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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report: October 1, 1999
(Date of earliest event reported)
LTC HEALTHCARE, INC.
(Exact name of registrant as specified in its charter)
NEVADA 1-14151 91-1895305
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification No.)
300 ESPLANADE DRIVE, SUITE 1865
OXNARD, CALIFORNIA 93030
(Address of principal executive offices, including zip code)
(805) 981-8659
(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OF ASSETS
Effective September 1, 1999 the Company entered into long-term leases with LTC
Properties, Inc. ("LTC") and began operating six skilled nursing facilities that
were previously operated by Mariner Post-Acute Networks, Inc. Subsequently,
effective October 1, 1999, the Company entered into long-term leases with LTC
and began operating eight skilled nursing facilities and one assisted living
facility. Six of these facilities were previously operated by a subsidiary of
Sun Healthcare Group, Inc. ("Sun") and three of these facilities were previously
operated by NewCare Health Corporation ("NewCare"). The 15 facilities are
located in six states and have 1,436 beds/units.
Effective October 1, 1999 in an auction held by the Bankruptcy Court, the
Company purchased three skilled nursing facilities and one hospital, a
partnership interest in a skilled nursing facility and leasehold interests in
nine skilled nursing facilities. All of the properties were formerly owned
and/or operated by NewCare. The Company acquired these assets and the related
accounts receivable for a total purchase price of $13 million, which was
financed through a non-recourse loan from a third party lender. In addition, the
Company received a $5 million non-recourse working capital line of credit from
the same lender. Three of these facilities are leased from LTC. The 14
facilities are located in five states and have a total of 1,323 beds.
Effective October 1, 1999, the Company entered into a management agreement with
a third party operator of long-term care facilities for the operation of the 23
facilities discussed above that were formerly operated by Sun and NewCare.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
The Company will seek to file any required financial statements of
businesses acquired by amendment to this Form 8-K as soon as
feasible.
(b) PRO FORMA FINANCIAL INFORMATION.
The Company will seek to file pro forma financial information by
amendment to this Form 8-K as soon as feasible.
(c) EXHIBITS.
10.1 Secured Term Note, dated as of September 30, 1999, by and
between LTC Healthcare of Atlanta, Inc., LTC Healthcare
of Bonner Springs, Inc., LTC Healthcare of Chicopee, Inc.,
LTC Healthcare of Coffeyville, Inc., LTC Healthcare of
Converse, Inc., LTC Healthcare of Fort Valley, Inc.,
LTC Healthcare of Gardner, Inc., LTC Healthcare of Holyoke,
Inc., LTC Healthcare of Jessup, Inc., LTC Healthcare of New
Port Richey, Inc., LTC Healthcare of Salina, Inc., LTC
Healthcare of Shepard, Inc., LTC Healthcare of South Hadley,
Inc., LTC Healthcare of Springfield, Inc., LTC Healthcare
of Statesboro, Inc., LTC Healthcare of Tyler, Inc., LTC
Healthcare of Whigham, Inc., LTC Healthcare Receivables,
Inc., LTC Healthcare Acquisition Company, Inc. and Heller
Healthcare Finance, Inc.
10.2 Revolving Credit Note, dated as of September 30, 1999, by
and between LTC Healthcare of Atlanta, Inc., LTC
Healthcare of Bonner Springs, Inc., LTC Healthcare of
Chicopee, Inc., LTC Healthcare of Coffeyville, Inc., LTC
Healthcare of Converse, Inc., LTC Healthcare of Fort
Valley, Inc., LTC Healthcare of Gardner, Inc., LTC
Healthcare of Holyoke, Inc., LTC Healthcare of Jessup,
Inc., LTC Healthcare of New Port Richey, Inc., LTC
Healthcare of Salina, Inc., LTC Healthcare of Shepard,
Inc., LTC Healthcare of South Hadley, Inc., LTC
Healthcare of Springfield, Inc., LTC Healthcare of
Statesboro, Inc., LTC Healthcare of Tyler, Inc., LTC
Healthcare of Whigham, Inc., LTC Healthcare Receivables,
Inc., LTC Healthcare Acquisition Company, Inc. and Heller
Healthcare Finance, Inc.
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10.3 Loan and Security Agreement dated as of September 30,
1999, by and between LTC Healthcare of Atlanta, Inc., LTC
Healthcare of Bonner Springs, Inc., LTC Healthcare of
Chicopee, Inc., LTC Healthcare of Coffeyville, Inc., LTC
Healthcare of Converse, Inc., LTC Healthcare of Fort
Valley, Inc., LTC Healthcare of Gardner, Inc., LTC
Healthcare of Holyoke, Inc., LTC Healthcare of Jessup,
Inc., LTC Healthcare of New Port Richey, Inc., LTC
Healthcare of Salina, Inc., LTC Healthcare of Shepard,
Inc., LTC Healthcare of South Hadley, Inc., LTC
Healthcare of Springfield, Inc., LTC Healthcare of
Statesboro, Inc., LTC Healthcare of Tyler, Inc., LTC
Healthcare of Whigham, Inc., LTC Healthcare Receivables,
Inc., LTC Healthcare Acquisition Company, Inc. and Heller
Healthcare Finance, Inc.
10.4 Agreement to Provide Management Services dated as of
September 30, 1999 by and between Senior Care Management
Group, LLC and LTC Healthcare of Atlanta, Inc., LTC
Healthcare of Bonner Springs, Inc., LTC Healthcare of
Chicopee, Inc., LTC Healthcare of Coffeyville, Inc., LTC
Healthcare of Converse, Inc., LTC Healthcare of Fort
Valley, Inc., LTC Healthcare of Gardner, Inc., LTC
Healthcare of Holyoke, Inc., LTC Healthcare of Jessup,
Inc., LTC Healthcare of New Port Richey, Inc., LTC
Healthcare of Salina, Inc., LTC Healthcare of Shepard,
Inc., LTC Healthcare of South Hadley, Inc., LTC
Healthcare of Springfield, Inc., LTC Healthcare of
Statesboro, Inc., LTC Healthcare of Tyler, Inc., LTC
Healthcare of Whigham, Inc., LTC Healthcare Receivables,
Inc. and LTC Healthcare Acquisition Company, Inc.
10.5 Agreement to Provide Management Services dated as of
September 30, 1999 by and between Senior Care Management
Group LLC and LTC Healthcare, Inc., LTC Healthcare of
Venice, Inc., LTC Healthcare of Crawfordville, Inc., LTC
Healthcare of Olathe, Inc., LTC Healthcare of
Tiptonville, Inc., LTC Healthcare of Roberta, Inc., LTC
Healthcare of Jonesboro, Inc., LTC Healthcare of
Richmond, Inc., LTC Healthcare of Tappahannock, Inc. and
LTC Healthcare of Fayetteville, Inc.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
LTC HEALTHCARE, INC.
Date: October 15, 1999 /s/ JAMES J. PIECZYNSKI
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James J. Pieczynski
President and Chief Financial Officer
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SECURED TERM NOTE
EXHIBIT 10.1
$13,675,000.00 SEPTEMBER 30, 1999
FOR VALUE RECEIVED, and intending to be legally bound, the undersigned, LTC
HEALTHCARE OF ATLANTA, INC., a Nevada corporation, LTC HEALTHCARE OF BONNER
SPRINGS, INC., a Nevada corporation, LTC HEALTHCARE OF CHICOPEE, INC., a Nevada
corporation, LTC HEALTHCARE OF COFFEYVILLE, INC., a Nevada corporation, LTC
HEALTHCARE OF CONVERSE, INC., a Nevada corporation, LTC HEALTHCARE OF FORT
VALLEY, INC., a Nevada corporation, LTC HEALTHCARE OF GARDNER, INC., a Nevada
corporation, LTC HEALTHCARE OF HOLYOKE, INC., a Nevada corporation, LTC
HEALTHCARE OF JESSUP, INC., a Nevada corporation, LTC HEALTHCARE OF NEW PORT
RICHEY, INC., a Nevada corporation, LTC HEALTHCARE OF SALINA, INC., a Nevada
corporation, LTC HEALTHCARE OF SHEPARD, INC., a Nevada corporation, LTC
HEALTHCARE OF SOUTH HADLEY, INC., a Nevada corporation, LTC HEALTHCARE OF
SPRINGFIELD, INC., a Nevada corporation, LTC HEALTHCARE OF STATESBORO, INC., a
Nevada corporation, LTC HEALTHCARE OF TYLER, INC., a Nevada corporation, LTC
HEALTHCARE OF WHIGHAM, INC., a Nevada corporation, LTC HEALTHCARE RECEIVABLES,
INC., a Nevada corporation, and LTC HEALTHCARE ACQUISITION COMPANY, INC., a
Nevada corporation (collectively, "BORROWER"), jointly and severally, promise to
pay, in lawful money of the United States, to the order of HELLER HEALTHCARE
FINANCE, INC., a Delaware corporation, its successors and assigns ("LENDER"),
the principal sum of THIRTEEN MILLION SIX HUNDRED SEVENTY FIVE THOUSAND AND
00/100 DOLLARS ($13,675,000.00), or so much of such sum as shall have been
advanced by Lender (the "PRINCIPAL SUM") in accordance with the terms of this
Secured Term Note (the "NOTE"), together with interest and other fees as further
set forth in this Note, to be paid in accordance with the terms set forth below.
