlord shall, prior to accepting such third party offer,
send written notice thereof to
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Tenant ("Landlord's Notice") along with a copy of such offer, and
further setting forth in detail all of the terms and conditions of such
third party offer, including the rent. Tenant shall thereafter have
thirty (30) days after the date of Landlord's Notice to exercise
Tenant's Lease Refusal Right, by giving Landlord written notice
thereof. Failure of Tenant to exercise the Lease Refusal Right within
such time period set forth above shall be deemed to extinguish the
Lease Refusal Right. Thereafter, Landlord may lease such Leased
Property to such third party on the same terms and conditions as set
forth in the Landlord's Notice. Tenant's Lease Refusal Right shall
revive in the event that Landlord fails to close such third party
offer. In the event that Tenant elects to exercise the Lease Refusal
Right and to lease the Leased Property thereby, Tenant shall lease such
Leased Property on the same terms and conditions and subject to all
time periods and other limitations as provided in Landlord's Notice.
ARTICLE XIV: ASSIGNMENT AND SUBLETTING; ATTORNMENT
14.01 Subletting and Assignment; Attornment. Subject to the provisions
of Section 14.03 below and any other express conditions or limitations set forth
herein, Tenant may, without the consent of Landlord, (i) assign this Agreement
or any Lease or sublet all or any part of the Leased Property to any Affiliate
of Tenant or Landlord, or (ii) sublet all or any part of the Leased Property (a)
in the normal course of the conduct of Tenant's business on the Leased Property
(such as but not limited to leasing of space for major moveable equipment or
functional departments such as pathology, pharmacy and radiology), or (b) as to
less than an aggregate of 20% of the rentable square footage of the buildings on
any Leased Property, to concessionaires or other third party users or operators
of portions of the Leased Property which are reasonably related to the
health-care industry or which provide direct services for patients or employees
of the Leased Property. Landlord shall not unreasonably withhold its consent to
any other or further subletting or assignment, provided that (a) in the case of
a subletting, the sublessee shall comply with the provisions of Section 14.02,
(b) in the case of an assignment, the assignee shall assume in writing and agree
to keep and perform all of the terms of this Lease on the part of Tenant to be
kept and performed and shall be, and become, jointly and severally liable with
Tenant for the performance thereof, (c) an original counterpart of each such
sublease and assignment and assumption, duly executed by Tenant and such
sublessee or assignee, as the case may be, in form and substance satisfactory to
the Landlord, shall be delivered promptly to Landlord, and (d) in case of either
an assignment or subletting, Tenant shall remain primarily liable, as principal
rather than as surety, for the prompt payment of the Rent and for the
performance and observance of all of the covenants and conditions to be
performed by Tenant hereunder.
14.02 Attornment. Tenant shall insert in each sublease permitted under
Section 14.01 provisions to the effect that (a) such sublease is subject and
subordinate to all of the terms and provisions of the Lease (including this
Agreement) and to the rights of Landlord hereunder, (b) in the event the Lease
shall terminate before the expiration of such sublease, the sublessee thereunder
will, at Landlord's option, attorn to Landlord and waive any right the sublessee
may have to terminate the sublease or to surrender possession thereunder, as a
result of the
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termination of the Lease, and (c) in the event the sublessee receives a
written notice from Landlord or Landlord's assignees, if any, stating that
Tenant is in Default under the Lease, the sublessee shall thereafter be
obligated to pay all rentals accruing under said sublease directly to the party
giving such notice, or as such party may direct. All rentals received from the
sublessee by Landlord or Landlord's assignees, if any, as the case may be, shall
be credited against the amounts owing by Tenant under the Lease.
14.03 Sublease Limitation. Anything contained in this Agreement or any
Lease to the contrary notwithstanding, Tenant shall not sublet the Leased
Property on any basis such that the rental to be paid by the sublessee
thereunder would be based, in whole or in part, on either (i) the income or
profits derived by the business activities of the sublessee, or (ii) any other
manner such that any portion of the sublease rental received by Landlord would
fail to qualify as "rents from real property" within the meaning of Section
856(d) of the Internal Revenue Code of 1986 as amended (the "Code"), or any
similar or successor provisions thereto.
ARTICLE XV: ARBITRATION
15.01 Arbitration. Except with respect to the payment of Base Rent
hereunder, in case any controversy shall arise between the parties hereto as to
any of the requirements of this Lease or the performance thereof, which the
parties shall be unable to settle by agreement or as otherwise provided herein,
such controversy shall be determined by arbitration to be initiated and
conducted as provisions of this Article XV.
15.02 Appointment of Arbitrators. The party or parties requesting
arbitration shall serve upon the other a demand therefor, in writing, specifying
the matter to be submitted to arbitration, and nominating some competent
disinterested person to act as an arbitrator; within twenty (20) days after
receipt of such written demand and notification, the other party shall, in
writing, nominate a competent disinterested person and the two (2) arbitrators
so designated shall, within ten (10) days thereafter, select a third arbitrator
and give immediate written notice of such selection to the parties and shall fix
in said notice a time and place for the first meeting of the arbitrators, which
meeting shall be held as soon as conveniently possible after the selection of
all arbitrators at which time and place the parties to the controversy may
appear and be heard.
15.03 Third Arbitrator. In case the notified party or parties shall
fail to make a selection upon notice, as aforesaid, or in case the first two (2)
arbitrators selected shall fail to agree upon a third arbitrator within ten (10)
days after their selection, then such arbitrator or arbitrators, may, upon
application made by either of the parties to the controversy, after twenty (20)
days' written notice thereof to the other party or parties, be appointed by the
Senior Judge of the United States District Court having jurisdiction of
controversies litigated in Nashville Tennessee.
15.04 Arbitration Procedure. Said arbitrators shall give each of the
parties not less than ten (10) days' written notice of the time and place of
each meeting at which the parties or
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any of them may appear and be heard and after hearing the parties in regard to
the matter in dispute and taking such other testimony and making such other
examinations and investigations as justice shall require and as the arbitrators
may deem necessary, they shall decide the question submitted to them; and the
decision of said arbitrators in writing signed by a majority of them shall be
final and binding upon the parties to such controversy. In rendering such
decision and award, the arbitrators shall not add to, subtract from or otherwise
modify the provisions of this Agreement or of any applicable Lease.
15.05 Expenses. The expenses of such arbitration shall be divided
between Landlord and Tenant unless otherwise specified in award. Each party in
interest shall pay the fees and expenses of its own counsel.
ARTICLE XVI: QUIET ENJOYMENT, SUBORDINATION, ATTORNMENT,
BOND FINANCING AND ESTOPPEL CERTIFICATES
16.01 Quiet Enjoyment. So long as Tenant performs all of its
obligations under this Agreement and each Lease, Tenant's possession of the
Leased Property will not be disturbed by or through Landlord.
16.02 Subordination. This Agreement and each Lease and Tenant's rights
under this Agreement and each Lease are subordinate to any ground lease or
underlying lease, first mortgage, first deed of trust, or other first lien
against the Leased Property, together with any renewal, consolidation,
extension, modification or replacement thereof, which now or at any subsequent
time affects the Leased Property or any interest of Landlord in the Leased
Property, except to the extent that any such instrument expressly provides that
this Agreement and each Lease is superior. This provision will be
self-operative, and no further instrument or subordination will be required in
order to effect it. However, Tenant shall execute, acknowledge and deliver to
Landlord, at any time and from time to time upon demand by Landlord, such
documents as may be requested by Landlord or any mortgagee or any holder of any
mortgage or other instrument described in this Section, to confirm or effect any
such subordination. If Tenant fails or refuses to execute, acknowledge, and
deliver any such document within twenty (20) days after written demand, Landlord
may execute, acknowledge and deliver any such document on behalf of Tenant as
Tenant's attorney-in-fact. Tenant hereby constitutes and irrevocably appoints
Landlord, its successors and assigns, as Tenant's attorney-in-fact to execute,
acknowledge, and deliver on behalf of Tenant any documents described in this
Section. This power of attorney is coupled with an interest and is irrevocable.
16.03 Attornment; Non-Disturbance. If any holder of any mortgage,
indenture, deed of trust, or other similar instrument described in Section 16.02
succeeds to Landlord's interest in the Leased Property, Tenant will pay to such
holder all Rent subsequently payable under this Lease. Tenant shall, upon
request of anyone succeeding to the interest of Landlord, automatically become
the tenant of, and attorn to, such successor in interest without changing this
Lease. The successor in interest will not be bound by [i] any payment of Rent
for more than
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one (1) month in advance; [ii] any amendment or modification of this Lease made
without its written consent; [iii] any claim against Landlord arising prior to
the date on which the successor succeeded to Landlord's interest; or [iv] any
claim or offset of Rent against the Landlord. Upon request by Landlord or such
successor in interest and without cost to Landlord or such successor in
interest, Tenant will execute, acknowledge and deliver an instrument or
instruments confirming the attornment. If Tenant fails or refuses to execute,
acknowledge, and deliver any such instrument within twenty (20) days after
written demand, then Landlord or such successor in interest will be entitled to
execute, acknowledge, and deliver any document on behalf of Tenant as Tenant's
attorney-in-fact. Tenant hereby constitutes and irrevocably appoints Landlord,
its successors and assigns, as Tenant's attorney-in-fact to execute,
acknowledge, and deliver on behalf of Tenant any such document. This power of
attorney is coupled with an interest and is irrevocable.
Landlord shall use reasonable efforts to obtain a non-disturbance
agreement from any such party referred to above which provides that in the event
such party succeeds to Landlord's interest under the Lease and provided that no
Event of Default by Tenant exists, such party will not disturb Tenant's
possession, use or occupancy of the Leased Property.
16.04 Estoppel Certificates. At the request of Landlord or any
mortgagee or purchaser of the Leased Property, Tenant shall execute,
acknowledge, and deliver an estoppel certificate, in recordable form, in favor
of Landlord or any mortgagee or purchaser of the Leased Property certifying the
following: [i] that the Lease is unmodified and in full force and effect, or if
there have been modifications that the same is in full force and effect as
modified and stating the modifications; [ii] the date to which Rent and other
charges have been paid; [iii] that neither Tenant nor Landlord is in default nor
is there any fact or condition which, with notice or lapse of time, or both,
would constitute a default, if that be the case, or specifying any existing
default; [iv] that Tenant has accepted and occupies the Leased Property; [v]
that Tenant has no defenses, set-offs, deductions, credits, or counterclaims
against Landlord, if that be the case, or specifying such that exist; [vi] that
the Landlord has no outstanding construction or repair obligations; and [vii]
such other information as may reasonably be requested by Landlord or any
mortgagee or purchaser. Any purchaser or mortgagee may rely on this estoppel
certificate. If Tenant fails to deliver the estoppel certificates to Landlord
within ten (10) days after the request of the Landlord, then Tenant shall be
deemed to have certified that [a] the Lease is in full force and effect and has
not been modified, or that the Lease has been modified as set forth in the
certificate delivered to Tenant; [b] Tenant has not prepaid any Rent or other
charges except for the current month; [c] Tenant has accepted and occupies the
Leased Property; [d] neither Tenant nor Landlord is in default nor is there any
fact or condition which, with notice or lapse of time, or both, would constitute
a default; [e] Landlord has no outstanding construction or repair obligation,
and [f] Tenant has no defenses, set-offs, deductions, credits, or counterclaims
against Landlord. Tenant hereby irrevocably appoints Landlord as Tenant's
attorney-in-fact to execute, acknowledge and deliver on Tenant's behalf any
estoppel certificate which Tenant does not object to within twenty (20) days
after Landlord sends the certificate to Tenant. This power of attorney is
coupled with an interest and is irrevocable.
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ARTICLE XVII: MISCELLANEOUS
17.01 Notices. Landlord and Tenant hereby agree that all notices,
demands, requests, and consents (hereinafter "notices") required to be given
pursuant to the terms of this Lease shall be in writing shall be addressed as
follows:
If to Landlord: NHR/OP, L.P.
100 Vine Street, Attn: President
Suite 1400, City Center
Murfreesboro, Tennessee 37130
If to Tenant: National HealthCare Corporation
100 Vine Street
Suite 1400, City Center
Murfreesboro, Tennessee 37130
With a copy to: Richard F. LaRoche, Jr.
Senior Vice President and Secretary
National HealthCare Corporation
100 Vine Street
Suite 1400, City Center
Murfreesboro, Tennessee 37130
With a copy to: Ernest E. Hyne, II, Esq.
Harwell Howard Hyne Gabbert & Manner
P.O. Box 2960
Nashville, Tennessee 37219;
and shall be served by [i] personal delivery, [ii] certified mail, return
receipt requested, postage prepaid, or [iii] nationally recognized overnight
courier. All notices shall be deemed to be given upon the earlier of actual
receipt or three (3) days after mailing, or one (1) business day after deposit
with the overnight courier. Any notices meeting the requirements of this Section
shall be effective, regardless of whether or not actually received. Landlord or
Tenant may change its notice address at any time by giving the other party
notice of such change.
17.02 Advertisement of Leased Property. In the event the parties hereto
have not executed a renewal lease of any Leased Property within ninety (90) days
prior to the expiration of the Term, then Landlord or its agent shall have the
right to enter such Leased Property at all reasonable times for the purpose of
exhibiting the Leased Property to others and to place upon the Leased Property
for and during the period commencing one hundred eighty (180) days prior to the
expiration of the Term "for sale" or "for rent" notices or signs.
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17.03 Entire Agreement. This Agreement and the individual Leases
contain the entire agreement between Landlord and Tenant with respect to the
subject matter hereof and thereof. No representations, warranties, and
agreements have been made by Landlord except as set forth in this Lease.
17.04 Severability. If any term or provision of this Agreement or any
Lease is held or deemed by Landlord to be invalid or unenforceable, such holding
shall not affect the remainder of this Agreement or any Lease and the same shall
remain in full force and effect, unless such holding substantially deprives
Tenant of the use of the Leased Property or Landlord of the Rents therefor, in
which event the Lease for such Leased Property shall forthwith terminate as if
by expiration of the Term.
17.05 Captions and Headings. The captions and headings are inserted
only as a matter of convenience and for reference and in no way define, limit or
describe the scope of this Agreement or the intent of any provision hereof.
17.06 Governing Law. This Lease shall be construed under the laws of
the State of Tennessee.
17.07 Recording of Lease. Tenant shall not record this Agreement.
Tenant may, however, record the Lease approved by Landlord with respect to each
Leased Property; provided, however, such lease shall not disclose the Base Rent
of other economic terms of the Lease.
17.08 Waiver. No waiver by Landlord of any condition or covenant herein
contained, or of any breach of any such condition or covenant, shall be held or
taken to be a waiver of any subsequent breach of such covenant or condition, or
to permit or excuse its continuance or any future breach thereof or of any
condition or covenant, nor shall the acceptance of Rent by Landlord at any time
when Tenant is in default in the performance or observance of any condition or
covenant herein be construed as a waiver of such default, or of Landlord's right
to terminate this Agreement or any Lease or exercise any other remedy granted
herein on account of such existing default.
17.09 Binding Effect. This Agreement and each Lease will be binding
upon and inure to the benefit of the heirs, successors, personal
representatives, and permitted assigns of Landlord and Tenant.
17.10 Authority. The persons executing this Agreement or any Lease on
behalf of Tenant warrant that [i] Tenant has the power and authority to enter
into this Agreement or such Lease; [ii] Tenant is qualified to do business in
the state in which the Leased Property is located; and [iii] they are authorized
to execute this Lease on behalf of Tenant. Tenant shall, at the request of
Landlord, provide evidence satisfactory to Landlord confirming these
representations.
17.11 Transfer of Permits, Etc. Upon the expiration or earlier
termination of the Term
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of any Lease (whether pursuant to the provisions of this Agreement or of such
Lease), Tenant shall to transfer and relinquish to Landlord or Landlord's
nominee and to cooperate with Landlord or Landlord's nominee in connection with
the processing by Landlord or such nominee of all licenses, operating permits,
certificates of need and other governmental authorization and all contracts,
including without limitation, a Certificate of Need, the nursing home and/or
health care facility license, and any other contracts with governmental or
quasi-governmental entities which may be necessary or appropriate for the
operation by Landlord or such nominee of the Leased Property for the purposes of
operating a nursing home and health care facility; provided that the costs and
expenses of any such transfer or the processing of any such application shall be
paid by Landlord or Landlord's nominee. Any such permits, licenses, certificates
and contracts which are held in Landlord's name now or at the termination of the
Lease shall remain the property of Landlord. To the extent permitted by law,
Tenant hereby irrevocably appoints Landlord, its successors and assigns and any
nominee or nominees specifically designated by Landlord or any successor or
assign as Tenant's attorney-in-fact to execute, acknowledge, deliver and file
all documents appropriate to such transfer or processing of any such application
on behalf of Tenant; this power of attorney is coupled with an interest and is
irrevocable.
17.12 Modification. This Agreement and any Lease may only be modified
by a writing signed by both Landlord and Tenant.
17.13 Incorporation by Reference. All schedules and exhibits referred
to in this Agreement are incorporated into this Agreement, and all schedules and
exhibits referred to in any Lease (as well as the provisions of this Agreement,
except to the extent specifically excluded from or inconsistent with the terms
of such Lease) are incorporated into such Lease.
17.14 No Merger. The surrender of this Agreement or of any Lease by
Tenant or the cancellation of this Agreement or of any Lease by agreement of
Tenant and Landlord or the termination of this Agreement or of any Lease on
account of Tenant's default will not work a merger, and will, at Landlord's
option, terminate any subleases or operate as an assignment to Landlord of any
subleases. Landlord's option under this paragraph will be exercised by notice to
Tenant and all known subtenants of any applicable Leased Property.
17.15 Laches. No delay or omission by either party hereto to exercise
any right or power accruing upon any noncompliance or default by the other party
with respect to any of the terms hereof shall impair any such right or power or
be construed to be a waiver thereof.
17.16 Waiver of Jury Trial. To the extent that there is any claim by
one party against the other that is not to be settled by arbitration as provided
in Article XV hereof, Landlord and Tenant waive trial by jury in any action,
proceeding or counterclaim brought by either of them against the other on all
matters arising out of this Lease or the use and occupancy of the Leased
Property (except claims for personal injury or property damage). If Landlord
commences any summary proceeding for nonpayment of Rent, Tenant will not
interpose, and waives the right to interpose, any counterclaim in any such
proceeding.
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17.17 Permitted Contests. Tenant, on its own or on Landlord's behalf
(or in Landlord's name), but at Tenant's expense, may contest, by appropriate
legal proceedings conducted in good faith and with due diligence, the amount or
validity or application, in whole or in part, of any Imposition or any legal
requirement or insurance requirement or any lien, attachment, levy, encumbrance,
charge or claim provided that [i] in the case of an unpaid Imposition, lien,
attachment, levy, encumbrance, charge or claim, the commencement and
continuation of such proceedings shall suspend the collection thereof from
Landlord and from the Leased Property; [ii] neither the Leased Property nor any
Rent therefrom nor any part thereof or interest therein would be in any
immediate danger of being sold, forfeited, attached or lost; [iii] in the case
of a legal requirement, Landlord would not be in any immediate danger of civil
or criminal liability for failure to comply therewith pending the outcome of
such Proceedings; [iv] in the event that any such contest shall involve a sum of
money or potential loss in excess of Fifty Thousand Dollars ($50,000.00), Tenant
shall deliver to Landlord and its counsel an opinion of Tenant's counsel to the
effect set forth in clauses [i], [ii] and [iii], to the extent applicable; [v]
in the case of a legal requirement and/or an Imposition, lien, encumbrance, or
charge, Tenant shall give such reasonable security as may be demanded by
Landlord to insure ultimate payment of the same and to prevent any sale or
forfeiture of the affected Leased Property or the Rent by reason of such
nonpayment or noncompliance; provided, however, the provisions of this Section
shall not be construed to permit Tenant to contest the payment of Rent (except
as to contests concerning the method of computation or the basis of levy of any
Imposition or the basis for the assertion of any other claim) or any other sums
payable by Tenant to Landlord hereunder; [vi] in the case of an insurance
requirement, the coverage required by Article IV shall be maintained: and [vii]
if such contest be finally resolved against Landlord or Tenant, Tenant shall, as
Additional Rent due hereunder, promptly pay the amount required to be paid,
together with all interest and penalties accrued thereon, or comply with the
applicable legal requirement or insurance requirement. Landlord, at Tenant's
expense, shall execute and deliver to Tenant such authorizations and other
documents as may be reasonably required in any such contest, and, if reasonably
requested by Tenant or if Landlord so desires, Landlord shall join as a party
therein. Tenant hereby agrees to indemnify and save Landlord harmless from and
against any liability, cost or expense of any kind that may be imposed upon
Landlord in connection with any such contest and any loss resulting therefrom.
17.18 Construction of Lease. This Agreement and each of the Leases for
Leased Properties described on Schedule A hereto have been prepared by Landlord
and its professional advisors and reviewed by Tenant and its professional
advisors. Landlord, Tenant, and their advisors believe that this Agreement and
such Leases are the product of all their efforts, that they express their
agreement, and agree that they shall not be interpreted in favor of either
Landlord or Tenant or against either Landlord or Tenant merely because of their
efforts in preparing such documents.
17.19 Counterparts. This Agreement and each Lease may be executed in
duplicate counterparts, each of which shall be deemed an original hereof or
thereof.
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17.20 Relationship of Landlord and Tenant. The relationship of Landlord
and Tenant is the relationship of lessor and lessee. Landlord and Tenant are not
partners, joint venturers, or associates.
17.21 Custody of Escrow Funds. Any funds paid to Landlord in escrow
hereunder may be held by Landlord or, at Landlord's election, by a financial
institution, the deposits or accounts of which are insured or guaranteed by a
federal or state agency. The funds shall not be deemed to be held in trust, may
be commingled with the general funds of Landlord or such other institution, and
shall not bear interest.
17.22 Sale of Real Estate Assets. Notwithstanding any other provision
of this Agreement or of any Lease, Landlord shall not be required to sell or
transfer Leased Property, or any portion thereof, which is a real estate asset
as defined in Section 856(c)(6) of the Code, to Tenant if Landlord's counsel
advises Landlord that such sale or transfer may not be a sale of property
described in Section 857(b)(6)(C) of the Code. If Landlord determines not to
sell such property pursuant to the above sentence, Tenant's right, if any, to
purchase the Leased Property shall continue and be exercisable at such time as
the transaction, upon the advice of Landlord's counsel, would be a sale of
property described in Section 857(b)(6)(C) of the Code.
17.23 Use of Tenant's Name. Following the expiration or earlier
termination of this Agreement and of all of the Leases, Landlord shall use its
best efforts, if requested by Tenant within 12 months of such expiration or
termination, to cause its name to be changed to a name that does not include the
word "National" or any variation thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Lease or
caused the same to be executed by their respective duly authorized officers as
of the date first set forth above.
LANDLORD: NHR/OP, L.P.
By: National Health Realty, Inc., its Managing
General Partner
By:
-------------------------------
Title:
-------------------------------
TENANT: NATIONAL HEALTHCARE CORPORATION
By:
-------------------------------
Title:
-------------------------------
37
<PAGE> 1
Exhibit 10.3
ADVISORY, ADMINISTRATIVE SERVICES
AND FACILITIES AGREEMENT
between
NATIONAL HEALTH INVESTORS, INC.
and
NATIONAL HEALTHCORP L.P.
THIS AGREEMENT is dated as of October 17, 1991, between NATIONAL HEALTH
INVESTORS, INC., a Maryland corporation (the "Corporation"), and NATIONAL
HEALTHCORP L.P., a Delaware limited partnership (the "Advisor").
WHEREAS on or about October 15, 1991 pursuant to a plan to reorganize
Advisor and to capitalize the Corporation, Advisor will convey, subject to
certain related liabilities and obligations, all of its right, title and
interest in and to certain real property and certain promissory notes (the
"Conveyance");
WHEREAS immediately following the Conveyance, the Corporation will
lease the real properties back to the Advisor pursuant to that certain Master
Lease Agreement, dated October 17, 1991 (the "Master Lease");
WHEREAS on or about October 15, 1991 and as part of the overall plan to
capitalize the Corporation, the Advisor plans to distribute (the "Distribution")
pro rata to each holder of the Advisor's outstanding Units of limited
partnership interest, all of the shares of common stock of the Corporation, par
value $.01 (the "Shares");
WHEREAS contemporaneously with the Conveyance and the Distribution, the
Corporation plans to issue certain debentures (the "Debentures") the proceeds of
which are to be used to enable the Corporation to expand its business;
WHEREAS the Corporation intends to qualify as a real estate investment
trust as defined in the Internal Revenue Code of 1986, as amended, as the same
may be amended or modified from time to time;
WHEREAS the Corporation desires to avail itself of the Advisor's
experience, sources of information, advice, and assistance and of certain
personnel and facilities available to the Advisor and to have the Advisor
undertake the duties and responsibilities hereinafter set forth, on behalf of
and subject to the supervision of the Board of Directors of the Corporation (the
"Directors"), as provided herein;
<PAGE> 2
WHEREAS the Advisor is willing to undertake to render such services,
subject to the supervision of the Directors, on the terms and conditions
hereinafter set forth; and
WHEREAS the relationships established by the Advisor and the
Corporation hereunder are independent of and unaffected by the relationships of
the parties established under the Master Lease.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the Corporation and the Advisor agree as follows:
1. Duties of Advisor. The Corporation hereby engages the Advisor, and
the Advisor undertakes to use its best efforts (a) to present to the Corporation
a continuing and suitable investment program consistent with the investment
policies and objectives of the Corporation and investment opportunities of a
character consistent with such investment program as the Directors may adopt
from time to time, (b) to manage the day-to-day affairs and operations of the
Corporation and (c) to provide such administrative services and facilities as
are appropriate for such management. In performance of such undertakings,
subject to the supervision and approval of the Directors and upon their
direction, and consistent with the provisions of the Articles of Incorporation
and Bylaws of the Corporation and of any policies for the Corporation from time
to time established by the Directors after consultation with the Advisor, the
Advisor shall:
(i) make or have made for the Corporation such research reports,
economic and statistical data, evaluations, analyses, opinions
and recommendations as it may deem necessary or desirable or as the
Directors of the Corporation may request with respect to investment
opportunities available to the Corporation;
(ii) formulate a program for the investment of the Corporation's
assets;
(iii) select and evaluate potential projects and investments for
the Corporation;
(iv) make recommendations as to the nature, terms and amount of
involvement or participation in such project or investments and the
timing thereof;
(v) evaluate and make recommendations as to the sale or other
disposition of assets of the Corporation;
(vi) make such further recommendations as to the investments of the
Corporation as the Advisor may deem necessary or desirable;
2
<PAGE> 3
(vii) investigate and make recommendations with respect to selection
of and relations with consultants, lenders and others (including
without limitation, tenants, property managers, accountants, mortgage
loan originators, correspondents and services, architects, engineers
and other technical advisers, attorneys, real estate and mortgage loan
bankers, brokers and dealers, corporate fiduciaries, escrow agents,
depositories, custodians, agents for collection, insurers, insurance
agents, banks, builders and developers, and persons acting in any other
capacity), in connection with the Corporation's properties;
(viii) provide office and clerical facilities adequate for the
Corporation's operations and affairs;
(ix) act, or obtain for the Corporation the services of others to
act, as may be required to provide accounting, auditing, custodial,
transfer agent, registrar and other similar services, to disburse and
collect the funds of the Corporation, to pay the debts and fulfill the
obligations of the Corporation, to handle the prosecution and
settlement of any claims of the Corporation, to oversee, handle,
prepare and distribute or cause to be distributed all communications
with the existing and future holders of the Corporation's securities,
including the holders of the Corporation's Shares and Debentures, and,
in connection with the foregoing, to investigate, select and conduct
relations with custodians, transfer agents, registrars, proxy
solicitors, attorneys, accountants, auditors, brokers and investors,
and others as necessary in connection with the Corporation's
operations;
(x) advise the Corporation concerning developments in the
healthcare and real estate investment trust industries appropriate or
useful to the Corporation's existing and potential future business and
investments;
(xi) make recommendations to the Directors as to appropriate
distributions by the Corporation to its stockholders; and
(xii) maintain or cause to be maintained records of activities
reasonably requested by the Corporation.
2. Delegation. With the consent of the Directors from time to time, the
Advisor may delegate to or use the services of any third party, including any
Affiliate of the Advisor, in performing its duties hereunder provided that such
third party is subject to the supervision of the Advisor. The services to be
provided to the Corporation by the Advisor shall, at the direction of the
Directors, be provided to any subsidiaries of the Corporation.
3
<PAGE> 4
3. No Partnership or Joint Venture. The Corporation and the Advisor are
not partners or joint venturers with each other and nothing herein shall be
construed so as to make them such partners or joint venturers or impose any
liability as such on either of them.
4. Records. At all times, the Advisor shall keep proper books of
account and records relating to services performed hereunder, which books of
account and records shall be accessible for inspection by the Corporation at any
time during ordinary business hours. Annually, and more frequently as reasonably
requested by the Directors, the Advisor shall report to the Directors its
estimated costs in providing the services for the Corporation hereunder (by
category of services to the extent practicable) and provide the Directors with
such information as is reasonably obtainable by the Advisor concerning the cost
to other real estate investment trusts specializing in healthcare facility
investments of administrative and advisory services comparable to those that are
the subject matter of this Agreement in order that the Directors may evaluate
the performance of the Advisor and the efficiency of the arrangements provided
for in this Agreement.
5. Qualification as a Real Estate Investment Trust. Anything else in
this Agreement to the contrary notwithstanding, the Advisor shall refrain from
any action which, in its sole judgment made in good faith or in the judgment of
the Directors of which the Advisor has written notice, would adversely affect
the status of the Corporation as a real estate investment trust as defined and
limited in Sections 856-860 of the Internal Revenue Code of 1986, as amended,
which would violate any law, rule, regulation or statement of policy or any
governmental body or agency having jurisdiction over the Corporation or over its
securities, or which would otherwise not be permitted by the Corporation's
Articles of Incorporation and Bylaws.
6. Bank Accounts. The Advisor, at the expense of the Corporation, may
establish and maintain one or more bank accounts in its own name, and may
collect and deposit into any such account or accounts, and disburse from any
such account or accounts, any money on behalf of the Corporation, under such
terms and conditions as the Directors may approve, provided that no funds in any
such account shall be commingled with funds of the Advisor; and the Advisor
shall from time to time render appropriate accounting of such collections and
payments to the Directors and to the auditors of the Corporation.
7. Bond. The Advisor, if and to the extent that the Directors require,
shall maintain a fidelity bond with a responsible surety company in such amount
as may be required by the Directors from time to time, covering all directors,
officers, employees and agents of the Advisor handling funds of the Corporation
and any investment documents or records pertaining to
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<PAGE> 5
investments of the Corporation. Such bond shall inure to the benefit of the
Corporation in respect of losses of any such property from acts of such
Directors, officers, employees and agents through theft, embezzlement, fraud,
negligence, error or omission or otherwise. The premium for said bond shall be
an expense of the Corporation.
8. Information Furnished Advisor. The Directors shall at all times keep
the Advisor fully informed with regard to the investment policy of the
Corporation, the capitalization policy of the Corporation and generally their
then current intentions as to the future of the properties and other investments
of the Corporation. In particular, the Directors shall notify the Advisor
promptly of their intention to sell or otherwise dispose of any of the
Corporation's investments or to make any new investment. The Corporation shall
furnish the Advisor with a certified copy of all financial statements, a signed
copy of each report prepared by independent certified public accountants and
such other information with regard to the Corporation's affairs as the Advisor
may from time to time reasonably request.
9. Consultation and Advice. In addition to the services described
above, the Advisor shall consult with the Directors, and shall, at the request
of the Directors or the officers of the Corporation, furnish advice and
recommendations with respect to other aspects of the business and affairs of the
Corporation. In general, the Advisor shall inform the Directors of any factors
which come to its attention which would influence the policies of the
Corporation, except to the extent that giving such information would involve a
breach of fiduciary duty.
10. Compensation to Advisor.
(a) The Corporation shall pay the Advisor for its services
hereunder annual compensation of $1,625,000, payable in monthly
instalments of $135,417 on the last day of each month, adjusted as set
forth in Subsection 10(d) below.
(b) The payment of such compensation to the Advisor shall be
conditioned upon the Corporation's having Funds From Operations (as
defined in Subsection 10(c) below) in each year equal to at least the
product ("Dividend Requirement") of (i) $2.00 times (ii) the average
number of shares of the Corporation outstanding on each dividend record
date during such year, and upon the Corporation's paying dividends in
each year at least equal to such Dividend Requirement. In the event
that the lower of (i) Funds From Operations and (ii) the actual
dividends paid in any year is less than the Dividend Requirement for
any year, the compensation payable to the Advisor in respect of such
year shall be reduced by the amount of such shortfall (the "Shortfall
Amount") and the Advisor shall repay to the Corporation any portion of
the Shortfall
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<PAGE> 6
Amount previously received for such year. The Advisor shall be entitled
to payment of any Shortfall Amount in any subsequent year to the extent
that Funds From Operations for such subsequent year exceeds the
Dividend Requirement for such subsequent year (and provided that the
actual dividends paid by the Corporation in such subsequent year are at
least equal to the Dividend Requirement for such year), together with
interest thereon, at two percent over the prime lending rate of the
Advisor's principal bank in Tennessee, compounded annually, from the
time that the same would otherwise have been payable to the Advisor or,
as the case may be, was repaid by the Advisor to the Corporation.
(c) As used in this Section 10, "Funds From Operations" means
the consolidated net income of the Corporation computed in accordance
with generally accepted accounting principles, plus depreciation and
amortization, less the amount of any capital gains or plus the amount
of any capital losses included in such net income, and before applying
the provisions of subsection 10(b) above.
(d) For each year during the term of this Agreement after 1992
that the Corporation has Funds From Operations Per Share in excess of
its Funds From Operations Per Share in 1992, the compensation provided
for in Subsection 10(a) shall be increased by the percentage that is
equal to the percentage increase of the amount of Funds From Operations
Per Share in such year over the greater of (i) amount of Funds From
Operations Per Share in 1992 or (ii) $2.00. In the event that
operations in 1993 and later years result in an increase in
compensation for any such year, the amount of such increase not
previously paid to the Advisor shall be paid promptly following the
determination of such increase, and monthly instalments of compensation
in the following year may be based upon the increased compensation
determined for such preceding year subject to repayment by the Advisor
to the extent that the amount paid in such following year exceeds the
amount of compensation ultimately determined with respect to such
following year. Funds From Operations Per Share in any year shall be
determined by dividing the Corporation's Funds From Operations in that
year by the average number of shares of Common Stock outstanding during
that year (such average number being calculated in accordance with
generally accepted accounting principles). The amount of any increase
in compensation for the year in which this Agreement terminates shall
be determined by annualizing the Corporation's Funds From Operations
for the number of full months in such year prior to the date of
termination.
11. Expenses of the Advisor. Except as provided in Section 12 and without
regard to the amount of compensation received hereunder by the Advisor, the
Advisor shall pay all expenses in
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<PAGE> 7
performing its obligations hereunder, including and in addition to
the following expenses:
(a) the cost of any accounting, statistical or bookkeeping
equipment necessary for the maintenance of the books and records of the
Corporation;
(b) employment expenses of the officers and directors and
personnel of the Advisor and all expenses, including travel expenses,
of the Advisor, incidental to the investigation and acquisition of
properties for the Corporation prior to the time the Directors
definitively decide to acquire the property or to have the Advisor
continue with the acquisition process, whether the property is acquired
or not, and after the Directors definitively decide to dispose of a
property;
(c) advertising and promotional expenses incurred in seeking
and disposing of investments for the Corporation;
(d) rent, telephone, utilities, office furniture and
furnishings and other office expenses incurred by or allocable to the
Advisor for its own benefit and account regardless of whether incurred
or used in connection with rendering the services to the Corporation
provided for in this Agreement;
(e) all costs and expenses which the Advisor is obligated to
pay to the Corporation or others under any lease of property by the
Advisor from the Corporation; and
(f) all miscellaneous administrative and other expenses of the
Advisor, whether or not relating to the performance by the Advisor of
its functions hereunder.
12. Expenses of the Corporation. The Corporation shall pay the following
expenses of the Corporation (except to the extent that the Advisor is
responsible for any such expenses as tenant of any property leased from the
Corporation):
(a) the cost of money borrowed by the Corporation;
(b) taxes on income and taxes and assessments on real property
and all other taxes applicable to the Corporation, including without
limitation, franchise and excise fees;
(c) except as provided in Section 11 hereof, all ordinary and
necessary expenses incurred with respect to and allocable to the
prudent operation and business of the Corporation, including without
limitation, any fees, salaries and other employment costs, taxes and
expenses paid to Directors, officers and employees of the Corporation
who are not also employees of the Advisor;
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<PAGE> 8
(d) fees and expenses paid to independent contractors,
appraisers, consultants, attorneys, managers and other agents retained
by or on behalf of the Corporation and expenses directly connected with
the acquisition, financing, refinancing, disposition and ownership of
real estate interests or of other property (including insurance
premiums, legal services, brokerage and sales commissions, maintenance,
repair and improvement of property);
(e) insurance as required by the Directors (including
Directors' liability insurance);
(f) expenses connected with payments of dividends or
distributions in cash or any other form made or caused to be made by
the Directors to shareholders of the Corporation and expenses connected
with payments of interest to holders of the Corporation's Debentures;
(g) all expenses connected with communications to holders of
securities of the Corporation and the other bookkeeping and clerical
work necessary in maintaining relations with holders of securities,
including the cost of printing and mailing certificates for securities
and proxy solicitation materials and reports to holders of the
Corporation's securities;
(h) transfer agent's, registrar's, dividend disbursing
agent's, dividend reinvestment plan agent's and indenture trustee's
fees and charges;
(i) legal and auditing fees and expenses of the Corporation;
and
(j) legal, auditing, accounting, underwriting, brokerage,
listing, registration and other fees and printing, engraving and other
expenses and taxes incurred in connection with the organization of the
Corporation and the issuance, distribution, transfer, registration and
listing of the Corporation's securities.
13. Other Activities of the Advisor. Nothing herein contained shall prevent
the Advisor or any of its officers, directors or employees or any of its
affiliates from engaging in other business activities related to real estate
investments, from undertaking investments permitted of them by the Corporation's
Bylaws or from acting as advisor to any other person or entity even though
having investment policies similar to the Corporation, and the Advisor and its
officers, directors or employees and any of its Affiliates shall be free from
any obligation to present to the Corporation any particular investment
opportunity which comes to the Advisor or such persons, regardless of whether
such opportunity
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<PAGE> 9
is within the Corporation's investment policies; provided, however, that when
the Advisor has the ability to present a particular investment opportunity which
is suitable for purchase by the Corporation and any other entities as to which
the Advisor has advisory responsibility, the Advisor will review the investment
portfolio of each entity and will decide which entity will acquire a particular
property on the basis of such factors as it deems appropriate including, among
others, cash-flow, the effect of the acquisition on diversification of the
portfolio of each, the estimated income tax effects of the purchase, the amount
of funds available and the length of time such funds have been available for
investment. In the event a particular property is equally appropriate for
investment by more than one entity, the Advisor will offer the investment to the
entity whose funds have been available for the longest period of time.
14. Term; Termination of Agreement. This Agreement shall continue in force
from the date hereof through December 31, 1996 and thereafter from year to year
unless earlier terminated as herein provided; provided, however, that either
party may terminate this Agreement at any time on or after January 1, 1993,
specified in a written notice of termination given to the other party at least
ninety days prior to the effective date of such termination; and provided,
further, that the Corporation may terminate this Agreement at any time during
the continuation of any event described in Section 17 hereof or otherwise for
cause. Upon the termination of this Agreement for any reason the Advisor shall
cooperate with the Corporation to provide an orderly management transition.
15. Amendments. This Agreement shall not be changed, modified, terminated or
discharged in whole or in part except by an instrument in writing signed by both
parties hereto, or their respective successors or assigns, or otherwise as
provided herein.
16. Assignment. This Agreement shall not be assigned or otherwise transferred
by the Advisor without the prior written consent of a majority of the Directors
including a majority of the Directors not affiliated with the Advisor. This
Agreement shall not be assigned by the Corporation without the consent of the
Advisor, except in the case of assignment by the Corporation to a corporation,
association, trust or other organization which is a successor to the
Corporation. Such successor shall be bound hereunder and by the terms of said
assignment in the same manner as the Corporation is bound hereunder.
17. Default, Bankruptcy, Etc. At the option solely of the Corporation upon
vote of a majority of its Directors, this Agreement shall be and become
terminated immediately upon written notice of termination from the Corporation
to the Advisor if any of the following events shall occur:
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<PAGE> 10
(a) If the Advisor shall violate any provision of this
Agreement, and after notice of such violation shall not cure such
default within thirty days; or
(b) If the Advisor shall be adjudged bankrupt or insolvent by
a court of competent jurisdiction, or an order shall be made by a court
of competent jurisdiction for the appointment of a receiver, liquidator
or trustee of the Advisor or of all or substantially all of its
property by reason of the foregoing, or approving any petition filed
against the Advisor for its reorganization, and such adjudication or
order shall remain in force or unstayed for a period of thirty days; or
(c) If the Advisor shall institute proceedings for voluntary
bankruptcy or file a petition seeking reorganization under the Federal
bankruptcy laws, or for relief under any law for the relief of debtors,
or shall consent to the appointment of a receiver of itself or of all
or substantially all its property, or shall make a general assignment
for the benefit of creditors, or shall admit in writing its inability
to pay its debts generally, as they become due.
The Advisor agrees that if any event specified in subsections (b) and
(c) of this Section 17 shall occur, it will give written notice thereof to the
Directors within seven days after the occurrence of such event.
18. Action Upon Termination. From and after the effective date of termination
of this Agreement, pursuant to Sections 14, 16 or 17 hereof, the Advisor, except
as provided in Section 10, shall not be entitled to compensation for further
services hereunder but shall be paid all compensation accruing to the date of
termination, including compensation the payment of which may have been deferred
as a result of the condition to payment set forth in Section 10(b) hereof. The
Advisor shall forthwith upon such termination:
(a) pay over to the Corporation all moneys collected and held
for the account of the Corporation pursuant to this Agreement, after
deducting any accrued compensation and reimbursement for its expenses
to which it is then entitled;
(b) deliver to the Directors a full accounting, including a
statement showing all payments collected by it and a statement of all
moneys held by it, covering the period following the date of the last
accounting furnished to the Directors;
(c) deliver to the Directors all property and documents of the
Corporation then in the custody of the Advisor in its capacity as such;
and
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(d) cooperate with the Directors to provide an orderly
management transition.
19. Miscellaneous. The Advisor assumes no responsibility under this Agreement
other than to render the services called for hereunder in good faith, and shall
not be responsible for any action of the Directors in following or declining to
follow any advice or recommendations of the Advisor. Neither the Advisor nor its
partners nor any shareholders, directors, officers or employees of any of its
partners shall be liable to the Corporation, the Directors, the holders of
securities of the Corporation or to any successor or assign of the Corporation
for any act taken in good faith and in a manner reasonably believed by the
Advisor or the person acting on behalf of the Advisor to be in the best
interests of the Corporation, or for any other act except an act constituting
bad faith, willful misfeasance, gross negligence or reckless disregard of its
duties.
20. Notices. Any notice, report or other communication required or permitted
to be given hereunder shall be in writing unless some other method of giving
such notice, report or other communication is accepted by the party to whom it
is given, and shall be given by being delivered at the following addresses of
the parties hereto:
The Directors and/or the Corporation:
Jack Tyrrell
3100 West End Avenue
Nashville, Tennessee 37203
Robert T. Webb
149 MTCS Drive
Murfreesboro, Tennessee 37129
Ted H. Welch
611 Commerce Street
29th Floor
Nashville, Tennessee 37219
with a copy to:
William B. King
Goodwin Proctor & Hoar
Exchange Place
Boston, Massachusetts 02109
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The Advisor:
Richard F. LaRoche, Jr.
National HealthCorp, L.P.
100 Vine Street
City Center, Suite 1400
Murfreesboro, Tennessee 37130
with a copy to:
Will Martin
Harwell Martin & Stegall, P.C.
P.O. Box 2960
Nashville, Tennessee 37219
Either party may at any time give notice in writing to the other party
of a change of its address for the purpose of this Section 20.
21. Headings. The section headings hereof have been inserted for convenience
of reference only and shall not be construed to affect the meaning, construction
or effect of this Agreement.
22. Governing Law. The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of the State of Maryland as at the time
in effect.
IN WITNESS WHEREOF, the Corporation and the Advisor, each by a duly
authorized officer have signed and delivered this Agreement under their
respective corporate seals all as of the day and year first above written.
NATIONAL HEALTH INVESTORS, INC.
By
--------------------------------
Its Secretary
-------------------------------
NATIONAL HEALTHCORP L.P.
By: NHC, Inc., its managing
partner
By
--------------------------------
Its President
-------------------------------
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<PAGE> 1
Exibit 10.4
ADVISORY, ADMINISTRATIVE SERVICES
AND FACILITIES AGREEMENT
BETWEEN
NATIONAL HEALTH REALTY, INC.
AND
NATIONAL HEALTHCARE CORPORATION
THIS AGREEMENT is dated as of October 1, 1997, but it is effective
January 1, 1998, between NATIONAL HEALTH REALTY, INC., a Maryland corporation
and its divisions, subsidiaries and partnerships in which it serves as general
partner (collectively the "Corporation"), and NATIONAL HEALTHCARE CORPORATION, a
Delaware corporation (the "Advisor").
WHEREAS effective 11:59 p.m. central time on December 31, 1997,
pursuant to a plan to restructure National HealthCare L.P. ("NHC"), NHC will
convey to NHR/OP, L.P. (the "Operating Partnership") by special form deed or by
Capitalized Lease, subject to certain related NHC liabilities and obligations,
all of its right, title and interest in and to certain real property and
mortgage notes receivables (the "Conveyance"); and
WHEREAS immediately following the Conveyance, the Operating Partnership
will lease the real properties back to NHC pursuant to that certain Master
Operating Lease Agreement, dated October 1, 1997, but effective January 1, 1998
(the "Master Lease"); and
WHEREAS effective January 1, 1998 and as part of the overall plan to
capitalize the Corporation, NHC plans to distribute (the "Distribution") pro
rata to each holder of NHC's outstanding units, all of the shares of common
stock of the Corporation, par value $.01 (the "Shares"), except with respect to
Excess Stock, as defined in the Corporation's charter; and
WHEREAS the parties acknowledge that Advisor currently performs
functions similar to those described herein for National Health Investors, Inc.,
a qualified real estate investment trust, which shares are traded on the New
York Stock Exchange (hereinafter "NHI"); and
WHEREAS the Corporation intends to qualify as a real estate investment
trust as defined in the Internal Revenue Code of 1986, as amended, as the same
may be amended or modified from time to time; and
WHEREAS the Corporation desires to avail itself of the Advisor's
experience, sources of information, advice, and assistance and of certain
personnel and facilities available to the Advisor and to have the Advisor
undertake the duties and responsibilities hereinafter set forth, on behalf of
and subject to the supervision of the Board of Directors of the Corporation (the
"Directors"), as provided herein; and
WHEREAS the Advisor is willing to undertake to render such services,
subject to the supervision of the Directors, on the terms and conditions
hereinafter set forth; and
WHEREAS the relationships established by the Advisor and the
Corporation hereunder are independent of and unaffected by the relationships of
the parties established under the Master Lease;
<PAGE> 2
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the Corporation and the Advisor agree as follows:
1. Duties of Advisor. The Corporation hereby engages the Advisor, and
the Advisor undertakes to use its best efforts (a) to present to the Corporation
a continuing and suitable investment program consistent with the investment
policies and objectives of the Corporation and investment opportunities of a
character consistent with such investment program as the Directors may adopt
from time to time, (b) to manage the day-to-day affairs and operations of the
Corporation and (c) to provide such administrative services and facilities as
are appropriate for such management. In performance of such undertakings,
subject to the supervision and approval of the Directors and upon their
direction, and consistent with the provisions of the Articles of Incorporation
and Bylaws of the Corporation and of any policies for the Corporation from time
to time established by the Directors after consultation with the Advisor, the
Advisor shall:
(i) make or have made for the Corporation such research reports,
economic and statistical data, evaluations, analyses, opinions and
recommendations as it may deem necessary or desirable or as the
Directors of the Corporation may request with respect to investment
opportunities available to the Corporation;
(ii) formulate a program for the investment of the Corporation's
assets;
(iii) select and evaluate potential projects and investments for
the Corporation;
(iv) make recommendations as to the nature, terms and amount
of involvement or participation in such project or investments and the
timing thereof;
(v) evaluate and make recommendations as to the sale or other
disposition of assets of the Corporation;
(vi) make such further recommendations as to the investments
of the Corporation as the Advisor may deem necessary or desirable;
(vii) investigate and make recommendations with respect to
selection of and relations with consultants, lenders and others
(including without limitation, tenants, property managers,
accountants, mortgage loan originators, correspondents and services,
architects, engineers and other technical advisers, attorneys, real
estate and mortgage loan bankers, brokers and dealers, corporate
fiduciaries, escrow agents, depositories, custodians, agents for
collection, insurers, insurance agents, banks, builders and
developers, and persons acting in any other capacity), in connection
with the Corporation's properties;
(viii) provide office and clerical facilities adequate for the
Corporation's operations and affairs;
(ix) act, or obtain for the Corporation the services of others to
act, as may be required to provide accounting, auditing, custodial,
transfer agent, registrar and other similar services, to disburse and
collect the funds of the Corporation, to pay the debts and fulfill the
obligations of the Corporation, to handle the prosecution and
settlement of any claims of the Corporation, to oversee, handle,
prepare and distribute or cause to be distributed all
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<PAGE> 3
communications with the existing and future holders of the
Corporation's securities, including the holders of the Corporation's
Shares and Debentures, and, in connection with the foregoing, to
investigate, select and conduct relations with custodians, transfer
agents, registrars, proxy solicitors, attorneys, accountants,
auditors, brokers and investors, and others as necessary in connection
with the Corporation's operations;
(x) advise the Corporation concerning developments in the
healthcare and real estate investment trust industries appropriate or
useful to the Corporation's existing and potential future business and
investments;
(xi) make recommendations to the Directors as to appropriate
distributions by the Corporation to its stockholders; and
(xii) maintain or cause to be maintained records of activities
reasonably requested by the Corporation.
The foregoing duties of Advisor will also be rendered, for no
additional fee, to entities directly or indirectly controlled by the
Corporation, including but not limited to Operating Partnership and its
subsidiaries.
2. Restriction on Investment Activities. The parties expressly
understand and agree that for that period of time equal to the lesser of i) the
term of this agreement, or ii) Advisor being actively engaged as the Investment
Advisor for NHI, Corporation and Operating Partnership (and entities controlled
by either or both of them) will not (without the prior written approval of NHI)
transact business with any party, person, company, or firm other than Advisor.
It is the intent of this restriction that Corporation will not be actively or
passively engaged in the pursuit of additional investment opportunities, but
rather will focus upon its capacities as Landlord and Noteholder of those
certain assets conveyed to it in the Conveyance by Advisor.
3. Delegation. With the consent of the Directors from time to time, the
Advisor may delegate to or use the services of any third party, including any
Affiliate of the Advisor, in performing its duties hereunder provided that such
third party is subject to the supervision of the Advisor. The services to be
provided to the Corporation by the Advisor shall, at the direction of the
Directors, be provided to any subsidiaries of the Corporation.
4. No Partnership or Joint Venture. The Corporation and the Advisor are
not partners or joint venturers with each other and nothing herein shall be
construed so as to make them such partners or joint venturers or impose any
liability as such on either of them.
5. Records. At all times, the Advisor shall keep proper books of
account and records relating to services performed hereunder, which books of
account and records shall be accessible for inspection by the Corporation at any
time during ordinary business hours. Annually, and more frequently as reasonably
requested by the Directors, the Advisor shall report to the Directors its
estimated costs in providing the services for the Corporation hereunder (by
category of services to the extent practicable) and provide the Directors with
such information as is reasonably obtainable by the Advisor concerning the cost
to other real estate investment trusts specializing in healthcare facility
investments of administrative and advisory services comparable to those that are
the subject matter of this Agreement in order that the Directors may evaluate
the performance of the Advisor and the efficiency of the arrangements provided
for in this Agreement.
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<PAGE> 4
6. Qualification as a Real Estate Investment Trust. Anything else in
this Agreement to the contrary notwithstanding, the Advisor shall refrain from
any action which, in its sole judgment made in good faith or in the judgment of
the Directors of which the Advisor has written notice, would adversely affect
the status of the Corporation as a real estate investment trust as defined and
limited in Sections 856-860 of the Internal Revenue Code of 1986, as amended,
which would violate any law, rule, regulation or statement of policy or any
governmental body or agency having jurisdiction over the Corporation or over its
securities, or which would otherwise not be permitted by the Corporation's
Articles of Incorporation and Bylaws.
7. Bank Accounts. The Advisor, at the expense of the Corporation, may
establish and maintain one or more bank accounts in its own name, and may
collect and deposit into any such account or accounts, and disburse from any
such account or accounts, any money on behalf of the Corporation, under such
terms and conditions as the Directors may approve, provided that no funds in any
such account shall be commingled with funds of the Advisor; and the Advisor
shall from time to time render appropriate accounting of such collections and
payments to the Directors and to the auditors of the Corporation.
8. Bond. The Advisor, if and to the extent that the Directors require,
shall maintain a fidelity bond with a responsible surety company in such amount
as may be required by the Directors from time to time, covering all directors,
officers, employees and agents of the Advisor handling funds of the Corporation
and any investment documents or records pertaining to investments of the
Corporation. Such bond shall inure to the benefit of the Corporation in respect
of losses of any such property from acts of such Directors, officers, employees
and agents through theft, embezzlement, fraud, negligence, error or omission or
otherwise. The premium for said bond shall be an expense of the Corporation.
9. Information Furnished Advisor. The Directors shall at all times keep
the Advisor fully informed with regard to the investment policy of the
Corporation, the capitalization policy of the Corporation and generally their
then current intentions as to the future of the properties and other investments
of the Corporation. In particular, the Directors shall notify the Advisor
promptly of their intention to sell or otherwise dispose of any of the
Corporation's investments or to make any new investment. The Corporation shall
furnish the Advisor with a certified copy of all financial statements, a signed
copy of each report prepared by independent certified public accountants and
such other information with regard to the Corporation's affairs as the Advisor
may from time to time reasonably request.
10. Consultation and Advice. In addition to the services described
above, the Advisor shall consult with the Directors, and shall, at the request
of the Directors or the officers of the Corporation, furnish advice and
recommendations with respect to other aspects of the business and affairs of the
Corporation. In general, the Advisor shall inform the Directors of any factors
which come to its attention which would influence the policies of the
Corporation, except to the extent that giving such information would involve a
breach of fiduciary duty.
11. Compensation to Advisor. The Corporation shall pay the Advisor for
its services hereunder the greater of i) two percent (2%) of Corporation's
consolidated gross revenues calculated according to generally accepted
accounting principles, or ii) the actual expenses incurred by Advisor as
outlined in Paragraph 12 herein. Advisor's compensation shall be payable in
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<PAGE> 5
monthly installments on the last day of each month, adjusted annually upon
completion of audit.
12. Expenses of the Advisor. Except as provided in Section 13 and
without regard to the amount of compensation received hereunder by the Advisor,
the Advisor shall pay all expenses in performing its obligations hereunder,
including and in addition to the following expenses:
(a) the cost of any accounting, statistical or bookkeeping
equipment necessary for the maintenance of the books and records of
the Corporation;
(b) employment expenses of the officers and directors and
personnel of the Advisor and all expenses, including travel expenses,
of the Advisor, incidental to the investigation and acquisition of
properties for the Corporation prior to the time the Directors
definitively decide to acquire the property or to have the Advisor
continue with the acquisition process, whether the property is
acquired or not, and after the Directors definitively decide to
dispose of a property;
(c) advertising and promotional expenses incurred in seeking and
disposing of investments for the Corporation;
(d) rent, telephone, utilities, office furniture and furnishings
and other office expenses incurred by or allocable to the Advisor for
its own benefit and account regardless of whether incurred or used in
connection with rendering the services to the Corporation provided for
in this Agreement;
(e) all costs and expenses which the Advisor is obligated to pay
to the Corporation or others under any lease of property by the
Advisor from the Corporation; and
(f) all miscellaneous administrative and other expenses of the
Advisor, whether or not relating to the performance by the Advisor of
its functions hereunder.
(g) fees and expenses paid to independent contractors,
appraisers, consultants, attorneys, managers and other agents retained
by or on behalf of the Corporation and expenses directly connected
with the acquisition, financing, refinancing, disposition and
ownership of real estate interests or of other property (including
insurance premiums, legal services, brokerage and sales commissions,
maintenance, repair and improvement of property);
(h) insurance as required by the Directors (including Directors'
liability insurance);
(i) expenses connected with payments of dividends or
distributions in cash or any other form made or caused to be made by
the Directors to shareholders of the Corporation and expenses
connected with payments of interest to holders of the Corporation's
Debentures;
(j) all expenses connected with communications to holders of
securities of the Corporation and the other bookkeeping and clerical
work necessary in maintaining relations with holders of securities,
including the cost of printing and mailing certificates for securities
and proxy solicitation materials and reports to holders of the
Corporation's
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<PAGE> 6
securities;
(k) transfer agent's, registrar's, dividend disbursing agent's,
dividend reinvestment plan agent's and indenture trustee's fees and
charges;
(l) legal and auditing fees and expenses of the Corporation; and
(m) legal, auditing, accounting, underwriting, brokerage,
listing, registration and other fees and printing, engraving and other
expenses and taxes incurred in connection with the organization of the
Corporation but any such expenses incurred after January 1, 1998 for
the issuance, distribution, transfer, registration and listing of the
Corporation's securities shall remain the Corporation's obligation.
13. Expenses of the Corporation. The Corporation shall pay the
following expenses of the Corporation (except to the extent that the Advisor is
responsible for any such expenses as tenant of any property leased from the
Corporation):
(a) dividends
(b) the cost of money borrowed by the Corporation, including
interest on debentures;
(c) taxes on income and taxes and assessments on real property
and all other taxes applicable to the Corporation, including without
limitation, franchise and excise fees;
(d) except as provided in Section 12 hereof, all ordinary and
necessary expenses incurred with respect to and allocable to the
prudent operation and business of the Corporation, including without
limitation, any fees, salaries and other employment costs, taxes and
expenses paid to Directors, officers and employees of the Corporation
who are not also employees of the Advisor;
14. Other Activities of the Advisor. Nothing herein contained shall
prevent the Advisor or any of its officers, directors or employees or any of its
affiliates from engaging in other business activities related to real estate
investments, from undertaking investments permitted of them by the Corporation's
Bylaws or from acting as advisor to any other person or entity even though
having investment policies similar to the Corporation, and the Advisor and its
officers, directors or employees and any of its Affiliates shall be free from
any obligation to present to the Corporation any particular investment
opportunity which comes to the Advisor or such persons, regardless of whether
such opportunity is within the Corporation's investment policies; provided,
however, that when the Advisor has the ability to present a particular
investment opportunity which is suitable for purchase by the Corporation and any
other entities as to which the Advisor has advisory responsibility, the Advisor
will review the investment portfolio of each entity and will decide which entity
will acquire a particular property on the basis of such factors as it deems
appropriate including, among others, cash-flow, the effect of the acquisition on
diversification of the portfolio of each, the estimated income tax effects of
the purchase, the amount of funds available and the length of time such funds
have been available for investment. In the event a particular property is
equally appropriate for investment by more than one entity, the Advisor will
offer the investment to the entity whose funds have been available for the
longest period of time.
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<PAGE> 7
15. Term; Termination of Agreement. This Agreement shall continue in
force from the date hereof through December 31, 2003 and thereafter from year to
year unless earlier terminated as herein provided; provided, however, that
either party may terminate this Agreement at any time on or after January 1,
2000, specified in a written notice of termination given to the other party at
least ninety days prior to the effective date of such termination; and provided,
further, that the Corporation may terminate this Agreement at any time during
the continuation of any event described in Section 18 hereof or otherwise for
cause. Upon the termination of this Agreement for any reason the Advisor shall
cooperate with the Corporation to provide an orderly management transition.
16. Amendments. This Agreement shall not be changed, modified,
terminated or discharged in whole or in part except by an instrument in writing
signed by both parties hereto, or their respective successors or assigns, or
otherwise as provided herein.
17. Assignment. This Agreement shall not be assigned or otherwise
transferred by the Advisor without the prior written consent of a majority of
the Directors including a majority of the Directors not affiliated with the
Advisor. This Agreement shall not be assigned by the Corporation without the
consent of the Advisor, except in the case of assignment by the Corporation to a
corporation, association, trust or other organization which is a successor to
the Corporation. Such successor shall be bound hereunder and by the terms of
said assignment in the same manner as the Corporation is bound hereunder.
18. Default, Bankruptcy, Etc. At the option solely of the Corporation
upon vote of a majority of its Directors, this Agreement shall be and become
terminated immediately upon written notice of termination from the Corporation
to the Advisor if any of the following events shall occur:
(a) If the Advisor shall violate any provision of this Agreement,
and after notice of such violation shall not cure such default within
thirty days; or
(b) If the Advisor shall be adjudged bankrupt or insolvent by a
court of competent jurisdiction, or an order shall be made by a court
of competent jurisdiction for the appointment of a receiver,
liquidator or trustee of the Advisor or of all or substantially all of
its property by reason of the foregoing, or approving any petition
filed against the Advisor for its reorganization, and such
adjudication or order shall remain in force or unstayed for a period
of thirty days; or
(c) If the Advisor shall institute proceedings for voluntary
bankruptcy or file a petition seeking reorganization under the Federal
bankruptcy laws, or for relief under any law for the relief of
debtors, or shall consent to the appointment of a receiver of itself
or of all or substantially all its property, or shall make a general
assignment for the benefit of creditors, or shall admit in writing its
inability to pay its debts generally, as they become due.
The Advisor agrees that if any event specified in subsections (b) and
(c) of this Section 18 shall occur, it will give written notice thereof to the
Directors within seven days after the occurrence of such event.
19. Action Upon Termination. From and after the effective date of
termination of this
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<PAGE> 8
Agreement, pursuant to Sections 15, 17 or 18 hereof, the Advisor, except as
provided in Section 11, shall not be entitled to compensation for further
services hereunder but shall be paid all compensation accruing to the date of
termination, including compensation the payment of which may have been deferred
as a result of the condition to payment set forth in Section 11(b) hereof. The
Advisor shall forthwith upon such termination:
(a) pay over to the Corporation all moneys collected and held
for the account of the Corporation pursuant to this Agreement, after
deducting any accrued compensation and reimbursement for its expenses
to which it is then entitled;
(b) deliver to the Directors a full accounting, including a
statement showing all payments collected by it and a statement of all
moneys held by it, covering the period following the date of the last
accounting furnished to the Directors;
(c) deliver to the Directors all property and documents of the
Corporation then in the custody of the Advisor in its capacity as
such; and
(d) cooperate with the Directors to provide an orderly management
transition.
20. Miscellaneous. The Advisor assumes no responsibility under this
Agreement other than to render the services called for hereunder in good faith,
and shall not be responsible for any action of the Directors in following or
declining to follow any advice or recommendations of the Advisor. Neither the
Advisor nor its partners nor any shareholders, directors, officers or employees
of any of its partners shall be liable to the Corporation, the Directors, the
holders of securities of the Corporation or to any successor or assign of the
Corporation for any act taken in good faith and in a manner reasonably believed
by the Advisor or the person acting on behalf of the Advisor to be in the best
interests of the Corporation, or for any other act except an act constituting
bad faith, willful misfeasance, gross negligence or reckless disregard of its
duties.
21. Notices. Any notice, report or other communication required or
permitted to be given hereunder shall be in writing unless some other method of
giving such notice, report or other communication is accepted by the party to
whom it is given, and shall be given by being delivered at the following
addresses of the parties hereto:
The Corporation:
W. Andrew Adams
National Health Realty, Inc.
100 Vine Street, Suite 1400
Murfreesboro, TN 37130
with a copy to:
William B. King
Goodwin, Procter & Hoar
Exchange Place, 24th Floor
Boston, MA 02109-2881
The Advisor:
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<PAGE> 9
Richard F. LaRoche, Jr.
National HealthCare Corporation
100 Vine Street
City Center, Suite 1400
Murfreesboro, Tennessee 37130
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<PAGE> 10
with a copy to:
Mr. Ernie Hyne
Harwell, Howard, Hyne, Manner & Gabbert
1800 First American Center
315 Deaderick Street
Nashville, TN 37238
Either party may at any time give notice in writing to the other party
of a change of its address for the purpose of this Section 21.
22. Headings. The section headings hereof have been inserted for
convenience of reference only and shall not be construed to affect the meaning,
construction or effect of this Agreement.
23. Governing Law. The provisions of this Agreement shall be construed
and interpreted in accordance with the laws of the State of Maryland as at the
time in effect.
IN WITNESS WHEREOF, the Corporation and the Advisor, each by a duly
authorized officer have signed and delivered this Agreement under their
respective corporate seals all as of the day and year first above written.
NATIONAL HEALTH REALTY, INC.
By
------------------------------
Its
-----------------------------
NATIONAL HEALTHCARE CORPORATION
By
------------------------------
Its
-----------------------------
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<PAGE> 1
Exhibit 10.5.1
SERVICE AGREEMENT
- --------------------------------------------------------------------------------
THIS SERVICE AGREEMENT is made and entered into on the ____ day of
____________, 1997, by and between National Health Corporation, a Tennessee
corporation (hereinafter referred to as "National"), and National HealthCare
Corporation, a Delaware corporation (hereinafter referred to as "NHC").
WITNESSETH:
WHEREAS, NHC desires to obtain access to the services of employees of
National and National desires to provide the services of such employees to NHC
for the purpose of assisting NHC to carry out its business purposes; and
WHEREAS, the parties hereto desire to set forth their agreement
relating to said employee services in writing.
NOW, THEREFORE, for good and valuable consideration, which the parties
hereby acknowledge, and in consideration of the premises contained herein, the
parties hereto intending to be legally bound, hereby agree as follows:
1. NATIONAL'S RESPONSIBILITIES AS REGARDS EMPLOYEES.
National, as employer of certain employees to provide services to NHC,
shall have the following authority and responsibility:
A. To employ those persons necessary to provide services to the
business of NHC after consultation with NHC, and as their
employer to set all wages and salaries, provide all fringe
benefits, and otherwise perform all duties customary, necessary
and appropriate as their employer.
<PAGE> 2
B. To utilize any qualified leveraged employee stock ownership plan
which it may establish, or has established, in order to
facilitate the acquisition of additional assets or businesses for
National to provide benefits to such employees, and to obtain
long-term and/or short-term financing, or any other valid
business purpose consistent with the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
C. To establish, or continue, and carry out profit-sharing, bonus,
purchase, option, savings, thrift and other incentive and
employee benefit plans, trusts, leveraged employee stock
ownership plans, as National in its sole discretion deems
advisable, for such employees of National and its officers and
directors, including plans, trusts and provisions which may
provide for the ownership, acquisition, holding, or disposition
of shares of National.
D. To purchase and pay for, in whole or part, insurance coverage of
the broadest and most commercially reasonable categories
(including health, accident, life, disability, workers
compensation, etc.) as may be determined by National, for any and
all National employees providing services to NHC.
E. To indemnify and purchase and maintain insurance on behalf of any
fiduciary of such plans, trusts or provisions, including, without
limitation, fiduciary insurance, bond(s) required by ERISA, and
health insurance on behalf of any fiduciary of such plans, trusts
or provisions, including without limitation, health insurance,
medical and dental reimbursement, life insurance, accident
insurance, disability insurance and other plans, trusts or
provisions.
F. To provide self insurance, at the discretion of National, for any
and all of the preceding employee benefit arrangements or
programs that could be funded through
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<PAGE> 3
insurance, and whether such arrangements are self-insured
or insured, to charge NHC for the costs or premiums thereon as
part of its consideration for this Agreement, provided that said
premiums shall be adjusted annually so that NHC pays only the
actual cost of the coverage, including commercially reasonable
reserves and direct administrative expenses.
2. DELEGATION OF AUTHORITY, POWER & DUTIES TO NATIONAL.
NHC delegates to National the authority, power and duty to
purchase and maintain, in its discretion, but at the expense of NHC,
liability and any other insurance, including errors and omissions
insurance, sufficient to protect NHC, its officers and directors and
any National employee providing services to NHC from those liabilities
and hazards which may be insured against in the conduct of NHC's
business and in the management of NHC's business.
3. ACCEPTANCE.
National accepts the delegation of the authority, powers, and
duties set forth in Section 2 of this Agreement and agrees to exercise
the powers and authority, and to discharge the duties, with a level of
skill and diligence that is customary in the business engaged in by
NHC.
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<PAGE> 4
4. CONSIDERATION FOR SERVICES OF NATIONAL EMPLOYEES.
Consideration for the services performed by National employees
to NHC, in addition to that described at Section 1.F, shall be as set
forth in Exhibit A hereto, which is made by reference a part of this
Agreement, as if fully set forth herein, as it may be amended from time
to time by execution by both parties hereto.
5. EMPLOYEE EXPENSES.
The parties to this Agreement recognize that NHC, as successor
by merger to National HealthCare, L.P., manages the business of nursing
homes previously purchased by National from National HealthCare, L.P.,
and that businesses currently owned by NHC may be sold to National in
the future. The parties hereto agree that with respect to any nursing
home or other property of NHC or its predecessor which is, or has been,
leased or sold to National, during the time of this Agreement NHC
acknowledges that, as negotiated between the parties hereto, it shall
have the continuing obligation to pay for all costs of employees
employed by National at such locations; provided, however, that at all
times as National may own, in its name, such nursing homes, then the
salary expenses incurred by National in the direct administration of
its Personnel Department and its Payroll Department attributable to
these properties shall be borne directly by National. In lieu of
reimbursing National's expenses therefor, NHC agrees to compensate
National by paying a monthly fee thereto equal to one percent (1%) of
the then current month's gross payroll of such employees as submitted
for reimbursement to NHC by National, but in no event shall this fee be
less than the actual cost of administering the Payroll and Personnel
Department.
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<PAGE> 5
6. UNEMPLOYMENT INSURANCE EXPENSE REIMBURSEMENT.
In the event of the sale, dissolution, liquidation,
reorganization or permanent closing of NHC's business which causes
National to terminate or lay-off any employee providing services to NHC
under this Agreement, NHC agrees promptly to reimburse National the
actual cost for all unemployment expenses and charges incurred by
National with respect to each such employee, in the event National is
unable to find employment for such employees and must terminate the
employee's employment for lack of work or any other reason.
7. WORK ENVIRONMENT AND RELATED MATTERS.
7.1. DIRECTION AND CONTROL - EMPLOYEES.
NHC and National agree that National as employer has the right
to exercise direction and control relating to the management of safety,
risk and labor matters at work site locations. However, National shall
consult with NHC, and NHC shall have the opportunity to consult with
National on the following issues, provided National shall retain the
final decision, after consultation with NHC, to
i. hire, fire, discipline and direct and regulate and supervise
all working conditions and labor policies;
ii. establish all wages, benefits, salaries, bonuses or
advancements;
iii. conduct safety inspections of NHC's equipment and work site;
and set and administer employment and safety policies; and
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<PAGE> 6
iv. facilitate collective bargaining relationships between
National and labor unions representing the employees
described hereunder and contract administration in
connection therewith.
National shall be entitled, at its own expense, to install in
conspicuous location(s) bulletin board(s) at NHC's work site(s), in
order to effectively communicate with the employees. NHC shall
cooperate with National in maintaining the integrity of such bulletin
board(s) and shall, upon request, insert or post information for the
employees described hereunder as requested or required by National from
time to time.
7.2. COOPERATION IN DEFENSE OF CLAIMS.
NHC represents that it will, and NHC agrees to, cooperate
fully when required to assist National in defending claims or
litigation from personnel decisions or job actions relating to the
employees described hereunder. NHC's cooperation shall include, but not
be limited to, the completion of reports and, if requested, attendance
at hearings as a witness, answering questions or interrogatories under
oath or otherwise and providing access to NHC's documents relating to
the employees described herein.
7.3. NHC RESPONSIBILITIES.
NHC shall comply with all health, labor and safety laws,
regulations, ordinances and rules of Federal, State and local
government authorities, and those policies set by National pursuant to
Section 7.1 iii. NHC shall comply at its own expenses with any
specific directives from National, National's workers' compensation
carrier or any government agency having jurisdiction over NHC's place
of business or the safety and health of the employees described
hereunder. NHC shall report all employee accidents and injuries to
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<PAGE> 7
National such reasonable period of time as National may require.
National and its carriers shall have the right to inspect NHC's place
of business at all reasonable times to insure compliance with this
Section and the terms of this Agreement.
NHC agrees to provide National with a periodic report
regarding the employees described hereunder, the hours worked and any
other information reasonably requested by National (the "Report") on a
form and at such schedule as requested by National. NHC represents and
warrants that the information provided to NHC in or in connection with
the Report shall be complete and accurate and that National may rely
upon such information.
8. REPRESENTATIONS AND WARRANTIES OF NHC.
The representation and warranties made by NHC in this
Agreement shall survive the term of this Agreement. Furthermore, the
representations and warranties in this Section are deemed to be
material and National is entering into this Agreement relying on such
representations and warranties. NHC represents and warrants to National
as follows:
8.1. EMPLOYEE RELATIONS.
A. Compliance.
NHC represents that it is in compliance with all
material Federal, State and local laws respecting employment
practices, terms and conditions of employment, wages and
hours, and is not engaged in any discriminatory employment or
unfair labor practice and there are no arrears in the payment
of wages, taxes or workers' compensation assessments or
penalties.
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<PAGE> 8
B. Labor Practices.
Except to the extent National has actual knowledge
or except as NHC has disclosed in writing prior to the
execution of this Agreement:
i. None of the employees providing services to NHC will be
represented by any labor union because of an agreement
between the union and NHC;
ii. There is no pending labor strike, material unfair labor
practice complaint or other material labor trouble
affecting NHC (including, but not limited to, any
organizational campaign) and there is no material labor
grievance pending against or affecting NHC which will
affect the employees described herein;
iii. There are no pending material arbitration proceedings
arising out of or under any collective bargaining
agreement to which NHC is a party which will affect the
employees described herein; and
iv. There is no pending material litigation, or other
material proceeding or basis for an unasserted claim
against NHC which is based on claims arising out of
employment relationships with NHC which will affect the
employees described herein, including, but not limited
to, claims for breach of contract, tort,
discrimination, employee benefits, wrongful termination
or any common law or statutory claims.
C. Payroll List.
NHC will provide to National a correct and complete
list of NHC's most recent payroll.
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<PAGE> 9
D. Taxes.
Where required by law, NHC will deduct, or withhold
as required, and remit to the relevant governmental authority
all income taxes, employment taxes, unemployment insurance
contributions or other amounts which it is required by statute
to deduct or remit to any governmental authority.
9. INDEMNIFICATION AND REIMBURSEMENT.
9.1. INDEMNIFICATION OF NATIONAL BY NHC.
A. Indemnification.
NHC hereby agrees to indemnify, defend and hold
harmless National and any parent, subsidiary or affiliate
thereof, and all directors, officers, attorneys, employees,
agents and consultants of each of the foregoing (collectively
"National") from and against all demands, claims, actions or
causes of action, assessments, losses, damages, judgments,
arbitration awards, liabilities (whether absolute or accrued,
contingent or otherwise), costs and expenses, including, but
not limited to, interest penalties and reasonable attorney
fees and expenses (collectively "Damages"), asserted against,
imposed upon or incurred by National, directly or indirectly,
by reason of or resulting from or relating to any of the
following:
(i) Misrepresentation or breach by NHC of
any warranty or term made or contained in this
Agreement or in any certificate or other instrument
or document furnished or to be furnished to National
under this Agreement, including, but not limited,
failure of NHC to cooperate in the
9
<PAGE> 10
defense of employment claims, litigation, grievances
and arbitration hereunder;
(ii) Litigation or other claims arising from
the acts or failures to act of NHC and/or its
employees, agents, former employees or former agents,
in accordance
(a) with applicable Federal, State
or local law or
(b) with the terms and conditions of
this Agreement or another agreement;
(iii) Employment matters relating to the
employees described herein as a result of gross
negligence or intentional misconduct by NHC or the
failure of NHC to obtain and/or follow specific
advice and direction from National in matters of
employee separation and/or discipline.
B. Notice and Defense of Claims.
If National so desires, it may tender the defense to
NHC of any matter for which it believes it is entitled to
indemnification pursuant to this Agreement in which event NHC
shall conduct such defense at its sole cost and, thereafter,
be liable for all damages with respect to such claim or
proceeding. NHC shall conduct such defense or settlement in a
manner to protect fully National; NHC and its counsel will
keep National fully advised as to the conduct of such defense
or settlement, and no compromise or settlement shall be agreed
or made without National's written consent. In any case
National shall have the right to employ its own counsel and
such counsel may participate in such action, but the
reasonable
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<PAGE> 11
fees and expenses of such counsel shall be at the
expense of National when and as incurred unless
(i) the employment counsel by National has
been authorized in writing by NHC;
(ii) National shall have reasonably
concluded, based upon the opinion of counsel, that
there may be a conflict of interest between NHC and
National in the conduct of the defense of such
action; or
(iii) NHC shall not, in fact, have employed
independent counsel reasonably satisfactory to
National to assume the defense of such action and
shall have been so notified by National. If clause
(ii) or (ii) of the preceding sentence shall be
applicable, then counsel for National shall have the
right to direct the defense of such claim, action,
suit or proceeding on behalf of National and the
reasonable fees and disbursements of such counsel
shall constitute damages hereunder.
9.2. INDEMNIFICATION BY NATIONAL.
National hereby agrees to indemnify, defend and hold harmless
NHC, its directors, officers, attorneys, employees, and agents and
consultants from and against all demands, claims, action, or causes of
action, assessments, losses, damages, judgments, arbitration awards,
liabilities (whether absolute or accrued, contingent or otherwise),
costs and expenses asserted against, imposed upon or incurred by NHC,
directly or indirectly, by reason of, resulting from or relating to
employee separation and/or discipline of employees by National.
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<PAGE> 12
9.3. COOPERATION.
The parties agree that, except where conflicts prevent same,
they shall render to each other such assistance as may reasonably be
expected and to cooperate in good faith with each other in order to
insure the proper and adequate defense of any claim, action, suit or
proceeding brought by any third party. Where counsel has been selected
pursuant to this Agreement, National shall be entitled to rely on the
advice of such counsel in the conduct of the defense.
9.4. CONFIDENTIALITY.
The parties agree to cooperate in such a manner as to preserve
and uphold the confidentiality of all business records and the
attorney-client and work-product privileges.
10. MISCELLANEOUS.
10.1. INDEPENDENT CONTRACTOR.
National is an independent contractor to NHC and neither party
is the agent of the other.
10.2. ABSENCE OF GUARANTEE.
Neither National nor its representatives have made any
representation, warranty or guarantee to NHC of growth forecasts or
production increases in NHC's business due to the entry of NHC into
this Agreement or the utilization of National's services.
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<PAGE> 13
10.3. ENTIRE AGREEMENT.
This constitutes the entire Agreement (including Exhibit A)
between the parties with regard to the subject matter herein. No prior
oral or written agreement, practice or course of dealing between the
parties relating to the subject matter herein shall supersede this
Agreement.
10.4. ASSIGNMENT/AMENDMENT.
Neither party can assign this Agreement nor any interest
herein without prior written consent from the other party. None of the
terms and provisions of this Agreement may be modified or amended
except by an instrument in writing executed by each party.
10.5. WAIVER.
Failure by either party to require performance by the other
party or to claim a material breach of any provision of this Agreement
will not be construed as a waiver of any subsequent breach nor
prejudice either party with regard to any subsequent action.
10.6. SEVERABILITY.
If any one or more of the provisions of this Agreement should
be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained
herewith shall not in any way be affected impaired or prejudiced
thereby and such provision deemed invalid, illegal or unenforceable
shall be construed beyond the reasonable control of National or NHC.
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<PAGE> 14
10.7. SECTION HEADINGS AND INTERPRETATION.
The Section Headings of this Agreement are for convenience of
the parties only and in no way alter, modify, amend, limit or restrict
contractual obligations of the parties. This Agreement shall not be
construed for or against either party based upon the drafting of this
Agreement.
11. TERM.
The Agreement may be terminated by any party, with or without notice,
at any time.
12. APPLICABLE LAW.
This Agreement shall be construed and governed under the laws of the
State of Tennessee, except where ERISA is invoked.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
set forth their hands and seals through their duly authorized officers and
agents on the date as first written above.