1. PRINCIPAL AND INTEREST.
a. Borrower promises to pay to Lender interest on the Principal Sum
on a monthly basis from the date of this Note until September 27, 2002 (the
"MATURITY DATE"). Interest shall be at a fluctuating rate per annum compounded
daily (on the basis of the actual number of days elapsed over a year of 360
days) equal to the Prime Rate plus two percent (Prime plus 2%) (the "BASE
RATE"), provided that after an Event of Default such rate shall be equal to the
Base Rate plus two percent (2%) (the "DEFAULT INTEREST RATE"). For purposes of
the foregoing, the term "PRIME RATE" means that rate of interest designated as
such by Citibank, N.A. (the "BANK"), or any successor to the Bank, as the rate
may from time to time fluctuate. If the Bank ceases to designate such a base
lending rate, Lender shall reasonably select an alternate, nationally recognized
commercial bank as the designator of such interest rate. Accrued interest shall
be payable monthly in arrears on the last Business Day (as defined below) of
each month from
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October, 1999 and continuing through and including the Maturity Date. After
maturity, and until the entire Principal Sum plus any other amount due and
unpaid shall be paid in full, without limiting any of Lender's other rights
and remedies, all outstanding amounts of the Principal Sum shall bear
interest, payable on demand, at the Default Interest Rate, but in no event
shall the interest payable exceed the maximum lawful rate.
b. In addition, ninety percent (90%) of any collections or proceeds
of any of the Collateral received by Borrower which relates to Bankruptcy
Receivables (as defined below) shall be paid by Borrower to Lender immediately
upon receipt and shall be applied to the Principal Sum. As used herein,
"Bankruptcy Receivables" shall mean and include Collateral relating to Accounts
for services rendered by NewCare Health Corporation and affiliates thereof
(collectively, "NewCare") from September 1, 1999 to September 30, 1999.
Borrower shall have the right to retain ten percent (10%) of collected proceeds
for services rendered of the Bankruptcy Receivables to be used entirely for
working capital or other operating expenses or capital improvements relating to
the nursing home facilities of Borrower.
c. In addition, beginning on the first anniversary of the date of
this Note (the "Closing Date") and at the end of each fiscal quarter thereafter,
Borrower shall deliver to Lender within thirty (30) days thereafter an amount
equal to fifty percent (50%) of Excess Cash Flow (as defined below) for the past
fiscal quarter, to be applied to first, to pay any advances made under the
Revolving Loan (as defined below) in excess of Borrower's availability
thereunder, if any, and then, to pay accrued interest and the Principal Sum.
Borrower shall have the right to retain fifty (50%) of Excess Cash Flow to be
used entirely for working capital or other operating expenses or capital
improvements relating to the nursing home facilities of Borrower. As used
herein, "Excess Cash Flow" shall mean the following, as determined in accordance
with GAAP: (i) net income (after deducting management fees permitted under the
terms of this Note), plus (ii) depreciation and amortization, less (iii) actual
capital expenditures reasonably approved by Lender (except that capital
expenditures less than $250 in the aggregate per bed per year and capital
expenditures required by governmental authorities shall not require Lender's
approval but Borrower shall provide Lender with prior notice of capital
expenditures required by governmental authorities); provided, however, that
gains or losses relating to proceeds of the sale of a Released Asset (as defined
in Paragraph 27 below) shall not be included in the calculation of Excess Cash
Flow.
d. If not sooner repaid, Borrower promises to pay to Lender the
entire Principal Sum on the Maturity Date. The term of this Note shall not be
extended unless the term of the Loan and Security Agreement of even date with
this Note by and between Borrower and Lender (the "LOAN AGREEMENT") pursuant to
which Borrower and Lender have entered into a revolving credit arrangement in a
principal amount not to exceed $5,000,000.00 (the "REVOLVING LOAN"), is extended
to the same date.
e. Repayment of Borrower's obligations under this Note is secured
by, among other things, the Collateral defined and described in Section 7 of
this Note.
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2. INTENTIONALLY DELETED.
3. ADDITIONAL PAYMENTS. Borrower further promises to pay to Lender,
immediately upon demand any and all other sums and charges that may at the time
become due and payable as specified under this Note, and all reasonable costs
and disbursements in connection with the preparation of this Note, and in the
collection of any payments due under this Note and in any action, suit or
proceeding to protect, sustain or enforce the rights and remedies of Lender
under this Note.
4. CONDITIONS TO BORROWING; PREPAYMENT.
a. Subject to the terms and conditions of this Note, Lender shall
make available to Borrower the initial advance of the Principal Sum in
immediately available funds not later than 12:00 Noon (Maryland time) on the
Business Day on which the following conditions precedent are satisfied:
(i) Borrower shall have executed and delivered to Lender, or
caused to be executed and delivered to Lender, the following documents
(collectively, the "LOAN DOCUMENTS"):
(A) This Note;
(B) That certain Secured Unconditional Guaranty of
Payment and Performance (the "GUARANTY") of even date herewith made by the
entities listed on SCHEDULE 1 hereof (collectively, "GUARANTOR" or "MANAGER") in
favor of Lender;
(C) Those certain Mortgages, Deeds of Trust and Deeds
to Secure Debt, of even date herewith made by each Borrower in favor of Lender
(the "MORTGAGES");
(D) Those certain Environmental Indemnity Agreements
of even date herewith made by each Borrower in favor of Lender (the
"ENVIRONMENTAL INDEMNITIES");
(E) That certain Security Agreement, Pledge and
Assignment of General Partnership Interests of even date herewith made by LTC
Healthcare of Tyler, Inc. in favor of Lender (the "PLEDGE AGREEMENT");
(F) All financing statements and other documents,
certificates and agreements reasonably deemed necessary or appropriate by Lender
to effectuate the transaction;
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(G) That certain Secured Unconditional Guaranty of
Payment and Performance (the "BORROWER GUARANTY") of even date herewith made by
Borrower in favor of Lender;
(ii) All representations, warranties and covenants contained in
this Note or otherwise made in writing in connection with this Note or the other
Loan Documents, or the documents entered into in connection with the Loan
Agreement (collectively with the Loan Agreement, the "REVOLVING LOAN
DOCUMENTS"), by or on behalf of Borrower shall be true and correct in all
material respects;
(iii) No Event of Default shall have occurred or be continuing
under this Note or any other Loan Documents;
(iv) No Event of Default shall have occurred and be continuing
under the Loan Agreement or any other Revolving Loan Documents;
(v) Entry of a Bankruptcy Court order satisfactory to Lender
which contains the provisions set forth in paragraph 10 of the commitment letter
dated as of September 29, 1999 between Borrower, Lender and Lenox Healthcare,
Inc.
(vi) Borrower shall have paid to Lender the purchase price, in
cash, to be applied to satisfy NewCare's outstanding obligations to Lender;
(vii) Lender shall have received Uniform Commercial Code
("UCC"), judgment and tax lien searches with the Secretary of State and local
filing offices of each jurisdiction where Borrower maintains a place of
business, which searches yield results consistent with the representations and
warranties contained in this Note; and
(viii) Borrower shall have entered into (i) management agreements
with Manager, and (y) interim management agreements with NewCare, in form and
substance satisfactory to Lender.
b. Borrower hereby irrevocably authorizes Lender to disburse the
proceeds of each requested advance by wire transfer to such bank account as may
be designated by Borrower from time to time or elsewhere if pursuant to written
direction from Borrower.
c. Lender shall enter all advances of the Principal Sum as debits to
a loan account in the name of Borrower and shall also record as credits in the
loan account all payments made by Borrower and all proceeds of Collateral that
are indefeasibly paid to Lender, and may record in the loan account, in
accordance with customary accounting practice, other debits and credits,
including interest and all charges and expenses properly chargeable to Borrower,
with respect to the extension of credit contemplated by this Note.
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d. Lender will account to Borrower monthly with a statement of
advances, charges and payments made pursuant to this Note, and the account
rendered by Lender shall be deemed final, binding and conclusive upon Borrower
absent manifest error, unless Lender is notified by Borrower in writing to the
contrary within thirty (30) days of the date each such account is mailed to
Borrower. Such notice shall be deemed an objection to those items specifically
objected to in the notice.
e. All outstanding principal, interest, fees and other amounts due
under this Note shall be prepaid in full simultaneously with repayment of all
Obligations under the Loan Agreement and/or the termination of the Loan
Agreement.
f. Borrower may prepay all or any part of the Principal Sum
outstanding without penalty, together with all interest accrued on the
Principal Sum and all other sums that are payable pursuant to this Note.