Attest: NATIONAL HEALTH CORPORATION ("National")
________________________ By:_________________________________________
Secretary ____________________, President
Attest: NATIONAL HEALTHCARE CORPORATION ("NHC")
________________________ By:_________________________________________
Secretary ____________________, President
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<PAGE> 15
EXHIBIT A
COMPENSATION FOR SERVICES OF NATIONAL EMPLOYEES
The compensation to be paid by NHC to National for services of National
employees shall be as follows:
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<PAGE> 1
Exhibit 10.5.3
NATIONAL HEALTHCARE CORPORATION
1997 STOCK OPTION & STOCK APPRECIATION RIGHTS PLAN
<PAGE> 2
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
Section 1. Purpose......................................................... 1
Section 2. Definitions.................................................... 1
2.1 "Board of Directors" or "Board"................................. 1
2.2 "Code".......................................................... 1
2.3 "Committee"..................................................... 1
2.4 "Common Stock".................................................. 1
2.5 "Employee"...................................................... 1
2.6 "Investment Advisor"............................................ 1
2.7 "ISO"........................................................... 2
2.8 "Non-Qualified Option".......................................... 2
2.9 "Option"........................................................ 2
2.10 "SAR"........................................................... 2
2.11 "Subsidiary of the Company"..................................... 2
Section 3. Eligibility..................................................... 2
Section 4. Common Stock Subject to the Plan................................ 2
4.1 Number.......................................................... 2
4.2 Terminated/Reacquired Options................................... 2
Section 5. Administration of the Plan...................................... 3
5.1 Committee..................................................... ..3
5.2 Options......................................................... 3
5.3 Plan Interpretation............................................. 3
5.4 Committee Interpretations Conclusive............................ 3
5.5 Committee Voting................................................ 4
5.6 Committee Exculpation........................................... 4
5.7 Granting of Options to Directors and Officers................... 4
Section 6. Terms and Conditions of Options................................. 4
6.1 ISOs............................................................ 4
6.2 Non-Qualified Options........................................... 6
6.3 SARs............................................................ 7
6.4 Terms and Conditions Common to All Options...................... 8
6.5 Payment of Exercise Price with Previously Issued Stock..........10
6.6 Modification, Extension and Renewal of Options..................10
6.7 Fixed Option Grant of Non-Qualified Stock Options to
Certain Directors...............................................10
6.8 Transfer of Non-Qualified Options and SARs......................10
6.9 Rights as a Stockholder.........................................11
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
6.10 Other Provisions.........................................................11
Section 7. Adjustments.....................................................11
7.1 Reorganization, Merger, Recapitalization, Etc...................11
7.2 Sale of Not Less Than 50% of Common Stock.......................11
7.3 Acceleration of Vesting.........................................12
7.4 Limited Rights Upon Company's Restructure.......................12
7.5 Effect of Options on Company's Capital and Business Structure...12
Section 8. Effect of the Plan on Employment Relationship...................12
Section 9. Amendment of the Plan...........................................12
Section 10. Compliance with Rule 16b-3 and Code Section 422.................13
Section 11. Investment Purpose..............................................13
Section 12. Indemnification of Committee....................................13
Section 13. Termination of the Plan.........................................13
Section 14. Application of Funds............................................14
Section 15. No Obligation to Exercise Option................................14
Section 16. Effective Date of the Plan......................................14
</TABLE>
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<PAGE> 4
NATIONAL HEALTHCARE CORPORATION
1997 STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN
Section 1. Purpose. The purpose of the NATIONAL HEALTHCARE CORPORATION
1997 Stock Option and Stock Appreciation Rights Plan (the "Plan") is to promote
the interests of NATIONAL HEALTHCARE CORPORATION, a Delaware corporation (the
"Company"), and its stockholders by providing an opportunity to selected
employees, officers, directors, consultants and advisors of the Company or any
Subsidiary thereof to purchase Common Stock of the Company or acquire stock
appreciation rights in the Company. By encouraging such stock ownership and/or
stock appreciation rights, the Company seeks to attract, retain and motivate
such employees and persons and to encourage such employees and persons to devote
their best efforts to the business and financial success of the Company. It is
intended that this purpose will be effected by the granting of "non-qualified
stock options" and/or "incentive stock options" to acquire the Common Stock of
the Company and "stock appreciation rights" in the Company. Under the Plan, the
Committee shall have the authority (in its sole discretion) to grant "incentive
stock options" within the meaning of section 422(b) of the Code and
"non-qualified stock options" and "stock appreciation rights" to which Code
section 421 does not apply. The Plan is not subject to the provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA").
Section 2. Definitions. For purposes of the Plan, the following terms
used herein shall have the following meanings, unless a different meaning is
clearly required by the context.
2.1 "Board of Directors" or "Board" shall mean the Board of
Directors of the Company.
2.2 "Code" shall mean the Internal Revenue Code of 1986, as
amended.
2.3 "Committee" shall mean the Executive Committee of the
Board of Directors or such other committee established by the Board of Directors
to which it delegates administration of the Plan under section 5.1 hereof, or if
no committee is then administering the Plan, the Board of Directors.
2.4 "Common Stock" shall mean the common stock, $0.01 par
value, of the Company.
2.5 "Employee" shall mean (i) with respect to an ISO, any
person, including an officer or director of the Company, who, at the time an ISO
is granted to such person hereunder, is employed, as such term is used in Code
section 422 and the Treasury Regulations promulgated thereunder, on a full-time
basis by the Company or any Subsidiary of the Company, and (ii) with respect to
a Non-Qualified Option or SAR, any person employed by or performing services,
whether as an employee or otherwise, for the Company, or any Subsidiary of the
Company, including, without limitation, directors and officers.
<PAGE> 5
2.6 "ISO" shall mean an Option to purchase Common Stock
granted under the Plan that constitutes and shall be treated as an "incentive
stock option," as such phrase is defined in section 422(b) of the Code.
2.7 "Non-Qualified Option" shall mean an Option to purchase
Common Stock granted to a Participant pursuant to the Plan that is not an
"incentive stock option," with respect to which Code section 421 does not apply,
and that shall not constitute nor be treated as an ISO.
2.8 "Option" shall mean any ISO, Non-Qualified Option or SAR
granted to a Participant pursuant to this Plan.
2.9 "SAR" shall mean a stock appreciation right as described
in section 6.3 hereof.
2.10 "Subsidiary of the Company" shall have the meaning set
forth in section 424(f) of the Code.
Section 3. Eligibility. Options may be granted to any Employee. The
Committee shall have the sole authority to select the persons to whom Options
are to be granted hereunder and to determine whether a person is to be granted
an ISO, a NonQualified Option, an SAR, or any combination thereof. No person
shall have any right to participate in the Plan. Any person selected by the
Committee for participation during any one period shall not by virtue of such
participation have the right to be selected as a Participant for any other
period. Any Participant may hold at any time more than one (1) Option, but only
upon such terms as provided hereunder and any agreement evidencing such Options.
Section 4. Common Stock Subject to the Plan.
4.1 Number. The total number of shares of Common Stock for
which Options may be granted under this Plan shall not exceed in the aggregate
1,000,000 shares of Common Stock.
4.2 Terminated/Reacquired Options. The shares of Common Stock
that may be subject to Options granted under this Plan may be either authorized
and unissued shares or shares reacquired at any time and now or hereafter held
as treasury stock as the Committee may determine. In the event any outstanding
Option expires or is terminated for any reason, the shares allocable to the
unexercised portion of such Option shall again become available for issuance
pursuant to the Plan. If any shares of Common Stock acquired pursuant to the
exercise of an Option shall have been repurchased or reacquired by the Company,
then such shares shall again become available for issuance pursuant to the Plan.
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<PAGE> 6
Section 5. Administration of the Plan.
5.1 Committee. The Plan shall be administered by the Executive
Committee of the Board of Directors or, at the Board of Directors' discretion,
any committee of the Board of Directors established thereby to which it
delegates the administration of the Plan, with the advice and recommendations of
the Company's compensation committee, if any. At any time that there is no
Executive Committee in existence or the Board of Directors has not delegated the
administration of the Plan to any other committee established by the Board, the
Company's Board of Directors shall administer the Plan and for these purposes
all references herein to the Committee shall be deemed to be references to the
Board of Directors.
5.2 Options. The Committee shall have the sole authority and
discretion under the Plan (i) to select the Participants who are to be granted
Options hereunder; (ii) to designate whether any Option to be granted hereunder
is to be an ISO, a Non-Qualified Option or an SAR; (iii) to establish the number
of shares of Common Stock that may be issued under each Option; (iv) to
determine the time and the conditions subject to which Options may be exercised
in whole or in part; (v) to determine the form of the consideration that may be
used to purchase shares of Common Stock upon exercise of any Option (including
the circumstances under which the Company's issued and outstanding shares of
Common Stock may be used by a Participant to exercise an Option); (vi) to impose
restrictions and/or conditions with respect to shares of Common Stock acquired
upon exercise of an Option; (vii) to determine the circumstances under which
shares of Common stock acquired upon exercise of any Option may be subject to
repurchase by the Company; (viii) to determine the circumstances and conditions
subject to which shares acquired upon exercise of an Option may be sold or
otherwise transferred, including, without limitation, the circumstances and
conditions subject to which a proposed sale of shares of Common Stock acquired
upon exercise of an Option may be subject to the Company's right of first
refusal (as well as the terms and conditions of any such right of first
refusal); (ix) to establish vesting provisions for any Option relating to the
time (or the circumstance) when the Option may be exercised by a Participant,
including vesting provisions that may be contingent upon the Company meeting
specified financial goals; (x) to accelerate the time when outstanding Options
may be exercised, provided, however, that any ISO shall be "accelerated" only as
permitted by section 424(h) of the Code; and (xi) to establish any other terms,
restrictions and/or conditions applicable to any Option not inconsistent with
the provisions of the Plan, and, with respect to ISOs, not inconsistent with the
provisions of Code section 422.
5.3 Plan Interpretation. The Committee shall be authorized to
interpret the Plan and any Option granted hereunder and may, from time to time,
adopt such rules and regulations, not inconsistent with the provisions of the
Plan, as it may deem advisable to carry out the purpose of the Plan.
5.4 Committee Interpretations Conclusive. The interpretation
and construction by the Committee of any provision of the Plan, any Option
granted hereunder or any agreement evidencing any such Option shall be final and
conclusive upon all parties, except as may otherwise be determined by the Board
of Directors.
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<PAGE> 7
5.5 Committee Voting. Subject to section 5.7 hereof, directors
of the Company (or members of the Committee) who are either eligible for Options
hereunder, or to whom Options have been granted hereunder, may vote on any
matter affecting the administration of the Plan or the granting of Options under
the Plan; provided, however, that no director (or member of the Committee) shall
vote upon the granting of an Option to himself, but any such director (or
Committee member) may be counted in determining the existence of a quorum at any
meeting of the Board of Directors (or the Committee) at which the Plan is
administered or action is taken with respect to the granting of any Option.
5.6 Committee Exculpation. All expenses and liabilities
incurred by the Committee in the administration of the Plan shall be borne by
the Company. The Committee may employ attorneys, consultants, accountants or
other persons in connection with the administration of the Plan. The Company,
and its officers and directors, shall be entitled to rely upon the advice,
opinions or valuations of any such persons. No member of the Committee or Board
of Directors shall be liable for any action, determination or interpretation
taken or made in good faith with respect to the Plan or any Option granted
hereunder.
5.7 Granting of Options to Directors and Officers.
Administrative discretion regarding the selection of any director or officer of
the Company to whom Options may be granted pursuant to this Plan, or the
determination of the number of shares of Common Stock that may be allocated
under such Options and the terms thereof, shall be exercised by: (a) approval in
advance by the full Board of Directors; (b) approval in advance by a committee
that is composed solely of two or more Non-Employee Directors, as such firm is
defined under Rule 16b-3 ("Rule 16b-3") promulgated under the Securities
Exchange Act of 1934; (c) approval in advance by a majority of the shareholders
in accordance with Rule 16b-3; (d) ratification by a majority of the
shareholders no later than the next annual meeting of the shareholders; or (e)
the officer or director retains the issuer equity securities for a period of six
(6) months following their acquisition in accordance with Rule 16b-3.
Section 6. Terms and Conditions of Options.
6.1 ISOs. The terms and conditions of each ISO granted under
the Plan shall be specified by the Committee, shall be set forth in a written
ISO agreement between the Company and the Participant in such form as the
Committee shall approve, and shall be clearly identified therein as an ISO. The
terms and conditions of each ISO shall be such that each ISO issued hereunder
shall constitute and shall be treated as an "incentive stock option" as defined
in section 422 of the Code. The terms and conditions of any ISO granted
hereunder need not be identical to those of any other ISO granted hereunder.
Notwithstanding the above, the terms and conditions of each ISO shall include
the following:
6.1.1 The option price shall not be less than one hundred
percent (100%) (or one hundred ten percent (110%)) in the case of an
Employee referred to in section 4.3 hereof) of the fair market value,
as determined in accordance with Code section 422(c)(7) and as
determined in good faith by the Board of Directors, of the
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<PAGE> 8
shares of Common Stock subject to the ISO on the date the ISO is
granted, but in no event shall the option price be less than the par
value of such shares, which price shall be payable in U.S. dollars upon
the exercise of such ISO and paid, except as otherwise provided in
section 6.5, in cash or by check immediately upon exercise.
6.1.2 The Committee shall fix the term of all ISOs granted
pursuant to the Plan, including the date on which such ISO shall expire
and terminate, provided, however, that such term shall in no event
exceed ten (10) years from the date on which such ISO is granted (or,
in the case of an ISO granted to an Employee referred to in section
6.1.3 hereof, such term shall in no event exceed five (5) years from
the date on which such ISO is granted). Each ISO shall be exercisable
in such amount or amounts, under such conditions and at such times or
intervals or in such installments as shall be determined by the
Committee in its sole discretion.
6.1.3 An ISO shall not be granted to an Employee who, at the
time the ISO is granted, owns (actually or constructively under the
provisions of section 424(d) of the Code) stock possessing more than
ten percent (10%) of the total combined voting power of all classes of
stock of the Company or Subsidiary of the Company (taking into account
the attribution rules of Code section 424), unless the option price is
at least one hundred ten percent (110%) of the fair market value
(determined as of the time the ISO is granted) of the shares of Common
Stock subject to the ISO and the ISO by its terms is not exercisable
more than five (5) years from the date it is granted. Notwithstanding
any other provision of the Plan, the provisions of this section 6.1.3
shall not apply, or be construed to apply, to any Non-Qualified Option
or SAR granted under the Plan.
6.1.4 In the event the Company or any Subsidiary of the
Company is required to withhold any Federal, state or local taxes in
respect of any compensation income realized by the Participant as a
result of any "disqualifying disposition" of any shares of Common Stock
acquired upon exercise of an ISO granted hereunder, the Company shall
deduct from any payments of any kind otherwise due to such Participant
the aggregate amount of such Federal, state or local taxes required to
be so withheld or, if such payments are insufficient to satisfy such
Federal, state or local taxes, or if no such payments are due or to
become due to such Participant, then such Participant shall be required
to pay to the Company, or make other arrangements satisfactory to the
Company regarding payment to the Company of, the aggregate amount of
any such taxes. All matters with respect to the total amount of taxes
to be withheld in respect of any such compensation income shall be
determined by the Committee in its sole discretion.
6.1.5 If upon the exercise of one or more Options granted
pursuant to this or any other plan of the Company or any Subsidiary of
the Company that are designated as ISOs upon the grant thereof, a
portion of such exercised Options are not treated as ISOs pursuant to
Code section 422(d), which sets a limit upon the aggregate fair market
value (determined at the time the ISOs are granted) of stock subject to
ISOs that may become exercisable by the optionee thereof for the first
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<PAGE> 9
time during any calendar year, then the Company shall issue one or more
certificates evidencing the Common Stock acquired pursuant to the
exercise of ISOs and one or more certificates evidencing the Common
Stock acquired pursuant to the exercise of Options not treated as ISOs
in accordance with Code section 422 and shall so identify such
certificates in the Company's stock transfer records.
6.1.6 Following a transfer of stock to any person pursuant to
such person's exercise of an ISO, the Company or any Subsidiary of the
Company shall (on or before January 31 of the calendar year following
the year of such transfer) furnish to such person the written statement
prescribed by Code section 6039 and the Treasury Regulations
promulgated thereunder.
6.2 Non-Qualified Options. The terms and conditions of each
NonQualified Option granted under the Plan shall be specified by the Committee,
in its sole discretion, shall be set forth in a written option agreement between
the Company and the Participant in such form as the Committee shall approve, and
shall be clearly identified therein as a Non-Qualified Stock Option. The terms
and conditions of each Non-Qualified Option shall be such that each
Non-Qualified Option granted hereunder shall not constitute or be treated as an
"incentive stock option," as such phrase is defined in section 422 of the Code,
and will be a "non-qualified stock option" for Federal income tax purposes to
which Code section 421 does not apply. The terms and conditions of any
Non-Qualified Option granted hereunder need not be identical to those of any
other Non-Qualified Option granted hereunder. Notwithstanding the above, the
terms and conditions of each NonQualified Option shall include the following:
6.2.1 The option price shall be as determined by the
Committee, but in no event shall the option price be more than one
hundred percent (100%) of the fair market value, as determined in good
faith by the Committee, of the shares of Common Stock subject to the
Non-Qualified Option on the date such Non-Qualified Option is granted,
nor less than the par value of such shares. The Committee may, in its
sole discretion, include in a Non-Qualified Option issued to an
Employee a provision providing for a reduction of the option price at a
set future date or dates on the condition that certain Company
objectives, as determined by the Committee, shall have been achieved by
such date.
6.2.2 The Committee shall fix the term of all Non-Qualified
Options granted pursuant to the Plan (including the date on which such
Non-Qualified Option shall expire and terminate). Such term may be more
than ten (10) years from the date on which such Non-Qualified Option is
granted. Each Non-Qualified Option shall be exercisable in such amount
or amounts, under such conditions, and at such times or intervals or in
such installments as shall be determined by the Committee in its sole
discretion.
6.2.3 In the event the Company is required to withhold any
Federal, state or local taxes in respect of any compensation income
realized by the Participant in respect of a Non-Qualified Option
granted hereunder or in respect of any shares of Common Stock acquired
upon exercise of a Non-Qualified Option, the Company
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<PAGE> 10
shall deduct from any payments of any kind otherwise due to such
Participant the aggregate amount of such Federal, state or local taxes
required to be so withheld or, if such payments are insufficient to
satisfy such Federal, state or local taxes, or if no such payments are
due or to become due to such Participant, then such Participant shall
be required to pay to the Company, or make other arrangements
satisfactory to the Company regarding payment to the Company of, the
aggregate amount of any such taxes. All matters with respect to the
total amount of taxes to be withheld in respect of any such
compensation income shall be determined by the Committee in its sole
discretion.
6.3 SARs. The terms and conditions of each SAR granted under
the Plan shall be specified by the Committee, in its sole discretion, shall be
set forth in a written agreement between the Company and the Participant in such
form as the Committee shall approve, and shall be clearly identified therein as
an SAR. The Committee shall have the power to grant, simultaneously with the
grant of a Non-Qualified Option or at any other time, stock appreciation rights
with respect to that portion of Common Stock as the Committee in its discretion
determines. Such rights may be granted separately and exclusively ("Exclusive
SARs") or under a Non-Qualified Option ("Attached SARs") either at the time of
grant of such Non-Qualified Option or upon any amendment thereof. The terms and
conditions of any SAR granted hereunder need not be identical to those of any
other SAR granted hereunder. Notwithstanding the above, the terms and conditions
of each SAR shall include the following:
6.3.1 Exclusive SARs shall include in their terms the fair
market value, for purposes of this section 6.3, of one (1) share of the
Company's Common Stock and shall provide that such SAR shall not be
exercisable prior to the date as determined by the Committee.
6.3.2 An Attached SAR may be exercised to the extent and only
to the extent the Non-Qualified Option to which it relates is
exercisable.
6.3.3 An SAR shall entitle the holder thereof to exercise such
SAR (or any portion thereof), and in the case of an Attached SAR, to
surrender simultaneously the Non-Qualified Option (or such portion
thereof) to the Company, and to receive from the Company in exchange
therefor cash, or its equivalent in shares of Common Stock or any
combination thereof as determined in the sole discretion of the
Committee, having an aggregate value equal to the excess of the value
of one (1) share of Common Stock at the date of exercise over the value
thereof upon the date the SAR exercised was granted, as determined
pursuant to section 6.3.1 above, times the number of SARs exercised or
the number of Non-Qualified Options surrendered.
6.3.4 The Committee reserves the right to call for the
exercise of an SAR at any time without the approval of the holder of
such SAR.
6.3.5 If the Committee elects to pay part or all of the
benefit determined in accordance with section 6.3.3 above in shares of
Common Stock, the value of a
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share of Common Stock for such purpose shall be the fair market value,
as determined in accordance with section 6.8 hereof, on the date of
exercise. Provided, however, that fractional shares shall not be
delivered under this paragraph 6.3, and in lieu thereof a cash
adjustment shall be made.
6.3.6 It shall be a condition to the obligation of the
Company, upon settlement of an SAR, that the holder thereof pay to the
Company, upon its demand, such amount as may be requested by the
Company for the purpose of satisfying its liability to withhold
Federal, state or local income or other taxes incurred by reason of the
exercise of the SAR. If the amount requested is not paid, the Company
may refuse to conclude settlement of the SAR.
6.4 Terms and Conditions Common to All Options. All Options
granted under the Plan shall include the following provisions:
6.4.1 All Options, by their terms, shall not be transferable
otherwise than by last will and testament or the laws of descent and
distribution, and, during an Employee's lifetime, shall be exercisable
only by the Employee.
6.4.2 Except as otherwise provided in section 6.4.3 (relating
to permanent and total disability), 6.4.4 (relating to death), and
6.4.5 (relating to "cause"), in the event a Participant shall cease to
be employed by the Company or a Subsidiary of the Company on a
full-time basis for any reason, the unexercised portion of any Option
held by such Participant at that time may only be exercised within
three (3) months after the date on which the Participant ceased to be
so employed, and only to the extent that the Participant could have
otherwise exercised such Option as of the date on which he ceased to be
so employed; provided, however, if the Participant shall die within
said three (3) month period, then the period during which any Option
may be exercised shall be extended to the date that is one (1) year
after the Participant ceased to be employed by the Company; provided,
further, that in no event may such Option be exercised beyond the
expiration of the term of the Option.
6.4.3 In the event a Participant shall cease to be employed by
the Company or any Subsidiary of the Company on a full-time basis by
reason of his "permanent and total disability" (within the meaning of
section 22(e)(3) of the Code), the unexercised portion of any Option
held by such Participant at that time may only be exercised within one
(1) year after the date on which the Participant ceased to be so
employed, and only to the extent that the optionee could have otherwise
exercised such Option as of the date on which he ceased to be so
employed; provided that in no event may such Option be exercised beyond
the expiration of the term of the Option.
6.4.4 In the event a Participant shall die while in the
full-time employ of the Company or a Subsidiary of the Company, the
unexercised portion of any Option held by such Participant at the time
of his death may only be exercised within one (1) year after the date
of such Participant's death, and only to the extent that the
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<PAGE> 12
Participant could have otherwise exercised such Option at the time of
his death. In such event, such Option may be exercised by the executor
or administrator of the Participant's estate or by any person or
persons who shall have acquired the Option directly from the
Participant by last will and testament or the applicable laws of
descent and distribution.
6.4.5 In the event a Participant is terminated from employment
with the Company for "cause," such Participant's right to exercise any
Option granted hereunder, weather vested or non-vested, shall terminate
upon notice of discharge. For purposes of this paragraph, "cause" shall
mean final conviction of a felony, adjudication of bankruptcy,
nonacceptance of office or conduct prejudicial to the interests of the
Company.
6.4.6 Each Option shall state the number of shares to which it
pertains and the requirements and vesting schedule thereof, if any.
6.4.7 If an optionee shall cease to be employed by the Company
or any Subsidiary of the Company for any reason, the Company, at its
discretion, may elect to repurchase from the optionee or his legal
representative any and all Common Stock received by such optionee upon
exercise of any Options as of the date of termination for a price per
share equal to the exercise price of such Options. The Company's right
to repurchase the Common Stock shall continue for a period of six (6)
years from the date of grant of such Option. The payment for shares of
Common Stock repurchased by the Company pursuant hereto shall be made,
in cash or by check, at the address of the optionee as set forth in the
stock records of the Company, or at such other location as the parties
to the repurchase may mutually agree. Upon payment by the Company in
compliance with the provisions of this section 6.4.7, the optionee or
his legal representative shall deliver to the Company for cancellation
the certificate(s) evidencing the Common Stock repurchased by the
Company. The failure of the optionee or legal representative to so
deliver the certificate(s) shall not impinge the validity of the
Company's repurchase.
6.5 Payment of Exercise Price with Previously Issued Stock.
Except as otherwise provided in an Option agreement between the Company and a
Participant granting an ISO or a Non-Qualified Option to such Participant, the
Committee may permit the option price for any Option granted under the Plan to
be paid, in whole or in part, with previously issued Common Stock of the Company
(valued as of the date of exercise of such Option).
6.6 Modification, Extension and Renewal of Options. Subject to
the terms and conditions and within the limitations of the Plan, and with
respect to ISOs as permitted by the Code, the Committee, in its discretion, may
modify, extend or renew outstanding Options granted under the Plan, or accept
the surrender of outstanding Options (to the extent not theretofore exercised)
and authorize the granting of new Options and substitutions therefor, provided,
however, that no modification, extension, renewal, revision or cancellation of
an Option shall, without the consent of the optionee thereof,
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cause an ISO to become a Non-Qualified Option or, except as otherwise set forth
herein, alter or impair any rights or obligations under any Option theretofore
granted under the Plan.
6.7 Fixed Option Grant of Non-Qualified Stock Options to
Certain Directors. Each Director of the Company who is not an employee of the
Company ("Non- Employee Director") shall on December 31, 1997, for fiscal year
1997, without the need of further action on the part of the Company,
automatically be granted a Non-Qualified Option to acquire ten thousand (10,000)
shares of Common Stock. Additionally, each year thereafter, at the first Board
meeting following the annual meeting of the Company's stockholders, each
Non-Employee Director on such date shall automatically be granted a
Non-Qualified Option to acquire 10,000 shares of Common Stock. All such
Non-Qualified Options shall have an exercise price equal to the fair market
value of the Common Stock at the close of business on the date of grant. If the
stock is listed upon an established stock exchange or exchanges, such fair
market value shall be deemed to be the last sales price of the Common Stock on
such stock exchange or exchanges on the day the Option is granted or if no sale
of the Company's Common Stock shall have been made on any stock exchange on that
day, on the next preceding day on which there was a sale of such stock. During
such time as the Common Stock is not listed upon an established stock exchange,
the fair market value per share shall be determined by the Committee. The
provisions of this section 6.7 may not be amended more than once every six (6)
months, other than to comply with changes in the Code, ERISA, or the rules
thereunder.
6.8 Transfer of Non-Qualified Options and SARs. Except as
provided in this section 6.8 or as specifically permitted in the Option
agreement, no Non-Qualified Option or SAR shall be transferable by the optionee
other than by last will and testament or the applicable laws of descent and
distribution, and during the lifetime of the optionee, Non-Qualified Options and
SARs granted hereunder may be exercised only by the optionee. Notwithstanding
anything in this section 6.8 to the contrary, any optionee of a Non-Qualified
Option or SAR may transfer same to members of his immediate family (or to one or
more trusts for the benefit of such family members or to partnerships or limited
liability companies in which such family members are the only partners or
members), if (i) the Option agreement with respect to which such Non-Qualified
Option or SAR expressly so provides and (ii) the optionee does not receive any
consideration for the transfer. Any Non-Qualified Option or SAR held by any such
transferees would continue to be subject to the same terms and conditions that
are applicable to such Options immediately prior to their transfer.
6.9 Rights as a Stockholder. Any optionee or transferee of an
Option granted hereunder shall have no rights as a stockholder of the Company
with respect to any shares of Common Stock to which such Option relates until
the date of the issuance of a stock certificate to him for such shares. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date such stock certificate is issued, except as
otherwise required by section 7 hereof.
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6.10 Other Provisions. The Option agreements authorized under
the Plan shall contain such other provisions, including, without limitation,
restrictions upon the exercise of Options, as the Committee shall deem
advisable. Any ISO agreement hereunder shall contain such limitations and
restrictions upon the exercise of ISOs as shall be necessary in order that such
ISOs will be "incentive stock options" as defined in section 422 of the Code, or
to conform to any change in the law, the provisions of which shall control any
inconsistent or contradictory provision of the Plan.
Section 7. Adjustments.
7.1 Reorganization, Merger, Recapitalization, Etc. Subject to
any required action by the stockholders, in the event that, after the adoption
of the Plan by the Board of Directors, the outstanding shares of the Company's
Common Stock shall be increased or decreased or changed into or exchanged for a
different number or kind of shares of stock or other securities of the Company
or of another corporation through reorganization, merger or consolidation,
recapitalization, reclassification, stock split, split-up, combination or
exchange of shares or declaration of any dividends payable in Common Stock or in
any other manner effected without the receipt of consideration by the Company,
the Committee shall appropriately adjust (i) the number of shares of Common
Stock (and the option price per share) subject to the unexercised portion of any
outstanding Option (to the nearest possible full share), provided, however, that
the limitations of sections 422 and 424 of the Code shall apply with respect to
adjustments made to ISOs so as not to cause any ISO to cease to qualify as an
ISO under Code section 422, and (ii) the number of shares of Common Stock for
which Options may be granted under this Plan, as set forth in section 4.1
hereof, and such adjustments shall be effective and binding for all purposes of
this Plan.
7.2 Sale of Not Less Than 50% of Common Stock. Notwithstanding
section 7.1, upon the closing of any offer to holders of not less than fifty
percent (50%) of the Company's Common Stock relating to the acquisition of their
shares in a single transaction or related series of transactions, including,
without limitation, through purchase, merger or otherwise, or any transaction
relating to the acquisition of substantially all of the assets or business of
the Company, the Committee may make such adjustment as it deems equitable in
respect of outstanding Options including, without limitation, the revision or
cancellation of any outstanding Options; provided, that, to the extent any such
Options shall be vested, such cancellation or revision shall be based upon the
difference between the acquisition value for the Company's Common Stock and the
exercise price of such Options. Any such equitable determination by the
Committee shall be effective and binding for all purposes of this Plan and any
Stock Option Agreement thereunder.
7.3 Acceleration of Vesting. A dissolution or liquidation of
the Company or a merger, consolidation or acquisition in which the Company is
not the surviving corporation shall cause the vesting date of each outstanding
Option to accelerate and be exercisable within sixty (60) days prior to such
occurrence in whole or in part.
7.4 Limited Rights Upon Company's Restructure. Except as
hereinbefore expressly provided in this section 7, an optionee shall have no
rights by
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reason of any subdivision or consolidation of shares of stock of any class or
the payment of any stock dividend or any other increase or decrease in the
number of shares of stock of any class or by reason of any dissolution,
liquidation, merger, or consolidation or spin-off of assets or stock of another
corporation, and any issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number or
price of shares of Common Stock subject to an Option.
7.5 Effect of Options on Company's Capital and Business
Structure. The grant of an Option pursuant to the Plan shall not affect in any
way the right or power of the Company to make adjustments, reclassification,
reorganizations or changes of its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or any part of
its business or assets.
Section 8. Effect of the Plan on Employment Relationship. Neither the
Plan nor any Option granted hereunder to a Participant shall be construed as
conferring upon such Participant any right to continue in the employ of the
Company or the service of the Company or any Subsidiary, as the case may be, or
limit in any respect the right of the Company or any Subsidiary to terminate
such Participant's employment or other relationship with the Company or any
Subsidiary, as the case may be, at any time.
Section 9. Amendment of the Plan. The Board of Directors may, as
permitted by law, amend the Plan from time to time as it deems desirable;
provided, however, that, without the approval of the holders of a majority of
the outstanding Common Stock of the Company entitled to vote thereon at a
shareholders' meeting, the Board of Directors may not amend the Plan to (i)
increase (except for increases due to adjustments in accordance with section 7
hereof) the aggregate number of shares of Common Stock for which Options may be
granted hereunder, (ii) increase the benefits accruing to a Participant under
this Plan, including any decrease in the minimum exercise price specified by the
Plan in respect of ISOs, (iii) change the class of Employees eligible to receive
Options under the Plan, or (iv) make any other revision to the Plan as it
relates to ISOs that requires shareholder approval under the Code.
Notwithstanding any other provision of the Plan, shareholder approval of
amendments to the Plan need not be obtained if such approval is not required
under Rule 16b-3 (to the extent applicable to the Company) as of the effective
date of such amendments, and with respect to ISOs, if such approval is not
required under Code section 422.
Section 10. Compliance with Rule 16b-3 and Code Section 422. The
Company shall use its best efforts to maintain the Plan, and to assure the
Options are granted and exercised under the Plan, in accordance with Rule 16b-3
(to the extent Rule 16b-3 could be applicable to any transaction in securities
arising in connection with the Plan), and with respect to ISOs, Code section
422, as said Rule 16b-3 and Code section 422 may be amended from time to time,
and any and all successor statutes and regulations thereof, including without
limitation, the seeking of any appropriate amendments to the Plan and all
requisite approvals and consents of such amendments, provided, however, that
except as otherwise set forth in the Plan, the Company shall take no action that
adversely affects
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<PAGE> 16
Options then outstanding under the Plan without the prior written consent of the
holders of such Options.
Section 11. Investment Purpose. Each Option under the Plan shall be
granted on the condition that the purchases of stock thereunder shall be for
investment purposes, and not with a view to resale or distribution, except that
in the event the stock subject to such Option is registered under the Securities
Act of 1933, as amended, or in the event a resale of such stock without such
registration would otherwise be permissible. Such condition shall be inoperative
if, in the opinion of counsel for the Company, such condition is not required
under the Securities Act of 1933 or any other applicable law, regulation, or
rule of any governmental agency.
Section 12. Indemnification of Committee. In addition to such other
rights of indemnification as they may have as directors or as members of the
Committee, the members of the Committee shall be indemnified by the Company
against the reasonable expenses, including attorneys' fees actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan or any Option granted hereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such Committee member is liable for negligence or misconduct in
the performance of his duties; provided that within sixty (60) days after
institution of any such action, suit or proceeding, a Committee member shall in
writing offer the Company the opportunity, at its own expense, to handle and
defend the same.
Section 13. Termination of the Plan. The Board of Directors may
terminate the Plan at any time. Unless the Plan shall theretofore have been
terminated by the Board, the Plan shall terminate ten (10) years after the date
of its initial adoption by the Board of Directors. No Option may be granted
hereunder after termination of the Plan. The termination or amendment of the
Plan shall not alter or impair any rights or obligations under any Option
theretofore granted under the Plan.
Section 14. Application of Funds. The proceeds received by the Company
from the sale of Common Stock pursuant to Options granted hereunder shall be
used for general corporate purposes.
Section 15. No Obligation to Exercise Option. The granting of an Option
hereunder shall impose no obligation upon the optionee thereof to exercise such
Option.
Section 16. Effective Date of the Plan. This Plan shall be effective as
of January 1, 1998.
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This Plan was adopted and approved by the Board of Directors on the
____ day of ______________, 1997 and the Company's shareholders, on the ____ day
of ______________, 1997.
--------------------------------------
Secretary
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"NHLP Deeds of Trust and Mortgages" means NHLP Deeds of Trust and
Mortgages as defined in Section 3.2.(c) of this Agreement.
"NHLP's Accounts" means all of the accounts of NHLP net of contractual
adjustments without regard for NHLP's bad debt reserve determined in accordance
with GAAP, including without limitation, all accounts, accounts receivable,
chattel paper, other choses in action related to accounts, and any right to
payment for goods sold or leased or for services rendered, whether or not
evidenced by an instrument or chattel paper, and whether or not earned by
performance, all of NHLP's rights as an unpaid vendor or lienor including
stoppage in transit, replevin or reclamation, and any other of NHLP's
property held by Agent or Banks or by others for Agent's or Banks' account,
including balances standing to NHLP's credit on the Agent's or any Bank's
books, and the proceeds of any and all of the foregoing.
"Note Purchase Date" means Note Purchase Date as defined in Section
3.2.(b) of this Agreement.
"Notes" means those non-recourse promissory notes executed by Borrower
referenced in Section 3.2.(a) hereof, together with any and all extensions,
amendments, restatements, renewals and modifications thereof.
"Notice of Revision" means Notice of Revision as defined in Section
5.4. of this Agreement.
"Participant" means any bank other than the Banks who purchases an
interest in the Commitment from any of the Banks.
"Participation Agreement" means any participation agreement to be
entered into between any Bank and a Participant.
"Person" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof, or any other form of
entity.
"Plan" means the National Health Corporation Leveraged Employee Stock
Ownership Plan, as adopted by National, effective January 20, 1988, and as
amended and/or restated or merged from time to time.
"Plan Administrator" means Plan Administrator as defined in Section
10.1.(c) of this Agreement.
"Pledge of Line of Credit Note Agreement" means pledge of Line of
Credit Note Agreement as defined in Section 3.2.(g) of this Agreement.
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"Pledge of NHLP's Accounts Agreement" means Pledge of NHLP's Accounts
Agreement as defined in Section 3.2.(d) of this Agreement.
"Pledge of Stock Agreement" means Pledge of Stock Agreement as defined
in Section 3.2.(f) of this Agreement.
"Pledge of Temporary Investments Agreement" means Pledge of Temporary
Investments Agreement as defined in Section 3.2.(e) of this Agreement.
"Pledged Nursing Homes" means the fifteen (15) nursing home properties
mortgaged, assigned and pledged by NHLP to secure payment of and performance
under the Guarantee and Contingent Purchase Agreement, which nursing home
properties are more particularly described on Exhibit A attached hereto and
made a part hereof, and any additions, substitutions or replacements thereto,
subject to the approval of the Majority Banks. With respect to the Pledged
Nursing Homes listed on Exhibit A hereto and/or any additions, substitutions or
replacements thereto, a survey of the property upon which such Pledged Nursing
Home is located shall be provided to Agent promptly upon request of Agent, at
the expense of NHLP which survey shall be sufficient to remove the survey
exception from any title policy issued with respect to such property.
"Quarter", "Quarterly" or "Fiscal Quarter" means a three month period
(or portion thereof) ending on March 31, June 30, September 30 or December 31.
"Qualified Lender" means any lender who is eligible for the interest
income exclusion with respect to a Securities Acquisition Loan as set forth in
Section 133 of the Code and the regulations thereunder.
"SCS" means Sovran Bank/Central South.
"Securities Acquisition Loan" means a securities acquisition loan as
defined in Section 133(b) of the Code and the regulations thereunder.
"ST" means SouthTrust Bank of Alabama.
"Stated Rate" means that variable rate of interest equal at all times
during the term of the Loan to eighty-five percent (85%) of the highest prime
rate of interest as published in the Wall Street Journal or such successor
rate of interest as is published in a generally available financial
publication, as such rate may change from time to time during the term of the
Loan.
"Stock" means Stock as defined in Section 2.2.(a) of this Agreement.
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<PAGE> 3
"Sovran Loan" means that certain loan in the original principal amount
of $38,500,000 from Sovran Bank/Central South to the National Health
Corporation Leveraged Employee Stock Ownership Trust as evidenced by that
certain Loan and security Agreement dated January 20, 1988 by and between
Marine Midland Bank, N.A., not individually or in its corporate capacity, but
solely as Trustee of the National Health Corporation Leveraged Employee Stock
Ownership Trust and Sovran Bank/Central South.
"Subordinated Debt" means any indebtedness that, to the satisfaction
of the Majority Banks as evidenced by a writing signed by the Majority Banks,
is by its terms expressly subject and subordinate in all respects to all
payments of Funded Debt, including without limitation all payments at any time
due or owing under the Guarantee and Contingent Purchase Agreement.
"Tangible Net Worth" means Tangible Net Worth as defined in Section
9.1.(d) of this Agreement.
"Taxable Date" means the first date on which an Event of Taxability
affects the taxable equivalent yield of the Banks.
"Taxable Rate" means Taxable Rate as defined in the Notes.
"Tendering Banks" means Tendering Banks as defined in Section 3.2.(b)
of this Agreement.
"Temporary Investments" means temporary investments pledged by
National and/or NHLP that are generated in connection with the purchase of
National stock by the Borrower or the execution of the Revolving Credit
Agreement dated December 16, 1988 between NHLP and National or in connection
with the sale of any Pledged Nursing Home by NHLP, which shall consist only of
cash or cash equivalents (including certificates of deposit at financial
institutions with capital in excess of One Hundred Million and No/100 Dollars
($100,000,000.00)), obligations of the United States Government, or obligations
of U.S. corporations with a published rating of no less than "A", provided that
in no event shall any of the foregoing have a maturity of greater than one (1)
year. In the event any of the foregoing held by Agent on behalf of Banks as
security for the Loan should fail to qualify as Temporary Investments
("Disqualified Security"), Borrower agrees to replace the Disqualified Security
with Temporary Investments within the thirty (30) day period following
Borrower's receipt of notice from Agent of the existence of the Disqualified
Security.
"TNB" means Third National Bank in Nashville.
"Trust" means the National Health Corporation Leveraged Employee Stock
Ownership Trust established by National, effective January 20, 1988, and
appointing Marine Midland Bank, N.A. as Trustee, as amended and/or restated
from time to time.
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<PAGE> 4
"Trustee" means Trustee as defined in Section 8.1 of this Agreement.
"Uniform Commercial Code" means the Uniform Commercial Code as adopted
by the State of Tennessee.
"Working Capital" means Working Capital as defined in Section 9.1.(b)
of this Agreement.
ARTICLE II
COLLATERAL
Section 2.1. The Commitment. Subject to the terms and conditions of
and relying on the representations, warranties and covenants contained in this
Agreement, the Banks, for a period ending December 16, 1993, agree to fund
severally but not jointly to the Borrower the aggregate maximum principal
amount of up to Fifty Million and No/100 Dollars ($50,000,000.00) (the
"Commitment"). The maximum Commitment of each of the Banks is as follows:
TNB $16,000,000
IT $15,000,000
SCS $ 9,000,000
ST $10,000,000
The Loan shall be evidenced by (i) the Sixteen Million Dollar ($16,000,000)
Note of TNB, (ii) the Fifteen Million Dollar ($15,000,000) Note of IT, (iii)
the Nine Million Dollar ($9,000,000) Note of SCS, and (iv) the Ten Million
Dollar ($10,000,000) Note of ST, which Notes are substantially in the form of
Exhibits B, C, D and E, respectively, with each Note payable in accordance with
its terms. The Loan is not a revolving loan so that amounts repaid on the Loan
after the Loan is funded cannot be reborrowed by Borrower.
Section 2.2. Description of Collateral. The Indebtedness shall be
secured by the following collateral ("Collateral"):
(a) The number of shares of common stock of National as are
actually purchased by Borrower with the Loan proceeds (the "Stock"),
together with all proceeds, monies, income, and benefits arising by
virtue of Borrower's ownership of the Stock, both now and in the
future, including without limitation all dividends, redemption
proceeds, and other distributions on or with respect to the Stock,
whether payable in cash, in stock, or in other property, and all
subscription and other rights in connection therewith; provided,
however, that the Stock shall not include Stock that the Banks have
released pursuant to Section 2.10. of this Agreement; and
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<PAGE> 5
(b) Contributions made to Borrower by national to enable Borrower to
meet its obligations under the Loan Documents (the "Contributions"); and
(c) Earnings attributable to the stock and the investment of the
Contributions; and
(d) NHLP and National's joint and several guarantees of payment of the
Loan, which guarantees shall be secured by the following (which shall be
included in the definition of Collateral):
(i) NHLP Deeds of Trust and Mortgages; or assignments of same;
(ii) A prior perfected security interest in NHLP'S Accounts
and furniture, fixtures and equipment located on or used in connection
with the Pledged Nursing Homes;
(iii) Temporary Investments pledged by National or NHLP, which
Temporary Investments shall on the Closing Date be in an amount equal
to Sixteen Million Four Hundred Fifty Eight Thousand Four Hundred
Thirty and No/100 Dollars ($16,458,430.00), shall decrease dollar for
dollar with NHLP's draws under the Line of Credit Note and shall
increase to the extent of proceeds resulting either from a sale of any
Pledged Nursing Home or payment on the Line of Credit Note by NHLP and
pledged to the Banks pursuant to Section 2.5 hereof; and
(iv) A pledge of the revolving credit note (the "Line of
Credit Note") in the principal amount of Fifty Million and No/100
Dollars ($50,000,000.00) executed of even date herewith by NHLP in
favor of National.
Section 2.3. Purpose. The security interests hereby granted by
Borrower to the Banks are security for the payment of an indebtedness in the
amount of Fifty Million and No/100 Dollars ($50,000,000.00) that is being
advanced by Banks to Borrower on the date of this Agreement evidenced by the
Notes, together with any and all extensions, renewals, amendments,
restatements, and/or modifications thereof. The mortgage liens and security
interests hereby granted by National and NHLP to the Banks are security for the
payment of and performance under the Guarantee and Contingent Purchase
Agreement.
Section 2.4. Valuation.
(a) At all times, "Available Collateral" must be maintained
in an amount equal to one hundred thirty percent (130%) of the
outstanding principal amount of the Loan that is not secured by
Temporary Investments. "Available
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Collateral" is defined as the sum of the value of the Collateral described in
paragraphs (d)(i) and (d)(ii) of Section 2.2. hereof. NHLP's Accounts will be
assigned a value of seventy percent (70%) of the book value of Eligible
Accounts for purposes of this paragraph (a). NHLP Deeds of Trust and Mortgages
will be assigned a value pursuant to Section 2.4.(b) below. Determination of
compliance with this requirement shall be on a Quarterly basis, commencing
December 31, 1988 and continuing on a Quarterly basis thereafter (the
"Compliance Date"). Notwithstanding the foregoing, in the event Borrower fails
to comply with the requirement set forth in the first sentence of this
paragraph (a) because Available Collateral fails to equal one hundred thirty
percent (130%) of the outstanding principal under the Loan by the amount of
Five Million and No/100 Dollars ($5,000,000.00) or less, the Borrower will be
deemed to have complied with such requirement; provided, (i) such deficiency
shall only exist for a maximum of two (2) consecutive Compliance Dates, (ii)
such deficiency shall be remedied on or before the end of the thirty (30) day
period following the second consecutive Compliance Date during which the
deficiency exists, and (iii) in no event shall a deficiency occur during the
quarter coinciding with the Borrower's year end.
(b) Deeds of trust and mortgages and/or expenditures of Loan proceeds
on nursing home properties listed on Exhibit F attached hereto and incorporated
herein by this reference can be added to the Collateral available to the Banks
and/or expended, as applicable, and replace the Temporary Investments described
in Section 2.2.(d) hereof as those funds are utilized. Temporary Investments
can be used only at the times and for the purposes approved by the Majority
Banks regardless of whether Available Collateral exceeds One Hundred Thirty
Percent (130%) of the outstanding principal amount of the Loan that is not
secured by Temporary Investments. Temporary Investments shall be released by
the Agent upon its determination of compliance with the terms of this Section
2.4 and the Security and Pledge Agreement (Temporary Investments) by NHLP
National and/or Borrower, as applicable. Deeds of trust and mortgages on
nursing home properties not listed on Exhibit F can be added at the request of
Borrower to the Collateral available to the Banks only with the approval of the
Majority Banks. For purposes of determining the Collateral value with respect
to each property (including those listed on Exhibit A), each nursing home
property will be assigned a value by Borrower of either (i) seven (7) times
cash flow based on quarterly financial statements for each nursing home
property supplied by NHLP to Agent or (ii) seventy-five percent (75%) of
appraised value of such nursing home property; provided, Majority Banks, at
their
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sole option, can request new appraisals in addition to those appraisals
furnished by Borrower or updates of appraisals furnished by Borrower at NHLP's
expense. Notwithstanding the provisions of subparagraph (i) of this paragraph
(b), with respect to any nursing home property acquired by NHLP that has a
negative cash flow resulting from operations at the time of such acquisition,
for a period of twelve (12) months from the date of any such acquisition, the
Collateral value with respect to such nursing home property shall be a value
equal to the acquisition price paid for such nursing home property; provided,
however, that after the expiration of any such twelve (12) month period, the
Collateral value with respect to such nursing home property shall be based on
the tests set forth in subparagraphs (i) and (ii) of this paragraph (b), but in
any event not less than zero. Development nursing home properties will be
assigned a value equal to actual project costs for a period of eighteen (18)
months from the completion date of the project. Thereafter, value will be
assigned based on the tests set forth in subparagraph (i) or (ii) of this
subparagraph (b). Existing nursing home facilities to which improvements are
made will be assigned a value by Borrower based on (I) the test set forth in
subparagraph (i) of this paragraph, plus the dollar amount expended on such
improvements, provided said expenditures equal or exceed Five Hundred Thousand
and No/100 Dollars ($500,000.00), or (II) the test set forth in subparagraph
(ii) of this paragraph for a period of eighteen (18) months from the completion
date of such improvements. Thereafter, value will be assigned based on the
tests set forth in subparagraph (i) or (ii) of this subparagraph (b).
(c) Notwithstanding any UCC-1 financing statements or other security
documents relating to accounts, general intangibles, chattel paper or
otherwise executed or filed in connection with the Sovran Loan, SCS
acknowledges and agrees that the Agent, on behalf of the Banks, shall have a
first priority and perfected security interest in Temporary Investments and all
proceeds, substitutions and replacements thereof.
Section 2.5. Amounts Paid With Respect to Collateral.
(a) During the term of the Loan, all dividends (including, without
limitation, cash dividends) and other amounts paid with regard to the
Collateral may be applied at the option of Majority Banks to the payment of
principal and interest on any portion of the Indebtedness secured hereby, in
inverse order of maturity. In addition, if NHLP sells a Pledged Nursing Home
and the Majority Banks do not elect to apply the proceeds of such sale to the
payment of principal and interest on the Indebtedness (which
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<PAGE> 8
application shall be in inverse order of maturity), the proceeds of such
sale shall be pledged to the Banks as Temporary Investments. If no
Event of Default exists (or with notice and/or the passage of time would
exist), at the option of NHLP and upon the approval of Majority Banks, the
amount of such proceeds resulting from any such sale may be used by NHLP to
purchase, renovate or construct an additional nursing home, or additions to
other NHLP nursing homes, which shall be collateral for the Guarantee and
Contingent Purchase Agreement and shall be deemed to be a Pledged Nursing
Home hereunder.
(b) During the term of the Loan, all amounts, awards or payments
received by NHLP, Agent or any of the Banks in connection with any
payments made for loss or damage under insurance policies insuring the
property described in the NHLP Deeds of Trust and Mortgages or in
connection with any condemnation or other taking of any part of any of the
property described in the NHLP Deeds of Trust and Mortgages may, at the
option of NHLP (which option shall exist as long as no Event of Default has
occurred or exists), be (i) paid and applied to the payment of principal
and interest on any portion of the Indebtedness in inverse order of
maturity or (ii) be paid over, wholly or in part, to NHLP for the purpose
of (A) pledging such amounts, awards or payments to the Banks as Temporary
Investments and subsequent disbursement, with the approval of the Majority
Banks, to NHLP in accordance with and subject to the provisions of Sections
2.4(b) and 2.5(a) above, or (B) using such proceeds to acquire substitute
Pledged Nursing Homes, acceptable to Majority Banks pursuant to the terms
of this Agreement or (C) for any other purpose or object satisfactory to
the Majority Banks; provided, however, that in no event shall the Banks or
Agent be obligated to assure or see to the proper application of any
amounts paid over to NHLP. In addition, in no event shall the application
of any such amounts, awards, or payments described herein to the
Indebtedness relieve Borrower of its obligations to continue to make
payments required under the Notes or change or alter in any way whatsoever
the obligations of NHLP and/or National under the Guarantee and Contingent
Purchase Agreement. If an Event of Default exists or has occurred, all such
amounts, awards and payments shall be paid over to the Agent and applied as
determined by the Majority Banks.
Section 2.6. Voting Rights. During the term of this Agreement, and so
long as an Event of Default under this Agreement or a default or Event of
Default (as such term is defined in each Loan Document) under the Loan
Documents has not occurred and continues to exist, Borrower shall have the
right to vote all unreleased, pledged shares of Stock. Consistent with the
applicable provisions of the Plan and ERISA, Borrower shall
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vote such pledged shares of Stock in accordance with sound business practices,
and shall not consent to any action with respect to, or of, such pledged shares
of Stock that would imperil the assets of the Plan, would result in a failure
to obtain full value for all sales or transfers of National's assets, or would
dissipate all or any part of the property of National; provided, however, if
the requirements of this Section 2.6. shall conflict with Borrower's or
Trustee's fiduciary responsibilities and duties towards Plan participants and
their beneficiaries, specifically including the "exclusive benefit rule," then
Borrower or Trustee shall vote in accordance with said fiduciary
responsibilities and duties and shall not violate the provisions of this
Section 2.6 by doing so.
Section 2.7. Change in Capital Structure. In the event that, during
the term of this Agreement, any share dividend, reclassification, readjustment,
merger, or other change is declared or made in the capital structure of
National, all new, substituted, and additional shares or other securities
issued in exchange for or on account of the Collateral by reason of any such
change shall be held by Agent under the terms of this Agreement in the same
manner as the shares originally pledged hereunder. All such securities
delivered to Borrower shall be delivered to Agent immediately.
Section 2.8. Warrants, Options, etc. In the event that during the term
of this Agreement subscription warrants or any other rights or options shall be
issued in connection with the Collateral, so long as Borrower, National and/or
NHLP are not in default hereunder, such warrants, rights, and options
immediately shall be assigned by the Agent and Banks to Borrower, if necessary
to allow Borrower to exercise such warrants, rights or options. If any such
option is exercised by Borrower, all new shares or other securities thereby
acquired by Borrower immediately shall be pledged and assigned to Agent and
Banks to be held under the terms of this Agreement in the same manner as the
Stock originally pledged hereunder.
Section 2.9. Additional Stock. Agent, on behalf of the Banks, shall be
entitled to receive and have delivered to it (a) all stock dividends, (b) stock
issued as a result of stock splits, and (c) amounts paid in cash or other
property as liquidating dividends or returns of capital on any Stock pledged
and not released hereunder, to be held by Agent under the terms of this
Agreement as additional Collateral. Borrower immediately shall pledge and
deposit with Agent all such stock or amounts that may have come into Borrower's
possession or control.
Section 2.10. Release of Stock. Agent, on behalf of the Banks, in
consultation with the Trustee as to the number of shares, shall hold the Stock
and shall release in accordance
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with Treas. Reg. 54.4975-7(b)(8)(i) a portion of the Stock as the Indebtedness
is repaid within thirty (30) days after the annual valuation date of the Plan.
That portion of the Stock that shall be released from encumbrance annually
during the term of the Loan shall equal the number of shares of Stock held as
Collateral immediately before the release multiplied by a fraction, the
numerator of which is the amount of principal and interest paid for the year,
and the denominator of which is the sum of the numerator plus the principal and
interest to be paid for all future years. The interest to be paid in future
years shall be computed by using the interest rate applicable as of the end of
the Plan's then current plan year. If the Stock consists of more than one
class of securities, the fraction above is applied to each class to determine
the pro rata portion of that class that shall be released.
ARTICLE III
LOAN PURPOSE AND
DOCUMENTATION
Section 3.1. Purpose. The purpose of the Loan will be solely for the
purchase by the Borrower of the stock pledged as Collateral and described in
2.2(a) above, followed by National's extension of a Fifty Million and No/100
Dollar ($50,000,000.00) line of credit to NHLP evidenced by the Revolving Credit
Note of even date herewith. NHLP represents and warrants that proceeds of such
line of credit will be used by NHLP solely for (i) the refinancing of existing
debt, (ii) subject to Majority Bank approval, the acquisition, renovation and
development of nursing home properties, and (iii) with Majority Bank approval,
for working capital uses.
Section 3.2. List of Documents. Agent shall receive the following
documents, satisfactory in all respects to Agent, each of which shall be duly
authorized, executed, and delivered to Agent by the appropriate entity or
entities, (together with this Agreement and all other documents and
certificates executed in connection with this Agreement, collectively, the
"Loan Documents"):
(a) Notes. Four (4) non-recourse promissory notes
executed by Borrower of even date herewith in the aggregate principal
amount of Fifty Million and No/100 Dollars ($50,000,000.00), together
with any extensions, renewals and modifications thereof (the
"Notes"). The Notes shall be payable to the order of and in such
amounts as follows:
<TABLE>
<S> <C>
TNB $16,000,000
IT $15,000,000
SCS $ 9,000,000
ST $10,000,000
</TABLE>
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<PAGE> 11
The Note for each of TNB, IT, SCS, and ST is in substantially the
form of Exhibit B, C, D and E, respectively. Repayment of the Notes
shall be based on a twenty (20) year amortization schedule with a
five (5) year put and automatic tender option (followed by subsequent
options as may be negotiated by NHLP and the Banks thereafter) to
NHLP in favor of Banks as set forth in Section 3.2.(b) below. The
amortization schedule for principal payments on the Loan is attached
hereto as Exhibit G.
(b) Guarantee and Contingent Purchase Agreement. A
Guarantee and Contingent Purchase Agreement executed by and among
NHLP, National and Banks of even date herewith, together with any
amendments and modifications thereto (the "Guarantee and Contingent
Purchase Agreement"), in which NHLP and National guarantee payment of
the Indebtedness. Pursuant to the terms of the Guarantee and
Contingent Purchase Agreement, NHLP shall on December 16, 1993 and,
if negotiated by NHLP and the Banks thereafter, (each of which dates
is referred to as a or the "Note Purchase Date") purchase, upon
tender by all of the Banks to NHLP of all of the Notes with an
instrument of assignment attached thereto, the Loan evidenced by the
Notes (and the Notes evidencing the same) by payment to the Banks of
an amount (representing the purchase price therefor) in immediately
available funds equal to the sum of the principal of and accrued and
unpaid interest on the Notes at the time of such purchase together
with any amounts that would be owing under the Loan and Security
Agreement in the event the Notes were being paid in full at the time
of such purchase. Such tender shall be deemed automatically to be
made, and title to the Notes shall be deemed automatically to have
passed to NHLP on each Note Purchase Date, whereupon NHLP shall
become obligated forthwith to pay the purchase price to the Banks,
unless (a) Agent shall have notified NHLP no less than sixty (60)
days prior to the applicable Note Purchase Date that all of the Banks
elect not to so tender, or (b) NHLP requests the Banks through the
Agent no less than ninety (90) days prior to the applicable Note
Purchase Date that all of the Banks not so tender, and Agent shall
have given the notice referred to in clause (a) above within the time
period provided therein, whereupon, in either such case, NHLP shall
not be obligated on such Note Purchase Date to pay the purchase price
to the Banks. The giving of notice by Agent under clause (a) above
shall not affect in any way the rights of the Banks to tender all of
the Notes to NHLP with respect to any subsequent Note Purchase Date.
(c) NHLP Deeds of Trust, Mortgages and Security
Agreements. Deeds of Trust, Leasehold Deeds of Trust, Mortgages, and
Security Agreements and, in certain cases, assignments of same
(collectively, the "NHLP Deeds of Trust and Mortgages") (i) securing
payment of and performance
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<PAGE> 12
under the Guarantee and Contingent Payment Agreement, (ii)
encumbering the real property on which the Pledged Nursing Homes are
located, and (iii) assigning NHLP's personal property (including,
without limitation, accounts receivable, furniture, fixtures and
equipment) located on or used in connection with the Pledged Nursing
Homes.
(d) Pledge of NHLP'S Accounts Agreement. A Pledge
Agreement executed by NHLP of even date herewith pledging NHLP's
Accounts as security for the Guarantee and Contingent Purchase
Agreement ("Pledge of NHLP's Accounts Agreement").
(e) Pledge of Temporary Investments Agreement. A Pledge
Agreement executed by National and NHLP of even date herewith
pledging Temporary Investments as security for the Guarantee and
Contingent Purchase Agreement ("Pledge of Temporary Investments
Agreement").
(f) Pledge of Stock Agreement. A Pledge Agreement
executed by Borrower of even date herewith pledging the Stock
("Pledge of Stock Agreement").
(g) Pledge of Line of Credit Note Agreement. A Security
and Pledge Agreement (Note) executed by National of even date
herewith pledging the Line of Credit Note ("Pledge of Line of Credit
Note Agreement").
Section 3.3. Non-Recourse Liability of Trustee and Borrower. The
Banks shall have no recourse against the Trustee on account of the Loan, and
the Trustee shall have no personal liability with respect to any obligation
hereunder or with respect to the representations, covenants and warranties
contained herein. The Banks shall have no recourse against the Borrower and the
Borrower shall have no obligation to make any payment hereunder or under the
Notes except to the extent of (x) the difference between (i) the sum of all
Contributions received by the Borrower from National for payments hereunder and
under the Notes and any earnings, income or dividends attributable to the
investment of such Contributions, and (ii) all payments on account of the
Borrower's obligations hereunder and under the Notes made by or on behalf of
the Borrower to the Banks and (y) the Banks' rights under the Pledge of Stock
Agreement.
Section 3.4. Participation. Each Bank shall have the right to enter
into one or more Participation Agreements with one or more banks on such terms
and conditions as such Bank shall deem advisable, provided that no Participant
shall have any rights under this Agreement.
Section 3.5. Purchase by NHLP. In the event that an Event of
Taxability occurs because (i) one or more of the Banks ceases to be a qualified
lender as defined in Section 133 of
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<PAGE> 13
the Code or (ii) the Borrower or Trustee enters into a prohibited transaction
as defined in the Code and the regulations thereunder, NHLP shall have the
right to purchase the Notes of the Bank or Banks involved, by the payment to
the Banks of an amount in immediately available funds equal to the sum of the
principal of and accrued and unpaid interest on the Notes at the time of such
purchase together with any amounts that would be owing under the Loan and
Security Agreement in the event the notes were being paid in full at the time
of such purchase. NHLP shall have the right to purchase such notes upon five
(5) days written notice to the Bank or Banks involved. Such purchase shall be
deemed automatically to be made, and title to the Notes shall be deemed
automatically to have passed to NHLP on the day when NHLP tenders the purchase
price to the Bank or Banks involved.
ARTICLE IV
PREPAYMENT TERMS AND USURY
Section 4.1. Prepayment. Borrower may prepay all or part of the
Indebtedness evidenced by the Notes at any time before the Notes mature without
penalty. The Banks shall apply any such payment first to accrued interest and
then to principal.
Section 4.2. Usury. Notwithstanding any provision of this Agreement
or the Notes or any other Loan Documents to the contrary, it is the intent of
the Agent, the Banks, the Borrower, and all parties liable on the Notes, that
the Banks or any subsequent holder shall never be entitled to receive, collect,
reserve or apply, as interest, any amount in excess of the maximum rate of
interest permitted to be charged by applicable law or regulations, as amended
or enacted from time to time. In the event any of the Banks, or any subsequent
holder, ever receive, collect, reserve or apply, as interest, any such excess,
such amount that would be excessive interest shall be deemed a partial
prepayment of principal and treated as such, or, if the principal Indebtedness
is paid in full, any remaining excess funds shall immediately be paid to the
Borrower. In determining whether or not the interest paid or payable under any
specific contingency exceeds the highest lawful rate, the Borrower, the Agent
and Banks shall, to the maximum extent permitted under applicable law, (a)
exclude voluntary prepayments and the effects thereof, and (b) amortize,
prorate, allocate, and spread, in equal parts, the total amount of interest
throughout the entire term of the Indebtedness; provided that if the
Indebtedness is paid and performed in full prior to the end of the full
contemplated term hereof, and if the interest received for the actual period of
existence hereof exceeds the maximum lawful rate, the holder of the Notes shall
refund to the Borrower the amount of such excess or credit the amount of such
excess against the principal portion of the Indebtedness, as of the date it was
received, and, in such event, neither the Agent nor the Banks
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<PAGE> 14
shall be subject to any penalties provided by any laws for contracting for,
charging, reserving or receiving interest in excess of the maximum lawful rate.
ARTICLE V
EVENT OF TAXABILITY
Section 5.1. Rate Adjustment.
(a) The amount, terms, and conditions of Indebtedness
evidenced by the Notes, this Agreement, and the other Loan Documents
have been agreed upon by Banks and Borrower based on (i) each Bank
being able to exclude fifty percent (50%) of the interest income from
the Loan from its Gross Income pursuant to Section 133 of the Code
for Securities Acquisition Loans made by Qualified Lenders, and (ii)
each Bank's highest marginal federal corporate tax rates remaining at
their present levels. The tax rates currently applicable to the
Banks, and circumstances (not now contemplated or anticipated) may
hereafter result in a determination (that may be disputed) that the
information contained in subparagraphs (i) through (ii) of this
Section 5.1.(a) has changed. Upon a Determination of Taxability,
effective on the applicable Taxable Date, the Stated Rate shall
automatically be adjusted (the "Adjusted Rate") to maintain for each
of the Banks the same taxable equivalent yield on the Loan that would
have been applicable but for the occurrence of the related Event of
Taxability. Each subsequent Event of Taxability shall necessitate an
adjustment to the Adjusted Rate, which rate shall be effective until
the next Event of Taxability or upon the total payment of the
Indebtedness, whether by prepayment or at or after the maturity of
the Notes. Notwithstanding the foregoing, in the event that one
hundred percent (100%) of the interest on the Notes shall be included
in the Gross Income of any of the Banks, the interest due and payable
on all principal amounts advanced pursuant to the terms of the Loan
shall automatically be adjusted to the Taxable Rate.
(b) The Borrower shall pay to Banks any and all Additions
to Tax imposed on Banks in connection with any Event of Taxability.
National shall make Contributions to Borrower to enable Borrower to
pay such Additions to Tax.
(c) The obligations of the Borrower under this Section
5.1. shall survive the payment in full of all amounts due under the
Notes and shall continue in effect until all amounts due hereunder
shall have been paid and in any event until the later of the date
that such amounts due have been paid or thirty (30) days after all
applicable statutes of limitations have run (after taking into
account all extensions and suspensions thereof) in respect of any
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<PAGE> 15
taxable year during which any payment of interest on the Notes or any
payment pursuant to this Section 5.1. was received or accrued.
(d) Although the Banks shall have no obligation to
contest any Event of Taxability, the Agent shall notify the Borrower
thereof as soon as reasonably possible. The Banks will permit
Borrower to supply the IRS with any documentation or legal argument
against any Event of Taxability, but the Banks will be under no
obligation to delay or withhold any action of acquiescence in order
to permit the Borrower to do so. If the Borrower and/or the Banks
should decide to contest an Event of Taxability, and if by settlement
or negotiation, court determinations, or otherwise, the amount of
interest payable on any of the Notes includable under the Code in the
Gross Income of the Banks is ultimately determined to be less than
the amount initially asserted, the Borrower shall be entitled to a
prompt refund of any such excess amount actually paid by the Borrower
to the Banks on account of such Event of Taxability plus interest
thereon at the rate of five percent (5%) per annum. Nothing referred
to herein shall be construed to require the Banks to join in any
actions, proceeding, or appeal with respect to protesting or
contesting an Event of Taxability.
Section 5.2. Records. Notwithstanding Borrower's right to supply the
IRS with any documentation or legal argument against any Determination of
Taxability or Event of Taxability, nothing in this Article V shall under any
circumstances give Borrower any right to inspect the tax returns or other
records of the Agent or any of the Banks. The Banks will cooperate with the
Borrower, at NHLP's expense, in supplying appropriate information available to
the Banks in the event of any contest of an Event of Taxability.
Section 5.3. Notice. For purposes of the written notification of
Determination of Taxability, such notification by Agent to Borrower shall be in
writing, signed by the appropriate officers of Agent, and shall:
(a) briefly describe the Event of Taxability that has
occurred, setting forth the Taxable Date; and
(b) specify (to the extent determinable) that portion of
the Loan to which such Event of Taxability relates (it being
understood that in the event Agent does not specify a portion of the
Loan to which such Event of Taxability relates, such Event of
Taxability shall relate to the entire Loan); and
(C) set forth the new Adjusted Rate and the period of
time for which such rate relates (including information
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<PAGE> 16
showing the calculations used in computing the new Adjusted Rate); and
(d) be accompanied by a description of the legislation
relied upon or a copy of either the Revenue Ruling, 30-day letter, or
other order or directive received by Agent or an opinion of counsel
acceptable to Agent (based on the consent of the Majority Banks) on
which such Event of Taxability is based.
Section 5.4. Revised Notice. If Agent has given Borrower written
notification of the occurrence of an Event of Taxability, Agent may at any time
and from time to time revise such notice of the occurrence of an Event
of Taxability to increase or decrease the amount payable under Section 5.1.
hereof by giving Borrower a written notice of such revision ("Notice of
Revision"), in which case Borrower and Agent shall make such adjustments
between themselves of amounts previously paid and to be paid as shall be
appropriate to reflect such revision as if the Notice of Revision had
constituted a part of the original notice of the occurrence of an Event of
Taxability, and any payments as a result of such adjustments for any period
prior to the date of the Notice of Revision shall be made within five (5) days
after Borrower has received such Notice of Revision. In addition, if Agent has
given Borrower notice of the occurrence of an Event of Taxability and Agent
subsequently determines for any period that the conclusions expressed in the
opinion of counsel acceptable to Agent (based on the consent of the Majority
Banks) on which such Determination of Taxability was based are not correct,
then (without limiting the right of the Agent to assert later that an Event of
Taxability has occurred with respect to such period), Borrower shall not be
obligated to pay the amounts set forth in Section 5.1. hereof for such period,
and Agent shall return any such payment or payments theretofore made with
respect to such period.
Section 5.5. Indemnification For Prohibited Transactions. NHLP and
National shall indemnify and hold Banks harmless from and against any taxes,
penalties and/or interest imposed on any of the Banks under the provisions of
Section 4975(a) and/or 4975(b) of the Code.
ARTICLE VI
ADDITIONAL INTEREST AND FEES
Section 6.1. Additional Interest. Borrower shall pay an amount equal
to one-half of one percent (.50%) (computed on the total commitment of Fifty
Million and No/100 Dollars ($50,000,000.00)) as additional interest on the Loan
("Additional Interest"), payable as follows:
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<PAGE> 17
(a) twenty-five percent (25%) of the Additional Interest
within five (5) days of the Closing;
(b) eighteen and three-quarters percent (18.75%) of the
Additional Interest ninety (90) days after the Closing;
(c) eighteen and three-quarters percent (18.75%) of the
Additional Interest one hundred eighty (180) days after the Closing;
(d) eighteen and three-quarters percent (18.75%) of the
Additional Interest two hundred seventy (270) days after the Closing;
and
(e) eighteen and three-quarters percent (18.75%) of the
Additional Interest three hundred sixty (360) days after the Closing.
All amounts due under this Section 6.1. shall be deemed to have been earned at
the closing of the Loan (the "Closing") and shall be due and payable as set
forth in this Section 6.1. irrespective of any events occurring after the
Closing, including but not limited to (i) Borrower's, National's and/or NHLP's
default under the Loan Documents, (ii) Borrower's failure to draw down or
utilize the full amount of the Loan, or (iii) Borrower's refinancing of the
Loan.
Section 6.2. Agent Fee. NHLP shall pay an agent's fee of Twenty One
Thousand and No/100 Dollars ($21,000.00) per year, payable quarterly in advance
to TNB as Agent.
ARTICLE VII
COVENANTS AND WARRANTIES OF BORROWER, NHLP AND NATIONAL
Section 7.1. All covenants and warranties made by the Borrower in
this Article VII shall be deemed to be covenants and warranties relating only
to the Borrower, and shall not relate to any covenants or warranties made with
respect to National and/or NHLP. In no event shall any covenants or warranties
made in this Article VII with respect to NHLP or National be deemed to have
been made by Borrower. In no event shall any covenants or warranties made in
this Article VII with respect to NHLP be deemed to have been made by National.
Borrower, NHLP and National, as appropriate, hereby severally and not jointly
covenant and warrant that:
(a) Organization, Powers, etc. (i) The Borrower, NHLP and
National have full power and authority to execute this Agreement and
the documents required hereunder, as applicable, and to carry out the
transactions contemplated hereby; (ii) an application has been filed
for a determination letter from the IRS that the Borrower qualifies
as an exempt trust under Section 501(a) of the
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<PAGE> 18
Code, National is validly existing and duly formed under the laws of
the State of Tennessee, and NHLP is validly existing and duly formed
under the laws of the State of Delaware; (iii) the Borrower, NHLP and
National have filed all papers with all governmental authorities
required as a pre-condition to own property and transact business;
(iv) the Borrower, NHLP and National have all the necessary power and
authority to own their properties and assets and to carry on their
businesses; and (v) the Borrower, NHLP and National have all
necessary power to enter into, execute and perform the Loan
Documents, as applicable.
(b) Authorization of Borrowing, etc. The execution,
delivery and performance of this Agreement, the borrowings hereunder
and the execution and delivery of the Notes and other Loan Documents
required hereunder have been duly authorized by all requisite trust,
limited partnership, or corporate action, as applicable, of the
Borrower, NHLP and National, and will not violate any provision of
law, any order of any court or other agency of government, any
provision of any indenture, agreement or other instrument to which
either the Borrower, NHLP or National is a party (with due notice
and/or lapse of time), or by which the Borrower, NHLP or National or
any of their properties or assets are bound, or be in conflict with,
result in a breach of or constitute (with due notice and/or lapse of
time) a default under any such indenture, agreement or other
instrument, or result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any of the
properties or assets of the Borrower, NHLP or National, except as
contemplated by this Agreement.
(c) Validity and Binding Nature. This Agreement, the
Notes and all other Loan Documents, when duly executed and delivered,
are and will be, legal, valid and binding obligations of the
Borrower, NHLP and National, as applicable, enforceable in accordance
with their respective terms.
(d) Title to Properties. The Borrower has good and
marketable title to all of the Borrower's properties and assets, and,
except for the liens provided herein and except for the lien
resulting from the pledge by Borrower of National stock to SCS under
the Sovran Loan, all such properties and assets are free and clear
of mortgages, pledges, liens, charges and other encumbrances.
(e) Litigation. There is no action, suit or proceeding at
law or in equity or by or before any governmental instrumentality,
arbitration board or other agency now pending, or, to the knowledge
of the Borrower, NHLP or National, threatened against or affecting
the Borrower,
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<PAGE> 19
NHLP or National, or any properties or rights of the Borrower, NHLP
or National, which, if determined adversely, would materially impair
the rights of the Borrower, NHLP or National to carry on business
substantially as now conducted or would materially adversely affect
the financial condition of either the Borrower, NHLP or National, or
would impair the ability of the Borrower, NHLP or National to perform
their respective obligations under the Loan Documents. Neither the
Borrower, NHLP nor National is in default with respect to any order,
decree or judgment of any court, arbitrator or governmental body.
(f) Payment of Taxes. The Borrower, NHLP and National, as
applicable, have respectively filed or caused to be filed all
Federal, state and local tax and information returns that are
required to be filed, and have paid or caused to be paid all taxes as
shown on said returns or on any assessment received by them, to the
extent that such taxes have become due, except for taxes that are
being contested in good faith and for which NHLP and/or National, as
the case may be, have provided additional security to the Banks
satisfactory in all respects to the Banks.
(g) Agreements. Neither the Borrower, NHLP nor National
is a party to any restriction materially adversely affecting its
business, properties or assets, operations or conditions (financial
or otherwise). Neither the Borrower, NHLP nor National is in default
in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement or
instrument to which it is a party.
(h) Purpose of Loan. Proceeds of the Loan will be used
exclusively for the purchase of the Stock.
(i) Investment Company Act. The Borrower is not an
"investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940,
as amended.
(j) Regulation U. The Borrower is not engaged
principally, or as one of its important activities, in the business
of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation U of the Board of Governors
of the Federal Reserve System).
(k) Trust Transactions. The sale by National of the
Stock to the Borrower, the purchase by the Borrower of the Stock,
and the distribution, if any, of the Stock pursuant to the Plan, do
not require registration under either the Securities Act of 1933 or
the Investment Company Act of 1940 or any applicable state securities
laws or regulations.
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<PAGE> 20
(l) Situs. Borrower's chief place of business is at the
address appearing after Borrower's signature hereto. Borrower will
notify Agent promptly in writing of any change in the location of any
such chief place of business or the establishment of any new place of
business.
(m) Protection of Collateral. Borrower, National and NHLP
are the owners of the assets titled respectively to each of them
constituting the Collateral free from any adverse lien, security
interest, or encumbrance other than those included herein as
described in Exhibit H. Borrower, National and NHLP will defend such
Collateral against all claims and demands of all persons at any
time claiming the same or any interest therein. Subject to the terms
of the Trust, no restrictions exist with respect to the transfer of
any of the pledged shares of Stock. Subject to the terms of the
Trust, Borrower has the right to transfer the shares of Stock free of
any encumbrances and without obtaining the consents of other
shareholders. Until the obligations under this Agreement, the Notes
and the Guarantee and Contingent Purchase Agreement have been paid in
full, Borrower, National and NHLP will keep such Collateral free from
any lien, security interest, or encumbrance, except for the security
interest described herein and the liens granted pursuant to the NHLP
Deeds of Trust and Mortgages.
(n) Records. Borrower, National and NHLP at all times
will keep accurate and complete records of their respective affairs
and (in the case of National and NHLP) the Collateral, and Borrower
(in the case of the Stock only), National and NHLP will not comingle
all or any portion of the Collateral with their other assets. Agent
or any of its agents shall have the right to call at Borrower's,
National's and NHLP's places of business upon notice and
during-normal business hours at intervals to be determined by Agent,
and without hindrance or delay, to inspect, audit, check, and make
extracts from the books, records, journals, orders, receipts,
correspondence, and other data of Borrower, National and NHLP
(o) Use of Collateral. Neither Borrower, National nor
NHLP will use the Collateral in violation of any statute or
ordinance.
(p) Sell or Transfer. Neither Borrower, National nor NHLP
shall sell or transfer all or any portion of the Collateral to a
third party without the Agent's prior written consent, which consent
shall be conditioned on approval of all of the Banks, which consent
shall not be unreasonably withheld; provided, however, that personal
property of Borrower, National or NHLP may be sold in the ordinary
course of business.
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(q) Notice upon Event of Default. In the event of the
occurrence of an Event of Default of which Borrower, National or NHLP
has knowledge, Borrower, National or NHLP shall notify Agent
immediately in writing, setting forth the nature of the default and
the action Borrower, National or NHLP proposes to take to cure the
default.
(r) Qualification of Plan and Trust. National has filed
for a determination that the Plan is an ESOP, and that the Trust is
a trust exempt from tax under Section 501(a) of the Code. Both the
Plan and the Trust are duly organized and existing under the laws of
the United States of America and are authorized to transact all
business that is now being transacted by them.
(s) Violation of Law. Borrower, NHLP and National will
materially comply with all applicable statutes and government
regulations.
(t) Costs, Expenses, etc. NHLP shall pay all costs
incurred by Banks and Agent in connection with the preparation,
recording, and filing of all documents evidencing or incident to this
transaction, including any legal fees incurred by Banks and Agent and
NHLP shall pay on behalf of Borrower on demand of Agent all costs,
fees, expenses, appraisals and any other expenses of any nature
whatsoever required to be paid in order for Borrower to comply with
all covenants, provisions and terms of this Agreement and the other
Loan Documents, whether now existing or hereafter arising; provided,
however, such costs shall not be paid from the Loan proceeds.
(u) Form 5500. Borrower or National shall furnish to
Agent annually a copy of the Plan's Annual Report, Form 5500, within
thirty, (30) days from the filing with the IRS, but in no event later
than nine (9) months after the end of the Plan's tax year.
(v) Determination Letter. Borrower or National shall
provide to Agent a copy of the favorable determination letter issued
by the IRS, indicating that the Plan is an ESOP qualified under
Section 401(a) of the Code, immediately after receipt of such
favorable determination letter.
(w) Contributions. Until such time as the Indebtedness
has been repaid in full, all cash Contributions made by National to
Borrower shall be used solely for the purposes of repaying the
Indebtedness and for paying administrative expenses and distributions
to Plan members and their beneficiaries in accordance with the terms
and provisions of the Plan and the Trust, unless the Majority Banks
agree otherwise in writing.
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(x) ESOP Opinion. Borrower shall, at its own expense, upon
Agent's request, furnish to Agent not more often than annually,
within thirty (30) days of each request, and shall furnish to Agent
on the Closing Date an opinion of Keck, Mahin & Cate, special ESOP
counsel to the Borrower, or other special ESOP counsel satisfactory
to the Agent, satisfactory in all respects to Agent assuring Agent
that the Plan is an ESOP and that the Loan is a Securities
Acquisition Loan.
(y) Interest Income Exclusion. Borrower shall provide to
Agent such information as Agent shall reasonably request from time to
time in order to ascertain whether the interest received by Banks
on the Notes has qualified, is qualified, and will continue to be
qualified as a Securities Acquisition Loan under Section 133 of the
Code.
(z) Consent. No consent of any party, not already
obtained, including the shareholders of National and the limited and
general partners of NHLP, and no license, approval, authorization,
registration, or declaration with any governmental or regulatory
authority or agency is required in connection with the execution,
delivery, performance, validity, or enforceability of the Loan
Documents.
(aa) Trust's Quarterly Financials. Borrower or National
shall furnish to Agent and all Banks within forty-five (45) days
after the close of each Quarter, including the last fiscal Quarter, a
balance sheet and income statement of the Trust, which need not be
certified but which shall accurately reflect the financial condition
of the Trust, together with a statement signed by the Trustee showing
the calculation of the financial covenants required in Section 7.1
(dd) of this Agreement.
(bb) Quarterly Financials. National and/or NHLP, as
appropriate, shall furnish to Agent and all Banks within forty-five
(45) days after the close of each Quarter, including with respect to
(ii) and (iii) of this Section 7.1(bb) the last fiscal Quarter, (i)
unaudited financial statements of National and NHLP using GAAP
consistently applied by a certified public accounting firm acceptable
to Agent, (ii) unaudited financial statements with respect to the
Pledged Nursing Homes, and (iii) a quarterly aging of NHLP's
Accounts.
(cc) Annual Financials. National and/or NHLP, as
appropriate, shall furnish to Agent and all Banks within sixty (60)
days after the close of each calendar year (i) audited financial
statements of National and NHLP using GAAP consistently applied by a
certified public accounting firm acceptable to Agent, which
statements shall express an
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unqualified opinion as to the soundness of each entity's respective
financial position, and (ii) audited financial statements of the Plan
compiled by a certified public accounting firm. The audited financial
statements shall be accompanied by a statement from the chief
financial officers and general partner of National and NHLP,
respectively, that no Events of Default have occurred (or with notice
and/or the passage of time would occur) under the Loan Documents.
(dd) Net Income. All income statements of the Trust
provided to Agent shall reflect a Net Income in excess of zero (o)
annually. For purposes of this subparagraph, the term, "Net Income,"
for any calendar year means the difference between the value of:
(A) the sum of annual cash contributions made
by National and any Affiliates to Borrower, plus earnings
from investments and net realized gain from the sale or
exchange of assets, if any, and other income of the Plan
and Trust for such year, and
(B) the sum of net realized loss from the
sale or exchange of assets plus distributions to former
Plan members and/or their beneficiaries for such year
plus interest expense plus annual administrative expenses
of the Plan and Trust, including without limitation,
amounts paid for office supplies, data processing,
service charges, and other expenses, plus principal and
interest payments for such year.