5. PAYMENT OFFICE. The Principal Sum, the interest on the Principal Sum,
and any other amounts payable under this Note are payable in lawful money of the
United States of America at the office of Lender, at 2 Wisconsin Circle, Fourth
Floor, Chevy Chase, Maryland 20815, Attention: Steven M. Curwin, Deputy General
Counsel, or at such other place as Lender may specify in writing to Borrower.
Any payment by other than immediately available funds shall be subject to
collection. Interest shall continue to accrue until the funds by which payment
is made are available to Lender for its use. Any payment stated to be due on a
day on which banks in Maryland are required or permitted to be closed for
business shall be due and payable on the next business day (each such day, a
"BUSINESS DAY") and such extension of time shall be included in the computation
of interest in connection with such payment.
6. NO PRESENTMENT; ACCELERATION. On the Maturity Date or upon the
occurrence of an Event of Default (as defined in Section 12 below) or upon
termination of the Loan Agreement, the outstanding Principal Sum, accrued and
unpaid interest on the Principal Sum, and all other sums owed by Borrower to
Lender in connection with this Note or the other Loan Documents shall
immediately become due and payable. Borrower hereby expressly waives any
presentment for payment, demand for payment, notice of nonpayment or dishonor,
protest and notice of protest of any kind.
7. SECURITY AGREEMENT.
a. This Note shall constitute a security agreement as that term is
used in the UCC and Borrower hereby grants to Lender, to secure Borrower's
obligations under this Note and the other Loan Documents, and under the Loan
Agreement and the Revolving Loan Documents ( collectively, the "Obligations"), a
security interest in the following (collectively, the "COLLATERAL"):
(i) All of Borrower's now-owned and hereafter acquired or
arising accounts, contract rights, general intangibles, chattel paper, documents
and instruments, as such
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terms are defined in the UCC, including, without limitation, all obligations
for the payment of money arising out of Borrower's sale of goods or rendition
of services ("ACCOUNTS"), accounts receivable and rights to payment of every
kind and description, and all of Borrower's contract rights, chattel paper,
documents and instruments with respect thereto, and all of Borrower's rights,
remedies, security and liens, in, to and in respect of the Accounts,
including, without limitation, rights of stoppage in transit, replevin,
repossession and reclamation and other rights and remedies of an unpaid
vendor, lienor or secured party, guaranties or other contracts of suretyship
with respect to the Accounts, deposits or other security for the obligation
of any Account Debtor, and credit and other insurance ("ACCOUNT DEBTOR" means
any person obligated on any Account of Borrower, including without
limitation, any Insurer and any Medicaid/Medicare payor);
(ii) All moneys, securities and other property and the proceeds
thereof, now or hereafter held or received by, in transit to, in possession of,
or under the control of Lender or a bailee or Affiliate of Lender, from or for
Borrower, whether for safekeeping, pledge, custody, transmission, collection or
otherwise, and all of Borrower's deposits (general or special), balances, sums
and credits with Lender at any time existing ("AFFILIATE" means with respect to
a specified person, any person directly or indirectly controlling, controlled
by, or under common control with the specified person, including without
limitation its stockholders and any affiliates. A person shall be deemed to
control a corporation if the person possesses, directly or indirectly, the power
to direct or cause the direction of the management and business of the
corporation whether through the ownership of voting securities, by contract, or
otherwise);
(iii) All of Borrower's right, title and interest in, to and in
respect of all goods relating to, or which by sale have resulted in, Accounts,
including, without limitation, all goods described in invoices or other
documents or instruments with respect to, or otherwise representing or
evidencing, any Account, and all returned, reclaimed or repossessed goods;
(iv) All of Borrower's now or hereafter acquired deposit
accounts into which Accounts are deposited, including the Lockbox Account
("LOCKBOX ACCOUNT" means an account maintained by Borrower at Bank One Arizona,
N.A. (or a successor financial institution), into which all collections of
Accounts are paid directly);
(v) All of Borrower's now owned and hereafter acquired or
arising general intangibles and other property of every kind and description
with respect to, evidencing or relating to its Accounts, accounts receivable and
other rights to payment, including, but not limited to, all existing and future
customer lists, choses in action, claims, books, records, ledger cards,
contracts, licenses, formulae, tax and other types of refunds, returned and
unearned insurance premiums, rights and claims under insurance policies, and
computer programs, information, software, records, and data, as the same relates
to the Accounts;
(vi) All of Borrower's other general intangibles (including,
without limitation, any proceeds from insurance policies after payment of prior
interests), patents, unpatented inventions, trade secrets, copyrights, contract
rights, goodwill, literary rights, rights to
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performance, rights under licenses, choses-in-action, claims, information
contained in computer media (such as data bases, source and object codes, and
information therein), things in action, trademarks and trademarks applied for
(together with the goodwill associated therewith) and derivatives thereof,
trade names (excluding, however, the name "LTC Healthcare" and derivations
thereof), including the right to make, use, and vend goods utilizing any of
the foregoing, and permits, licenses, certifications, authorizations and
approvals, and the rights of Borrower thereunder, issued by any governmental,
regulatory, or private authority, agency, or entity whether now owned or
hereafter acquired, together with all cash and non-cash proceeds and products
thereof;
(vii) All of Borrower's now owned or hereafter acquired
inventory of every description which is held by Borrower for sale or lease or is
furnished by Borrower under any contract of service or is held by Borrower as
raw materials, work in process or materials used or consumed in a business,
wherever located, and as the same may now and hereafter from time to time be
constituted, together with all cash and non-cash proceeds and products thereof;
(viii) All of Borrower's now owned or hereafter acquired
machinery, equipment, computer equipment, tools, tooling, furniture, fixtures,
goods, supplies, materials, work in process, whether now owned or hereafter
acquired, together with all additions, parts, fittings, accessories, special
tools, attachments, and accessions now and hereafter affixed thereto and/or used
in connection therewith, all replacements thereof and substitutions therefor,
and all cash and non-cash proceeds and products thereof;
(ix) The Property and/or Mortgaged Property (as defined in the
Mortgages); and
(x) The proceeds (including, without limitation, insurance
proceeds) of all of the foregoing.
b. Upon the occurrence of an Event of Default under this Note or the
other Loan Documents, or an Event of Default under the Loan Agreement or the
other Revolving Loan Documents, Lender, in addition to all other rights,
options, and remedies granted to Lender under this Note or at law or in equity,
may take any of the following steps:
(i) Declare the Loan to be immediately due and payable;
(ii) Exercise all other rights granted to it under this Note
and all rights under the UCC in effect in the applicable jurisdiction(s) and
under any other applicable law; and
(iii) Exercise all rights and remedies under all Loan Documents
or Revolving Loan Documents now or hereafter in effect, including but not
limited to:
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(A) The right to take possession of, send notices
regarding, and collect directly the Collateral, with or without judicial
process;
(B) The right to (by its own means or with judicial
assistance) enter any of Borrower's premises and take possession of the
Collateral, or render it unusable, or dispose of the Collateral on such premises
in compliance with subsection (c) below, without any liability for rent,
storage, utilities, or other sums, and Borrower shall not resist or interfere
with such action; and
(C) The right to require Borrower at Borrower's
expense to assemble all or any part of the Collateral and make it available to
Lender at any place designated by Lender.
c. Borrower agrees that a notice received by it at least five (5)
days before the time of any intended public sale, or the time after which any
private sale or other disposition of the Collateral is to be made, shall be
deemed to be reasonable notice of such sale or other disposition. If permitted
by applicable law, any perishable Collateral that threatens to decline rapidly
in value or that is sold on a recognized market may be sold immediately by
Lender without prior notice to Borrower. At any sale or disposition of
Collateral, Lender may (to the extent permitted by applicable law) purchase all
or any part of the Collateral, free from any right of redemption by Borrower,
which right is hereby waived and released. Borrower covenants and agrees not to
interfere with or impose any obstacle to Lender's exercise of its rights and
remedies with respect to the Collateral following an Event of Default.
d. Lender shall have the right to proceed against all or any portion
of the Collateral to satisfy in any order (i) the liabilities and obligations of
Borrower to Lender under this Note and the other Loan Documents or (ii) upon the
occurrence of an Event of Default under the Loan Agreement or the other
Revolving Loan Documents, the liabilities and obligations of Borrower under the
Loan Agreement and Revolving Loan Documents. All rights and remedies granted
Lender under this Note or under any of the other Loan Documents, or otherwise
available at law or in equity, shall be deemed concurrent and cumulative, and
not alternative remedies, and Lender may proceed with any number of remedies at
the same time until the Principal Sum, all interest, costs, expenses and other
charges due under, and all other existing and future liabilities and obligations
of Borrower to Lender under, this Note are satisfied in full. The exercise of
any one right or remedy shall not be deemed a waiver or release of any other
right or remedy, and Lender, upon the occurrence of an Event of Default, may
proceed against Borrower, and/or the Collateral, at any time, under any
agreement, with any available remedy and in any order.
8. USE OF FUNDS. Borrower covenants and agrees that the loan of the
Principal Sum, or any portion of the Principal Sum, shall be used for
acquisition of NewCare assets from the bankruptcy estate.
9. REPRESENTATIONS. Each entity constituting Borrower hereby warrants
and represents to Lender that:
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a. Borrower is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Nevada, and is (or within thirty
(30) days from the date hereof shall be) in good standing as a foreign
corporation in each jurisdiction in which the character of the properties owned
or leased by it or the nature of its business makes such qualification
necessary, has the corporate power and authority to own its assets and transact
the business in which it is engaged, and has obtained all certificates, licenses
(directly or through a management agreement with NewCare) and qualifications
required under all laws, regulations, ordinances, or orders of public
authorities necessary for the ownership and operation of all of its properties
and transaction of all of its business.
b. Borrower has full corporate power and authority to borrow the
Loan and to enter into, execute, and deliver this Note, and to incur and perform
its obligations under this Note and the other Loan Documents, all of which have
been duly authorized by all necessary corporate action. No consent or approval
of shareholders of, or lenders to, Borrower, and no consent, approval, filing or
registration with any governmental authority is required as a condition to the
validity of this Note or the other Loan Documents or the performance by Borrower
of its obligations under this Note or the other Loan Documents.
c. This Note, when issued and delivered for value received, and all
other Loan Documents constitute the valid and binding obligations of Borrower,
enforceable against Borrower in accordance with their respective terms.
d. The execution and delivery by Borrower of this Note and the other
Loan Documents do not, and the performance of Borrower's obligations under this
Note and the other Loan Documents will not, violate, conflict with, constitute a
default under, or result in the creation of a lien or encumbrance (other than a
lien, security interest, charge or other encumbrance in favor of Lender) upon
the property of Borrower under (i) any provision of Borrower's certificate of
incorporation or bylaws, (ii) any provision of any law, rule or regulation
applicable to Borrower, or (iii) any of the following (A) any indenture or other
agreement or instrument to which Borrower is a party or by which Borrower or its
property is bound, or (B) any judgment, order or decree of any court,
arbitration tribunal, or governmental entity applicable to Borrower or
Borrower's properties or assets.
e. There are no actions, suits, proceedings or investigations
pending, including, without limitation, any condemnation proceeding, or, to the
knowledge of Borrower, threatened, against or adversely affecting Borrower's
properties or assets or the validity or enforceability of this Note or the other
Loan Documents or the ability of Borrower to perform any obligations under this
Note or the other Loan Documents. Borrower is not in default with respect to
any order, writ, injunction, decree or demand of any court, arbitration tribunal
or governmental authority having jurisdiction over Borrower.
f. INTENTIONALLY DELETED.
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g. Borrower is not in default under or with respect to any
obligation in any respect that could be adverse to its business, operations,
property or financial condition, or that could adversely affect the ability of
Borrower to perform its obligations under this Note or the other Loan Documents.
No Event of Default or event that, with the giving of notice or lapse of time,
or both, could become an Event of Default, has occurred and is continuing.
h. INTENTIONALLY DELETED.
i. Borrower has filed, or has obtained extensions for the filing of,
all federal, state and other tax returns which are required to be filed, and has
paid all taxes shown as due on those returns and all assessments, fees and other
amounts due as of the date hereof. All tax liabilities of Borrower are
adequately provided for on Borrower's books. No tax liability has been asserted
by the Internal Revenue Service or other taxing authority against Borrower for
taxes in excess of those already paid.
j. The use of the proceeds of the Loan and Borrower's issuance of
this Note will not, directly or indirectly, violate or result in a violation of
the Securities Act of 1933 or the Securities Exchange Act of 1934, as amended,
or any regulations issued pursuant thereto, including without limitation
Regulations U, T, or X of the Board of Governors of the Federal Reserve System.
Borrower is not engaged in the business of extending credit for the purpose of
the purchasing or carrying "margin stock" within the meaning of those
regulations. No part of the proceeds of the Loan will be used to purchase or
carry any margin stock or to extend credit to others for such purpose.
k. Borrower is not an investment company within the meaning of the
Investment Company Act of 1940, as amended, nor is it, directly or indirectly,
controlled by or acting on behalf of any Person which is an investment company
within the meaning of that Act.
l. Borrower is not in violation of any statute, rule or regulation
of any governmental authority (including, without limitation, any statute, rule
or regulation relating to employment practices or to environmental, occupational
and health standards and controls). Borrower has obtained all licenses
(directly or through a management agreement with NewCare), permits, franchises,
and other governmental authorizations necessary for the ownership of its
properties and the conduct of its business. Borrower is current with all
reports and documents required to be filed with any state or federal securities
commission or similar governmental authority and is in full compliance with all
applicable rules and regulations of such commissions.
m. To the best of Borrower's knowledge, no use, exposure, release,
generation, manufacture, storage, treatment, transportation or disposal of
hazardous material has occurred or is occurring on or from any real property on
which the Collateral is located (the "PREMISES") or which is owned, leased or
otherwise occupied by Borrower, or has occurred off the Premises as a result of
any action of Borrower. All hazardous material used, treated, stored,
transported to or from, generated or handled on the Premises, or off the
Premises by Borrower, has been disposed of on or off the Premises by or on
behalf of Borrower in a lawful manner.
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There are no underground storage tanks present on or under the Premises owned
or leased by Borrower. No other environmental, public health or safety
hazards exist with respect to the Premises.
n. The only places of business of Borrower, and the places where it
keeps and intends to keep the Collateral and records concerning the Collateral,
are at the addresses set forth in SCHEDULE 9(n), which also lists the owner of
record of each such property.
o. Borrower exclusively owns or possesses all the patents, patent
applications, trademarks, trademark applications, service marks, trade names,
copyrights, franchises, licenses (directly or through a management agreement
with NewCare), and rights with respect to the foregoing necessary for the
current and planned future conduct of its business, without any conflict with
the rights of others. Borrower is not in default of any obligation or
undertaking with respect to such intellectual property or rights.
p. The identity of the stockholders of record of all classes of the
outstanding stock of Borrower, together with the respective ownership
percentages held by such stockholders, are as set forth on SCHEDULE 9(p).
q. Neither this Note nor any other Loan Document nor any other
agreement, document, certificate, or statement furnished to Lender by or on
behalf of Borrower in connection with the transactions contemplated hereby
contains any untrue statement of material fact or omits to state a material fact
necessary to make the statements contained in this Note or in the other Loan
Documents or such other documents not misleading. There is no fact known to
Borrower that adversely affects or in the future may adversely affect the
business, operations, affairs or financial condition of Borrower, or any of its
properties or assets.
r. Borrower does not own or hold any equity or long-term debt
investments in, have any outstanding advances to, have any outstanding
guarantees for the obligations of, or have any outstanding borrowings from, any
Person. Borrower is not a party to any contract or agreement, or subject to any
corporate restriction, which adversely affects its business.
s. Within five (5) years before the date of this Note, neither the
business, property or assets, or operations of Borrower has been adversely
affected in any way by any casualty, strike, lockout, combination of workers, or
order of the United States of America or other governmental authority, directed
against Borrower. There are no pending or threatened labor disputes, strikes,
lockouts, or similar occurrences or grievances against Borrower or its business.
t. Within five (5) years before the date of this Note, Borrower has
not conducted business under or used any other name (whether corporate,
partnership or assumed) except as listed on SCHEDULE 9(t). Borrower is the sole
owner of all names listed on that Schedule and any and all business done and
invoices issued in such names are Borrower's sales, business,
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and invoices. Each trade name of Borrower represents a division or trading
style of Borrower and not a separate Person or independent Affiliate.
u. Borrower is not engaged in any joint venture or partnership with
any other Person.