(ee) Quarterly Compliance. Borrower, NHLP and National
shall each furnish to Agent within forty-five (45) days after the
close of each Quarter a statement confirming that no Event of Default
exists under this Agreement with respect to the party furnishing the
statement, and NHLP shall furnish to Agent within forty-five (45)
days after the close of each quarter calculations showing compliance
with Section 9.1. hereof.
(ff) Contributions. National shall make Contributions to
Borrower sufficient in amount to enable Borrower to make payments due
under the Loan as and when such payments are due.
(gg) Records. Upon receipt of any contribution from
National, Borrower shall promptly note on its appropriate books and
records the amount of such contribution designated to be applied to
the Sovran Loan and the amount designated to be applied to this Loan.
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Section 7.2. Negative Covenants - Borrower and National. So long as
any Indebtedness secured hereby is outstanding, Borrower and/or National, as
stated below, each covenant that, without the prior written consent of the
Majority Banks:
(a) The Borrower shall not become liable, directly or
indirectly, with respect to any obligation for money borrowed, or the
equivalent, except (i) the Indebtedness, (ii) the loan evidenced by
that certain Loan and Security Agreement dated as of January 20, 1988
by and between Marine Midland Bank, N.A., not in its individual or
corporate capacity, but solely as Trustee of National Health
Corporation Leveraged Employee Stock Ownership Trust and SCS, and
(iii) any indebtedness fully guaranteed by NHLP.
(b) The Borrower shall not make investments, other than
in qualified employer securities of National, except for investments
in Temporary Investments.
(c) Neither the Borrower (in the case of the Stock only)
nor National shall suffer or permit any of the Collateral to become
subject to any security interest, lien, or other encumbrance, except
for any lien in connection with the Loan in favor of Agent or the
Banks.
(d) The Borrower shall not create, incur or suffer to
exist any pledge, mortgage, assignment or other encumbrance of or
upon any of the Stock (other than as pledged to the Banks as provided
herein), or of or upon the income or profits thereof.
(e) National covenants that it will not permit its
tangible net worth at any time to be less than Fifteen Million
Dollars ($15,000,000). For purposes of this subparagraph, "tangible
net worth" shall have the meaning set forth in the Guarantee and
Contingent Purchase Agreement dated January 20, 1988 between NHESOP,
Inc. and SCS (the "SCS Guaranty"), as amended by paragraph 2 of the
First Amendment to Guarantee and Contingent Purchase Agreement, dated
as of December 16, 1988.
Section 7.3. Negative Covenants - NHLP. So long as any Indebtedness
secured hereby is outstanding, NHLP covenants that, without the prior written
consent of the Majority Banks, it will not suffer or permit any of the
Collateral to become subject to any security interest, lien, or other
encumbrance, except for any lien in favor of Agent or the Banks.
Section 7.4. Prohibited Transactions. So long as any indebtedness
evidenced by any of the Notes is outstanding, Borrower shall give notice to
Agent of any notice Borrower receives from the Department of Labor alleging
that a "prohibited transaction" as defined in the Code and the regulations
thereunder has occurred.
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ARTICLE VIII
COVENANTS AND WARRANTIES OF THE TRUSTEE
Section 8.1. Trustee hereby covenants and warrants
that:
(a) Authority. As of the date hereof, Marine Midland Bank,
N.A. (the "Trustee") is the sole trustee of the Plan and the Trust
and has full authority to bind the Plan, the Trust, and/or Borrower
and to execute this Agreement and any note or notes evidencing the
Indebtedness secured hereby. Borrower and Trustee shall notify Agent
promptly in writing of any change of Trustee. For purposes of the
Loan, Banks and Borrower acknowledge that only Marine Midland Bank,
N.A. shall be executing the Loan Documents on behalf of the Plan and
the Trust solely in its capacity as independent trustee and not in
its individual or corporate capacity.
(b) Organization, Powers, etc. (i) The Trustee has full
power and authority to execute this Agreement, the Notes, Pledge of
Stock Agreement and all other documents to be executed by the Trustee
on behalf of the Borrower in connection with the Loan and to carry
out the transactions contemplated hereby; (ii) the Trustee is validly
existing and duly formed as a national banking association; and (iii)
the Trustee has filed all papers with all governmental authorities,
if any, that are required as a pre-condition to acting as Trustee of
the Borrower.
(c) Litigation. There is no action, suit or proceeding at
law or in equity or by or before any governmental instrumentality,
arbitration board or other agency now pending, or to the knowledge of
the Trustee, threatened against or affecting the Trustee that would
adversely affect the Trustee's power, authority or ability to act as
Trustee of the Borrower.
ARTICLE IX
COVENANTS AND CONDITIONS IMPOSED ON NHLP
Section 9.1. NHLP shall comply with the following financial
covenants, with determination of compliance being made Quarterly unless more
frequently requested by Agent:
(a) Current Ratio. NHLP shall at all times maintain a
"Current Ratio" of at least 1.5 to 1. "Current Ratio" shall be
defined as the ratio of current assets to current liabilities.
(b) Working Capital. NHLP shall at all times maintain a
minimum "Working Capital" level of Ten Million and No/100 Dollars
($10,000,000.00). "Working Capital" shall be defined as current
assets less current liabilities.
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(c) Funded Debt to Adjusted Tangible Net Worth Ratio. NHLP shall at
all times maintain a "Funded Debt" to "Adjusted Tangible Net Worth" ratio
of no more than 3.5:1. "Funded Debt" is defined as long term debt,
but excluding Subordinated Debt, notes payable, current maturities of long
term debt, plus capitalized and operating leases, plus all guaranties; and
"Adjusted Tangible Net Worth" is defined as total equity of NHLP, plus
approximately Fifteen Million Seven Hundred Forty-Five Dollars
($15,745,000) in deferred income resulting from the profit on the sale of
nursing home properties to National as equity (which amount shall decrease
in accordance with NHLP's books and records that comply with GAAP), plus
Subordinated Debt, minus good will and unamortized loan costs in excess of
One Million Four Hundred Thousand and No/100 Dollars ($1,400,000.00).
(d) Tangible Net Worth. NHLP shall at all times maintain the following
minimum Tangible Net Worth requirements for the following periods:
(A) From the date of closing through March 30, 1989 - Thirty
Four Million Dollars ($34,000,000).
(B) From March 31, 1989 through June 29, 1989 - Thirty Five
Million Two Hundred Thousand Dollars ($35,200,000).
(C) From June 30, 1989 through September 29, 1989 - Thirty
Six Million Four Hundred Thousand Dollars ($36,400,000).
(D) From September 30, 1989 through December 30, 1989 -
Thirty Seven Million Six Hundred Thousand Dollars ($37,600,000).
(E) From December 31, 1989 through March 30, 1990 - Forty
Million Dollars ($40,000,000).
(F) On March 31, 1990 and on subsequent calendar quarter
endings, the minimum Tangible Net Worth requirements will increase by
One Million Four Hundred Thousand Dollars ($1,400,000) per quarter on
a cumulative basis.
"Tangible Net Worth" is defined as total equity of NHLP, plus Subordinated
Debt, minus good will and unamortized loan costs in excess of One Million Four
Hundred Thousand Dollars ($1,400,000).
(e) Debt Service Coverage. NHLP shall at all times maintain a minimum
"Debt Service Coverage" of 1.3 to 1. The Debt Service Coverage is defined
as the ratio of (i) the
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annualized sum of net income, plus depreciation/amortization, plus interest
expense, minus distributions paid to holders of units of NHLP for the
fiscal year as projected by NHLP and evidenced by written financial
projections furnished to Agent, or as actually paid, whichever is greater,
to (ii) interest expense, plus current maturities of long term debt, plus
any payments required to fund any guaranty obligations of NHLP.
(f) Notes Receivable. NHLP shall at all times limit the balance of
notes receivable as set forth on its financials to no more than NHLP's
Adjusted Tangible Net Worth; provided, however, that the notes receivable
listed on Exhibit I attached hereto shall be excluded from the balance of
notes receivable as set forth on NHLP's financials in determining
compliance with this subparagraph (f). The listing of notes receivable on
Exhibit I attached hereto may be modified, amended, increased and/or
reduced from time to time by the Majority Banks; provided, however, that
any nursing home project or use of Loan proceeds approved by Majority Banks
which results in a note receivable to NHLP automatically shall be excluded
from the balance of notes receivables and shall be listed on Exhibit I.
ARTICLE X
CONDITIONS PRECEDENT TO LOAN
Section 10.1. The following shall be conditions precedent to Banks'
obligation to make the Loan contemplated hereby:
(a) ESOP Opinion. Borrower shall provide Agent on behalf of Banks an
opinion of Keck, Mahin & Cate, special ESOP counsel to Borrower,
substantially in the form attached hereto as Exhibit J, attached hereto and
made a part hereof.
(b) Opinion of Counsel. NHLP shall provide Agent on behalf of Banks
with an opinion of outside counsel that is acceptable to Agent and Agent's
counsel, which opinion shall be substantially in the form attached hereto
as Exhibit K and made a part hereof. NHLP shall provide Agent with opinions
of local counsel concerning the NHLP Deeds of Trust and Mortgages, which
opinions shall be acceptable to Agent and Agent's counsel and substantially
in the form attached hereto as Exhibit K and made a part hereof.
(c) Plan and Trust. National shall provide Agent executed or adopted
copies, satisfactory in all respects to Agent, of the Plan document, Trust
agreement, and all amendments thereto, together with a certified copy,
satisfactory in all respects to Agent, of the direction of
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the "Plan Administrator" (as that term is defined in Borrower's Plan document)
to Borrower and/or Trustee to authorize the execution, delivery, and
performance of the Loan Documents and the purchase of Twenty Nine Million Five
Hundred Eighty Five Thousand Seven Hundred Ninety Eight (29,585,798) shares of
common stock of National.
(d) Trustee Certificate. Borrower shall provide Agent a certificate,
satisfactory to Agent in all respects, stating that the Trustee has accepted
all duties, obligations, liabilities, and responsibilities of that position and
has agreed to act as such.
(e) Charter and Limited Partnership Certificate. National and NHLP
shall provide Agent certified copies of the charter and by-laws of National and
the limited partnership agreement and certificate of limited partnership of
NHLP, respectively, together with certified copies, satisfactory in all respects
to Agent, of all corporate and partnership resolutions and/or actions taken by
National and NHLP respectively, authorizing the execution, delivery, and
performance of the Guarantee and Contingent Purchase Agreement, the NHLP Deeds
of Trust and Mortgages, Pledge of Line of Credit Note Agreement, Pledge of
NHLP's Accounts Agreement and Pledge of Temporary Investments Agreement, and
the other agreements and transactions contemplated herein.
(f) Signature Information - Borrower. Borrower shall provide Agent a
certificate, satisfactory in all respects to Agent, setting forth the name,
title, and specimen signature of (i) the individual or individuals who have
executed the Plan document and Trust agreement, (ii) the Trustee or Trustees
who will, until replaced by a successor trustee or trustees, act as Borrower's
representative or representatives for the purpose of executing documents and
delivering and accepting notices and other communications in connection with
the Loan Documents. Agent may conclusively rely on such certificate until Agent
receives notice in writing from Borrower to the contrary.
(g) Signature Information - NHC and NHLP. National and NHLP shall
provide Agent with a certificate, satisfactory in all respects to Agent, of
each entity, setting forth the name, title, and specimen signatures of the
officer or officers (i) who are authorized to sign the Guarantee and Contingent
Purchase Agreement, the NHLP Deeds of Trust and Mortgages, Pledge of Line of
Credit Note Agreement, Pledge of NHLP's Accounts Agreement and Pledge of
Temporary Investments Agreement, and other documents contemplated by the
transactions described herein on behalf of National or NHLP, as the case may be,
and (ii) who will, until replaced by another officer or officers duly
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authorized for that purpose, act as their representatives for the purposes of
executing documents and delivering and receiving notices and other
communications in connection with the Loan Documents. Agent may conclusively
rely on such certificate until Agent receive notice in writing from Borrower to
the contrary.
(h) Documents-Borrower. Borrower shall deliver to Agent the Notes and
Pledge of Stock Agreement, duly completed and executed by Borrower, together
with certificates for Twenty Nine Million Five Hundred Eighty Five Thousand
Seven Hundred Ninety Eight (29,585,798) shares of stock of National, with duly
executed stock powers in blank.
(i) Documents-NHC and NHLP. National and NHLP shall deliver to Agent
the Guarantee and Contingent Purchase Agreement, duly completed and executed by
National and NHLP.
(j) Documents-NHLP. NHLP shall deliver to Agent the NHLP Deeds of Trust
and Mortgages, all title insurance policies and coverages required by the NHLP
Deeds of Trust and Mortgages and such consent and estoppel certificates
requested by the Agent executed by all parties holding prior liens on the
Pledged Nursing Homes. Such estoppel certificates shall be in form and
substance satisfactory to Agent and its counsel. In the event NHLP does not
deliver all of the required documents in connection with the NHLP Deeds of
Trust and Mortgages delivered and executed at the Closing, NHLP shall have
thirty (30) days from the Closing Date to deliver such required documentation
or, in the event that NHLP is unable to deliver and/or record all such
documentation, NHLP shall have the right to substitute additional Pledged
Nursing Homes acceptable to the Majority Lenders and shall have sixty (60) days
from the Closing Date to deliver and execute additional NHLP Deeds of Trust and
Mortgages and deliver the documentation required by Agent described above with
respect to such substitute Pledged Nursing Homes. NHLP shall also deliver to
Agent the Pledge of NHLP's Accounts Agreement and financing statements as
required by Agent, duly completed and executed by NHLP.
(k) Documents-NHC. National shall deliver to Agent the Security and
Pledge Agreement (Temporary Investments), the Security and Pledge Agreement
(Note), and financing statements as required by Agent, duly completed and
executed by National.
(l) Determination Letter. NHLP shall provide Agent with evidence of
the filing of an application for a determination letter from the IRS stating
that the Plan meets the requirements for qualification under section 401(a) of
the Code and the regulations thereunder, that the Plan meets the requirements
of sections 4975(e)(7) and 409
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of the Code and constitutes an ESOP, and that the Trust qualifies as an
exempt trust under section 501(a) of the Code. In addition, such
application shall contain no exceptions to qualification, except that
continued qualification of the Plan will depend on its effect in operation,
which may be reviewed periodically. However, reference may be made to the
fact that the determination letter, when issued, may be subject to adoption
of proposed amendments requested by the IRS. Borrower or NHLP shall also
provide Agent with copies of all the documents or amendments filed with the
IRS to obtain the determination letter.
(m) Value of Stock. Borrower shall provide Agent with a certificate of
Valuemetrics, Inc. that is in all respects satisfactory to Agent stating
that a "qualified independent appraiser," as defined in Section
401(a)(28)(C) and Section 170 of the Code and the regulations thereunder,
has valued the Stock to be worth no less than Fifty Million and No/100
Dollars ($50,000,000.00) using the factors set forth in applicable IRS
Revenue Rulings and judicial decisions, including Department of Labor
proposed regulation Section 2510.3(18).
(n) Event of Taxability. No Event of Taxability shall have occurred.
(o) Event of Default. No Event of Default shall have occurred and be
continuing.
(p) Representations and Warranties. The representations and
warranties in the Loan Documents shall be true and correct on and as of the
Closing Date, and the Trustee and the chief financial officer of National
and NHLP shall have delivered to Agent a duly executed certificate with
respect to their respective representations and warranties satisfactory in
all respects to Agent as to the foregoing.
(q) Additional Documents or Information. Borrower shall provide Agent
with any other documents or information that Agent or Agent's counsel,
Messrs. Farris, Warfield & Kanaday, may reasonably require.
Section 10.2. Waiver. No advance of the proceeds of the Loan shall
constitute a waiver of any of the conditions of Banks' obligation to make the
Loan, and the failure of Borrower to satisfy any condition not satisfied at
Closing within ten (10) days after receipt of written notice from the Majority
Banks shall constitute an Event of Default hereunder.
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ARTICLE XI
DEFAULT
Section 11.1. Definition. The term "Event of Default," whenever used
in this Agreement and in any instrument referred to herein, shall mean any one
or more of the following events or conditions:
(a) Principal or Interest Payment. Failure by Borrower to
make payment of any installment of principal or interest on any of the
obligations contained herein or in the Notes within five (5) business
days of when the same shall be due and payable under the terms hereof
or thereof.
(b) Covenant or Agreement. Any breach by Borrower, NHLP
and/or National of any covenant, agreement, condition precedent, or
undertaking of Borrower, NBLP and/or National contained in this
Agreement, if such breach shall continue without being cured to
Majority Banks' satisfaction for thirty (30) days after notice thereof
to Borrower from Agent by certified mail.
(c) Representations or Warranties. Any breach of Borrower's,
NHLP's and/or National's representations or warranties contained
herein or any misstatement or omission of fact or failure to state
facts necessary to make such representations and warranties in this
Agreement not misleading.
(d) Guarantee. Any breach of any agreement, undertaking, or
covenant contained in the Guarantee and Contingent Purchase Agreement
or the occurrence of any event of default as described in the other
Loan Documents or in any other agreement now or hereafter executed by
Borrower or Guarantors that evidences or secures the Indebtedness if
such breach or default shall continue without being cured to Majority
Banks' satisfaction for thirty (30) days after notice thereof to
Borrower from Agent by certified mail.
(e) Misleading Report. Any report, certificate, financial
statement or other instrument furnished in connection with this
Agreement or the borrowings hereunder shall prove to be false or
misleading in any material respect.
(f) Compliance with Plan and Trust. Except as required by
ERISA, failure by the Borrower or the Trustee to comply with the terms
of the Plan document or the Trust agreement.
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<PAGE> 32
(g) Involuntary Bankruptcy or Receivership Proceedings. A
receiver, custodian, liquidator or trustee of NHLP or National, or of
any of their property, is appointed by the order or decree of any
court or agency or supervisory authority having jurisdiction, and such
decree or order remains in effect for more than sixty (60) days; or
Borrower, NHLP or National is adjudicated bankrupt or insolvent; or
any of the property of Borrower, NHLP or National is sequestered by
court order and such order remains in effect for more than sixty (60)
days; or a petition is filed against Borrower, NHLP or National under
any state or federal bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution, liquidation or
receivership law of any jurisdiction, whether now or hereafter in
effect, and not dismissed within sixty (60) days of filing.
(h) Voluntary Petitions. Borrower, NHLP or National takes
affirmative steps to prepare to file or files a petition in voluntary
bankruptcy or seeks relief under any provision of any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction, whether now or
hereafter in effect, or consents to the filing of any petition against
it under any such law.
(i) Monetary Judgment. Final judgment for the payment of
money exceeding valid, applicable, collectible insurance coverage by
more than One Hundred Thousand and No/100 Dollars (S100,000.00) shall
be rendered against the Borrower, NHLP or National and such judgment
is not discharged or satisfied within one hundred twenty (120) days of
the date such judgment becomes final.
(j) Existence. "The Borrower, NHLP or National shall cease to
exist.
(k) Plan Termination. The complete termination of the Plan,
which shall include, without limitation, the complete cessation of
contributions by National and its Affiliates to Borrower or the
termination of the Plan by appropriate corporate resolution(s).
(1) Tax Lien. The filing of any tax lien whatsoever with
respect to any of the Plan's or the Guarantors' property, except for a
tax lien that is being contested in good faith and for which Borrower
or Guarantors, as the case may be, provide additional security to
Banks satisfactory in all respects to Banks.
(m) Plan Failure. The failure of the Plan to qualify as an
ESOP under Section 401(a), and the failure of the Trust to qualify as
a tax exempt trust under Section
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501(a), respectively, of the Code after a final determination by the
IRS of such disqualification at the appeals level of the IRS.
(n) Injunctive Relief under ERISA. The commencement of any
proceeding under ERISA by or against Borrower, any of the Banks, the
Agent, the Plan, the Trust, or either of the Guarantors seeking
injunctive relief with respect to any of the terms, conditions, and
provisions of the Loan Documents, which proceeding is not dismissed
within thirty (30) days of its filing.
(o) Cross Default. The occurrence of any Event of Default as
defined under that certain Loan and Security Agreement dated as of
January 20, 1988 by and between Marine Midland Bank, N.A., not
individually but as Trustee of the National Health Corporation
Leveraged Employee Stock Ownership Trust and SCS or under any document
executed in connection therewith, including but not limited to that
certain Guarantee and Contingent Purchase Agreement dated as of
January 20, 1988 by and between National and SCS.
Section 11.2. Remedies.
(a) Due and Payable. Upon the occurrence of any Event of
Default, at the option of the Majority Banks, all obligations of
Borrower contained herein or in the Notes shall become due and payable
immediately without presentment, demand, or notice to Borrower or any
other person obligated hereon or thereon, except as otherwise provided
in Section 11.1.(b) and Section 11.1.(d) above. Notwithstanding
anything in this Agreement or the Notes to the contrary, upon the
occurrence of an Event of Default, Banks shall be entitled to payment
from Borrower only from (i) the unreleased Shares of Stock of
National, (ii) the Contributions, and (iii) earnings attributable to
the unreleased shares of Stock of National and the investment of the
Contributions.
(b) Uniform Commercial Code. Agent on behalf of the Banks
shall have and may exercise any or all of the rights and remedies of a
secured party (i) under the Uniform Commercial Code, and (ii) as
otherwise granted herein or under any other law or under any other
agreement now or hereafter executed by Borrower and/or Guarantors,
within the limitations of Treas. Reg. 54.4975-7 or any applicable
successor regulation, including without limitation the right and power
to sell at public or private sale or sales, or otherwise dispose of or
utilize, any such portion of the Collateral pledged hereby or by the
Loan Documents and any part or parts thereof in any manner authorized
or permitted under the Uniform Commercial Code after default by a
debtor. Agent on behalf of Banks may apply the proceeds
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thereof toward the payment of any costs and expenses and attorneys' fees
and legal expenses thereby incurred by Agent on behalf of Banks and toward
payment of the obligations secured hereby in such order or manner as Agent
may elect.
(c) Disposition. To the extent permitted by ERISA and
other relevant law, Borrower expressly waives any notice of sale or other
disposition of the Collateral and all other rights or remedies of Borrower
or formalities prescribed by law relative to sale or disposition of the
Collateral or exercise of any other right or remedy of Agent or Banks
existing after default hereunder. To the extent any such notice cannot be
waived, Borrower agrees that if such notice is mailed, postage prepaid, or
sent by telegram, charges prepaid, to Borrower at Borrower's address herein
stated at least five (5) days before the time of the sale or disposition
such notice shall be deemed reasonable and shall satisfy fully any
requirement of giving notice. All recitals in any instrument of assignment
or any other instrument executed by Agent or Banks incidental to sale,
transfer, assignment, or other disposition or utilization of the Collateral
or any proceeds thereof, or any part thereof shall be full proof of the
matters stated therein. No other proof shall be required to establish full
legal propriety of the sale or other action taken by Agent or Banks or of
any fact, condition, or thing incident thereto, and all prerequisites of
such sale or other action or of any fact, condition, or thing incident
thereto shall be presumed conclusively to have been performed or to have
occurred.
ARTICLE XII
BANKS' AGREEMENT
Except as provided in Section 12.8. below, this Article XII is between
and among the Agent and the Banks only. Neither the Borrower, NHLP, nor
National, nor any other creditor of the Borrower, NHLP or National nor any
other Person shall have any rights, duties or obligations under this Article
XII, whether as a third party beneficiary or otherwise.
Section 12.1. Authorization. With respect to all funds advanced
hereunder or under the Notes, TNB, IT, SCS and ST shall be obligated to advance
thirty two percent (32%), thirty percent (30%), eighteen percent (18%), and
twenty percent (20%), respectively, and each such Bank shall own a
corresponding undivided interest in the Collateral and Loan Documents. Each
Bank authorizes the Agent to act on behalf of such Bank or holder to the extent
provided herein or in any document or instrument delivered hereunder or in
connection herewith and signed by such Bank, and to take such other action
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as may be reasonably incidental thereto. The Agent shall be considered as
acting solely in an administrative and ministerial capacity, not as trustee or
other fiduciary of the Banks. The Agent shall not be construed as having any
agency or fiduciary relationship with the Borrower, National or NHLP
whatsoever. The Agent shall not have any duties or obligations to the Banks
other than those expressly provided for in the Loan Documents. As to any
matters provided for by the Loan Documents (including, without limitation,
enforcement or collection of the Notes, the Guarantee and Contingent Purchase
Agreement, or any of the other Loan Documents), the Agent shall not be required
to exercise any discretion or take any action, but shall be fully protected in
so acting or in refraining from acting, upon the instructions of the Majority
Banks (except as otherwise provided in Section 13.7. for matters which require
the consent of all Banks), and such instructions shall be binding upon all
Banks and holders of the Notes, and the Agent shall not be liable to any party
hereto for any consequence of any such action or refraining from action.
Notwithstanding any instructions of the Majority Banks, the Agent shall not be
required to take any action that exposes the Agent to personal liability or
that is contrary to any Loan Document or applicable law.
Section 12.2. Standard of Care. Neither the Agent nor any of its
officers, directors, agents, employees or representatives shall be liable for
any action taken or omitted to be taken by it or any of them under or in
connection with any Loan Document, except for its or their own gross negligence
or wilful misconduct. Without limitation of the generality of the foregoing,
the Agent: (a) may treat the payee of any Notes as the holder thereof and as a
Bank hereunder until the Agent receives written notice of the assignment or
transfer thereof signed by such payee and in form satisfactory to the Agent
(which notice shall be binding on all parties hereto); (b) may consult with
legal counsel (including counsel for the Borrower), independent public
accountants and other experts and advisors selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants, experts or other
advisors; (c) makes no warranty or representation to any Bank and shall not be
responsible to any Bank for any statements, warranties or representations made
in or in connection with any Loan Document or for any failure or delay in
performance by the Borrower or any Bank under the Loan Documents; (d) shall not
have any duty to ascertain or to inquire as to the performance or observance OF
any of the terms, covenants or conditions of any Loan Document or to inspect
the assets (including, without limitation, the books and records) of the
Borrower, NHLP or National or to inspect any Collateral; (e) shall not be
responsible to any Bank for the due execution, legality, validity,
enforceability, perfection, collectability, genuineness, sufficiency or value
of any Loan Document or
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Collateral or any other instrument or document furnished pursuant thereto or
for the accuracy or completeness of any credit or other information provided to
the Banks; (f) shall incur no liability under or in respect of any Loan
Document by acting upon any notice, consent, certificate or other instrument or
writing (which may be by telecopier, telegram, cable or telex) believed by it
to be genuine and signed or sent by the proper party or parties; and (g) shall
incur no liability for relying on any matters of fact that might reasonably be
expected to be within the knowledge of the Borrower, NHLP or National or upon a
certificate or other writing signed by Borrower, NHLP or National.
Section 12.3. No Waiver of Rights. With respect to the Notes, the
Agent shall have the same rights and powers hereunder as any other Bank and may
exercise the same as though it were not the Agent. The Agent may accept
deposits from, and generally engage in any kind of business with, the Borrower,
NHLP and National.
Section 12.4. Payments. All payments (including prepayments) by the
Borrower, NHLP or National on account of the Notes shall be made at the main
office of the Agent prior to 10:00 a.m., Nashville time, on the date of payment
in immediately available funds and, when due or upon instructions from the
Borrower, NHLP or National, may be made by debit to the Borrower's, NHLP's or
National's general account with Agent, as appropriate. The Agent shall use its
best efforts to deliver to each Bank on the same day as received by Agent in
immediately available funds such Bank's ratable share of all payments received
by the Agent for the benefit of the Banks but in the event Agent is unable to
deliver such payments to any Bank on the same day of receipt, Agent agrees to
pay such Bank interest on the payment for each day the Agent is unable to
deliver the payments after the date of its receipt based on the overnight
federal funds rate of interest. Any payment due for any reason under this
Agreement that is required to be made on a date on which the Agent is not open
for business shall be extended until the next day on which the Agent is open
for the transaction of business.
Section 12.5. Indemnification. The Agent shall not be required to do
any act hereunder or under any other document or instrument delivered hereunder
or in connection herewith or take any action toward the execution or
enforcement of the agency hereby created, or to prosecute or defend any suit in
respect of this Agreement or the Notes or the Guarantee and Contingent Purchase
Agreement or the Collateral or to advance funds hereunder upon the failure by
any Bank to fund its pro rata share of the Commitment hereunder, unless ratably
indemnified to its satisfaction (to the extent not reimbursed by Borrower) by
the holders of the Notes against loss, cost, liability and expense (including
reasonable fees and
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out-of-pocket expenses of counsel), claim, demand, action, loss or liability
(except such as result from Agent's gross negligence or willful misconduct)
that Agent may suffer or incur in connection with this Agreement or any action
taken or omitted by Agent hereunder. If any indemnity furnished to the Agent
for or against any loss, cost, liability, and expense or for any purpose shall,
in the opinion of the Agent, be insufficient or become impaired, the Agent may
call for additional indemnity and not commence or cease to do the acts
indemnified against until such additional indemnity is furnished. Each Bank
agrees to reimburse the Agent promptly upon demand for such Bank's pro rata
share of any expenses referred to in Section 13.13. incurred by the Agent to
the extent that the Agent is not reimbursed for such expenses by the Borrower.
Each Bank agrees to, in accordance with its pro rata share of the
Commitment hereunder, indemnify Agent (to the extent not reimbursed by
Borrower) against any cost, expense (including reasonable fees and
out-of-pocket expenses of counsel), claim, demand, action, loss or liability
(except such as result from Agent's gross negligence or willful misconduct)
that Agent may suffer or incur in connection with this Agreement or any Loan
Document or any action taken or omitted by Agent hereunder or under any Loan
Document.
Section 12.6 Exculpation. Neither Agent nor any of its directors,
officers, employees or agents shall be liable for any action taken or not taken
by it in connection herewith (a) with the consent or at the request of the
Banks or Majority Banks, as appropriate, or (b) in the absence of its own gross
negligence or willful misconduct. Neither Agent nor any of its directors,
officers, employees or agents shall (i) be responsible for any recitals,
representations or warranties contained in, or for the execution, validity,
genuineness, effectiveness or enforceability of this Agreement, any Note or any
other instrument or document delivered hereunder or in connection herewith,
(iii) be responsible for the validity, genuineness, perfection, effectiveness,
enforceability, existence, value or enforcement of any Collateral or security,
or (iii) be under any duty to inquire into or pass upon any of the foregoing
matters, or to make any inquiry concerning the performance by Borrower or any
other obligor of its obligations.
Section 12.7. Credit Investigation. Each Bank acknowledges that it has
made such inquiries and taken such care on its own behalf as would have been
the case had the Commitment been granted and the Loan made directly by such
Bank to the Borrower. Each Bank agrees and acknowledges that the Agent makes no
representations or warranties about the creditworthiness of the Borrower or any
other party to this Agreement or with respect to the legality, validity,
sufficiency or enforceability of this Agreement, the Notes or
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<PAGE> 38
the value of any security therefor and that each Bank has not entered into this
Agreement in reliance upon any action, statement, representation, or warranty
of any other Bank or Agent. Each Bank agrees that it will, independently and
without reliance upon the Agent or any other Bank and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement and
the other loan Documents. Neither the Agent nor any other Bank shall have any
obligation whatsoever to make any such credit analysis or decisions for a Bank
or to provide any credit or other information with respect to the Borrower now
or in the future in the possession of the Agent or such other Bank, except that
the Agent shall promptly forward to the Banks a copy of any notice received by
the Agent from the Borrower of the occurrence of an Event of Default hereunder
and copies of all material documents delivered to it by the Borrower, NHLP or
National pursuant to the Loan Documents.
Section 12.8. Resignation and Replacement. Agent may resign at any
time as Agent under the Loan Documents by giving written notice thereof to
Banks and Borrower, which resignation shall be effective upon a successor
Agent's acceptance of its appointment. Borrower or the Majority Banks may
replace Agent at any time following sixty (60) days' prior written notice to
Agent and Banks; provided, however, that Borrower shall have such right only in
the absence of an Event of Default. Upon any such resignation or replacement,
the Majority Banks shall have the right to appoint a successor Agent hereunder,
which successor Agent shall also be reasonably acceptable to Borrower. If no
such successor Agent shall have been so appointed by the Majority Banks and
shall have accepted such appointment within thirty (30) days after the retiring
Agent's giving of notice of resignation, then the retiring Agent may, on behalf
of Banks, appoint a successor Agent, which shall be a commercial bank organized
under the laws of the United States of America or of any State thereof having
assets of at least One Billion and No/100 Dollars ($1,000,000,000.00) and which
shall be reasonably acceptable to Borrower. Upon the acceptance of any
appointment as Agent under the Loan Documents by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations under the Loan
Documents. After any retiring Agent's resignation or replacement as an Agent
under the Loan Documents, the provisions of this Section 12.8. shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
an Agent under the Loan Documents.
Section 12.9. Proration of Payments. Except as may be provided in
other sections of this Agreement, all funds received by Banks, or any of them,
shall be allocated pro rata among all
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Banks in proportion to the then outstanding balances due on the Notes. If any
Bank or other holder of any Notes shall obtain any payment or other recovery
(whether voluntary, involuntary, by application of offset or otherwise) on
account of principal of or interest on the Note then held by it in excess of
its pro rata share of payments and other recoveries obtained by all Banks or
other holders on account of principal of and interest on the Note then held by
them, such Bank or other holder shall purchase from the other Banks or holders
such participation in the Note held by them as shall be necessary to cause such
purchasing Bank or other holder to share the excess payment or other recovery
ratably with each of them; provided, however, if all or any portion of the
excess payment or other recovery is thereafter recovered from such purchasing
holder, the purchase shall be rescinded and the purchase price restored to the
extent of such recovery, but without interest. Notwithstanding the foregoing,
no Bank shall, except as provided in Section 12.11 below, have any obligation
to account for or share any amount, property or profit of any kind received by
it for its own account arising out of a banking or other relationship with the
Borrower, NHLP or National apart from the obligations under the Loan Documents.
Section 12.10. No Liability for Errors. The Agent shall not be liable
for any error in computing the amounts payable to any Bank in respect of any
amounts due to the Banks under the Loan Documents or in making payment of such
amounts. In the event of an error in computing any amount payable to any Bank
or in the making of a payment, the Agent, the Borrower and such Bank shall,
forthwith upon discovery of such error, make such adjustment as shall be
required to correct such error, including the payment of interest on any
amounts that were incorrectly paid or not paid from the date paid or of the
date due to the date returned or paid, all as the case may be, at the average
daily rate for the overnight sale of federal funds by the Agent in effect for
such period.
Section 12.11. Offset. In addition to and not in limitation of all
rights of offset that any Bank or other holder of any Note may have under
applicable law, each Bank or other holder of a Note shall, upon the occurrence
of any Event of Default described in this Agreement or in the Note in question,
have the right to appropriate and apply to the payment of such Notes any and
all balances, credits, deposits, accounts or moneys of the Borrower, National
and/or NHLP then or thereafter with such Bank or other holder; provided,
however, all funds received as a result of such offsets shall be applied pro
rata among the Banks in proportion to the then outstanding balances of the
Notes. Each Bank agrees to notify the other Banks immediately upon the exercise
by it of this right of offset. SCS agrees that any such funds of Borrower or
NHLP received as a result of any such offset by SCS shall be applied to the
Notes pro rata as set forth in this section and shall not be
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<PAGE> 40
applied to satisfy any portion of the Sovran Loan. The Banks agree that any
funds of National received as a result of any such offset by SCS may be applied
to satisfy the Sovran Loan; provided, however, that any such funds of National
derived from payments by NHLP on the Line of Credit Note or from transfers made
to National by NHLP without consideration (excluding, however, distributions
made with respect to NHLP limited partnership units owned by National) shall be
applied to the Notes pro rata as set forth in this section and shall not be
applied to satisfy any portion of the Sovran Loan.
ARTICLE XIII
MISCELLANEOUS
Section 13.1. Survival. All agreements, representations, and
warranties contained herein or made in writing by or on behalf of Borrower,
National and NHLP in connection with the transactions contemplated hereby shall
survive the execution and delivery of this Agreement, any investigation at any
time made by Banks or on their behalf, and the acquisition and disposition of
the term note or notes evidencing the Indebtedness secured hereby. All
statements contained in any certificate or other instrument delivered by or on
behalf of Borrower pursuant hereto or in connection with the transactions
contemplated hereby shall be deemed representations and warranties by Borrower,
National and NHLP hereunder.
Section 13.2. Selection of Remedies. This Agreement shall
not prejudice the right of Agent and/or Banks at their option to enforce
collection of the Notes evidencing the Indebtedness secured hereby by suit or
in any other lawful manner, or to resort to any other security for the payment
of the Notes, this Agreement and the other Loan Documents being additional,
cumulative, and concurrent security for the payment of such obligations.
Section 13.3. Cumulative Remedies. No right or remedy in this Loan and
Security Agreement, the Notes, or the other Loan Documents referred to herein
is intended to be exclusive of any other right or remedy, but every such right
or remedy shall be cumulative and shall be in addition to every other right or
remedy herein or in such notes conferred, now or hereafter existing, at law, in
equity, or by statute.
Section 13.4. Delay or Omission. No delay or omission by Banks to
exercise any right or remedy shall impair any other right or remedy or be
construed to be a waiver of any default or an acquiescence therein. Every right
and remedy herein conferred or now or hereafter existing at law, in equity, or
by statute may be exercised separately or concurrently and in such order and as
often as may be deemed reasonable by Agent or Banks.
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<PAGE> 41
Section 13.5. Invalidity. The invalidity or unenforceability of any of
the rights or remedies herein provided in any jurisdiction shall not in any way
affect the right to the enforcement in such jurisdiction or elsewhere of any of
the other rights or remedies herein provided.
Section 13.6. Time. Time is of the essence with regard to each and
every provision of this Agreement.
Section 13.7. Entire Agreement. This Agreement, and the documents
executed and delivered pursuant hereto, constitute the entire agreement between
the parties and no amendment or waiver of any provision of any Loan Document,
nor any consent thereunder, shall in any event be effective without the written
concurrence of the Agent acting in each case at the direction of the Majority
Banks and, then such waiver or consent shall be effective only in the specific
instance and for the specific purposes for which given; provided, however, that
no amendment, waiver or consent shall, unless in writing and signed by all the
Banks, do any of the following: (a) increase or extend the Commitment of the
Banks, (b) reduce the principal of, or interest on, the Notes or any fees
thereunder, (c) postpone any date fixed for any payment of principal, of or
interest on, the Notes or any fees thereunder, (d) release any Collateral
except as shall be otherwise provided in any Loan Document, (e) take any action
that requires the signing or consent of all the Banks pursuant to the terms of
any Loan Document, (f) change the definition of Majority Banks, (g) modify or
amend Article V hereunder, or (h) amend or waive Section 3.1. or this Section
13.7. and provided, further, that no amendment, waiver or consent shall, unless
in writing and signed by the Agent in addition to the Banks required
hereinabove to take such action, affect the rights or duties of the Agent under
any Loan Document.
Section 13.8. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the successors and assigns of the
parties hereto; provided, however, in no event shall Borrower or any Guarantor
assign its rights under the Loan Documents without the prior written consent of
Agent. Any such assignment without such prior written consent shall be void.
Section 13.9. Exempt Loan. The Loan is intended to be a loan exempt
from the "prohibited transaction" provisions of Sections 406(a) of ERISA and
Section 4975(c)(1)(A) through (c)(1)(E) of the Code by virtue of the provisions
of Section 408(b)(3) of ERISA, Section 408(e) of ERISA, Sections 4975(d)(3) and
(13) of the Code and the applicable regulations thereunder. The terms of this
Agreement, the Notes and the other Loan Documents, and the rights and
obligations of the parties hereunder and thereunder, shall be construed and
interpreted so as to comply with such provisions and regulations and with
rulings thereunder.
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Section 13.10. Counterparts. This Agreement may be executed in two
(2) or more counterparts, and it shall not be necessary that the signatures of
all parties be contained on any one counterpart; each counterpart shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
Section 13.11. Waiver of Jury Trial. NATIONAL, NHLP, AGENT AND THE
BANKS HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE (TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW) ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR THE TRANSACTIONS COMTEMPLATED HEREIN. FURTHER, NHLP AND NATIONAL
HEREBY CERTIFY THAT NO REPRESENTATIVE OF AGENT OR OF ANY OF THE BANKS OR ANY
OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT ANY OF THE BANKS OR
OTHER HOLDER OF THIS AGREEMENT WOULD NOT, IN THE EVENT OF SUCH LITIGATION, SEEK
TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION. NHLP AND NATIONAL
ACKNOWLEDGE THAT THE BANKS HAVE BEEN INDUCED TO MAKE THE LOAN EVIDENCED BY THE
NOTES BY, INTER ALIA, THE PROVISIONS OF THIS SECTION 13.11.
Section 13.12. Closing. The closing shall occur at the offices of
Messrs. Farris, Warfield & Kanaday on December 21, 1988 at 10:00 a.m. Nashville
time or at such other location and time as the parties hereto shall mutually
agree.
Section 13.13. Costs, Expenses, and Taxes. NHLP agrees to pay on
demand all out-of-pocket costs and expenses of Agent and the Banks (including
the reasonable fees and out-of-pocket expenses of counsel for Agent and the
Banks and of local counsel, if any, whom Agent and the Banks' counsel may
retain) in connection with the preparation, execution, delivery, administration,
enforcement and/or protection of Agent's and the Banks' rights under the Loan
Documents. In addition, National and NHLP shall indemnify Agent and the Banks
from and against any and all costs, expenses (including reasonable legal fees),
claims, demands, actions, losses or liabilities (except such as are a direct
result of the gross negligence or willful misconduct of Agent and/or the Banks)
that Agent and/or the Banks may suffer or incur in connection with this
Agreement or any of the Loan Documents. In addition, NHLP agrees to pay and to
hold Agent and the Banks harmless from all liability for any stamp or other
taxes (including taxes under Tennessee Code Annotated Section 67-4-409 due upon
the recordation of mortgages and financing statements) that may be payable in
connection with the execution or delivery of this Agreement and the Collateral
under this Agreement, or the issuance of the Notes or any other Loan Documents
delivered or to be delivered under or in connection with this Agreement. NHLP,
upon request, promptly will reimburse Agent and the Banks for all amounts
expended, advanced, or incurred by Agent and the Banks
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<PAGE> 43
to satisfy any obligation of Borrower under this Agreement or any other Loan
Documents, or to perfect a lien in favor of the Banks, or to protect the Pledged
Nursing Homes or the businesses of Borrower, National and NHLP, or to collect
the Indebtedness, or to enforce the rights of Agent and Banks under this
Agreement or any other Loan Document, which amounts will include without
limitation all court costs, attorneys' fees, fees of auditors and accountants,
costs of insurance, and investigation expenses reasonably incurred by Agent and
the Banks in connection with any such matters, together with interest thereon at
the rate applicable to past due principal and interest as set forth in the Loan
Documents but in no event in excess of the maximum lawful rate of interest
permitted by applicable law on each such amount. All obligations for which this
Section provides shall survive any termination of this Agreement.
Section 13.14. Conflicts. In the event of any conflict between or
among any provision of the Guarantee and Contingent Purchase Agreement and this
Agreement, the provisions of the Guarantee and Contingent Purchase Agreement
shall control and prevail over this Agreement; provided, however, as to the
rights and obligations of the Borrower only, this Agreement shall control and
prevail. In the event of any conflict between or among any provision of this
Agreement and any other Loan Document other than the Guarantee and Contingent
Purchase Agreement, the provisions of this Agreement shall control and prevail
over the other Loan Documents other than the Guarantee and Contingent Purchase
Agreement.
ARTICLE XIV
CHOICE OF LAW
Section 14.1. Tennessee. This Agreement is being delivered and is
intended to be performed in the State of Tennessee and, to the extent not
governed by the laws of the United States of America, shall be construed and
enforced in accordance with and governed by the laws of such State.
Section 14.2. Jurisdiction. THE BORROWER, NHLP, NATIONAL AND EACH
BANK HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY TENNESSEE STATE OR
FEDERAL COURT SITTING IN THE CITY OF NASHVILLE OVER ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. THE BORROWER, NHLP,
NATIONAL AND EACH BANK HEREBY IRREVOCABLY WAIVE TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY OBJECTION THAT THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE
VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT AND ANY
CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. THE BORROWER, NHLP AND NATIONAL AND EACH BANK
HEREBY AGREE THAT A FINAL JUDGMENT IN
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ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT, AFTER ALL
APPROPRIATE APPEALS, SHALL BE CONCLUSIVE AND BINDING UPON EACH OF THEM.
Section 14.3. Process. PROCESS MAY BE SERVED IN ANY SUIT, ACTION
COUNTERCLAIM OR PROCEEDING OF THE NATURE REFERRED TO IN SECTION 14.2. HEREOF
BY MAILING COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID,
RETURN RECEIPT REQUESTED, TO THE ADDRESS OF THE BORROWER, NHLP, NATIONAL AND
EACH BANK, AS APPLICABLE, AS SET FORTH IN SECTION 15.1. HEREOF OR TO ANY OTHER
ADDRESSES OF WHICH THE BORROWER, NHLP, NATIONAL AND EACH BANK HAVE GIVEN
WRITTEN NOTICE TO THE AGENT. THE BORROWER, NHLP, NATIONAL AND EACH BANK HEREBY
AGREE THAT SUCH SERVICE (A) SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE
OF PROCESS UPON EACH OF THEM IN ANY SUCH SUIT, ACTION, COUNTERCLAIM OR
PROCEEDING, AND (B) SHALL TO THE FULLEST EXTENT ENFORCEABLE BY LAW, BE TAKEN
AND HELD TO BE VALID PERSONAL SERVICE UPON AND PERSONAL DELIVERY TO EACH OF
THEM.
ARTICLE XV
NOTICE
Section 15.1. Notice. Any communications between the parties hereto
or notices provided herein shall be deemed given upon the mailing of same by
certified mail, return receipt requested, to Banks c/o Agent, at Third National
Bank, 201 Fourth Avenue North, Nashville, Tennessee 37244 Attention: Melanie B.
Dunn, to each of the Banks directly at the addresses set forth on Exhibit L
attached hereto and incorporated herein by reference, and to Borrower at 250
Park Avenue, New York, New York, Attention: Stephen J. Hartman, Jr. or to such
other addresses as the parties may indicate hereafter in writing.
Section 15.2. Notice to SCS. Upon the occurrence and continuance of
an Event of Default, Agent promptly shall give written notice of such Event of
Default to SCS as lender under the Sovran Loan. SCS shall also, upon the
occurrence and continuance of a default or an Event of Default (as such term is
defined in the loan agreement governing the Sovran Loan), promptly give written
notice of such default or Event of Default to Agent.
ARTICLE XVI
SEVERABILITY
Section 16.1. Severability. If any provision of this Agreement shall
be held invalid under any applicable law, SUCH invalidity shall not affect any
other provision of this Agreement that can be given effect without the invalid
provision, and, to this end, the provisions hereof are severable.
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IN WITNESS WHEREOF, this Agreement has been executed and delivered as
of the day and date first above written.
BORROWER
NATIONAL HEALTH CORPORATION
LEVERAGED EMPLOYEE STOCK
OWNERSHIP TRUST
By: MARINE MIDLAND BANK, N.A.
solely as trustee and not
in its individual or
corporate capacity
By: /s/
-------------------------------
Title: MGR-EBTS
---------------------------
250 Park Avenue
New York, New York
BANKS
THIRD NATIONAL BANK IN NASHVILLE
By: /s/
-------------------------------
Title: Senior Vice President
----------------------------
Third National Bank Building
201 Fourth Avenue, North
Nashville, Tennessee 37244
SOVRAN BANK/CENTRAL SOUTH
By: /s/
-------------------------------
Title: Vice President
----------------------------
One Commerce Place M-5
Nashville, Tennessee 37219
----------------------------
AGENT
THIRD NATIONAL BANK IN
NASHVILLE, AS AGENT
By: /s/
-------------------------------
Title: Senior Vice President
----------------------------
Third National Bank Building
201 Fourth Avenue North
Nashville, Tennessee 37244
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<PAGE> 46
The undersigned hereby enter into this Loan and security Agreement as parties
hereto in order to be bound by any and all applicable representations,
warranties, covenants and agreements contained herein:
NATIONAL HEALTHCORP L.P.
By:/s/ NHC, Inc.
-----------------------------------
Managing General Partner
By:/s/
-------------------------
Title: President
----------------------
1400 City Center
100 Vine Street
Murfreesboro, TN 37130
NATIONAL HEALTH CORPORATION
By:/s/
------------------------------------
Title: Senior Vice President
1400 City Center
100 Vine Street
Murfreesboro, TN 37130
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<PAGE> 47
IRVING TRUST COMPANY
By:/s/
------------------------------
Title:Vice President
1290 Avenue of the Americas
29th Floor
New York, New York 10104
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<PAGE> 48
SOUTHTRUST BANK OF ALABAMA,
NATIONAL ASSOCIATION
By:/s/
----------------------------------
Title: Vice President
420 North 20th Street
Birmingham, Alabama 35203
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<PAGE> 1
Exhibit 10.7
AMENDED AND RESTATED
REVOLVING CREDIT NOTE
Nashville, Tennessee $19,000,000
Originally Dated December 16, 1988
Amended and Restated as of September 1, 1995
WITNESSETH:
WHEREAS, National Health Corporation (now known as National HealthCare
Corporation) ("National") extended a $50,000,000 line of credit (the "Loan") to
National HealthCorp L.P. (now known as National HealthCare L.P.) ("Borrower")
evidenced by that certain Revolving Credit Note dated December 16, 1988 executed
by Borrower to the order of National in the original principal amount of
$50,000,000 (the "Note");
WHEREAS, the purpose of the Loan was to refinance existing debt of
Borrower and to finance the acquisition, construction and renovation of a health
care facilities owned or to be owned by Borrower;
WHEREAS, National Health Investors, Inc. ("NHI") acquired certain
health care facilities from Borrower and National has agreed to permit NHI to
assume repayment of $31,000,000 of the Loan and to likewise have available to it
a line of credit facility under the Loan of up to $31,000,000 to be evidenced by
that certain Revolving Credit Note dated as of September 1, 1995 executed by NHI
to the order of National in the principal amount of $31,000,000;
WHEREAS, the Borrower and National desire to and hereby amend and
restate the Note to reflect the decrease in the revolving credit availability to
Borrower thereunder from $50,000,000 to $19,000,000 pursuant to terms of this
Amended and Restated Revolving Credit Note;
NOW, THEREFORE, FOR VALUE RECEIVED, NATIONAL HEALTHCARE L.P. (the
"Borrower") promises and agrees to pay to the order of National HealthCare
Corporation (the "National") at its offices in Murfreesboro, Tennessee, or at
such other place as may be designated in writing by the holder, in lawful money
of the United States of America, the principal sum of Nineteen Million and
No/100 Dollars ($19,000,000.00), or so much thereof as may be advanced from time
to time by the National, together with interest from the date hereof on the
unpaid principal balance outstanding from time to time hereon computed from the
date of each advance until maturity, at the "Stated Rate" as defined in the
Revolving Credit Agreement between National and Borrower of even date hereof (as
may be amended and/or restated from time to time, the "REVOLVING CREDIT
AGREEMENT").
Interest shall be paid to the National on the 1st day of each month
following the date of execution hereof (the "PAYMENT DATE"). If the Principal
outstanding hereunder exceeds the
<PAGE> 2
Commitment, Borrower shall immediately pay any such excess to National. All
outstanding principal plus accrued interest due hereunder shall be due and
payable in full by Borrower on December 15, 2008. This Revolving Credit Note is
the note referred to and issued under the Revolving Credit Agreement and this
note and the holder hereof are entitled to all the benefits provided for their
benefit referred to therein to which Revolving Credit Agreement reference is
hereby made. All the defined terms used in this Note, except terms otherwise
defined herein shall have the same meaning as such terms have in the Revolving
Credit Agreement.
National shall record on its books or records or on a schedule to this
note the principal amount of each advance. The record thereof, whether shown on
the books or records or on the schedule to this Note shall be conclusive and
binding on the Borrower except in the case of manifest error; provided, however,
that the failure of National to record any of the foregoing shall not limit or
otherwise affect the obligation of the Borrower to repay all advances made under
the Revolving Credit Agreement together with the interest thereon.
The Borrower shall pay an amount equal to .50% (computed on the total
Commitment of National outstanding on December 16, 1988, i.e., $50,000,000.00)
as additional interest hereunder ("ADDITIONAL INTEREST"), payable as follows:
(a) 25% of the Additional Interest on or before December 21,
1988;
(b) 18.75 % of the Additional Interest on or before March 16,
1989;
(c) 18.75% of the Additional Interest on or before June 14,
1989;
(d) 18.75% of the Additional Interest on or before September
12, 1989; and
(e) 18.75% of the Additional Interest on or before December
11, 1989.
All Additional Interest shall be deemed to have been earned as of the
date of this Note and shall be due and payable as set forth in this Note,
irrespective of any events occurring after the date hereof, including but not
limited to (i) Borrower's default under this Note, Revolving Credit Agreement or
any document executed in connection herewith, (ii) Borrower's failure to draw
down the full amount of the indebtedness evidenced by this Note, or (iii)
Borrower's refinancing of the indebtedness evidenced by this Note.
The Borrower reserves privilege to pay all or part of the indebtedness
evidenced hereby at any time before maturity subject to prepayment penalty
described in the Revolving Credit Agreement. National shall apply any such
payment first to accrued interest and then to principal.
Principal and unpaid interest bear interest following any default in
payment of principal and interest as herein provided at the maximum lawful rate
of interest permitted by law until paid. In case of suit, or if this obligation
is placed in an attorney's hands for collection, or to protect the security for
its payment, the undersigned will pay all costs of collection and litigation,
including a reasonable attorneys' fee.
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<PAGE> 3
In the event that there occurs any breach of any promise made in or
default under this Note or in the Revolving Credit Agreement then, at the option
of the holder, the entire indebtedness hereby evidenced shall become due,
payable and collectible then or thereafter, without notice, as the holder may
elect regardless of the date of maturity. The holder may waive any default
before or after the same has been declared and restore this Note to full force
and effect without impairing any rights hereunder, such right of waiver being a
continuing one.
The makers, endorsers, guarantors and all parties to this Note and all
who may become liable for same, jointly and severally waive presentment for
payment, protest, notice of protest, notice of nonpayment of this Note, demand
and all legal diligence in enforcing collection, and hereby expressly agree that
the lawful owner or holder of this Note may defer or postpone collection of the
whole or any part thereof, either principal and/or interest, or may extend or
renew the whole or any part thereof, either principal and/or interest, or may
accept additional collateral or security for the payment of this Note, or may
release the whole or any part of any collateral security and/or liens given to
secure the payment of this Note, or may release from liability on account of
this Note any one or more of the makers, endorsers, guarantors and/or other
parties thereto, all without notice to them or any of them; and such deferment,
postponement, renewal, extension, acceptance of additional collateral or
security and/or release shall not in any way effect or change the obligation of
any such maker, endorser, guarantor or other party to this Note, or of any who
may become liable for the payment thereof.
The Borrower shall pay a "late charge" as set forth below of any
payments of principal and/or interest due when paid after the due date thereof,
(provided that in no event shall said "late charge" result in the payment of
interest in excess of the maximum lawful rate of interest permitted by
applicable law), to cover the extra expenses involved in handling delinquent
payments:
(a) if any payment is from 1 to 15 days late, 1% of the
payment due;
(b) if any payment is from 16 to 20 days late, 2% of the
payment due;
(c) if any payment is 20 or more days late, 5 % of the payment
due.
The term "maximum lawful rate of interest" as used herein shall mean a
rate of interest equal to the higher or greater of the following: (a) the
"applicable formula rate" defined in Tennessee Code Annotated Section
47-14-102(2), or (b) such other rate of interest as may be charged under other
applicable laws or regulations.
This Note amends and restates that certain Revolving Credit Note dated
December 16, 1988 executed by Borrower to the order of National in the original
principal amount of up to $50,000,000 and does not and is not intended by the
parties hereto to constitute a novation of the existing underlying indebtedness.
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<PAGE> 4
This Note has been executed and delivered in, and shall be governed by
and construed according to the laws of the State of Tennessee except to the
extent preempted by applicable laws of the United States of America.
Executed as of this 1st day of September, 1995.
NATIONAL HEALTHCARE, L.P.
By: National, Inc. Managing
General Partner
By: /s/
-----------------------------
Title: Sr V.P.
--------------------
Accepted by:
NATIONAL HEALTHCARE CORPORATION
By: /s/
-----------------------------
Title: Sr. V.P.
-----------------------------
Pay to the order of Third National Bank in Nashville, as Agent, with recourse.
NATIONAL HEALTHCARE CORPORATION
By: /s/
--------------------------------
Title: Sr. V.P.
-----------------------------
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<PAGE> 1
Exhibit 10.8
AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
THIS AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT ("Agreement") made
and entered into as of this 1st day of September, 1995, by and between National
HealthCare L.P., a Delaware limited partnership (formerly known as National
HealthCorp L.P.) ("BORROWER") and National HealthCare Corporation, a Tennessee
corporation (formerly known as National Health Corporation) ("NATIONAL").
W I T N E S S E T H:
WHEREAS, National extended a revolving credit loan in the amount of
550,000,000 (the "$50,000,000 LOAN") to Borrower evidenced by that certain
Revolving Credit Note dated December 16, 1988 executed by Borrower to the order
of National in the original principal amount of $50,000,000 (the "NOTE")
pursuant to the terms of that certain Revolving Credit Agreement dated December
16, 1988 executed by and between Borrower and National (the "AGREEMENT");
WHEREAS, National obtained the funds to loan to Borrower under the
$50,000,000 Loan by selling $50,000,000 of National common stock to National
Health Corporation Leveraged Employee Stock Ownership Trust) (now known as
National HealthCare Corporation Leveraged Employee Stock Ownership Trust) (the
"TRUST");
WHEREAS, the Trust obtained the funds to purchase the National common
stock from a loan made by Third National Bank in Nashville ("TNB"), Irving Trust
Company ("IT"), Sovran Bank/Central South ("SCS") and SouthTrust Bank of Alabama
("ST") pursuant to a Loan and Security Agreement dated December 16, 1988
executed by and among Trust, Borrower, National, TNB, IT, SCS, ST and TNB as
Agent (the "LOAN AGREEMENT");
WHEREAS, the Loan Agreement benefitted the Borrower;
WHEREAS, Borrower transferred certain assets of Borrower to National
Health Investors, Inc., a Maryland corporation ("NHI") in 1991 and NHI
guaranteed, jointly and severally with National and the Borrower, the
indebtedness described in the Loan Agreement;
WHEREAS, at the request of Borrower, National and NHI, the Lenders to
the Loan Agreement have agreed to limit the joint and several guarantee
obligations of Borrower and National to thirty-eight percent (38 %) of the
indebtedness described in the Loan Agreement and limit the guarantee obligation
of NHI to sixty-two percent (62%) of the indebtedness described in the Loan
Agreement;
<PAGE> 2
WHEREAS, Borrower, National and NHI have agreed to likewise allocate
the credit extended under the $50,000,000 Loan between Borrower and NHI by
thirty-eight percent (38 %) and sixty-two percent (62 %), respectively, and NHI
has agreed to assume repayment for sixty-two percent (62%) of the amounts
outstanding under the Note as of September 1, 1995, all as pursuant to the terms
of that certain Revolving Credit Agreement dated as of September 1, 1995
executed by and between NHI and National and that certain Revolving Credit Note
dated as of September 1, 1995 executed by NHI to the order of National in the
principal amount of $31,000,000 in connection therewith;
WHEREAS, National and Borrower desire to amend the Agreement and Note
to reflect the reduction in the commitment to Borrower and to reflect other
changes to the terms of the Agreement;
WHEREAS, National and Borrower desire to amend and restate the
Agreement as hereinafter set forth;
NOW, THEREFORE, for and in consideration of the foregoing premises, and
the covenants and agreements contained herein, and other valuable consideration,
the receipt and sufficiency of which are acknowledged hereby, Borrower and
National hereby agree to amend and restate the Agreement as follows:
ARTICLE I
DEFINITIONS
Section 1.1. As used herein, the following terms shall have the
following meanings (all terms defined in this Section 1.1. or in other
provisions of this Agreement in the singular shall have the same meanings when
used in the plural and vice versa):
"ADJUSTED TANGIBLE NET WORTH" means Adjusted Tangible Net Worth as
defined in Section 7.1(a) of this Agreement.
"AFFILIATE" means:
(a) Any corporation that is a member of the same controlled
group of corporations (within the meaning of Section 414(b) of the
Code) as is National; and
(b) Any other trade or business (whether or not incorporated)
controlling, controlled by, or under common control (within the meaning
of Sections 414(c) and 414(o) of the Code) with National; and
(c) Any other corporation, partnership, or other organization
that is a member of an affiliated service group (within the meaning of
Sections 414(m) and 414(o) of the Code) with National.
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<PAGE> 3
"BONY" means Irving Trust Company later known as The Bank of New York.
"CLOSING" means Closing as defined in Section 5.1. of this Agreement.
"CLOSING DATE" means December 16, 1988.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITMENT" means (a) from the Closing Date until September 1, 1995,
the obligation of National to extend credit to the Borrower pursuant to this
Agreement in the aggregate principal amount of up to Fifty Million and No/100
Dollars ($50,000,000) as set forth in Section 2.1. of this Agreement and (b)
from September 1, 1995, the obligation of National to extend credit to the
Borrower pursuant to this Agreement in the aggregate principal amount of up to
Nineteen Million and No/100 Dollars ($19,000,000) as set forth in Section 2.1.
of this Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESOP" means an employee stock ownership plan, as defined in Section
4975(e)(7) of the Code and the regulations thereunder, qualified under Section
401(a) of the Code.
"EVENT OF DEFAULT" means any Event of Default as such term is defined
in Article IX herein.
"FANB" means First American National Bank.
"FCB" means First City Bank.
"FUNB" means First Union National Bank of Tennessee, formerly known as
Dominion Bank of Middle Tennessee.
"FUNDED DEBT" means Funded Debt as defined in Section 7.1.(a) of this
Agreement.
"GAAP" means generally accepted accounting principles at any date of
determination in respect of a company or entity conducting a business the same
as or similar to that of the company or entity being studied, including, without
limitation, those set forth in applicable bulletins, opinions, pronouncements,
statements and interpretations issued by the Accounting Principles Board, the
American Institute of Certified Public Accountants and the Financial Accounting
Standards Board, consistently applied.
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<PAGE> 4
"INDEBTEDNESS" means all amounts owing under this Agreement and all
indebtedness evidenced by the Note, including accrued interest thereon, and any
and all costs and expenses incurred by National in enforcing or protecting its
rights with respect to the Note, including, but not limited to, reasonable
attorneys' fees.
"IRS" means the Internal Revenue Service.
"LOAN" means any borrowing under this Agreement and/or any extension of
credit by National to or for Borrower pursuant to this Agreement or any other
Loan Documents, including any renewal, amendment, extension or modification
thereof.
"LOAN AGREEMENT" means the Loan and Security Agreement dated December
16, 1988 by and among the Borrower, National, Trust, BONY, SBT, ST and TNB and
TNB as Agent, as amended by that certain First Amendment to Loan and Security
Agreement dated as of October 17, 1991 executed by Trust, Borrower, National,
TNB, ST and TNB as Agent, as amended by that certain Second Amendment to Loan
and Security Agreement dated as of October 17, 1991 executed by Trust, Borrower,
National, TNB, ST and TNB as Agent, as amended by that certain Third Amendment
to Loan and Security Agreement dated December 31, 1991 executed by Trust,
Borrower, National, TNB, ST, FUNB and TNB as Agent, as amended by that certain
Fourth Amendment to Loan and Security Agreement dated May 21, 1992 executed by
Trust, Borrower, National, TNB, ST, FUNB, FANB, FCB and TNB as Agent, as amended
by that certain Fifth Amendment to Loan and Security Agreement dated December
30, 1993 executed by Trust, Borrower, National, NHI, TNB, ST, FUNB, FANB, FCB
and TNB as Agent, as amended by that certain Sixth Amendment to Loan and
Security Agreement dated May 31, 1994 executed by Trust, Borrower, National,
NHI, TNB, ST, FUNB, FANB, FCB and TNB as Agent, as amended by that certain
Seventh Amendment to Loan and Security Agreement dated as of September 1, 1995
executed by Trust, Borrower, National, NHI, TNB, ST, FUNB, FANB, FCB and TNB as
Agent, and as may be hereinafter amended, modified or restated from time to
time.
"LOAN DOCUMENTS" means Loan Documents as defined in Section 3.2. of
this Agreement.
"MAINTENANCE CAPITAL EXPENDITURES" means, with respect to any Person,
expenditures for the improvement, maintenance or renovation of assets which are
capitalized in accordance with GAAP, but specifically excluding, without
limitation, the expansion of existing nursing homes or other healthcare related
facilities and the acquisition, development or construction of new property.
"MAINTENANCE CAPITAL EXPENDITURE AMOUNT" means, with respect to
Borrower for any period, the greater of (a) actual Maintenance Capital
Expenditures made during such period or (b) Five Hundred Dollars ($500.00) per
bed owned or leased by Borrower during such period or any portion thereof.
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<PAGE> 5
"MEMBER" means a participant of the Plan.
"NHI" means National Health Investors, Inc., a Maryland corporation.
"NHI CREDIT AGREEMENT" means the Revolving Credit Agreement dated as of
September 1, 1995 executed by and between National and NHI, as may be amended,
modified or restated from time to time.
"NOTE" means the promissory note executed by Borrower referenced in
Section 3.2. (a) hereof, together with any and all extensions, amendments,
restatements, renewals and modifications thereof.
"PERSON" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof, or any other form of entity.
"PLAN" means the National Health Corporation Leveraged Employee Stock
Ownership Plan, as adopted by National, effective January 20, 1988, now known as
National HealthCare Corporation Leveraged Employee Stock Ownership Plan, and as
may be further amended and/or restated or merged from time to time.
"SBT" means Sovran Bank/Central South, later known as Sovran
Bank/Tennessee.
"ST" means South Trust Bank of Alabama.
"STATED RATE" means that rate of interest charged to the Trust for
borrowings by the Trust pursuant to the Loan Agreement, as such rate shall
change from time to time or be adjusted as provided for in the Loan Agreement.
"SOVRAN LOAN" means that certain loan in the original principal amount
of $38,500,000 from Sovran Bank/Central South to NHESOP, Inc. Leverage Employee
Stock Ownership Trust as evidenced by that certain Loan and Security Agreement
dated January 20, 1988 by and between Marine Midland Bank, N.A., not
individually but as Trustee of the NHESOP, Inc. Leverage Employee Stock
Ownership Trust and Sovran Bank/Central South.
"SUBORDINATED DEBT" means any indebtedness that, to the satisfaction of
National as evidenced by a writing signed by National is by its terms expressly
subject and subordinate in all respects to all payments of Funded Debt.
"TNB" means Third National Bank in Nashville.
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<PAGE> 6
"TRUST" means the National Health Corporation Leveraged Employee Stock
Ownership Trust established by National, effective January 20, 1988, and
appointing Marine Midland Bank, N.A. as Trustee, which has been amended to
replace Marine Midland Bank, N.A. as Trustee with Richard F. LaRoche, Jr. and
Dr. Olin W. Williams as Co-Trustees and to change the name to National
HealthCare Corporation Leveraged Employee Stock Ownership Trust, and as may be
further amended and/or restated from time to time.
ARTICLE II
COMMITMENT
Section 2.1. The Commitment. Subject to the terms and conditions of and
relying on the representations, warranties and covenants contained in this
Agreement, National agrees to lend to Borrower the aggregate maximum principal
amount of up to Fifty Million and No/100 Dollars ($50,000,000.00) (the
"COMMITMENT"); provided, however, that the Commitment shall be divided between
Borrower and NHI as of September 1, 1995 with $19,000,000 of the Commitment
being allocated to Borrower and $31,000,000 of the Commitment being allocated to
NHI pursuant to the terms of the NHI Credit Agreement and the Commitment to
Borrower and NHI may be reduced on a percentage basis of 38% and 62%,
respectively, from time to time, so that at no time shall the combined
Commitments of National to Borrower and NHI be in excess of the principal amount
outstanding from time to time under the Loan Agreement.
The Loan is a revolving loan so that amounts repaid on the Loan after
the Loan is funded can be reborrowed by Borrower but, in no event shall the
principal amount outstanding exceed the Commitment allocated to the Borrower.
National shall establish a loan account for Borrower and shall record
in such loan account each loan made to Borrower under the Commitment allocated
to the Borrower, all payments of principal and interest and the current
principal balance from time to time outstanding. The record thereof shall be
conclusive and binding on the Borrower as to such amounts in the records, except
in the case of manifest error; provided, however, that the failure of National
to record any of the foregoing shall not limit or otherwise affect the
obligation of the Borrower to repay all loans made to it hereunder together with
accrued interest thereon.
The Borrower shall pay the Stated Rate on all amounts from time to time
outstanding hereunder.
<PAGE> 7
ARTICLE III
LOAN PURPOSE AND DOCUMENTATION
Section 3.1. Purpose. The purpose of the Loan will be solely for the
refinancing of existing debt and the acquisition, renovation and development of
nursing home properties owned or leased by Borrower.
Section 3.2. List of Documents. National shall receive the following
documents, satisfactory in all respects to National, each of which shall be duly
authorized, executed, and delivered to National by the appropriate entity or
entities, (together with this Agreement and all other documents and certificates
executed in connection with this Agreement, collectively, the "LOAN DOCUMENTS"):
(a) Note. A revolving credit note executed by Borrower dated
December 16, 1988 in the aggregate principal amount of Fifty Million
and No/100 Dollars ($50,000,000.00), as amended and restated by the
Amended and Restated Revolving Credit Note dated as of September 1,
1995 in the aggregate principal amount of Nineteen Million and No/100
Dollars ($19,000,000), together with any extensions, renewals and
modifications thereof (the "NOTE").
The Note shall be in substantially the form of Exhibit A.
ARTICLE IV
PREPAYMENT TERMS AND USURY
Section 4.1. Prepayment. Borrower may prepay all or part of the
Indebtedness evidenced by the Note at any time before the Note matures without
penalty (any such prepayment shall be applied first to accrued interest and then
to principal); provided, however, that in the event of a prepayment of principal
by Borrower to National accompanied by a simultaneous substantial reduction in
contractual services between Borrower and National (exceeding thirty percent
(30%) of annualized revenues with the base being the immediately preceding
twelve (12) month period) then Borrower agrees to pay to National a prepayment
fee computed by multiplying the prepaid principal amount by the Wall Street
Journal Prime Rate on the date of prepayment by 15%. For example: Assume that
in the third year of the loan amortization National is purchased and both the
Management Agreement between Borrower and National, as well as National's
relationship as the Administrative General Partner of Borrower are terminated.
Further assume that the principal balance owing at this time is $15,000,000 and
the Wall Street Journal Prime Rate on the transaction date is 10%. The
prepayment fee would then be calculated as follows: Principal outstanding X Wall
Street Journal Prime Rate X 15%, or $15,000,000 X 10% X 15%, or $225,000.
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<PAGE> 8
Section 4.2. Usury. Notwithstanding any provision of this Agreement or
the Note or any other Loan Documents to the contrary, it is the intent of
National and the Borrower, and all parties liable on the Note, that National or
any subsequent holder shall never be entitled to receive, collect, reserve or
apply, as interest, any amount in excess of the maximum rate of interest
permitted to be charged by applicable law or regulations, as amended or enacted
from time to time. In the event National, or any subsequent holder, ever
receive, collect, reserve or apply, as interest, any such excess, such amount
that would be excessive interest shall be deemed a partial prepayment of
principal and treated as such, or, if the principal Indebtedness is paid in
full, any remaining excess funds shall immediately be paid to the Borrower. In
determining whether or not the interest paid or payable under any specific
contingency exceeds the highest lawful rate, the Borrower and National shall, to
the maximum extent permitted under applicable law, (a) exclude voluntary
prepayments and the effects thereof, and (b) amortize, prorate, allocate, and
spread, in equal parts, the total amount of interest throughout the entire term
of the Indebtedness; provided that if the Indebtedness is paid and performed in
full prior to the end of the full contemplated term hereof, and if the interest
received for the actual period of existence hereof exceeds the maximum lawful
rate, the holder of the Note shall refund to the Borrower the amount of such
excess or credit the amount of such excess against the principal portion of the
Indebtedness, as of the date it was received, and, in such event, National
shall not be subject to any penalties provided by any laws for contracting for,
charging, reserving or receiving interest in excess of the maximum lawful rate.
ARTICLE V
ADDITIONAL INTEREST AND FEES
Section 5.1. Additional Interest. Borrower shall pay to National an
amount equal to one-half of one percent (.50 %) (computed on the total
commitment of Fifty Million and No/100 Dollars ($50,000,000.00)) as additional
interest on the Loan ("ADDITIONAL INTEREST"), payable as follows:
(a) twenty-five percent (25%) of the Additional Interest on
or before December 21, 1988;
(b) eighteen and three-quarters percent (18.75%) of the
Additional Interest March 16, 1989;
(c) eighteen and three-quarters percent (18.75%) of the
Additional Interest on or before June 14, 1989;
(d) eighteen and three-quarters percent (18.75%) of the
Additional Interest on or before September 12, 1989; and
(e) eighteen and three-quarters percent (18.75%) of the
Additional Interest on or before December 11, 1989.
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<PAGE> 9
All amounts due under this Section 5.1. shall be deemed to have been earned at
the closing of the Loan (the "CLOSING") and shall be due and payable as set
forth in this Section 5.1. irrespective of any events occurring after the
Closing, including but not limited to (i) Borrower's default under the Loan
Documents, (ii) Borrower's failure to draw down or utilize the full amount of
the Loan, or (iii) Borrower's refinancing of the Loan.
Section 5.2. Fees. As additional consideration, Borrower shall pay all
costs, expenses and fees of any kind incurred by the Trust in connection with
the Loan Agreement.
Section 5.3. Spread Fees. Borrower agrees that it shall on June 30 and
December 31 of each year pay to National the difference, if any, between the
amount of interest received by National from the Temporary Investments (as
defined in the Loan Agreement) from time to time held by National and the amount
of interest paid by the Trust pursuant to the Loan Agreement to borrow an amount
of money equal to the principal amount of the Temporary Investments from time to
time held by National.
ARTICLE VI
COVENANTS AND WARRANTIES OF BORROWER
Section 6.1. Borrower hereby covenants, represents and warrants that:
(a) Organization, Powers, etc. (i) Borrower has full power and
authority to execute this Agreement and the documents required
hereunder, as applicable, and to carry out the transactions
contemplated hereby; (ii) the Borrower is validly existing and duly
formed under the laws of the State of Delaware; (iii) the Borrower has
filed all papers with all governmental authorities required as a
pre-condition to own property and transact business; (iv) the Borrower
has all the necessary power and authority to own its properties and
assets and to carry on its businesses; and (v) the Borrower has all
necessary power to enter into, execute and perform the Loan Documents,
as applicable.
(b) Authorization of Borrowing etc. The execution, delivery
and performance of this Agreement, the borrowings hereunder and the
execution and delivery of the Note and other Loan Documents required
hereunder have been duly authorized by all limited partnership action
of the Borrower, and will not violate any provision of law, any order
of any court or other agency of government, any provision of any
indenture, agreement or other instrument to which the Borrower is a
party, or by which the Borrower or any of its properties or assets are
bound, or be in conflict with, result in a breach of or constitute
(with due notice and/or lapse of time) a default under any such
indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever
upon any of the properties or assets of the Borrower except as
contemplated by this Agreement.
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<PAGE> 10
(c) Validity and Binding Nature. This Agreement, the Note and
all other Loan Documents, when duly executed and delivered, are and
will be, legal, valid and binding obligations of the Borrower
enforceable in accordance with their respective terms.
(d) Title to Properties. The Borrower has good and marketable
title to all of the Borrower's properties and assets, and except as
disclosed to National all such properties and assets are free and clear
of mortgages, pledges, liens, charges and other encumbrances.
(e) Litigation. There is no action, suit or proceeding at law
or in equity or by or before any governmental instrumentality,
arbitration board or other agency now pending, or, to the knowledge of
the Borrower, threatened against or affecting the Borrower, or any
properties or rights of the Borrower, which, if determined adversely,
would materially impair the rights of the Borrower to carry on business
substantially as now conducted or would materially adversely affect the
financial condition of the Borrower as a whole, or would impair the
ability of the Borrower to perform its obligations under the Loan
Documents. The Borrower is not in default with respect to any order,
decree or judgment of any court, arbitrator or governmental body.
(f) Payment of Taxes. The Borrower has filed or caused to be
filed all Federal, state and local tax and information returns that are
required to be filed, and have paid or caused to be paid all taxes as
shown on said returns or on any assessment received by them, to the
extent that such taxes have become due, except for taxes that are being
contested in good faith and all property reserved/or on Borrower's
books and records.
(g) Agreements. Borrower is not a party to any restriction
adversely affecting its business, properties or assets, operations or
conditions (financial or otherwise). Borrower is not in default in the
performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any agreement or instrument to
which it is a party.
(h) Purpose of Loan. Proceeds of the Loan will be used
exclusively for the purposes set out in section 3.1.
(i) Investment Company Act. The Borrower is not an "investment
company" or a company "controlled" by an "investment company," within
the meaning of the Investment Company Act of 1940, as amended.
(j) Regulation U. The Borrower is not engaged principally, or
as one of its important activities, in the business of extending credit
for the purpose of purchasing or carrying margin stock (within the
meaning of Regulation U of the Board of Governors of the Federal
Reserve System).
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<PAGE> 11
(k) Situs. Borrower's chief place of business is at the
address appearing after Borrower's signature hereto. Borrower will
notify National promptly in writing of any change in the location of
any such chief place of business or the establishment of any new place
of business.
(1) Records. Borrower at all times will keep accurate and
complete records of its affairs. National shall have the right to call
at Borrower's places of business at intervals to be determined by
National, and without hindrance or delay, to inspect, audit, check, and
make extracts from the books, records, journals, orders, receipts,
correspondence, and other data of Borrower.
(m) Sell or Transfer. Borrower, shall not sell or transfer all
or a material portion of its assets to a third party outside the normal
course of Borrower's business without National's prior written consent.
(n) Notice upon Event of Default. In the event of the
occurrence of an Event of Default, Borrower shall notify National
immediately in writing, setting forth the nature of the default and the
action Borrower proposes to take to cure the default.
(o) Violation of Law. Borrower will comply with all applicable
statutes and government regulations concerning its operations and
assets.
(p) Costs, Expenses, etc. Borrower shall pay all costs
incurred by National in connection with the preparation, recording, and
filing of all documents evidencing or incident to this transaction,
including any legal fees incurred by National.
(q) Consent. No consent of any party, not already obtained,
including the limited and general partners of Borrower, and no license,
approval, authorization, registration, or declaration with any
governmental or regulatory authority or agency is required in
connection with the execution, delivery, performance, validity, or
enforceability of the Loan Documents.
(r) Quarterly Financials. Borrower shall furnish to National
within forty-five (45) days after the close of each quarter, including
with respect to (ii) and (iii) of this Section 6.1 (r) the last fiscal
quarter, (i) unaudited financial statements of Borrower using GAAP
consistently applied by a certified public accounting firm acceptable
to National, (ii) unaudited financial statements of Borrower's nursing
homes, and (iii) a quarterly aging of Borrower's Accounts.
(s) Annual Financials. Borrower shall furnish to National
within ninety (90) days after the close of each calendar year audited
financial statements of Borrower using GAAP consistently applied by a
certified public accounting firm acceptable to National, which
statements shall express an unqualified opinion as to the soundness of
Borrower's financial position. The audited financial statements shall
be accompanied by a statement
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from the chief financial officer and general partner of Borrower, that
no Events of Default have occurred (or with notice and/or the passage
of time would occur) under the Loan Documents.
(t) Quarterly Compliance. Borrower shall each furnish to
National within forty-five (45) days after the close of each quarter a
statement confirming that no Event of Default exists under this
Agreement, and Borrower shall furnish to National within forty-five
(45) days after the close of each quarter calculations showing
compliance with Section 7.1. hereof.
(u) SEC Reports. All of the financial statements of Borrower
and the descriptions of Borrower's business and operations in
Borrower's 10-Ks which have been delivered to National have been and
are true and correct in all material respects and there has been no
material adverse change in Borrower's financial condition, operations
or further prospects since June 30, 1995.
Section 6.2. Negative Covenants. So long as any Indebtedness secured
hereby is outstanding, Borrower covenants that, without the prior written
consent of National, it will not:
(a) Become liable, directly or indirectly, with respect to any
obligation for money borrowed, or the equivalent, except the (i)
Indebtedness, (ii) the loan evidenced by that certain Loan and Security
Agreement dated as of January 20, 1988 by and between Marine Midland
Bank, N.A., not individually but as Trustee of NHESOP, Inc. Leveraged
Employee Stock Ownership Trust and SBT, (iii) the Two Million and
No/100 Dollar ($2,000,000.00) working capital loan from Borrower to
National and (iv) pursuant to the Loan Agreement and related documents.
(b) Make investments, other than in qualified employer
securities of National, except for investments in Temporary Investments
(as defined in the Loan Agreement).
(c) Suffer or permit any of its assets to become subject to
any security interest, lien, or other encumbrance, except for those
required by the Loan Agreement.