10. AFFIRMATIVE COVENANTS.
Each entity constituting Borrower covenants and agrees that until
this Note shall be repaid in full:
[a. FINANCIAL STATEMENTS AND COLLATERAL REPORTS. Borrower will
furnish to Lender (i) a sales and collections report and accounts receivable
aging schedule on a form acceptable to Lender within fifteen (15) days after the
end of each calendar month, which shall include, but not be limited to, a report
of sales, credits issued, and collections received; (ii) payable aging schedules
within fifteen (15) days after the end of each calendar month; (iii) internally
prepared monthly financial statements for Borrower, certified by the chief
financial officer of Borrower, within forty-five (45) days of the end of each
calendar month, accompanied by management analysis and actual vs. budget
variance reports; (iv) to the extent prepared by Borrower, annual projections,
profit and loss statements, balance sheets, and cash flow reports (prepared on a
monthly basis) for the succeeding fiscal year within thirty (30) days before the
end of each of Borrower's fiscal years; (v) internally prepared annual financial
statements for Borrower within sixty (60) days after the end of each of
Borrower's fiscal years; (vi) annual audited financial statements for Borrower
prepared by _________________________, or a firm of independent public
accountants satisfactory to Lender, within one hundred thirty-five (135) days
after the end of each of Borrower's fiscal years; (vii) promptly upon receipt
thereof, copies of any reports submitted to Borrower by the independent
accountants in connection with any interim audit of the books of Borrower and
copies of each management control letter provided to Borrower by independent
accountants; (viii) as soon as available, copies of all financial statements and
notices provided by Borrower to all of its stockholders; and (ix) such
additional information, reports or statements as Lender may from time to time
request. Annual financial statements shall set forth in comparative form
figures for the corresponding periods in the prior fiscal year. All financial
statements shall include a balance sheet and statement of earnings and shall be
prepared in accordance with GAAP.]
b. PAYMENTS HEREUNDER. Borrower will make all payments of
principal, interest, fees, and all other payments required hereunder, under this
Note, and under any other agreements with Lender to which Borrower is a party,
as and when due.
c. EXISTENCE, GOOD STANDING, AND COMPLIANCE WITH LAWS. Borrower
will do or cause to be done all things necessary (i) to obtain and keep in full
force and effect all corporate existence, rights, licenses, privileges, and
franchises of Borrower necessary to the ownership of its property or the conduct
of its business, and comply with all applicable present and future laws,
ordinances, rules, regulations, orders and decrees of any Governmental Authority
having or
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claiming jurisdiction over Borrower; and (ii) to maintain and protect the
properties used or useful in the conduct of the operations of Borrower, in a
prudent manner, including without limitation the maintenance at all times of
such insurance upon its insurable property and operations as required by law
or by subsection (e) below.
d. TAXES AND CHARGES. Borrower will timely file all tax reports and
pay and discharge all taxes, assessments and governmental charges or levies
imposed upon Borrower, or its income or profits or upon its properties or any
part thereof, before the same shall be in default and prior to the date on which
penalties attach thereto, as well as all lawful claims for labor, material,
supplies or otherwise which, if unpaid, might become a lien or charge upon the
properties or any part thereof of Borrower; PROVIDED, HOWEVER, that Borrower
shall not be required to pay and discharge or cause to be paid and discharged
any such tax, assessment, charge, levy or claim so long as the validity or
amount thereof shall be contested in good faith and by appropriate proceedings
by Borrower, as determined in the reasonable judgement of Lender, and Borrower
shall have set aside on their books adequate reserve therefor; and PROVIDED
FURTHER, that such deferment of payment is permissible only so long as
Borrower's title to, and its right to use, the Collateral is not adversely
affected thereby and Lender's lien and priority on the Collateral are not
adversely affected, altered or impaired thereby.
e. INSURANCE. Borrower will carry adequate public liability,
property and professional liability insurance with responsible companies
satisfactory to Lender in such amounts and against such risks as is customarily
maintained by similar businesses and by owners of similar property in the same
general area. In the event of a casualty or loss in excess of $500,000 at a
facility owned by Borrower, all insurance proceeds shall be disbursed to Lender
and shall be applied, at Lender's discretion, to the Obligations or to the
reconstruction of the damaged facility.
f. GENERAL INFORMATION. Borrower will furnish to Lender such
information as Lender may, from time to time, request with respect to the
business or financial affairs of Borrower, and permit any officer, employee or
agent of Lender to visit and inspect any of the properties, to examine the
minute books, books of account and other records, including management letters
prepared by Borrower's auditors, of Borrower, and make copies thereof or
extracts therefrom, and to discuss its and their business affairs, finances and
accounts with, and be advised as to the same by, the accountants and officers of
Borrower, all at such times and as often as Lender may require.
g. MAINTENANCE OF PROPERTY. Borrower will maintain, keep and
preserve the Collateral in good repair, working order and condition and from
time to time make all needful and proper repairs, renewals, replacements,
betterments and improvements to the Collateral.
h. NOTIFICATION OF EVENTS OF DEFAULT AND ADVERSE DEVELOPMENTS.
Borrower promptly will notify Lender upon the occurrence of: (i) any Event of
Default; (ii) any event which, with the giving of notice or lapse of time, or
both, could constitute an Event of Default; (iii) any event, development or
circumstance whereby the financial statements previously
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<PAGE>
furnished to Lender fail in any material respect to present fairly, in
accordance with GAAP, the financial condition and operational results of
Borrower; (iv) any judicial, administrative or arbitration proceeding pending
against Borrower, and any judicial or administrative proceeding known by
Borrower to be threatened against it which, if adversely decided, could
adversely affect its condition (financial or otherwise) or operations
(present or prospective) or which may expose Borrower to uninsured liability
of $100,000.00 or more; (v) any default claimed by any other creditor for
Borrowed Money of Borrower other than Lender; and (vi) any other development
in the business or affairs of Borrower which may be adverse; in each case
describing the nature thereof and (in the case of notification under clauses
(i) and (ii)) the action Borrower proposes to take with respect thereto.
i. EMPLOYEE BENEFIT PLANS. No employee benefit plan (a "PLAN")
subject to the Employee Retirement Income Security Act of 1974 ("ERISA") and
regulations issued pursuant to ERISA that is maintained by Borrower or under
which Borrower could have any material liability under ERISA (i) has failed to
meet minimum funding standards established in Section 302 of ERISA, (ii) has
failed to substantially comply with all applicable requirements of ERISA and of
the Internal Revenue Code, including all applicable rulings and regulations
thereunder, or (iii) has engaged in or been involved in a prohibited transaction
(as defined in ERISA) under ERISA or under the Internal Revenue Code. Neither
Borrower nor any member of a Controlled Group that includes Borrower has not
assumed, or received notice of a claim asserted against Borrower or another
member of the Controlled Group for, withdrawal liability (as defined in the
Multi-Employer Pension Plan Amendments Act of 1980, as amended) with respect to
any multi-employer pension plan. Borrower has timely made when due all
contributions with respect to any multi-employer pension plan in which it
participates and no event has occurred triggering a material claim against
Borrower for withdrawal liability with respect to any multi-employer pension
plan in which Borrower participates.
j. FINANCIAL RECORDS. Borrower shall keep current and accurate
books of records and accounts in which full and correct entries will be made of
all of its business transactions, and will reflect in its financial statements
adequate accruals and appropriations to reserves, all in accordance with GAAP.
k. PLACES OF BUSINESS. Borrower shall give thirty (30) days' prior
written notice to Lender of any change in the location of any of its places of
business, of the places where its records concerning its Accounts are kept, of
the places where the Collateral is kept, or of the establishment of any new, or
the discontinuance of any existing, places of business.
l. BUSINESS CONDUCTED. Borrower shall continue in the business
presently conducted by it using its best efforts to maintain its customers and
goodwill. Borrower shall not engage, directly or indirectly, in any line of
business substantially different from the business conducted by it immediately
prior to the Closing Date, or engage in business or lines of business which are
not reasonably related thereto.
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m. LITIGATION AND OTHER PROCEEDINGS. Borrower shall give prompt
notice to Lender of any litigation, arbitration, or other proceeding before any
Governmental Authority against or affecting Borrower if the amount claimed is
more than $100,000.00.
n. LICENSURE; MEDICAID/MEDICARE COST REPORTS. Borrower will
maintain (directly or through a management agreement with Newcare) all
certificates of need, provider numbers and licenses necessary to conduct its
business as currently conducted, and take any steps required to comply with any
such new or additional requirements that may be imposed on providers of medical
products and services. If required, all Medicaid/Medicare cost reports will be
properly filed. Borrower shall obtain all such certificates of need, provider
numbers and licenses issued in its name on or before March 29, 2000.
o. VISITS AND INSPECTIONS. Borrower agrees to permit
representatives of Lender, from time to time, as often as may be reasonably
requested, but only during normal business hours, to visit and inspect the
properties of Borrower, and to inspect, audit and make extracts from its books
and records, and discuss with its officers, its employees and its independent
accountants, Borrower's business, assets, liabilities, financial condition,
business prospects and results of operations.
p. FURTHER ASSURANCES. Borrower will defend its title to the
Collateral against all persons and will, upon request of the Lender, (i) furnish
such further assurances of title as may be required by the Lender, (ii) deliver
and execute or cause to be delivered and executed, in form and content
satisfactory to the Lender, any financing statements, notices, certificates of
title, and other documents and pay the cost of filing or recording the same in
all public offices deemed necessary by the Lender, as well as any recordation,
documentary, or transfer tax required by law to be paid in connection with such
filing or recording, and (iii) do such other acts as the Lender may reasonably
request in order to perfect, preserve, maintain, or continue the perfection of
the Lender's security interest in the Collateral and/or its priority.
11. NEGATIVE COVENANTS.
Each entity constituting Borrower covenants and agrees that until this
Note shall be repaid in full:
a. BORROWING. Borrower will not create, incur, assume or suffer to
exist any liability for borrowed money except: (i) indebtedness to Lender; (ii)
indebtedness of Borrower secured by mortgages, encumbrances or liens expressly
permitted by Lender; (iii) accounts payable to trade creditors and current
operating expenses (other than for borrowed money) which are recognized in
Borrower's accounting system and not aged more than one hundred twenty (120)
days from the billing date or more than thirty (30) days from the due date, in
each case incurred in the ordinary course of business and paid within such time
period, unless the same are
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being contested in good faith and by appropriate and lawful proceedings, and
Borrower shall have set aside such reserves, if any, with respect thereto as
are required by GAAP and deemed adequate by Borrower and its independent
accountants; and (iv) borrowings incurred in the ordinary course of its
business and not exceeding $200,000.00 in the aggregate outstanding at any
one time. Borrower will not make prepayments on any existing or future
indebtedness for borrowed money in excess of $200,000.00 to any third person
or entity (other than Lender, to the extent permitted by this Note or any
subsequent agreement between Borrower and Lender).
b. LIENS AND ENCUMBRANCES. Borrower will not create, incur, assume
or suffer to exist any mortgage, pledge, lien or other encumbrance of any kind
(including the charge upon property purchased under a conditional sale or other
title retention agreement) upon, or any security interest in, any of the
Collateral, whether now owned or hereafter acquired.
c. MERGER, ACQUISITION, OR SALE OF ASSETS. Except as permitted
pursuant to Paragraph 27 hereof, Borrower will not, without prior written notice
to, and the prior written consent of Lender: (i) enter into any transaction of
merger or consolidation; (ii) liquidate, wind-up or dissolve itself (or suffer
any liquidation or dissolution); (iii) convey, sell, lease, sublease, transfer
or otherwise dispose of, in one transaction or a series of transactions, any of
its assets, or the capital stock of any subsidiary of Borrower, whether now
owned or hereafter acquired; or (iv) acquire by purchase or otherwise all or any
substantial part of the business or assets of, or stock or other evidence of
beneficial ownership of, any Person.
d. SALE AND LEASEBACK. Except as permitted pursuant to Paragraph 27
hereof, Borrower will not, directly or indirectly, enter into any arrangement
whereby Borrower sells or transfers all or any part of its assets and thereupon
and within one year thereafter rents or leases the assets so sold or transferred
without the prior written notice to, and the prior express written consent of,
Lender, which consent shall not be unreasonably withheld.
e. DIVIDENDS, DISTRIBUTIONS, AND MANAGEMENT FEES. Borrower will not
make, declare or pay any dividends or distributions with respect to, purchase,
redeem or otherwise acquire for value any of its outstanding stock now or
hereafter outstanding, or return any capital of its stockholders other than
Excess Proceeds (as defined herein) and such other amounts as may be approved by
Lender. Borrower will not pay management fees or fees of a similar nature to
any person other than a management fee to Manager equal to: (i) five percent
(5%) of revenues from the facilities prior to the existence of a monetary Event
of Default or a material Event of Default, and (ii) following any such Event of
Default, the lesser of (x) Manager's actual costs to operate the facilities and
(y) two and one half percent (2.5%) of revenues of the facilities. Neither
Borrower nor Manager shall terminate any management agreement without Lender's
consent (and the termination of any such management agreement shall not be
effective until Lender has consented thereto).
f. SUBSIDIARIES. Borrower does not have, and will not form, any
subsidiary, or make any equity investment in or any loan in the nature of an
equity investment to, any other
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person, without the prior written consent of Lender, which consent shall not
be unreasonably withheld.
g. TRANSACTIONS WITH AFFILIATES AND SUBSIDIARIES. Without the prior
written consent of Lender, which consent shall not be unreasonably withheld,
Borrower will not enter into any transaction, including without limitation the
purchase, sale, or exchange of property, or the lending or giving of funds to
any Affiliate or subsidiary, except in the ordinary course of business and
pursuant to the reasonable requirements of Borrower's business and upon terms
substantially the same and no less favorable to Borrower as it would obtain in a
comparable arm's length transaction with any Person not an Affiliate or
subsidiary, and so long as the transaction is not otherwise prohibited under
this Note. The term "PERSON" means an individual, partnership, corporation,
trust, joint venture, joint stock company, limited liability company,
association, unincorporated organization, governmental authority, or any other
entity.
h. CHANGE IN CAPITAL STRUCTURE. There shall occur no change in
Borrower's capital structure as set forth in SCHEDULE 11(G) without the prior
written consent of Lender, which consent shall not be unreasonably withheld.
i. CONTRACTS AND AGREEMENTS. Borrower will not become or be a party
to any contract or agreement which would breach this Note, or breach any other
instrument, agreement, or document to which Borrower is a party or by which it
is or may be bound.
j. COMPLIANCE WITH ERISA. Borrower will not permit with respect to
any Plan covered by Title IV of ERISA any Prohibited Transaction or any
Reportable Event.
k. CERTIFICATES OF NEED. Borrower will not amend, alter or suspend
or terminate or make provisional in any material way, any certificate of need or
provider number without the prior written consent of Lender other than in
connection with the closing of the Elms Nursing Home, the Oak Manor Nursing Home
and the Pine Manor Nursing Home (the "CLOSED HOMES").
l. USE OF LENDER'S NAME. Borrower will not use Lender's name (or
the name of any of Lender's affiliates) in connection with any of its business
operations. Borrower may disclose to third parties that Borrower has a
borrowing relationship with Lender. Nothing contained in this Note is intended
to permit or authorize Borrower to make any contract on behalf of Lender.
m. TRUTH OF STATEMENTS AND CERTIFICATES. Borrower will not furnish
to Lender any certificate or other document that contains any untrue statement
of a material fact or that omits to state a material fact necessary to make it
not misleading in light of the circumstances under which it was furnished.
12. EVENTS OF DEFAULT. The following events are each an "EVENT OF
DEFAULT" under this Note:
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a. Borrower fails to make any payment of principal when due or fails
to make any payment of interest, fees or other amounts owed to or for the
account of Lender under this Note and such payment remains unpaid for five (5)
days after the date that such payment is due; or
b. Borrower has made any representations or warranties in this Note,
the other Loan Documents, any financial statement delivered to Lender or
otherwise in connection with this Note or the related transaction that contains
any untrue statement of a material fact or omits a material fact necessary to
make the statements contained in this Note or in such document or financial
statement not misleading, provided, however, that with respect to asserted liens
or security interests in the Collateral which arose or accrued prior to the date
hereof, the Borrower shall have a cure period of 60 days after written notice
from Lender of such default; or
c. Borrower shall fail to perform or observe, or cause to be
performed or observed, any other term, obligation, covenant, condition or
agreement contained in this Note or the other Loan Documents and any such
failure shall have continued for a period of ten (10) days after written notice
of such failure; or
d. Borrower shall (i) apply for, or consent in writing to, the
appointment of a receiver, trustee or liquidator; or (ii) file a voluntary
petition seeking relief under the Bankruptcy Code, or be unable, or admit in
writing Borrower's inability, to pay their debts as they become due; or (iii)
make a general assignment for the benefit of creditors; or (iv) file a petition
or an answer seeking reorganization or an arrangement or a readjustment of debt
with creditors, apply for, take advantage, permit or suffer to exist the
commencement of any insolvency, bankruptcy, suspension of payments,
reorganization, debt arrangement, liquidation, dissolution or similar event,
under the law of the United States or of any state in which Borrower is a
resident; or (v) file an answer admitting the material allegations of a petition
filed against Borrower in any such bankruptcy, reorganization or insolvency case
or proceeding or (vi) take any action authorizing, or in furtherance of, any of
the foregoing; or
e. Either (i) an involuntary case is commenced against Borrower and
the petition is not contested within ten (10) days or is not dismissed within
sixty (60) days after the commencement of the case or (ii) an order, judgment or
decree shall be entered by any court of competent jurisdiction on the
application of a creditor adjudicating Borrower bankrupt or insolvent, or
appointing a receiver, trustee or liquidator of Borrower or of all or
substantially all of the assets of Borrower and the order, judgment or decree
shall continue unstayed and in effect for a period of sixty (60) days or shall
not be discharged within ten (10) days after the expiration of any stay of such
order, judgment, or decree; or
f. Any obligation of Borrower for the payment of borrowed money in
excess of $200,000 in the aggregate is not paid when due or within any
applicable grace period, or such obligation becomes or is declared to be due and
payable before the expressed maturity of the obligation, or there shall have
occurred an event that, with the giving of notice or lapse of time,
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or both, would cause any such obligation to become, or allow any such
obligation to be declared to be, due and payable; or
g. One or more final judgments against Borrower or attachments
against its property not fully and unconditionally covered by insurance in
excess of $200,000 in the aggregate shall be rendered by a court of record and
shall remain unpaid, unstayed on appeal, undischarged, unbonded and undismissed
for a period of twenty (20) days;
h. An Event of Default occurs under the Guaranty, the Pledge
Agreement, the Environmental Indemnity, the Mortgages, the Loan Agreement or
other Revolving Loan Documents;
i. Borrower ceases any material portion of its business operations
as presently conducted other than as permitted in Paragraph 27 hereof and in
connection with the closing of the Closed Homes;
j. There shall occur a material adverse change in the financial
condition or business prospects of Borrower, or Lender in good faith shall deem
itself insecure as a result of acts or events bearing upon the financial
condition of Borrower or the repayment of this Note, which default shall have
continued unremedied for a period of ten (10) days after written notice from
Lender.