(d) Create, incur or suffer to exist any pledge, mortgage,
assignment or other encumbrance of or upon any of its assets or
property now owned or hereafter acquired, or of or upon the income or
profits thereof, except (i) deposits or pledges in connection with or
to secure payment of worker's compensation, unemployment insurance, old
age pensions or other social security or in connection with the good
faith contest of any tax lien, (ii) presently existing liens, provided
that the principal amount of indebtedness outstanding from time to time
secured by such liens shall not be increased, (iii) liens remaining
undischarged for not longer than sixty (60) days from the creation
thereof in respect of judgments or awards that do not constitute an
Event of Default hereunder, (iv) liens for taxes or reassessments or
governmental charges or levies if payment shall not at the time be
required to be made, (v) liens in respect of pledges or deposits to
secure
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public or statutory obligations or to secure performance in connection
with bids or contracts or materialmen's, mechanics', carrier's,
workmen's, repairmen's or other like liens not then delinquent, or
deposits to obtain the release of such liens; deposits to secure
surety, stay, appeal or custom bonds; and licenses or leases of
patents, trademarks or trade names, (vi) leases, liens, rights of
reverter and other possessory rights of the lessor thereunder; zoning
restrictions, easements, rights-of-way or other restrictions on the use
of real property, and minor irregularities in the title thereto; and
any other liens and encumbrances similar to those described in this
subparagraph (vi) that were not incurred in connection with the
borrowing of money or the obtaining of advances or credits, (vii)
purchase money security interests so long as such liens attach only to
the property acquired thereby, and (vii) the security interests
expressly provided herein or in the Loan Agreement and related
documents; provided that all of the foregoing do not in the aggregate
materially detract from the value of Borrower's property or materially
impair the use thereof in the operation of its businesses or the
marketability thereof.
ARTICLE VII
COVENANTS AND CONDITIONS IMPOSED ON BORROWER
Section 7.1. Borrower shall comply with the following financial
covenants, with determination of compliance being made quarterly unless more
frequently requested by National:
(a) Funded Debt to Adjusted Tangible Net Worth Ratio. Borrower
shall at all times maintain a "FUNDED DEBT" TO "ADJUSTED TANGIBLE NET
WORTH" ratio of no more than 3.5 to 1. "Funded Debt" is defined as long
term debt (but excluding Subordinated Debt), plus notes payable, plus
current maturities of long term debt, plus capitalized and operating
leases, plus all guaranties; and "Adjusted Tangible Net Worth" is
defined as total equity of Borrower, plus approximately Fifteen Million
Seven Hundred Forty-Five Thousand Dollars ($15,745,000) in deferred
income resulting from the profit on the sale of nursing home properties
to National as equity (which amount shall decrease in accordance with
Borrower's books and records that comply with GAAP), plus Subordinated
Debt, minus goodwill and unamortized loan costs in excess of One
Million Four Hundred Thousand and No/100 Dollars ($1,400,000.00).
(b) Debt Service Coverage. Borrower shall at all times
maintain a minimum "Debt Service Coverage" of 1.3 to 1. The Debt
Service Coverage is defined as the ratio of (i) the annualized sum of
net income, plus depreciation/amortization, plus interest expense,
minus the Maintenance Capital Expenditures Amount for such period, to
(ii) interest expense, plus current maturities of long term debt, plus
any payments required to fund any guaranty obligations of Borrower.
(c) Notes Receivable. Borrower shall at all times limit the
balance of notes receivable as set forth on its financials to no more
than Borrower's Adjusted Tangible Net Worth; provided, however, that
the notes receivable listed in Exhibit B attached
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hereto shall be excluded from the balance of notes receivable as set
forth on Borrower's financials in determining compliance with this
subparagraph (c). The listing of notes receivable on Exhibit B attached
hereto may be modified, amended and/or reduced from time to time by
National; provided, however, that any nursing home project or use of
Loan proceeds approved by National which results in a note receivable
to Borrower automatically shall be excluded from the balance of notes
receivable and shall be listed on Exhibit B.
(d) Fixed Charge Coverage Ratio. Borrower shall at all times
maintain a Fixed Charge Coverage Ratio of not less than 1.10 TO 1.
"FIXED CHARGE COVERAGE RATIO" shall mean (a) the annualized sum of net
income, plus depreciation and amortization, plus interest expense, plus
lease expense (excluding any components included in interest expense
and amortization), minus distributions paid to holders of units of
Borrower for the fiscal year, as projected by Borrower in written
financial projections furnished to National or as actually paid,
whichever is greater, divided by (b) the sum of interest expense, plus
current maturities of long-term debt, plus lease expense (excluding any
components included in interest expense and current maturities of
long-term debt) plus any payments required to fund any obligations
guaranteed by Borrower, including, without limitation, the Guaranteed
Obligations (as such term is defined in the Loan Agreement), all as
determined in accordance with GAAP.
ARTICLE VIII
CONDITIONS PRECEDENT TO LOAN
Section 8.1. The following shall be conditions precedent to National's
obligation to make Loan contemplated hereby:
(a) Opinion of Counsel. Borrower shall provide National with
an opinion of counsel that is acceptable to National and National's
counsel.
(b) Charter and Limited Partnership Certificate. Borrower
shall provide National certified copies of Borrower's limited
partnership agreement and certificate of limited partnership of
Borrower, together with certified copies, satisfactory in all respects
to National, of all corporate and partnership resolutions and/or
actions taken by Borrower and its general partner, authorizing the
execution, delivery, and performance of this Agreement and the other
agreements and transactions contemplated herein.
(c) Signature Information. Borrower shall provide Agent a
certificate, satisfactory in all respects to National, of who will act
as Borrower's representative or representatives for the purpose of
executing documents and delivering and accepting notices and other
communications in connection with the Loan Documents. National may
conclusively rely on such certificate until National receives notice in
writing from Borrower to the contrary.
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<PAGE> 15
(d) Documents. Borrower shall deliver to National the Note
duly completed and executed by Borrower.
(e) Event of Default. No Event of Default shall have occurred
and be continuing.
(f) Representations and Warranties. The representations and
warranties in the Loan Documents shall be true and correct on and as of
the Closing Date, and the chief financial officer of Borrower shall
have delivered to National a duly executed certificate satisfactory in
all respects to National as to the foregoing.
(g) Additional Documents or Information. Borrower shall
provide National with any other documents or information that National
may reasonably require.
Section 8.2. Waiver. No advance of the proceeds of the Loan shall
constitute a waiver of any of the conditions of National's obligation to make
the Loan, and the failure of Borrower to satisfy any condition not satisfied at
Closing within ten (10) days after receipt of written notice from National shall
constitute an Event of Default hereunder.
ARTICLE IX
DEFAULT
Section 9.1. The term "Event of Default," whenever used in this
Agreement and in any instrument referred to herein, shall mean any one or more
of the following events or conditions:
(a) Principal or Interest Payment. Failure by Borrower to make
payment of any installment of principal or interest on any of the
obligations contained herein or in the Note within five (5) business
days of when the same shall be due and payable under the terms hereof
or thereof.
(b) Covenant or Agreement. Any breach by Borrower of any
covenant, agreement, condition precedent, or undertaking of Borrower
contained in this Agreement, if such breach shall continue without
being cured for thirty (30) days after notice thereof to Borrower from
National by certified mail.
(c) Representations or Warranties. Any breach of Borrower's
representations or warranties contained herein or any misstatement or
omission of fact or failure to state facts necessary to make such
representations and warranties in this Agreement not misleading.
(d) Misleading Report. Any report, certificate, financial
statement or other instrument furnished in connection with this
Agreement or the borrowings hereunder shall prove to be false or
misleading in any material respect.
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(e) Involuntary Bankruptcy or Receivership Proceedings. A
receiver, custodian, liquidator or trustee of Borrower, or of any of
its property, is appointed by the order or decree of any court or
agency or supervisory authority having jurisdiction, and such decree or
order remains in effect for more than sixty (60) days; or Borrower is
adjudicated bankrupt or insolvent; or any of the property of Borrower
is sequestered by court order and such order remains in effect for more
than sixty (60) days; or a petition is filed against Borrower under any
state or federal bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution, liquidation or receivership law of
any jurisdiction, whether now or hereafter in effect, and not dismissed
within sixty (60) days of filing.
(f) Voluntary Petitions. Borrower takes affirmative steps to
prepare to file or files a petition in voluntary bankruptcy or seeks
relief under any provision of any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in
effect, or consents to the filing of any petition against it under any
such law.
(g) Monetary Judgment. Final judgment for the payment of money
exceeding valid, applicable, collectible insurance coverage by more
than One Hundred Thousand and No/100 Dollars ($100,000.00) shall be
rendered against the Borrower and such judgment is not discharged or
satisfied within one hundred twenty (120) days of the date such
judgment becomes final;
(h) Existence. The Borrower shall cease to exist.
(i) Plan Termination. The complete termination of the Trust,
which shall include, without limitation, the complete cessation of
contributions by National and its Affiliates to Plan or the termination
of the Plan by appropriate corporate resolution(s).
(j) Tax Lien. The filing of any tax lien whatsoever with
respect to any of Borrower's property, except for a tax lien that is
being contested in good faith.
(k) Cross Default. The occurrence of any event of default as
defined under (i) the Sovran Loan or (ii) the Loan Agreement.
Section 9.2. Remedies. Upon the occurrence of any Event of Default all
obligations of Borrower contained herein or in the Note shall become due and
payable immediately without presentment, demand, or notice to Borrower or any
other person obligated hereon or thereon.
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ARTICLE X
MISCELLANEOUS
Section 10.1. Survival. All agreements, representations, and warranties
contained herein or made in writing by or on behalf of Borrower in connection
with the transactions contemplated hereby shall survive the execution and
delivery of this Agreement, any investigation at any time made by National and
the acquisition and disposition of the note evidencing the Indebtedness secured
hereby.
Section 10.2. Selection of Remedies. This Agreement shall not prejudice
the right of National at its option to enforce collection of the Note evidencing
the Indebtedness by suit or in any other lawful manner, or to resort to any
other security for the payment of the Note, this Agreement and the other Loan
Documents being additional, cumulative, and concurrent security for the payment
of such obligations.
Section 10.3. Cumulative Remedies. No right or remedy in this Revolving
Credit Agreement, the Note, or the other Loan Documents referred to herein is
intended to be exclusive of any other right or remedy, but every such right or
remedy shall be cumulative and shall be in addition to every other right or
remedy herein or in such notes conferred, now or hereafter existing, at law, in
equity, or by statute.
Section 10.4. Delay or Omission. No delay or omission by National to
exercise any right or remedy shall impair any other right or remedy or be
construed to be a waiver of any default or an acquiescence therein. Every right
and remedy herein conferred or now or hereafter existing at law, in equity, or
by statute may be exercised separately or concurrently and in such order and as
often as may be deemed reasonable by National.
Section 10.5. Invalidity. The invalidity or unenforceability of any of
the rights or remedies herein provided in any jurisdiction shall not in any way
affect the right to the enforcement in such jurisdiction or elsewhere of any of
the other rights or remedies herein provided.
Section 10.6. Time. Time is of the essence with regard to each and
every provision of this Agreement.
Section 10.7. Entire Agreement. This Agreement, and the documents
executed and delivered pursuant hereto, constitute the entire agreement between
the parties and no amendment or waiver of any provision of any Loan Document,
nor any consent thereunder, shall in any event be effective without the written
concurrence of National then such waiver or consent shall be effective only in
the specific instance and for the specific purposes for which given.
Section 10.8. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the successors and assigns of the parties
hereto; provided, however, in no event
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shall Borrower assign its rights under the Loan Documents without the prior
written consent of National. Any such assignment without such prior written
consent shall be void.
Section 10.9. Counterparts. This Agreement may be executed in two (2)
or more counterparts, and it shall not be necessary that the signatures of all
parties be contained on any one counterpart; each counterpart shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
Section 10.10. Waiver of Jury Trial. NATIONAL AND BORROWER HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVER (TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW) ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREIN.
Section 10.11. Closing. The closing shall occur at the offices of
Farris, Warfield & Kanaday on December 16, 1988 at 10:00 a.m. Nashville time or
at such other location and time as the parties hereto shall mutually agree.
Section 10.12. Costs, Expenses, and Taxes. Borrower agrees to pay on
demand all out-of-pocket costs and expenses of National (including the
reasonable fees and out-of-pocket expenses of counsel for National and of local
counsel, if any, whom National's counsel may retain) in connection with the
preparation, execution, delivery, administration, enforcement and/or protection
of National's rights under the Loan Documents. In addition, Borrower shall
indemnify National from and against any and all costs, expenses (including
reasonable legal fees), claims, demands, actions, losses or liabilities (except
such as are a direct result of the gross negligence or willful misconduct of
National) that National may suffer or incur in connection with this Agreement or
any of the Loan Documents. In addition, Borrower agree to pay and to hold
National harmless from all liability for any stamp or other taxes (including
taxes under Tennessee Code Annotated Section 67-4-409 due upon the recordation
of mortgages and financing statements) that may be payable in connection with
the execution or delivery of this Agreement, under this Agreement, or the
issuance of the Note or any other Loan Documents delivered or to be delivered
under or in connection with this Agreement. Borrower, upon request, promptly
will reimburse National for all amounts expended, advanced, or incurred by
National to satisfy any obligation of Borrower under this Agreement or any
other Loan Documents, or obligation of Borrower, or to collect the
Indebtedness, or to enforce the rights of National under this Agreement or any
other Loan Document, which amounts will include without limitation all court
costs, attorneys' fees, fees of auditors and accountants, costs of insurance,
and investigation expenses reasonably incurred by National in connection with
any such matters, together with interest thereon at the rate applicable to past
due principal and interest as set forth in the Loan Documents but in no event in
excess of the maximum lawful rate of interest permitted by applicable law on
each such amount. All obligations for which this Section provides shall survive
any termination of this Agreement.
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ARTICLE XI
CHOICE OF LAW
Section 11.1. Tennessee. This Agreement is being delivered and is
intended to be performed in the State of Tennessee and, to the extent not
governed by the laws of the United States of America, shall be construed and
enforced in accordance with and governed by the laws of such State.
Section 11.2. Jurisdiction. THE BORROWER HEREBY IRREVOCABLY SUBMITS TO
THE JURISDICTION OF ANY TENNESSEE STATE OR FEDERAL COURT SITTING IN THE CITY OF
NASHVILLE OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT. THE BORROWER HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT AND
ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. THE BORROWER HEREBY AGREE THAT A FINAL
JUDGMENT IN ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT, AFTER
ALL APPROPRIATE APPEALS, SHALL BE CONCLUSIVE AND BINDING UPON IT.
Section 11.3. Process. PROCESS MAY BE SERVED IN ANY SUIT, ACTION
COUNTERCLAIM OR PROCEEDING OF THE NATURE REFERRED TO IN SECTION 11.2. HEREOF BY
MAILING COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, RETURN
RECEIPT REQUESTED, TO THE ADDRESS OF THE BORROWER, AND NATIONAL, AS APPLICABLE,
AS SET FORTH IN SECTION 12.1. HEREOF OR TO ANY OTHER ADDRESSES OF WHICH THE
BORROWER HAVE GIVEN WRITTEN NOTICE TO NATIONAL. THE BORROWER HEREBY AGREES THAT
SUCH SERVICE (A) SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS
UPON IT IN ANY SUCH SUIT, ACTION, COUNTERCLAIM OR PROCEEDING, AND (B) SHALL TO
THE FULLEST EXTENT ENFORCEABLE BY LAW, BE TAKEN AND HELD TO BE VALID PERSONAL
SERVICE UPON AND PERSONAL DELIVERY TO IT.
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ARTICLE XII
NOTICE
SECTON 12.1 Notice. Any communications between the parties hereto or
notices provided herein shall be deemed given upon the mailing of same by
certified mail, return receipt requested, to: the address set forth below or to
such other addresses as the parties may indicate hereafter in writing.
Borrower: 100 Vine Street
Murfreesboro, Tennessee 37130
Attention: Mr. W. Andrews Adams
National: 100 Vine Street
Murfreesboro, Tennessee 37130
Attention: Mr. Richard F. LaRoche, Jr.
ARTICLE XIII
SEVERABILITY
Section 13.1. Severability. If any provision of this Agreement shall
be held invalid under any applicable law, such invalidty shall not affect any
other provision of this Agreement that can be given effect without the invalid
provision, and, to this end, the provisions hereof are severable.
IN WITNESS WHEREOF, this Agreement has been executed and delivered as
of the day and date first above written.
NATIONAL HEALTHCARE L.P.
By: NHC, INC.
Managing General Partner
By: /s/
-----------------------------
Title: Sr. V.P.
--------------------------
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NATIONAL HEALTHCARE CORPORATION
By: /s/
--------------------------------
Title: Sr V.P.
-----------------------------
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Exhibit 10.9
THIRD AMENDMENT TO GUARANTEE AND
CONTINGENT PURCHASE AGREEMENT
THIS THIRD AMENDMENT TO GUARANTEE AND CONTINGENT PURCHASE AGREEMENT
(the "Amendment") is entered into this 14th day of October, 1993 by and among
NATIONAL HEALTHCORP L.P., a Delaware limited partnership ("NHLP"), NATIONAL
HEALTH CORPORATION, a Tennessee corporation ("National") (NHLP and National may
sometimes be referred to herein collectively as the "Guarantors"), THIRD
NATIONAL BANK IN NASHVILLE ("TNB"), SOUTHTRUST BANK OF ALABAMA, NATIONAL
ASSOCIATION ("ST"), FIRST UNION NATIONAL BANK OF TENNESSEE (formerly known as
Dominion Bank of Middle Tennessee) ("FUNB"), FIRST AMERICAN NATIONAL BANK
("FANB") and FIRST CITY BANK ("FCB") (TNB, ST, FUNB, FANB and FCB are
hereinafter sometimes collectively referred to as the "Banks"), and THIRD
NATIONAL BANK IN NASHVILLE, as agent for the Banks (in such capacity, the
"Agent").
WITNESSETH:
WHEREAS, pursuant to that certain Guarantee and Contingent Purchase
Agreement (the "Guarantee") dated as of December 16, 1988 by and among the
Guarantors, TNB, ST, Irving Trust Company (later known as The Bank of New York)
("BONY") and Sovran Bank/Central South (later known as Sovran Bank/Tennessee)
("SBT") and Agent, as amended by First Amendment to Guarantee and Contingent
Purchase Agreement dated October 17, 1991 by and among Guarantors, TNB, ST and
Agent and as further amended by Second Amendment to Guarantee and Contingent
Purchase Agreement dated May 21, 1992 by and among Guarantors. Banks and Agent
(as amended, the "Guarantee"), the Guarantors jointly and severally guaranteed,
among other things, repayment to the Banks of the following described notes
executed by National Health Corporation Leveraged Employee Stock Ownership Trust
(the "Borrower" or the "ESOP") to the order of the TNB, ST, BONY and SBT,
respectively (the "Notes"):
(a) a certain non-recourse promissory note dated as of
December 16, 1988 in the original principal amount of Sixteen Million
Dollars ($16,000,000) executed by Borrower payable to TNB, together
with interest and other charges thereon;
(b) a certain non-recourse promissory note dated December 16,
1988 in the original principal amount of Fifteen Million Dollars
($15,000,000) executed by Borrower payable to BONY, together with
interest and other charges thereon, as assigned to TNB pursuant to that
certain Assignment of Note and Loan Documents dated October 18, 1991
executed by BONY in favor of TNB;
(c) a certain non-recourse promissory note dated December 16,
1988 in the original principal amount of Nine Million Dollars
($9,000,000) executed by Borrower
<PAGE> 2
payable to ST, together with interest and other charges thereon, as
assigned to TNB pursuant to that certain Assignment of Note and Loan
Documents dated October 17, 1991 executed by SBT in favor of TNB; and
(d) a certain non-recourse promissory note dated December 16,
1988 in the original principal amount of Ten Million Dollars
($10,000,000) executed by Borrower payable to ST, together with
interest and other charges thereon;
WHEREAS, pursuant to Section 5 of the Guarantee, NHLP is obligated to
purchase the Notes on December 16, 1993 unless the Agent has notified NHLP no
less than sixty (60) days prior to December 16, 1993 that all of the Banks elect
not to tender the Notes;
WHEREAS, the Banks have directed the Agent to notify the NHLP that the
Banks elect not to tender the Notes to NHLP on December 16, 1993 provided that
NHLP agrees to a new Note Purchase Date (as such term is defined in the
Guarantee) of December 16, 1998, pursuant to the terms of this Amendment;
WHEREAS, the Guarantors desire to induce the Banks not to tender the
Notes to NHLP on December 16, 1993 and agree to enter into this Amendment;
WHEREAS, the Guarantors, the Banks and the Agent desire to amend the
Guarantee as hereinafter set forth.
NOW, THEREFORE, in consideration of the premises, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by the parties hereto, the parties agree as follows:
1. Section 5 of the Guarantee entitled "Contingent Purchase
Obligations" is hereby amended in its entirety to read as follows:
Section 5. Contingent Purchase Obligations. NHLP shall on
December 16, 1998 and, if agreed to and as negotiated by NHLP and the
Banks, thereafter, (each of which dates is referred to as a or the
"Note Purchase Date") purchase, upon tender by all of the Banks to NHLP
of all of the Notes with an instrument of assignment attached thereto,
the Loan evidenced by the Notes (and the Notes evidencing the same) by
payment to the Banks of an amount (representing the purchase price
therefor) in immediately available funds equal to the sum of the
principal of and accrued and unpaid interest on the Notes at the time
of such purchase together with any amounts that would be owing under
the Loan and Security Agreement in the event the Notes were being paid
in full at the time of such purchase. Such tender shall be deemed
automatically to be made, and title to the Notes shall be deemed
automatically to have passed to NHLP on each Note Purchase Date
whereupon NHLP shall become obligated forthwith to pay the purchase
price to the Banks, unless (a) Agent shall have notified NHLP no less
than sixty (60) days prior to the applicable Note Purchase Date that
all of the Banks elect not to so tender, or (b)
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<PAGE> 3
NHLP requests the Banks (through the Agent) no less than ninety (90)
days prior to the applicable Note Purchase Date that the Banks not so
tender, and Agent shall have given the notice referred to in clause (a)
above within the time period provided therein, whereupon, in either
such case, NHLP shall not be obligated on such Note Purchase Date to
pay the purchase price to the Banks. The giving of notice by Agent
under clause (a) above shall not affect in any way the rights of the
Banks to tender all of the Notes to NHLP with respect to any subsequent
Note Purchase Date. The Banks and NHLP agree that if any Bank
determines to take advantage of the automatic tender provisions hereof
(the "Electing Bank"), then all Banks shall be bound by such
determination unless another Bank or Banks purchase the Electing Bank's
Note or interest in a Note, as applicable, prior to the sixty (60) day
period referred to in clause (a) above, but in no event shall any Bank
be obligated to purchase the Electing Bank's Note or interest in a
Note. In connection with any legal proceeding instituted by the Banks
to enforce the obligation of NHLP to pay such purchase price, NHLP
hereby waives any defense based upon adequate remedy at law and agrees
that specific performance is the only appropriate remedy for breach of
this Section 5. Any such purchase shall be made by NHLP from the Banks
without recourse and without representation or warranty of any Kind
whatsoever, other than with respect to each Bank's good title to its
Note and each such Note's being free of Liens caused by the Banks.
Following any such purchase, NHLP shall remain obligated under Section
2 hereof in respect of any other amounts owing, or from time to time to
be owing, by the Borrower under the Loan and Security Agreement.
2. The Guarantors hereby reaffirm for the Banks and the Agent all
of their respective obligations, representations, warranties and covenants
contained in the Guarantee.
3. The Guarantors hereby represent that no event has occurred and
no claim, offset, defense or other condition exists which with the passage of
time or giving of notice would constitute a default under any provisions of the
Guarantee, as hereby amended.
4. The Guarantors hereby further represent that no event has
occurred and no claim, offset, defense or other condition exists that would
relieve either NHLP and/or National of any of their respective obligations to
the Banks and/or Agent under the Guarantee, as hereby amended.
5. All terms used in this Amendment shall have the same meanings
as in the Guarantee unless otherwise defined herein.
6. Except as specifically modified herein, the Guarantee shall
remain in full force and effect, and nothing herein is intended to nor shall it
release, diminish or waive any rights of the Banks and Agent under the
Guarantee.
7. This Amendment may be executed in more than one counterpart,
all of which taken together, shall constitute one and the same instrument.
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<PAGE> 4
8. This Amendment shall be governed by and construed in
accordance with the laws of the State of Tennessee.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first written above.
NATIONAL HEALTHCORP. L.P.,
a Delaware limited partnership
By: NHC, Inc., general partnership
By: /s/
-------------------------------------
Title: Sr. V.P.
----------------------------------
NATIONAL HEALTH CORPORATION,
a Tennessee corporation
By: /s/
-----------------------------------------
Title: Sr. V.P.
--------------------------------------
THIRD NATIONAL BANK IN NASHVILLE
By: /s/
-----------------------------------------
Title: Group V.P.
--------------------------------------
SOUTHTRUST BANK OF ALABAMA,
NATIONAL ASSOCIATION
By: /s/
-----------------------------------------
Title: Group Vice President
--------------------------------------
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<PAGE> 5
FIRST UNION NATIONAL BANK OF TENNESSEE
By: /s/
-----------------------------------------
Title: Vice President
--------------------------------------
FIRST AMERICAN NATIONAL BANK
By: /s/
-----------------------------------------
Title: Senior Vice President
--------------------------------------
FIRST CITY BANK
By: /s/
-----------------------------------------
Title: President
--------------------------------------
THIRD NATIONAL BANK IN NASHVILLE,
Agent
By: /s/
-----------------------------------------
Title: Group V.P.
--------------------------------------
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<PAGE> 1
Exhibit 10.10
FOURTH AMENDMENT TO GUARANTEE AND
CONTINGENT PURCHASE AGREEMENT
THIS FOURTH AMENDMENT TO GUARANTEE AND CONTINGENT PURCHASE AGREEMENT
(the "Amendment") is entered into this 30th day of December, 1993 by and among
NATIONAL HEALTHCORP L.P., a Delaware limited partnership ("NHLP"), NATIONAL
HEALTH CORPORATION, a Tennessee corporation ("National") (NHLP and National may
sometimes be referred to herein collectively as the "Guarantors"), THIRD
NATIONAL BANK IN NASHVILLE ("TNB"), SOUTHTRUST BANK OF ALABAMA, NATIONAL
ASSOCIATION ("ST"), FIRST UNION NATIONAL BANK OF TENNESSEE formerly known as
Dominion Bank of Middle Tennessee) ("FUNB"), FIRST AMERICAN NATIONAL BANK
("FANB") and FIRST CITY BANK ("FCB") (TNB, ST, FUNB, FANB and FCB are
hereinafter sometimes collectively referred to as the "Banks"), and THIRD
NATIONAL BANK IN NASHVILLE, as agent for the Banks (in such capacity, the
"Agent").
WITNESSETH:
WHEREAS, pursuant to that certain Guarantee and Contingent Purchase
Agreement (the "Guarantee") dated as of December 16, 1988 by and among the
Guarantors, TNB, ST, Irving Trust Company (later known as The Bank of New York)
("BONY") and Sovran Bank/Central South (later known as Sovran Bank/Tennessee)
("SBT") and Agent, as amended by First Amendment to Guarantee and Contingent
Purchase Agreement dated October 17, 1991 by and among Guarantors, TNB, ST and
Agent, as further amended by Second Amendment to Guarantee and Contingent
Purchase Agreement dated May 21, 1992 by and among Guarantors, Banks and Agent
and as further amended by Third Amendment to Guarantee and Contingent Purchase
Agreement dated October 14, 1993 by and among the Guarantor, the Banks and Agent
(as amended, the "Guarantee"), the Guarantors jointly and severally guaranteed,
among other things, repayment to the Banks of the following described notes
executed by National Health Corporation Leveraged Employee Stock Ownership Trust
(the "Borrower" or the "ESOP") to the order of the TNB, ST, BONY and SBT,
respectively (the "Notes"):
(a) a certain non-recourse promissory note dated as of
December 16, 1988 in the original principal amount of Sixteen Million
Dollars ($16,000,000) executed by Borrower payable to TNB, together
with interest and other charges thereon;
(b) a certain non-recourse promissory note dated December 16,
1988 in the original principal amount of Fifteen Million Dollars
($15,000,000) executed by Borrower payable to BONY, together with
interest and other charges thereon, as assigned to TNB pursuant to that
certain Assignment of Note and Loan Documents dated October 18, 1991
executed by BONY in favor of TNB;
<PAGE> 2
(c) a certain non-recourse promissory note dated December 16,
1988 in the original principal amount of Nine Million Dollars
($9,000,000) executed by Borrower payable to SBT, together with
interest and other charges thereon, as assigned to TNB pursuant to that
certain Assignment of Note and Loan Documents dated October 17, 1991
executed by SBT, in favor of TNB; and
(d) a certain non-recourse promissory note dated December 16,
1988 in the original principal amount of Ten Million Dollars
($10,000,000) executed by Borrower payable to ST, together with
interest and other charges thereon;
WHEREAS, the Guarantors, the Banks and the Agent desire to amend the
Guarantee as hereinafter set forth.
NOW, THEREFORE, in consideration of the premises, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by the parties hereto, the parties agree as follows:
1. Section 5 of the Guarantee entitled "Contingent Purchase
Obligations" is hereby mended in its entirety to read as follows:
Section 5. Contingent Purchase Obligations.
(a) NHLP shall on December 16, 1998 and, if agreed to and as
negotiated by NHLP and the Banks, thereafter, (each of which dates is
referred to as a or the "Note Purchase Date") purchase, upon tender by
all of the Banks to NHLP of all of the Notes with an instrument of
assignment attached thereto, the Loan evidenced by the Notes (and the
Notes evidencing the same) by payment to the Banks of an amount
(representing the purchase price therefor) in immediately available
funds equal to the sum of the principal of and accrued and unpaid
interest on the Notes at the time of such purchase together with any
amounts that would be owing under the Loan and Security Agreement in
the event the Notes were being paid in full at the time of such
purchase (the "Purchase Price"). Such tender shall be deemed
automatically to be made, and title to the Notes shall be deemed
automatically to have passed to NHLP on each Note Purchase Date,
whereupon NHLP shall become obligated forthwith to pay the Purchase
Price to the Banks, unless (a) Agent shall have notified NHLP no less
than sixty (60) days prior to the applicable Note Purchase Date that
all of the Banks elect not to so tender, or (b) NHLP requests the Banks
(through the Agent) no less than ninety (90) days prior to the
applicable Note Purchase Date that the Banks not so tender, and Agent
shall have given the notice referred to in clause (a) above within the
time period provided therein, or (c) the Agent shall notify Guarantor
no less than thirty (30) days prior to the applicable Note Purchase
Date that the interest of an Electing Bank (as hereinafter defined) in
its Note, or in its portion of a Note, as applicable, has been
purchased by a Purchasing Bank (as hereinafter defined), whereupon, in
any such case, NHLP shall not be obligated on such Note Purchase Date
to pay the Purchase Price to the Banks. The giving of notice by
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<PAGE> 3
Agent under clause (a) above or (c) shall not affect in any way the
rights of the Banks to tender all of the Notes to NHLP with respect to
any subsequent Note Purchase Date. The Banks and NHLP agree that if any
Bank determines to take advantage of the automatic tender provisions
hereof (the "Electing Bank"), then all Banks shall be bound by such
determination unless no less than thirty (30) days prior to the
applicable Note Purchase Date another Bank or Banks (the "Purchasing
Bank") gives notice to Agent in writing that the Purchasing Bank
desires to purchase and does so purchase the Electing Bank's Note or
interest in a Note, as applicable, by thirty (30) days prior to the
applicable Note Purchase Date, but in no event shall any Bank be
obligated to purchase the Electing Bank's Note or interest in a Note.
The Purchasing Bank shall pay the Electing Bank an amount equal to all
principal, interests, fees and other amounts owed or accrued to the
Electing Bank to the date on which such purchase becomes effective, but
no later than thirty (30) days prior to the applicable Note Purchase
Date (the "Note Payment"). Upon receipt of the Note Payment, the
Electing Bank shall assign to the Purchasing Bank the Electing Bank's
Note or interest in the Note (and deliver the original Note to the
Purchasing Bank if held by the Electing Bank) pursuant to the form of
Assignment attached hereto as Exhibit A.
(b) In connection with any legal proceeding instituted by the
Banks to enforce the obligation of NHLP to pay the Purchase Price, NHLP
hereby waives any defense based upon adequate remedy at law and agrees
that specific performance is the only appropriate remedy for breach of
this Section 5. Any such purchase shall be made by NHLP from the Banks
without recourse and without representation or warranty of any kind
whatsoever, other than with respect to each Bank's good title to its
Note (or interest therein) and each such Note's being free of Liens
caused by the Banks. Following any such purchase, NHLP shall remain
obligated under Section 2 hereof in respect of any other amounts owing,
or from time to time to be owing, by the Borrower under the Loan and
Security Agreement.
2. The Guarantors hereby reaffirm for the Banks and the Agent all
of their respective obligations, representations, warranties and covenants
contained in the Guarantee.
3. The Guarantors hereby represent that no event has occurred and
no claim, offset, defense or other condition exists which with the passage of
time or giving of notice would constitute a default under any provisions of the
Guarantee, as hereby amended.
4. The Guarantors hereby further represent that no event has
occurred and no claim, offset, defense or other condition exists that would
relieve either NHLP and/or National of any of their respective obligations to
the Banks and/or Agent under the Guarantee, as hereby amended.
5. All terms used in this Amendment shall have the same meanings
as in the Guarantee unless otherwise defined herein.
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<PAGE> 4
6. Except as specifically modified herein, the Guarantee shall remain
in full force and effct, and nothing herein is intended to nor shall it
release, diminish or waive any rights of the Banks and Agent under the
Guarantee.
7. This Amendment may be executed in more than one counterpart, all of
which taken together, shall constitute one and the same instrument.
8. This Amendment shall be governed by and construed in accordance
with the laws of the State of Tennessee.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first written above.
GUARANTORS:
NATIONAL HEALTHCORP L.P.,
a Delaware limited partnership
By: NHC, Inc., general partner
By: /s/
------------------------------
Title: Sr. V.P.
----------------------------
NATIONAL HEALTH CORPORATION,
a Tennessee corporation
By: /s/
-----------------------------------
Title: Sr. V.P.
---------------------------------
BANKS:
THIRD NATIONAL BANK IN NASHVILLE
By: /s/
------------------------------------
Title: Group V.P.
---------------------------------
- 4 -
<PAGE> 5
SOUTHTRUST BANK OF ALABAMA,
NATIONAL ASSOCIATION
By: /s/
------------------------------
Title: Group Vice President
---------------------------
FIRST UNION NATIONAL BANK OF TENNESSEE
By: /s/
------------------------------
Title: Vice President
---------------------------
FIRST AMERICAN NATIONAL BANK
By: /s/
------------------------------
Title: Senior Vice President
---------------------------
FIRST CITY BANK
By: /s/
-----------------------------
Title: President
--------------------------
AGENT:
-----
THIRD NATIONAL BANK IN NASHVILLE,
Agent
By: /s/
-----------------------------
Title: Group V.P.
--------------------------
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<PAGE> 1
Exhibit 10.11
FIFTH AMENDMENT TO GUARANTEE AND
CONTINGENT PURCHASE AGREEMENT
THIS FIFTH AMENDMENT TO GUARANTEE AND CONTINGENT PURCHASE AGREEMENT
(the "AMENDMENT") is entered into as of September 1, 1995 by and among NATIONAL
HEALTHCARE L.P., a Delaware limited partnership (formerly known as National
HealthCorp L. P.) ("NHLP"), NATIONAL HEALTHCARE CORPORATION, a Tennessee
corporation (formerly known as National Health Corporation) ("NATIONAL") (NHLP
and National may sometimes be referred to herein collectively as the
"GUARANTORS"), THIRD NATIONAL BANK IN NASHVILLE ("TNB"), SOUTHTRUST BANK OF
ALABAMA, NATIONAL ASSOCIATION ("ST"), FIRST UNION NATIONAL BANK OF TENNESSEE
(formerly known as Dominion Bank of Middle Tennessee) ("FUNB"), FIRST AMERICAN
NATIONAL BANK ("FANB") and FIRST CITY BANK ("FCB") (TNB, ST, FUNB, FANB and FCB
are hereinafter sometimes collectively referred to as the "BANKS"), and THIRD
NATIONAL BANK IN NASHVILLE, as agent for the Banks (in such capacity, the
"AGENT").
WITNESSETH:
WHEREAS, pursuant to that certain Guarantee and Contingent Purchase
Agreement dated as of December 16, 1988 by and among the Guarantors, TNB, ST,
Irving Trust Company (later known as The Bank of New York) ("BONY") and Sovran
Bank/Central South (later known as Sovran Bank/Tennessee) ("SBT") and Agent, as
amended by First Amendment to Guarantee and Contingent Purchase Agreement dated
October 17, 1991 by and among Guarantors, TNB, ST and Agent, as further amended
by Second Amendment to Guarantee and Contingent Purchase Agreement dated May 21,
1992 by and among Guarantors, Banks and Agent, as further amended by Third
Amendment to Guarantee and Contingent Purchase Agreement dated October 14, 1993
by and among the Guarantor, the Banks and Agent and as further amended by Fourth
Amendment to Guarantee and Contingent Purchase Agreement dated December 30, 1993
(as amended, the "GUARANTEE"), the Guarantors jointly and severally guaranteed,
among other things, repayment to the Banks of the following described notes
executed by National Health Corporation Leveraged Employee Stock Ownership Trust
(now known as National HealthCare Corporation Leveraged Employee Stock Ownership
Trust) (the "BORROWER" or the "ESOP") to the order of the TNB, ST, BONY and SBT,
respectively (as may be amended or modified from time to time, the "NOTES"):
(a) a certain non-recourse promissory note dated as of
December 16, 1988 in the original principal amount of Sixteen Million
Dollars ($16,000,000) executed by Borrower payable to TNB, together
with interest and other charges thereon;
(b) a certain non-recourse promissory note dated December 16,
1988 in the original principal amount of Fifteen Million Dollars
($15,000,000) executed by Borrower
<PAGE> 2
payable to BONY, together with interest and other charges thereon, as
assigned to TNB pursuant to that certain Assignment of Note and Loan
Documents dated October 18, 1991 executed by BONY in favor of TNB;
(c) a certain non-recourse promissory note dated December 16,
1988 in the original principal amount of Nine Million Dollars
($9,000,000) executed by Borrower payable to SBT, together with
interest and other charges thereon, as assigned to TNB pursuant to that
certain Assignment of Note and Loan Documents dated October 17, 1991
executed by SBT, in favor of TNB; and
(d) a certain non-recourse promissory note dated December 16,
1988 in the original principal amount of Ten Million Dollars
($10,000,000) executed by Borrower payable to ST, together with
interest and other charges thereon;
WHEREAS, the Guarantors, the Banks and the Agent desire to amend the
Guarantee as hereinafter set forth.
NOW, THEREFORE, in consideration of the premises, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by the parties hereto, the parties agree as follows:
1. Section 1.01 of the Guarantee entitled "Certain Defined Terms"
is hereby amended by adding the following defined terms in the appropriate
alphabetical order:
"MAINTENANCE CAPITAL EXPENDITURES" means, with respect to any
Person, expenditures for the improvement, maintenance or renovation of
assets which are capitalized in accordance with GAAP, but specifically
excluding, without limitation, the expansion of existing nursing homes
or other health care related facilities and the acquisition,
development or construction of new property.
"MAINTENANCE CAPITAL EXPENDITURE AMOUNT" MEANS, WITH RESPECT
to NHLP for any period, the greater of (a) actual Maintenance Capital
Expenditures made during such period or (b) Five Hundred Dollars
($500.00) per bed owned or leased by NHLP during such period or any
portion thereof.
"NHC - REIT" means National Health Investors, Inc., a Maryland
corporation, its successors and assigns.
"REPORTED TAXABLE INCOME" means, with respect to NHLP for any
fiscal year, the ordinary and portfolio income of NHLP as reported to
the Internal Revenue Service on Form 1065 (or any successor form) for
such fiscal year.
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<PAGE> 3
2. Section 2.01 of the Guarantee entitled "Joint and Several
Guarantee" is hereby amended by deleting the first phrase of the first sentence
therein in its entirety and substituting in lieu thereof the following:
"For value received in consideration of Banks' making the Loan
to Borrower and subject to Section 2.12 hereof,. . ." .
3. Section 2.06 of the Guarantee entitled "Remedies" is hereby
amended in its entirety to read as follows:
2.06 Remedies. The Guarantors agree that as between the
Guarantors on the one hand and the Banks on the other hand, the
obligations of the Borrower guaranteed hereunder may be declared to be
forthwith due and payable as provided in Section 11.2 of the Loan and
Security Agreement for purposes of this Section 2, notwithstanding any
stay, injunction or other prohibition preventing such declaration as
against the Borrower or any other guarantor of the Guaranteed
Obligations and that, in the event any such stay, injunction or other
prohibition shall be in effect at any time when any Event of Default
shall have occurred and be continuing, such obligations (whether or not
due and payable by the Borrower) may, for purposes of this Section 2,
be declared by Agent on behalf of Banks to be immediately due and
payable by the Guarantors subject to Section 2.12 herein, and Agent on
behalf of Banks may pursue any or all of Banks' remedies available
under the Collateral Documents. In addition, and without limitation of
the foregoing, at any tune when any Event of Default shall have
occurred and be continuing, Agent on behalf of Banks may, by notice to
the Guarantors and by tender to NHLP on behalf of the Guarantors and
NHC-REIT of the Note with an instrument of assignment attached thereto,
require the Guarantors and NHC-REIT to purchase the Loan (and the
Note), whereupon the Guarantors and NHC-REIT shall forthwith purchase
the Loan (and the Note) by payment to the Banks of an amount
(representing the purchase price therefor) in immediately available
funds equal to the sum of the principal of and accrued and unpaid
interest on the Loan at the time of such purchase together with any
amount that would be owing under Section 11.2 of the Loan and Security
Agreement in the event the Loan were being paid in full at the time of
such purchase (the "Purchase Price") payable thirty-eight percent (38%)
by the Guarantors and sixty-two percent (62%) by NHC-REIT. Such tender
shall be deemed to be made and title to the Note shall be deemed to
have passed to the Guarantors and NHC-REIT if the Agent on behalf of
Banks notify NHLP that the Agent on behalf of Banks is holding the Note
for the account of the Guarantors and NHC-REIT, whereupon the
Guarantors shall become jointly and severally obligated to immediately
pay their portion of the Purchase Price to the Agent on behalf of the
Banks. In connection with any legal proceeding instituted by the Agent
on behalf of Banks to enforce the obligation of the Guarantors to pay
their portion of the Purchase Price, the Guarantors hereby waive any
defense based upon adequate remedy at law. The
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<PAGE> 4
Guarantors hereby expressly waive tender of the Note in connection with
any purchase thereof by the Guarantors required hereunder as a result
of an Event of Default specified in Article XI of the Loan and Security
Agreement. Any such purchase shall be made by the Guarantors from the
Agent on behalf of Banks without recourse and without representation or
warranty of any kind whatsoever. Following any such purchase, the
Guarantors shall remain obligated under this Section 2 in respect of
their guarantee of any other amounts owing by the Borrower under the
Loan and Security Agreement that may remain unpaid at the time.
4. Section 2.11 of the Guarantee entitled "Collateral Documents"
is hereby amended in its entirety to read as follows:
2.11 Collateral Documents. This Guarantee and Contingent
Purchase Agreement is secured by the Loan Documents described in
Section 3.2 of the Loan and Security Agreement as securing this
Agreement (herein the "COLLATERAL DOCUMENTS"). The Guarantors agree
that any breach under any Loan Document is and shall be deemed a breach
under this Agreement and the Guarantors hereby agree that upon the
occurrence of such breach or upon the occurrence of a breach of any
promise, covenant, representation or warranty contained herein, that
the Agent shall have the right to exercise the remedies set forth in
Section 2.06 of this Agreement.
5. Section 2 of the Guarantee entitled "The Guarantee
("Guarantee") and Collateral Documents" is hereby amended by adding the
following new Section 2.12 after existing Section 2.11 thereof:
2.12 Limited Guaranty. Guarantors' joint and several liability
to the Banks under this Agreement is limited to thirty-eight percent
(38%) of the sum of (A) the principal balance outstanding under the
Note upon the occurrence of an Event of Default, (B) interest accruing
under the Note, (C) interest on said amount at the maximum lawful rate
of interest permitted by law until paid measured from the date Agent
makes demand upon any Guarantor for payment under this Agreement, (D)
all other amounts owing by the Borrower under the Loan and Security
Agreement, and (E) of all reasonable attorneys' fees and expenses
incurred by Agent in the collection of the Guaranteed Obligations or
the protection of Agent's or any Bank's rights under this Agreement. If
any payments are received by Agent on behalf of the Banks in payment of
the Guaranteed Obligations from any source other than either Guarantor,
those payments will not reduce either Guarantor's liability under this
Agreement to the extent there remains an outstanding unpaid balance of
the Guaranteed Obligations.
6. Section 4.01(a)(iii) of the Guarantee entitled "Quarterly
Compliance" is hereby amended in its entirety to read as follows:
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<PAGE> 5
(iii) Quarterly Compliance. NHLP and National
shall each furnish to Agent within forty-five (45) days after
the close of each quarter a statement confirming that no
default exists under this Agreement with respect to the party
furnishing this statement, and NHLP shall furnish to Agent
within forty-five (45) days after the close of each quarter
calculations showing compliance with Section 4.01(h) hereof.
7. Section 4.01(a) of the Guarantee entitled "Financial
Statements" is hereby amended by adding the following new Section 4.01(a)(iv)
after existing Section 4.01(a)(iii) thereof:
(iv) Other Reports. NHLP shall furnish to Agent
within ninety (90) days after the last day of the fourth
quarter of each fiscal year, (a) a calculation of Reported
Taxable Income for such fiscal year consistent with a
calculation which will be used to determine the Reported
Taxable Income to be filed on Form 1065 (or any successor
form) of the Internal Revenue Service by NHLP for such fiscal
year, and (b) promptly after filing thereof, a final copy of
Form 1065 (or any successor form) as filed by NHLP for such
fiscal year.
8. Section 4.01 (h) of the Guarantee entitled "Financial
Covenants" is hereby amended in its entirety to read as follows:
(h) Financial Covenants. NHLP shall comply with the following
financial covenants, with determination of compliance being made
quarterly:
(i) [INTENTIONALLY OMITTED].
(ii) [INTENTIONALLY OMITTED].
(iii) Funded Debt to Adjusted Tangible Net Worth
Ratio. NHLP shall at all times maintain a "Funded Debt" to
"ADJUSTED TANGIBLE NET WORTH" ratio of no more than 3.5 to 1.
"FUNDED DEBT" is defined as longterm debt (but excluding
Subordinated Debt), plus notes payable, plus current
maturities of long-term debt, plus capitalized and operating
leases, plus all guaranties; and "Adjusted Tangible Net Worth"
is defined as total equity of NHLP, plus approximately Fifteen
Million Seven Hundred Forty-Five Thousand Dollars
($15,745,000.00) in deferred income resulting from the profit
on the sale of nursing home properties to National as equity
(which amount shall decrease in accordance with NHLP's books
and records that comply with GAAP), plus
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<PAGE> 6
Subordinated Debt, minus the general intangibles of NHLP,
including, without limitation, goodwill and unamortized loan
costs in excess of One Million Four Hundred Thousand Dollars
($1,400,000.00).
(iv) [INTENTIONALLY OMITTED].
(v) Debt Service Coverage. NHLP shall at all
times maintain a minimum "Debt Service Coverage" of 1.3 to 1.
"DEBT SERVICE COVERAGE" is defined as the ratio of (i) the
annualized sum of net income, plus depreciation/ amortization,
plus interest expense, minus the Maintenance Capital
Expenditures Amount for such period, to (ii) interest expense,
plus current maturities of long term debt, plus any payments
required to fund any guaranty obligations of NHLP.
(vi) Notes Receivable. NHLP shall at all times
limit the balance of notes receivable as set forth on its
financials to no more than NHLP's Adjusted Tangible Net Worth;
provided, however, that the notes receivable listed on Exhibit
I attached to the Loan Agreement and Security Agreement shall
be excluded from the balance of notes receivable as set forth
on NHLP's financials in determining compliance with this
subparagraph (h)(vi). The listing of notes receivable on
Exhibit I attached to the Loan and Security Agreement may be
modified, amended, increased and reduced from time to time by
the Majority Banks; provided, however, that any nursing home
project or use of Loan proceeds approved by Majority Banks
which results in a note receivable to NHLP automatically shall
be excluded from the balance of notes receivables and shall be
listed on Exhibit I.
(vii) Fixed Charge Coverage Ratio. NHLP shall at
all times maintain a Fixed Charge Coverage Ratio of not less
than 1.10 to 1. "Fixed Charge Coverage Ratio" is defined as
(a) the annualized sum of net income, plus depreciation and
amortization, plus interest expense, plus lease expense
(excluding any components included in interest expense and
amortization), minus distributions paid to holders of units of
NHLP for the fiscal year, as projected by NHLP in written
financial projections furnished to the Banks or as actually
paid, whichever is greater, divided by (b) the sum of interest
expense, plus current maturities of long-term debt, plus lease
expense (excluding any components included in interest expense
and current maturities of long-term debt) plus any payments
required to fund any obligations guaranteed by NHLP,
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<PAGE> 7
including, without limitation, the Guaranteed Obligations, all
as determined in accordance with GAAP.
9. Section 4.02(a) of the Guarantee entitled "Limitations on
Payments" is retitled "Limitations on Payments and Distributions" and is amended
to add the following new Section 4.02(a)(ii) after existing Section 4.02(a)(i)
thereof:
(ii) Restrictions on Distributions. NHLP shall
not make distributions to the holders of units of NHLP other
than distributions in respect of any fiscal year which in the
aggregate do not exceed sixty-two and one-half percent (62.5%)
of Reported Taxable Income for such fiscal year, provided,
however, that in the event such distributions in respect of
any fiscal year (for purposes of this Section, the "First
Year") exceed sixty percent (60%) of Reported Taxable Income
for such year, NHLP shall not make distributions to holders of
units of NHLP pursuant to this Section in respect of the next
succeeding fiscal year (for purposes of this Section, the
"Second Year") which in the aggregate, together with
distributions made in respect of the First Year, exceed sixty
percent (60%) of the sum of Reported Taxable Income for the
First Year and the Second Year.
10. Section 4.02(b)(ii) of the Guarantee entitled "Tangible Net
Worth" is hereby deleted in its entirety and the remaining subsections are
renumbered accordingly.
11. Section 5(a) of the Guarantee is hereby amended in its
entirety to read as follows:
(a) NHLP and NHC-REIT shall on December 16, 1998 and on
December 31, 2001, and, if agreed to and as negotiated by NHLP,
NHC-REIT and the Banks, thereafter, (each of which dates is referred to
as a or the "NOTE PURCHASE DATE") purchase, upon tender by all of the
Banks to NHLP on behalf of NHLP and NHC-REIT of the Note with an
instrument of assignment attached thereto, the Loan evidenced by the
Note (and the Note evidencing the same) by payment to the Banks of an
amount (representing the purchase price therefor) in immediately
available funds equal to the sum of the principal of and accrued and
unpaid interest on the Note at the time of such purchase together with
any amounts that would be owing under the Loan and Security Agreement
in the event the Note was being paid in full at the time of such
purchase (the "Purchase Price") payable thirty-eight percent (38%) by
NHLP and sixty-two percent (62%) by NHC-REIT. Such tender shall be
deemed automatically to be made, and title to the Note shall be deemed
automatically to have passed to NHLP and NHC
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<PAGE> 8
REIT on each Note Purchase Date, whereupon NHLP and NHC-REIT
shall become obligated forthwith to pay the Purchase Price to
the Banks, unless (i) Agent shall have notified NHLP on
behalf of NHLP and NHC-REIT no less than sixty (60) days
prior to the applicable Note Purchase Date that all of the
Banks elect not to so tender, or (ii) NHLP and NHC-REIT
request the Banks (through the Agent) no less than ninety
(90) days prior to the applicable Note Purchase Date that the
Banks not so tender, and Agent shall have given the notice
referred to in clause (i) above within the time period
provided therein, or (iii) the Agent shall notify NHLP on
behalf of NHLP and NHC-REIT no less than thirty (30) days
prior to the applicable Note Purchase Date that the interest
of an Electing Bank (as hereinafter defined) in its Note, or
in its portion of a Note, as applicable, has been purchased
by a Purchasing Bank (as hereinafter defined), whereupon, in
any such case, NHLP and NHC-REIT shall not be obligated on
such Note Purchase Date to pay the Purchase Price to the
Banks. The giving of notice by Agent under clause (i) above
or (iii) shall not affect in any way the rights of the Banks
to tender all of the Notes to NHLP on behalf of NHLP and
NHC-REIT with respect to any subsequent Note Purchase Date.
The Banks and NHLP agree that if any Bank determines to take
advantage of the automatic tender provisions hereof (the
"ELECTING BANK"), then all Banks shall be bound by such
determination unless no less than thirty (30) days prior to
the applicable Note Purchase Date another Bank or Banks (the
"Purchasing Bank") gives notice to Agent in writing that the
Purchasing Bank desires to purchase and does so purchase the
Electing Bank's Note or interest in a Note, as applicable, by
thirty (30) days prior to the applicable Note Purchase Date,
but in no event shall any Bank be obligated to purchase the
Electing Bank's Note or interest in a Note. The Purchasing
Bank shall pay the Electing Bank an amount equal to all
principal, interests, fees and other amounts owed or accrued
to the Electing Bank to the date on which such purchase
becomes effective, but no later than thirty (30) days prior
to the applicable Note Purchase Date (the "NOTE PAYMENT").
Upon receipt of the Note Payment, the Electing Bank shall
assign to the Purchasing Bank the Electing Bank's Note or
interest in the Note (and deliver the original Note to the
Purchasing Bank if held by the Electing Bank) pursuant to the
form of Assignment attached hereto as Exhibit A.
12. The Guarantors hereby reaffirm for the Banks and the Agent all
of their respective obligations, representations, warranties and covenants
contained in the Guarantee.
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<PAGE> 9
13. The Guarantors hereby represent that no event has occurred and
no claim, offset, defense or other condition exists which with the passage of
time or giving of notice would constitute a default under any provisions of the
Guarantee, as hereby amended.
14. The Guarantors hereby further represent that no event has
occurred and no claim, offset, defense or other condition exists that would
relieve either NHLP and/or National of any of their respective obligations to
the Banks and/or Agent under the Guarantee, as hereby amended.
15. All terms used in this Amendment shall have the same meanings
as in the Guarantee unless otherwise defined herein.
16. Except as specifically modified herein, the Guarantee shall
remain in full force and effect, and nothing herein is intended to nor shall it
release, diminish or waive any rights of the Banks and Agent under Guarantee.
17. This Amendment may be executed in more than one counterpart,
all of which taken together, shall constitute one and the same instrument.
18. This Amendment shall be governed by and construed in accordance
with the laws of the State of Tennessee.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first written above.
GUARANTORS:
NATIONAL HEALTHCARE L.P.,
a Delaware limited partnership
By: NHC, Inc., general partner
By: /s/
----------------------
Title: Sr VP
----------------------
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<PAGE> 10
NATIONAL HEALTHCARE CORPORATION,
a Tennessee corporation
By: /s/
-----------------------------
Title: Sr VP
--------------------------
BANKS:
THIRD NATIONAL BANK IN NASHVILLE
By: /s/
------------------------------
Title: VP
---------------------------
SOUTHTRUST BANK OF ALABAMA,
NATIONAL ASSOCIATION
By: /s/
------------------------------
Title: Group V.P.
---------------------------
FIRST UNION NATIONAL BANK OF TENNESSEE
By: /s/
-------------------------------
Title: Vice President
----------------------------
FIRST AMERICAN NATIONAL BANK
By: /s/
-------------------------------
Title: AVP
--------------------------
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<PAGE> 11
FIRST CITY BANK
By:/s/
-----------------------------
Title: President and C.E.O
--------------------------
AGENT:
THIRD NATIONAL BANK IN NASHVILLE,
Agent
By:
------------------------------
Title:
---------------------------
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<PAGE> 12
FIRST CITY BANK
By:
-----------------------------
Title:
--------------------------
AGENT:
THIRD NATIONAL BANK IN NASHVILLE,
Agent
By:/s/
------------------------------
Title: VP
---------------------------
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<PAGE> 1
Exhibit 10.12
SURETYSHIP AGREEMENT
FOR VALUE RECEIVED, and in consideration of credit given, or to be
given, advances made or to be made, or other financial accommodation from time
to time afforded or to be afforded to City Center, Ltd., a Tennessee limited
partnership, (hereinafter referred to as "Debtor"), by NHESOP, Inc., a Tennessee
corporation, or its successors, endorsees, transferees and assigns (all of which
hereinafter are referred to collectively as "Lender"), the undersigned, National
HealthCorp L.P., a Delaware limited partnership, hereby, for itself and its
successors and assigns, guarantees the full and prompt payment to Lender at
maturity and at all times thereafter of any and all indebtedness, obligations
and liabilities of every kind and nature, however created, arising or evidenced,
of Debtor to Lender (including all liabilities of any partnership created or
arising while Debtor may have been or may be a member thereof), whether now
existing or hereafter created or arising, whether direct or indirect, absolute
or contingent, joint or several, and howsoever owned, held or acquired, whether
through discount, overdraft, purchase, direct loan or as collateral, or
otherwise together with all expenses, legal and/or otherwise (including court
costs and attorney's fees) incurred by Lender in collecting or endeavoring to
collect the Indebtedness or any part thereof, in protecting any collateral, and
in enforcing this Suretyship Agreement (all of which hereinafter are referred to
collectively
<PAGE> 2
as the "Indebtedness.). The right of recovery, however, is limited to Eight
Million Five Hundred Thousand and No/100 Dollars ($8,500,000.00), plus interest
on all loans and/or advances hereunder and all expenses hereinbefore mentioned.
This suretyship shall be a continuing, absolute and unconditional
guaranty, and shall apply to and cover all loans, discounts or renewals thereof
made by Lender to Debtor and any and all Indebtedness, of any nature and
howsoever arising or created or evidenced, owing to Lender by Debtor, and shall
remain in full force and effect until any and all of the Indebtedness, or any
extensions or renewals thereof, and expenses in connection therewith, shall be
fully paid. The undersigned, hereby expressly waives all applicable statutes of
limitation which may exist at any time in favor of the undersigned. The
dissolution or withdrawal of the undersigned shall not terminate this
suretyship. In the event of such dissolution or withdrawal, this suretyship
shall, notwithstanding, continue and remain in force against the survivor or
survivors of the undersigned.
Lender is hereby expressly authorized to make from time to time,
without notice to anyone, any extensions, renewals, sales, pledges, surrenders,
compromises, settlements, releases, indulgences, alterations, substitutions,
exchanges, changes in, modifications, or other dispositions, of or to all or any
part of the Indebtedness, either express or implied, or of any contracts or
instruments evidencing any thereof, or of any security or collateral therefor,
and/or to take any security for or other guarantees upon any of the
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<PAGE> 3
Indebtedness, and the liability of the undersigned hereunder shall not be in any
manner affected, diminished or impaired thereby, or by any lack of diligence,
failure, neglect or omission on the part of Lender to make any demand or
protest, or give any notice of dishonor or default, or to realize upon or
protect any of the Indebtedness, or any collateral or security therefor, or to
exercise any lien upon or right of appropriation or set-off of any moneys,
accounts, credits, or property of Debtor, possessed by Lender, towards the
liquidation of the Indebtedness, or by any application of payments or credits
thereon. Lender shall have the exclusive right to determine how, when and what
application of payments and credits, if any, shall be made on the Indebtedness,
or any part thereof, and shall be under no obligation, at any time, to first
resort to, make demand on, file claim against, or exhaust its remedies against
Debtor, the undersigned, or other persons or corporations, their properties or
estates, or to resort to or exhaust its remedies against any collateral,
security, property, liens or other rights whatsoever. It is expressly agreed
that Lender may at any time make demand for payment on, or bring suit against,
the undersigned surety. Lender may compound with any other surety or any other
sureties for such sums or on such terms as it may see fit and release any other
surety or sureties from all further liability to Lender without thereby
impairing the rights of Lender in any respect to demand, sue for and collect the
balance of the Indebtedness from the undersigned. Any claims against Debtor
accruing to the undersigned by reason of payments made hereunder shall be
subordinate to any indebtedness then or subsequently owed by Debtor to Lender.
As security for
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<PAGE> 4
the undertakings and obligations of the undersigned hereunder, the undersigned
expressly grants and gives to Lender a general lien upon all money, negotiable
instruments, commercial paper, notes, bonds, stock, credits and/or choses in
action, or any interest therein, and any other property, rights and interests of
the undersigned or any evidence thereof, which have or at any time shall come
into the possession, custody or control of Lender. In the event of default
hereunder, Lender may sell or cause to be sold, at public or private sale, in
any manner which may be lawful, for cash or credit and upon such terms as Lender
may see fit, and without demand or notice to the undersigned, all or any of such
security, and Lender or any other person may purchase such property, rights or
interests so sold and thereafter hold the same free of any claim or right of
whatsoever kind, including any statutory right or equity of redemption, of the
undersigned, such demand, notice or statutory right or equity of redemption
being hereby expressly waived and released.
In event of the dissolution, liquidation or insolvency (however
evidenced) of, or the institution of bankruptcy or receivership proceedings by
or against, Debtor, all of the Indebtedness of Debtor then existing shall, for
the purposes of this suretyship and at the option of Lender, immediately become
due and payable from the undersigned. In such event, any and all sums or
payments of any nature which may be or become due and payable by Debtor to the
undersigned are hereby assigned to Lender, and shall be collectible by Lender,
without necessity for other authority than this instrument, until all
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<PAGE> 5
of the Indebtedness of the Debtor to Lender shall be fully paid and discharged,
but such collection by Lender shall not in any respect affect, impair or
diminish any other rights of Lender hereunder.
The granting of credit from time to time by Lender to Debtor, in excess
of the amount to which right of recovery under this suretyship is limited and
without notice to the undersigned, is hereby expressly authorized and shall in
no way affect or impair this suretyship. In event that the Indebtedness of
Debtor to Lender shall so exceed the amount to which this suretyship is limited,
any payments by Debtor or any collections or recovery by Lender from any sources
other than this suretyship may be applied first by Lender to any portion of the
Indebtedness which exceeds the limits of this suretyship. The undersigned hereby
waives demand, presentment for payment, protest and diligence in collection and
all other notices or demands whatsoever with respect to this suretyship and the
enforcement hereof.
Lender may, without any notice whatsoever to anyone, sell, assign or
transfer all or any part of the Indebtedness, and in that event each and every
immediate and successive assignee, transferee or holder of all or any part of
the Indebtedness shall have the right to enforce this suretyship, by suit or
otherwise, for the benefit of such assignee, transferee or holder, as fully as
though such assignee, transferee or holder were herein by name given such
rights, powers and benefits, which assignee or transferee shall specifically
include without limitation, Sovran Bank/Central South; provided, however, that
Lender shall have an unimpaired right, prior and superior to that of
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<PAGE> 6
any assignee, transferee or holder, to enforce this suretyship for the benefit
of Lender as to so much of the Indebtedness that Lender has not sold, assigned
or transferred.
In the event Lender is required at any time to refund or repay to any
person for any reason any sums collected by it on account of the obligations
subject to this Suretyship Agreement, including but not limited to sums repaid
to a Trustee in Bankruptcy as a result of an avoided preferential transfer or
fraudulent conveyance, undersigned agrees that all such sums shall be subject to
the terms of this suretyship agreement and that Lender shall be entitled to
recover such sums from undersigned notwithstanding the fact that this suretyship
agreement may have previously been returned to undersigned or that undersigned
may have previously been discharged from further liability under this suretyship
agreement.
No act of commission or omission of any kind, or at any time, on the
part of Lender in respect of any matter whatsoever shall in any way affect or
impair this suretyship. This suretyship is in addition to and not in
substitution for or discharge of any other suretyship held by Lender.
This suretyship and every part thereof shall be binding upon the
undersigned, and upon his respective heirs, legal representatives, successors
and assigns, as fully as though everywhere specifically mentioned, and shall be
construed according to the local laws of the
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<PAGE> 7
State of Tennessee, in which State it shall be performed by the undersigned.
All disputes or controversies which may arise from or in connection
with this suretyship, its construction, interpretation, effect, performance or
nonperformance or the consequences thereof, shall be determined exclusively by
the courts of the State of Tennessee and the Federal Courts sitting in the
State of Tennessee.
WITNESS my signature, and the acceptance hereof by Lender, this 8 day
of March, 1988.
NATIONAL HEALTHCORP L.P., a
Delaware limited partnership
BY: NHC, INC.
General Partner
BY: /s/
-------------------
TITLE: President
-----------------
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<PAGE> 8
STATE OF TENNESSEE)
COUNTY OF Rutherford)
Before me, the undersigned, a Notary Public in and for the County and
State aforesaid, personally appeared W. Andrew Adams, with whom I am personally
acquainted (or proved to me on the basis of satisfactory evidence), and who
upon oath acknowledged himself to be President of NHC, Inc., the general
partner of National HealthCorp L.P., the within named bargainor, a Tennessee
limited partnership, and that he as such President of the general partner,
being authorized so to do, executed the foregoing instrument for the purposes
therein contained, by signing the name of the limited partnership by himself as
President of NHC, Inc., general partner of National HealthCorp L.P.
Witness my hand and seal, at office in M'boro, Tennessee, this the 8
day of March, 1988.
/s/
--------------------------
NOTARY PUBLIC
My Commission Expires: 5-22-90
---------
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<PAGE> 1
Exhibit 10.13
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT ("Guaranty Agreement"), made and entered into as of
the 1st day of December, 1987, by and among NATIONAL HEALTHCORP L.P., a
Delaware limited partnership (the Partnership Guarantor JACKS O. McCARVER an
individual resident of the State of Texas (the "Individual Guarantor") (the
Partnership Guarantor and the Individual Guarantor being some times hereinafter
referred to individually as a Guarantor and collectively as the "Guarantors")
and THE TORONTO-DOMINION Bank acting through its Chicago-Branch (the "Banks");
W I T E S S E T H :
WHEREAS, the Issuers have heretofore issued, or will issue the Bonds
pursuant to their respective Indentures with the Trustees; and
WHEREAS, the proceeds of the Bonds have heretofore been loaned by or will
be loaned by, the Issuers to Florida Convalescent Centers, Inc., a Florida
corporation (together with its successors and permitted assigns, the
"Borrower"), or have been or will be utilized by the Issuers, pursuant to the
Financing Agreements (as hereinafter defined), for the purpose of refunding the
Refunded Bonds; and
WHEREAS, subject to the terms and conditions of that certain Reimbursement
Agreement of even date herewith (as the same may be amended from time to time,
the "Reimbursement Agreement") between the Borrower and the Bank, and
acknowledged by the Guarantors, the Bank has agreed to issue for the account of
the Borrower certain Letters of Credit to assure the timely payment of the
principal of and interest on the Bonds, and the purchase price of Bonds tendered
for purchase pursuant to the Indentures; and
WHEREAS, pursuant to the provisions of the Reimbursement Agreement, the
Borrower will be responsible for amounts drawn under the Letters of Credit, and
for fees and other amounts due with respect to the Letters of Credit; and
WHEREAS, it is a condition to the issuance of the Letters of Credit that
the Guarantors jointly severally and unconditionally guarantee to the Bank the
payment of all amounts owing by the Borrower from time to time under the
Reimbursement Agreement and certain other amounts and obligations; and
WHEREAS, the Individual Guarantor is the sole shareholder of the Borrower
and the Partnership Guarantor has heretofore entered into one or more agreements
with the Borrower whereby the Partnership Guarantor agreed to provide working
capital to the
<PAGE> 2
Borrower and to guarantee certain obligations of the Borrower with respect to
the Projects; and
WHEREAS, the Guarantors are desirous that the Bank issue the Letters of
Credit and are willing to enter into this Guaranty Agreement in order to induce
the Bank to issue the Letters of Credit so as to enhance the marketability of
the Bonds and thereby achieve interest cost and other savings;
NOW, THEREFORE in consideration of the premises and in order to enhance the
marketability of the Bonds and thereby achieve interest cost and other savings,
the Guarantors do hereby, subject to the terms hereof, jointly and severally
covenant and agree with the Bank as follows:
ARTICLE I
Definitions
Section 1.1 Definitions. For purposes of this Guaranty Agreement, the
following terms shall have the following meanings:
"Accumulated Funding Deficiency" has the meaning assigned to that term in
Section 302 of ERISA.
"Affiliate" means any Person directly or indirectly controlling, controlled
by, or under direct or indirect common control with, any Guarantor.
"Applicable Law" means in respect of any Person, all provisions of
constitutions, statutes, rules, regulations and orders of governmental bodies or
regulatory agencies applicable to such Person, and all orders and decrees of all
courts and arbitrators in proceedings or actions to which the Person in question
is a party.
"Authorized Signatory" means such personnel of the Partnership Guarantor or
its managing general partner as may be designated in writing by the Partnership
Guarantor to the Bank as having authority to sign documents, certificates and
other instruments to be signed on behalf of the Partnership Guarantor.
"Capitalized Lease Obligation" means, with respect to any Person, that
portion of any obligation as lessee which at the time would be required to be
capitalized on the balance sheet of such lessee ii) accordance with Financial
Accounting Standards Board Statement No. 13 dated November 1976, as it may be
amended
"Consolidated Current Assets" means the aggregate, after eliminating
intercompany items, of all Current Assets of the Partnership Guarantor and its
Subsidiaries, consolidated in accordance with GAAP.
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<PAGE> 3
"Consolidated Current Liabilities" means the aggregate, after eliminating
intercompany items, of all Current Liabilities of the Partnership Guarantor and
its Subsidiaries, consolidated in accordance with GAAP
"Consolidated Funded Debt" means the aggregate, after eliminating
intercompany items, of all Funded Debt of the Partnership Guarantor and its
Subsidiaries, consolidated in accordance with GAAP.
"Consolidated Net Income" means the aggregate, after eliminating
intercompany items, of all Net Income of the Partnership Guarantor and its
Subsidiaries, consolidated in accordance with GAAP.
"Consolidated Tangible Net Worth" means the aggregate, after eliminating
intercompany items, of all Tangible Net Worth of the Partnership Guarantor and
its Subsidiaries, consolidated in accordance with GAAP.
"Current Assets" means, with respect to any Person, the aggregate amount of
all assets which would, in accordance with GAAP, properly be classified as
current assets; provided, however, such method of determination shall be
modified where in conflict with the following: Current Assets will include only
those assets which may, in the ordinary course of business, be reasonably
converted into cash within a period of one (1) year from the date as of which
such computation is being made, and Current Assets will exclude (i) loans and
advances to or receivables due from employees, partners or officers of such
Person, (ii) all deferred assets, other than prepaid items such as insurance,
taxes, interest, commissions, rents, royalties and similar items, and (iii)
any properties or assets located outside the continental United States.
"Current Liabilities" means, with respect to any Person, the aggregate
amount of all current obligations, as determined in accordance with GAAP, but in
any event shall include all obligations except those having a maturity date
which is more than one (1) year from the date as of which such computation is
being made.
"Current Maturities of Funded Debt" means, with respect to any Person, that
portion of its Indebtedness which matures or becomes due within one (1) year
from the date as of which such computation is made and which formerly qualified
as Funded Debt.
"Current Ratio" means the ratio of Consolidated Current Assets to
Consolidated Current Liabilities.
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<PAGE> 4
"Debt Service Coverage Ratio" means, with respect to any Person for any
period, a ratio of (i) the sum of Net Income and Operating Lease Obligations,
depreciation, amortization and interest expense of such Person for such period
to (ii) the sum of Current Maturities of Funded Debt and interest expense,
Operating Lease Obligations and payments required to fund obligations guaranteed
by such Person.
"Equity" means the total partners' equity of the Partnership Guarantor
(including the par value of the issued and outstanding capital stock, capital
surplus and retained earnings of all of the Partnership Guarantor's
Subsidiaries).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Event of Default" mean any of the events specified in Section 6.1 hereof,
provided that any requirement for notice or lapse of time has been satisfied;
"Facility" means any nursing home or health care facility or part thereof
(including without limitation, related medical office buildings, parking lots or
other related real property) owned, operated or managed by the Partnership
Guarantor or any of its Subsidiaries; together with any other nursing home or
health care facility or part thereof which is hereafter acquired by the
Partnership Guarantor or any of its Subsidiaries, in each case, including,
without limitation, the land on which such facility is located, all buildings
and other improvements thereon, all fixtures, equipment, inventory and other
tangible personal property located in or used in connection with such facility
and all accounts receivable and other intangible personal property related to
the operations of such facility, all whether now or hereafter existing.
"Facility Guaranty Agreements" means the Agreements to Guarantee between
the Borrower and the Partnership Guarantor (as successor in interest to National
Health Corporation, a Tennessee corporation), pursuant to which the Partnership
Guarantor has agreed to guarantee certain obligations of the Borrower with
respect to the financing of the Projects, together with any amendments or
supplements thereto, any replacements thereof and any new, similar agreements
which the Borrower and the Partnership Guarantor may hereafter enter into with
respect to Facilities other than the Projects, as the latter agreements may be
amended or supplemented from time to time.
"Funded Debt" means, with respect to any Person, all obligations and
indebtedness issued, incurred, assumed or guaranteed by such Person or for the
payment of which such Person is otherwise liable, directly or indirectly,
whether or not such
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<PAGE> 5
obligations and indebtedness now exist or shall hereafter be created, which
mature or become due more than one (1) year after the date on which a
calculation of Funded Debt is being made, and shall include all Capitalized
Lease Obligations.
GAAP, means, as in effect from time to time, generally accepted accounting
principles consistently applied.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof, and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled (through stock or
capital ownership or otherwise) by any of the foregoing.
"Guaranty" or "guarantee" as applied to an obligation, means and includes
(a) any guaranty or other agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of any part
or all of such obligation, including, without limiting the foregoing, the
payment or reimbursement of amounts drawn down by beneficiaries of letters of
credit.
"Indebtedness" means, with respect to any Person, (i) all items, except
items of capital stock or of surplus or of general contingency or deferred tax
reserves, which in accordance with GAAP would be included in determining total
liabilities as shown on the liability side of a balance sheet of such Person,
(ii) to the extent not otherwise included, all obligations secured by any Lien
to which any property or assets owned by such Person is subject, whether or not
the obligation secured thereby shall have been assumed, and (iii) to the extent
not otherwise included, all Capitalized Lease Obligations of such Person and all
obligations of such Person with respect to leases constituting part of a sale
and lease-back arrangement.
"Lien" means, with respect to any property, any security deed, mortgage,
deed to secure debt, deed of trust, lien, pledge, assignment, charge, security
interest, title retention agreement, levy, execution, seizure, attachment,
garnishment or other encumbrance of any kind in respect of such property.
"Management Agreements" means the management agreements between the
Partnership Guarantor (whether as an original party or as successor-by-merger to
F.M.S.C., Inc., a Florida corporation) and the Borrower pursuant to which the
Guarantor manages the Projects, as said management agreements may be amended or
supplemented from time to time.
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<PAGE> 6
"Materially Adverse Effect" means any act, omission or undertaking which
would, singly or in the aggregate, have a materially adverse effect upon the
business, assets, liabilities, financial condition, results of operations or
business prospects of the Guarantors or any of the Partnership Guarantor's
Subsidiaries or the ability of the Guarantors to perform any material
obligations under this Guaranty Agreement.
"Multiemployer Plan" has the meaning set forth in Section 4001(a)(3) of
ERISA.
"Necessary Authorizations" means with respect to any Person, all
authorizations, consents, approvals, permits, licenses and exemptions of,
filings and registrations with, and reports to, all governmental and other
regulatory authorities, whether federal, state or local, and all agencies
thereof, required for the operation of the business of such Person and the
consummation of the transactions contemplated herein.
"Net Income" means, as applied to any Person for any fiscal period, the
aggregate amount of net income (or net loss) of such Person, after taxes, for
such period as determined in accordance with GAAP,
"Operating Lease Obligations" means all lease obligations other than
Capitalized Lease Obligations.
"Partnership Agreement" means the limited partnership agreement pursuant to
which the Partnership Guarantor is organized and existing, as the same may be
amended and supplemented from time to time.
"Permitted Liens" means, as applied to any Person,
(a) Liens securing taxes, assessments and other governmental charges or
levies (excluding any Lien imposed pursuant to any of the provisions of ERISA)
or the claims of materialmen, mechanics, carriers, warehousemen or landlords for
labor, materials, supplies or rentals incurred in the ordinary course of
business, but in all cases only if payment shall not at the time be required to
be made;
(b) Liens consisting of deposits or pledges made in the ordinary COURSE of
business in connection with, or to secure payment of, obligations under worker's
compensation unemployment insurance or similar legislation;
(c) Liens constituting encumbrances in the nature of zoning restrictions,
easements and rights or restrictions of record on use of real property, which in
the sole judgment of the Bank, do not materially detract from the value of such
property or impair the use thereof in the business of the Guarantors;
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<PAGE> 7
(d) Liens of record as of the date of delivery of this Guaranty Agreement
acceptable to the Bank;
(e) Liens in favor of the Bank; and
(f) Purchase money security interests which arise by operation of law for a
period of twenty-one (21) days after the inception thereof.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Plan" means an employee benefit plan or other plan maintained for
employees of any Person.
"Prohibited Transaction" means a transaction which is prohibited under
Section 4975 of the Code or Section 406 of ERISA and not exempt under Section
4975 of the Code or Section 408 of ERISA
"Reportable Event" shall have the meaning set forth in Title IV of ERISA
"Revolver Agreement" means that certain Revolving Credit Loan Agreement
dated as of March 31, 1987, by and among the Partnership Guarantor, as borrower,
Third National Bank in Nashville, The Citizens and Southern National Bank and
Commerce Union Bank, collectively as lenders; and Third National Bank in
Nashville, as agent, providing for a $30,000,000 revolving line of credit.
"Single Employer Plan" means any Plan which is not a Multiemployer Plan.
"Subordinated Debt" means the Indebtedness of the Partnership Guarantor
which is subordinated in right of payment to the obligations of the Partnership
Guarantor under this Guaranty Agreement.
"Subsidiary. shall mean, as applied to any Person, (a) any of which more
than 50% of the outstanding stock (other than directors' qualifying shares)
having ordinary voting power to elect a majority of its board of directors (or
other governing body), regardless of the existence at the time of a right of the
holders of any class or classes (however designated) of securities of such
corporation to exercise such voting power by reason of the happening of any
contingency, or any partnership of which more than 50% of the outstanding
partnership interests is, at the time, owned by such Person or by one or more
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Subsidiaries of such Person, or by such Person and one or more Subsidiaries of
such person, and (b) any other entity which is controlled or capable of being
controlled by such Person, or by one or more Subsidiaries of such Person, or by
such Person and one or more Subsidiaries of such Person.
"Tangible Net Assets" shall mean, with respect to any Person, the aggregate
amount of all items categorized as assets on the balance sheet of such Person,
including, without limitation, Equity and Subordinated Debt, but excluding all
except $1,167,000 of deferred assets and all other items which would be
considered "intangible assets" under GAAP, including goodwill, trademarks,
service marks, formulae, franchise rights and patents.
"Tangible Net Worth" shall mean, with respect to any Person, the excess of
Tangible Net Assets over Indebtedness (other than Subordinated Debt).
"Termination Event" means (i) a Reportable Event, (ii) the termination of a
Single Employer Plan, or the treatment of a Single Employer Plan amendment as a
termination of the Plan under Section 4041 of ERISA or the filing of a notice of
intent to terminate a Single Employer Plan, (iii) the institution of proceedings
to terminate a Single Employer Plan by the Pension Benefit Guaranty Corporation
under Section 4042 of ERISA or (iv) the appointment of a trustee to administer
any Single Employer Plan.
"Working Capital" shall mean, with respect to any Person, the excess of
Current Assets over Current Liabilities.
1.2 Financial Terms. Except as hereinabove provided, all financial terms
used in this Guaranty Agreement shall be interpreted in accordance with GAAP,
1.3. Terms Not Defined Herein. Capitalized terms not defined herein shall,
unless otherwise indicated herein, have the meanings ascribed to such terms in
the Reimbursement Agreement.
ARTICLE II
Guaranty
2.1 Guaranty. (a) The Guarantors hereby jointly, severally, absolutely,
unconditionally and irrevocably guarantee to the Bank the full and prompt
payment of all amounts now or hereafter owing to the Bank by the Borrower under
the provisions of the Reimbursement Agreement, under the Mortgages (including,
without limitation, indemnification amounts pursuant to
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<PAGE> 9
Section 1.14 thereof), under the Pledge Agreement and under any of the other
Related Documents when and as the same shall become due, whether at the stated
maturity thereof, by acceleration or call for prepayment or otherwise, and agree
to pay all reasonable expenses and charges (including court costs and attorney's
fees and expenses) paid or incurred by the Bank in realizing upon any of the
payments hereby guaranteed or in enforcing this Guaranty Agreement.
(b) The Guarantors hereby jointly, severally, absolutely, unconditionally
and irrevocably guarantee to the Bank the full and faithful performance all of
the Borrower's obligations under the Financing Agreements to be kept and
performed with respect to the completion of the construction, renovation,
installation and equipping of the Projects, in accordance with the plans and
specifications referred to in the Financing Agreements, free from any liens or
claims of any or all persons performing services or labor on the Projects, or
any of them, or furnishing materials thereto. If for any reason or under any
contingency, the Borrower shall abandon the construction, renovation,
installation and equipping of the Projects, or any of them, in accordance with
the terms of the applicable Financing Agreements, or shall fail to pay the costs
thereof, then, in any such event, the Bank shall have the option to require the
Guarantors, or either of them, to assume all responsibility therefor, and the
Guarantors hereby agree that they shall jointly and severally assume all
responsibility therefor and, at their own cost and expense, cause such
Project(s) to be fully completed in accordance with the above-mentioned plans
and specifications and applicable Financing Agreement(s), and shall pay and
discharge all liens and claims of all persons performing services or labor in
connection therewith or furnishing materials hereto which the Borrower shall
have failed to pay, whether or not such services, labor or materials shall have
been provided for in said plans and specifications.