13. LENDER'S RIGHTS.
a. Upon the occurrence of an Event of Default, Lender may, in
addition to its rights and remedies set forth in Sections 6 and 7 above,
proceed, to the extent permitted by law, to protect and enforce its rights
either by suit in equity or by action at law, or both, whether for the specific
performance of any covenant, condition or agreement contained in this Note or in
aid of the exercise of any power granted in this Note, or proceed to enforce the
payment of this Note or to enforce any other legal or equitable right of Lender.
No right or remedy in this Note, the other Loan Documents or in other agreement
or instrument to the benefit of Lender is intended to be exclusive of any other
right or remedy, and each and every such right or remedy shall be cumulative and
shall be in addition to every other right and remedy given under this Note or
now or hereafter existing at law or in equity or by statute or otherwise.
Without limiting the generality of the foregoing, if the outstanding Principal
Sum, or any of the other obligations of Borrower to Lender shall not be paid
when due, Lender shall not be required to resort to any particular security,
right or remedy or to proceed in any particular order of priority, and Lender
shall have the right at any time and from time to time, in any commercially
reasonable manner and in any order, to enforce its security interests with
respect to the Collateral, liens, rights and remedies, or any of them, as it
deems appropriate in the circumstances, and apply the proceeds of any Collateral
to such obligations of Borrower as it determines in its sole discretion.
b. If an Event of Default has occurred as provided above and
Borrower has not paid the all amounts outstanding, including all principal,
together with interest accrued on
19
<PAGE>
such amounts, upon demand by Lender, then Borrower shall pay to Lender
interest on such outstanding amounts at a rate per annum equal to the Default
Interest Rate from the date such outstanding amounts are due until the date
this Note is paid in full. Borrower promises to pay all costs of collection,
including reasonable attorneys' fees, if this Note is referred to an attorney
for collection after the Event of Default.
14. NO DEFENSES. Borrower's obligations under this Note shall not be
subject to any set-off, counterclaim or defense to payment that Borrower now has
or may have in the future.
15. NO WAIVER. No failure or delay on the part of Lender in exercising
any right, power or privilege under this Note or the other Loan Documents, nor
any course of dealing between Borrower and Lender, shall operate as a waiver of
the right, power or privilege, nor shall a single or partial exercise of any
right, power or privilege preclude any other or further exercise of, or the
exercise of any other, right, power or privilege.
16. WRITING REQUIRED. No modification or waiver of any provisions of this
Note or any other Loan Documents, and no consent to any departure by Borrower,
shall in any event be effective, without respect to any course of dealing
between the parties, unless the modification or waiver shall be in a writing
executed by Lender and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice to or
demand on Borrower in any case shall thereby entitle Borrower to any other or
further notice or demand in the same, similar or other circumstances.
17. USURY LIMITATION. Notwithstanding anything contained to the contrary
in this Note, Lender shall never be entitled to receive, collect or apply as
interest any amount in excess of the maximum rate of interest permitted to be
charged by applicable law. If Lender receives, collects or applies as interest
any such excess, the amount that would be excessive interest shall be applied to
the reduction of the Principal Sum; and if the Principal Sum is paid in full,
any remaining excess shall be paid to Borrower. In determining whether or not
the interest paid or payable in any specific case exceeds the highest lawful
rate, Lender and Borrower shall to the maximum extent permitted under applicable
law: (i) characterize any non-principal payment as an expense, fee or premium
rather than as interest; and (ii) "spread" the total amount of interest
throughout the entire term of the obligation so that the interest rate is deemed
to have been uniform throughout the entire term.
18. NOTICES. Any notice or demand given under this Note shall be given by
delivering it, sending by telecopier (with a confirming copy by regular mail),
or by mailing it by certified or registered mail, postage prepaid, return
receipt requested, or sent by prepaid overnight courier service addressed to
Borrower at: LTC Healthcare Acquisition Company, Inc., 300 Esplanade Drive,
Suite 1860, Oxnard, CA 93030, Attention: Andre C. Dimitriadis, Telephone: (805)
981-8655, Telecopier: (805) 981-8663, with a copy to Cohn & Kelakos, LLP, 101
Arch Street, Boston, MA 02110, Attention: George M. Kelakos, Telephone: (617)
951-2505, Telecopier: (617) 951-0679, or at such other place as Borrower may
specify in writing to Lender. Any notice to be given to Lender under this Note
shall be given by personally delivering it, sending by
20
<PAGE>
telecopier (with a confirming copy by regular mail), or mailing it by
certified or registered mail, return receipt requested, or sent by prepaid
overnight courier service, addressed to Lender at: 2 Wisconsin Circle,
Fourth Floor, Chevy Chase, Maryland 20815 Attention: Steven M. Curwin, Deputy
General Counsel--Telephone: (301) 961-1640, Telecopier: (301) 664-9866, or
at such other place as Lender may specify in writing to Borrower. Each party
may designate a change of address by notice to the other given in accordance
with this Section 18 at least fifteen (15) days before such change of address
is to become effective. A notice given under this Note shall be deemed
received upon receipt if it is personally delivered or sent by telecopier or
overnight courier service and five (5) days after it is deposited in the U.S.
mail if it is sent by regular mail.
19. SECTION HEADINGS. The headings of the several paragraphs of this Note
are inserted solely for convenience of reference and are not a part of and are
not intended to govern, limit or aid in the construction of any term or
provision.
20. SEVERABILITY. If any term, provision, covenant or condition of this
Note or the application of such term, provision, covenant or condition to any
party or circumstance shall be found by a court of competent jurisdiction to be,
to any extent, invalid or unenforceable, the remainder of this Note and the
application of such term, provision, covenant, or condition to parties or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby, and each term, provision, covenant or condition
shall be valid and enforced to the fullest extent permitted by law. Upon
determination that any such term, provision, covenant or condition is invalid,
illegal or unenforceable, Lender may, but is not obligated to, advance funds to
Borrower under this Note until Borrower and Lender amend this Note so as to
effect the original intent of the parties as closely as possible in a valid and
enforceable manner.
21. SURVIVAL OF TERMS. All covenants, agreements, representations and
warranties made in this Note or in any financial statements delivered pursuant
to this Note shall survive Borrower's execution and delivery of this Note to
Lender and shall continue in full force and effect so long as this Note or any
other obligation under this Note shall be outstanding and unpaid or any other
obligation of Borrower to Lender or its affiliates under this Note shall remain
unperformed.
22. INDEMNITY. Borrower hereby agrees to indemnify and hold harmless
Lender, its partners, officers, agents and employees (collectively,
"INDEMNITEE") from and against any liability, loss, cost, expense, claim,
damage, suit, action or proceeding ever suffered or incurred by Lender
(including reasonable attorneys' fees and expenses) arising from Borrower's
failure to observe, perform or discharge any of its covenants, obligations,
agreements or duties under this Note or from the breach of any of the
representations or warranties contained in this Note. In addition, Borrower
shall defend Indemnitee against and save it harmless from all claims of any
Person with respect to the Collateral. Notwithstanding any contrary provision
in this Agreement, the obligations of Borrower under this Section 22 shall
survive the payment in full of the all obligations under this Note and the
termination of this Note.