(c) The obligations guaranteed by the Guarantors under this Section 2.1 are
sometimes hereinafter collectively referred to as the "Guaranteed Obligations.
2.2 Payments. All payments by the Guarantors shall be paid in lawful money
of the United States of America, to Account No. 544-7-74055, at Manufacturers
Hanover Trust, 40 Wall Street, New York, New York 10005, for credit to The
Toronto-Dominion Bank, New York Branch, in favor of Toronto-Dominion Chicago
Branch, or at such other account as the Bank may designate to the Guarantors in
writing. Each and every default in payment of sums due and payable under the
provisions of this Guaranty Agreement shall give rise to a separate cause of
action hereunder, and separate suits may be brought hereunder as each cause of
action arises.
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<PAGE> 10
2.3 Obligations Absolute and Unconditional. The obligations of the
Guarantors under this Guaranty Agreement shall be absolute and unconditional and
shall remain in full force and effect until there shall be no Letter of Credit
outstanding and all amounts owing to the Bank under the provisions of the
Reimbursement Agreement and the other Related Documents and the obligation of
the Guarantors under Section 2.1 hereof shall have been paid in full,
irrespective of the validity, regularity or enforceability of the Bond
Documents, the Letters of Credit or the Reimbursement Agreement or any other
Related Document, and, until such payment, shall not be affected, modified or
impaired upon the happening from time to time of any event, including, without
limitation, any of the following, whether or not with notice to or the consent
of the Guarantors, or either of them:
(a) the compromise, settlement, release or termination of any or all of the
obligations, covenants or agreements of the Borrower under the Reimbursement
Agreement, the Pledge Agreement, any Mortgage, any Financing Agreement or any
other Related Documents;
(b) the failure to give notice to the Guarantors, or either of them, of the
occurrence of a default or an event of default under the terms and provisions of
this Guaranty Agreement, the Reimbursement Agreement, the Pledge Agreement, any
Indenture, any Mortgage, any Financing Agreement or any other Related Documents;
(c) the waiver of the payment, performance or observance by any Issuer, any
Trustee, the Borrower or any Guarantor of any of the obligations, covenants, or
agreements of any of them contained in the Reimbursement Agreement, the Pledge
Agreement, any Indenture, any Financing Agreement, any Mortgage or any of the
other Related Documents, or this Guaranty Agreement;
(d) the extension of the time for payment of any principal of or interest
on the Bonds or of the time for performance of any other obligations, covenants
or agreements under or arising out of the Reimbursement Agreement, any
Indenture, any Financing Agreement, the Pledge Agreement, any Mortgage or any of
the other Related Documents, or under or arising out of this Guaranty Agreement,
or the extension or the renewal of any thereof;
(e) the modification or amendment (whether material or otherwise) of any
obligation, covenant or agreement set forth in the Reimbursement Agreement, the
Pledge Agreement, any Indenture, any Financing Agreement, any Mortgage or any
other Related Document;
(f) the taking or the omission of any of the actions referred to in the
Reimbursement Agreement, the Pledge Agreement, any Indenture, any Financing
Agreement, any Mortgage or any other Related Documents or this Guaranty
Agreement;
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<PAGE> 11
(g) any failure, omission, delay or lack on the part of any Issuer, any
Trustee or the Bank to enforce, assert or exercise any right, power or remedy
conferred on any Issuer, any Trustee or the Bank in this Guaranty Agreement, the
Reimbursement Agreement, the Pledge Agreement, any Indenture, any Financing
Agreement, any Mortgage or any other Related Document, or any other act or acts
on the part of any Issuer, any Trustee, the Bank or any holder at any time or
from time to time of the Bonds;
(h) the voluntary or involuntary liquidation, dissolution, marshalling of
assets and liabilities, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition with creditors or
readjustment of, or other similar proceedings affecting any Guarantor, the
Borrower or any Issuer or any of the assets of them, or any allegation or
contest of the validity of this Guaranty Agreement in any such proceeding or the
sale or other disposition of all or substantially all the assets of any Issuer,
the Borrower or any Guarantors; and this Guaranty Agreement shall continue to be
effective or be reinstated, as the case may be, if, at any time, payment, or any
part thereof, pursuant to Section 2.1 hereof, is rescinded or must otherwise be
restored or returned by the Bank upon any of the events listed in this
subsection (h) or otherwise, as though such payment has not been made;
(i) to the extent permitted by applicable law, the release or discharge of
the Guarantors, or either of them, from the performance or observance of any
obligation, covenant or agreement contained in this Guaranty Agreement by
operation of law;
(j) the default or failure of the Guarantors, or either of them, fully to
perform any of the obligations thereof set forth in this Guaranty Agreement;
(k) the failure of the Bank to comply with the terms of the this Guaranty
Agreement, the Reimbursement Agreement, the Pledge Agreement, any Mortgage or
any of the other Related Documents;
(1) the invalidity or unenforceability of the Reimbursement Agreement, the
Pledge Agreement, any Indenture, any Financing Agreement, any Mortgage or any
other Related Documents;
(m) the sale, assignment or mortgaging or the purported sale, assignment or
mortgaging of all or any part of the Projects; or
(n) any other cause, whether similar or dissimilar to the foregoing.
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<PAGE> 12
2.4 No set-off. No set-off counterclaim, reduction, or diminution of any
obligation, or, to the extent permitted by applicable law, any defense of any
kind or nature which the Guarantors or the Borrower, or any of the foregoing,
has or may have against any Issuer, any Trustee or the Bank shall be available
hereunder to the Guarantors, or either of them.
2.5 Right to Proceed against Guarantors-First. In the event of a default in
payment of any amount owing to the Bank from time to time under the provisions
of the Reimbursement Agreement, the Pledge Agreement, any Mortgage or any other
Related Document, whether at the stated maturity thereof, by acceleration or
call for prepayment or otherwise, and in each instance the expiration of any
applicable cure period provided for in the Reimbursement Agreement, the Pledge
Agreement, such Mortgage or any other such Related Document, the Bank may
proceed hereunder, and the Bank, in its sole discretion, shall have the right to
proceed first and directly against the Guarantors, or either of them, under this
Guaranty Agreement without proceeding against the Borrower or exhausting any
other remedies which it may have and without resorting to any other security
held by the Bank.
2.6 Waiver of Notice. The Guarantors hereby expressly waive: (a) notice of
acceptance of this Guaranty Agreement, (b) notice of the existence or creation
of all or any of the Guaranteed Obligations, (c) presentment, demand, notice of
dishonor, protest, and all other notices whatsoever, (d) all diligence in
collection or protection of or realization upon the Guaranteed Obligations or
any part thereof, any obligation hereunder, or any security for any of the
foregoing, except as provided by law, and (e) all rights of subrogation, all
rights to enforce any remedy the Bank may have against the Borrower and all
rights to participate in any security held by the Bank for the Guaranteed
Obligations until the Guaranteed Obligations have been paid or performed in
full.
2.7 Attorneys Fees and Expenses. The Guarantors jointly and severally agree
to pay all costs, expenses and fees, including all reasonable attorney's fees,
which may be incurred by the Bank in amending this Guaranty, in enforcing or
attempting to enforce this Guaranty Agreement following any default on the part
of the Guarantors, or either of them, hereunder, whether the same shall be
enforced by suit or otherwise, or in consenting to any action not otherwise
permitted hereunder.
2.8 Assignment of Guaranteed Obligations by Bank. The Bank may, without
notice of any kind, sell, assign or transfer all or any of the Guaranteed
Obligations, and in such event each and every immediate and successive assignee,
transferee, or holder of all or any of the Guaranteed Obligations, shall have
the right to
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<PAGE> 13
enforce this Guaranty Agreement, by suit or otherwise, for the benefit of such
assignee, transferee or holder as fully as if such assignee, transferee or
holder were herein by name specifically given such rights, powers and benefits,
but the Bank shall have an unimpaired right, prior and superior to that of any
such assignee, transferee or holder, to enforce this Guaranty Agreement for the
Bank's benefit, as to so much of the Guaranteed Obligations as the Bank has not
sold, assigned or transferred.
ARTICLE III
Representations and Warranties
3.1 The Partnership Guarantor represents and warrants that:
(a) Organization; Power, Qualification. The Partnership Guarantor is a
limited partnership duly organized, validly existing under the laws of the state
of its organization, each of its Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation, and the Partnership Guarantor and each of its Subsidiaries has
the power and authority, corporate, partnership and otherwise, to own or lease
and operate their respective properties and to carry on their respective
businesses as now being and hereafter proposed to be conducted and are duly
qualified and in good standing as a foreign partnership or corporation, as the
case may be, and authorized to do business, in each jurisdiction in which the
character of their respective properties or the nature of their respective
businesses requires such qualification or authorization, and in which failure to
so qualify would have a Materially Adverse Effect.
(b) Authorization. The Partnership Guarantor has the power and has taken
all necessary action to authorize it to execute, deliver and perform this
Guaranty Agreement in accordance with its terms and to consummate the
transactions contemplated hereby. This Guaranty Agreement has been duly executed
and delivered by the Partnership Guarantor and is a legal, valid and binding
obligation of the Partnership Guarantor, enforceable in accordance with its
terms, subject, as to enforcement of remedies, to the following qualifications:
(i) an order of specific performance and an injunction are discretionary
remedies and, in particular, may not be available where damages are considered
an adequate remedy at law, and (ii) enforcement may be limited by bankruptcy,
insolvency, liquidation, reorganization, reconstruction and other similar laws
affecting enforcement of creditors' rights generally (insofar as any such law
relates to the bankruptcy, insolvency or similar event of the Partnership
Guarantor).
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<PAGE> 14
(c) Subsidiaries. Except as listed on Exhibit "A" attached hereto, the
Partnership Guarantor has no Subsidiaries. With respect to each Subsidiary of
the Partnership Guarantor, Exhibit "A" also sets forth (i) the state of its
incorporation; (ii) all jurisdictions in which such Subsidiary is qualified to
do business as a foreign corporation; (iii) the address of the principal place
of business and chief executive office of such Subsidiary; and (iv) the name and
registered office of the registered agent appointed by such Subsidiary.
(d) Compliance with Laws, etc. of Guaranty Agreement and Contemplated
Transactions. The execution, delivery and performance of this Guaranty Agreement
in accordance with its terms and the consummation of the transactions
contemplated hereby do not and will not (i) violate any Applicable Law, (ii)
conflict with, result in a breach of, or constitute a default under the
Partnership Agreement of the Partnership Guarantor or under any material
indenture, agreement, or other instrument to which the Partnership Guarantor is
a party or by which it or any of its properties may be bound, or, (iii) result
in or require the creation or imposition of any Lien upon or with respect to any
property now owned or hereafter acquired by the Partnership Guarantor except
Permitted Liens.
(e) Necessary Authorizations. The Partnership Guarantor and each of its
Subsidiaries has secured all Necessary Authorizations, and all such Necessary
Authorizations are in full force and effect. None of said Necessary
Authorizations are the subject of any pending or, to the best of the Partnership
Guarantor's knowledge, threatened attack or revocation, by the grantor of the
Necessary Authorization. The Partnership Guarantor is not required to obtain any
additional Necessary Authorizations in connection with the execution, delivery
and performance of this Guaranty Agreement.
(f) Title to Properties. The Partnership Guarantor and each of its
Subsidiaries has good, marketable and legal title to, or a valid leasehold
interest in, all of their respective material properties and assets, and none of
such properties or assets is subject to any Liens which materially detract from
the value of such properties or assets or materially interferes with the
business or operations of the Partnership Guarantor or any of its Subsidiaries
as presently conducted or proposed to be conducted. All improvements on the real
estate owned by, leased to or used by the Partnership Guarantor and its
Subsidiaries conform in all material respects to all applicable state and local
laws, zoning and building ordinances and health and safety ordinances, and such
real estate is zoned for the various purposes for which such real estate and
improvements thereon are presently being used.
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<PAGE> 15
(g) Collective Bargaining. There are no material grievances, disputes or
controversies with any union or any other organization of the employees of the
Partnership Guarantor or any of its Subsidiaries or threats of strikes, work
stoppages or any asserted pending demands for collective bargaining by any union
or organization.
(h) Taxes. All federal, state and other tax returns of the Partnership
Guarantor and each of its Subsidiaries required by law to be filed have been
duly filed, and all federal, state and other taxes, assessments and other
governmental charges or levies upon the Partnership Guarantor and each of its
Subsidiaries and any of their respective properties, income, profits and assets,
which are due and payable, have been paid, except any such the payment of which
the Partnership Guarantor or any of its Subsidiaries, as applicable, is
contesting in good faith by appropriate proceedings and for which adequate
reserves have been provided on the books of the Partnership Guarantor or any of
its Subsidiaries, as applicable, and as to which neither any Lien other than a
Permitted Lien has attached nor any foreclosure, distraint, sale or similar
proceedings have been commenced. The charges, accruals and reserves on the books
of the Partnership Guarantor and each of its Subsidiaries in respect of taxes
are, in the reasonable judgment of the Partnership Guarantor, adequate.
(i) Financial Statements. The Partnership Guarantor has furnished, or
caused to be furnished, to the Bank financial statements for the Partnership
Guarantor and its Subsidiaries on a consolidated basis which are complete and
correct in all material respects and present fairly in accordance with GAAP, the
financial position of the Partnership Guarantor and its Subsidiaries on a
consolidated basis as at June 30, 1987 and the results of operations for the
periods then ended. Except as disclosed in such financial statements, neither
the Partnership Guarantor nor any of its Subsidiaries had any material
liabilities, contingent or otherwise, and there are no material unrealized or
anticipated losses of the Partnership Guarantor or any of its Subsidiaries,
which have not heretofore been disclosed in writing to the Bank.
(j) No Adverse Channel. Since June 30, 1987, there has occurred no event
which would have a Materially Adverse Effect.
(k) Investments and Guaranties. The Partnership Guarantor" has not made
investments in, advances to, or guaranties of, the obligations of any Person,
except as reflected in the financial statements referred to in Section 3.1(i)
above or as otherwise disclosed to the Bank in writing.
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<PAGE> 16
(1) Liabilities, Litigation etc. Except for liabilities incurred in the
normal course of business, neither the Partnership Guarantor nor any of its
Subsidiaries has any material (individually or in the aggregate) liabilities,
direct or contingent, except as disclosed or referred to in the financial
statements referred to in Section 3.1(i) above. Except as described in such
financial statements or on Exhibit "B" attached hereto, there is no litigation,
legal or administrative proceeding, investigation or other action of any nature
pending or, to the knowledge of the Partnership Guarantor, threatened against or
effecting the Partnership Guarantor or any of its Subsidiaries or any of their
respective properties which involves the possibility of any judgment or
liability not fully covered by insurance, and which may have a Materially
Adverse Effect. The Partnership Guarantor knows of no unusual or unduly
burdensome restriction, restraint or hazard relative to the business or
properties of the Partnership Guarantor or any of its Subsidiaries except as
previously disclosed to the Bank in writing.
(m) ERISA. No Reportable event has occurred and is continuing with respect
to any Plan of the Partnership Guarantor or any of its Subsidiaries and neither
the Partnership Guarantor nor any of its Subsidiaries has any material unfunded
liability; for vested benefits. Neither the Partnership Guarantor nor any of
its Subsidiaries has incurred any material Accumulated Funding Deficiency or
incurred any material liability to the Pension Benefit Guaranty Corporation
established under ERISA (or any successor thereto under ERISA) in connection
with any Plan.
(n) Patents, Trademarks, Franchises, etc. The Partnership Guarantor and
each of its Subsidiaries owns, possesses or has the right to use all necessary
patents, trademarks, trademark rights, trade names, trade name rights, service
marks, copyrights, franchises and licenses, and rights with respect thereof,
necessary to conduct its business as now conducted, without known conflict with
any patent, trademark, tradename, servicemark, franchise, license or copyright
of any other Person, and in each case, subject to no mortgage, pledge, lien,
lease, encumbrance, charge, security interest, title retention agreement or
option. All such patents, trademarks, trademark rights, tradenames, tradename
rights, servicemarks, copyrights, franchises and licenses are in full force and
effect, the holder thereof is in full compliance in all material respects with
all of the provisions thereof, and no such asset or agreement is subject to any
pending or, to the best of the Partnership Guarantor's knowledge, threatened
attack of revocation.
(o) Compliance with Law: Absence of Default. The Partnership Guarantor and
each of its Subsidiaries is in compliance with all Applicable Laws
non-compliance with which
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<PAGE> 17
would have a Materially Adverse Effect and with all of the provisions of their
respective partnership agreements, articles of incorporation and by-laws, as the
case may be, and no event has occurred or failed to occur, which has not been
remedied or waived, the occurrence or non-occurrence of which constitutes, (i)
an Event of Default or (ii) a default by the Partnership Guarantor or any of its
Subsidiaries under any other indenture, agreement or other instrument, or any
judgment, decree or order to which the Partnership Guarantor or any of its
Subsidiaries is a party or by which the Partnership Guarantor or any of its
Subsidiaries or any of their respective properties may be bound, which default
could have a Materially Adverse Effect.
(p) Casualties: Taking of Properties etc. Neither the business nor the
properties of the Partnership Guarantor or any of its subsidiaries has been
materially and adversely affected as a result of any fire, explosion,
earthquake, flood, drought, windstorm, accident, strike or other labor
disturbance, embargo, requisition or taking of property or cancellation of
contracts, permits or concessions by any domestic or foreign government or any
agency thereof, riot, activities of armed forces or acts of God or of any public
enemy.
(q) Accuracy and completeness of Information. All information, reports and
other papers and data relating to the Partnership Guarantor or any of its
Subsidiaries furnished to the Bank were, at the time the same were so furnished,
complete and correct in all material respects to the extent necessary to give
the Bank a true and accurate knowledge of the subject matter. No fact is
currently known to the Partnership Guarantor which has or could reasonably be
expected to have a Materially Adverse Effect. No information, exhibit or report
furnished or to be furnished by the Partnership Guarantor to the Bank in
connection with this Guaranty Agreement, including all financial statements of
the Partnership Guarantor previously delivered to the Bank, contain as of the
date thereof, or will contain as of the Date of Issuance of any Letter of
Credit, any material misstatement of fact or fail or will fail to state any
material fact, the omission of which would render the statements therein
materially false or misleading.
(r) Business. The Partnership Guarantor is engaged in the business of
owning and operating licensed nursing homes and other health care facilities.
(s) Investments, Advances, and Guaranties. The Partnership Guarantor has
not made investments in, advances to, or guaranties of, the obligations of any
Person, or committed or agreed to do any of these things, except as reflected in
the Financial Statements or as previously disclosed to the Bank in writing.
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<PAGE> 18
(t) Regulation U. The Partnership Guarantor is not engaged principally, or
as one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying margin stock within the meaning of Regulation
of the Board of Governors of the Federal Reserve System.
(u) Personal Holding Company. The Partnership Guarantor is not a "personal
holding company" as defined in Section 542 of the Code.
(v) Tax Shelter. The Partnership Guarantor is not a "tax shelter" as
defined in Section 6111 of the Code.
(w) Filings. To the date hereof, the Partnership Guarantor has filed all
reports and statements required to be filed with the Securities and Exchange
Commission, if any, and any stock exchange which lists securities issued by the
Partnership Guarantor. As of their respective dates, such reports and statements
complied in all material respects with all rules and regulations promulgated by
the Securities and Exchange Commission and such stock exchanges and did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(x) Solvency. The Partnership Guarantor and its Subsidiaries are now and at
all times hereafter shall be solvent and able to pay their respective debts as
they mature, and the Partnership Guarantor and its Subsidiaries now own and
shall at all times hereafter own property whose fair salable value is greater
than the amount required to pay their respective debts.
(y) Capital. The Partnership Guarantor and its Subsidiaries now have and
shall have at all times hereafter capital sufficient to carry on their
respective businesses and transactions and all businesses and transactions in
which they are about to engage.
(z) Healthcare Compliance. The Partnership Guarantor and each of its
Subsidiaries have all permits, licenses, authorizations and approvals material
to the lawful ownership (or lease) and operation of each Facility, and each such
Facility is in substantial compliance with all zoning laws, building codes,
environmental protection laws and other laws material to the use, occupancy and
ownership thereof, and each such Facility may be expanded and/or rebuilt in the
event of a casualty without violation of applicable zoning laws and has access
to utilities sufficient to satisfy its needs. Each Facility, except as provided
in Exhibit "C" hereto, is entitled to participate in, or is a party to, the
Medicare, Medicaid and, to the best of the
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<PAGE> 19
Partnership Guarantor's knowledge after due inquiry, all other public and
private reimbursement programs applicable to facilities of the same type as such
facility. All certifications and contracts allowing participation in such
reimbursement programs are in full force and effect and have not been amended or
otherwise modified, rescinded, revoked or assigned as of the date hereof. Each
Facility, except as provided in Exhibit "C" hereto, is in such material
compliance with the requirements of Medicare, Medicaid and all other public and
private reimbursement programs applicable thereto that reimbursement thereunder
will not be affected or impaired by any noncompliance therewith.
(aa) Tax-Exempt Status of Bonds. The Partnership Guarantor has not taken
any action which would cause interest on the Bonds and the Refunded Bonds, or
any of them, to be subject to federal income taxation.
(bb) Management Agreements Facility Guaranty Agreements. The Partnership
Guarantor has heretofore furnished the Bank with true, correct and complete
copies of the Management Agreements and the Facility Guaranty Agreements and all
amendments thereto. Except as so amended, none of the Management Agreements or
the Facility Guaranty Agreements has been modified, amended or terminated, and
each of the Management Agreements and the Facility Guaranty Agreements is in
full force and effect.
3.2 The Individual Guarantor represents and warrants that:
(a) Due Execution, Etc. The Individual Guarantor has the power and legal
capacity to execute, deliver and perform this Guaranty Agreement in accordance
with its terms and to consummate the transactions contemplated hereby. This
Guaranty Agreement has been duly executed and delivered by the Individual
Guarantor and is a legal, valid and binding obligation of the Individual
Guarantor, enforceable in accordance with its terms, subject, as to enforcement
of remedies, to the following qualifications: (i) an order of specific
performance and an injunction are discretionary remedies and, in particular, may
not be available where damages are considered an adequate remedy at law, and
(ii) enforcement may be limited by bankruptcy, insolvency, liquidation,
reorganization, reconstruction and other similar laws affecting enforcement of
creditors' rights generally (insofar as any such law relates to the bankruptcy,
insolvency or similar event of the Individual Guarantor).
(b) Compliance with Laws, etc. of Guaranty Agreement and Contemplated
Transactions. The execution, delivery and performance of this Guaranty Agreement
in accordance with its terms and the consummation of the transactions
contemplated hereby do not and will not (i) violate any Applicable Law, (ii)
conflict with, result in a breach of, or constitute a default
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<PAGE> 20
under any material indenture, agreement, or other instrument to which the
Individual Guarantor is a party or by which he or any of his properties may be
bound, or, (iii) result in or require the creation or imposition of any Lien
upon or with respect to any property now owned or hereafter acquired by the
Individual Guarantor except Permitted Liens.
(c) Liabilities, Litigation, etc. The Individual Guarantor does not have
any material (individually or in the aggregate) liabilities, direct or
contingent, except as disclosed in Exhibit "B" hereto. Except as so disclosed,
there is no litigation, legal or administrative proceeding, investigation or
other action of any nature pending or, to the knowledge of the Individual
Guarantor, threatened against or affecting the Individual Guarantor which
involves the possibility of any judgment or liability not fully covered by
insurance, and which may have a Materially Adverse Effect.
(d) Solvency. The Individual Guarantor is now and at all times hereafter
shall be solvent and able to pay his debts as they mature.
3.3 Survival of Representations and Warranties, etc. All representations
and warranties made under this Guaranty Agreement shall be deemed to be made,
and shall be true and correct, at and as of the date of delivery of this
Guaranty Agreement and at as of the date of each Drawing, except to the
extent previously fulfilled in accordance with the terms hereof and to the
extent subsequently inapplicable. All representations and warranties made under
this Guaranty Agreement shall survive, and not be waived by, the honoring of any
Drawing by the Bank or by any investigation or inquiry by the Bank.
ARTICLE IV
Special Covenants
Until this Guaranty Agreement is terminated, the Guarantors covenant and
agree as follows:
4.1 Preservation of Existence and Similar Matters. The Partnership
Guarantor and each of its Subsidiaries will, subject to the provisions of
Section 4.16 hereof, (i) preserve and maintain their respective existence,
rights, franchises, licenses and privileges in their respective states of
incorporation or organization, as the case may be, including, without
limitation, all Necessary Authorizations and (ii) qualify and remain qualified
and authorized to do business in each jurisdiction in which the character of
properties or the nature of businesses requires such qualification or
authorization.
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4.2 Compliance with Applicable Law. The Partnership Guarantor will comply
with the requirements of all Applicable Law.
4.3 Maintenance of Properties. The Partnership Guarantor will maintain and
will cause each of its Subsidiaries to maintain or cause to be maintained in the
ordinary course of business in good repair, working order and condition all
properties used or useful in their respective businesses (whether owned or held
under lease), and from time to time to make or cause to be made all needed and
appropriate repairs, renewals, replacements, additions, betterments and
improvements thereto.
4.4 Accounting Methods and Financial Records. The Partnership Guarantor
will maintain and will cause each of its Subsidiaries to maintain a system of
accounting established and administered in accordance with GAAP, keep adequate
records and books of account in which complete entries will be made in
accordance with such accounting principles consistently applied and reflecting
all transactions required to be reflected by such accounting principles.
4.5 Payment of Taxes and Claims. The Guarantors and each of the Partnership
Guarantor's Subsidiaries will pay and discharge all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits or
upon any properties belonging to it prior to the date on which penalties attach
thereto, and all lawful claims for labor, materials and supplies which, if
unpaid, might become a Lien or charge upon any of its properties; except that,
no such tax, assessment, charge, levy or claim need be paid which is being
contested in good faith by appropriate proceedings and, in the case of the
Partnership Guarantor, for which adequate reserves shall have been set aside on
the appropriate books, but only so long as such tax, assessment, charge, levy or
claim does not become a Lien or charge other than a Permitted Lien and no
foreclosure, distraint, sale or similar proceedings shall have been commenced
and remain unstayed for a period of thirty (30) days after such commencement.
The Guarantors and each of the Partnership Guarantor's Subsidiaries shall timely
file all information returns required by federal, state or local tax
authorities.
4.6 Visits and Inspections. The Partnership Guarantor will permit and will
cause each of its Subsidiaries to permit representatives of the Bank to (i)
visit and inspect the properties of the Partnership Guarantor and each of its
Subsidiaries during normal business hours, (ii) inspect and make extracts from
and copies of its books and records, and (iii) discuss with its principal
officers its businesses, assets, liabilities, financial positions, results of
operations and business prospects relating to the Partnership Guarantor and each
of its Subsidiaries.
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4.7 payment of Indebtedness. The Partnership Guarantor and each of its
Subsidiaries will, subject to any provisions therein regarding subordination,
pay any and all of its Indebtedness when and as the same becomes due, other than
amounts duly disputed in good faith the non-payment of which would not have a
Materially Adverse Effect.
4.8 ERISA The Partnership Guarantor will at all times make, or cause to be
made, prompt payment of contributions required to meet the minimum funding
standards set forth in ERISA with respect to its and its Affiliates' employee
benefit plans; promptly after the filing thereof, furnish to the Bank copies of
any annual report required to be filed pursuant to ERISA in connection with each
such plan of it and its Affiliates; notify the Bank as soon as practicable of
any Reportable Event and of any additional act or condition arising in
connection with any such plan which the Partnership Guarantor believes might
constitute grounds for the termination thereof by the Pension Benefit Guaranty
Corporation or for the appointment by the appropriate United States District
Court of a trustee to administer such plan; and furnish to the Bank, promptly
upon the Bank's request therefor such additional information concerning any such
employee benefit plan as may be reasonably requested by the Bank.
4.9 Audited Annual Financial Statements and Information: Certificate of No
Default. The Partnership Guarantor will furnish to the Bank, within one hundred
twenty (120) days after the end of each fiscal year of the Partnership
Guarantor, the balance sheets of the Partnership Guarantor as at the end of such
fiscal year and the related statements of income, retained earnings and changes
in financial position of the Partnership Guarantor for such fiscal year, on a
consolidated and a consolidating basis with the Partnership Guarantor's
Subsidiaries, setting forth in comparative form the figures as at the end of and
(except for the first year after the date hereof) for the previous fiscal year
and certified without qualifications or with only such qualifications as shall
be acceptable to the Bank by independent certified public accountants of
recognized standing reasonably satisfactory to the Bank, whose opinion shall be
in scope and substance satisfactory to the Bank, and who shall have authorized
the Partnership Guarantor to deliver such -- financial statements and opinion
thereon to the Bank pursuant to this Guaranty Agreement. In the event that any
such financial statements are qualified by the independent certified public
accountants preparing such financial statements, such accountants shall submit
to the Bank, with such financial statements, their certificate to the effect
that in making the examination necessary for their audit they have obtained no
knowledge of the occurrence of an Event of Default or any fact or circumstance
which, with notice or lapse of time, or both, would constitute an
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Event of Default, or if they have obtained knowledge of any such Event of
Default or any such fact or circumstance, disclosing the nature and period of
existence of such Event of Default or of such fact or circumstance.
4.10 Quarterly Financial Statements and Information. The Partnership
Guarantor will furnish to the Bank, within sixty (60) days after the last day of
each of the first three quarters in each fiscal year of the Partnership
Guarantor, the balance sheets of the Partnership Guarantor as at the end of such
quarter and the related statements of income and retained earnings of the
Partnership Guarantor for such quarter and for the elapsed portion of the fiscal
year ended with the last day of such quarter, all of which shall be on a
consolidated and a consolidating basis with Partnership Guarantor's Subsidiaries
and certified by a person authorized to make such certification on behalf of the
Partnership Guarantor, as the case may be, to be, in his opinion, complete and
correct in all material respects and to present fairly, in accordance with GAAP,
the statements of financial position of the Partnership Guarantor as at the end
of each period and the results of operations for such period, and for the
elapsed portion of the year ended with the last day of such period, subject only
to normal year-end adjustments.
4.11 Quarterly Performance Certificates. The Partnership Guarantor shall
furnish the Bank, within sixty (60) days after the last day of each of the first
three quarters in each fiscal year of the Partnership Guarantor, and within one
hundred twenty (120) days after the last day of the fourth quarter of each
fiscal year, a certificate of an Authorized Signatory:
(a) setting forth as at the end of such quarterly period or fiscal year, as
the case may be, the arithmetical calculations required to establish whether or
not the Partnership Guarantor, on a consolidated basis, was in compliance with
the requirements of Section 4.14 hereof; and
(b) stating that, to the best of his knowledge, no Event of Default, and no
fact or circumstance which with notice or the passage of time or both would
constitute an Event of Default, has occurred as at the end of such quarterly
period or year, as the case may be, or, if an Event of Default or any such fact
or circumstance has occurred disclosing each such Event of Default, fact and
circumstance and its nature, when it occurred, whether it is continuing and the
steps being taken by the Partnership Guarantor with respect to such default or
Event of Default.
4.12 Copies of Other reports. The Partnership Guarantor shall furnish the
following documents and information to the Bank:
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(a) promptly upon receipt thereof, copies of all reports, if any, submitted
to the Partnership Guarantor by the Partnership Guarantor's independent public
accountants regarding the Partnership Guarantor or any of its Subsidiaries,
including, without limitation, any management report prepared in connection with
the annual audit referred to in Section 4.9 hereof.
(b) within forty-five (45) days after the end of each calendar year, annual
projections of operating income and expenses for the Partnership Guarantor, and
all material amendments and changes thereafter to the same.
(c) from time to time and promptly upon each request, such data,
certificates, reports, statements, opinions of counsel, documents or further
information regarding the business, assets, liabilities, financial position,
projections, results of operations or business prospects of the Partnership
Guarantor or any of its Subsidiaries as the Bank reasonably may request.
(d) promptly after the preparation of the same, copies of all reports or
financial information filed with the Securities and Exchange Commission.
4.13 Notice of Litigation and Other Matters. The Guarantors will give the
Bank prompt notice of the following events after Guarantors have, or in the
exercise of reasonable diligence should have, received notice thereof:
(a) the commencement of all proceedings and investigations by or before any
governmental body and all actions and proceedings in any court or before any
arbitrator (1) against, or (2) (to the extent known to any Guarantor) in any
other way relating adversely to, the Guarantors, or either of them, or any of
the Partnership Guarantor's Subsidiaries or any of their respective assets or
businesses which, if adversely determined, would singly or when aggregated with
all other such proceedings, investigations and actions, if adversely determined,
have a Materially Adverse Effect;
(b) any material adverse change with respect to the business, assets,
liabilities, financial position, results of operations or business prospects of
the Guarantors, or either of them, or any of the Partnership Guarantor's
Subsidiaries other than changes in the ordinary course of business the effects
of which have not had a Materially Adverse Effect;
(c) any event of default or the occurrence or nonoccurrence of any event
which constitutes, or which with the passage of time or giving of notice, or
both, would constitute, an event of default by the Guarantors, or either of
them, or any the Partnership Guarantor's of Subsidiaries under any material
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agreement other than this Guaranty Agreement to which any such Guarantor or any
of the Partnership Guarantor's Subsidiaries is a party or by which their
respective properties may be bound, giving in each case the details thereof and
specifying the action proposed to be taken with respect thereto; and
(d) copies of all notices of actual suspension or revocation of
participation or qualification with respect to (A) the Medicare or Medicaid
programs, (B.) any private health insurance program issued by any Governmental
Authority having jurisdiction over the licensing or operation of any of the
Projects or any other health care related assets or operations of the
Partnership Guarantor and any of its Subsidiaries, or (C) any private insurance
company.
4.14 Financial Covenants. The Partnership Guarantor will maintain at all
times:
(a) a Current Ratio greater than or equal to 1.5 to 1;
(b) Working Capital greater than or equal to $7,500,000;
(c) a ratio of Funded Debt to Tangible Net Worth less than or equal to (i)
4.50 to 1.0 for the period from the date of delivery of this Guaranty Agreement
through March 31, 1988; (ii) 4.25 to 1.0 for the period from April 1, 1988
through September 30, 1988; and (iii) 4.0 to 1.0 thereafter; provided, however,
that if at any time during any of the periods set forth above the Partnership
Guarantor shall (i) issue Equity or Subordinated Debt or (ii) sell any of its
assets and, as a result of either of such events, the Partnership Guarantor
obtains proceeds which causes the Partnership Guarantor to have a ratio of
Funded Debt to Tangible Net Worth which is less than the above ratios, then the
Partnership Guarantor shall thereafter maintain the lesser of such ratio or,
during succeeding periods, the ratio set forth above for such succeeding periods
and further provided, that at no time shall the Partnership Guarantor be
required to maintain a ratio of Funded Debt to Tangible Net Worth which is less
than 4.0 to 1.0.
(d) Consolidated Tangible Net Worth of not less than (i) $32,000,000 for
the period from the date of delivery of this Guaranty Agreement through December
30, 1987. (ii) $36,000,000 for the period from December 31, 1987 through
December 30, 1988; and (iii) $40,000,000 at all times thereafter provided,
however, that at such time as the Partnership Guarantor shall have maintained
its (a) Current Ratio at not less than 1.5 and (b) ratio of Funded Debt to
Tangible Net Worth at not more than 3.5 to 1.0 for two consecutive fiscal
quarters, then for so long as the Partnership Guarantor continues to maintain
such ratios, the Partnership Guarantor shall instead maintain its Tangible Net
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Worth at not less than the following amounts for the following periods: (i)
$32,000,000 for the period from the date delivery of this Guaranty Agreement
through December 30, (ii) $34,000,000 for the period from December 31, 1987
through December 30, 1988 and (iii) $36,000,000 at all times the and
(e) a Debt Service Coverage Ratio of at least 1.3 to
4.15 Amendment of Bond Documents. The Partnership Guarantor will not amend,
modify, supplement or terminate Bond Documents, or any of them, or permit or
consent to an amendment, modification, supplementation or termination, were the
Bank's prior written consent.
4.16 No Merger Consolidation or Sale of Assets. The Partnership Guarantor
will not dissolve or otherwise dispose all or substantially all of its assets
and will not console with or merge into another partnership or corporation or
per one or more other partnerships or corporations to consolidate with or merge
into it without the prior written consent of Bank; provided that, so long as no
Event of Default then and is continuing hereunder, the Partnership Guarantor
may consolidate with the Borrower, allow the Borrower to merge the Partnership
Guarantor, or acquire all or substantially the assets of the Borrower, provided
further, that (a) the Partnership Guarantor is the surviving, resulting or
transfer entity (as the case may be), (b) the Partnership Guarantor assumes in
writing the Borrower obligations under the Reimbursement Agreement, the Pledge
Agreement, any applicable Mortgage(s) and such other Related Documents as the
Bank require, (c) immediately following the consummation of such consolidation,
merger or asset acquisition, the Partnership Guarantor is in compliance with
each and every covenant set in Section 4.14 hereof, as evidenced to the Bank by
an opinion independent certified public accountants of recognized satisfactory
to the Bank, and (d) the Partnership Guarantor furnishes to the Bank such
additional agreements, certificate title insurance and legal opinions
(including, without limitation, an opinion of nationally recognized bond
counsel satisfactory to the Bank that such consolidation, merger or acquisition
of assets will not adversely affect the exemption from federal income taxation
of interest on the Bonds) as Bank may require. Notwithstanding the immediately
preceding sentence so long as no Event of Default shall exist and be continuing
hereunder, the Partnership Guarantor may incorporate itself (whether by
consolidation with or merger into a corporation, or otherwise), provided that
(i) the surviving resulting entity (as the case may be) is a corporation
incorporated under the laws of one of the states of the United States of
America and, if not incorporated under the laws of a
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State of Florida is duly qualified to transact business in the State of Florida,
(ii) such surviving or resulting corporation assumes in writing the obligations
of the Partnership Guarantor under this Guaranty, (iii) immediately following
the consummation of such consolidation, merger or other incorporation
transaction, such surviving or resulting corporation is in compliance with each
and every covenant set forth in Section 4.14 hereof, as evidenced to the Bank by
an opinion of independent certified public accountants of recognized standing
satisfactory to the Bank, and (iv) such surviving or resulting corporation
furnishes to the Bank such additional agreements, certificates and legal
opinions as the Bank may require.
4.17 Insurance. The Partnership Guarantor shall use its best efforts to
maintain adequate medical malpractice liability insurance at a minimum of
$1,000,000 per occurrence and $1,000,000 in the aggregate; and the Partnership
Guarantor shall maintain, and cause each of the Partnership Guarantor's
Subsidiaries to maintain, with responsible and reputable insurance companies or
associations (a) insurance (including, without limitation, comprehensive general
liability and hazard insurance insuring replacement value with respect to all of
its properties) with respect to its properties and business, in such amounts,
covering such risks and having deductibles, as is carried generally in
accordance with sound business practice by companies in similar businesses
similarly situated or as otherwise is deemed acceptable by the Bank, and (b)
workmen's compensation and other insurance as may be required by law.
4.18 Individual Guarantor Financial Reporting Requirements. Within one
hundred twenty (120) days after the end of each calendar year, the Individual
Guarantor shall furnish financial statements of the Individual Guarantor in such
reasonable detail as may be requested by the Bank. The Individual Guarantor
shall also furnish such additional financial information as the Bank may
reasonably request from time to time.
ARTICLE V
Subordination
5.1 Subordination. The Partnership Guarantor hereby agrees that all
amounts owing from time to time to the Partnership Guarantor under the
Management Agreements and guaranty fees and other payments owing from time
to time to the Partnership Guarantor under the Facility Guaranty Agreements,
are subordinated in right of payment to the prior payment in full of all
amounts now or hereafter owing under the Reimbursement Agreement, the Pledge
Agreement, the Mortgages and the other Related Documents, and under this
Guaranty Agreement.
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ARTICLE VI
EVENTS OF DEFAULTS; REMEDIES
6.1 Events of Default. The occurrence of any of the following events shall
be an "Event of Default" hereunder
(a) any representation or warranty made by the Guarantors, or either of
them, herein or in any certificate or financial or other written statement
furnished by such Guarantors pursuant to this Guaranty Agreement shall prove to
have been untrue or incomplete in any material respect when made; or
(b) The Guarantors, or either of them, shall fail to perform or observe any
term, covenant or agreement contained in Sections 2.1, 4.9, 4.10, 4.11, 4.14,
4.15 or 4.16 to which such Guarantors are subject; or
(c) The Guarantors, or either of them, shall fail to perform or observe any
term, covenant or agreement contained in this Guaranty Agreement and to which
such Guarantors are subject, other than those referred to in paragraph (b) of
this Section 6.1, and any such failure shall remain unremedied for thirty (30)
days after written notice thereof shall have been given to the Guarantors by the
Bank or
(d) any material provision of this Guaranty Agreement shall at any time for
any reason cease to be valid and binding on the Guarantors, or either of them,
or shall be declared to be null and void, or the validity or enforceability
thereof shall be contested by the Guarantors, or either of them, or any
Governmental Authority having jurisdiction in the premises, or the Guarantors,
or either of them, shall deny that they have any or further liability or
obligation under this Guaranty Agreement or
(e) the Partnership Guarantor shall fail to pay when due and payable, after
giving effect to any applicable grace period, the principal of or interest on
any Indebtedness in an aggregate amount over $100,000 (excluding Indebtedness
guaranteed under this Guaranty Agreement) or the maturity of any such
Indebtedness shall have been accelerated or been required to be prepaid prior
to the stated maturity thereof or any event shall have occurred and be
continuing which with the passage of time or the giving of notice or both, would
permit any holder or holders of such Indebtedness any trustee or agent acting on
behalf of such holder or holders or any other Person so to accelerate such
maturity, unless the Partnership Guarantor's obligation to pay, or the
acceleration or required prepayment of, such Indebtedness is being contested or
any right of set-off is being asserted by the Partnership Guarantor in good
faith by appropriate
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proceedings and reserves in respect thereof deemed adequate by the Partnership
Guarantor have been established on the books of the Partnership Guarantor in
accordance with GAAP, or
(f) a judgment or order for the payment of money shall be entered against
the Partnership Guarantor by any court or a warrant of attachment or execution
or similar process shall be issued or levied against property of the Partnership
Guarantor, which in the aggregate exceeds $100,000 in value over any applicable
issuance coverage or reserve previously established on the books of the
Partnership Guarantor and such judgment, order, warrant or process shall
continue undischarged or unstayed for thirty (30) consecutive days; or
(g) (1) any Guarantor shall (A) apply for or consent to the appointment of
a receiver, trustee, liquidator or custodian or the like of itself or of its
property, (B) admit in writing its inability to pay its debts generally as they
become due, (C) make a general assignment for the benefit of creditors, (D) be
adjudicated a bankrupt or insolvent, or (E) commence a voluntary case under the
Federal bankruptcy laws of the United States of America or file a voluntary
petition or answer seeking reorganization, an arrangement with creditors or an
order for relief or seeking to take advantage of any insolvency law or file an
answer admitting the material allegations of a petition filed against it in any
bankruptcy, reorganization or insolvency proceeding, or corporate action shall
be taken by it for the purpose of effecting any of the foregoing; or (2) if
without the application, approval or consent of such Guarantor a proceeding
shall be instituted in any court of competent jurisdiction, under any law
relating to bankruptcy, insolvency, reorganization or relief of debtors,
seeking in respect of such Guarantor an order for relief or an adjudication in
bankruptcy, reorganization, dissolution, winding up, liquidation, a composition
or arrangement with creditors, a readjustment of debts, the appointment of a
trustee, receiver, liquidator or custodian or the like of such Guarantor or of
all or any substantial part of its assets, or other like relief in respect
thereof under any bankruptcy or insolvency law, and, if such proceeding is being
contested by such Guarantor in good faith, the same shall (A) result in the
entry of an order for relief or any such adjudication or appointment or (B)
continue undismissed, or pending and unstayed, for any period of sixty (60)
days; or
(h) an "event of default" shall occur under the provisions of the Revolver
Agreement; or
(i) (A) a Termination Event with respect to a Plan shall occur, (B) any
person shall engage in any Prohibited Transaction involving any Plan of the
Partnership Guarantor or any Affiliated of the Partnership Guarantor, (C) an
Accumulated Funding
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Deficiency, whether or not waived, shall exist with respect to any Plan of the
Partnership Guarantor or any Affiliate of the Partnership Guarantor (D) the
Partnership Guarantor or any Affiliate of the Partnership Guarantor shall be in
"default" (as defined in Section 4219(c)(5) of ERISA with respect to payments
due to a Multiemployer Plan resulting from the Partnership Guarantor's or such
Partnership Guarantor Affiliate's complete or partial withdrawal (as described
in Section 4203 or 4205 of ERISA from such Plan, or (E) any other event or
condition shall occur or exist with respect to a Single Employer Plan of the
Partnership Guarantor or any Affiliate of the Partnership Guarantor except that
no such event or condition shall constitute an Event of Default if it, together
with all other events or conditions at the time existing, would not subject the
Partnership Guarantor to any tax, penalty, debt or liability which, alone or in
the aggregate, would have a Materially Adverse Effect on the Partnership
Guarantor.
6.2 Remedies. (a) Upon the occurrence of an Event of Default, the Bank may
thereupon exercise such rights and remedies as may be provided in the
Reimbursement Agreement, the Pledge Agreement, this Guaranty, any Mortgage and
any other Related Documents by reason of such Event of Default in order to
enforce the provisions of this Guaranty, with or without the simultaneous
exercise of any other such right or remedy under said documents.
(b) No remedy herein conferred upon or reserved to the Bank is intended to
be exclusive of any other available remedy or remedies, but each and every such
remedy shall be cumulative and shall be in addition to every other remedy given
under this Guaranty Agreement or now or hereafter existing at law or in equity
or by statute. No delay or omission to exercise any right or power accruing upon
any default, omission or failure of performance hereunder shall impair any such
right of power or shall be construed to be a waiver thereof, but any such right
and power may be exercised from time to time as often as may be deemed
expedient. In order to entitle the Bank to exercise any remedy reserved to it in
this Guaranty Agreement, it shall not be necessary to give any notice, other
than such notice as may be herein expressly required. In the event any provision
contained in this Guaranty Agreement should be breached by any party and
thereafter duly waived by the other party so empowered to act, such waiver shall
be limited to the particular breach so waived and shall not be deemed to waive
any other breach hereunder. No waiver, amendment, release or modification of
this Guaranty Agreement shall be established by conduct, custom or course of
dealing, but solely by an instrument in writing duly executed by the parties
thereunto duly authorized by this Guaranty Agreement.
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ARTICLE VII
Miscellaneous
7.1 When Obligations Arise. The obligations of the Guarantors hereunder
shall arise absolutely and unconditionally the issuance by the Bank of the first
Letter of Credit to be issued pursuant to the Reimbursement Agreement.
7.2 Nature of Guarantors' Obligations. This guaranty Agreement is a
continuing obligation of the Guarantors and shall (i) be binding upon the
Guarantors, their respective heirs, executors, personal representatives
successors and permitted assigns, and (ii) inure to the benefit of and be
enforceable by the Bank and its successors, transferees and assigns; provided,
that neither of the Guarantors may assign all or any part of this Guaranty
Agreement or the rights or obligations of such Guarantor hereunder without the
prior written consent of the Bank; and, provided further, that unless the Bank
shall agree in writing to release any Guarantor from its rights or obligations
hereunder, no such assignment (whether or not consented to by the Bank) shall in
itself relieve or release such Guarantor from its obligations hereunder.
7.3 Notices. All notices, requests and other communications hereunder shall
be in writing and shall be given to the party to whom sent, addressed to it as
follows:
If directed to the Bank:
The Toronto-Dominion Bank, Chicago Branch
Three First National Plaza, Suite 1900
Chicago, Illinois 60602
Attention: Senior Manager, Credit Administration
with a copy to:
The Toronto-Dominion Bank
U.S.A. Division
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
Attention: Senior Manager
Health Care Finance
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If directed to the Partnership Guarantor:
National HealthCorp L.P.
814 S. Church Street
Murfreesboro, Tennessee 37130
Attention: Richard F. LaRoche, Jr.
Senior Vice President and General Counsel
If directed to the Individual Guarantor:
Mr. James O. McCarver
c/o Florida Convalescent Centers, Inc.
1111 Mockingbird Lane, Suite 1111
Dallas, Texas 75247
The Bank and the Guarantors may designate a different address to which such
notices should be sent by giving the other written notice thereof. Each such
notice, request or communication shall be effective (i) if given by mail,
three (3) Business Days after such communication is deposited in the mails with
first class postage prepaid, addressed as aforesaid or (ii) if given by any
other means, when delivered at the address of the party to whom such notice is
being delivered.
7.4 Bank's Right of Set-Off.
(a) To the fullest extent permitted by law, upon the occurrence and during
the continuance of any Event of Default, the Bank is hereby authorized at any
time and from time to time, without notice to the Guarantors (any such notice
being expressly waived by the Guarantors), to set-off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by the Bank to or for the credit
or the account of the Guarantors, or either of them, against any of the
obligations of the Guarantors now or hereafter existing under this Guaranty
Agreement, irrespective of whether the Bank shall have made any demand hereunder
or thereunder and although such obligations may be unmatured.
(b) The Bank agrees promptly to notify the Guarantors after any set-off and
application, provided that the failure to give such notice shall not affect the
validity of such set-off and application. Subject to the provisions of
subsection (a), the rights of the Bank under this Section are in addition to
other rights and remedies (including, without limitation, other rights of
set-off) which the Bank may have.
7.5 Jurisdiction; Service of Process. The Guarantors agree that any legal
action or proceeding with respect to this Guaranty Agreement or to enforce any
judgment obtained against
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the Guarantors, or against either of them, in connection with this Guaranty
Agreement may be brought by the Bank in the courts of the State or in the United
States District Court for the Northern District of Illinois, or any other court
to the jurisdiction of which the Guarantors, or either of them, or any of their
respective properties is or may be subject. The Guarantors each irrevocably
submits to the jurisdiction of the courts of the State and of the United States
District Court for the Northern District of Illinois, and irrevocably waive any
present or future objection to venue in any such court, and any present or
future claim that any such court is an inconvenient forum, in connection with
any action or proceeding relating to this Guaranty Agreement. Nothing herein
shall effect the right of the Bank to serve process in any manner permitted by
law or to bring any civil suit, action or proceeding against the Guarantors, or
either of them, or their respective property in the courts of any jurisdiction
in which venue may be granted.
(b) For the purposes of any legal action or proceeding brought by the Bank
with respect to this Guaranty, the Partnership Guarantor hereby irrevocably
designates and appoints CT Corporation System, currently located at 208 South
LaSalle Street, Chicago, Illinois, 60604, as its authorized agent for service of
process in the State of Illinois. The Bank shall for all purposes be entitled to
treat such designee of the Partnership Guarantor as the authorized agent to
receive for and on its behalf service of writs or summons or other legal process
in the State of Illinois; delivery of such service to its authorized agent shall
be deemed to be made when personally delivered to the agent or three (3) days
after mailing by registered or certified mail addressed to such authorized
agent. In the event that, for any reason, such agent or his successor shall no
longer serve as agent of the Partnership Guarantor to receive service of process
in the State of Illinois, the Partnership Guarantor shall appoint a person in
the State of Illinois as a successor so to serve and advise the Bank thereof so
that at all times the Partnership Guarantor will maintain an agent to receive
service of process in the State of Illinois on its behalf with respect to this
Guaranty Agreement. In the event that, for any reason, service of legal process
cannot be made in the manner described above, such service may be made in such
other manner as permitted by law.
7.6 Amendments. This Guaranty Agreement may be amended, and the guarantors
may take any action herein prohibited, or omit to perform any act herein
required to be performed, only if the Guarantors shall first obtain the written
consent of the Bank thereto. No course of dealing between the Guarantors and the
Bank nor any delay in exercising any rights hereunder, shall operate as a waiver
of any rights of the Bank hereunder.
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<PAGE> 34
7.7 Sole Judgment of the Bank. Unless otherwise specifically indicated,
if any agreement, certificate or other writing, or any action taken or to be
taken, is by the terms of this Guaranty Agreement required to be satisfactory
to the bank, the determination of such satisfaction shall be made by the Bank
in its sole and exclusive judgment exercised in good faith.
7.8 Severability. Any provision of this Guaranty Agreement which is
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or non-authorization as to the remaining provisions hereof and
shall not affect the validity, enforceability or legality of such provision in
any other jurisdiction.
7.9 Headings. Section headings are included herein for convenience of
reference only and shall not constitute a part of this Guaranty Agreement for
any other purpose.
7.10 Governing Law. This Guaranty Agreement is intended to be performed in
the State of Illinois, and shall be construed and enforced in accordance with
and the rights of the parties shall be governed by, the laws of the State of
Illinois.
7.11 Exhibits. All Exhibits referred to herein are by this reference
incorporated herein and made a part hereof.
7.12 Entire Agreement; Multiple Counterparts. This Guaranty Agreement
constitutes the entire agreement, and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and may be executed simultaneously in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.13 Time of the Essence. Time is of the essence of this contract.
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<PAGE> 35
IN WITNESS WHEREOF, the Guarantors and the Bank have duly executed and
delivered this Guaranty Agreement, or caused same to be duly executed and
delivered, under seal, as of the date first above written.
/s/
---------------------------------- [SEAL]
JAMES O. McCARVER
NATIONAL HEALTHCORP L.P., a
Delaware limited partnership
By: NHC, Inc., a Tennessee
corporation, as Managing
General Partner
By: /s/
---------------------------------
Title: President
Attest:
------------------------------
Title: SECRETARY
[SEAL]
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<PAGE> 36
THE TORONTO-DOMINION BANK
acting through its
Chicago Branch
By:/S/
---------------------
Title: MANAGER
CREDIT
ADMINISTRATION
[BANK SEAL]
<PAGE> 1
Exhibit 10.14
GUARANTY AGREEMENT
between
NATIONAL HEALTHCORP L.P.,
the Guarantor
and
SOCIETE GENERALE,
the Bank
Dated
as of
May 1, 1993
<PAGE> 2
ARTICLE I
Definitions
<TABLE>
<CAPTION>
<S> <C> <C>
Section 1.1 Definitions ........................................... 2
Section 1.2 Financial Terms........................................ 8
Section 1.3 Terms Not Defined Herein............................... 9
ARTICLE II
Guaranty
Section 2.1 Guaranty .............................................. 9
Section 2.3 Obligations Absolute and Unconditional................. 10
Section 2.4 No Set-off ............................................ 12
Section 2.5 Right to Proceed against Guarantor First............... 12
Section 2.6 Waiver of Notice ...................................... 12
Section 2.7 Attorneys Fees and Expenses............................ 13
Section 2.8 Assignment of Guaranteed Obligations by Bank........... 13
ARTICLE III
Representations and Warranties
Section 3.1............................................................... 13
(a) Organization: Power: Qualification.................................... 13
(b) Authorization......................................................... 14
(c) Subsidiaries.......................................................... 14
(d) Compliance with Laws, etc. of Guaranty Agreement and
Contemplated Transactions............................................. 14
(e) Necessary Authorizations.............................................. 14
(f) Title to Properties................................................... 15
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
Section 4.9 Audited Annual Financial Statements and Information;
Certificate of No Default.............................. 22
Section 4.10 Quarterly Financial Statements and Information......... 22
Section 4.11 Quarterly Performance Certificates..................... 23
Section 4.12 Copies of Other Reports................................ 23
Section 4.13 Notice of Litigation and Other Matters................. 24
Section 4.14 Financial Covenants.................................... 24
Section 4.15 Amendment of Bond Documents............................ 25
Section 4.16 No Merger, Consolidation or Sale of Assets............. 25
Section 4.17 Insurance.............................................. 26
Section 4.18 [Reserved]............................................. 26
Section 4.19 No More Favorable Terms for Other Lenders.............. 26
Section 4.20 Liens on and Dispositions of Certain Property
Interests.............................................. 27
Section 4.21 Indemnification........................................ 27
ARTICLE V
Subordination
Section 5.1 Subordination.......................................... 28
ARTICLE VI
EVENTS OF DEFAULTS; REMEDIES
Section 6.1 Events of Default............................................. 28
Section 6.2 Remedies...................................................... 30
ARTICLE VII
Miscellaneous
Section 7.1 When Obligations Arise................................. 31
Section 7.2 Nature of Guarantor' Obligations....................... 31
-iii-
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
Section 7.3 Notices................................................ 31
Section 7.4 Bank's Right of Set-Off................................ 32
Section 7.5 Jurisdiction: Service of Process....................... 32
Section 7.6 Amendments............................................. 33
Section 7.7 Sole Judgment of the Bank.............................. 34
Section 7.8 Severability........................................... 34
Section 7.9 Headings............................................... 34
Section 7.10 Governing Law.......................................... 34
Section 7.11 Exhibits............................................... 34
Section 7.12 Entire Agreement; Multiple Counterparts................ 34
Section 7.13 Time of the Essence.................................... 34
</TABLE>
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<PAGE> 5
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT ("Guaranty Agreement"), made and entered into
as of the 1st day of May, 1993, by and between NATIONAL HEALTHCORP L.P., a
Delaware limited partnership (the "Guarantor"), and SOCIETE GENERALE, acting
through its New York Branch (the "Bank");
W I T N E S S E T H:
WHEREAS, the Issuer has issued the Bonds pursuant to the Indenture; and
WHEREAS, the proceeds of the Bonds have been loaned by the Issuer to
Richland Place, Inc., a Tennessee non-profit corporation (together with its
successors and permitted assigns, the "Borrower"), pursuant to the Loan
Agreement (as hereinafter defined), for the purpose of refinancing the Prior
Debt; and
WHEREAS, subject to the terms and conditions of that certain
Reimbursement Agreement of even date herewith (as the same may be amended from
time to time, the "Reimbursement Agreement") between the Borrower and the Bank,
and acknowledged by the Guarantor, the Bank has agreed to issue for the account
of the Borrower a Letter of Credit to assure the timely payment of the principal
of and interest on the Bonds, and the purchase price of Bonds tendered for
purchase pursuant to the Indenture; and
WHEREAS, it is a condition to the issuance of the Letter of Credit that
the Guarantor unconditionally guarantee to the Bank the payment of all amounts
owing by the Borrower from time to time under the Reimbursement Agreement and
certain other amounts and obligations; and
WHEREAS, the Guarantor has heretofore entered into one or more
agreements with the Borrower whereby the Guarantor has provided construction
financing and working capital to the Borrower with respect to the Project; and
WHEREAS, the Guarantor is desirous that the Bank issue the Letter of
Credit and is willing to enter into this Guaranty Agreement in order to induce
the Bank to issue the Letter of Credit so as to enhance the marketability of the
Bonds and thereby achieve interest cost and other savings;
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<PAGE> 6
NOW, THEREFORE, in consideration of the premises and in order to
enhance the marketability of the Bonds and thereby achieve interest cost and
other savings, the Guarantor hereby, subject to the terms hereof, covenants and
agrees with the Bank follows:
ARTICLE I
Definitions
Section 1.1 Definitions. For purposes of this Guaranty Agreement, the
following terms shall have the following meanings:
"Accumulated Funding Deficiency" has the meaning assigned to that term
in Section 302 of ERISA
"Adjusted Tangible Net Worth" means, with respect to the Guarantor,
Equity plus Fifteen Million Seven Hundred Forty-five Thousand Dollars
($15,745,000) in deferred income resulting from the profit on the sale of
nursing home properties to National as equity (which amount shall decrease over
time in accordance with the Guarantor's books and records that comply with
GAAP), plus Subordinated Debt, minus goodwill and unamortized loan costs in
excess of One Million Four Hundred Thousand and No/100 Dollars ($1,400,000).
"Affiliate" means any Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, the Guarantor.
"Applicable Law" means in respect of any Person, all provisions of
constitutions, statutes, rules, regulations and orders of governmental bodies or
regulatory agencies applicable to such Person, and all orders and decrees to all
courts and arbitrators in proceedings or actions to which the Person in question
is a party.
"Authorized Signatory" means such personnel of the Guarantor or its
managing general partner as may be designated in writing by the Guarantor to the
Bank as having authority to sign documents, certificates and other instruments
to be signed on behalf of the Guarantor.
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<PAGE> 7
"Current Assets" means, with respect to any Person, the aggregate
amount of all assets which would, in accordance with GAAP, properly be
classified as current assets; provided, however, such method of determination
shall be modified where in conflict with the following: Current Assets will
include only those assets which may, in the ordinary course of business, be
reasonably converted into cash within a period of one (1) year from the date as
of which such computation is being made, and Current Assets will exclude (i)
uncollateralized loans and advances to or receivables due from employees,
partners or officers of such Person, (ii) all deferred assets, other than
prepaid items such as insurance, taxes, interest, commissions, rents, royalties
and similar items, and (iii) any properties or assets located outside the
continental United States.
"Current Ratio" means the ratio of Consolidated Current Assets to
Consolidated Current Liabilities.
"Debt Service Coverage Ratio" means, with respect to the Guarantor for
any period, the ratio of (i) the annualized sum of Net Income and operating
lease obligations, depreciation, amortization and interest expense for such
period, minus distributions paid to holders of units of the Guarantor during
such period, or projected by the Guarantor in written financial projections
furnished to the Bank to be paid with respect to such period, whichever is
greater, to (ii) the sum of current maturities of Funded Debt and interest
expense, operating lease obligations and payments required to fund any
obligations guaranteed by the Guarantor, including, without limitation, the
Guaranteed Obligations, all as determined in accordance with GAAP."
"Equity" means the total partners' equity of the Guarantor (including
the par value of the issued and outstanding capital stock, capital surplus and
retained earnings of all of the Guarantor's Subsidiaries).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Event of Default" means any of the events specified in Section 6.1
hereof; provided that any requirement for notice or lapse of time has been
satisfied.
"Facility" means any nursing home or healthcare facility or part
thereof (including without limitation, related medical office buildings, parking
lots or other related real property) owned, operated or managed by the Guarantor
or any of its Subsidiaries; together with any other nursing home or health care
facility or part thereof which is
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<PAGE> 8
hereafter acquired by the Guarantor or any of its Subsidiaries, in each case,
including, without limitation, the land on which such facility is located, all
buildings and other improvements thereon, all fixtures, equipment, inventory and
other tangible personal property located in or used in connection with such
facility and all accounts receivable and other intangible personal property
related to the operations of such facility, all whether now or hereafter
existing.
"Facility Guaranty Agreements" means the Agreements to Guarantee
between the Borrower and the Guarantor, pursuant to which the Guarantor has
agreed to guarantee certain obligations of the Borrower with respect to the
financing of the Project, together with any amendments or supplements thereto,
any replacements thereof and any new, similar agreements which the Borrower and
the Guarantor may hereafter enter into with respect to Facilities other than the
Project, as the latter agreements may be amended or supplemented from time to
time.
"Fixed Charge Coverage Ratio" means, with respect to the Guarantor for
any period, (a) the annualized sum of Net Income, plus depreciation,
amortization, interest expense, and capitalized lease obligations and operating
lease obligations (excluding any components included in interest expense and
amortization), minus distributions paid to holders of units of the Guarantor
during such period, or projected by the Guarantor in written financial
projections furnished to the Bank to be paid with respect to such period,
whichever is greater, divided by (b) the sum of interest expense, current
maturities of Funded Debt, and capitalized lease obligations and operating lease
obligations (excluding any components included in interest expense and current
maturities of Funded Debt), and any payments required to fund any obligations
guaranteed by the Guarantor, including, without limitation, the Guaranteed
Obligations, all as determined in accordance with GAAP.
"Funded Debt" means, with respect to any Person, all obligations and
indebtedness issued, incurred, assumed or guaranteed by such Person or for the
payment of which such Person is otherwise liable, directly or indirectly,
whether or not such obligations and indebtedness now exist or shall hereafter be
created, which mature or become due more than one (1) year after the date on
which a calculation of Funded Debt is being made (excluding Subordinated Debt),
plus notes payable, current maturities of Funded Debt, capitalized lease
obligations, operating lease obligations and all Guarantees.
"GAAP" means, as in effect from time to time, generally accepted
accounting principles consistently applied.
-4-
<PAGE> 9
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled (through
stock or capital ownership or otherwise) by any of the foregoing.
"Guaranty" or "guarantee," as applied to an obligation, means and
includes (a) any guaranty or other agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of any part
or all of such obligation, including, without limiting the foregoing, the
payment or reimbursement of amounts drawn down by beneficiaries of letters of
credit.
"Indebtedness" means, with respect to any Person, (i) all items, except
items of capital stock or of surplus or of general contingency or deferred tax
reserves, which in accordance with GAAP would be included in determining total
liabilities as shown on the liability side of a balance sheet of such Person,
(ii) to the extent not otherwise included, all obligations secured by any Lien
to which any property or assets owned by such Person is subject, whether or not
the obligation secured thereby shall have been assumed, and (iii) to the extent
not otherwise included, all Capitalized Lease Obligations of such Person and all
obligations of such Person with respect to leases constituting part of a sale
and lease arrangement.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
security interest or encumbrance of any kind in respect of such asset. For the
purpose of this Guaranty Agreement, the Guarantor shall be deemed to own,
subject to a Lien, any asset that it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such asset."
"Loan and Security Agreement" means that certain Loan and Security
Agreement dated as of December 16, 1988, by and among National Health
Corporation Leveraged Employee Stock Ownership Trust, the Banks named
therein,Third National Bank in Nashville as agent for said banks, the Guarantor
and National, as amended from time to time.
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<PAGE> 10
"Management Agreement" means the management agreement between the
Guarantor and the Borrower pursuant to which the Guarantor manages the Project,
as said management agreement may be amended or supplemented from time to time.
Master Lease" means that certain Master Agreement to Lease dated as of
October 17, 1991, between NHI, as landlord, and the Guarantor, as tenant, as the
same may be amended from time to time.
"Materially Adverse Effect" means any act, omission or undertaking
which would, singly or in the aggregate, have a materially adverse effect upon
the business, assets, liabilities, financial condition, results of operations or
business prospects of the Guarantor or any of the Guarantor's Subsidiaries or
upon the ability of the Guarantor to perform any material obligations under this
Guaranty Agreement.
"Multiemployer Plan" has the meaning set forth in Section 4001(a)(3) of
ERISA.
"National" means National Health Corporation, a Tennessee corporation,
and its successors and assigns.
"NHI" means National Health Investors, Inc., a Maryland corporation
intending to qualify as a real estate investment trust under the applicable
provisions of the Internal Revenue Code, and its successors and permitted
assigns.
"Necessary Authorizations" means with respect to any Person, all
authorizations, consents, approvals, permits, licenses and exemptions of,
filings and registrations with, and reports to, all governmental and other
regulatory authorities, whether federal, state or local, and all agencies
thereof, required for the operation of the business of such Person and the
consummation of the transactions contemplated herein.
"Net Income" means, as applied to any Person for any fiscal period, the
aggregate amount of net income (or net loss) of such Person, after taxes, for
such period as determined in accordance with GAAP.
"Partner Agreement" means the limited partnership agreement pursuant to
which the Guarantor is organized and existing, as the same may be amended and
supplemented from time to time.
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<PAGE> 11
"Permitted liens" means, as applied to any Person,
(a) Liens securing taxes, assessments and other governmental charges or
levies (excluding any Lien imposed pursuant to any of the provisions of ERISA)
or the claims of materialmen, mechanics, carriers, warehousemen or landlords for
labor, materials, supplies or rentals incurred in the ordinary course of
business, but in all cases only if payment shall not at the time be required to
be made;
(b) Liens consisting of deposits or pledges made in the ordinary course
of business in connection with, or to secure payment of, obligations under
worker's compensation unemployment insurance or similar legislation;
(c) Liens constituting encumbrances in the nature of zoning
restrictions, easements and rights or restrictions of record on use of real
property, which in the sole judgment of the Bank, do not materially detract from
the value of such property or impair the use thereof in the business of the
Guarantor;
(d) Liens of record as of the date of delivery of this Guaranty
Agreement acceptable to the Bank;
(e) Liens in favor of the Bank; and
(f) Purchase money security interests which arise by operation of law
for a period of twenty-one (21) days after the inception thereof.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Plan" means an employee benefit plan or other plan maintained for
employees of any Person.
"Prohibited Transaction" means a transaction which is prohibited under
Section 4975 of the Code or Section 406 of ERISA and not exempt under Section
4975 of the Code or Section 408 of ERISA.
"Reportable Event" shall have the meaning set forth in Title IV of
ERISA.
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<PAGE> 12
"Single Employer Plan" means any Plan which is not a Multiemployer
Plan.
"Subordinated Debt" means the Indebtedness of the Guarantor which is
subordinated in right of payment to the obligations of the Guarantor under this
Guaranty Agreement pursuant to subordination provisions satisfactory to the
Bank. The subordination provisions in the Guarantor's convertible subordinate
debt which is outstanding as of the date hereof, are satisfactory to the Bank.
"Subsidiary" shall mean, as applied to any Person, (a) any corporation
of which more than 50% of the outstanding stock (other than directors'
qualifying shares) having ordinary voting power to elect a majority of its board
of directors (or other governing body), regardless of the existence at the time
of a right of the holders of any class or classes (however designated) of
securities of such corporation to exercise such voting power by reason of the
happening of any contingency, or any partnership of which more than 50% of the
outstanding partnership interests is, at the time, owned by such Person or by
one or more Subsidiaries of such Person, or by such Person and one or more
Subsidiaries of such Person, and (b) any other entity which is controlled or
capable of being controlled by such Person, or by one or more Subsidiaries of
such Person, or by such Person and one or more Subsidiaries of such Person.
"Tangible Net Worth" means, with respect to the Guarantor, Equity plus
Subordinated Debt, plus deferred income minus the general intangibles of the
Guarantor, including, without limitation, goodwill and unamortized loan costs in
excess of One Million Four Hundred Thousand Dollars ($1,400,000)."
"Termination Event" means (i) a Reportable Event, (ii) the termination
of a Single Employer Plan, or the treatment of a Single Employer Plan amendment
as a termination of the Plan under Section 4041 of ERISA, or the filing of a
notice of intent to terminated a Single Employer Plan, (iii) the institution of
proceedings to terminate a Single Employer Plan by the Pension Benefit Guaranty
Corporation under Section 4042 of ERISA, or (iv) the appointment of a trustee to
administer any Single Employer Plan.
"Working Capital shall mean, with respect to any Person, the excess of
Current Assets over Current Liabilities.
Section 1.2 Financial Terms. Except as hereinabove provided, all
financial terms used in this Guaranty Agreement shall be interpreted in
accordance with GAAP.
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<PAGE> 13
Section 1.3 Terms Not Defined Herein. Capitalized terms not defined
herein shall, unless otherwise indicated herein, have the meanings ascribed to
such terms in the Reimbursement Agreement.
ARTICLE II
Guaranty
Section 2.1 Guaranty. (a) The Guarantor hereby absolutely,
unconditionally and irrevocably guarantee to the Bank the full and prompt
payment of all amounts now or hereafter owing to the Bank by the Borrower under
the provisions of the Reimbursement Agreement, under the Mortgage (including,
without limitation, indemnification amounts pursuant thereto, under the Pledge
Agreement, under the Security Agreement and under any of the other Financing
Documents when and as the same shall become due, whether at the stated maturity
thereof, by acceleration or call for prepayment or otherwise, and agree to pay
all reasonable expenses and charges (including court costs and attorney's fees
and expenses) paid or incurred by the Bank in realizing upon any of the payments
hereby guaranteed or in enforcing this Guaranty Agreement.
[(b) The Guarantor hereby absolutely, unconditionally and irrevocably
guarantee to the Bank the full and faithful performance all of the Borrower's
obligations under the Loan Agreement to be kept and performed with respect to
the completion of the construction, renovation, installation and equipping of
the Projects, in accordance with the plans and specifications referred to in the
Loan Agreement, free from any liens or claims of any or all persons performing
services or labor on the Projects, or any of them, or furnishing materials
thereto. If for any reason or under any contingency, the Borrower shall abandon
the construction, renovation, installation of equipping of the Projects, or any
of them, in accordance with the terms of the applicable Loan Agreement, or shall
fail to pay the costs thereof, then, in any such event, the Bank shall have the
option to require the Guarantor to assume all responsibility therefor, and the
Guarantor hereby agrees to assume all responsibility therefor and, at its own
costs and expense, cause the Project to be fully completed in accordance with
the above-mentioned plans and specifications and the Loan Agreement, and shall
pay and discharge all liens and claims of all persons performing services or
labor in connection therewith or furnishing materials hereto which the Borrower
shall have failed to pay, whether or not such services, labor or materials shall
have been provided for in said plans and specifications.
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<PAGE> 14
(c) The obligations guaranteed by the Guarantor under this Section 2.1
are sometimes hereinafter collectively referred to as the "Guaranteed
Obligations."
Section 2.2 Payments. All payments by the Guarantor shall be paid in
lawful money of the United States of America, by wire transfer in immediately
available funds to Citibank, N.A., ABA No. 021000089 for the account of Societe
Generale, New York Branch, Account No. 36008936, Reference: Richland Place, Inc.
or at such other account as the Bank may designate to the Guarantor in writing.
Each and every default in payment of sums due and payable under the provisions
of this Guaranty Agreement shall give rise to a separate cause of action
hereunder, and separate suits may be brought hereunder as each cause of action
arises.
Section 2.3 Obligations Absolute and Unconditional. The obligations of
the Guarantor under this Guaranty Agreement shall be absolute and unconditional
and shall remain in full force and effect until there shall be no Letter of
Credit outstanding and all amounts owing to the Bank under the provisions of the
Reimbursement Agreement and the other Financing Documents and the obligation of
the Guarantor under Section 2.1 hereof shall have been paid in full,
irrespective of the validity, regularity or enforceability of the Bond
Documents, the Letter of Credit or the Reimbursement Agreement or any other
Financing Document, and until such payment, shall not be affected, modified or
impaired upon the happening from time to time of any event, including, without
limitation, any of the following, whether or not with notice to or the consent
of the Guarantor, or either of them:
(a) the compromise, settlement, release or termination of any or all of
the obligations, covenants or agreements of the Borrower under the Reimbursement
Agreement, the Pledge Agreement, any Mortgage, the Loan Agreement or any other
Financing Documents;
(b) the failure to give notice to the Guarantor, or either of them, of
the occurrence of a default or an event of default under the terms and
provisions of this Guaranty Agreement, the Reimbursement Agreement, the
Pledge Agreement, the Indenture, any Mortgage, the Loan Agreement or any other
Financing Documents;
(c) the waiver of the payment, performance or observance by the
Issuer, the Trustee, the Borrower or the Guarantor of any of the obligations,
covenants, or agreements of any of them contained in the Reimbursement
Agreement, the Pledge
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<PAGE> 15
Agreement, the Indenture, any Loan Agreement, Mortgage or any of the other
Financing Documents, or this Guaranty Agreement;
(d) the extension of the time for payment of any principal of or
interest on the Bonds or of the time for performance of any other obligations,
covenants or agreements under or arising out of the Reimbursement Agreement, the
Indenture, the Loan Agreement, the Pledge Agreement, the Mortgage or any of the
other Financing Documents, or under or arising out of this Guaranty Agreement,
or the extension or the renewal of any thereof;
(e) the modification or amendment (whether material or otherwise) of
any obligation, covenant or agreement set forth in the Reimbursement Agreement,
the Pledge Agreement, the Indenture, the Loan Agreement, the Mortgage or any
other Financing Document;
(f) the taking or the omission of any of the actions referred to in the
Reimbursement Agreement, the Pledge Agreement, the Indenture, any Loan
Agreement, any Mortgage or any other Financing Document or this Guaranty
Agreement;
(g) any failure, omission, delay or lack on the part of the Issuer, the
Trustee or the Bank to enforce, assert or exercise any right, power or remedy
conferred on the Issuer, the Trustee or the Bank in this Guaranty Agreement, the
Reimbursement Agreement, the Pledge Agreement, the Indenture, the Loan
Agreement, any Mortgage or any other Financing Document, or any other act or
acts on the part of the Issuer, the Trustee, the Bank or any holder at any time
or from time to time of the Bonds;
(h) the voluntary or involuntary liquidation, dissolution, marshalling
of assets and liabilities, receivership, insolvency, bankruptcy, assignment for
the benefit of creditors, reorganization, arrangement, composition with
creditors or readjustment of, or other similar proceedings affecting the
Guarantor, the Borrower or the Issuer or any of the Assets of them, or any
allegation or contest of the validity of this Guaranty Agreement in any such
proceeding or the sale or other disposition of all or substantially all the
assets of the Issuer, the Borrower or the Guarantor; and this Guaranty Agreement
shall continue to be effective or be reinstated, as the case may be, if, at any
time, payment, or any part thereof, pursuant to Section 2.1. hereof, is
rescinded or must otherwise be restored or returned by the Bank upon any of the
events listed in this subsection (h) or otherwise, as though such payment has
not been made;
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<PAGE> 16
(i) to the extent permitted by applicable law, the release or discharge
of the Guarantor from the performance or observance of any obligation, covenant
or agreement contained in this Guaranty Agreement by operation of law,
(j) the default or failure of the Guarantor fully to perform any of the
obligations thereof set forth in this Guaranty Agreement;
(k) the failure of the Bank to comply with the terms of this Guaranty
Agreement, the Reimbursement Agreement, the Pledge Agreement, the Mortgage or
any other Financing Documents;
(1) the invalidity or unenforceability of the Reimbursement Agreement,
the Pledge Agreement, the Indenture, the Loan Agreement, the Mortgage or any
other Financing Documents;
(m) the sale, assignment or mortgaging or the purported sale,
assignment or mortgaging of all or any part of the Project; or
(n) any other cause, whether similar or dissimilar to the foregoing.
Section 2.4 No Set-off. No set-off, counterclaim, reduction, or
diminution of any obligation, or, to the extent permitted by applicable law, any
defense of any kind or nature which the Guarantor or the Borrower, or either of
the foregoing, has or may have against the Issuer, the Trustee or the Bank shall
be available hereunder to the Guarantor;
Section 2.5 Right to Proceed against Guarantor First. In the event of a
default in payment of any amount owing to the Bank from time to time under the
provisions of the Reimbursement Agreement, the Pledge Agreement, the Mortgage or
any other Financing Document, whether at the stated maturity thereof, by
acceleration or call for prepayment or otherwise, and in each instance the
expiration of any applicable cure period provided for in the Reimbursement
Agreement, the Pledge Agreement, Mortgage or any other Financing Document, the
Bank may proceed hereunder, and the Bank, in its sole discretion, shall have
the right to proceed first and directly against the Guarantor under this
Guaranty Agreement without proceeding against the Borrower or exhausting any
other remedies which it may have and without resorting to any other security
held by the Bank.
Section 2.6 Waiver of Notice. The Guarantor hereby expressly waives:
(a) notice of acceptance of this Guaranty Agreement, (b) notice of the existence
or creation of all
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or any of the Guaranteed Obligations, (c) presentment, demand, notice of
dishonor, protest, and all other notices whatsoever, (d) all diligence in
collection or protection of or realization upon the Guaranteed Obligations or
any part thereof, any obligation hereunder, or any security for any of the
foregoing, except as provided by law, and (e) all rights of subrogation, all
rights to enforce any remedy the Bank may have against the Borrower and all
rights to participate in any security held by the Bank for the Guaranteed
Obligations until the Guaranteed Obligations have been paid or performed in
full.
Section 2.7 Attorneys Fees and Expenses. The Guarantor agrees to pay
all costs, expenses and fees, including all reasonable attorney's fees, which
may be incurred by the Bank in amending this Guaranty, in enforcing or
attempting to enforce this Guaranty Agreement following any default on the part
of the Guarantor hereunder, whether the same shall be enforced by suit or
otherwise, or in consenting to any action not otherwise permitted hereunder.
Section 2.8 Assignment of Guaranteed Obligations by Bank. The Bank may,
without notice of any kind, sell, assign or transfer all or any of the
Guaranteed Obligations, and in such event each and every immediate and
successive assignee, transferee, or holder of all or any of the Guaranteed
Obligations, shall have the right to enforce this Guaranty Agreement, by suit or
otherwise, for the benefit of such assignee, transferee or holder as fully as if
such assignee, transferee or holder were herein by name specifically given such
rights, powers and benefits, but the Bank shall have an unimpaired right, prior
and superior to that of any such assignee, transferee or holder, to enforce this
Guaranty Agreement for the Bank's benefit, as to so much of the Guaranteed
Obligations as the Bank has not sold, assigned or transferred.
ARTICLE III
Representations and Warranties
Section 3.1 The Guarantor represents and warrants that:
(a) Organization; Power; Qualification. The Guarantor is a limited
partnership duly organized, validly existing under the laws of the state of its
organization, each of its Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation
and the Guarantor and each of its Subsidiaries has the power and authority,
corporate, partnership and otherwise, to own or lease and operate their
respective properties and to carry on their respective businesses as now being
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<PAGE> 18
and hereafter proposed to be conducted and are duly qualified and in good
standing as a foreign partnership or corporation, as the case may be, and
authorized to do business, in each jurisdiction in which the character of their
respective properties or the nature of their respective businesses requires such
qualification or authorization, and in which failure to so qualify would have a
Materially Adverse Effect.
(b) Authorization. The Guarantor has the power and has taken all
necessary action to authorize it to execute, deliver and perform this Guaranty
Agreement in accordance with its terms and to consummate the transactions
contemplated hereby. This Guaranty Agreement has been duly executed and
delivered by the Guarantor and is a legal, valid and binding obligation of the
Guarantor, enforceable in accordance with its terms, subject, as to enforcement
of remedies, to the following qualifications: (i) an order of specific
performance and an injunction are discretionary remedies and, in particular, may
not be available where damages are considered an adequate remedy at law, and
(ii) enforcement may be limited by bankruptcy, insolvency, liquidation,
reorganization, reconstruction and other similar laws affecting enforcement of
creditors' rights generally (insofar as any such law relates to the bankruptcy,
insolvency or similar event of the Guarantor).
(c) Subsidiaries. Except as listed on Exhibit "A" attached hereto, the
Guarantor has no Subsidiaries. With respect to each Subsidiary of the Guarantor,
Exhibit "A" also sets forth (i) the state of its incorporation; (ii) all
jurisdictions in which such Subsidiary is qualified to do business as a foreign
corporation; (iii) the address of the principal place of business and chief
executive office of such Subsidiary; and (iv) the name and registered office of
the registered agent appointed by such Subsidiary.
(d) Compliance with Laws, etc. of Guaranty Agreement and Contemplated
Transactions. The execution, delivery and performance of this Guaranty Agreement
in accordance with its terms and the consummation of the transactions
contemplated hereby do not and will not (i) violate any Applicable Law, (ii)
conflict with, result in a breach of, or constitute a default under the
Agreement of the Guarantor or under any material indenture, agreement, or other
instrument to which the Guarantor is a party or by which it or any of its
properties may be bound, or, (iii) result in or require the creation or
imposition of any Lien upon or with respect to any property now owned or
hereafter acquired by the Guarantor except Permitted Liens.
(e) Necessary Authorizations. The Guarantor and each of its
Subsidiaries has secured all Necessary Authorizations, and all such Necessary
Authorizations are in full
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<PAGE> 19
force and effect. None of said Necessary Authorizations are the subject of any
pending or, to the best of the Guarantor's knowledge, threatened attack or
revocation, by the grantor of the Necessary Authorization. The Guarantor is not
required to obtain any additional Necessary Authorizations in connection with
the execution, delivery and performance of this Guaranty Agreement.
(f) Title to Properties. The Guarantor and each of its Subsidiaries has
good, marketable and legal title to, or a valid leasehold interest in, all of
their respective material properties and assets, and none of such properties or
assets is subject to any Liens which materially detract from the value of such
properties or assets or materially detract from the value of such properties or
assets or materially interferes with the business or operations of the Guarantor
or any of its Subsidiaries as presently conducted or proposed to be conducted.
All improvements on the real estate owned by, leased to or used by the Guarantor
and its Subsidiaries conform in all material respects to all applicable state
and local laws, zoning and building ordinances and health and safety ordinances,
and such real estate is zoned for the various purposes for which such real
estate and improvements thereon are presently being used.
(g) Collective Bargaining. There are no material grievances, disputes
or controversies with any union or any other organization of the employees of
the Guarantor or any of its Subsidiaries or threats of strikes, work stoppages
or any asserted pending demands for collective bargaining by any union or
organization.
(h) Taxes. All federal, state and other tax returns of the Guarantor
and each of its Subsidiaries required by law to be filed have been duly filed,
and all federal, stated and other taxes, assessments and other governmental
charges or levies any of their respective properties, income, profits and
assets, which are due and payable, have been paid, except any such the payment
of which the Guarantor or any of its Subsidiaries, as applicable, is contesting
in good faith by appropriate proceedings and for which adequate reserves have
been provided on the books of the Guarantor or any of its Subsidiaries, as
applicable, and as to which neither any Lien other than a Permitted Lien has
attached nor any foreclosure, distraint, sale or similar proceedings have
been commenced. The charges, accruals and reserves on the books of the
Guarantor and each of its Subsidiaries in respect of taxes are, in the
reasonable judgment of the Guarantor, adequate.
(i) Financial Statements. The Guarantor has furnished, or caused to be
furnished, to the Bank financial statements for the Guarantor and its
Subsidiaries on a consolidated basis which are complete and correct in all
material respects and present
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<PAGE> 20
fairly in accordance with GAAP financial position of the Guarantor and its
Subsidiaries on a consolidated basis as of December 31, 1992, and the results of
operations for the periods then ended. Except as disclosed in such financial
statements, neither the Guarantor nor any of its Subsidiaries had any material
liabilities, contingent or otherwise, and there are no material unrealized or
anticipated losses of the Guarantor or any of its Subsidiaries, which have not
heretofore been disclosed in writing to the Bank.
(i) No Adverse Change. Since December 31,1992, there has occurred no
event which would have a Materially Adverse Effect.
(k) Investments and Guaranties. The Guarantor has not made investments
in, advances to, or guaranties of, the obligations of any Person, except as
reflected in the financial statements referred to in Section 3.1(i) above or as
otherwise disclosed to the Bank in writing.
(l) Liabilities Litigation etc. Except for liabilities incurred in the
normal course of business, neither the Guarantor nor any of its Subsidiaries has
any material (individually or in the aggregate) liabilities, direct or
contingent, except as disclosed or referred to in the financial statements
referred to in Section 3.1(i) above. Except as described in such financial
statements or on Exhibit "B" attached hereto, there is no litigation, legal or
administrative proceeding, investigation or other action of any nature pending
or, to the knowledge of the Guarantor, threatened against or affecting the
Guarantor or any of its Subsidiaries or any of their respective properties which
involves the possibility of any judgment or liability not fully covered by
insurance, and which may have a Materially Adverse Effect. The Guarantor knows
of no unusual or unduly burdensome restriction, restraint or hazard relative to
the business or properties of the Guarantor or any of its Subsidiaries except as
previously disclosed to the Bank in writing.
(m) ERISA. No Reportable Event has occurred and is continuing with
respect to any Plan of the Guarantor or any of its Subsidiaries and neither the
Guarantor nor any of its Subsidiaries has any material unfunded liability for
vested benefits. Neither the Guarantor nor any of its Subsidiaries has incurred
any material Accumulated Funding Deficiency or incurred any material liability
to the Pension Benefit Guaranty Corporation established under ERISA (or any
successor thereto under ERISA) in connection with any Plan.
(n) Patents, Trademarks, Franchises, etc. The Guarantor and each of its
Subsidiaries owns, possesses or has the right to use all necessary patents,
trademarks,
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<PAGE> 21
trademark rights, trade names, trade name rights, service marks, copyrights,
franchises and licenses, and rights with respect thereof, necessary to conduct
its business as now conducted, without known conflict with any patent,
trademark, tradename, servicemark, franchise, license or copyright of any other
Person, and in each case, subject to no mortgage, pledge, lien, lease,
encumbrance, charge, security interest, title retention agreement or option. All
such patents, trademarks, trademark rights, tradenames, tradename rights,
servicemarks, copyrights, franchises and licenses are in full force and effect,
the holder thereof is in full compliance in all material respects with all of
the provisions thereof, and no such asset or agreement is subject to any pending
or, to the best of the Guarantor's knowledge, threatened attack or revocation.
(o) Compliance with Law; Absence of Default. The Guarantor and each of
its Subsidiaries is in compliance with all Applicable Laws non-compliance with
which would have a Materially Adverse Effect and with all of the provisions of
their respective partnership agreements, articles of incorporation and by-laws,
as the case may be, and no event has occurred or failed to occur, which has not
been remedied or waived, the occurrence or non-occurrence of which constitutes,
(i) an Event of Default or (ii) a default by the Guarantor or any of its
Subsidiaries under any other indenture, agreement or other instrument, or any
judgment, decree or order to which the Guarantor or any of its Subsidiaries is a
party or by which the Guarantor or any of its Subsidiaries or any of their
respective properties may be bound, which default could have a Materially
Adverse Effect.
(p) Casualties; Taking of Properties etc. Neither the business nor the
properties of the Guarantor or any of its Subsidiaries has been materially and
adversely affected as a result of any fire, explosion, earthquake, flood,
drought, windstorm, accident, strike or other labor disturbance, embargo,
requisition or taking of property or cancellation of contracts, permits or
concessions by any domestic or foreign government or any agency thereof, riot,
activities of armed forces or acts of God or of any public enemy.
(q) Accuracy and Completeness of Information. All information, reports
and other papers and data relating to the Guarantor or any of its Subsidiaries
furnished to the Bank were, at the time the same were so furnished, complete and
correct in all material respects to the extent necessary to give the Bank a
true and accurate knowledge of the subject matter. No fact is currently known to
the Guarantor which has or could reasonably be expected to have a Materially
Adverse Effect. No information, exhibit or report furnished or to be furnished
by the Guarantor to the Bank in connection with this Guaranty Agreement,
including all financial statements of the Guarantor previously delivered to the
Bank contain as of the date thereof, or will contain as of the Date of
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<PAGE> 22
Issuance of any Letter of Credit, any material misstatement of fact or fail or
will fail to state any material fact, the omission of which would render the
statements therein materially false or misleading.
(r) Business. The Guarantor is engaged in the business of owning and
operating licensed nursing homes and other health care facilities.
(s) Investments, Advances, and Guaranties. The Guarantor has not made
investments in advances to, or guaranties of, the obligations of any Person, or
committed or agreed to do any of these things, except as reflected in the
Financial Statements or as previously disclosed to the Bank in writing.
(t) Regulation U. The Guarantor is not engaged principally, or as one
of its important activities, in the business of extending credit for the purpose
of purchasing or carrying margin stock within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System.
(u) Personal Holding Company. The Guarantor is not a "personal holding
company" as defined in Section 542 of the Code.
(v) Tax Shelter. The Guarantor is not a "tax shelter" as defined in
Section 6111 of the Code.
(w) Filings. To the date hereof, the Guarantor has filed all reports
and statements required to be filed with the Securities and Exchange
Commission, if any, and any stock exchange which lists securities issued by the
Guarantor. As of their respective dates, such reports and statements complied in
all material respects with all rules and regulations promulgated by the
Securities and Exchange Commission and such stock exchanges and did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(x) Solvency. The Guarantor and its "Subsidiaries are now and at all
times hereafter shall be solvent and able to pay their respective debts as they
mature, and the Guarantor and its Subsidiaries now own and shall at all times
hereafter own property whose fair salable value is greater than the amount
required to pay their respective debts.
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(y) Capital. The Guarantor and its Subsidiaries now have and shall have
at all times hereafter capital sufficient to carry on their respective
businesses and transactions and all businesses and transactions in which they
are about to engage.
(z) Healthcare Compliance. The Guarantor and each of its Subsidiaries
have all permits, licenses, authorizations and approvals materials to the lawful
ownership (or lease) and operation of each Facility, and each such Facility is
in substantial compliance with all zoning laws, building codes, environmental
protection laws and other laws material to the use, occupancy and ownership
thereof, and each such Facility may be expanded and/or rebuilt in the event of a
casualty without violation of applicable zoning laws and has access to utilities
sufficient to satisfy its needs. Each Facility, except as provided in Exhibit
"C" hereto, is eligible upon application to participate in, or is a party to,
the Medicare, Medicaid and, to the best of the Guarantor's knowledge after due
inquiry, all other public and private reimbursement programs applicable to
facilities of the same type as such facility. All certifications and contracts
allowing participation in such reimbursement programs are in full force and
effect and have not been amended or otherwise modified, rescinded, revoked or
assigned as of the date hereof. Each Facility, except as provided in Exhibit "C"
hereto, is in such material compliance with the requirements of Medicare,
Medicaid and all other public and private reimbursement programs applicable
thereto that reimbursement thereunder will not be affected or impaired by any
noncompliance therewith.
(aa) Tax Exempt Status of Bonds. The Guarantor has not taken any action
which would cause interest on the Bonds and the Refunded Bonds, or any of them,
to be subject to federal income taxation.
(bb) Management Agreements; Facility Guaranty Agreements. The Guarantor
has heretofore furnished the Bank with true, correct and complete copies of the
Management Agreement and the Facility Guaranty Agreements and all amendments
thereto. Except as so amended, none of the Management Agreements or the Facility
Guaranty Agreements has been modified, amended or terminated, and each of the
Management Agreement and the Facility Guaranty Agreements is in full force and
effect.
Section 3.2 Survival of Representations and Warranties, etc. All
representations and warranties made under this Guaranty Agreement shall be
deemed to be made, and shall be true and correct, at and as of the date of
delivery of this Guaranty Agreement and at and as of the date of each Drawing,
except to the extent previously fulfilled in accordance with the terms hereof
and to the extent subsequently inapplicable. All
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representations and warranties made under this Guaranty Agreement shall survive,
and not be waived by, the honoring of any Drawing by the Bank or by any
investigation or inquiry by the Bank.
ARTICLE P IV
Special Covenants
Until this Guaranty Agreement is terminated, the Guarantor covenants
and agrees as follows:
Section 4.1 Preservation of Existence and Similar Matters. The
Guarantor and each of its Subsidiaries will, subject to the provisions of
Section 4.16 hereof, (i) preserve and maintain their respective existence,
rights, franchise, licenses and privileges in their respective states of
incorporation organization, as the case may be, including, without limitation,
all Necessary Authorizations and (ii) qualify and remain qualified and
authorized to do business in each jurisdiction in which the character of
properties or the nature of businesses requires such qualification or
authorization.
Section 4.2 Compliance with Applicable Law. The Guarantor will comply
with the requirements of all Applicable Law.
Section 4.3 Maintenance of Properties. The Guarantor will maintain and
will cause each of its Subsidiaries to maintain or cause to be maintained in the
ordinary course of business in good repair, working order and condition
all properties used or useful in their respective businesses (whether owned or
held under lease), and from time to time to make or cause to be made all needed
and appropriate repairs, renewals, replacements, additions, betterments and
improvements thereto.
Section 4.4 Accounting Methods and Financial Records. The Guarantor
will maintain and will cause each of its Subsidiaries to maintain a system of
accounting established and administered in accordance with GAAP, keep adequate
records and books of account in which complete entries will be made in
accordance with such accounting principles consistently applied and reflecting
all transactions required to be reflected by such accounting principles.
Section 4.5 Payment of Taxes and Claims. The Guarantor and each of the
Guarantor's Subsidiaries will pay and discharge all taxes, assessments and
governmental
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charges or levies imposed upon them or upon their income or profits or upon any
properties belonging to them prior to the dates on which penalties attach
thereto, and all lawful claims for labor, materials and supplies which, if
unpaid, might become a Lien or charge upon any of its properties; except that,
no such tax, assessment, charge, levy or claim need be paid which is being
contested in good faith by appropriate proceedings and, in the case of the
Guarantor, for which adequate reserves shall have been set aside on the
appropriate books, but only so long as such tax, assessment, charge, levy or
claim does not become a Lien or charge other than a Permitted Lien and no
foreclosure, distraint, sale or similar proceedings shall have been commenced
and remain unstayed for a period of thirty (30) days after such commencement.
The Guarantor and each of the Guarantor's Subsidiaries shall timely file all
information returns required by federal, state or local tax authorities.
Section 4.6 Visits and Inspections. The Guarantor will permit and will
cause each of its Subsidiaries to permit representatives of the Bank to (i)
visit and inspect the properties of the Guarantor and each of its Subsidiaries
during normal business hours, (ii) inspect and make extracts from copies of its
books and records, and (iii) discuss with its principal officers its businesses,
assets, liabilities, financial positions, results of operations and business
prospects relating to the Guarantor and each of its Subsidiaries.
Section 4.7 Payment of Indebtedness. The Guarantor and each of its
Subsidiaries will, subject to any provisions therein regarding subordination,
pay any and all of its Indebtedness when and as the same becomes due, other than
amounts duly disputed in good faith the non-payment of which would not have a
Materially Adverse Effect.
Section 4.8 ERISA. The Guarantor will at all times make, or cause to be
made, prompt payment of contributions required to meet the minimum funding
standards set forth in ERISA with respect to its and its Affiliates' employee
benefit plans; promptly after the filing thereof, furnish to the Bank copies of
any annual report required to be filed pursuant to ERISA in connection with each
such plan of it and its Affiliates; notify the Bank as soon as practicable of
any Reportable Event and of any additional act or condition arising in
connection with any such plan which the Guarantor believes might constitute
grounds for the termination thereof by the Pension Benefit Guaranty Corporation
or for the appointment by the appropriate United States District Court of a
trustee to administer such plan; and furnish to the Bank promptly upon the
Bank's request therefor, such additional information concerning any such
employee benefit plan as may be reasonably requested by the Bank.
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Section 4.9 Audited Annual Financial Statements and Information;
Certificate of No Default. The Guarantor will furnish to the Bank, within ninety
(90) days after the end of each fiscal year of the Guarantor, the balance sheets
of the Guarantor as at the end of such fiscal year and the related statements of
income, retained earnings and changes in financial position of the Guarantor for
such fiscal year, on a consolidated and a consolidating basis with the
Guarantor's Subsidiaries, setting forth in comparative form the figures as at
the end of and (except for the first year after the date hereof) for the
previous fiscal year and certified without qualifications or with only such
qualifications as shall be acceptable to the Bank by independent certified
public accountants of recognized standing reasonably satisfactory to the Bank,
whose opinion shall be in scope and substance satisfactory to the Bank, and who
shall have authorized the Guarantor to deliver such financial statements and
opinion thereon to the Bank pursuant to this Guaranty Agreement. In the event
that any such financial statements are qualified by the independent certified
public accountants preparing such financial statements, such accountants shall
submit to the Bank, with such financial statements, their certificate to the
effect that in making the examination necessary for their audit they have
obtained no knowledge of the occurrence of an Event of Default or any fact or
circumstance which, with notice or lapse of time, or both, would constitute an
Event of Default, or if they have obtained knowledge of any such Event of
Default or any such fact or circumstance, disclosing the nature and period of
existence of such Event of Default or of such fact or circumstance.
Section 4.10 Quarterly Financial Statements and Information. The
Guarantor will furnish to the Bank, within forty-five (45) days after the last
day of each of the first three quarters in each fiscal year of the Guarantor,
the balance sheets of the Guarantor as at the end of such quarter and the
related statements of income and retained earnings of the Guarantor for such
quarter and for the elapsed portion of the fiscal year ended with the last day
of such quarter, all of which shall be on a consolidated basis with the
Guarantor's Subsidiaries, setting forth in comparative form the figures as at
the end of and (except for the first fiscal year after the date hereof) for the
corresponding quarter of the previous fiscal year, and certified by a person
authorized to make such certification on behalf of the Guarantor, as the case
may be, to be, in his opinion, complete and correct in all material respects
and to present fairly, in accordance with GAAP, the statements of financial
position of the Guarantor as at the end of each period and the results
of operations for such period, and for the elapsed portion of the year ended
with the last day of such period, subject only to normal year-end adjustments.
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Section 4.11. Quarterly Performance Certificates. The Guarantor shall
furnish the Bank, within forty-five (45) days after the last day of each of the
first three quarters in each fiscal year of the Guarantor, and within ninety
(90) days after the last day of the fourth quarter of each fiscal year, a
certificate of an Authorized Signatory:
(a) setting forth as at the end of such quarterly period or fiscal
year, as the case may be, the arithmetical calculations required to establish
whether or not the Guarantor, on a consolidated basis, was in compliance with
the requirements of Section 4.14 hereof; and
(b) stating that, to the best of his knowledge, no Event of Default,
and no fact or circumstance which with notice or the passage of time or both
would constitute an Event of Default, has occurred as at the end of such
quarterly period or year, as the case may be, or, if an Event of Default or any
such fact or circumstance has occurred, disclosing each such Event of Default,
fact and circumstance and its nature, when it occurred, whether it is continuing
and the steps being taken by the Guarantor with respect to such default or Event
of Default.
Section 4.12 Copies of Other Reports. The Guarantor shall furnish the
following documents and information to the Bank:
(a) promptly upon receipt thereof, copies of all reports, if any,
submitted to the Guarantor by the Guarantor's independent public accountants
regarding the Guarantor or any of its Subsidiaries, including, without
limitation, any management report prepared in connection with the annual audit
referred to in Section 4.9 hereof.
(b) within forty-five (45) days after the end of each calendar year,
annual projections of operating income and expenses for the Guarantor, and all
material amendments and changes thereafter to the same.
(c) from time to time and promptly upon each request, such data,
certificates, reports, statements, opinions of counsel, documents or further
information regarding the business, assets, liabilities, financial position,
projections, results of operations or business prospects of the Guarantor or any
of its Subsidiaries as the Bank reasonably may request.
(d) promptly after the preparation of the same, copies of all reports
or financial information filed with the Securities and Exchange Commission.
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Section 4.13 Notice of Litigation and Other Matters. The Guarantor will
give the Bank prompt notice of the following events after Guarantor has, or in
the exercise of reasonable diligence should have, received notice thereof:
(a) the commencement of all proceedings and investigations by or before
any governmental body and all actions and proceedings in any court or before any
arbitrator (1) against, or (2) (to the extent known to the Guarantor) in any
other way relating adversely to, the Guarantor, or any of the Guarantor's
Subsidiaries or any of their respective assets or businesses which, if adversely
determined, would singly or when aggregated with all other such proceedings,
investigations and actions, if adversely determined, have a Materially Adverse
Effect;
(b) any material adverse change with respect to the business, assets,
liabilities, financial position, results of operations or business prospects of
the Guarantor, or any of the Guarantor's Subsidiaries other than changes in the
ordinary course of business the effects of which have not had a Materially
Adverse Effect;
(c) any event of default or the occurrence or non-occurrence of any
event which constitutes, or which with the passage of time or giving of notice,
or both, would constitute, an event of default by the Guarantor, or any of the
Guarantor's Subsidiaries under any material agreement other than this Guaranty
Agreement to which the Guarantor or any of the Guarantor's Subsidiaries is a
party or by which their respective properties may be bound, giving in each case
the details thereof and specifying the action proposed to be taken with respect
thereto; and
(d) copies of all notices of actual suspension or revocation of
participation or qualification with respect to (A) the Medicare or Medicaid
programs, (B) any private health insurance program issued by any Governmental
Authority having jurisdiction over the licensing or operation of any of the
Projects or any other health care related assets or operations of the Guarantor
and any of its Subsidiaries, or (C) any private insurance company.
Section 4.14 Financial Covenants. The Guarantor shall comply with the
following financial covenants, with determination of compliance being made
quarterly unless more frequently requested by the Bank:
(a) Current Ratio. The Guarantor shall at all times maintain a
Current Ratio of at least 1.5 to 1.0.
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(b) Working Capital. The Guarantor shall at all times maintain
minimum Working Capital of at least Ten Million and No/100 Dollars
$10,000,000).
(c) Funded Debt to Adjusted Tangible Net Worth Ratio. The
Guarantor shall at all times maintain a ratio of Funded Debt to
Adjusted Tangible Net Worth of no more than 3.5:1.0.
(d) Tangible Net Worth. The Guarantor shall at all times
maintain a Tangible Net Worth of not less than $56,800,000; provided,
however, that beginning on June 30, 1993, and on subsequent calendar
quarter endings, the minimum Tangible Net Worth requirement set forth
herein will increase by One Million Four Hundred Thousand Dollars
($1,400,000) per quarter on a cumulative basis.
(e) Debt Service Coverage. The Guarantor shall at all times
maintain a minimum Debt Service Coverage Ratio of at least 1.3 to 1.0.
(f) Fixed Charge Coverage. The Guarantor shall at all times
maintain a Fixed Charge Coverage Ratio of at least 1.10 to 1.0."
(g) Liquidity. The Guarantor's Consolidated Balance Sheet for
the Guarantor's Fiscal Years ending between the date hereof and the
Expiration Date (as defined in the Reimbursement Agreement) and for the
Guarantor's fiscal quarter ending immediately prior to the Expiration
Date, shall reflect at least $7,500,000 in cash and cash equivalents.
Section 4.15 Amendment of Bond Documents. The Guarantor will not amend,
modify, supplement or terminate the Bond Documents, or any of them, or permit or
consent to any such amendment, modification, supplementation or termination,
without the Bank's prior written consent.
Section 4.16 No Merger, Consolidation or Sale of Assets. The Guarantor
will not dissolve or otherwise dispose of all or substantially all of its assets
and will not consolidate with or merge into another partnership or corporation
or permit one or more other partnerships or corporations to consolidate with or
merge into it without the prior written consent of the Bank. Notwithstanding the
immediately preceding sentence, so long as no
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Event of Default shall exist and be continuing hereunder, the Guarantor may
incorporate itself (whether by consolidation with or merger into a corporation,
or otherwise), provided that (i) the surviving or resulting entity (as the case
may be) is a corporation incorporated under the laws of one of the states of the
United States of America and, if not incorporated under the laws of the State of
Tennessee is duly qualified to transact business in the State of Tennessee, (ii)
such surviving or resulting corporation assumes in writing the obligations of
the Guarantor under this Guaranty, (iii) immediately following the consummation
of such consolidation, merger or other incorporation transaction, such surviving
or resulting corporation is in compliance with each and every covenant set forth
in Section 4.14 hereof, as evidenced to the Bank by an opinion of independent
certified public accountants of recognized standing satisfactory to the Bank,
and (iv) such surviving or resulting corporation furnishes to the Bank such
additional agreements, certificates and legal opinions as the Bank may require.
Section 4.17 Insurance. The Guarantor shall use its best efforts to
maintain adequate medical malpractice liability insurance at a minimum of
$1,000,000 per occurrence and $1,000,000 in the aggregate; and the Guarantor
shall maintain, and cause each of the Guarantor's operating Subsidiaries to
maintain, with responsible and reputable insurance companies or associations (a)
insurance (including, without limitation, comprehensive general liability and
hazard insurance insuring replacement value with respect to all of its
properties) with respect to its properties and business, in such amounts,
covering such risks and having deductibles, as is carried generally in
accordance with sound business practice by companies in similar businesses
similarly situated or as otherwise is deemed acceptable by the Bank and (b)
workmen's compensation and other insurance as may be required by law.
Section 4.18 [Reserved].
Section 4.19 No More Favorable Terms for Other Lenders. The Guarantor
covenants and agrees that, with respect to its lending and credit relationships
with Persons other than the Bank, the Guarantor will not agree or consent in
writing to 'covenants, events of default and terms of repayment (including,
without limitation, any obligations to purchase or repurchase evidences of
Indebtedness) which are more favorable to such Person than the covenants, events
of default and terms of repayment set forth herein; provided, however, that
this covenant shall apply only to such lending and credit relationships in
which the Guarantor is indebted, or has guaranteed or otherwise assured
payment of Indebtedness of a third party, to such Person in an amount greater
than $1,000,000, and shall not apply to either the refinancing of the interests
of The Bank of
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New York and C&S/Sovran Bank in the financing made pursuant to the Loan and
Security Agreement or to the pledge by the Guarantor of one or more certificates
of deposit to Third National Bank in Nashville in connection with such
refinancing.
Section 4.20 Liens on and Dispositions of Certain Property Interests.
(a) Liens. The Guarantor covenants and agrees that it
will not create, assume or suffer to exist any Lien (other
than those in existence on the date hereof and consented to by
the Bank) upon its right, title or interest in and to any of
the Facilities, including, but not limited to, its rights,
title or interest in, to and under the Master Lease or any of
the separate Leases referred to in Section 1.01 of the Master
Lease, or its leasehold interest in property created thereby,
without the prior written consent of Bank, except for Liens
for taxes or other governmental charges not yet due or that
are being actively contested in good faith by appropriate
proceedings, and Liens in favor of the agent and the lenders
under the Loan and Security Agreement.
(b) Disposition of Certain Property Interests.
Notwithstanding the covenant set forth in Section 4.16 above,
the Guarantor covenants and agrees that it will not sell,
assign, convey, sublease or otherwise dispose of any of its
interest in any of the Facilities, including, but not limited
to, its rights, title or interest in, to and under the Master
Lease or in any of the separate Leases referred to in Section
1.01 of the Master Lease, without the prior written consent of
the Bank.
Section 4.21 Indemnification. The Guarantor shall (to the fullest
extent permitted by Applicable Law) indemnify the Bank and each affiliate
thereof and their respective directors, officers, employees and agents from, and
hold each of them harmless against, any and all losses, liabilities, claims or
damages to which any of them may become subject, insofar as such losses,
liabilities, claims or damages arise out of or result from this Guaranty
Agreement from any breach by the Guarantor of this Guaranty Agreement or from
any investigation, litigation or other proceeding (including any threatened
investigation or proceeding) relating to the foregoing, and the Guarantor shall
reimburse the Bank and each affiliate thereof and their respective directors,
officers, employees and agents, upon demand for any reasonable expenses
(including, without limitation, legal fees and expenses) incurred in connection
with any such investigation or proceeding; but
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excluding any such losses, liabilities, claims, damages or expenses incurred by
reason of the gross negligence or willful misconduct of the Person to be
indemnified.
ARTICLE V
Subordination
Section 5.1 Subordination. The Guarantor hereby agrees that all amounts
owing from time to time to the Guarantor under the Management Agreements [and
guaranty fees and other payments owing from time to time to the Guarantor under
the Facility Guaranty Agreements], are subordinated in right of payment to the
prior payment in full of all amounts now or hereafter owing under the
Reimbursement Agreement, the Pledge Agreement, the Security Agreement, the
Mortgage and the other Financing Documents, and under this Guaranty Agreement.
ARTICLE VI
EVENTS OF DEFAULT; REMEDIES
Section 6.1 Events of Default. The occurrence of any of the following
events shall be an "Event of Default" hereunder:
(a) any representation or warranty made by the Guarantor herein or in
any certificate or financial or other written statement furnished by the
Guarantor pursuant to this Guaranty Agreement shall prove to have been untrue or
incomplete in any material respect when made; or
(b) The Guarantor shall fail to perform or observe any term, covenant
or agreement contained in Sections 2.1, 4.9, 4.10, 4.11, 4.14, 4.15, 4.16, 4.19
or 4.20; or
(c) The Guarantor shall fail to perform or observe any term, covenant
or agreement contained in this Guaranty Agreement other than those referred
to in paragraph (b) of this Section 6.1, and any such failure shall remain
unremedied for thirty (30) days after written notice thereof shall have been
given to the Guarantor by the Bank; or
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<PAGE> 33
(d) any material provision of this Guaranty Agreement shall at any time
for any reason cease to be valid and binding on the Guarantor or shall be
declared to be null and void, or the validity or enforceability thereof shall be
contested by the guarantor or any Governmental Authority having jurisdiction in
the premises, or the Guarantor shall deny that it has any or further liability
or obligation under this Guaranty Agreement; or
(e) the Guarantor shall fail to pay when due and payable, after giving
effect to any applicable grace period, the principal of or interest on any
Indebtedness in an aggregate amount over $100,000 (excluding Indebtedness
guaranteed under this Guaranty Agreement) or the maturity of any such
Indebtedness shall have been accelerated or been required to be prepaid prior to
the stated maturity thereof or any event shall have occurred and be continuing
which with the passage of time or the giving of notice or both, would permit any
holder or holders of such Indebtedness, any trustee or agent acting on behalf of
such holder or holders or any other Person so to accelerate such maturity,
unless the Guarantor's obligation to pay, or the acceleration or required
prepayment of, such Indebtedness is being contested or any right of set-off is
being asserted by the Guarantor in good faith by appropriate proceedings and
reserves in respect thereof deemed adequate by the Guarantor have been
established on the books of the Guarantor in accordance with GAAP; or
(f) a judgment or order for the payment of money shall be entered
against the Guarantor by any court or a warrant of attachment or execution or
similar process shall be issued or levied against property of the Guarantor,
which in the aggregate exceeds $100,000 in value over any applicable issuance
coverage or reserve previously established on the books of the Guarantor and
such judgment, order, warrant or process shall continue undischarged or
unstayed for thirty (30) consecutive days; or
(g) (1) the Guarantor shall (A) apply for or consent to the appointment
of a receiver, trustee, liquidator or custodian or the like of itself or of its
property, (B) admit in writing its inability to pay its debts generally as they
become due, (C) make a general assignment for the benefit of creditors, (D) be
adjudicated a bankrupt or insolvent, or (E) commence a voluntary case under the
Federal bankruptcy laws of the United States of America or file a voluntary
petition or answer seeking reorganization, an arrangement with creditors or an
order for relief or seeking to take advantage of any insolvency law or file
against it in any bankruptcy, reorganization or insolvency proceeding, or
corporate action shall be taken by it for the purpose of effecting any of the
foregoing; or (2) if without the application, approval or consent of the
Guarantor a proceeding shall be instituted in any court of competent
jurisdiction, under any law relating to bankruptcy, reorganization,
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dissolution, winding up, liquidation, a composition or arrangement with
creditors, a readjustment of debts, the appointment of a trustee, receiver,
liquidator or custodian or the like of the Guarantor or of all or any
substantial part of its assets, or other like relief in respect thereof under
any bankruptcy or insolvency law, and, if such proceeding is being contested by
the Guarantor in good faith, the same shall (A) result in the entry of an order
for relief or any such adjudication or appointment or (B) continue undismissed,
or pending and unstayed, for any period of sixty (60) days; or
(h) an "event of default" shall occur under the provisions of the
Revolver Agreement; or
(i) (A) a Termination Event with respect to a Plan shall occur, (B) any
Person shall engage in any Prohibited Transaction involving any Plan of the
Guarantor or any Affiliate of the Guarantor, (C) an Accumulated Funding
Deficiency, whether or not waived, shall exist with respect to any Plan of the
Guarantor or any Affiliate of the Guarantor (D) the Guarantor or any Affiliate
of the Guarantor shall be in "default" (as defined in Section 4219(c)(5) of
ERISA) with respect to payments due to a Multiemployer Plan resulting from the
Guarantor's or such the Guarantor Affiliate's complete or partial withdrawal (as
described in Section 4203 and 4205 of ERISA) from such Plan, or (E) any other
event or condition shall occur or exist with respect to a Single Employer Plan
of the Guarantor or any Affiliate of the Guarantor except that no such event or
condition shall constitute an Event of Default if it, together with all other
events or conditions at the time existing, would not subject the Guarantor to
any tax, penalty, debt or liability which, alone or in the aggregate, would have
a Materially Adverse Effect on the Guarantor.
Section 6.2 Remedies. (a) Upon the occurrence of an Event of Default,
the Bank may thereupon exercise such rights and remedies as may be provided in
the Reimbursement Agreement, the Pledge Agreement, this Guaranty, the Mortgage
and any other Financing Document by reason of such Event of Default in order to
enforce the provisions of this Guaranty, with or without the simultaneous
exercise of any other such right or remedy under said documents.
(b) No remedy herein conferred upon or reserved to the Bank is
intended to be exclusive of any other available remedy or remedies, but each and
every such remedy shall shall be cumulative and shall be in addition to every
other remedy given under this Guaranty Agreement or now or hereafter existing
at law or in equity or by statute. No delay or omission to exercise any right
or power accruing upon any default, omission or failure of performance
hereunder shall impair any such right of power or shall be construed to be
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<PAGE> 35
a waiver thereof, but any such right and power may be exercised from time to
time as often as may be deemed expedient. In order to entitle the Bank to
exercise any remedy reserved to it in this Guaranty Agreement, it shall not be
necessary to give any notice, other than such notice as may be herein expressly
required. In the event any provision contained in this Guaranty Agreement should
be breached by any party and thereafter duly waived by the other party so
empowered to act, such waiver shall be limited to the particular breach so
waived and shall not be deemed to waive any other breach hereunder. No wavier,
amendment, release or modification of this Guaranty Agreement shall be
established by conduct, custom or course of dealing, but solely by an instrument
in writing duly executed by the parties thereunto duly authorized by this
Guaranty Agreement.
ARTICLE VII
Miscellaneous
Section 7.1 When Obligations Arise. The obligations of the Guarantor
hereunder shall arise absolutely and unconditionally upon the issuance by the
Bank of the Letter of Credit to be issued pursuant to the Reimbursement
Agreement.
Section 7.2 Nature of Guarantor' Obligations. This Guaranty Agreement
is a continuing obligation of the Guarantor and shall (i) be binding upon the
Guarantor, its heirs, executors, personal representatives, successors and
permitted assigns, and (ii) inure to the benefit of and be enforceable by the
Bank and its successors, transferees and assigns; provided that the Guarantor
may not assign all or any part of this Guaranty Agreement or the rights or
obligations of the Guarantor hereunder without the prior written consent of the
Bank; and, provided further, that unless the Bank shall agree in writing to
release the Guarantor from its rights or obligations hereunder, no such
assignment (whether or not consented to by the Bank) shall in itself relieve or
release the Guarantor from its obligations hereunder.
Section 7.3 Notices. All notices, requests and other communications
hereunder shall be in writing and shall be given to the party to whom sent,
addressed to it as follows:
If directed to the Bank:
Societe Generale, New York Branch
50 Rockefeller Plaza
New York, New York 10020
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<PAGE> 36
If directed to the Guarantor:
National HealthCorp L.P.
City Center
100 Vine Street
Murfressboro, Tennessee 37130
Attention: Richard F. LaRoche, Jr.
Senior Vice President and General Counsel
The Bank and the Guarantor may designate a different address to which such
notices should be sent by giving the other written notice thereof. Each such
notice, request or communication shall be effective (i) if given by mail, three
(3) Business Days after such communication is deposited in the mails with first
class postage prepaid, addressed as aforesaid or (ii) if given by any other
means, when delivered at the address of the party to whom such notice is being
delivered.
Section 7.4 Bank's Right of Set-Off.
(a) To the fullest extent permitted by law, upon the occurrence and
during the continuance of any Event of Default, the Bank is hereby authorized at
any time and from time to time, without notice to the Guarantor (any such notice
being expressly waived by the Guarantor), to set-off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by the Bank to or for the credit
or the account of the Guarantor, or either of them, against any of the
obligations of the Guarantor now or hereafter existing under this Guaranty
Agreement, irrespective of whether the Bank shall have made any demand hereunder
or thereunder and although such obligations may be unmatured.
(b) The Bank agrees promptly to notify the Guarantor after any set-off
and application, provided that the failure to give such notice shall not effect
the validity of such set-off and application. Subject to the provisions of
subsection (a), the rights of the Bank under this Section are in addition to
other rights and remedies (including, without limitation, other rights of
set-off) which the Bank may have.
Section 7.5 Jurisdiction; Service of Process. The Guarantor agrees that
any legal action or proceeding with respect to this Guaranty Agreement or to
enforce any judgment
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<PAGE> 37
obtained against the Guarantor, or against either of them, in connection with
this Guaranty Agreement may be brought by the Bank in the courts of the State or
in the United States District Courts which are located in the City of New York,
or any other court to the jurisdiction of which the Guarantor or any of their
respective properties is or may be subject. The Guarantor irrevocably submits to
the jurisdiction of the courts of the State and of the United States District
Courts located in the city of New York, and irrevocably waive any present or
future objection to venue in any such court, and any present or future claim
that any such court is an inconvenient forum, in connection with any action or
proceeding relating to this Guaranty Agreement. Nothing herein shall effect the
right of the Bank to serve process in any manner permitted by law or to bring
any civil suit, action or proceeding against the Guarantor or their respective
property in the courts of any jurisdiction in which venue may be granted.
(b) For the purposes of any legal action or proceeding brought by the
Bank with respect to this Guaranty, the Guarantor hereby irrevocably designates
and appoints CT Corporation System, currently located at 1633 Broadway, New
York, New York, 10019, as its authorized agent for service of process in the
State of New York. The Bank shall for all purposes be entitled to treat such
designee of the Guarantor as the authorized agent to receive for and on its
behalf service of writs or summons or other legal process in the State of New
York; delivery of such service to its authorized agent shall be deemed to be
made when personally delivered to the agent or three (3) days after mailing by
registered or certified mail addressed to such authorized agent. In the event
that, for any reason, such agent or his successor shall no longer serve as agent
of the Guarantor to receive Service or process in the State of Illinois, the
Guarantor shall appoint a person in the State of New York as a successor so to
serve and advise the Bank thereof so that at all times the partnership Guarantor
will maintain an agent to receive service of process in the State of New York on
its behalf with respect to this Guaranty Agreement. In the event that, for any
reason, service of legal process cannot be made in the manner described above,
such service may be made in such other manner as permitted by law.
Section 7.6 Amendments. This Guaranty Agreement may be amended, and the
Guarantor may take any action herein prohibited, or omit to perform any act
herein required to be performed, only if the Guarantor shall first obtain the
written consent of the Bank thereto. No course of dealing between the Guarantor
and the Bank nor any delay in exercising any rights hereunder, shall operate as
a waiver of any rights of the Bank hereunder.
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<PAGE> 38
Section 7.7 Sole Judgment of the Bank. Unless otherwise specifically
indicated, if any agreement, certificate or other writing, or any action taken
or to be taken, is by the terms of this Guaranty Agreement required to be
satisfactory to the Bank, the determination of such satisfaction shall be made
by the Bank in its sole and exclusive judgment exercised in good faith.
Section 7.8 Severability. Any provision of this Guaranty Agreement
which is prohibited, unenforceable or not authorized in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or non-authorization as to the remaining provisions hereof and
shall not affect the validity, enforceability or legality of such provision in
any other jurisdiction.
Section 7.9 Headings. Section headings are included herein for
convenience of reference only and shall not constitute a part of this Guaranty
Agreement for any other purpose.
Section 7.10 Governing Law. This Guaranty Agreement is intended to be
performed in the State of New York, and shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of New York.
Section 7.11 Exhibits. All Exhibits referred to herein are by this
reference incorporated herein and made a part hereof.
Section 7.12 Entire Agreement; Multiple Counterparts. This Guaranty
Agreement constitutes the entire agreement, and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof and may be executed simultaneously in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 7.13 Time of the Essence. Time is of the essence of this
contract.
Section 7.14 Financing Documents. Guarantor has participated in the
negotiation and preparation of the Financing Documents and has received
execution copies of each.
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<PAGE> 39
IN WITNESS WHEREOF, the Guarantor and the Bank have duly executed and
delivered this Guaranty Agreement, or caused same to be duly exercised and
delivered as of the date first above written.
NATIONAL HEALTHCORP L.P., a
Delaware limited partnership
By: NHC, Inc., a Tennessee
corporation, as Managing General
Partner
By: /s/
------------------------
Title:
Attest: /s/
---------------------
Title:
SOCIETE GENERALE,
acting through its
New York Branch
By: /s/
---------------------------------
Title: VP
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<PAGE> 1
Exhibit 10.15
THIS GUARANTY AGREEMENT made and entered into as of March 5, 1991 (the
("Guaranty") between National HealthCorp L.P., a Delaware limited partnership
the ("Guarantor"), and The Bank of Tokyo, Ltd., New York Agency, a New York
agency of a Japanese banking corporation (the "Bank").
WHEREAS:
A. Palm Beach County the ("Issuer") has issued its Industrial
Development Revenue Bonds (Florida Convalescent Centers, Inc. Project), Series
1986 (the "Bonds") under and pursuant to the Trust Indenture dated as of
November 1, 1986 and amended and restated as of March 10, 1987 and further
amended and restated as of June 30, 1987 among the Issuer, Third National Bank
in Nashville, as original Trustee, and Sun Bank/South Florida, N.A., as
Co-Trustee (the "Indenture") for the benefit of Florida Convalescent Centers,
Inc. (the "Company").
B. The Company and the Guarantor have entered into an Amended and
Restated Reimbursement Agreement of even date herewith (the "Reimbursement
Agreement") with the Bank pursuant to which the Bank has issued its Irrevocable
Letter of Credit for the purpose of providing direct payment of principal of and
interest on and purchase price of the Bonds (the "Letter of Credit") in favor of
The Bank of Tokyo Trust Company, as successor Trustee (the "Trustee").
C. The proceeds of the Bonds have been advanced by the Issuer to the
Company for the purpose of acquiring, constructing and equipping a nursing home
facility in Palm Beach County, Florida owned by the Company (the "Project").
D. A corporate predecessor of the Guarantor has contracted with the
Company to manage the Project pursuant to a Management Agreement dated as of
November 1, 1986.
E. The Guarantor desired that the Issuer issue the Bonds and is willing
to enter into this Guaranty Agreement in order (i) to enhance the continued
marketability of the Bonds by causing the issuance of the Letter of Credit and
thereby achieve cost and other savings to the Company and financial benefits
for the Guarantor, and (ii) to secure the monetary obligations of the Company to
the Bank under the Reimbursement Agreement and the Mortgage referred to therein
(the "Mortgage"), and the monetary obligations of the Guarantor to the Bank
under the Reimbursement Agreement, which obligations to the Bank are each herein
defined as a "Guaranteed Obligation".
NOW THEREFORE, in consideration of the premises, the Guarantor,
National HealthCorp L.P., does hereby, subject to the terms hereof, covenant and
agree with the Bank as follows:
<PAGE> 2
ARTICLE I
REPRESENTATIONS AND WARRANTIES
OF THE GUARANTOR
The Guarantor does hereby represent and warrant that it is a limited
partnership duly organized under the laws of the State of Delaware, is qualified
to do business under the laws of the State of Florida, is not in violation of
any provisions of its Certificate of Limited Partnership or Partnership
Agreement, or the laws of the States of Tennessee, Delaware or Florida, has
power to enter into this Guaranty Agreement, has duly authorized the execution
and delivery of this Guaranty Agreement by proper partnership action, and
neither this Guaranty Agreement nor the agreements herein contained contravene
or constitute a default under any agreement, instrument or indenture, or any
provision of its Certificate of Limited Partnership or Partnership Agreement or
any other requirement of law. The execution by the Guarantor of this Guaranty
Agreement will result in a direct financial benefit to it.
ARTICLE II
COVENANTS AND AGREEMENTS
Section 2.1 The Guarantor hereby guarantees the payment to the Bank of
the Guaranteed Obligations of the Company and the Guarantor under the
Reimbursement Agreement and the Mortgage. All payments by the Guarantor shall be
paid in lawful money of the United States of America. Each and every default in
payment of the amounts due under the Reimbursement Agreement or the Mortgage
shall give rise to a separate cause of action hereunder, and separate suits may
be brought hereunder as each cause of action arises.
Section 2.2 The obligations of the Guarantor under this Guaranty shall
be absolute and unconditional and shall remain in full force and effect until
all Guaranteed Obligations due under the Reimbursement and the Mortgage shall
have been paid and such Obligations shall not be affected, modified or impaired
upon the happening from time to time of any event other than such payment,
without limitation any of the following, whether or not with notice to, or the
consent of, the Guarantor:
(a) the compromise, settlement, release or termination of any or all
of the obligations, covenants or agreements of the Company or the Bank under the
Reimbursement Agreement or the Mortgage;
(b) the failure to give notice to the Guarantor of the occurrence of an
event of default under the terms and provisions of the Reimbursement Agreement
or the Mortgage.
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<PAGE> 3
(c) the assignment or mortgaging of all or any part of the interest of
the Bank or the Company in the Project or any failure of title with respect to
the interests of the Bank or the Company in the Project;
(d) the waiver of the payment, performance or observance by the Bank or
the Company of any of the obligations, covenants or agreements contained in the
Reimbursement Agreement or the Mortgage or in this Guaranty Agreement;
(e) the extension of the time for payment of any Guaranteed Obligation
or the time for performance of any other obligations, covenants or agreements
under or arising in connection with the Reimbursement Agreement or the Mortgage
or this Guaranty or the extension or renewal of any thereof;
(f) the modification or amendment (whether material or otherwise) of
any Guaranteed Obligation or the Reimbursement Agreement or the Mortgage
provided that, the obligations of the Guarantor are not thereby increased or
expanded without its prior written consent;
(g) the taking, suffering or omitting to take, or the omission of any
of the actions referred to in the Reimbursement or the Mortgage and any actions
under this Guaranty Agreement.
(h) any failure, omission, delay or lack on the part of the Bank to
enforce, assert or exercise any right, power or remedy conferred on the Bank in
this Guaranty Agreement or by the Reimbursement Agreement or the Mortgage;
(i) the voluntary or involuntary liquidation, dissolution, sale or
other disposition of all or substantially all the assets, marshalling of assets
and liabilities, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition with creditors or
readjustment of, or other similar proceedings affecting the Guarantor, the
Company, the Bank, the Trustee or the Issuer or any of the assets of any of them
or any allegation or contest of the validity of this Guaranty Agreement, the
Reimbursement Agreement or the Mortgage in any such proceeding;
(j) to the extent permitted by law, the releasor discharge of the
Guarantor from the performance or observance of my obligation, covenant or
agreement contained in this Guaranty Agreement by operation of law; or
(k) the default or failure of the Guarantor fully to perform any of its
obligations as set forth in this Guaranty Agreement; or
(l) the assignment of any right, title or interest of the Issuer to the
Trustee, its successors or assigns; or
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<PAGE> 4
(m) the invalidity of the Reimbursement Agreement or the Mortgage or
any term thereof;
(n) the transfer of the Project or changes in the beneficial or actual
owners of the Company; or
(o) the foreclosure of the Mortgage; or
(p) any other circumstance, occurrence or condition, whether similar or
dissimilar to any of the foregoing, that might be raised in avoidance of or in
defense against any action to enforce the obligations of the Guarantor under the
provisions hereof.
Section 2.3 The rights of the Bank to enforce the obligations of the
Guarantor under this Guaranty Agreement by any proceedings, whether by action at
law, suit in equity, or otherwise, shall not be impaired by any right,
counterclaim or defense of any character whatsoever, including without
limitation any right, claim or defense or rescission, recoupment, reduction,
limitation, set-off, counterclaim, waiver, frustration, surrender, alteration or
compromise. This Guaranty Agreement and the obligations of the Guarantor
hereunder are separate and independent of the Company's obligations under the
Reimbursement Agreement and the Mortgage, and it is specifically understood and
agreed by the Guarantor that any payment now or hereafter made by or on behalf
of the Company under or pursuant to the Reimbursement Agreement or the Mortgage
shall not, except to the extent paid to the owners of the Bonds directly by the
Trustee, affect, impair or diminish, in any manner whatsoever, the obligations
of the Guarantor hereunder. In the event that the Company or any successor or
assignee under the Reimbursement Agreement or the Mortgage should fail to
perform any agreement on its part, the Guarantor may institute such action as it
deems necessary to compel performance so long as such action does not abrogate
the Guarantor's obligations hereunder.
Section 2.4 In the event of a default in the payment of a Guaranteed
Obligation, the Bank shall have the right to proceed first and directly against
the Guarantor under this Guaranty Agreement to the extent of its obligations
hereunder without proceeding against or exhausting any other remedies which it
may have and without resorting to any other security held by the Bank.
Section 2.5 The Guarantor hereby expressly waives notice from the Bank
of its acceptance and reliance on this Guaranty Agreement. The Guarantor agrees
to pay all costs, expenses and fees, including all reasonable attorneys' fees
which may be incurred by the Bank in enforcing or attempting to enforce this
Guaranty Agreement following default hereunder, whether the same by enforced by
suit or otherwise.
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<PAGE> 5
Section 2.6 No remedy herein conferred upon or reserved to the Bank is
intended to be exclusive of any other available remedy or remedies, but each and
every such remedy shall be cumulative and shall be in addition to every other
remedy given under this Guaranty Agreement or now or hereafter existing at law
or in equity. No delay or omission to exercise any right or power accruing upon
any default, omission or failure of performance hereunder shall impair any such
right or power or shall be construed to be a waiver thereof, but any such right
and power may be exercised from time to time and as often as may be deemed
expedient. In order to entitle the Bank to exercise any remedy reserved to it in
this Guaranty Agreement, it shall not be necessary to give any notice, other
than such notice as may be herein expressly required. In the event any provision
contained in this Guaranty Agreement should be breached by the Guarantor and
thereafter duly waived by the Bank, such waiver shall be limited to the
particular breach so waived and shall not be deemed to waive any other breach
hereunder. No waiver, amendment, release or modification of this Guaranty
Agreement shall be established by conduct, custom or course of dealing, but
solely by an instrument in writing duly executed by the Bank.
Section 2.7 The Guarantor agrees that it will maintain its partnership
existence throughout the term of years that the Bonds will remain outstanding
and unpaid, and during such period the Guarantor will remain qualified to engage
in the business and be subject to service of process in the States of Tennessee
and Florida. The Guarantor further agrees that it will not dispose of all or
substantially all of its assets except to a corporation incorporated and
existing under the laws of one of the States of the United States of America and
qualified to do business in Florida; provided, in all cases, that such other
corporation shall have a net worth not less than that of the Guarantor and shall
assume in writing all of the obligations of the Guarantor herein.
Section 2.8 The Guarantor covenants and agrees that so long as the
Bonds remain outstanding and unpaid, it will furnish to the Bank, as soon as
available and, in any event, within 125 days after the end of each fiscal year,
copies of a certified balance sheet of the Guarantor and its consolidated
subsidiaries as of the end of the fiscal year. The Guarantor shall also furnish
to the Bank copies of its financial statements for all fiscal years accompanied
by the auditor's report thereon, as well as copies of all interim quarterly
reports sent to the Guarantor's limited partners.
Section 2.9 This Guaranty is entered into by the Guarantor for the
benefit of the Bank and may be amended or supplemented only with the prior
written consent of the Bank.
Section 2.10 (a) Until the Guaranteed Obligations have been paid
full and particularly with respect to any
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<PAGE> 6
payment by the Company made to the Bank within one year prior to the
commencement of any bankruptcy or reorganization proceedings affecting the
Company, the Guarantor hereby (i) waives, and releases and discharges, any claim
of any kind or nature whatsoever it may have against the Company for
indemnification, contribution, subrogation or any other form of reimbursement
with respect to any amounts it may be required to pay under this Guaranty
Agreement, (ii) waives any right to enforce any remedy which the Bank now have
or may hereafter have against the Company and (iii) waives any benefit of, and
any right to participate in, any security now or hereafter held by the Bank.
(b) The Guarantor shall be discharged of its obligations hereunder upon
the payment of all Guaranteed Obligations; provided that, in the event the Bank
is required by order of the court or administrative body having jurisdiction at
any time to refund or repay to any person or entity any sums collected by it on
account of the obligations subject to this Guaranty Agreement, the Guarantor
agrees that all such sums shall remain subject to the terms of this Guaranty
Agreement and the Bank shall be entitled to recover such sums from the Guarantor
notwithstanding the fact that the Guarantor shall have been otherwise discharged
from further liability under this Guaranty Agreement, but only on the condition
precedent that the Bank shall have given the Guarantor written notice of such
court or administrative proceeding and shall have afforded the Guarantor a
reasonable opportunity to contest any demand for a refund or repayment. The
Guarantor shall have an opportunity to make such a contest only within the time
requirements of the court or administrative body having jurisdiction and must
proceed with diligence to completion of the contest or the condition precedent
described in the preceding sentence shall be deemed to have been waived by the
Guarantor.
Section 2.11 The Guarantor hereby subordinates the payment of
management fees from the Company to the prior payment in full of the Bonds and
the obligations owing to the Bank under the Reimbursement Agreement, and agrees
that no payment thereof shall be made while there remains a payment default on
the Bonds or under the Reimbursement Agreement.
ARTICLE III
MISCELLANEOUS
Section 3.1 The obligations of the Guarantor hereunder shall arise
absolutely and unconditionally when the Letter of Credit shall have been issued
and delivered by the Bank.
Section 3.2 The Guaranty Agreement constitutes the entire agreement of
guarantee, and supersedes all prior agreements and understanding, both written
and oral, between the parties with respect to the subject matter hereof and may
be
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<PAGE> 7
executed simultaneously in several counterparts, each of which shall be deemed
an original, and all of which together shall constitute one and the same
instrument.
Section 3.3 The invalidity or unenforceability of any one or more
phrases, sentences, clauses or Sections in this Guaranty Agreement shall not
affect the validity or enforceability of the remaining portions of this Guaranty
Agreement, or any part thereof.
Section 3.4 This Guaranty Agreement shall be governed by and construed
interpreted in accordance with the laws of the State of New York.
Section 3.5 The agreements contained herein on the part of the
Guarantor shall inure to and be binding upon its successors and assigns,
including without limitation, any successor or assign in any transaction
expressly permitted by Section 2.7 hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Guaranty
Agreement to be executed in their respective names by their respective duly
authorized officials as of the date first above stated.
NATIONAL HEALTHCORP L.P.
as Guarantor
By: NHC, INC.
Managing Partner
By:
----------------------------------
Title: Senior Vice President
Accepted:
THE BANK OF TOKYO, LTD.
NEW YORK AGENCY
By:
-----------------------------------
Title: Attorney-in-fact
- 7-
<PAGE> 1
Exhibit 10.16
THIS GUARANTY AGREEMENT made and entered into as of March 5, 1991 (the
"Guaranty") between National HealthCorp L.P., a Delaware limited partnership
(the "Guarantor"), and The Bank of Tokyo, Ltd., New York Agency, a New York
agency of a Japanese banking corporation (the "Bank").
WHEREAS:
A. The Dade County Industrial Development Authority (the "Issuer") has
issued its Industrial Development Revenue Bonds (Florida Convalescent Associates
Project), Series 1986 (the "Bonds") under and pursuant to the Amended and
Restated Trust Indenture dated as of December 1, 1986 and amended and restated
as of April 1, 1987 among the Issuer, Third National Bank in Nashville, as
original Trustee, and Sun Bank/South Florida, N.A., as Co-Trustee (the
"Indenture") for the benefit of Florida Convalescent Associates (the "Company").
B. The Company and the Guarantor have entered into an Amended and
Restated Reimbursement Agreement of even date herewith (the "Reimbursement
Agreement") with the Bank pursuant to which the Bank has issued its Irrevocable
Letter of Credit for the purpose of providing direct payment of principal of and
interest on and purchase price of the Bonds (the "Letter of Credit") in favor of
The Bank of Tokyo Trust Company, as Trustee (the "Trustee").
C. The proceeds of the Bonds have been advanced by the Issuer to the
Company for the purpose of acquiring, constructing and equipping a nursing home
facility in Dade County, Florida owned by the Company (the "Project").
D. A corporate predecessor of the Guarantor has contracted with the
Company to manage the Project pursuant to a Management Agreement dated as of
November 1, 1986.
E. The Guarantor desired that the Issuer issue the Bonds and is willing
to enter into this Guaranty Agreement in order (i) to enhance the continued
marketability of the Bonds by causing the issuance of the Letter of Credit and
thereby achieve cost and other savings to the Company and financial benefits for
the Guarantor, and (ii) to secure the monetary obligations of the Mortgage
referred to therein (the "Mortgage"), and the monetary obligations of the
Guarantor to the Bank under the Reimbursement Agreement, which obligations to
the Bank are each herein defined as a "Guaranteed Obligation".
NOW THEREFORE, in consideration of the premises, the Guarantor, does
hereby, subject to the terms hereof, covenant and agree with the Bank as
follows:
<PAGE> 2
ARTICLE I
REPRESENTATIONS AND WARRANTIES
OF THE GUARANTOR
The Guarantor does hereby represent and warrant that it is a limited
partnership duly organized under the laws of the State of Delaware, is qualified
to do business under the laws of the State of Florida, is not in violation of
any provisions of its Certificate of Limited Partnership or Partnership
Agreement, or the laws of the States of Tennessee, Delaware or Florida, has
power to enter into this Guaranty Agreement, has duly authorized the execution
and delivery of this Guaranty Agreement by proper partnership action, and
neither this Guaranty Agreement nor the agreements herein contained contravene
or constitute a default under any agreement, instrument or indenture, or any
provision of its Certificate of Limited Partnership or Partnership Agreement or
any other requirement of law. The execution by the Guarantor of this Guaranty
Agreement will result in a direct financial benefit to it.
ARTICLE II
COVENANTS AND AGREEMENTS
Section 2.1 The Guarantor hereby guarantees the payment to the Bank of
the Guaranteed Obligations of the Company and the Guarantor under the
Reimbursement Agreement and the Mortgage. All payments by the Guarantor shall be
paid in lawful money of the United States of America. Each and every default in
payment of the amounts due under the Reimbursement Agreement or the Mortgage
shall give rise to a separate cause of action hereunder, and separate suits may
be brought hereunder as each; cause of action arises.
Section 2.2 The obligations of the Guarantor under this Guaranty shall
be absolute and unconditional and shall remain in full force and effect until
all Guaranteed Obligations due under the Reimbursement and the Mortgage shall
have been paid and such Obligations shall not be affected, modified or impaired
upon the happening from time to time of any event other than such payment,
including without limitation of any of the following, whether or not with
notice to, or the consent of, the Guarantor:
(a) the compromise, settlement, release or termination of any or all of
the obligations, covenants or agreements of the Company or the Bank under the
Reimbursement Agreement or the Mortgage;
(b) the failure to give notice to the Guarantor of the occurrence of
an event of default under the terms and provisions of the Reimbursement
Agreement or the Mortgage.
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<PAGE> 3
(c) the assignment or mortgaging of all or any part of the interest of
the Bank or the Company in the Project or any failure of title with respect to
the interests of the Bank or the Company in the Project;
(d) the waiver of the payment, performance or observance by the Bank or
the Company of any of the obligations, covenants or agreements contained in the
Reimbursement Agreement or the Mortgage or in this Guaranty Agreement;
(e) the extension of the time for payment of any Guaranteed Obligation
or the time for performance of any other obligations, covenants or agreements
under or arising in connection with the Reimbursement Agreement or the Mortgage
or this Guaranty or the extension or renewal of any thereof;
(f) the modification or amendment (whether material or otherwise) of
any Guaranteed Obligation or the Reimbursement Agreement or the Mortgage
provided that, the obligations of the Guarantor are not thereby increased or
expanded without its prior written consent;
(g) the taking, suffering or omitting to take, or the omission of any
of the actions referred to in the Reimbursement or the Mortgage and any actions
under this Guaranty Agreement.
(h) any failure, omission, delay or lack on the part of the Bank to
enforce, assert or exercise any right, power or remedy conferred on the Bank in
this Guaranty Agreement or by the Reimbursement Agreement or the Mortgage;
(i) the voluntary or involuntary liquidation, dissolution, sale or
other disposition of all or substantially all the assets, marshalling of assets
and liabilities, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition with creditors or
readjustment of, or other similar proceedings affecting the Guarantor, the
Company, the Bank, the Trustee or the Issuer or any of the assets of any of them
or any allegation or contest of the validity of this Guaranty Agreement, the
Reimbursement Agreement or the Mortgage in any such proceeding;
(j) to the extent permitted by law, the release or discharge of the
Guarantor from the performance or observance of any obligation, covenant or
agreement contained in this Guaranty Agreement by operation of law; or
(k) the default or failure of the Guarantor fully to perform any of its
obligations as set forth in this Guaranty Agreement; or
(l) the assignment of any right, title or interest of the Issuer to
the Trustee, its successors or assigns; or
- 3 -
<PAGE> 4
(m) the invalidity of the Reimbursement Agreement or the Mortgage or
any term thereof;
(n) the transfer of the Project or changes in the beneficial or actual
owners of the Company; or
(o) the foreclosure of the Mortgage; or
(p) any other circumstance, occurrence or condition, whether similar
or dissimilar to any of the foregoing, that might be raised in avoidance of or
in defense against any action to enforce the obligations of the Guarantor under
the provisions hereof.
Section 2.3 The rights of the Bank to enforce the obligations of the
Guarantor under this Guaranty Agreement by any proceedings, whether by action at
law, suit in equity, or otherwise, shall not be impaired by any right,
counterclaim or defense of any character whatsoever, including without
limitation any right, claim or defense or rescission, recoupment, reduction,
limitation, set-off, counterclaim, waiver, frustration, surrender, alteration or
compromise. This Guaranty Agreement and the obligations of the Guarantor
hereunder are separate and independent of the Company's obligations under the
Reimbursement Agreement and the Mortgage, and it is specifically understood and
agreed by the Guarantor that any payment now or hereafter made by or on behalf
of the Company under or pursuant to the Reimbursement Agreement or the Mortgage
shall not, except to the extent paid to the owners of the Bonds directly by the
Trustee, affect, impair or diminish, in any manner whatsoever, the obligations
of the Guarantor hereunder. In the event that the Company or any successor or
assignee under the Reimbursement Agreement or the Mortgage should fail to
perform any agreement on its part, the Guarantor may institute such action as
it deems necessary to compel performance so long as such action does not
abrogate the Guarantor's obligations hereunder.
Section 2.4 In the event of a default in the payment of a Guaranteed
Obligation, the Bank shall have the right to proceed first and directly against
the Guarantor under this Guaranty Agreement to the extent of its obligations
hereunder without proceeding against or exhausting any other remedies which it
may have and without resorting to any other security held by the Bank.
Section 2.5 The Guarantor hereby expressly waives notice from the Bank
of its acceptance and reliance on this Guaranty Agreement. The Guarantor agrees
to pay all costs, expenses and fees, including all reasonable attorneys' fees
which may be incurred by the Bank in enforcing or attempting to enforce this
Guaranty Agreement following default hereunder, whether the same by enforced by
suit or otherwise.
- 4 -
<PAGE> 5
Section 2.6 No remedy herein conferred upon or reserved to the Bank is
intended to be exclusive of any other available remedy or remedies, but each
and every such remedy shall be cumulative and shall be in addition to every
other remedy given under this Guaranty Agreement or now or hereafter existing at
law or in equity. No delay or omission to exercise any right or power accruing
upon any default, omission or failure of performance hereunder shall impair any
such right or power or shall be construed to be a waiver thereof, but any such
right and power may be exercised from time to time and as often as may be deemed
expedient. In order to entitle the Bank to exercise any remedy reserved to it in
this Guaranty Agreement, it shall not be necessary to give any notice, other
than such notice as may be herein expressly required. In the event any provision
contained in this Guaranty Agreement should be breached by the Guarantor and
thereafter duly waived by the Bank, such waiver shall be limited to the
particular breach so waived and shall not be deemed to waive any other breach
hereunder. No waiver, amendment, release or modification of this Guaranty
Agreement shall be established by conduct, custom or course of dealing, but
solely by an instrument in writing duly executed by the Bank.
Section 2.7 The Guarantor agrees that it will maintain its partnership
existence throughout the term of years that the Bonds will remain outstanding
and unpaid, and during such period the Guarantor will remain qualified to engage
in the business and be subject to service of process in the States of Tennessee
and Florida. The Guarantor further agrees that it will not dispose of all or
substantially all of its assets except to a corporation incorporated and
existing under the laws of one of the States of the United States of America
and qualified to do business in Florida; provided, in all cases, that such other
corporation shall have a net worth not less than that of the Guarantor and shall
assume in writing all of the obligations of the Guarantor herein.
Section 2.8 The Guarantor covenants and agrees that so long as the
Bonds remain outstanding and unpaid, it will furnish to the Bank, as soon as
available and, in any event, within 125 days after the end of each fiscal year,
copies of a certified balance sheet of the Guarantor and its consolidated
subsidiaries as of the end of fiscal year. The Guarantor shall also furnish to
the Bank copies of its financial statements for all fiscal years accompanied by
the auditor's report thereon, as well as copies of all interim quarterly reports
sent to the Guarantor's limited partners.
Section 2.9 This Guaranty is entered into by the Guarantor for the
benefit of the Bank and may be amended or supplemented only with the prior
written consent of the Bank.
Section 2.10 (a) Until the Guaranteed Obligations have been paid in
full and particularly with respect to any
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<PAGE> 6
payment by the Company made to the Bank within one year prior to the
commencement of any bankruptcy or reorganization proceedings affecting the
Company, the Guarantor hereby (i) waives, and releases and discharges, any claim
of any kind or nature whatsoever it may have against the Company for
indemnification, contribution, subrogation or any other form of reimbursement
with respect to any amounts it may be required to pay under this Guaranty
Agreement, (ii) waives any right to enforce any remedy which the Bank now have
or may hereafter have against the Company and (iii) waives any benefit of, and
any right to participate in, any security now or hereafter held by the Bank.
(b) The Guarantor shall be discharged of its obligations hereunder upon
the payment of all Guaranteed Obligations; provided that, in the event the Bank
is required by order of the court or administrative body having jurisdiction at
any time to refund or repay to any person or entity any sums collected by it on
account of the obligations subject to this Guaranty Agreement, the guarantor
agrees that all such sums shall remain subject to the terms of this Guaranty
Agreement and the Bank shall be entitled to recover such sums from the Guarantor
notwithstanding the fact that the Guarantor shall have been otherwise discharged
from further liability under this Guaranty Agreement, but only on the condition
precedent that the Bank shall have given the Guarantor written notice of such
court or administrative proceeding and shall have afforded the Guarantor a
reasonable opportunity to contest any demand for a refund or repayment. The
Guarantor shall have an opportunity to make such a contest only within the time
requirements of the court or administrative body having jurisdiction and must
proceed with diligence to completion of the contest or the condition precedent
described in the preceding sentence shall be deemed to have been waived by the
Guarantor.
Section 2.11 The Guarantor hereby subordinates the payment of
management fees from the Company to the prior payment in full of the Bonds and
the obligations owing to the Bank under the Reimbursement Agreement, and agrees
that no payment thereof shall be made while there remains a payment default on
the Bonds or under the Reimbursement Agreement.
ARTICLE III
MISCELLANEOUS
Section 3.1 The obligations of the Guarantor hereunder shall arise
absolutely and unconditionally when the Letter of Credit shall have been issued
and delivered by the Bank.
Section 3.2 The Guaranty Agreement constitutes the entire agreement of
guarantee, and supersedes all prior agreements and understanding, both written
and oral, between the
- 6 -
<PAGE> 7
parties with respect to the subject matter hereof and may be executed
simultaneously in several counterparts, each of which shall be deemed an
original, and all of which together shall constitute one and the same
instrument.
Section 3.3 The invalidity or unenforceability of any one or more
phrases, sentences, clauses or Sections in this Guaranty Agreement shall not
affect the validity or enforceability of the remaining portions of this Guaranty
Agreement, or any part thereof.
Section 3.4 This Guaranty Agreement shall be governed by and construed
interpreted in accordance with the laws of the State of New York.
Section 3.5 The agreements contained herein on the part of the
Guarantor shall inure to and be binding upon its successors and assigns,
including without limitation, any successor or assign in any transaction
expressly permitted by Section 2.7 hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Guaranty
Agreement to be executed in their respective names by their respective duly
authorized officials as of the date first above stated.
NATIONAL HEALTHCORP L.P.
as Guarantor
By:NHC, INC.
Managing Partner
By /s/
-----------------------------------
Title: Senior Vice President
Accepted:
THE BANK OF TOKYO, LTD.
NEW YORK AGENCY
By /s/
-----------------------------------
Title: Attorney-in-fact
- 7 -
<PAGE> 1
Exhibit 10.17
AMENDMENT TO GUARANTY
THIS AMENDMENT TO GUARANTY AGREEMENT (hereinafter sometimes referred to
as this "Amendment"), entered into as of the 17th day of October, 1991, by and
among NATIONAL HEALTHCORP L.P., a Delaware limited partnership (the "Partnership
Guarantor"), JAMES O. McCARVER, an individual resident of the State of Florida
(formerly an individual resident of the State of Texas and hereinafter referred
to as the "Individual Guarantor") (the Partnership Guarantor and the Individual
Guarantor being sometimes hereinafter referred to individually as a "Guarantor"
and collectively as the "Guarantors"), and THE TORONTO-DOMINION BANK, acting
through its Chicago Branch (the "Bank");
W I T N E S S E T H:
WHEREAS, the Issuers have heretofore issued the Bonds pursuant to their
respective Indentures with the Trustees; and
WHEREAS, the proceeds of the Bonds have heretofore been loaned by the
Issuers to Florida Convalescent Centers, Inc., a Florida corporation (together
with its successors and permitted assigns, the "Borrower"), or have been
utilized by the Issuers pursuant to the Financing Agreements, for the purpose of
refunding the Refunded Bonds, the proceeds of which had been used to finance the
acquisition, construction and equipping of the Projects; and
WHEREAS, subject to the terms and conditions of that certain
Reimbursement Agreement dated as of December 1, 1987 (as amended from time to
time, the "Reimbursement Agreement") between the Borrower and the Bank, and
acknowledged by the Guarantors, the Bank has issued for the account of the
Borrower its Letters of Credit to assure the timely payment of the principal of
and interest on the Bonds, and the purchase price of Bonds tendered for purchase
pursuant to the Indentures; and
WHEREAS, pursuant to the provisions of the Reimbursement Agreement, the
Borrower is responsible for amounts drawn under the Letters of Credit, and for
fees and other amounts due with respect to the Letters of Credit; and
WHEREAS, as a condition to the issuance of the Letters of Credit, the
Guarantors entered into that certain Guaranty Agreement dated as of December 1,
1987 (as heretofore amended, the "Guaranty Agreement"), from the Guarantors in
favor of the Bank, pursuant to which the Guarantors have jointly, severally and
unconditionally guaranteed to the Bank the payment of all amounts owing by the
Borrower from time to time under the Reimbursement Agreement and certain other
amounts and obligations referred to in the Guaranty
<PAGE> 2
Agreement (the amounts and obligations so guaranteed being sometimes referred to
herein as the "Guaranteed Obligations"); and
WHEREAS, the Partnership Guarantor and National Health Investors, Inc.,
a Maryland corporation intending to qualify as a real estate investment trust
under the applicable provisions of the Internal Revenue Code ("NHI"), have
entered into an agreement pursuant to which the Partnership Guarantor will
convey its ownership interest in forty (40) nursing homes and three (3)
retirement centers, and in certain other assets, to NHI (said transaction being
hereinafter referred to as the "Asset Transfer"); and
WHEREAS, in consideration of the Asset Transfer, NHI has agreed, among
other things, to guarantee to the Bank the payment and performance of all of the
Guaranteed Obligations by executing and delivering that certain Guaranty
Agreement of even date herewith from NHI in favor of the Bank (the "NHI
Guaranty"); and
WHEREAS, as a condition to granting its consent to the Asset Transfer,
the Bank is requiring, among other things, that the Guaranty Agreement be
amended and reaffirmed as hereinafter provided, and that the Borrower agree to
amend the Reimbursement Agreement as provided in that certain Amendment to
Reimbursement Agreement of even date herewith (the "Reimbursement Agreement
Amendment") between the Borrower and the Bank, and acknowledged by the
Guarantors and NHI;
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged by each of the parties hereto, the parties hereto agree that
capitalized terms used herein but not otherwise defined or limited in this
Amendment shall have the meanings ascribed thereto in the Guaranty Agreement and
further agree as follows:
1. Amendment to Section 1.1.
(a) The Guaranty Agreement is hereby amended by amending
certain of the existing definitions in Section 1.1, Definitions, as follows:
(i) The definition of "Debt Service Coverage
Ratio" is hereby amended by deleting said definition in its entirety
and by substituting the following in lieu thereof:
"'Debt Service Coverage Ratio' means, with respect to
the Partnership Guarantor for any period, the ratio of (i) the
annualized sum of Net Income and operating lease obligations,
depreciation, amortization and interest expense for such
period, minus distributions paid to holders of units of the
Partnership Guarantor
2
<PAGE> 3
during such period, or projected by the Partnership Guarantor
in written financial projections furnished to the Bank to be
paid with respect to such period, whichever is greater, to
(ii) the sum of current maturities of Funded Debt and interest
expense, operating lease obligations and payments required to
fund any obligations guaranteed by the Partnership Guarantor,
including, without limitation, the Guaranteed Obligations, all
as determined in accordance with GAAP."
(ii) The definition of "Funded Debt" is hereby
amended by deleting from the end thereof the phrase ", and shall
include all capitalized lease obligations.", and by substituting in
lieu thereof the phrase "(excluding Subordinated Debt), plus notes
payable, current maturities of Funded Debt, capitalized lease
obligations, operating lease obligations and all Guarantees."
(iii) The definition of "Lien" is hereby amended
by deleting said definition in its entirety and by substituting the
following in lieu thereof:
"'Lien' means, with respect to any asset, any
mortgage, lien, pledge, security interest or encumbrance of
any kind in respect of such asset. For the purpose of this
Guaranty Agreement, each party hereto shall be deemed to own,
subject to a Lien, any asset that it has acquired or holds
subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title
retention agreement relating to such asset."
(iv) The definition of "Subordinated Debt" is
hereby amended by inserting immediately before the period at the end
thereof the phrase "pursuant to subordination provisions satisfactory
to the Bank."
(iii) The definition of "Tangible Net Worth" is
hereby amended by deleting said definition in its entirety and by
substituting the following in lieu thereof:
"'Tangible Net Worth' means, with respect to the
Partnership Guarantor, Equity plus Subordinated Debt, minus
the general intangibles of the Partnership Guarantor,
including, without limitation, goodwill and unamortized loan
costs in excess of One Million Four Hundred Thousand Dollars
($1,400,000)."
(b) The Guaranty Agreement is hereby further amended by
deleting in their entirety the definitions of "Capitalized Lease Obligation",
"Consolidated Current Assets", "Consolidated Current Liabilities", "Consolidated
Funded Debt", "Consolidated Net
3
<PAGE> 4
Income", "Consolidated Tangible Net Worth", "Current Liabilities", "Current
Maturities of Funded Debt", "Operating Lease Obligations" and "Tangible Net
Assets".
(c) The Guaranty Agreement is hereby further amended by adding
the following new definitions in Section 1.1, Definitions:
"'Adjusted Tangible Net Worth' means, with respect to the
Partnership Guarantor, Equity plus Fifteen Million Seven Hundred
Forty-Five Thousand Dollars ($15,745,000) in deferred income resulting
from the profit on the sale of nursing home properties to National as
equity (which amount shall decrease over time in accordance with the
Partnership Guarantor's books and records that comply with GAAP), plus
Subordinated Debt, minus goodwill and unamortized loan costs in excess
of One Million Four Hundred Thousand and No/100 Dollars
($1,400,000.00).
"Consent Letter" means that certain letter dated September 27,
1991, from the Bank to the Partnership Guarantor, as modified and
supplemented by that certain letter date October 1, 1991, from the Bank
to the Partnership Guarantor, pursuant to which the Bank agreed to
consent to the Asset Transfer upon the fulfillment of all of the
conditions set forth therein.
'Fixed Charge Coverage Ratio' means, with respect to the
Partnership Guarantor for any period, (a) the annualized sum of Net
Income, plus depreciation, amortization, interest expense, and
capitalized lease obligations and operating lease obligations
(excluding any components included in interest expense and
amortization), minus distributions paid to holders of units of the
Partnership Guarantor during such period, or projected by the
Partnership Guarantor in written financial projections furnished to the
Bank to be paid with respect to such period, whichever is greater,
divided by (b) the sum of interest expense, current maturities of
Funded Debt, and capitalized lease obligations and operating lease
obligations (excluding any components included in interest expense and
current maturities of Funded Debt), and any payments required to fund
any obligations guaranteed by the Partnership Guarantor, including,
without limitation, the Guaranteed Obligations all as determined in
accordance with GAAP.
'Loan and Security Agreement' means that certain Loan and
Security Agreement dated as of December 16, 1988, by and among National
Health Corporation Leveraged Employee Stock Ownership Trust, the Banks
named therein, Third National Bank in Nashville as agent for said
banks, the Partnership Guarantor and National, as amended from time to
time.
4
<PAGE> 5
'Master Lease' means that certain Master Agreement to Lease
dated as of October 17, 1991, between NHI, as landlord, and the
Partnership Guarantor, as tenant, as the same may be amended from time
to time.
'National' means National Health Corporation, a Tennessee
corporation, and its successors and assigns.
'NHI' means National Health Investors, Inc., a Maryland
corporation intending to qualify as a real estate investment trust
under the applicable provisions of the Internal Revenue Code, and its
successors and permitted assigns.
'NHI Guaranty Agreement' means that certain Guaranty Agreement
of even date herewith from NHI in favor of the Bank, as the same may be
amended from time to time.
'Partnership Guarantor Pledge Agreement' means that certain
Collateral Pledge Agreement of even date herewith by and between the
Partnership Guarantor and the Bank, pursuant to which the Partnership
Guarantor has pledged certain cash or marketable securities to the Bank
pursuant to Section 4.19 hereof as collateral for the guaranty
obligations of the Partnership Guarantor hereunder, as amended from
time to time."
2. Amendments to Article II. Article II of the Guaranty Agreement is
hereby amended by deleting from Section 2.2 thereof the phrase "to Account No.
544-7-74055, at Manufacturers Hanover Trust Company, 40 Wall Street, New York,
New York 10005, for credit to The Toronto-Dominion Bank, New York Branch, in
favor of Toronto-Dominion Chicago Branch," and by substituting the following in
lieu thereof:
", by wire transfer, to Morgan Guaranty Trust Company, ABA No.
021000238, to the account of The Toronto-Dominion Bank, Account No.
63000271, for further credit to Toronto-Dominion Cayman, Account No.
2159251,".
3. Amendments to Article IV.
(a) The Guaranty Agreement is hereby amended (i) by deleting
therefrom the phrase "one hundred twenty (120) days" wherever such phrase
appears in Section 4.9, Audited Annual Financial Statements and Information;
Certificate of No Default, Section 4.10, Quarterly Financial Statements and
Information, and Section 4.11, Quarterly Performance Certificates, and by
substituting in lieu thereof the phrase "ninety (90) days", and (ii) by deleting
therefrom the phrase "sixty (60) days" wherever such phrase appears in said
Sections 4.9, 4.10 and 4.11, and by substituting in lieu thereof the phrase
"forty-five (45) days".
5
<PAGE> 6
(b) The Guaranty is hereby amended by adding the following
clause immediately after the phrase "all of which shall be on a consolidated and
a consolidating basis with Partnership Guarantor's Subsidiaries" in Section 4.10
thereof:
", setting forth in comparative form the figures as at the end
of and (except for the first fiscal year after the date
hereof) for the corresponding quarter of the previous fiscal
year,".
(c) The Guaranty Agreement is hereby amended by deleting
therefrom Section 4.14, Financial Covenants, in its entirety and by substituting
the following therefor:
"4.14 Financial Covenants. The Partnership Guarantor
shall comply with the following financial covenants, with
determination of compliance being made quarterly unless more
frequently requested by the Bank:
(a) Current Ratio. The Partnership Guarantor shall at
all times maintain a Current Ratio of at least 1.5 to 1.0.
(b) Working Capital. The Partnership Guarantor shall
at all times maintain minimum Working Capital of at least Ten
Million and No/100 Dollars ($10,000,000.00).
(c) Funded Debt to Adjusted Tangible Net Worth Ratio.
The Partnership Guarantor shall at all times maintain a ratio
of Funded Debt to Adjusted Tangible Net Worth of no more than
3.5:1.0.
(d) Tangible Net Worth. The Partnership Guarantor
shall at all times maintain a Tangible Net Worth of not less
than (i) $32,000,000 for the period from the date of delivery
of this Guaranty Agreement through December 30, 1987; (ii)
$36,000,000 for the period from December 31, 1987 through
December 30, 1988; and (iii) $40,000,000 at all times
thereafter; provided, however, that beginning on March 31,
1990, and on subsequent calendar quarter endings, the minimum
Tangible Net Worth requirement set forth herein will increase
by One Million Four Hundred Thousand Dollars ($1,400,000) per
quarter on a cumulative basis.
(e) Debt Service Coverage. The Partnership Guarantor
shall at all times maintain a minimum Debt Service Coverage
Ratio of at least 1.3 to 1.0.
(f) Fixed Charge Coverage. The Partnership Guarantor
shall at all times maintain a Fixed Charge Coverage Ratio of
at least 1.10 to 1.0."
6
<PAGE> 7
(b) The Guaranty Agreement is hereby amended by deleting the
words "and (d)" from Section 4.16, No Merger, Consolidation or Sale of Assets,
and by substituting the following in lieu thereof:
"(d) the Partnership Guarantor causes NHI to confirm in a
writing satisfactory to the Bank that the NHI Guaranty
Agreement will continue to guaranty the obligations of the
surviving entity under the Reimbursement Agreement and other
Related Documents, and (e)".
(c) The Guaranty Agreement is hereby amended by adding the
following as new Sections 4.19, 4.20, 4.21, 4.22, 4.23 and 4.24 at the end of
Article IV thereof:
"4.19 Pledge of Additional Collateral. The
Partnership Guarantor covenants and agrees to deliver to the
Bank cash collateral in the amount of $5,000,000, to be held
by the Bank pursuant to, and subject to the terms and
conditions of, the Partnership Guarantor Pledge Agreement.
4.20 No More Favorable Terms for Other Lenders. The
Partnership Guarantor covenants and agrees that, with respect
to its lending and credit relationships with Persons other
than the Bank, the Partnership Guarantor will not agree or
consent in writing to covenants, events of default and terms
of repayment (including, without limitation, any obligations
to purchase or repurchase evidences of Indebtedness) which are
more favorable to such Person than the covenants, events of
default and terms of repayment set forth herein; provided,
however, that this covenant shall apply only to such lending
and credit relationships in which the Partnership Guarantor is
indebted, or has guaranteed or otherwise assured payment of
Indebtedness of a third party, to such Person in an amount
greater than $1,000,000, and shall not apply to either the
refinancing of the interests of The Bank of New York and
C&S/Sovran Bank in the financing made pursuant to the Loan and
Security Agreement or to the pledge by the Partnership
Guarantor of one or more certificates of deposit to Third
National Bank in Nashville in connection with such
refinancing.
4.21 Replacement of Letters of Credit. The Guarantors
acknowledge that, pursuant to the Reimbursement Agreement, the
Borrower has agreed to replace the Letters of Credit with one
or more Alternate Credit Facilities or Qualified Credit
Facilities (as such capitalized terms are defined in the
applicable Financing Agreements) on or before April 1, 1992,
notwithstanding the stated expiration dates of the Letters of
Credit.
7
<PAGE> 8
The Guarantors hereby covenant and agree to cause the Letters
of Credit to be so replaced and to assist the Borrower in
whatever way required in order to effect such replacements by
April l, 1992, including, without limitation, by guaranteeing
any reimbursement obligations relating to such Alternate
Credit Facilities or Qualified Credit Facilities.
4.22 Liens on and Dispositions of Certain Property
Interests.
(a) Liens. The Partnership Guarantor covenants and
agrees that it will not create, assume or suffer to exist any
Lien (other than those in existence on the date hereof and
consented to by the Bank) upon its right, title or interest in
and to any of the Facilities, including, but not limited to,
its rights, title or interest in, to and under the Master
Lease or any of the separate Leases referred to in Section
1.01 of the Master Lease, or its leasehold interest in
property created thereby, without the prior written consent of
Bank, except for Liens for taxes or other governmental charges
not yet due or that are being actively contested in good faith
by appropriate proceedings, and Liens in favor of the agent
and the lenders under the Loan and Security Agreement.
(b) Disposition of Certain Property Interests.
Notwithstanding the covenant set forth in Section 4.16 above,
the Partnership Guarantor covenants and agrees that it will
not sell, assign, convey, sublease or otherwise dispose of any
of its interest in any of the Facilities, including, but not
limited to, its rights, title or interest in, to and under the
Master Lease or in any of the separate Leases referred to in
Section 1.01 of the Master Lease, without the prior written
consent of the Bank.
4.23 Indemnification. The Partnership Guarantor shall
(to the fullest extent permitted by Applicable Law) indemnify
the Bank and each affiliate thereof and their respective
directors, officers, employees and agents from, and hold each
of them harmless against, any and all losses, liabilities,
claims or damages to which any of them may become subject,
insofar as such losses, liabilities, claims or damages arise
out of or result from this Guaranty Agreement, the Asset
Transfer or any related transaction, from any breach by the
Partnership Guarantor of this Guaranty Agreement or from any
investigation, litigation or other proceeding (including any
threatened investigation or proceeding) relating to the
foregoing, and the Partnership Guarantor shall
8
<PAGE> 9
reimburse the Bank and each affiliate thereof and their
respective directors, officers, employees and agents, upon
demand for any reasonable expenses (including, without
limitation, legal fees and expenses) incurred in connection
with any such investigation or proceeding; but excluding any
such losses, liabilities, claims, damages or expenses incurred
by reason of the gross negligence or willful misconduct of the
Person to be indemnified.
4.24 Additional Consents. The Partnership Guarantor
covenants and agrees that it will use its best efforts to
obtain the consents described on Exhibit "A" hereto and by
this reference incorporated herein at the earliest practicable
time and to furnish the Bank with evidence thereof
satisfactory to the Bank."
4. Amendments to Section 6.1. Section 6.1 of the Guaranty
Agreement, Events of Default, is hereby amended as follows:
(a) Section 6.1(b) of the Guaranty Agreement is hereby amended
by deleting the phrase "4.15 or 4.16" therefrom, and by substituting in lieu
thereof the phrase "4.15, 4.16, 4.19, 4.20, 4.21 and 4.22".
(b) Section 6.1(h) of the Guaranty Agreement is hereby amended
by inserting the following phrase immediately after the reference to the
"Revolver Agreement" and prior to the semi-colon: ", the Partnership Guarantor
Pledge Agreement, the NHI Guaranty Agreement or the Loan and Security
Agreement".
5. Amendments to Section 7.2. Section 7.2 of the Guaranty
Agreement, Notices, is hereby amended as follows:
(1) The notice address for the Chicago Branch of the Bank
remains unchanged; however, the address to which copies of notices to the Bank
are to be sent is hereby amended to read as follows: "The Toronto-Dominion Bank,
USA Division, 31 West 52nd Street, New York, New York 10019-6101, Attention:
Managing Director, Health Care Finance."
6. Consent to NHI Guaranty Agreement and Reimbursement Agreement
Amendment: Reaffirmation of Guaranty Obligations. The Guarantors hereby consent
to the execution and delivery of the NHI Guaranty Agreement and the
Reimbursement Agreement Amendment and hereby reaffirm their respective
obligations under the Guaranty Agreement, as herein amended, and the joint,
several, absolute and unconditional guaranty to the Bank of the timely payment
and performance of all of the Guaranteed Obligations.
7. Continuing Effectiveness Except as Amended. Except to the
extent specifically amended as herein set forth, the Guaranty
9
<PAGE> 10
Agreement remains unchanged, and the Guaranty Agreement, as herein amended,
remains in full force and effect.
8. Severability. Any provision of this Amendment which is prohibited,
unenforceable or not authorized in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition, unenforceability
or non-authorization as to the remaining provisions hereof and shall not affect
the validity, enforceability or legality of such provision in any other
jurisdiction.
9. Governing Law. This Amendment is intended to be performed in the
State of Illinois, and shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the laws of the State of
Illinois.
10. Multiple Counterparts. This Amendment may be executed
simultaneously in several counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
11. Satisfaction of Conditions. The Partnership Guarantor hereby
represents and warrants that it has satisfied all conditions required to be met
by it pursuant to the Consent Letter other than those, if any, waived in writing
by the Bank on or prior to the date hereof. The Individual Guarantor hereby
represents and warrants that the Borrower has satisfied all conditions required
to be met by it pursuant to the Consent Letter other than those, if any, waived
in writing by the Bank on or prior to the date hereof.
[The remainder of this page has been intentionally left blank.]
10
<PAGE> 11
IN WITNESS WHEREOF, the Guarantors and the Bank have duly executed and
delivered this Amendment, or caused same to be duly executed and delivered,
under seal, as of the date first above written.
/s/ JAMES O. MCCARVER [SEAL]
---------------------------
JAMES O. MCCARVER
NATIONAL HEALTHCORP L.P., a
Delaware limited partnership
By: NHC, Inc., a Tennessee
corporation, as Managing
General Partner
By: /s/ LaRoche, Jr
----------------------------
Title: Sr V.P
---------------------------
Attest:
--------------------------
Title:
---------------------------
[SEAL]
[AMENDMENT TO GUARANTY]
<PAGE> 1
Exhibit 10.18
AMENDMENT TO GUARANTY AGREEMENT
(NHLP AND MCCARVER)
THIS AMENDMENT TO GUARANTY AGREEMENT (hereinafter sometimes referred to as
this "Amendment"), entered into as of the 22nd day of July, 1992, by and among
NATIONAL HEALTHCORP L.P., a Delaware limited partnership (the "Partnership
Guarantor"), a JAMES O. McCARVER, an individual resident of the State of
Florida (formerly an individual resident of the State of Texas and hereinafter
referred to as the "Individual Guarantor") (the Partnership Guarantor and the
Individual Guarantor being sometimes hereinafter referred to collectively as
the "Guarantors"), and THE TORONTO-DOMINION BANK, acting through its Chicago
Branch (the "Bank");
W I T N E S S E T H:
WHEREAS, the Guarantors have entered into that certain Guaranty Agreement
dated as of December 1, 1987 (as heretofore amended, the "Guaranty Agreement"),
in favor of the Bank, guaranteeing, among other things, payment of the
obligations of the Borrower under the Reimbursement Agreement; and
WHEREAS, in connection with the extension by the Bank of the expiration
dates of the Letters of Credit issued by the Bank for the account of the
Borrower pursuant to the Reimbursement Agreement, the Guarantor has requested
certain amendments to the Guaranty Agreement and the Bank is willing to agree to
such amendments as hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing premises, the sum of Ten
and No/100 Dollars ($10.00) and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by each of the parties
hereto, the parties hereto agree that capitalized terms used herein (including,
without limitation, in the recitals hereof) but not otherwise defined or limited
in this Amendment shall have the meanings ascribed thereto in the Guaranty
Agreement and further agree as follows:
<PAGE> 2
1. Amendments to Section 1.1.
(a) The Guaranty Agreement is hereby amended by deleting
clause (f) from the definition of "Permitted Liens" contained in Section 1.1,
Definitions, in its entirety, and by substituting the following language in lieu
thereof as a new clause (f):
"(f) Liens incurred after the date of this Guaranty
Agreement given to secure the payment of the purchase price
incurred in connection with the acquisition of fixed assets or
equipment used or useful and intended to be used in carrying
on the business of such Person, including Liens existing on
such fixed assets or equipment at the time of acquisition
thereof, or at the time of acquisition by such Person of any
business entity then owning such fixed assets or equipment,
whether or not the existing Liens were given to secure the
payment of the purchase price of the fixed assets or equipment
to which they attach, so long as they were not incurred,
extended or renewed in contemplation of such acquisition,
provided that (i) the Lien shall attach solely to the property
so acquired or purchased; (ii) at the time of acquisition of
such fixed assets or equipment, the aggregate amount remaining
unpaid on all Indebtedness secured by Liens on such fixed
assets or equipment, whether or not assumed by such Person,
shall not exceed an amount equal to 100% of the lesser of the
total purchase price or fair market value at the time of
acquisition of such fixed assets or equipment (as determined
in good faith by the Board of Directors or the managing
general partner, as the case may be, of such Person); and
(iii) all such Indebtedness shall be payable in equal monthly,
quarterly, semiannual or annual installments of principal and
interest and shall not be callable at the lender's option for
reasons unrelated to the credit worthiness of such person or
the destruction of the collateral for such Indebtedness."
(b) The Guaranty Agreement is hereby further amended by adding
the following language at the end of the definition of "Funded Debt," contained
in Section 1.1, Definitions:
For purposes of this definition as of any calculation date,
operating lease obligations relating to each operating lease
shall be calculated at the rate of eight (8) times the annual
rent expense under such lease for the lease year in which such
calculation date falls; provided, however, that there shall be
excluded from any such calculation of operating lease
obligations (i) any operating lease obligations arising under
any operating lease between NHI and the Partnership Guarantor
existing
-2-
<PAGE> 3
prior to July 22, 1992 [date of this amendment], and (ii) any
obligations arising under any other operating lease to the
extent such obligations are otherwise included in Funded Debt
by virtue of the foregoing definitions.
2. Amendments to Article IV.
(a) The Guaranty Agreement is hereby amended by deleting
therefrom Section 4.20, No More Favorable Terms for Other Lenders, in its
entirety, and by substituting in lieu thereof the following language: "Section
4.20 [RESERVED]."
(b) The Guaranty Agreement is hereby further amended by
deleting therefrom Section 4.21, Replacement of Letters of Credit, in its
entirety, and by substituting in lieu thereof the following language: "Section
4.21 [RESERVED]."
(c) The Guaranty Agreement is hereby further amended by
deleting therefrom Section 4.22(a), Liens, in its entirety, and by substituting
in lieu thereof the following language: "Section 4.22(a) [RESERVED]."
(d) The Guaranty Agreement is hereby further amended by
deleting therefrom Section 4.22(b), Disposition of Certain Property Interests,
in its entirety, and by substituting the following in lieu thereof, as a new
Section 4.22(b):
"(b) Use of Proceeds from the Disposition of Certain
Property Interests. Except as hereinafter provided, the
Partnership Guarantor may sell, convey, assign or otherwise
dispose of its property or assets, whether real or personal,
tangible or intangible, and any interest therein (each, a
"Disposition"), from time to time, without the consent of the
Bank, provided that the proceeds (net of any reasonable and
customary costs of the transaction) received by the
Partnership Guarantor from such Dispositions shall be retained
by the Partnership Guarantor and used in the Partnership
Guarantor's business for any lawful business purpose, and in
no event shall be distributed, directly or indirectly, to any
of the partners of the Partnership Guarantor. Notwithstanding
the generality of the immediately preceding sentence, in no
event shall the Partnership Guarantor sell, convey, assign or
otherwise dispose of any right, title or interest in, to or
under the Master Lease or any of the separate Leases referred
to in Section 1.01 of the Master Lease, without the prior
written consent of the Bank."
-3-
<PAGE> 4
3. Amendment to Section 6.1. The Guaranty Agreement is hereby further
amended by deleting from Section 6.1(b) thereof the references to Section 4.20
and Section 4.21.
4. Consent to Extension of Letters of Credit and Related Matters. The
Guarantors hereby consent to (a) the extension of the expiration dates of the
Letters of Credit to March 25, 1994, and (b) the execution and delivery by the
Borrower and the Bank of that certain Amendment to Reimbursement Agreement of
even date herewith between the Borrower and the Bank.
5. Reaffirmation of Representations and Warranties: Absence of Default.
The Guarantors hereby (a) reaffirm that their representatives and warranties as
set forth in the Guaranty Agreement are true and correct on the date hereof, and
(b) represent and warrant to the Bank that no Default or Event of Default has
occurred and is continuing on the date hereof.
6. Continuing Effectiveness Except as Amended: Reaffirmation of
Obligations. Except to the extent specifically amended as herein set forth, the
Guaranty Agreement remains unchanged, and the Guaranty Agreement, as herein
amended, remains in full force and effect. The Guarantors hereby reaffirm their
obligations under the Guaranty Agreement, as herein amended, and the joint,
several, absolute and unconditional guaranty to the Bank of the timely payment
and performance of all of the Guaranteed Obligations.
7. Severability. Any provision of this Amendment which is prohibited,
unenforceable or not authorized in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition, unenforceability
or non-authorization as to the remaining provisions hereof and shall not affect
the validity, enforceability or legality of such provision in any other
jurisdiction.
8. Governing Law. This Amendment is intended to be performed in the
State of Illinois, and shall be construed and +enforced in accordance with, and
the rights of the parties shall be governed by, the laws of the State of
Illinois.
9. Multiple Counterparts. This Amendment may be executed simultaneously
in several counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
-4-
<PAGE> 5
AMENDMENT TO GUARANTY AGREEMENT
(JAMES O. McCARVER AND NATIONAL HEALTHCORP L.P.)
IN WITNESS WHEREOF, The Guarantors and the Bank have duly executed and
delivered this Amendment, or caused same to be duly executed and delivered, as
of the date first above written.
/s/ [SEAL]
----------------------
JAMES O. McCARVER
NATIONAL HEALTHCORP L.P., a
Delaware limited partnership
By: NHC, Inc., a Tennessee
corporation, as Managing
General Partner
By: /s/
-------------------------------
Title: SR VP
----------------------------
Attest: /s/
---------------------------
Title: SR VP
----------------------------
-5-
<PAGE> 6
SIGNATURE PAGE TO AMENDMENT TO GUARANTY AGREEMENT
DATED AS OF JULY 22, 1992
BY AND AMONG
JAMES O. McCARVER, NATIONAL HEALTHCORP L.P. AND
THE TORONTO-DOMINION BANK,
ACTING THROUGH ITS CHICAGO BRANCH
THE TORONTO-DOMINION BANK, acting
through its Chicago Branch
By:/s/
---------------------------------
Title: MANAGER CREDIT ADMINISTRATION
-------------------------------
-6-
<PAGE> 1
Exhibit 10.19
FOURTH AMENDMENT TO GUARANTY AGREEMENT
(NHLP AND MCCARVER)
THIS FOURTH AMENDMENT TO GUARANTY AGREEMENT (hereinafter sometimes
referred to as this "Amendment"), entered into as of the 30th day of June,
1995, by and among NATIONAL HEALTHCARE L.P. (formerly known as National
Healthcorp L.P.), a Delaware limited partnership (the "Partnership Guarantor"),
and JAMES O. McCARVER, an individual resident of the State of Florida (formerly
an individual resident of the State of Texas and hereinafter referred to as the
"Individual Guarantor") (the Partnership Guarantor and the Individual Guarantor
being sometimes hereinafter referred to collectively as the "Guarantors"), and
the TORONTO-DOMINION BANK, acting through its Houston Agency (previously its
Chicago Branch and hereinafter referred to as the "Bank");
W I T N E S S E T H:
WHEREAS, the Guarantors have entered into that certain Guaranty Agreement
dated as of December 1, 1987 (as heretofore amended, the "Guaranty Agreement"),
in favor of the Bank, guaranteeing, among other things, payment of the
obligations of December 1, 1987 (as amended from time to time, the
"Reimbursement Agreement"), by and between Florida Convalescent Centers, Inc.,
a Florida corporation (the "Borrower"), and the Bank; and
WHEREAS, the parties to the Guaranty Agreement desire to amend the
Guaranty Agreement as hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing premises, the sum of Ten
and No/100 Dollars ($10.00) and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by each of the parties
hereto, the parties hereto agree that capitalized terms used herein (including,
without limitation, in the recitals hereof) but not otherwise defined or limited
in this Amendment shall have the meanings ascribed thereto in the Guaranty
Agreement and further agree as follows:
1. Amendment to Section 1.1.
(a) Section 1.1 of the Guaranty Agreement, Definitions, is hereby
amended by deleting the definitions of "Debt Service Coverage Ratio" and "Fixed
Charge Coverage Ratio" contained therein and by substituting in lieu thereof
the following:
<PAGE> 2
"'Debt Service Coverage Ratio' means, with respect to the
Partnership Guarantor for any period, the ratio of (a) the annualized
sum of Net Income and operating lease obligations, depreciation,
amortization and interest expense for such period, minus the
Maintenance Capital Expenditure Amount for such period, to (b) the sum
of current maturities or Funded Debt and interest expense, operating
lease obligations and payments required to fund any obligations
guaranteed by the Partnership Guarantor, including, without limitation,
the Guaranteed Obligations, all as determined in accordance with GAAP."
"'Fixed Charge Coverage Ratio' means, with respect to the
Partnership Guarantor for any period, the ratio of (a) the annualized
sum of Net Income, plus depreciation, amortization, interest expense,
and capitalized lease obligations and operating lease obligations
(excluding any components included in interest expense and
amortization), minus the Maintenance Capital Expenditure Amount for
such period, to (b) the sum of interest expense, current maturities of
Funded Debt, and capitalized lease obligations and operating lease
obligations (excluding any components included in interest expense and
current maturities of Funded Debt), and any payments required to fund
any obligations guaranteed by the Partnership Guarantor, including,
without limitation, the Guaranteed Obligations, all as determined in
accordance with GAAP."
(b) Section 1.1. of the Guaranty Agreement, Definitions, is hereby
further amended by inserting the following additional definitions in their
appropriate alphabetical order:
"'Maintenance Capital Expenditures means, with respect to any
Person, expenditures for the improvement, maintenance or renovation of
assets which are capitalized in accordance with GAAP, but specifically
excluding, without limitation, the expansion of existing Facilities or
the acquisition, development or construction of new property."
"'Maintenance Capital Expenditure Amount' means, with respect
to the Partnership Guarantor for any period, the greater of (a) actual
Maintenance Capital Expenditures made during such period, or (b) five
hundred dollars ($500) per bed owned or leased by the Partnership
Guarantor during such period or any portion thereof."
"'Reported Taxable Income' means, with respect to the
Partnership Guarantor for any fiscal year, the ordinary and portfolio
income of the Partnership Guarantor as reported to the Internal Revenue
Service on Form 1065 (or any successor form) for such fiscal year."
-2-
<PAGE> 3
2. Amendments to Article IV.
(a) Section 4.11 of the Guaranty Agreement, Quarterly Performance
Certificates, is hereby amended by deleting Section 4.11(a) thereof in its
entirety and by substituting in lieu thereof the following
"(a) setting forth as at the end of such quarterly period or
fiscal year, as the case may be, the arithmetical calculations required
to establish whether or not the Partnership Guarantor, on a
consolidated basis, was in compliance with the requirements of Section
4.14 and 4.25 hereof, and, with respect to compliance with Section 4.25
hereof, setting forth as of the end of such quarterly period or fiscal
year, as the case may be, (i) the amount of distributions made to the
holders of units of the Partnership Guarantor during such period, (ii)
the aggregate amount of distributions made to the holders of units of
the Partnership Guarantor for the then current fiscal year-to-date, and
(iii) the estimated Reported Taxable Income for such quarterly and
year-to-date period."
(b) Section 4.12 of the Guaranty Agreement, Copies of Other
Reports, is hereby amended by adding the following new Section 4.12(e) after
existing Section 4.12(d) thereof:
"(e) within ninety (90) days after the last day of the fourth
quarter of each fiscal year, (a) a calculation of Reported Taxable
Income for such fiscal year consistent with the calculation which will
be used to determine the Reported Taxable Income to be filed on Form
1065 (or any successor form) of the Internal Revenue Service by the
Partnership Guarantor for such fiscal year, and (b) promptly after
filing thereof, a final copy of Form 1065 (or any successor form) as
filed by the Partnership Guarantor for such fiscal year."
(c) Article IV of the Guaranty Agreement is hereby further amended
by adding the following new Section 4.25 at the end of Article IV thereof:
"4.15 Distributions. The Partnership Guarantor shall not make
distributions to the holders of units of the Partnership Guarantor other
than distributions in respect of any fiscal year which in the aggregate
do not exceed sixty-two and one half percent (62.5%) of Reported Taxable
Income for such fiscal year; provided, however, that in the event such
distributions in respect of any fiscal year (for purposes of this
Section, the "First Year") exceed sixty percent (60%) of Reported
Taxable Income for such year, the
-3-
<PAGE> 4
holders of units of the Partnership Guarantor pursuant to this Section
4.25 in respect of the next succeeding fiscal year (for purposes of this
Section, the "Second Year") which in the aggregate, and together with
distributions made in respect of the First Year, exceed sixty percent
(60%) of the sum of Reported Taxable Income for the First Year and the
Second Year."
3. Amendment to Section 6.1. Section 6.1. of the Guaranty
Agreement, Events of Default, is hereby amended by deleting Section 6.1(b)
thereof in its entirety and by substituting in lieu thereof the following:
"(b) The Guarantors, or either of them, shall fail to perform or
observe any term, convenant or agreement contained in Sections 2.1, 4.9,
4.10, 4.11, 4.14, 4.15, 4.16, 4.19, 4.22 or 4.25 to which such
Guarantors are subject; or"
4. Reaffirmation of Obligations. The Guarantors hereby reaffirm
their respective obligations under the Guaranty Agreement, as herein amended,
and their joint, several, absolute and unconditional guarantee to the Bank of
the timely payment and performance of all of the Guarantee Obligations.
5. Reaffirmation of Representations and Warranties; Absence of
Default. The Guarantors hereby (a) reaffirm that their representations and
warranties as set forth in the Guaranty Agreement are true and correct on the
date hereof, and (b) represent and warrant to the Bank that no Default or Event
of Default has occurred and is continuing on the date hereof.
6. No Other Amendments. Except to the extent specifically amended
as herein set forth, the Guaranty Agreement remains unchanged, and the Guaranty
Agreement, as herein amended, remains in full force and effect.
7. Severability. Any provision of this Amendment which is
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or non-authorization as to the remaining provisions hereof and
shall not affect the validity, enforceability or legality of such provision in
any other jurisdiction.
8. Governing Law. This Amendment shall be construed and enforced
in accordance with, and the rights of the parties shall be governed by, the
laws of the State of Illinois.
-40-
<PAGE> 5
9. Multiple Counterparts. This Amendment may be executed
simultaneously in several counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-5-
<PAGE> 6
IN WITNESS WHEREOF, the Guarantors and the Bank have duly executed and
delivered this Amendment, or caused same to be duly executed and delivered, as
of the date first above written.
------------------------------[SEAL]
JAMES O. McCARVER
NATIONAL HEALTHCARE L.P. (formerly
known as National Healthcorp L.P.),
a Delaware limited partnership
By: NHC, Inc., a Tennessee
corporation, as Managing
General Partner
By: /s/
---------------------------
Title: SR. VP
-------------------------
Attest: /s/
------------------------
Title:
------------------------
-NO-
[SEAL]
THE TORONTO-DOMINION BANK, acting
through its Houston Agency
By:
---------------------------------
Title:
------------------------------
-6-
<PAGE> 1
Exhibit 10.20
SUBORDINATION AGREEMENT
This Subordination Agreement (this "Agreement"), dated as of May 1,
1993, is made and entered into by and among SOCIETE GENERALE, a banking
corporation organized under the laws of France, acting through its New York
Branch (the "Bank"); RICHLAND PLACE, INC., a nonprofit corporation organized
and existing under the laws of the State of Tennessee (the "Company"); and
NATIONAL HEALTHCORP L.P., a Delaware Limited Partnership ("NHC").
R E C I T A L S
The Company has requested the Health and Educational Facilities Board
of the Metropolitan Government of Nashville and Davidson County, Tennessee (the
"Issuer") to issue, pursuant to the Trust Indenture (the "Trust Indenture")
dated as of May 1, 1993 between the Issuer and First American National Bank, as
trustee (the "Trustee"), its Multi-Modal Interchangeable Rate Health
Facility Revenue Bonds (Richland Place, Inc. Project) Series 1993, in the
aggregate principal amount of $33,300,000 (the "Bonds") for the purpose of
lending the proceeds thereof to the Company pursuant to a Loan Agreement (the
"Loan Agreement"), dated as of May 1, 1993, between the Company and the Issuer.
In order to provide credit and liquidity support for the Bonds, the
Company has requested that the Bank issue an irrevocable letter of credit in
favor of the Trustee in the amount of $33,747,042 (the "Letter of Credit") and,
in connection therewith, the Company and the Bank have entered into a
Reimbursement and Credit Agreement (the "Reimbursement Agreement") dated as of
May 1, 1993. As a condition to the issuance of the Letter of Credit, the Bank
has requested that the Company and NHC enter into this Agreement.
In consideration of the premises, and in order to induce the Bank to
issue the Letter of Credit, the parties hereto contract and agree as follows:
AGREEMENT
Section 1. Definitions and Interpretation.
1.1 Definitions. As used herein, the following terms shall have the
respective meanings set forth or referred to below:
"Accrued Fees" shall have the meaning set forth in Exhibit A hereto.
<PAGE> 2
"Agreement" means this Subordination Agreement.
"Agreement to Guaranty" means that certain Agreement to Guaranty dated
as of May 1, 1993 between the Company and NHC.
"Bank" is defined in the introduction to this Agreement.
"Bankruptcy Code" means 11 U.S.C. Section 101 et seq., as from time to
time hereafter amended, and any successor or similar statute.
"Bonds" is defined in the recitals of this Agreement.
"Company" is defined in the introduction to this Agreement.
"Financing Documents" means the Reimbursement Agreement, the Trust
Indenture, the Loan Agreement, the Mortgage, the Security Agreement, the Pledge
Agreement and each of the other documents, instruments and agreements referred
to as Financing Documents in the Reimbursement Agreement.
"Facility" means the Site and all improvements, fixtures and personal
property now or hereafter located thereon which comprises the campus and
facilities of a continuing care retirement center owned and operated by the
Company and known as Richland Place. The Facility is located on a +/- 7.40-acre
site in Nashville, Tennessee, and consists of Residential Units, Assisted
Living Units, a Skilled Nursing Facility and dining and communal facilities.
"Guaranty Fee" shall have the meaning set forth in the Agreement to
Guaranty.
"Issuer" is defined in the recitals of this Agreement.
"Letter of Credit" is defined in the recitals of this Agreement.
"Loan Agreement" is defined in the recitals of this Agreement.
-2-
<PAGE> 3
"Management Agreement" means that certain Management Agreement dated
as of February 1, 1989, between the Company and NHC, as amended.
"Management Fee" shall have the meaning set forth in the Management
Agreement.
"NHC" is defined in the introduction to this Agreement.
"Notice of Payment of Fees" means a certificate delivered by the
Company to the Bank substantially in the form of Exhibit A hereto.
"Participant" means the Bank or any bank or financial institution to
which the Bank may participate a portion of the Bank's credit exposure under
the Letter of Credit.
"Permitted Fee Payments" shall have the meaning set forth in Exhibit A
hereto.
"Person" means and includes any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, institution, entity, party or government (whether national,
federal, state, county, city, municipal, or otherwise, including, without
limitation, any instrumentality, division, agency, body or department thereof).
"Reimbursement Agreement" is defined in the recitals of this
Agreement.
"Senior Indebtedness" means and includes all loans, advances, debts,
liabilities, obligations, contingent obligations, covenants and duties owing by
the Company to the Bank or any other Participant, of any kind or nature,
present or future arising under the Reimbursement Agreement or under any other
Financing Document. The term includes, without limitation, all interest,
charges, expenses, fees, attorneys' fees and any other sums chargeable
to the Company by the Bank under the Reimbursement Agreement or any other
Financing Document.
"Subordinated Indebtedness" means and includes Accrued Fees and all
other loans, advances, debts, liabilities, obligations, contingent obligations,
-3-
<PAGE> 4
covenants and duties owing by the Company to NHC, of any kind or
nature, present or future (whether or not arising in connection with the
Facility) except for the Company's obligations to NHC for any expenses
related to the direct labor costs incurred by any NHC employee whose sole
job is to provide services at the Facility, including salaries and wages,
any taxes related to that payroll expense, any direct expenses related to
the employee such as insurance benefits and benefit days relating to
vacation, holiday or sick leave, retirement plan, and any other expense
incurred by NHC which is directly related to the employee's compensation,
reimbursement of expense for travel, continuing education, and a pro rata
allocation of the cost of administration of the employee's benefit package.
"Trust Indenture" is defined in the recitals of this Agreement.
"Trustee" is defined in the recitals of this Agreement.
1.2 Interpretations. The section headings of this Agreement are included
herein for convenience of reference purposes only and shall not constitute a
part of this Agreement or affect its interpretation in any respect. Except
where the context otherwise requires, words imparting the singular number shall
include the plural number and vice versa.
1.3 References etc. Any reference in this Agreement to a document or
instrument shall mean such document or instrument and all exhibits thereto as
amended or supplemented from time to time. Any reference in this Agreement to
any Person as a party to any document or instrument shall include its
successors and assigns to such status and in the case of the Company shall
include its subsidiaries, if any, which are permitted or required under
Generally Accepted Accounting Principles to be consolidated with the Company in
its financial statements.
1.4 Incorporation of Certain Definitions by Reference. Each capitalized
term used herein and not otherwise defined herein shall have the meaning
provided therefor in the Reimbursement Agreement.
Section 2. Management Fee and Guaranty Fee.
-4-
<PAGE> 5
2.1 Permitted Management Fee Payments and Permitted Guaranty Fee
Payments.
Within 30 days after the end of each month in which a
Management Fee becomes due and payable pursuant to the Management
Agreement or a Guaranty Fee becomes due and payable pursuant to the
Agreement to Guaranty, the Company shall prepare and deliver to the
Bank a Notice of Payment of Fees, certifying as to the Permitted Fee
Payments, if any, and the Accrued Fees, if any.
For any month in which a Management Fee or a Guaranty Fee
becomes due and payable, the Company may only make payment to NHC of
an amount equal to Permitted Fee Payments, if any, so long as no event
has occurred and is continuing that, with the passage of time or the
giving of notice, or both, would constitute an Event of Default, as
defined in the Reimbursement Agreement.
2.2 Accrued Fees to be Subordinated Indebtedness.
Any Accrued Fees for any month shall automatically become
Subordinated Indebtedness, further payment of which and the rights of
holders of which shall be governed by all other provisions of this
Agreement.
Section 3. Subordination.
3.1 Subordinated Indebtedness Subordinated to Senior Indebtedness.
Each of the Company and NHC, for itself and its successors and assigns,
covenants and agrees, and each future holder of any Subordinated Indebtedness,
by its acceptance thereof, shall be deemed to have agreed, that the payment of
the Subordinated Indebtedness shall be subordinate and subject in right of
payment, to the extent and in the manner hereinafter set forth, to the prior
payment in full of all Senior Indebtedness, and that the Bank, as the holder of
Senior Indebtedness, whether now outstanding or hereafter created, incurred,
assumed or guaranteed, shall be deemed to have acquired Senior Indebtedness in
reliance upon the provisions contained in this Agreement.
3.2 Subordinated Indebtedness Subordinated to Prior Payment of All
Senior Indebtedness on Dissolution, Liquidation, Reorganization Etc. Upon any
payment or distribution of the assets of the Company of any kind or character,
whether in cash, property or securities (including any collateral, whether
proceeds thereof or in kind, at any time securing the Subordinated
Indebtedness) to creditors upon any dissolution, winding-
-5-
<PAGE> 6
up, total or partial liquidation, reorganization, composition, arrangement,
adjustment or readjustment of the Company or its securities (whether voluntary
or involuntary, or in bankruptcy, insolvency, reorganization, liquidation or
receivership proceedings, or upon an assignment for the benefit of creditors,
or any other marshalling of the assets and liabilities of the Company), then in
such event:
(1) the Bank shall be entitled to receive payment in full in
cash or cash equivalents (or to have such payment duly provided for in
a manner satisfactory to the Bank) of all amounts due or to become due
on or in respect of all Senior Indebtedness, before any payment in
cash or cash equivalents is made on account of or applied on the
Subordinated Indebtedness;
(2) any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities (other than
securities the payment of which is subordinate, at least to the extent
provided in this Section 3 with respect to the Subordinated
Indebtedness, to the payment of all Senior Indebtedness of the Company
at the time outstanding and to the payment of all securities issued to
the Bank in exchange therefor), to which the holders of the
Subordinated Indebtedness would be entitled except for the provisions
of this Section 3, shall be paid or delivered by any debtor,
custodian, liquidating trustee, agent or other Person making such
payment or distribution, directly to the Bank, or its representative
for application to the payment of all such Senior Indebtedness
remaining unpaid, to the extent necessary to pay all such Senior
Indebtedness in full after giving effect to any concurrent payments or
distribution, or provision therefor, to the Bank; and
(3) in the event that, notwithstanding the foregoing provisions
of this Section 3.2, any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or
securities (other than securities the payment of which is subordinate,
at least to the extent provided in this Section 3 with respect to the
Subordinated Indebtedness, to the payment of all Senior Indebtedness
of the Company at the time outstanding and to the payment of all
securities issued to the Bank in exchange therefor), shall be
received by any holder of Subordinated Indebtedness before all such
Senior Indebtedness is paid in full, such payment or distribution
shall be held in trust for the benefit of, and shall be immediately
paid or delivered by such holder to the Bank or its representative for
application to the payment of all such Senior Indebtedness remaining
unpaid to the
-6-
<PAGE> 7
extent necessary to pay all such Senior Indebtedness in full after giving
effect to any concurrent payment or distribution, or provision therefor, to
the Bank.
3.3 No Payments With Respect to Subordinated Indebtedness in Certain
Circumstances.
(a) No payment (of either principal or accrued interest) on account of
the Subordinated Indebtedness or any judgment with respect thereto shall be
made by or on behalf of the Company so long as the Letter of Credit remains
outstanding or any Senior Indebtedness remains unpaid.
(b) Following an acceleration of the maturity of any Senior
Indebtedness and as long as such acceleration shall continue unrescinded,
such Senior Indebtedness shall first be paid in full, or provision for such
payment shall be made in a manner satisfactory to the Bank, before any
payment is made on account of or applied on the Subordinated Indebtedness.
(c) In the event that, notwithstanding the foregoing provisions of
this Section 3.3, any payment or distribution of assets of the Company
of any kind or character, whether in cash, property or securities, shall
be received by any holder of Subordinated Indebtedness contrary to the
foregoing provisions of this Section 3.3, such payment or distribution
shall be held in trust for the benefit of, and shall be immediately paid or
delivered by such holder to the Bank or its representative for application
to the payment or prepayment of all such Senior Indebtedness remaining
unpaid to the extent necessary to pay all such Senior Indebtedness in full
after giving effect to any concurrent payment or distribution or provisions
therefor to the Bank.
3.4 Holders of Subordinated Indebtedness to be Subrogated to Rights of the
Bank. Subject to the payment in full of all Senior Indebtedness, the rights of
the holders of Subordinated Indebtedness shall be subrogated to the rights of
the Bank to receive payments or distributions of assets of the Company
applicable to the Senior Indebtedness until the Subordinated Indebtedness shall
be paid in full, and for purposes of such subrogation, no payment or
distribution to the Bank of assets, whether in cash, property or securities,
distributable to the Bank under the provisions hereof to which the holders of
the Subordinated Indebtedness would be entitled except for the provisions of
this Section 3, and no payment pursuant to the provisions of this Section 3 to
the Bank by the holders of the Subordinated Indebtedness shall, as between the
Company, its creditors
-7-
<PAGE> 8
(other than the Bank) and the holders of the Subordinated Indebtedness, be
deemed to be a payment by the Company to or on account of such Senior
Indebtedness, it being understood that the provisions of this Section 3 are, and
are intended, solely for the purpose of defining the relative rights of the
holders of the Subordinated Indebtedness, on the one hand, and the Bank, on the
other hand.
3.5 Obligations of the Company Unconditional. Nothing contained in this
Section 3 or elsewhere in this Agreement is intended to or shall impair, as
between the Company and its creditors other than the Bank, the obligations of
the Company to the holders of the Subordinated Indebtedness to pay the
Subordinated Indebtedness as and when it shall become due and payable in
accordance with its terms, nor is intended to or shall affect the relative
rights of the holders of the Subordinated Indebtedness and creditors of the
Company other than the Bank, nor shall anything herein or therein prevent any
holder of Subordinated Indebtedness from exercising all remedies otherwise
permitted by applicable law, subject to the rights, if any, under this Section 3
of the Bank in respect to assets, whether in cash, property or securities, of
the Company received upon the exercise of any such remedy.
3.6 Legend. The Company covenants to cause each note now or hereafter
issued to evidence any portion of the Subordinated Indebtedness to have affixed
upon it a legend which reads substantially as follows:
"This instrument is subject to the Subordination
Agreement dated as of May 1, 1993, among Societe Generale,
New York Branch, Richland Place, Inc., and National
HealthCorp L.P., which, among other things, contains
provisions subordinating the obligations of the maker hereof
to the payee hereof to the maker's obligations to Societe
Generale, New York Branch, to which provisions the holder
of this instrument, by acceptance hereof, agrees."
Section 4. Representations Warranties and Covenants.
4.1. Incorporation of Representations and Warranties by Reference. NHC
hereby makes to the Bank the same representations and warranties as are set
forth in the Guaranty Agreement between NHC and the Bank dated as of May 1,
1993, which representations and warranties, as well as related defined terms
contained therein, are
-8-
<PAGE> 9
hereby incorporated by reference with the same effect as if each and every such
representation and warranty and defined term were set forth herein in its
entirety.
4.2. Authorization. NHC has the power and has taken all necessary action to
execute, deliver and perform this Agreement in accordance with its terms, and
the execution, delivery and performance of this Agreement are not in
contravention of any provision of law or of any agreement or indenture by which
NHC is bound or of the Amended and Restated Agreement of Limited Partnership of
NHC, and do not require the consent or approval of any Governmental Authority or
other Person which has not yet been obtained and a copy thereof furnished to the
Bank.
4.3. Validity and Enforceability. This Agreement constitutes a legal, valid
and binding obligation of NHC, enforceable against NHC in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, equitable principles of general application, or other similar
laws affecting creditors' rights generally, provided, however, that the
existence of such limitations do not affect the validity of this Agreement.
4.4. Approvals and Consents. All filings with, or approvals or consents of,
Governmental Authorities required under the laws of the State of Tennessee or
the United States to be made or obtained by NHC for the valid authorization,
execution, delivery and performance by NHC of this Agreement have been duly made
or obtained.
4.5. No Breach: No Defaults. Neither the execution and delivery of this
Agreement, nor compliance with the terms and provisions of thereof will conflict
with or result in a breach of, or require any consent under, the Amended and
Restated Agreement of Limited Partnership of NHC, or any law or regulation
applicable to NHC, or any order, writ, injunction or decree of any court or
governmental authority or agency applicable to NHC, or any agreement or
instrument to which NHC is a party or by which it is bound or to which it is
subject, or constitute a default under any such agreement or instrument, or
result in the creation or imposition of any Lien upon any of the revenues or
property of NHC pursuant to the terms of any such agreement or instrument.
4.6. Reliance by the Bank. All representations and warranties made herein,
or deemed made herein, to the Bank are made with the understanding that the Bank
is relying upon the accuracy of such representations and warranties.
Notwithstanding that the Bank may conduct its own investigation as to some or
all of the matters covered by the representations and warranties in this
Agreement, the Bank is entitled to rely on all
-9-
<PAGE> 10
representations and warranties as a material inducement to the Bank's extension
of the credit evidenced by the Letter of Credit and the Term Loan Note.
Section 5. Miscellaneous.
5.1 Notices. All notices hereunder shall be in writing and shall be
sufficiently given if personally delivered or mailed by first class registered
or certified mail, return receipt requested, postage prepaid, and addressed:
(a) If to NHC:
National HealthCorp L.P.
City Center
100 Vine Street
Murfreesboro, Tennessee 37130
Attention: Richard F. LaRoche, Jr.
Senior Vice President and General Counsel;
(b) If to the Company, to it at its address of the Company originally
specified in the Reimbursement Agreement;
(c) If to the Bank, to it at its address originally specified in the
Reimbursement Agreement;
(d) If to the Trustee, to it at its address originally specified in the
Trust Indenture;
or to such other address or addresses as the party to whom such notice is
directed may have designated by like notice in writing to the other parties
hereto. A notice shall be deemed to have been given when personally delivered
or, if mailed, on the earlier of (i) three (3) days after the date on which it
is deposited in the mails, or (ii) the date on which it is received.
5.2 Successors; Continuing Effect; etc. This Agreement is being entered
into for the benefit of, and shall be binding upon the parties hereto, and their
respective successors and assigns. This Agreement shall be a continuing
agreement and shall be irrevocable and shall remain in full force and effect as
long as there is both Senior and
-10-
<PAGE> 11
Subordinated Indebtedness outstanding, but shall terminate upon the payment in
full of all outstanding Senior Indebtedness.
5.3 No Disposition of Subordinated Indebtedness. No holder of Subordinated
Indebtedness will sell, assign, pledge, encumber or otherwise dispose of any of
the Subordinated Indebtedness unless such sale, assignment, pledge, encumbrance
or disposition is made expressly subject to this Agreement.
5.4 Amendments. etc. This Agreement may be amended, and the terms hereof
may be waived, only with the written consent of the Bank, the Company and NHC.
5.5 Applicable Law. This Agreement, which may be executed in any number of
counterparts, shall be governed by and construed in accordance with the laws of
the State of New York.
-11-
<PAGE> 12
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
BANK:
SOCIETE GENERALE, New York Branch
By: /s/
--------------------------------
Name: ANDREW P.NESI
--------------------------
Title: VP
--------------------------
COMPANY:
RICHLAND PLACE, INC.
By: /s/
--------------------------------
Name: John W. Clay
---------------------------
Title: Chmn.
---------------------------
NHC:
NATIONAL HEALTHCORP L.P.
By /s/
--------------------------------
Name: Richard F. LaRoche Jr.
---------------------------
Title: Sr. VP
---------------------------
-12-
<PAGE> 1
Exhibit 10.21
DATE OF EXECUTION: DECEMBER 31, 1993
RENEWAL NOTE
FOR VALUE RECEIVED, the undersigned National Health Corporation promises to
pay to the order to National HealthCorp L.P. the principal amount of $10,000,000
which sum shall bear interest at 8 1/2% with interest to be paid quarterly and
with the principal due and payable upon the first of the following to occur:
a. The termination of that certain Management Agreement presently existing
between National Health Corporation and National HealthCorp L.P. dated as of
January 1, 1988, or
b. The payment in full of that certain Promissory Note now held by
NationsBank issued by the National Health Corporation Leveraged Stock Ownership
Plan in the original principal amount of $38,500,000.
Privilege is reserved to prepay this note, in whole or in part at any time
without premium or fee.
All installments of both principal and interest of this note are payable at
such place as the holder hereof may designate in writing in lawful money of the
United States of America.
If this note is placed in the hands of an attorney for collection, by suit
or otherwise, or to enforce its collection, or to protect the security for its
payment, the undersigned will pay all costs of collection and litigation
together with a reasonable attorney's fee.
Upon failure to pay any installment of principal or any installment of
interest of this note when due, then the remaining installments of principal
shall at once become due and payable, at the option of the legal holder hereof.
The makers and endorsers severally waive presentment, protest and demand,
notice of protest, demand and of dishonor and nonpayment of this note, and
expressly agree that this note, or any payment thereunder, may be extended from
time to time, without in any way affecting the liability of the makers and
endorsers hereof.
This Promissory Note is unsecured and is a Renewal Note of an original
$10,000,000 Promissory Note made by National Health Corporation payable to the
order of National HealthCorp L.P. The original note provided for principal
reductions, but the reductions could only be made if approved by NationsBank.
NationsBank by its
<PAGE> 2
extension of its "put" option to National HealthCorp L.P. specifically
prohibited the payment of any principal on the original note.
Executed this the 31st day of December, 1993.
NATIONAL HEALTH CORPORATION
By: /s/
--------------------------------------
Ernest G. Burgess, Senior Vice President
<PAGE> 1
Exhibit 10.22
SECOND
DEED OF TRUST NOTE
$10,000,000.00 Nashville, Tennessee
January 20, 1988
FOR VALUE RECEIVED, on or before January 1, 1998, the undersigned
promises to pay to the order of National HealthCorp L.P., a Delaware limited
partnership, the sum of Ten Million and No/100 Dollars ($10,000,000.00), with
interest from January 22, 1988 at the rate of ten percent (10.0%) per annum.
Principal shall be due and payable quarter-annually on each April 1, July 1,
October 1, and January 1 during the term or this Note according to the
following annualized schedule of principal payments:
<TABLE>
<CAPTION>
Year Principal Payment Year Principal Payment
---- ----------------- ---- -----------------
<S> <C> <C> <C>
1988 $0 1993 $100,000.00
1989 0 1994 200,000.00
1990 0 1995 300,000.00
1991 0 1996 400,000.00
1992 0 1997 500,000.00
</TABLE>
The remainder of the principal shall be due and payable in full on January 1,
1998. The amount of principal which shall be due and payable each quarter during
each term year in which principal is payable shall equal one-fourth (1/4) of the
principal payment for such year during the term of this Note, as stated in the
above schedule, the first such payment of principal being due and payable on
April 1, 1993. Interest shall be due and payable quarter-annually on the then
outstanding principal balance on each April 1, July 1, October 1, and January
1 during the term of this Note, the first such payment of interest being due and
payable on April 1, 1988. Interest accrued, but not paid, shall accrue
additional interest at the rate of ten percent (10.0%) per annum, compounded
monthly.
Both principal and interest due on this note are payable in
Murfreesboro, Tennessee at par in lawful money of the United States of America,
in the Main Office of National HealthCorp L.P.
This Note shall be subordinate to the obligations of the undersigned
under that certain Guarantee and Contingent Purchase Agreement, by and between
the undersigned and Sovran Bank/Central South, of even date herewith, such
subordination being more particularly stated in that certain Debt Subordination
Agreement by National HealthCorp L.P., of even date herewith.
PAGE 1 OF A 3 PAGE NOTE
<PAGE> 2
This note is secured by a second priority deeds of trust and/or second
priority mortgages of even date herewith on eight (8) nursing home facilities
located in South Carolina, Florida, and Tennessee, which properties are more
fully described in said second priority deeds of trust and second priority
mortgages.
In the event there is a default in the payment of any part of interest
or principal in accordance with the terms hereof, or upon failure of the
undersigned to keep and perform all the covenants, promises, agreements,
conditions and provisions of this note and the deeds of trust and mortgages
hereinabove mentioned, or if any obligor hereon makes a general assignment for
the benefit of creditors, or files a voluntary petition in bankruptcy laws, or
if a petition for reorganization under the bankruptcy laws; or if a petition in
bankruptcy is filed against any obligor; or if a receiver or trustee is
appointed for all or any part of the property and assets of any obligor; or
should any levy, attachment or garnishment be issued, or any lien filed against
the property of any obligor and not be satisfied or released within thirty (30)
days after filing; then, in any such case, the entire unpaid principal sum
evidenced by this Note, together with all accrued interest, shall, at the option
of any holder, without notice, become due and payable forthwith, and shall
thereafter bear interest until paid at the highest rate of interest permitted to
be charged under the laws in effect from time to time. Failure of the holder to
exercise this right of accelerating the maturity of the debt, or indulgence
granted from time to time, shall in no event be considered as a waiver of said
right of acceleration or stop the holder from exercising said right.
All persons, partnerships, or corporations now or at any time liable,
whether primarily or secondarily, for the payment of the indebtedness hereby
evidenced, for themselves, their heirs, legal representatives and assigns, waive
demand, presentment for payment, notice of dishonor, protest, notice of protest,
and diligence in collection and all other notices or demands whatsoever with
respect to this note or the enforcement hereof, and consent that the time of
said payments or any part thereof may be extended by the holder hereof and
assent to any substitution, exchange, or release of collateral permitted by the
holder hereof, all without in any wise modifying, altering, releasing,
affecting, or limiting their respective liability.
The term obligor, as used in this Note, shall mean all parties and each
of them, directly or indirectly obligated for the indebtedness that this Note
evidences, whether as principal, maker, endorser, surety, guarantor, or
otherwise.
It is expressly understood and agreed by all parties hereto, including
obligors, that if it is necessary to enforce payment of this Note through an
attorney or by suit, undersigned or any obligors shall pay reasonable attorney's
fees and all costs of collection.
PAGE 2 OF A 3 PAGE NOTE
<PAGE> 3
This obligation is made and intended as a Tennessee contract and is to
be so construed.
IN WITNESS WHEREOF, this note has been duly executed by the undersigned
the day and year first above written.
NHESOP, INC., a Tennessee
corporation
BY:
--------------------------
ITS: Sr. V.P.
-------------------------
PAGE 3 OF A 3 PAGE NOTE
<PAGE> 1
Exhibit 10.23
FIRST AMENDED
SECOND
DEED OF TRUST NOTE
$10,000,000.00 Nashville, Tennessee
December 21, 1988
This First Amended Second Deed of Trust Note changes the interest rate
payable on certain indebtedness of National Health Corporation (formerly NHESOP,
Inc.) to National HealthCorp L.P., which indebtedness is reflected in a certain
Second Deed of Trust Note dated January 20, 1988 and executed by NHESOP, Inc. It
is the intent of the undersigned and National HealthCorp L.P. that the
aforementioned Second Deed of Trust Note shall be replaced by this Second Deed
of Trust Note as of the date hereof.
FOR VALUE RECEIVED, on or before January 1, 1998, the undersigned
promises to pay to the order of National HealthCorp L.P., a Delaware limited
partnership, the sum of Ten Million and No/100 Dollars ($10,000,000.00), with
interest from December 21, 1988 at the rate of eight and one-half percent
(8.5%) per annum. Principal shall be due and payable quarter-annually on each
April 1, July 1, October 1, and January 1 during the term of this Note according
to the following annualized schedule of principal payments:
<TABLE>
<CAPTION>
Year Principal Payment Year Principal Payment
---- ----------------- ---- -----------------
<S> <C> <C> <C>
1988 $0 1993 $100,000.00
1989 0 1994 200,000.00
1990 0 1995 300,000.00
1991 0 1996 400,000.00
1992 0 1997 500,000.00
</TABLE>
The remainder of the principal shall be due and payable in full on January 1,
1998. The amount of principal which shall be due and payable each quarter during
each term year in which principal is payable shall equal one-fourth (1/4) of the
principal payment for such year during the term of this Note, as stated in the
above schedule, the first such payment of principal being due and payable
on April 1, 1993. Interest shall be due and payable quarter-annually on the then
outstanding principal balance on each April 1, July 1, October 1, and January 1
during the term of this Note, the first such payment of interest being due and
payable on January 1, 1989. Interest accrued, but not paid, shall accrue
additional interest at the rate of eight and one-half percent (8.5%) per annum
compounded monthly.
PAGE 1 OF A 3 PAGE NOTE
<PAGE> 2
Both principal and interest due on this note are payable in
Murfreesboro, Tennessee at par in lawful money of the United States of America,
in the Main Office of National HealthCorp L.P.
This Note shall be subordinate to the obligations of the undersigned
under that certain Guarantee and Contingent Purchase Agreement, by and between
the undersigned and Sovran Bank/Central South, of even date herewith, such
subordination being more particularly stated in that certain Debt Subordination
Agreement by National HealthCorp L.P., dated January 20, 1988.
This note is secured by a second priority deeds of trust and/or second
priority mortgages of even date herewith on eight (8) nursing home facilities
located in South Carolina, Florida, and Tennessee, which properties are more
fully described in said second priority deeds of trust and second priority
mortgages.
In the event there is a default in the payment of any part of interest
or principal in accordance with the terms hereof, or upon failure of the
undersigned to keep and perform all the covenants, promises, agreements,
conditions and provisions of this note and the deeds of trust and mortgages
hereinabove mentioned, or if any obligor hereon makes a general assignment for
the benefit of creditors, or files a voluntary petition in bankruptcy, or a
petition for reorganization under the bankruptcy laws; or if a petition in
bankruptcy is filed against any obligor or if a receiver or trustee is appointed
for all or any part of the property and assets of any obligor or should any
levy, attachment or garnishment be issued, or any lien filed against the
property of any obligor and not be satisfied or released within thirty (30) days
after filing; then, in any such case, the entire unpaid principal sum evidenced
by this Note, together with all accrued interest, shall, at the option of any
holder, without notice, become due and payable forthwith, and shall thereafter
bear interest until paid at the highest rate of interest permitted to be charged
under the laws in effect from time to time. Failure of the holder to exercise
this right of accelerating the maturity of the debt, or indulgence granted from
time to time, shall in no event be considered as a waiver of said right of
acceleration or stop the holder from exercising said right.
All persons, partnerships, or corporations now or at any time liable,
whether primarily or secondarily, for the payment of the indebtedness hereby
evidenced, for themselves, their heirs, legal representatives and assigns, waive
demand, presentment for payment, notice of dishonor, protest, notice of protest,
and diligence in collection and all other notices or demands whatsoever with
respect to this note or the enforcement hereof, and consent that the time of
said payments or any part thereof may be extended by the holder hereof and
assent to any substitution, exchange, or release of collateral permitted by the
holder hereof, all without in any wise modifying, altering, releasing,
affecting, or limiting their respective liability.
PAGE 2 OF A 3 PAGE NOTE
<PAGE> 3
The term obligor, as used in this Note, shall mean all parties and each
of them, directly or indirectly obligated for the indebtedness that this Note
evidences, whether as principal, maker, endorser, surety, guarantor, or
otherwise.
It is expressly understood and agreed by all parties hereto, including
obligors, that if it is necessary to enforce payment of this Note through an
attorney or by suit, undersigned or any obligors shall pay reasonable
attorney's fees and all costs of collection.
This obligation is made and intended as a Tennessee contract and is to
be so construed.
IN WITNESS WHEREOF, this note has been duly executed by the undersigned
the day and year first above written.
NATIONAL HEALTH CORPORATION,
a Tennessee corporation
BY:
-------------------------
ITS:Senior Vice President
-------------------------
PAGE 3 OF A 3 PAGE NOTE
<PAGE> 1
Exhibit 10.24
PROMISSORY NOTE
$2,797,511.28 January 15, 1996
FOR VALUE RECEIVED, the undersigned National HealthCare L.P. does
hereby promise to pay to the order of National Health Investors, Inc., or its
assigns or designee, the principal amount of Two Million Seven Hundred
Ninety-Seven Thousand Five Hundred Eleven and 28/100 ($2,797,511.28) Dollars to
bear interest at 7.75 percent per annum as calculated on actual days based on
the 365 day year with interest only through December 31, 1996, and thereafter in
180 equal payments of principal and interest based upon an amortization schedule
at the above rate of interest with the outstanding principal and accrued
interest, if any, due and payable on December 31, 2006, unless that certain
Master Agreement to Lease between the parties bearing date of October 17, 1991,
is renewed in whole or in part, in which case the unpaid principal and interest,
if any, will be due and payable on December 31, 2011.
Privilege is reserved to prepay this note, in whole or in part at any time
without premium or fee.
All installments of both principal and interest of this note are payable at such
place as the holder hereof may designate in writing in lawful money of the
United States of America.
If this note is placed in the hands of an attorney for collection, by suit or
otherwise, or to enforce its collection, or to protect the security for its
payment, the undersigned will pay all costs of collection and litigation
together with a reasonable attorney's fee.
Upon failure to pay any installment of principal or any installment of interest
of this note when due, then the remaining installments of principal shall at
once become due and payable, at the option of the legal holder hereof.
The makers and endorsers severally waive presentment, protest and demand, notice
of protest, demand and of dishonor and nonpayment of this note, and expressly
agree that this note, or any payment thereunder, may be extended from time to
time, without in any way affecting the liability of the makers and endorsers
hereof.
This Note is unsecured.
NATIONAL HEALTHCARE L.P.
By: /s/ Richard F. LaRoche, Jr.
---------------------------
Richard F. LaRoche, Jr.
Senior Vice President
<PAGE> 1
Exhibit 10.25
RENEWAL TERM NOTE
$10,000,000 Nashville, Tennessee
January 1, 1992
FOR VALUE RECEIVED, on January 1, 1998, the "Maturity Date", undersigned
promises to pay to the order of National Health Corporation the sum of Ten
Million and No/100 Dollars ($10,000,000.00), with interest at the rate of eight
and one-half per cent (8.5%) per annum. Said interest shall be due and payable
quarter-annually on the first day of each January 1, April 1, July 1, and
October 1 during the term of this note, the first such payment of interest being
due and payable on April 1, 1992. Principal shall be due and payable in full on
the Maturity Date. Privilege to prepay principal, in whole or in part, on this
note is hereby waived by the undersigned. This note renews and extends maker's
previous note dated October 17, 1991.
Both principal and interest due on this note are payable in Murfreesboro,
Tennessee, at par in lawful money of the United States of America, in the office
of the holder.
This note is unsecured and is made in accordance with a Term Loan Agreement of
even date herewith.
In the event there is a default in the payment of any part of interest or
principal in accordance with the terms hereof, or upon failure of the
undersigned to keep and perform all the covenants, promises, agreements,
conditions and provisions of this note or the Term Loan Agreement hereinabove
mentioned; then, the entire unpaid principal sum evidenced by this note,
together with all accrued interest, shall at the option of any holder, without
notice, become due and payable forthwith, and shall thereafter bear interest
until paid at the highest rate of interest permitted to be charged under the
laws in effect from time to time. Failure of the holder to exercise this right
of accelerating the maturity of the debt, or indulgence grantee from time to
time, shall in no event be considered as a waiver of said right of acceleration
or stop the holder from exercising said right.
All persons, partnerships, or corporations now or at any time liable, whether
primarily or secondarily, for the payment of the indebtedness hereby evidenced,
for themselves, their heirs, legal representatives and assigns, waive demand,
presentment for payment, notice of dishonor, protest, notice of protest, and
diligence in collection and all other notices or demands whatsoever with respect
to this note or the enforcement hereof, and consent that the time of said
payments or any part thereof may be extended by the holder hereof and assent to
any substitution, exchange, or release of collateral permitted by the holder
hereof, all without in any wise modifying, altering, releasing, affecting, or
limiting their respective ability.
The term obligor as used in this note, shall mean all parties, and each of them,
directly or indirectly obligated for the indebtedness that this note evidences,
whether as principal, maker, endorser, surety, guarantor or otherwise.
The undersigned will pay, on demand, any attorney's fees and related expenses
that the
<PAGE> 2
holder incurs in collecting or attempting to collect the indebtedness evidenced
by this note. This obligation is made and intended as a Tennessee contract and
is to be so construed. Maker reserves the right to prepay this note without
penalty or premium at any time.
IN WITNESS WHEREOF, this note has been duly executed by the undersigned the day
and year first above written.
NATIONAL HEALTHCORP L.P.
BY: NHC, INC.,
Managing General Partner
By: /s/
--------------------------
Senior Vice President
ENDORSEMENT
As collateral security, pay to the order of Sovran Bank/Tennessee.
NATIONAL HEALTH CORPORATION
BY: /s/
-------------------------
Senior Vice President
<PAGE> 1
Exhibit 10.26
State: Georgia
This Instrument Was Prepared By:
Cynthia N. Sellers
Farris, Warfield & Kanaday
Seventeenth Floor
Third National Bank Building
201 Fourth Avenue, North
Nashville, Tennessee 37219
(615) 244-5200
ASSUMPTION AND MODIFICATION AGREEMENT
This Assumption and Modification Agreement (this "Agreement") is
entered into as of the 17th day of October, 1991, by and among NATIONAL HEALTH
INVESTORS, INC., a Maryland corporation with offices at 100 Vine Street, Suite
1402, City Center, Murfreesboro, Tennessee 37130 ("NHC-REIT"), NATIONAL
HEALTHCORP L.P. ("NHLP"), and THIRD NATIONAL BANK IN NASHVILLE, AGENT, as Agent
for Third National Bank in Nashville, ("TNB") and SouthTrust Bank of Alabama,
National Association ("ST") (TNB and ST are collectively hereinafter referred to
as the "Lenders").
W I T N E S S E T H:
WHEREAS, pursuant to a Loan and Security Agreement dated as of December
16, 1988 (the "Loan and Security Agreement") among the National Health
Corporation Leveraged Employee Stock Ownership Trust (the "Borrower"), NHLP,
National Health Corporation ("National") and TNB, Sovran Bank/Central South (now
known as Sovran Bank/Tennessee) ("SBT"), ST and Irving Trust Company (now known
as The Bank of New York) ("BONY"), TNB, SBT, ST and BONY agreed, subject to the
terms and conditions of the Loan and Security Agreement, to make a loan (the
"Loan") to the Borrower for the purpose of enabling the Borrower to purchase
shares of common stock of National, followed by National's extension of a Fifty
Million Dollar ($50,000,000.00) line of credit to NHLP, the proceeds of which
were used and will continue to be used by NHLP solely for the refinancing of
existing debt and the acquisition, renovation and development of certain nursing
home properties approved by the Majority Banks (as such term is defined in the
Loan and Security Agreement); and
WHEREAS, the Loan is secured by, among other things, a Guarantee and
Contingent Purchase Agreement dated as of December 16, 1988 executed by NHLP and
National in favor of TNB, SBT, ST, BONY and Agent (the "NHLP/National
Guaranty"); and
WHEREAS, the performance and payment of NHLP and National under the
NHLP/National Guaranty is secured by, among other things, liens on and security
interests in health care centers (or land being developed into health care
centers) owned by NHLP in several states of the United States of America (the
"Pledged-Nursing Homes") and evidenced by deeds of trust, deeds to secure debt
and mortgages executed by NHLP to or for the benefit of the Agent, including
without limitation the deeds of trust, deeds to secure debt and mortgages
described below, each executed by NHLP in favor of Agent, and each dated as of
December 16, 1988 (collectively, the "Mortgages"):
(a) Tennessee Deed of Trust, Assignment of Rents, Security
Agreement and Fixture Filing of record in Book 7732, page 83,
Register's Office for Davidson County, Tennessee;
<PAGE> 2
(b) Tennessee Deed of Trust, Assignment of Rents, Security Agreement
and Fixture Filing of record in Book 240, page 347, Register's Office for
Dickson County, Tennessee;
(c) Deed of Trust of Leasehold Estate and Security Agreement record in
Book 240, page 348, Register's Office for Dickson County, Tennessee;
(d) Tennessee Deed of Trust, Assignment of Rents, Security Agreement
and Fixture Filing, dated as of December 16, 1988, of record in Book 206, page
295, Register's Office for Giles County, Tennessee;
(e) Tennessee Deed of Trust, Assignment of Rents, Security Agreement
and Fixture Filing of record in LM Book 296, page 689, Register's Office for
Robertson County, Tennessee;
(f) Tennessee Deed of Trust, Assignment of Rents, Security Agreement
and Fixture Filing of record in Book 1024, page 140, Register's Office for
Maury County, Tennessee;
(g) Mortgage of record in Mortgage Book 363, page 122, County Clerk's
Office of Hopkins County, Kentucky;
(h) Deed of Trust, Assignment of Rents and Security Agreement of record
in Book 1246, page 1927, Office of Recorder of Deeds, St. Charles County,
Missouri;
(i) Deed of Trust, Assignment of Rents and Security Agreement dated
December 16, 1988, of record in book 983, page 396, Office of Recorder of
Deeds, St. Francios County, Missouri;
(j) Deed of Trust, Assignment of Rents and Security Agreement of record
in Book 288, page 854, Office of Recorder of Deeds, Dunklin County, Missouri;
(k) Deed of Trust, Assignment of Rents and Security Agreement, of
record in Book 8431, page 287, Office of Recorder of Deeds, St. Louis County,
Missouri;
(l) Second Mortgage and Security Agreement, of record in Book 770, page
080, County Clerk's Office of Anderson County, South Carolina;
(m) Deed to Secure Debt and Security Agreement, of record in Book 602,
page 663, Office of the Clerk of Superior Court, Walker County, Georgia;
(n) Tennessee Deed of Trust, Assignment of Rents, Security Agreement
and Fixture Filing of record in Trust Book 298, page 743, Register's Office for
McMinn County, Tennessee;
(o) Tennessee Deed of Trust, Assignment of Rents, Security Agreement
and Fixture Filing of record in Book 147, page 416, Register's Office for
Marshall County, Tennessee;
(p) Tennessee Deed of Trust, Assignment of Rents, Security Agreement
and Fixture Filing of record in Trust Deed Book 257, page 882, Register's
Office for Warren County, Tennessee;
(q) Mortgage of record in Mortgage Book 377, page 149, Office of the
Clerk of Hopkins County, Kentucky; and
<PAGE> 3
(r) Mortgage, Assignment of Rents, Security Agreement and
Fixture Filing of record in Book 1788, page 277, Office of Judge of
Probate, Calhoun County, Alabama.
WHEREAS, NHLP also executed that certain Security Agreement dated
December 16, 1988 in favor of the Lenders, SBT and BONY regarding personal
property located on or used in connection with real property located in
Madisonville, Kentucky and that certain Security Agreement dated December 27,
1989, in favor of the lenders, SBT and BONY regarding personal property located
on or used in connection with real property located in Dawson Springs, Kentucky
dated in 1989 (collectively, the "Security Agreements"); and
WHEREAS, NHLP desires to transfer the Pledged Nursing Homes, being all
property described in the Mortgages, into NHC-REIT; and
WHEREAS, the Mortgages prohibit the transfer of the Pledged Nursing
Homes without the Agent's prior written consent; and
WHEREAS, pursuant to that certain Assignment dated October 18, 1991
executed by BONY and TNB (the "BONY Assignment"), TNB has been assigned all of
BONY's rights, title and interest and obligations under and to the Loan and all
documentation executed by or on behalf of BONY in connection with the Loan; and
WHEREAS, pursuant to that certain Assignment dated October 17th, 1991
executed by SBT and TNB (the "SBT Assignment"), TNB has been assigned all of
SBT's rights, title and interest and obligations under and to the Loan and all
documentation executed by or on behalf of SBT in connection with the Loan; and
WHEREAS, the Agent on behalf of the Lenders has consented to the
transfer of the Pledged Nursing Homes by NHLP to NHC-REIT provided that, among
other things, NHLP and NHC-REIT execute this Agreement in favor of the Agent,
and NHC-REIT assume jointly and severally with NHLP all of the duties,
obligations, indebtedness, covenants, agreements, promises, representations and
warranties under the Mortgages, Security Agreements and all other documents
executed in connection therewith, without releasing NHLP therefrom; and
WHEREAS, NHLP and NHC-REIT, to induce the Agent to consent to the
transfer of the Pledged Nursing Homes and the other real property owned by NHLP
to NHC-REIT, desire to execute this Agreement;
NOW, THEREFORE, in consideration of the premises, and in order to
induce the Agent to consent to the transfer of the Pledged Nursing Homes by NHLP
to NHC-REIT, NHLP and NHC-REIT agree with the Agent as follows:
1. NHC-REIT hereby assumes, together with NHLP, joint and several
liability for all obligations, agreements, promises, indebtedness,
representations, warranties and covenants under each and all of the
Mortgages and Security Agreements, and any other documents, instruments and/or
agreements executed from time to time in connection with the Mortgages,
Security Agreements, any instruments evidencing any indebtedness secured by the
Mortgages and/or Security Agreements (the Mortgages, Security Agreements, and
all other documents, instruments and agreements are sometimes collectively
referred to herein as the "Loan Documents").
2. The Mortgages and the Security Agreements are hereby amended to the
extent necessary to reflect that NHC-REIT has assumed joint and several
liability with NHLP for all
-3-
<PAGE> 4
obligations, agreements, promises, indebtedness, representations, warranties and
covenants under, described in and/or arising pursuant to the Mortgages and
Security Agreements, and that references in the Mortgages and Security
Agreements to the "Grantor", "Mortgagor" and "Debtor" shall be deemed to refer
jointly and severally to NHC-REIT and NHLP.
3. Each of the Mortgages and Security Agreements is further amended to
the extent necessary to provide that the Agent referred to therein is now acting
as agent for TNB and ST and any of their successors and assigns, and not for
BONY and SBT, and that TNB has replaced BONY and SBT as the "Lenders," "Banks"
or "Mortgagees" thereunder.
4. Each of NHC-REIT and NHLP represents and warrants to the Agent and
the Lenders that:
(a) The execution and performance of this Agreement by
NHC-REIT have been validly authorized and approved by all necessary and
appropriate corporate action;
(b) The execution and performance of this Agreement by NHLP
have been validly authorized and approved by all necessary and
appropriate partnership actions;
(c) NHC-REIT is lawfully seized and possessed of all rights,
title and interest in and to the Pledged Nursing Homes (including all
improvements thereon) described in the Mortgages;
(d) Each Mortgage continues to be a first lien on that portion
of the Pledged Nursing Homes described therein (except as described on
Exhibit A hereto), and neither NHC-REIT nor NHLP has executed any other
deed of trust, mortgage, deed to secure debt or any other instrument,
or granted any liens in favor of any other person or entity, affecting
any portion of the Pledged Nursing Homes;
(e) No person or entity (other than as described in Exhibit A)
has any lien or any right to claim any lien upon any portion of the
Pledged Nursing Homes superior to the lien of the Agent on behalf of
the Lenders evidenced by the Mortgages;
(f) No event has occurred and no claim, offset, defense or
other condition exists which with passage of time or giving of notice
would constitute a default under any provision of any of the Mortgages,
Security Agreements, or any of the other Loan Documents;
(g) No event has occurred and no claim, offset, defense or
other condition exists that would relieve either NHC-REIT or NHLP of
any of their respective obligations to the Agent and/or Lenders under
the Mortgages, Security Agreements, or other Loan Documents; and
(h) Except as hereby expressly amended, all obligations under
the Mortgages, Security Agreements and other Loan Documents shall
continue in full force and effect.
5. This Agreement shall be governed by the laws of the State of
Tennessee, except to the extent that the law of the state in which any Mortgage
was recorded shall govern with respect to the enforcement or interpretation of
this Agreement as to such Mortgage.
6. This Agreement may be executed in counterparts, all of which shall
together constitute one instrument.
-4-
<PAGE> 5
IN WITNESS WHEREOF the parties have caused this Assignment to be signed
and sealed on the date set forth below but to be effective as of the date first
above written.
SIGNED, sealed and delivered NATIONAL HEALTHCORP L.P.
in the presence of and By: NHC, Inc., Managing
executed by the undersigned General Partner
on October 16 , 1991
-----------
/s/
- -------------------------------- By: /s/
Witness -------------------------
Title: President
-----------------------
(SEAL)
/s/
- --------------------------------
Notary Public
My Commission Expires: 1-23-94
----------
(Notary Seal)
SIGNED, sealed and NATIONAL HEALTH INVESTORS, INC.
delivered in the presence
of and executed by the
undersigned on October 16, 1991 By: /s/
------------ -------------------------
/s/ Title: President
- -------------------------------- -----------------------
Witness (SEAL)
/s/
- --------------------------------
Notary Public
My Commission Expires:1-23-94
----------
(Notary Seal)
SIGNED, sealed and THIRD NATIONAL BANK, IN
delivered in the presence NASHVILLE, AGENT
of and executed by the
undersigned on October 16, 1991
-----------
/s/ By: /s/
- -------------------------------- ------------------------
Witness Title: AVP
---------------------
(SEAL)
/s/
- --------------------------------
Notary Public
My Commission Expires: 1-23-94
----------
(Notary Seal)
-5-
<PAGE> 1
Exhibit 10.27
AMENDED AND RESTATED
REIMBURSEMENT AGREEMENT
among
FLORIDA CONVALESCENT ASSOCIATES
NATIONAL HEALTHCORP L.P.
and
THE BANK OF TOKYO, LTD., NEW YORK AGENCY
----------------------------------------------------------
$6,000,000
Dade County Industrial Development Authority
Industrial Development Revenue Bonds (Florida Convalescent
Associates Project), Series 1986
----------------------------------------------------------
----------------------------
Dated as of December 1, 1986
and Amended and Restated as of March 1, 1991
----------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Recitals.
1. Reimbursement and Other Payments................................... 2
2. Agreements of Bank; Conditions Precedent to
Issuance of Letters of Credit...................................... 5
3. Obligations Absolute............................................... 8
4. Security for Reimbursement Obligations.............................. 9
5. Representations and Warranties of the
Partnership, the Guarantor and F.M.S.C............................. 10
6. Covenants of the Partnership....................................... 14
7. Covenants of the Guarantor......................................... 19
8. Events of Default and Default Rate................................. 21
9. Rights and Remedies................................................ 22
10. No Waiver; Remedies................................................ 23
11. Right of Set-Off................................................... 23
12. Indemnification.................................................... 23
13. Continuing Obligation; Assignment.................................. 24
14. Transfer of Letter of Credit, Reduction,
Reinstatement and Termination of Letter of
Credit and Related Matters......................................... 24
15. Liability of Bank.................................................. 25
16. Costs, Expenses and Taxes.......................................... 26
17. Definitions........................................................ 27
18. Amendments, Etc.................................................... 29
19. Notices............................................................ 29
20. Participations..................................................... 30
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
21. Jurisdiction..................................................... 30
22. Waiver of Jury Trial............................................. 31
23. Severability..................................................... 31
24. Governing Law.................................................... 31
25. Headings......................................................... 31
Signatures.............................................................. 32
</TABLE>
Exhibit I - Form of Irrevocable Letter of Credit
Exhibit II - Form of Guaranty Agreement
(ii)
<PAGE> 4
AMENDED AND RESTATED
REIMBURSEMENT AGREEMENT
AMENDED AND RESTATED REIMBURSEMENT AGREEMENT dated as of December 1,
1986 and amended and restated as of March l, 1990, among Florida Convalescent
Associates, a Florida general partnership (the "Partnership"), National
HealthCorp L.P., a Delaware limited partnership (the "Guarantor") and The Bank
of Tokyo, Ltd., New York Agency, a New York agency of a Japanese banking
corporation (the "Bank").
WHEREAS:
A. The Dade County Industrial Development Authority, as Issuer (the
"Issuer"), has issued its Industrial Development Revenue Bonds (Florida
Convalescent Associates Project), Series 1986 (the "Bonds") pursuant to an
Amended and Restated Trust Indenture dated as of December 1, 1986 and amended
and restated as of April 1, 1987 among the Issuer, Third National Bank in
Nashville, as Trustee (the "Original Trustee"), and Sun Bank/South Florida,
N.A., a national banking association (the "Co-Trustee"), as Co-Trustee (the
"Indenture").
B. The unpaid aggregate principal amount of the Bonds outstanding is
$5,800,000.
C. The proceeds from the sale of the Bonds have been advanced by the
Issuer to the Partnership for the purpose of acquiring, constructing and
equipping a nursing home facility in Dade County, Florida owned by the
Partnership.
D. Under the terms of the Indenture, the Partnership has heretofore
furnished an Irrevocable Letter of Credit No. SB7832 dated December 29, 1986
(the "Original Letter of Credit") issued by Sun Bank, National Association,
Orlando, Florida (the "Original Bank") to the Original Trustee for the account
of the Partnership and the Guarantor which provides credit and liquidity support
for the Bonds.
E. At the request of the Company and the Guarantor:
the Original Trustee has resigned as Trustee under the Indenture
and the Issuer and the Bondholders have appointed The Bank of Tokyo Trust
Company, a New York banking corporation (the "Trustee"), as Successor Trustee
under the Indenture, in each case effective as of the date hereof.
F. The Partnership has requested the Bank to substitute for the
Original Letter of Credit its Irrevocable Letter of Credit substantially in the
form of Exhibit I hereto (the "Letter of Credit").
<PAGE> 5
G. The Original Letter of Credit was issued by the Bank pursuant to a
Reimbursement Agreement dated as of December l, 1986 among the Partnership, the
corporate predecessors to the Guarantor, and the Original Bank which as of the
date hereof has been assigned by the Original Bank to the Bank.
H. As a condition to the issuance and maintenance of the Letter of
Credit, the Partnership, the Guarantor and the Bank desire to specify the
reimbursement and other obligations of the Partnership and the Guarantor to the
Bank, and to amend such original Reimbursement Agreement inter alia to (i)
reduce the required Letter of Credit fee, (ii) extend the termination date of
the Letter of Credit and (iii) make certain changes in the representations,
warranties and covenants of the parties thereto and the terms and conditions
thereof.
I. A corporate predecessor of the Guarantor entered into a management
agreement with the Partnership providing for the management of the Project.
J. The parties hereto wish for convenience to restate in their entirety
the terms of the Reimbursement Agreement under this Amended and Restated
Reimbursement Agreement as further amended hereby.
NOW, THEREFORE, in consideration of the premises and in order to induce
the Bank to issue the Letter of Credit, the Partnership, the Guarantor and the
Bank hereby agree as follows.
SECTION 1. Reimbursement and Other Payments.
(a) Reimbursement. The Partnership and the Guarantor, jointly and severally,
hereby agree to pay to the Bank:
(i) on the Business Day five days prior to any drawing under
the Letter of Credit pursuant to Section 503 of the Indenture with
respect to the interest on any Bond (other than Bonds purchased or
deemed purchased as contemplated by Section 1(a)(vi) hereof) but not
later than the Termination Date, the Partnership and the Guarantor.
shall pay to the Bank an amount equal to the total amounts to be so
drawn under the Letter of Credit with respect to such interest;
(ii) on the Business Day five days prior to the first day of
each month, the Partnership and the Guarantor shall pay to the Bank an
amount equal to one twelfth of the Amortization Installment next coming
due to be deposited and held in a separate sub-account and designated
the "Florida
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<PAGE> 6
Convalescent Associates Amortization Installment Subaccount";
(iii) except as described in Section 1(a)(vi) below, on the
day of any other draw under the Letter of Credit pursuant to the
Indenture, a sum equal to the amount drawn;
(iv) on the day of each draw under the Letter of Credit
pursuant to the Indenture (other than draws for which the Company and
the Guarantor have paid to the Bank the amount to be so drawn pursuant
to Section l(a)(i) or (ii)), a sum equal to such amount as shall be
necessary to cover the costs of transferring funds and other costs and
expenses of the Bank, if any, incurred in connection with such draw;
(v) on demand, any amount that is paid by the Bank in
connection with its exercise of its discretionary rights pursuant to
Section 9(b) hereof;
(vi) on or before 180 days following the date of any drawing
under the Letter of Credit with respect to payment of the portion of
the purchase price corresponding to the principal on any Bonds
delivered to the Tender Agent pursuant to Section 923 of the Indenture,
which Bonds shall be, for purposes hereof, deemed to have been
purchased by the Partnership and the Guarantor and shall be pledged to
the Bank pursuant to this Agreement, the Partnership and the Guarantor
shall pay to the Bank (i) an amount equal to the total amounts drawn
under the Letter of Credit to pay the principal portion only of the
purchase price of said Bonds plus (ii) interest on any and all amounts
remaining unpaid by the Partnership and the Guarantor attributable to a
drawing on the Letter of Credit from the date of such drawing
(regardless of any grace period permitted under Section 8 hereof) until
payment in full, at a rate per annum equal to the Bank Rate plus 1/4 of
1% for the first 90 days from the date of such drawing, and at a rate
per annum equal to the Bank Rate plus 1/2 of 1% thereafter; and
(vii) on demand, any and all reasonable charges and expenses
incurred by the Bank including reasonable fees and costs of Bank's
counsel in enforcing any rights under this Agreement following the
occurrence of a Default.
The interest portion of the purchase price of Bonds purchased
with proceeds from a draw under the Letter of Credit, the principal portion of
which is repayable under Section 1(a)(vi) above, shall be repaid on the Business
Day next succeeding the draw under the Letter of Credit.
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<PAGE> 7
Except as otherwise provided in this Agreement, prior to the
time of a drawing under the Letter of Credit, the Partnership and the Guarantor
shall not be entitled to prepay to the Bank, and the Bank shall not accept
prepayment for, the reimbursement obligation of the Partnership and the
Guarantor for the amount drawn. All calculations of interest hereunder shall be
made on a daily basis and on the basis of a 360-day year and actual days
elapsed.
(b) Fees. The Partnership and the Guarantor hereby agree to
pay to the Bank a letter of credit fee with respect to the Letter of Credit,
computed (on the basis of a year of 360 days) at the rate of 1% per annum on the
Stated Amount available under the Letter of Credit, from and including the date
of issuance of the Letter of Credit (the "Date of Issuance") through and
including the termination of the Letter of Credit, whether or not extended by
the Bank as provided herein, payable quarterly in advance on the Date of
Issuance and thereafter on the first day of January, April, July and October of
each year, commencing as of April 1, 1991, with a final quarterly payment on
April 1, 1995. The letter of credit fee shall be earned when due and shall not
be subject to any refund or reduction under any circumstances whatsoever.
(c) Payments in Respect of Increased Costs. If any change in
any law, executive order or regulation or in any request or directive of any
administrative or governmental authority (whether or not having the force of
law) or in the interpretation of any of the foregoing by any court or
administrative or governmental authority charged with the administration thereof
applicable to the Bank or any Participant shall either (i) impose, modify or
deem applicable any reserve, risk/capital adequacy, special deposit or similar
requirement against letters of credit issued by the Bank or participation
therein by any Participant (ii) impose on the Bank or any Participant any other
condition regarding this Agreement or the Letter of Credit, and the result of
any event referred to in clause (i) or (ii) above shall be to increase the cost
to the Bank or any Participant of issuing or maintaining the Letter of Credit or
participation therein, then the Partnership and the Guarantor shall pay to the
Bank, from time to time as specified by the Bank, additional amounts which shall
be sufficient to compensate the Bank or such Participant for such increased
costs together with interest on each such amount from the date demanded until
payment in full thereof at the Bank Rate. The Bank's or a Participant's
determination of the amount of such costs and the allocation, if any, of such
costs among the Bank or such Participant and other customers which have
arrangements with the Bank or such Participant similar to this Agreement, if
done in
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<PAGE> 8
good faith and if such allocation is made on an equitable basis, shall, in the
absence of manifest error, be conclusive.
(d) Payments and Reimbursement Account.
(i) All payments by the Partnership and the Guarantor
to the Bank hereunder shall be made in lawful currency of the United
States and in immediately available funds prior to 4:00 p.m., New York
time, on the date such payments are due at the Bank's office at 100
Broadway, New York, New York 10005, Attention: National Banking
Department, with specific reference to the Letter of Credit by number,
or otherwise as may be directed by the Bank by notice to the
Partnership and the Guarantor. In the case of payments of the
obligations under Section l(a), such payments shall be accompanied by a
written advice stating whether such payment is to reimburse the Bank
for a drawing which applied to the payment of interest on the Bonds,
principal of the Banks or purchase price of Bonds. In the event that
the date specified for any payment hereunder is not a Business Day,
such payment shall be made not later than the next following Business
Day and interest shall be paid at the rate provided for herein on any
such payment to the Business Day on which such payment is made.
(ii) The Bank shall open and maintain on its books a
Reimbursement Account and shall debit such Reimbursement Account with
the amount of each drawing and accrued interest thereon and shall
credit such Reimbursement Account for each payment under Section l(a).
The records of the Bank with respect to the Reimbursement Account shall
be prima facie evidence in the absence of manifest error of the
reimbursement obligation of the Partnership under Section l(a) and
accrued interest thereon and all payments made by the Partnership with
respect thereto.
SECTION 2. Agreements of Bank; Conditions Precedent to Issuance of Letter of
Credit.
(a) Agreements of Bank. Subject to the terms and conditions of this
Agreement, the Bank agrees to issue the Letter of Credit in the initial Stated
Amount of $5,843,983 and with an initial termination date of July l, 1995 on the
Date of Issuance.
At the request of the Partnership and the Guarantor, during the 60-day
period following January 1 of the year of the termination date then in effect,
the Bank may at its option extend the term of the Letter of Credit for an
additional two year period beyond the termination date then in effect, or for
such other period as the Partnership, the Guarantor and the Bank
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<PAGE> 9
shall agree upon at the time of such extension. If no written consent as to the
extension of the Letter of Credit is given by the Bank then the Letter of Credit
shall expire on the termination date then in effect. Any such extension shall be
deemed to extend the term of the Letter of Credit upon the same terms and
conditions as shall then be in effect, except as the Partnership, the Guarantor
and the Bank shall otherwise agree and subject to the terms and conditions of
the Indenture. Any such date to which the term of the Letter of Credit shall be
extended shall, from and after the date of such extension, constitute the
termination date then in effect for all purposes of this Agreement and the
Letter of Credit.
(b) Conditions Precedent to Issuance of Letter of Credit.
(i) The Bank shall have received on or before the Date of
Issuance the following, in form and substance satisfactory to the Bank
and its counsel:
(A) certified copies of the Certificate of Limited
Partnership and Partnership Agreement of the Guarantor, and
Certificate of General Partnership and Partnership Agreement
of the Partnership;
(B) certificates dated the Date of Issuance from the
general partner of the Partnership and the Guarantor
certifying the names and true signatures of the officers of
the general partner of the Partnership and the Guarantor who
are authorized to sign the Basic Documents and other documents
to be delivered by the Partnership and Guarantor;
(C) copies of the resolutions adopted by the
Partnership and the Guarantor authorizing the execution,
delivery and performance of this Agreement, the Guaranty
Agreement and the other Basic Documents to which either is a
party, certified as of the Date of Issuance by an officer of
the general partner of the Partnership and the Guarantor;
(D) a favorable opinion dated the Date of Issuance of
Messrs. Robenalt, Rodabaugh & Staley, counsel for the
Partnership, with respect to the enforceability against the
Partnership of this Agreement and the other Basic Documents
and such further matters as the Bank may request;
(E) a favorable opinion dated the Date of Issuance of
Richard F. LaRoche, Jr., counsel for the
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<PAGE> 10
Guarantor, with respect to the enforceability against the
Guarantor of this Agreement, the Guaranty Agreement and the
other Basic Documents and such further matters as the Bank may
request;
(F) a favorable opinion of Messrs. Squire, Sanders &
Dempsey, Bond Counsel, with respect to compliance with the
requirements of the Indenture and the Contract and such
further matters as the Bank or the Trustee may request;
(G) the Guaranty Agreement, duly executed by the
Guarantor and the Bank;
(H) an executed copy (or a duplicate thereof) of the
Indenture, the Contract, the Mortgage, the Trustee Assignment
of Mortgage, the Bank Assignment of Mortgage, the Mortgage
Amendment, the Substitution Agreement, this Agreement and each
of the documents required to be delivered by the Partnership
or the Issuer in connection with the Original Letter of Credit
or the Letter of Credit;
(I) evidence of the valid creation and perfection of
the liens and security interests referred to in Section 4
hereof in favor of the Bank;
(J) satisfactory evidence of a title insurance policy
(current ALTA Loan Policy form) covering the real property
included in the Project, in form and substance satisfactory to
the Bank, and subject only to permitted exceptions and other
exceptions approved by the Bank;
(K) certificates of insurance effective as of the
Date of Issuance against casualty and public liability in
connection with the real and tangible personal property
included in the Project, naming the Trustee and the Bank as
loss payees and additional insureds, showing amounts of
coverage and insurers satisfactory to the Bank; and
(L) such other documents, instruments, approvals
(and, if requested by the Bank certified duplicates of
executed copies thereof) or opinions as the Bank or its
counsel may reasonably request.
(ii) The following statements shall be true and correct on the
Date of Issuance, and the Bank shall have received a certificate signed
by an officer of the general
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<PAGE> 11
partner of the Partnership and the Guarantor dated the Date of Issuance, stating
that:
(A) the representations and warranties contained in
Section 5 (with respect to the Partnership) and Section 6
(with respect to the Guarantor) of this Agreement and all
representations and warranties of the Partnership and the
Guarantor contained in the other Basic Documents are correct
on and as of the Date of Issuance as though made on and as of
such date; and
(B) no Default or Event of Default has occurred and
is continuing, or would result from the issuance of the Letter
of Credit and no event has occurred and is continuing which
would constitute any such Event of Default but for the
requirement that notice be given or time elapse or both.
(iii) On the Date of Issuance the Indenture shall be in full
force and effect;
(iv) On the Date of Issuance:
(A) The issuance of the Letter of Credit shall not
subject the Bank to any penalty or special tax and shall not
be prohibited by any law, governmental order or regulation,
and all necessary consents, approvals and authorizations of
any governmental or administrative agency or any other Person
to or of any of the transactions contemplated hereby shall
have been obtained and shall be in full force and effect; and
(B) No change or prospective change in law or
regulation, or any interpretation thereof by any court or
administrative banking or governmental authority charged or
claiming to be charged with the administration thereof
applicable to the Bank, the Letter of Credit or the Bonds or
change in circumstances affecting the market for tax exempt
securities has occurred, which in the opinion of the Bank,
would have any effect described in Section 1(c) or would
increase the risk to the Bank with respect to payments under
this Agreement or the security therefor.
SECTION 3. Obligations Absolute. Except to the extent
prohibited by applicable law which cannot be waived, the obligations of the
Partnership and the Guarantor under this Agreement shall be absolute,
unconditional and irrevocable, and shall be paid strictly in accordance with the
terms of this Agreement, under all circumstances whatsoever, including without
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<PAGE> 12
limitation the existence of any claim, set-off, defense or other right which the
Partnership and the Guarantor may have at any time against the Trustee, any
beneficiary or any transferee of the Letter of Credit (or any Person for whom
the Trustee, any such beneficiary or any such transferee may be acting), the
Bank or any other Person, whether in connection with this Agreement, any of the
other Basic Documents or any unrelated transaction.
SECTION 4. Security for Reimbursement Obligation.
(a) As security for payment of the obligations of the
Partnership and the Guarantor pursuant to Section 1 hereof or otherwise
hereunder, the Partnership has granted to the Original Trustee and the Original
Bank, and the Original Trustee has assigned to the Trustee its interest in, for
the benefit of the Bank and the Bondholders, (i) a first mortgage lien on the
Project realty, the priority of which shall be evidenced by a mortgagee title
insurance policy, subject only to exceptions other than Permitted Exceptions as
described in Exhibit B to the Mortgage, all of which the Bank must have
consented to in writing; (ii) a security interest in all machinery, equipment,
furniture, fixtures, and furnishings owned by Partnership and located at any
time on the Project site, and all contract rights of Partnership relating to the
Project; (iii) an assignment of any and all rents and leases relating to the
Project; and (iv) an assignment of all rights of the Partnership with respect to
the management, construction management, and leasing of the Project, and the
Partnership shall cause all direct interests and lien and security interests
held by the Original Bank in the foregoing to be assigned by the Original Bank
to the Bank. In addition, the reimbursement obligations and other of the
Partnership under this Agreement shall be unconditionally guaranteed by the
Guarantor pursuant to the Guaranty Agreement.
(b) As security for the payment of the obligations of the
Partnership and the Guarantor pursuant to Section 1 and otherwise hereunder the
Partnership hereby grants to the Bank a lien on moneys or instruments (at such
times as they become payable to the Partnership under the Indenture) which the
Partnership has an interest in or title to pursuant to the Indenture, now or
hereafter held in the Bond Fund or otherwise by the Trustee under any provision
of the Indenture and in the right of the Partnership to receive any such money
or instruments. The Bank hereby confirms that such lien is and shall be junior
and subordinate to the lien on such moneys in favor of the Trustee for the
Bondholders.
(c) As security for the payment of the obligations of the
Partnership and the Guarantor pursuant to Section 1 and
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<PAGE> 13
otherwise hereunder, the Partnership and the Guarantor hereby pledge, assign,
hypothecate, transfer, and deliver to the Bank all of its or their right, title,
and interest to the "Purchased Bonds" (as hereinafter defined) as the same may
be from time to time delivered to the Tender Agent or Paying Agent, as the case
may be by the owners thereof, which Purchased Bonds are deemed to be purchased
by the Partnership or the Guarantor, as the case may be, pursuant to Section 1
of this Agreement. The Partnership and the Guarantor hereby grant to the Bank a
first lien on, and security interest in, its or their right, title and interest
in and to the Purchased Bonds, the interest thereon and all proceeds thereof as
collateral security for the prompt and complete payment when due of all amounts
due in respect of the payment obligations of the Partnership and the Guarantor
set forth in this Agreement and interest on such amounts as set forth herein.
The term "Purchased Bonds" shall mean Bonds purchased with the proceeds of a
draw on the Letter of Credit as to which the Stated Amount of the Letter of
Credit has not been reinstated in the amount of such drawings made for
the payment of the portion of the purchase price with respect to principal of
such Bonds.
(d) As security for the payment of the obligations of the
Partnership and the Guarantor pursuant to Section 1 and otherwise hereunder, the
Partnership and the Guarantor hereby pledge, assign, hypothecate, transfer, and
deliver to the Bank all of its or their right, title, and interest to any and
all bank accounts, savings accounts, certificates of deposit or any other
accounts maintained by the Partnership or the Guarantor at the Bank. The
Partnership and the Guarantor acknowledge and agree that all monies held or
pledged to the Bank hereunder and the proceeds from investment thereof shall be
subject to the requirements of Section 7.8 of the Contract.
SECTION 5. Representations and Warranties of the Partnership
and the Guarantor
1. The Partnership represents and warrants as follows:
(a) Partnership Existence. The Partnership is a general
partnership duly organized validly existing and in good standing under
the laws of the State of Florida, and has all requisite partnership
power and authority to conduct its business, to own its properties and
to execute and deliver and to perform all of its obligations under the
Basic Documents.
(b) Authorization; No Conflict. The execution, delivery and
performance by the Partnership of this Agreement and each other Basic
Document are within the Partnership's powers, have been duly authorized
by all necessary partnership action,
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<PAGE> 14
and do not and will not (i) violate any provision of any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award presently in
effect having applicability to the Partnership or of the General Partnership
Agreement of the Partnership, bylaws of the Authority, including all amendments
thereto, (ii) result in a breach of or constitute a default under any indenture
or loan or credit agreement or any other agreement, lease or instrument to which
the Partnership is a party or by which it or its properties may be bound or
affected, or (iii) except as provided in or contemplated by the Basic Documents,
result in or require the creation of any lien, security interest or other charge
or encumbrance upon or with respect to any of the Partnership's properties.
(c) Approvals. No consent of any person and no authorization
or approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required for the valid or due
execution, delivery and performance by the Partnership of any Basic Document,
other than such consents, authorizations, approvals or actions which cannot be
obtained on the date hereof and are not required to be obtained on the date
hereof. The Partnership is in compliance with all of the terms and conditions of
each such consent, authorization, approval or action already obtained, has
applied for each such consent, authorization, approval or action that may be
applied for at this rime and has met or has made provisions adequate for meeting
all requirements for each such consent, authorization, approval or action nor
yet obtained.
(d) Binding Obligations. Each of the Basic Documents is a
legal, valid and binding obligation of the Partnership, enforceable against the
Partnership in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other laws or
equitable principles relating to or limiting creditors' rights generally.
(e) Litigation. There is no action, suit or proceeding pending
or, to the knowledge of the Partnership, threatened against or affecting the
Partnership or the properties of the Partnership before any court or
governmental department, commission, board, bureau, agency or instrumentality
which, if determined adversely to the Partnership would have a material adverse
effect on the financial condition, properties or operations of the Partnership,
except as set forth in Exhibit A hereof, or which questions the validity of any
Basic Document or any action taken or to be taken pursuant thereto.
(f) No Defaults. The Partnership is not in violation of any
statute or other law or in default under any order, regulation or ruling of any
court or other tribunal or
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<PAGE> 15
governmental or administrative authority or agency, or in default under its
General Partnership Agreement, any indenture, agreement, lease, instrument or
other undertaking to which the Partnership is a party or by which it or its
property or assets may be bound or affected, which has a material adverse effect
on the business or operations of the Partnership. No default has occurred with
respect to the Partnership.
(g) No Material Restrictions. The Partnership is not subject
to any charter, corporate or other legal restriction, or any contract, lease or
other agreement, or any judgment, decree, order, law, rule or regulation which
in the judgment of the Partnership has or is expected in the future to have a
materially adverse effect on the business, assets or financial condition of the
Partnership or on its ability to carry out its obligations under the Basic
Documents, except as otherwise reflected in adequate reserves.
(h) Information. No certificate, report or other paper
furnished by the Partnership to the Bank or any other Person in connection with
the Basic Documents contains as of its effective date any material misstatement
of fact or fails to state a material fact or any fact necessary to make the
statements contained therein not misleading in any material respect as of such
date, and all of the information contained therein is true, accurate and
complete in all material respects as of such date.
(i) Properties and Leases. The Partnership has good and
marketable title to all of its real and personal properties and tangible assets,
and except as otherwise heretofore disclosed to the Bank in writing, all such
properties and assets are free and clear of mortgages, security interests and
other encumbrances. The Partnership enjoys peaceful and undisturbed possession
in all material respects under all material leases as to which it is a lessee
and all such leases are valid and subsisting and in full force and effect.
(j) Financial Statements. The financial statements of the
Partnership which have been delivered to the Bank fairly present the financial
condition of the Partnership as of the dates thereof, all in accordance with
generally accepted accounting principles consistently applied, and since such
dates, there has been no material adverse change in such condition.
(k) ERISA Compliance. The Partnership is in substantial
compliance in all material respects with the applicable provisions of ERISA and
the regulations and published interpretations thereunder, and the Partnership
has not failed to comply with any such provision, regulation or interpretation
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<PAGE> 16
which would subject the Partnership to any material tax or penalty. No
Reportable Event (as defined in Section 4043(b) of Title IV of ERISA) has
occurred with respect to any pension plan which might constitute grounds for a
termination of, and no proceedings have been instituted by the Partnership to
withdraw from or to terminate, any pension plan as to which either may have any
material liability.
(l) Hazardous Substances. Except as heretofore separately
disclosed to the Bank in writing, the Project is presently in substantial
compliance with all applicable Hazardous Substance Laws relating to or affecting
the Project (including but not limited to, the discharge or removal of any
Hazardous Substances from the Project site), and to the Partnership's knowledge
there is not now pending or threatened any action, suit, investigation or
proceeding against the Partnership (other than as has been previously disclosed
in writing to the Bank) or the Project, or against any other party relating to
the Project, seeking to enforce any right or remedy under any applicable
Hazardous Substance Laws.
(m) Collateral. The provisions of the Mortgage Amendment and
Assignment will be effective to create in favor of the Bank a legal, valid and
enforceable security interest in and lien on the "Mortgaged and Secured
Property" (as defined in the Mortgage), upon the recording of the Mortgage
Assignment and Amendment and the filing of properly executed UCC-1 financing
statements.
2. The Guarantor represents and warrants as follows:
(a) Partnership Existence. The Guarantor is a limited
partnership duly organized, validly existing and in good standing under the
laws of the State of Delaware, and has all requisite capacity and authority to
enter into this Agreement and perform its obligations hereunder, and the
assumption by the Guarantor of its obligations hereunder will result in direct
financial benefits to the Guarantor.
(b) Binding Obligations. This Agreement constitutes a valid
and legally binding obligation enforceable against the Guarantor in accordance
with its terms.
(c) Authorization; No Conflict. Neither the execution,
delivery and performance of the Agreement by the Guarantor, nor the performance
of its terms, conditions or provisions by the Guarantor (i) conflicts with,
violates or results in a breach of any law, administrative regulation or court
decree applicable to the Guarantor, (ii) conflicts with, or
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<PAGE> 17
results in a breach of, any of the terms, conditions or provisions of any
restriction to which the Guarantor is subject.
(d) Approvals. No authorization, consent, approval, license,
exemption of or filing or registration with any court or governmental
department, commission, board, bureau, exchange control authority or
instrumentality, in any country, is or will be necessary to the valid execution,
delivery or performance (including making all payments in United States currency
as, when and where due) by the Guarantor of this Agreement.
(e) Financial Statements. The financial statements of the
Guarantor which have been delivered to the Bank fairly present the financial
condition of the Guarantor as of the dates thereof, all in accordance with
generally accepted accounting principles consistently applied, and since such
dates, there has been no material adverse change in such condition.
(f) Litigation. There are no actions, suits or proceedings
pending or, to the knowledge of the Guarantor, threatened against or affecting
the properties of the Guarantor before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
which, if determined adversely to the Guarantor, would have a material adverse
effect on its financial condition or properties.
(g) Disclosure. There are no facts that the Guarantor has
failed to disclose to the Bank that, individually or in the aggregate,
materially adversely affect or, as far as the Guarantor can foresee, will
materially adversely affect the business, properties, operations or condition
(financial or otherwise) or prospects of the Guarantor.
(h) Subordination. The Bank's agreement to issue the Letter of
Credit is acknowledged to be conditioned upon the subordination of the
Guarantor's management fees to the payment of Bonds and the obligations owing to
the Bank under this Agreement, and to the extent not specifically provided for
in the Basic Documents, the Guarantor hereby subordinates the payment of such
fees to the prior payment in full of the Bonds and the obligations owing to the
Bank under this Agreement, and agrees that no payment thereof shall be made
while there remains a payment default on the Bonds or under this Agreement.
SECTION 6. Covenants of the Partnership. The Partnership
shall, unless the Bank shall otherwise consent in writing, observe and perform
the following covenants and agreements:
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<PAGE> 18
(a) Preservation of Legal Existence, etc. The Partnership
shall preserve and maintain its legal existence, rights and privileges in the
State of Florida.
(b) Compliance with Laws, etc. The Partnership shall comply in
all material respects with all applicable laws, rules, regulations and orders of
any governmental authority, noncompliance with which would materially and
adversely affect the business or condition of the Partnership, such compliance
to include, without limitation, paying before the same become delinquent all
material taxes, assessments and governmental charges imposed upon it or upon its
property, except to the extent compliance with any of the foregoing is then
being contested in good faith.
(c) Maintenance of Insurance. The Partnership shall cause to
be maintained insurance with responsible and reputable insurance companies or
associations casualty, public liability and other insurance in such amounts and
covering such risks as are reasonably satisfactory to the Bank, and shall cause
the Bank to be named in all policies as loss payee and an additional insured as
its interests may appear and shall provide evidence of compliance with this
covenant to the Bank in the form of certificates of insurance and endorsements.
(d) Visitation Rights. At any reasonable time and from time to
time upon reasonable notice, the Partnership shall permit the Bank or any agents
or representatives of the Bank to examine and make copies of and abstracts from
the records and books of account of, and visit the properties of, the
Partnership and discuss the general business affairs of the Partnership with its
officers.
(e) Records and Accounts. The Partnership shall keep true
records and books of account in which entries will be made in accordance with
Generally Accepted Accounting Principles consistently applied and will maintain
accounts and reserves adequate in the opinion of the Partnership for all taxes
(including income taxes), all depreciation, depletion, obsolescence and
amortization of its properties, all other contingencies and all other proper
reserves.
(f) Payment of Debts, Taxes, etc. The Partnership shall pay,
or cause to be paid, all of its debts and perform, or cause to be performed, all
of its obligations promptly and in accordance with the respective terms thereof,
and promptly pay and discharge, or cause to be paid and discharged, all taxes,
assessments and governmental charges or levies imposed upon it, upon its income
or receipts or upon any of its assets or properties before the same shall become
in default, as well as
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pay all lawful claims for labor, materials and supplies or otherwise that, if
not so paid, could or would result in the imposition of a lien or charge upon
such assets or properties or any part thereof; provided, however, that it shall
not constitute an Event of Default hereunder if the Partnership fails to perform
any such obligation or to pay any such debt (except for any indebtedness owing
under or in respect of any Bond Document), tax, assessment, or governmental or
other charge, levy or claim that is being contested in good faith and by proper
proceedings diligently pursued, if the effect of such failure to pay or perform
has not been to accelerate the maturity thereof or of any other debt or
obligation of the Partnership or to subject any part of the assets and
properties of the Partnership to forfeiture, and if the Partnership has obtained
therefor an adequate bond or adequate insurance or established therefor a
reserve of an adequate amount.
(g) Further Assurances. The Partnership shall execute and
deliver to the Bank such further instruments, provide it with such further data
and information and take such further action as the Bank may reasonably request
or as may be necessary further to effect the purposes of the Basic Documents.
(h) Financial Statements and Other Information. The
Partnership shall furnish to the Bank such information including, without
limitation, prompt notice of the commencement of any material litigation against
the Partnership, and all financial statements prepared by the Partnership for
its own use and accountants' management letters, respecting the business,
properties or the condition or operations, financial or otherwise, of the
Partnership as the Bank may from time to time reasonably request.
(i) Maintenance of Properties. The Partnership shall cause all
of its properties used or useful in the conduct of its business as it relates to
the Project to be maintained and kept in good condition, repair and working
order and supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as in the judgment of the Partnership may be necessary so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times.
(j) Conduct of Business. The Partnership shall continue to
engage primarily in the business now conducted by it and not change the general
nature of its business without prior written consent of the Bank.
(k) Financial Covenants. The Project shall maintain a 1:1 debt
service coverage ratio. The debt service coverage ratio
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shall be calculated as follows: net profit after tax plus depreciation and
amortization expense minus dividends paid, plus interest expense plus management
and guaranty fees (other than those management and guaranty fees expressly
subordinated to the obligations owing to the Bank under the Agreement) divided
by current maturities of long-term debt, plus interest expense.
(l) ERISA Compliance. The Partnership will maintain each of
its pension plans or programs as to which it may have liability in compliance in
all material respects with the applicable provisions of ERISA and the
regulations and published interpretations thereunder the failure to comply with
which, could subject the Partnership to a tax or penalty which might have
material adverse effect on its financial condition.
(m) Hazardous Substances.
(i) The Partnership shall use its best efforts to comply with,
and ensure substantial compliance by all tenants or occupants of the
Project with all applicable Hazardous Substance Laws relating to or
affecting the Project, and the Partnership shall use its best efforts
to keep the Project free and clear of any liens imposed pursuant to any
applicable Hazardous Substance Laws, all at the Partnership's sole cost
and expense. The Partnership will at all times obtain and or maintain
all licenses, permits and/or governmental or regulatory actions made
known to the Partnership or of which the Partnership is or becomes
aware of which are necessary to comply with applicable Hazardous
Substance Laws relating to or affecting the Project or the
Partnership's use of the Project, and the Partnership shall be and
shall continue to be at all times in substantial compliance with the
terms and provisions thereof.
(ii) The Partnership agrees to indemnify the Bank and hold the
Bank harmless from and against any and all losses, liabilities,
including liability, damages, injuries, expenses, including strict
liability, damages, injuries, expenses, including reasonable attorneys'
fees, costs of any settlement or judgment or claims of any and every
kind whatsoever paid, incurred or suffered by, or asserted against,
the Bank by any person or entity or governmental agency for, with
respect to or as a result of, the presence on or under, or the escape,
seepage, leakage, spillage, discharge, emission, discharging or release
from, the Project of any Hazardous Substance (including, without
limitation, injuries, expenses, including reasonable attorneys' fees,
costs of any settlement or judgment or claims, asserted or arising
under the Comprehensive
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<PAGE> 21
Environmental Response, Compensation and Liability Act, any so called
federal, state or local "Superfund" or "Superlien" laws, and any
statute, law ordinance, code, rule, regulation, order or decree
regulating, relating to or imposing liability, including strict
liability, or standards of conduct concerning any Hazardous Substance).
(iii) If the Partnership receives any notice of (A) the
happening of any significant event involving the use, spill, release,
leak, seepage, discharge or cleanup of any Hazardous Substance at the
Project site or in connection with the Partnership's operations
thereon, or (B) any environmental compliant, then the Partnership shall
immediately notify the Bank in writing of said notice.
(iv) The Bank shall have the right in its sole discretion
under the circumstances set forth below, to require the Partnership to
perform (at the Partnership's expense) an environmental risk
assessment, each of which must be satisfactory to the Bank, with regard
to the Project or with regard to the hazardous waste management
practices used directly by the Partnership or by its agents in
connection with the Project. Such audit or environmental risk
assessment shall be reasonable in scope, and the Partnership shall have
the opportunity to review and participate in any such audit or
assessment and participate in any such determination as to scope. Said
audit and/or risk assessment must be an environmental consultant
satisfactory to the Bank and may be requested by the Bank in its
reasonable business judgment based upon the Bank becoming aware of an
event, condition or occurrence involving the use, spill or release of
Hazardous Substances on the Project site creating a material or
substantial environmental hazard. Prior to making the request for such
an environmental audit or environmental risk assessment, the Bank shall
notify the Partnership of the basis for its request in writing and with
sufficient specificity and the Partnership shall be given 30 days to
provide the Bank with either evidence satisfactory to the Bank that the
basis for such audit or assessment request is inaccurate or why the
condition is not hazardous. Should the Partnership fail to begin any
such environmental audit or risk assessment with 60 days of the Bank's
written request, the Bank shall have the right but not the obligation
to retain an environmental consultant to perform any such environmental
audit or risk assessment which reasonably addresses the basis for its
concern. All reasonable costs and expenses incurred by the Bank in the
exercise of such rights shall be payable by the Bank upon demand and
shall be secured by all collateral available to the Bank.
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<PAGE> 22
(v) The obligations of the Partnership under clause (ii) shall
survive the termination of this Agreement.
(n) Defaults. The Partnership will promptly notify the Bank of any
Event of Default of which the Partnership has knowledge, setting forth the
details of such Event of Default and any action which the Partnership proposes
to take with respect thereto.
(o) Related Covenants. The Partnership will fully and faithfully
perform each of the covenants and agreements required of it pursuant to the
provisions of the Basic Documents.
(p) Basic Documents. Except as permitted in the Basic Documents, the
Partnership will not directly or indirectly amend, supplement, terminate or
waive, or consent to the amendment, supplement, termination or waiver of, any of
the provisions of the Basic Documents or enter into any new Basic Documents,
without the express written consent of the Bank as to the form and substance of
such new Basic Document or such amendment, supplement, termination, waiver or
consent (which consent shall not be unreasonably withheld).
(q) Transfers or Encumbrances. The Partnership will not hereafter sell,
transfer or create or permit the creation of any pledge, assignment,
encumbrance, lien, mortgage, restriction, security interest in or to the Project
other than the Mortgage and as permitted thereby.
(r) Reorganization or Fundamental Change. The Partnership will not
initiate any proceedings to dissolve or liquidate without making prior
provisions for the payment in full of its indebtedness, nor will it sell, lease
or transfer a material part of its assets to any person except with the prior
written consent of the Bank.
SECTION 7. Covenants of the Guarantor. (a) The Guarantor covenants to
maintain the following financial status until the termination date of the Letter
of Credit, with determination of compliance being made quarterly:
(i) Current Ratio. The Guarantor shall at all times maintain a
"Current Ratio" of at lease 1.5 to 1. "Current Ratio" shall be defined
as the ratio of Current Assets to Current Liabilities.
(ii) Working Capital. The Guarantor shall at all time maintain
a minimum "Working Capital" level of $10,000,000. "Working Capital"
shall be defined as Current Assets less Current Liabilities.
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<PAGE> 23
(iii) Funded Debt to Adjusted Tangible Net Worth Ratio. The
Guarantor shall at all time maintain a "Funded Debt" to "Adjusted
Tangible Net Worth" ratio of no more than 3.5 to 1 until December 31,
1992 and thereafter of no more than 3.25 to 1. "Funded Debt" is defined
as long term debt, but excluding Subordinated Debt, notes payable,
current maturities of long term debt, plus capitalized and operating
leases, plus all guaranties. "Adjusted Tangible Net Worth" is defined
as total equity of the Guarantor, plus approximately Fifteen Million
Seven Hundred Forty-Five Dollars ($15,745,000) in deferred income
resulting from the profit on the sale of nursing home properties
[National] as equity (which amount shall decrease in accordance with
the Guarantor's books and records that comply with generally accepted
accounting principles), plus "Subordinated Debt", minus good will and
unamortized loan costs in excess of One Million Four Hundred Thousand
and No/100 Dollars ($1,400,000.00). "Subordinated Debt" is defined as
any indebtedness of the Guarantor which is approved by the Bank and to
the extent applicable is calculated in accordance with that certain
Loan and Security Agreement dated December 16, 1988 between the
Guarantor, the National Health Corporation Leveraged Employee Stock
Ownership Trust, Third national Bank in Nashville and certain other
parties and that certain Guarantee and Contingent Purchase Agreement
dated December 16, 1989 between the Guarantor, Third National Bank in
Nashville, and certain other parties.
(iv) Tangible Net Worth. The Guarantor shall at all times
maintain minimum Tangible Net Worth requirements for the following
periods:
$44,200,000 from the date hereof through December 30,
1990; and
On December 31, 1990 and on subsequent calendar
quarter endings, the minimum Tangible Net Worth
requirements will increase $1,400,000 per quarter on
a cumulative basis.
"Tangible New Worth" is defined as total equity of the
Guarantor, plus Subordinated Debt, minus good will and
unamortized loan costs in excess of One Million Four Hundred
Thousand Dollars ($1,400,000).
(v) Debt Service Coverage. The Guarantor shall at all times
maintain a minimum "Debt Service Coverage" of 1.3 to 1. Debt Service
Coverage" is defined as the ratio of (A) the annualized sum of net
income, plus depreciation/
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<PAGE> 24
amortization, plus interest expense, minus distributions paid to
holders of units of the Guarantor in written financial projections
furnished to Bank or as actually paid, whichever is greater to (B)
interest expense, plus current maturities of long term debt, plus any
payments required to fund any guaranty obligations of the Guarantor.
(b) Defaults. The Guarantor will promptly notify the Bank of
any Event of Default of which the Guarantor has knowledge, setting forth the
details of such Event of Default and any action which the Guarantor proposes to
take with respect thereto.
SECTION 8. Events of Default and Default Rate. The occurrence
of any of the following events shall constitute an "Event of Default" hereunder:
(a) any representation or warranty made by the Partnership or
the Guarantor in connection with any Bond Document shall prove to have been
false or misleading in any material respect when made, regardless of whether it
was made only to the knowledge of the Partnership or the Guarantor; or
(b) the Partnership or the Guarantor shall fail to pay when
due any amount specified in Section l(a) hereof; or
(c) the Partnership and the Guarantor shall fail to pay when
due any amount specified in Section l(b) or l(c) hereof and any such failure
shall remain unremedied for five days; or
(d) the Partnership and the Guarantor shall fail to perform or
observe any other term, covenant or agreement contained in this Agreement, and
such failure shall remain unremedied for 30 days after written notice thereof
shall have been given to the Partnership and the Guarantor by the Bank; or
(e) there shall occur an Event of Default under any other
Basic Document;
(f) the Partnership shall fail to make any payment owing by it
under the Contract when due and payable including, without limitation, the
payments specified in Section 5.1 of the Contract;
(g) the Partnership or the Guarantor shall file any petition
or action for relief under any bankruptcy, reorganization, insolvency or
moratorium law, or any other law or laws for the relief of, or relating to,
debtors; or
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<PAGE> 25
(h) an involuntary petition shall be filed under any
bankruptcy statute against the Partnership or the Guarantor and such petition
shall not have been dismissed within 90 days, or a receiver, custodian, trustee,
assignee for the benefit of creditors (or other similar official) shall be
appointed to take possession or control of all or substantially all of the
properties of the Partnership or the Guarantor; or
(i) any material provision of this Agreement, or of any of the
Basic Documents shall at any time for any reason cease to be valid and binding
in accordance with its terms on the Partnership or the Guarantor, or the
validly, enforceability, or priority thereof shall be contested by the
Partnership or the Guarantor.
If the Partnership or the Guarantor fails to make payment of
any amounts due hereunder at the time such amounts are due, interest shall
accrue and shall be due and payable on demand at the Bank Rate plus 2%.
SECTION 9. Rights and Remedies.
(a) Defaults under this Agreement. Upon the occurrence of an
Event of Default hereunder, the Bank, in its sole discretion, may proceed to
protect and enforce its rights by suit in equity, action at law and/or other
appropriate proceeding either for specific performance of any covenant or
condition contained in this Agreement or in any instrument or assignment
delivered to the Bank pursuant to this Agreement or in aid of the exercise of
any power granted in this Agreement or any such instrument or assignment and the
Bank may:
(i) by notice in writing to the Partnership and the Guarantor
declare all or any part of the amount equivalent to the Stated Amount
available under the Letter of Credit and all obligations then
outstanding under this Agreement to be forthwith due and payable, and
thereupon the same shall become so due and payable without
presentation, protest or further demand or notice of any kind, all of
which are hereby expressly waived;
(ii) furnish a written notice to the Partnership, the
Guarantor and the Trustee stating that an Event of Default exists
hereunder and requesting that the Trustee, pursuant to Section 9.2 of
the Contract and Section 802 of the Indenture, declare all Bonds then
outstanding to be due and payable immediately; and
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<PAGE> 26
(iii) exercise any rights and remedies available to it by law
or under this Agreement, the Guaranty Agreement or any other Basic
Document.
(b) Default Under Other Documents. The Bank may cure any Event
of Default under the Indenture specified by the Trustee; provided, however, that
nothing contained herein shall obligate the Bank to cure such an Event of
Default.
SECTION 10. No Waiver, Remedies. No failure on the part of the
Bank to exercise, and no delay in exercising, any right hereunder shall operate
as a waiver thereof; nor shall any single or partial exercise of any right
hereunder preclude any other further exercise thereof or the exercise of any
other right. The remedies herein provided are cumulative and not exclusive of
any remedies provided by law.
SECTION 11. Right of Set-Off. Nothing contained in this
Agreement shall be deemed to waive or limit in any manner the Bank's right to
set off any or all deposits at any time held, and any other indebtedness at any
time owing by the Bank to or for the credit or the account of the Partnership
and the Guarantor, against any and all obligations of the Partnership and the
Guarantor now or hereafter existing in respect of the reimbursement and other
obligations of Partnership and the Guarantor hereunder.
SECTION 12. Indemnification. To the extent not prohibited by
applicable law which cannot be waived, the Partnership and the Guarantor each
hereby indemnifies and holds harmless the Bank from and against any and all
claims, damages, losses, liabilities, reasonable costs or expenses whatsoever
which the Bank may incur (or which may be claimed against the Bank by any person
or entity whatsoever) by reason of or in connection with the execution and
delivery or transfer of, or payment or failure to pay under, the Letter of
Credit, including those arising from or based upon information furnished by the
Partnership and the Guarantor or any other Person and alleged to have contained
any material misstatements or to have been materially misleading or to have
omitted material information; provided, that the Partnership and the Guarantor
shall not required to indemnify the Bank for any claims, damages, losses,
liabilities, costs or expenses to the extent but only to the extent caused by
the willful misconduct or gross negligence of the Bank. Nothing in this Section
12 is intended to limited the reimbursement obligation of the Partnership and
the Guarantor contained in Section 1.
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<PAGE> 27
SECTION 13. Continuing Obligation; Assignment. All covenants,
agreements, representations and warranties made or incorporated herein and in
certificates delivered pursuant hereto to the Bank, notwithstanding any
investigation made by the Bank or on its behalf, and shall survive the execution
and delivery to the Bank hereof and thereof. This Agreement is a continuing
obligation and shall (a) be binding upon the Partnership, the Guarantor and
their respective successors and assigns and (b) inure to the benefit of and be
enforceable by the Bank and its successors, transferees and assigns; provided,
that the Partnership and the Guarantor may not assign all or any part of this
Agreement without the prior written consent of the Bank.
SECTION 14. Transfer of Letter of Credit, Reduction,
Reinstatement and Termination of Letter of Credit and Related Matters.
(a) The Letter of Credit may be transferred in accordance with
the provisions set forth therein.
(b) Upon receipt by the Bank of a certificate from the Trustee
stating the Partnership is entitled to a credit against the principal amount of
Bonds by reason of a partial redemption of such Bonds in accordance with Section
301(e) of the Indenture and certifying the principal amounts of Bonds deemed to
have been paid and discharged pursuant to the Indenture, then the stated Amount
shall be permanently reduced, without penalty or premium, by an amount equal to
the sum of such credit plus an amount equivalent to 210 days' interest thereon
at 13% per annum (computed on the basis of a year consisting of 365 or 366 days
based on the actual number of days elapsed); provided, that the principal
component of any such partial reduction of the Letter of Credit shall be in the
amount of $5,000 or an integral multiple thereof.
(c) Upon partial reduction of the Stated Amount pursuant to
paragraph (b) hereof, the Bank shall have the right, exercisable by prior
written notice to the Trustee, to require the Trustee to surrender the Letter of
Credit to the Bank on the tenth business day following such notice and to accept
on such date, in substitution for the Letter of Credit, a substitute irrevocable
letter of credit in the form of Exhibit I hereto, dated such date, for an amount
equal to the amount to which the Stated Amount shall have been so reduced but
otherwise having terms identical to the Letter of Credit.
(d) Upon any remarketing or other sale of Purchased Bonds
which have previously been delivered to the Tender Agent, the obligation of the
Bank to honor demands for payment under the
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<PAGE> 28
Letter of Credit with respect to the payment of principal or the portion of the
purchase price corresponding to principal of Bonds will be reinstated by an
amount equal to the aggregate principal amount of such Bonds, provided that such
reinstatement shall not cause the amount of the Letter of Credit to exceed the
Stated Amount (as defined in the Letter of Credit), and provided further, that
the Bank shall be under no obligation to consent to any remarketing or other
sale of Purchased Bonds.
(e) On the Business Day following any drawing on the Letter of
Credit, the obligation of the Bank to honor demands for payment under the Letter
of Credit for interest, or the portion of purchase price corresponding to
interest on the Bonds will be reinstated to an amount equal to 210 days' accrued
interest (at an assumed rate of 13% per annum, calculated on the basis of a year
of 365 days, based on the actual number of days elapsed) on the outstanding
principal amount of the Bonds, provided that the Letter of Credit shall not be
reinstated if (i) the Bank has not been reimbursed as required hereunder for
such drawing or for a previous or subsequent drawing under the Letter of Credit
and the Bank shall have notified the Trustee by telephone or telex prior to the
Business Day following the day on which such drawing was made, and subsequently
confirmed in writing, that the Letter of Credit shall not be reinstated, or (ii)
an Event of Default shall have occurred and then be continuing.
(f) Upon termination of the Letter of Credit on the Conversion
Date and provided all payment obligations hereunder have been satisfied, the
Bank shall promptly refund to the Partnership and the Guarantor all moneys then
held by the Bank in the Florida Convalescent Associates Amortization Installment
Subaccount created pursuant to Section 1(a)(ii) hereunder.
SECTION 15. Liability of Bank. (a) The Bank may accept
documents that appear on their face to be in order, without responsibility for
further investigation, regardless of any notice or information to the contrary.
The Bank may honor, as complying with the terms of the Letter of Credit and this
Agreement, any documents otherwise in order signed or issued by a successor
trustee under the Indenture. Any action, inaction or omission on the part of the
Bank under or in connection with the Letter of Credit or related instruments or
documents, if in good faith and in conformity with such laws, regulations or
commercial or banking customs as the Bank may deem to be applicable, shall be
binding upon the Issuer, the Partnership and the Guarantor, shall not place the
Bank under any liability to the Issuer, the Partnership and the Guarantor, and
shall not affect, impair or prevent the vesting of any of the rights or powers
of the Bank hereunder. Nothing in this Section 15(a) is intended or shall be
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<PAGE> 29
construed to limit the reimbursement obligations of the Partnership and the
Guarantor contained in Section 1.
(b) If the Partnership and the Guarantor request or consent in
writing to any modification or extension of the Letter of Credit or waive
failure of any draft, certificate or other document to comply with the terms of
the Letter of Credit, the Bank shall be deemed to have relied and be entitled to
rely on such request, consent or waiver with respect to any action taken or
omitted by the Bank pursuant thereto, and such modification, extension or waiver
shall be binding upon the Company and the Guarantor.
(c) Notwithstanding anything to the contrary contained in the
Agreement, in the event the Bank shall fail to honor a draw properly submitted
to it under the terms of the Letter of Credit or there shall have occurred an
Act of Bankruptcy of the Bank, all moneys held by the Bank for the benefit of
the Partnership and the Guarantor pursuant to Section 1(a)(ii) of this Agreement
shall be promptly remitted to the Trustee to be held for the benefit of the
Bondholders. Upon the occurrence of a default by the Bank (whether by failure to
honor a draw under the Letter of Credit set forth above or an Act of Bankruptcy)
and provided the Partnership and the Guarantor have satisfied all obligations to
the Bank hereunder, any and all liens, pledges, assignments, transfers and
hypothecations granted hereunder or pursuant to the terms hereof shall be, and
shall be deemed to be, released, cancelled and satisfied.
SECTION 16. Costs, Expenses and Taxes. The Partnership and the
Guarantor agree to pay on demand all reasonable costs and expenses incurred by
the Bank in connection with the preparation, execution, delivery and
administration of the Letter of Credit and this Agreement and any other
documents which may be delivered in connection therewith including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for the
Bank with respect thereto and with respect to advising the Bank as to its rights
and responsibilities under the Basic Documents and all costs and expenses, if
any, in connection with the enforcement of the Basic Documents and such other
documents. In addition, the Partnership shall pay any and all stamp and other
taxes and fees payable or determined to be payable in connection with the
execution, delivery, filing and recording of any of the Basic Documents and
such other documents and agrees to save the Bank harmless from and against any
and all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes and fees.
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SECTION 17. Definitions. All capitalized terms not otherwise
defined herein shall have the meanings set forth in the Indenture. The following
terms, not otherwise defined herein, as used in this Agreement and any
certificate or document executed in connection therewith shall have the
following meanings:
"Act of Bankruptcy" means the filing of a petition in
bankruptcy (or other commencement of a bankruptcy or similar proceeding) by or
against the Partnership, the Guarantors, the Issuer or the Bank under any
applicable bankruptcy, insolvency or similar law as now or hereinafter in
effect.
"Bank Assignment of Mortgage" means the Assignment of Mortgage
and Security Agreement, dated as of the Date of Issuance, between the Original
Bank and the Bank.
"Bank Rate" means the rate announced by the Bank from time to
time as its prime rate; any change in the Bank Rate shall take effect on the
date specified in the announcement of such change.
"Basic Documents" mean each of this Agreement, the Indenture,
the Contract, the Bonds, the Mortgage, the Trustee Assignment of Mortgage, the
Bank Assignment of Mortgage, the Mortgage Amendment, the Substitution Agreement,
the Guaranty Agreement and the Remarketing Agreement.
"Bondholder" has the meaning provided for in the Indenture.
"Business Day" has the meaning provided for in the Letter of
Credit.
"Current Assets" means the aggregate amount of assets of the
indicated Person which may properly be classified as current assets in
accordance with Generally Accepted Accounting Principles on a consolidated
basis.
"Current Liabilities" means all liabilities of the indicated
Person maturing on demand or within one year from the date as of which current
liabilities are to be determined and such other liabilities (including taxes
accrued or estimated and amounts owed which have been accelerated) as may
properly be classified as current liabilities on a balance sheet in accordance
with Generally Accepted Accounting Principles on a consolidated basis.
"Default" means any Event of Default or any event,
circumstance or condition which, with the giving of notice or the passage of
time or both, would constitute an Event of Default
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<PAGE> 31
including, without limitation, an Event of Default under any Bond Document
incorporated by reference in Section 8(e).
"generally accepted accounting principles" means generally
accepted accounting principles as defined by the Financial Accounting Standards
Board as from time to time in effect that are consistently applied and, when
used with respect to the Partnership or the Guarantor, as the case may be, that
are consistent with the accounting practice of the Partnership or the Guarantor,
as the case may be reflected in the financial statements for the Partnership or
the Guarantor, as the case may be, with such changes as may be approved by an
independent public accountant satisfactory to the Bank.
"Guaranty Agreement" means the Guaranty Agreement between the
Guarantor and the Bank, substantially in the form attached hereto as Exhibit II.
"Hazardous Substances" mean and include those elements or
compounds which are contained in the list of hazardous substances adopted by the
United States Environmental Protection Agency or by any agency of the State of
Florida or the list of toxic pollutants designated in or which are defined as
hazardous, toxic, pollutant, infectious or radioactive by any Hazardous
Substance Laws.
"Hazardous Substance Laws" means any federal, state or local
statute, law, ordinance, code, rule, regulation, order or decree regulating,
relating to or imposing liability or standards of conduct concerning, any
hazardous, toxic or dangerous waste, substance or material, as now or any time
hereafter in effect.
"Mortgage Amendment" means that certain Amendment No. 1 to
Mortgage and Security Agreement, dated as of the Date of Issuance, among the
Company, the Trustee and the Bank.
"Participant means any bank or financial institution
to which the Bank or any Participant has granted a participation in the Letter
of Credit.
"Person" means a corporation, association, partnership, joint
venture, trust, organization, business, individual or government or any
governmental agency or political subdivision thereof.
"Project" has the meaning provided for in the Indenture.
"Stated Amount" means the Stated Amount in effect under the
Letter of Credit from time to time.
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<PAGE> 32
"Substitution Agreement" means the Substitution Agreement
dated of the Date of Issuance among the Company, the Guarantor, James McCarver,
the Original Bank, the Bank, the Issuer, the Original Trustee, the Co-Trustee
and the Trustee.
"Termination Date" means the date on which all Bonds have been
paid in full, all amounts due hereunder to the Bank have been paid in full and
the collateral securing this Agreement has been released by the Bank.
"Trustee Assignment of Mortgage" means the Assignment of
Mortgage and Security Agreement, dated as of the Date of Issuance, between the
Original Trustee and the Trustee.
Any reference in this Agreement to the Issuer or the Trustee
shall include those which succeed to their functions, duties or responsibilities
pursuant to or by operation of law or who are lawfully performing their
functions. Any reference in this Agreement to any statute or law or chapter or
section thereof shall include all amendments, supplements or successor
provisions thereto.
SECTION 18. Amendments, Etc. No amendment or waiver of any
provision of this Agreement nor consent to any departure by the Partnership and
the Guarantor therefrom shall in any event be effective unless the same shall be
in writing and signed by the Bank, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
SECTION 19. Notices. Unless otherwise specifically provided
for in this Agreement, all notices, requests and other communications shall be
in written (including telecopy, telex or similar writing) form and shall be
given to the party to whom sent, addressed to it, at its address set forth below
or such other address or telecopy or telex number as such party may hereafter
specify for the purpose by notice to the other parties set forth below. Each
such notice, request or communication shall be effective (i) if given by telex
or telecopy means, which such communication is transmitted to the address
specified below and the appropriate answer back is received, (ii) if given by
mail, four Business Days after such communication is deposited in the mails with
first class postage prepaid, addressed as aforesaid or (iii) if given by any
other means, which delivered at the address specified below.
- 29 -
<PAGE> 33
If to the Partnership:
Florida Convalescent Associates
c/o Florida Convalescent Centers, Inc.
8242 Cypress Hollow Drive
Sarasota, Florida 34238
Attention: James McCarver
Telephone: (813) 921-6061
and
If to the Guarantor:
National HealthCorp L.P.
100 Vine Street
P.O. Box 1398
Murfressboro, Tennessee 37133
Attention: Richard F. LaRoche, Jr.
Telephone: (615) 890-2020
Fax: (615) 890-0123
If to the Bank:
The Bank of Tokyo, Ltd., New York Agency
National Banking Department
100 Broadway
New York, New York 10005
Telephone: (212) 766-3539
Fax: (212) 349-7964
SECTION 20. Participations. The Bank may at any time grant a
participation to any Participant in any or all of the obligations of the
Partnership and the Guarantor hereunder and under the Letter of Credit; provided
that the Partnership and the Guarantor shall have the right to continue to deal
solely with the Bank, and further provided that no such participation shall
cause any national rating agency to withdraw or lower the bond rating of the
Bonds, if the Bonds are then rated, or affect the tax-exempt status of interest
on the Bonds.
SECTION 21. Jurisdiction. The Partnership and the Guarantor
each agrees that any legal action or proceeding in connection with this
Agreement, the Letter of Credit or the Basic Documents involving the Bank (other
than the Mortgage) will be brought in the courts of the State of New York
located in the
- 30 -
<PAGE> 34
Borough of Manhattan, City of New York or in the United States District Court
for the Southern District of New York, and may be brought by the Bank in such
courts or any other court to the jurisdiction of which the Partnership or the
Guarantor or any of their respective property is or may be subject. The
Partnership and the Guarantor each irrevocably submits to the jurisdiction of
said courts of the State of New York or the United States, and to the extent
permitted by applicable law, each waives and agrees not to assert, as a defense
or otherwise, in any such action or proceeding, any claim that it is not
personally subject to the jurisdiction of such courts, that the action or
proceeding is brought in an inconvenient forum or the venue thereof is improper,
or that the Basic Documents or the subject matter thereof may not be enforced in
or by such courts. The Partnership and the Guarantor each agrees that service of
process may be made on its by certified or registered mail to the address
specified in Section 19, or any other method authorized by the laws of the State
of New York.
SECTION 22. Waiver of Jury Trial. IN CONSIDERATION OF THE
LETTER OF CREDIT AND THE INTEREST, FEES AND COLLATERAL WITH RESPECT THERETO
PROVIDED FOR IN THE BASIC DOCUMENTS, AND THE FACT THAT THE TIME AND EXPENSE
REQUIRED FOR A TRIAL BY JURY EXCEED THE TIME AND EXPENSE REQUIRED FOR A BENCH
TRIAL, THE BORROWER, THE GUARANTOR AND THE BANK HEREBY IRREVOCABLY WAIVE ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED
UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THE BASIC
DOCUMENTS, OR THE ACTIONS OF THE BANK IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE OR ENFORCEMENT THEREOF.
SECTION 23. Severability. Any provision of this Agreement
which is prohibited, unenforceable or not authorized in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or nonauthorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
SECTION 24. Governing Law. This Agreement shall be governed
by, and construed in accordance with, the law of the State of New York.
SECTION 25. Headings. Section headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
- 31 -
<PAGE> 35
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
FLORIDA CONVALESCENT ASSOCIATES
By: Florida Convalescent Centers,
Inc.
General Partner
By: /s/
----------------------------------
Title: President
NATIONAL HEALTHCORP L.P.
By: NHC, Inc.
Managing Partner
By: /s/
----------------------------------
Title: Senior Vice President
THE BANK OF TOKYO, LTD.
NEW YORK AGENCY
By: /s/
-----------------------------------
Title: Attorney-in-Fact
- 32 -
<PAGE> 1
Exhibit 10.28
================================================================================
CONTRIBUTION AND ASSUMPTION AGREEMENT
Between
NATIONAL HEALTHCORP L.P.
and
NATIONAL HEALTH INVESTORS, INC.
EFFECTIVE OCTOBER 17, 1991
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1. The Transaction........................................... 1
1.1. Nursing Home & Retirement Center Assets
Contributed............................................... 1
1.2. Notes Contributed......................................... 2
1.3. Assumed Liabilities....................................... 2
1.4. Leaseback of Facilities................................... 2
ARTICLE 2. Share Issuance for Capital Contribution................... 2
2.1. Issuance of Shares........................................ 2
ARTICLE 3. Representations and Warranties by NHLP.................... 3
3.1. Organizational Status..................................... 3
3.2. Authorization............................................. 3
3.3. Good and Marketable Title................................. 3
3.4. Compliance with Laws...................................... 3
3.5. No Breach of Statute, Decree or Contract.................. 3
3.6. No Litigation, Etc. ..................................... 4
3.7. Licenses, Permits and Standards........................... 4
3.8. Governmental Reports...................................... 5
3.9. Environmental Issues...................................... 5
3.10. Plans of Correction....................................... 5
3.11. Cost Reports.............................................. 5
3.12. Physical Plant, Equipment and Utilities................... 5
3.13. Accuracy of Documents..................................... 6
ARTICLE 4. Representations and Warranties by NHI-REIT................ 6
4.1. Corporate................................................. 6
4.2. No Breach of Statute or Contract.......................... 6
4.3. No Litigation or Adverse Events........................... 6
ARTICLE 5. Closing; Post Closing..................................... 6
5.1. Closing................................................... 6
5.2. NHLP's Deliveries......................................... 7
5.3. NHI-REIT's Deliveries..................................... 7
5.4. Post-Closing Deliveries................................... 8
ARTICLE 6. Indemnification........................................... 8
6.1. Indemnification by NHLP................................... 8
6.2. Indemnification by NHI-REIT............................... 9
6.3. Taxes..................................................... 9
6.4. Notice Requirements....................................... 9
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE 7. Other Covenants and Contractual Provisions................ 10
7.1. Notices................................................... 10
7.2. Transfer Taxes............................................ 10
7.3. Expenses.................................................. 11
7.4. Headings.................................................. 11
7.5. Governing Law............................................. 11
7.6. Assignment................................................ 11
7.7. Counterparts.............................................. 11
7.8. Survival of Provisions.................................... 11
7.9. Exhibits.................................................. 11
7.10. Finder's Fees............................................. 11
</TABLE>
ii
<PAGE> 4
CONTRIBUTION AND ASSUMPTION AGREEMENT
This Agreement is entered into effective as of October 17, 1991, by
and between NATIONAL HEALTHCORP L.P., a Delaware limited partnership ("NHLP"),
and NATIONAL HEALTH INVESTORS, INC., a Maryland corporation ("NHI-REIT").
R E C I T A L S :
WHEREAS, NHLP is the owner or lessee of certain property described in
Section 1.1 with respect to the nursing homes and retirement centers described
in Section 1.1 hereof (collectively the "Facilities") and to certain notes and
security documents described in Section 1.2 hereof ("Notes") (the Facilities and
Notes shall be referred to collectively as the "Assets"); and
WHEREAS, NHLP desires to convey and transfer to NHI-REIT all
of NHLP's right, title, and interest in and to the Assets; and
WHEREAS, in exchange for the Assets, NHI-REIT shall assume and agree to
timely discharge certain liabilities and liens and exceptions with respect to
such property as described in Section 1.3, and NHI-REIT shall issue stock to
NHLP as its sole shareholder, all on the terms as provided in this Agreement;
and
WHEREAS, NHI-REIT shall lease the Facilities back to NHLP as
provided in this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties, intending to be
legally bound, hereby agree as follows:
ARTICLE 1.
THE TRANSACTION
1.1. Nursing Home & Retirement Center Assets Contributed. At the
closing as described in Article 5 (the "Closing"), NHLP shall contribute,
transfer, convey, and deliver to NHI-REIT, and NHI-REIT (or, at the sole
election of NHI-REIT, a subsidiary of NHI-REIT) shall accept from NHLP, all of
NHLP's right, title, and interest in and to the Facilities, including land,
improvements, appurtenances, fixtures, and in certain cases, leasehold rights,
all as described in Section 1.02 (attached hereto as Exhibit 1.1) of that
certain Master Agreement to Lease between NHLP and NHI-REIT of even date
herewith.
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<PAGE> 5
1.2. Notes Contributed. At the Closing, NHLP shall contribute,
transfer, convey, and deliver to NHI-REIT and NHI-REIT (or, at the sole election
of NHI-REIT, a subsidiary of NHI-REIT) shall accept from NHLP, all of NHLP's
right, title and interest in and to the Notes and related security documents
(including any guaranties, and security documents owned by NHLP relating to any
guaranties, of such Notes) as described in Exhibit 1.2. The parties acknowledge
that NHLP is retaining and will not transfer to NHI-REIT the rights associated
with the Notes to purchase the property securing the Notes upon default of the
Notes, as well as the right of first refusal to purchase the property securing
the Notes, all as contained in certain related agreements entitled "Agreement to
Provide Working Capital and Other Funds," or "Agreement to Guarantee."
1.3. Assumed Liabilities. The Assets are conveyed subject to, and at
Closing NHI-REIT shall assume (or, at the sole election of NHI-REIT,
subsidiaries of NHI-REIT shall assume, with the guarantee of NHI-REIT) the
liabilities of NHLP set forth (listing name to whom the obligation is owed, the
nature and amount of the obligation, and noting if such obligation is in
default) in Exhibit 1.3 to this Agreement (collectively, the "Assumed
Liabilities"), but no other liabilities of NHLP. In certain cases, NHLP's
lenders may require that NHLP remain liable, and in such cases, NHI-REIT shall
indemnify and hold harmless NHLP (and any of NHLP's affiliates, including
National Health Corporation, W. Andrew Adams and NHC, Inc., the three general
partners of NHLP) from any and all damages, costs or expenses that they may
incur after the Closing on account of any such Assumed Liabilities; provided,
however, that this indemnity shall not serve to release NHLP from any
obligations under Article 3, or Sections 5.2, 5.4, 6.1, 6.3, or 7.10 of this
Agreement or of any instrument implementing such obligations of NHLP.
NHI-REIT shall provide assumption agreements or guaranties in forms
acceptable to the third party obligees with respect to all Assumed Liabilities.
1.4. Leaseback of Facilities. NHI-REIT, as lessor, shall lease to NHLP,
as lessee, the Facilities pursuant to the Master Agreement to Lease referenced
in Section 1.1 hereof.
ARTICLE 2.
SHARE ISSUANCE FOR CAPITAL CONTRIBUTION
2.1. Issuance of Shares. In exchange for the contribution by NHLP of
the Assets to NHI-REIT, NHI-REIT shall issue 7,306,570 shares of its common
stock to NHLP, which will be the sole stockholder of NHI-REIT. The parties
acknowledge that promptly after the issuance of the common stock to NHLP, NHLP
intends to
2
<PAGE> 6
cause the distribution and transfer of such stock to the persons who are the
unitholders of NHLP on the record date for such distribution.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES BY NHLP
NHLP represents and warrants to NHI-REIT as follows:
3.1. Organizational Status. NHLP is duly organized, validly existing
and in good standing under the laws of the State of Delaware and is duly
qualified in each of the states in which the Facilities are located.
3.2. Authorization. The execution, delivery and performance of this
Agreement and the transactions contemplated herein have been duly authorized by
all necessary partnership action of NHLP and this Agreement constitutes the
valid and binding obligation of NHLP, enforceable in accordance with its terms.
3.3. Good and Marketable Title. NHLP has good and marketable fee
simple, or leasehold, as the case may be, title to all property included in the
Assets, free and clear of all liens, encumbrances, charges, restrictions,
conditions and adverse claims, except for the exceptions to title listed on
Exhibit 3.3 (the "Title Exceptions"). The transfer of the Assets to NHI-REIT at
the Closing will be valid and will vest such Assets in NHI-REIT free and clear
of all liens, encumbrances, and charges and adverse claims, except for the Title
Exceptions and the Assumed Liabilities. None of the Facilities are located in
any federal or state flood zone or if they are, flood insurance has been
obtained. All Facilities comply with setback line requirements and no easements
or other restrictions materially adversely affect the Facilities. There are no
material encroachments on the real estate of the Facilities by others, nor do
the Facilities encroach on any other person's property in any manner which would
have a material adverse effect on the condition, financial or otherwise, or the
earnings, business affairs or business prospects of NHI-REIT and the Facilities,
considered as one enterprise.
3.4. Compliance with Laws. NHLP has complied in all material respects
with all applicable laws, rules and regulations.
3.5. No Breach of Statute, Decree or Contract. The execution, delivery
and performance of this Agreement and the transactions contemplated hereby do
not and will not breach any statute, regulation or ordinance of any governmental
authority, will not, at the Closing, conflict with or result in a breach of or
default under any of the terms, conditions, or provisions of NHLP's Partnership
Agreement, or any order, writ, injunction, decree,
3
<PAGE> 7
contract, agreement, or instrument to which NHLP is a party or by which the
Assets are or may be bound, will not result in the creation or imposition of any
lien, charge, or encumbrance of any nature upon any of the Assets, and will not
give to others any interest or rights in, or with respect to, or rights to
accelerate indebtedness secured by, any of the Assets, except where such would
not have a material adverse effect on the condition, financial or otherwise, or
the earnings, business affairs or business prospects of NHI-REIT and its
subsidiaries, considered as one enterprise. Except as further disclosed on
Exhibit 3.5, all of the Notes and related security documents conveyed pursuant
to Section 1.2 are legal and valid, and none is in default, and no event exists
which, with notice or passage of time, or both, would become an event of default
by any party thereunder. With respect to any other material agreements relating
to the Assets, NHLP represents that: neither NHLP nor, to NHLP's knowledge, any
other party to any such agreements or contracts is in default of its respective
obligations thereunder, and no event exists which, with notice or passage of
time, would become an event of default by NHLP thereunder. To NHLP's knowledge,
no event exists which, with notice or passage of time, would become an event of
default by any other party thereunder and neither NHLP nor any other party has
manifested a prospective inability to perform thereunder. All such obligations
are in full force and effect.
3.6. No Litigation, Etc. Except as listed on Exhibit 3.6, there is no
suit, claim, action, or legal, administrative, arbitrative, or other proceeding
or governmental investigation pending or, to NHLP's knowledge, threatened, by or
against or relating to any of the Assets.
3.7. Licenses, Permits and Standards. NHLP has obtained and has in
force all required licenses, provider agreements, permits and certificates of
need in connection with the operation of the Facilities. None of such licenses,
permits or certificates of need are conditional or restricted in a material
manner. The Facilities shall be licensed at Closing, all provider agreements,
permits and Certificates of Need in connection with the operation of the
Facilities shall be in full force and effect. The Facilities are not currently,
and have not been, subject to any variances or waivers with respect to licensure
requirements or life safety codes, which could have a material adverse effect on
the condition, financial or otherwise, or the earnings, business affairs or
business prospects of NHI-REIT and the Facilities, considered as one enterprise.
Each of the Facilities meets all standards and conditions for participation in
the Medicare, Medicaid and related programs and has not received any suspension
of continuing participation therein and is not subject to decertification from
the programs, or subject to any restriction in the admission of residents which
could have a material adverse effect on the
4
<PAGE> 8
condition, financial or otherwise, or the earnings, business affairs or business
prospects of NHI-REIT and the Facilities, considered as one enterprise.
3.8. Governmental Reports. All returns, reports, plans and filings of
any kind or nature necessary to be filed by NHLP with any governmental
authorities in connection with the Facilities and as may be necessary to
preserve or protect NHLP's rights in the Assets have been properly completed and
timely filed in compliance with all applicable requirements except where such
failure would not have a material adverse effect on the condition, financial or
otherwise, or the earnings, business affairs or business prospects of NHI-REIT
and the Facilities, considered as one enterprise
3.9. Environmental Issues. None of the real estate comprising the
Facilities has ever been used by NHLP or previous owners and/or operators to
refine, produce, generate, store, handle, transfer, process or transport
"Hazardous Substances" or "Hazardous Waste", as such terms are defined in
applicable environmental laws, rules and regulations, except to the extent that
fuel oil and gasoline have been stored on the real estate solely to operate
emergency generators at the Facilities. No lien has been attached to real estate
or personal property comprising the Facilities for "Damages" and/or "Cleanup and
Removal Costs" under applicable environmental laws. NHLP has complied with all
federal and state environmental and waste disposal laws, rules and regulations
applicable to the Facilities.
3.10. Plans of Correction. There are no pending or threatened work
orders or plans of correction relating to the Facilities from or required by any
police or fire department, sanitation, health or work authorities or from any
other federal, state or municipal or local authority which could have a material
adverse effect on the condition, financial or otherwise, or the earnings,
business affairs or business prospects of NHI-REIT and the Facilities,
considered as one enterprise
3.11. Cost Reports. NHLP is current with each and every State Medicaid
program and the federal Medicare program as to all cost reports required with
respect to the Facilities, and such reports are, in all material respects, true
and correct.
3.12. Physical Plant, Equipment and Utilities. The machinery and
equipment in the Assets are in good operating condition, ordinary wear and tear
excepted, have been maintained in a manner consistent with that of a similarly
organized business, prudently managed, conform with all applicable ordinances,
regulations and zoning or other laws, and are in good working order. All
buildings included in the Assets are in good condition, ordinary wear and tear
excepted, have been maintained in a manner consistent with that of a similarly
organized business, prudently managed, and conform with all applicable
ordinances, regulations
5
<PAGE> 9
and zoning or other laws (without obtaining waivers, variances, or extensions).
The use of the Facilities for their current use complies with all zoning
requirements and there are no problems or defects or deficiencies in any
necessary utility services and easements for the Facilities including
electrical, gas, water and telephone.
3.13. Accuracy of Documents. All copies of contracts, agreements,
financial statements and documents delivered or made available by NHLP in
connection with the transactions contemplated hereby are complete and accurate.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES BY NHI-REIT
4.1. Corporate. NHI-REIT is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Maryland.
4.2. No Breach of Statute or Contract. The execution, delivery and
performance of this Agreement has been duly authorized by all necessary
corporate action of NHI-REIT and constitutes the valid and binding obligation of
NHI-REIT, enforceable in accordance with its terms and will not breach any
statute or regulation of any governmental authority, and will not at the Closing
conflict with or result in a breach of or default under any of the terms,
conditions, or provisions of NHI-REIT's Articles of Incorporation or By-Laws or
any order, writ, injunction, decree, agreement, or instrument to which NHI-REIT
is a party, or by which it is or may be bound.
4.3. No Litigation or Adverse Events. There is no suit, claim, action,
or legal, administrative, arbitrative, or other proceeding or governmental
investigation pending or, to NHI-REIT's knowledge, threatened, by or against
NHI-REIT, and no event or condition of any character, to NHI-REIT's knowledge,
pertaining to NHI-REIT, which possibly could prevent the consummation of the
transactions contemplated by this Agreement.
ARTICLE 5.
CLOSING; POST CLOSING
5.1. Closing. The Closing shall take place on October 17, 1991 at the
offices of Harwell Martin & Stegall, P.C. in Nashville, Tennessee.
6
<PAGE> 10
5.2. NHLP's Deliveries. At the Closing, NHLP shall deliver to NHI-REIT:
(1) Resolutions of the Directors of the managing general
partner of NHLP authorizing the execution and delivery of this Agreement and the
consummation of the transaction contemplated hereby, certified as of the date of
the Closing by NHLP's Secretary, as having been duly adopted and being in full
force and effect and unmodified on the date of the Closing.
(2) If the Closing occurs on a date later than the date of
this Agreement, a certificate of the principal executive officer of the managing
general partner of NHLP to the effect that all representations and warranties
set forth in Article 3 are true and correct in all material respects as of the
Closing.
(3) Quitclaim deeds (which shall be on a county-by-county or
state-by-state basis) and bills of sale transferring all real property and all
permanently affixed tangible personal property included in the Assets to
NHI-REIT or a subsidiary of NHI-REIT.
(4) The right to immediate possession of all real property and
all permanently affixed tangible personal property included in the Assets.
(5) Assignments conveying the Notes, including the related
security documents, to NHI-REIT or one or more subsidiaries of NHI-REIT.
(6) The Lease agreements referred to in Section 1.4 hereof.
5.3. NHI-REIT's Deliveries. At the Closing, NHI-REIT shall deliver to
NHLP:
(1) Resolutions of NHI-REIT's Board of Directors authorizing
the execution and delivery of this Agreement, and such other documents as may be
reasonably required, and the consummation of the transactions contemplated
hereby, certified as of the date of the Closing by an officer of NHI-REIT as
having been duly adopted and being in full force and effect on the date of the
Closing.
(2) If the Closing occurs on a date later than the date of
this Agreement, a certificate of an executive officer of NHI-REIT to the effect
that all representations and warranties set forth in Article 4 are true and
correct in all material respects as of the Closing.
(3) A certificate for 7,306,570 shares of NHI-REIT Common
Stock, registered in the name of NHLP.
7
<PAGE> 11
(4) The Lease agreements referred to in Section 1.4 hereof.
(5) Instruments evidencing NHI-REIT's assumption of the
Assumed Liabilities, as NHLP and its lenders may reasonably request.
5.4. Post-Closing Deliveries. After the Closing, each party to this
Agreement shall, at the request of the other, furnish, execute, and deliver such
further deeds, bills of sale, conveyances, assumptions, documents, instruments,
certificates, notices and other further assurances as the requesting party shall
reasonably request as necessary or desirable to effect, confirm and evidence the
complete consummation of this Agreement and the transactions contemplated
hereby. Without limiting the generality of the foregoing, NHLP shall make
available to NHI-REIT all of its financial and tax records with respect to the
Assets whenever requested by NHI-REIT.
ARTICLE 6.
INDEMNIFICATION
6.1. Indemnification by NHLP. NHLP shall indemnify and hold NHI-REIT
harmless from and against any liability, loss, damage, and expense (including
reasonable attorney's fees) resulting from (a) the breach of any representation
or warranty set forth in Article 3 hereof or otherwise herein, (b) any claims,
obligations, liens, debts, encumbrances, or liabilities, including any
assessments, adjustments or offsets under the Medicare or State Medicaid
programs and any claims or suits for damages for personal injury, death or
property damage, resulting from, upon, or in connection with the operation of
the Facilities or the Assets arising out of transactions or occurrences prior to
the Closing (other than matters for which NHI-REIT is specifically responsible
pursuant to this Agreement), (c) any claims, debts, obligations, liens,
encumbrances and liabilities of NHLP or the Facilities which arose prior to
Closing, except the Assumed Liabilities; (d) any claim made by creditors of NHLP
against NHI-REIT under the Bulk Transfer Provisions of the Uniform Commercial
Code; (e) any claims which result from the breach by NHLP of obligations, the
breach of which cause agreements of NHI-REIT to be defaulted; (f) the additional
interest costs, points, commitment fees and legal fees associated with any
refinancing resulting from the exercise, by any obligee of any part of the
Assumed Liabilities of a put option under which up to $47,327,000
(approximately) of Assumed Liabilities may be called for payment in December
1993; (g) the additional interest costs, points, commitment fees and legal fees
associated with any refinancing resulting from any refusal by Sovran
Bank/Tennessee or its successors in interest or assignees to renew, on
substantially
8
<PAGE> 12
the same terms, a letter of credit expiring in December 1995 in the approximate
amount of $6,200,000, which secures in part two of the Facilities to be conveyed
to NHI-REIT hereunder; (h) any liability, loss or damage arising from any claim
against the Assets pursuant to the enforcement of any deeds of trust, mortgages,
collateral assignments or security agreements under which any of the Assets is
cross-collateralized with respect to obligations of NHLP which are not to be
assumed by NHI-REIT hereunder; (i) additional interest costs, points, commitment
fees and legal fees associated with any refinancing resulting from the exercise
of a put option under which up to $37,500,000 of Assumed Liabilities may be
called for payment approximately one year after the Closing; and (j)
acceleration or default of any Assumed Liabilities or any obligation of NHLP
secured in whole or in part by any of the Assets, by virtue of the failure of
NHLP to obtain a consent to the transactions hereunder. Upon receipt of notice
of such an event, NHLP may assume the defense of the claim set forth therein
with counsel reasonably satisfactory to NHI-REIT, and NHLP shall cooperate in
all reasonable respects in such defense. NHLP shall have the right to settle any
such claim and NHI-REIT shall not settle any claims for which indemnification is
requested hereunder without the prior written consent of NHLP which shall not be
unreasonably withheld; provided that NHLP has made provisions, reasonably
acceptable to NHI-REIT, for the funding of the indemnification related thereto.
6.2. Indemnification by NHI-REIT. NHI-REIT shall indemnify and hold
NHLP harmless from and against any liability, loss, damage, and expense
(including reasonable attorney's fee) resulting from (a) the breach of any
representation or warranty set forth in Article 4 hereof or otherwise herein,
and (b) any claims, obligations, liens, debts, encumbrances or liabilities
resulting from, upon, or in connection with the operation of the Facilities or
the Assets arising out of transactions or occurrences after the Closing (other
than matters for which NHLP is specifically responsible pursuant to this
Agreement). Upon receipt of notice of such an event, NHI-REIT may assume the
defense of the claim set forth therein with counsel reasonably satisfactory to
NHLP, and NHI-REIT shall cooperate in all reasonable respects in such defense.
NHI-REIT shall have the right to settle any such claim and NHLP shall not settle
any claim for which indemnification is requested hereunder without the prior
written consent of NHI-REIT.
6.3. Taxes. All unemployment insurance and social security taxes and
all other taxes due the federal or any state or local government by NHLP and
arising from NHLP's ownership or use of the Facilities or the Assets prior to
the Closing shall be paid by NHLP when due.
6.4. Notice Requirements. A party seeking indemnification (the
"indemnitee") under Sections 6.1 or 6.2 hereof shall give notice to the
indemnifying party (the "indemnitor") of any claim
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asserted by or against the indemnitee and such notice shall be sufficient if
evidenced by a writing and given within a reasonable time after the indemnitee
has actual knowledge of the claim. A reasonable time shall be that which does
not materially prejudice the indemnitor's ability to contest or defend the
claim.
ARTICLE 7.
OTHER COVENANTS AND CONTRACTUAL PROVISIONS
7.1. Notices. Any notice or other communication required or permitted
to be given hereunder shall be deemed to have been properly given when deposited
in the U.S. mail if mailed by certified mail, postage prepaid, addressed as
follows (or to such other addresses as the parties may specify by due notice to
the others):
NHLP:
National HealthCorp L.P.
100 Vine Street
Suite 1400, City Center
Murfreesboro, Tennessee 37130
with a copy to:
Richard F. LaRoche, Jr.,
Senior Vice President & Secretary
National HealthCorp L.P.
100 Vine Street
Suite 1400, City Center
Murfreesboro, Tennessee 37130
NHI-REIT:
National Health Investors, Inc.
100 Vine Street
Suite 1400, City Center
Murfreesboro, Tennessee 37130
with a copy to:
ATTN: William B. King, P.C.
Goodwin, Procter & Hoar
Exchange Place
Boston, MA 02109-2881
7.2. Transfer Taxes. Any applicable real estate transfer taxes shall
be paid by NHI-REIT.
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7.3. Expenses. All costs, fees and expenses, including title transfer,
sales and use taxes, assumption fees, and attorney's fees incurred in connection
with the organization of NHI-REIT and the conveyance of assets and the
assumption of liabilities contemplated by this Agreement shall be borne by NHI-
REIT. Except as otherwise specifically provided herein, each party shall bear
its own expenses in the performance of this Agreement.
7.4. Headings. The headings in this Agreement are intended solely for
convenience or reference and shall be given no effect in the construction or
interpretation of this Agreement.
7.5. Governing Law. This Agreement shall be governed by the laws of
the State of Tennessee.
7.6. Assignment. This Agreement shall inure to the benefit of and be
binding on the successors and legal representatives of each of the parties, but
this Agreement may not be assigned by any party without the written consent of
the other parties; provided, however, that NHI-REIT may assign this Agreement in
whole or in part to one or more third parties which are controlled by NHI-REIT
or such other entities to which NHLP has consented, which consent shall not be
unreasonably withheld or delayed, but such assignment shall not relieve NHI-REIT
of its obligations hereunder and the assignee shall additionally assume such
obligations.
7.7. Counterparts. This Agreement may be executed in one or more
counterparts, all of which will be considered one and the same agreement.
7.8. Survival of Provisions. Each representation and warranty contained
herein and each indemnity set forth herein shall be deemed to survive the
Closing for ten (10) years, except the representations relating to title and
environmental matters (Sections 3.3 and 3.9) shall be deemed to survive for that
period necessary to the satisfactory completion of the duties or obligations set
forth therein and any applicable statute of limitations.
7.9. Exhibits. The Exhibits attached hereto, and all post-signing
Exhibits attached hereafter together with all documents incorporated by
reference therein, form an integral part of this Agreement and are hereby
incorporated into this Agreement wherever reference is made to them to the same
extent as if they were set out in full at the point at which such reference is
made.
7.10. Finder's Fees. Both parties represent to the other that no
person is entitled to a brokerage or finder's fee for this transaction.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written, and acknowledge and agree, to the fullest extent
permitted by law, that this Agreement shall be effective as of October 17, 1991
(the "Effective Date") for all economic, accounting, tax or other purposes,
notwithstanding the fact that this Agreement may be executed or consummated on a
date other than the Effective Date.
NHLP:
National HealthCorp L.P. By its
Managing General Partner, NHC, Inc.
By: _______________________________
Title:_____________________________
NHI-REIT:
National Health Investors, Inc.
By: _______________________________
Title:_____________________________
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EXHIBIT 21
Subsidiaries of National HealthCare Corporation
(DE)
1. National HealthCare Corporation of Alabama (AL)
2. National HealthCare Corporation of Georgia (GA)
3. National HealthCare Corporation of Florida (FL)
4. National HealthCare Corporation of Indiana (IN)
5. National HealthCare Corporation of Kentucky (KY)
6. National HealthCare Corporation of Missouri (MO)
7. National HealthCare Corporation of North Carolina (NC)
8. National HealthCare Corporation of South Carolina (SC)
9. National HealthCare Corporation of Tennessee (TN)
10. National HealthCare Corporation of Virginia (VA)
11. City Corporation (TN)
12. Tennessee Management Services Corporation (TN)
13. Nutritional Support Services, L.P. (TN)
14. Knoxville Health Care Center, L.P. (TN)
15. Fort Oglethorpe Health Care Center, L.P. (TN)
16. NHC Insurance Company (TN)
17. National Health Rehabilitation L.P. (TN)
<PAGE> 1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report on National HealthCare L.P. dated October 15, 1997 and to all references
to our firm included in or made a part of this Form S-4 Registration Statement.
ARTHUR ANDERSEN LLP
Nashville, Tennessee
September 30, 1997