21
<PAGE>
23. JOINT AND SEVERAL LIABILITY. EACH ENTITY CONSTITUTING BORROWER
SHALL BE JOINTLY AND SEVERALLY LIABLE FOR ALL OF THE OBLIGATIONS OF BORROWER
UNDER THIS NOTE. EACH BORROWER, INDIVIDUALLY, EXPRESSLY UNDERSTANDS, AGREES
AND ACKNOWLEDGES, THAT THE LOAN WOULD NOT BE MADE AVAILABLE ON THE TERMS
HEREIN IN THE ABSENCE OF THE COLLECTIVE CREDIT OF ALL OF THE BORROWERS, THE
JOINT AND SEVERAL LIABILITY OF ALL BORROWERS, AND THE CROSS COLLATERALIZATION
OF THE COLLATERAL OF ALL BORROWERS. ACCORDINGLY, EACH BORROWER, INDIVIDUALLY
ACKNOWLEDGES THAT THE BENEFIT TO EACH OF THE PARTICIPANTS IN THE FACILITY AS
A WHOLE CONSTITUTES REASONABLY EQUIVALENT VALUE, REGARDLESS OF THE AMOUNT OF
THE LOAN ACTUALLY BORROWED BY, ADVANCED TO, OR THE AMOUNT OF COLLATERAL
PROVIDED BY, ANY INDIVIDUAL BORROWER.
24. GOVERNING LAW; CONSENT TO JURISDICTION. THIS NOTE IS TO BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
MARYLAND WITHOUT RESPECT TO ANY OTHERWISE APPLICABLE CONFLICTS-OF-LAWS
PRINCIPLES, BOTH AS TO INTERPRETATION AND PERFORMANCE, AND THE PARTIES
EXPRESSLY CONSENT AND AGREE TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS
OF THE STATE OF MARYLAND AND THE UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF MARYLAND AND TO THE LAYING OF VENUE IN MARYLAND, WAIVING ALL
CLAIMS OR DEFENSES BASED ON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE,
INCONVENIENT FORUM OR THE LIKE. BORROWER HEREBY CONSENTS TO SERVICE OF
PROCESS BY MAILING A COPY OF THE SUMMONS TO BORROWER, BY CERTIFIED OR
REGISTERED MAIL, POSTAGE PREPAID, TO BORROWER'S ADDRESS SET FORTH IN SECTION
[18] ABOVE. BORROWER FURTHER WAIVES ANY CLAIM FOR CONSEQUENTIAL DAMAGES IN
RESPECT OF ANY ACTION TAKEN OR OMITTED TO BE TAKEN BY LENDER IN GOOD FAITH.
25. WAIVER OF TRIAL BY JURY. EACH OF BORROWER AND LENDER HEREBY (A)
COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUES TRIABLE OF
RIGHT BY A JURY, AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE
EXTENT THAT ANY SUCH RIGHT SHALL NOW HEREAFTER EXIST. THIS WAIVER OF RIGHT
TO TRIAL BY JURY IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY, BY EACH OF
BORROWER AND LENDER, AND THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY
EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD
OTHERWISE ACCRUE. EACH PARTY IS HEREBY AUTHORIZED AND REQUESTED TO SUBMIT
THIS NOTE TO ANY COURT HAVING JURISDICTION OVER THE SUBJECT MATTER AND THE
PARTIES TO THIS NOTE, SO AS TO SERVE AS CONCLUSIVE EVIDENCE OF THE FOREGOING
WAIVER OF THE RIGHT TO JURY TRIAL. FURTHER, EACH OF BORROWER
22
<PAGE>
AND LENDER HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF THE OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WILL NOT
SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.
26. NO LIABILITY OF BORROWER'S AFFILIATES. No affiliate of Borrower,
including all parents, subsidiaries and other affiliates of Borrower (the
"Affiliates"), including all officers and directors of the Borrower or the
Affiliates shall have any responsibility or liability for the payment or
performance of any obligations or duties under this Note, the Borrower
Guaranty or any other agreement or transaction provided or contemplated in
the Loan Documents or the Revolving Loan Documents.
27. RELEASE. (a) So long as no monetary Event of Default or material
Event of Default has occurred under this Note, the Loan Documents or the
Revolving Loan Documents, Collateral listed on SCHEDULE 3 shall be released
from Lender's lien (a "RELEASED ASSET") upon payment by Borrower of (a) an
amount equal to one hundred percent (100%) of the value allocated to such
item on SCHEDULE 3, and (b) if the sale price for the Released Asset exceeds
the Release Price (the "EXCESS PROCEEDS"), an amount equal to portion of the
Excess Proceeds Lender is entitled to as set forth below ((a) and (b) being
referred to herein as the "RELEASE PRICE"). The Excess Proceeds shall be
distributed as follows: (i) an amount equal to taxes owed by Borrower in
connection with the sale of such Released Asset (the "Tax Payment"), shall be
paid to Borrower to be used exclusively to pay for such taxes, and (ii) the
balance of the Excess Proceeds less the Tax Payment (the "Balance") shall be
distributed as follows: (x) if the Released Asset is sold during the first
nine (9) months following the Closing Date, seventy five percent (75%) of the
Excess Proceeds shall be paid to Lender, fifteen percent (15%) shall be
retained by Borrower to be used exclusively for working capital or other
operating expenses or capital improvements relating to the nursing home
facilities of Borrower; five percent (5%) shall be paid to Manager, and five
percent (5%) shall be paid to LTC Healthcare, Inc. (ii) if the Released Asset
is sold after the first nine (9) months following the Closing Date, seventy
five percent (75%) of the Excess Proceeds shall be paid to Lender and twenty
five percent (25%) of the Excess Proceeds shall be retained by Borrower to be
used exclusively for working capital or other operating expenses or capital
improvements relating to the nursing home facilities of Borrower. The
Release Price received by Lender shall be applied to pay down the outstanding
Principal Sum.
(b) On or after July 1, 2000, upon payment of all of the outstanding
principal, accrued interest and other Obligations owing under this Note
(including any Obligations arising in connection with the Borrower Guaranty),
provided no Event of Default has occurred under the Loan Documents or the
Revolving Loan Documents and no advances have been made under the Revolving
Loan which currently exceed Borrower's availability thereunder, Lender shall
release its interest in (i) the Collateral described in Paragraph 7(a) (vi)
through (ix) of this Note, (ii) the Collateral described in the Pledge
Agreement, and (iii) in the Property or Mortgaged Property set forth in (w)
that certain Deed to Secured Debt of even date herewith made by LTC
Healthcare of Fort Valley, Inc. in favor of Lender, (x) that certain Deed to
Secure Debt of even date herewith
23
<PAGE>
made by LTC Healthcare of Jessup, Inc. in favor of Lender, (y) that certain
Deed to Secure Debt of even date herewith made by LTC Healthcare of Atlanta,
Inc. in favor of Lender, (z) that certain Mortgage, Assignment of Leases and
Rents, Security Agreement and Fixture Filings of even date herewith made by
LTC Healthcare of Gardner, Inc. in favor of Lender, and any other Mortgages
granted by Borrower to Lender under this Note. In no event however, shall
Lender release its interest in the Collateral described in Paragraph 7(a)(i)
through (v) and (x) of this Note.
[SIGNATURES ON FOLLOWING PAGE]
24
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Secured Term
Note as of the day and year first above written.
BORROWER:
LTC HEALTHCARE OF ATLANTA, INC.,
a Nevada corporation
By: /s/ James J. Pieczynski
-----------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF BONNER SPRINGS, INC.,
a Nevada corporation
By: /s/ James J. Pieczynski
-----------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF CHICOPEE, INC.,
a Nevada corporation
By: /s/ James J. Pieczynski
-----------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF COFFEYVILLE, INC.,
a Nevada corporation
By: /s/ James J. Pieczynski
-----------------------------
Name: James J. Pieczynski
Title: Treasurer
25
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LTC HEALTHCARE OF CONVERSE, INC.,
a Nevada corporation
By: /s/ James J. Pieczynski
-----------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF FORT VALLEY, INC.,
a Nevada corporation
By: /s/ James J. Pieczynski
-----------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF GARDNER, INC.,
a Nevada corporation
By: /s/ James J. Pieczynski
-----------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF HOLYOKE, INC.,
a Nevada corporation
By: /s/ James J. Pieczynski
-----------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF JESSUP, INC.,
a Nevada corporation
By: /s/ James J. Pieczynski
-----------------------------
Name: James J. Pieczynski
Title: Treasurer
26
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LTC HEALTHCARE OF NEW PORT RICHEY, INC.,
a Nevada corporation
By: /s/ James J. Pieczynski
-----------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF SALINA, INC.,
a Nevada corporation
By: /s/ James J. Pieczynski
-----------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF SHEPARD, INC.,
a Nevada corporation
By: /s/ James J. Pieczynski
-----------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF SOUTH HADLEY, INC.,
a Nevada corporation
By: /s/ James J. Pieczynski
-----------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF SPRINGFIELD, INC.,
a Nevada corporation
By: /s/ James J. Pieczynski
-----------------------------
Name: James J. Pieczynski
Title: Treasurer
27
<PAGE>
LTC HEALTHCARE OF STATESBORO, INC.,
a Nevada corporation
By: /s/ James J. Pieczynski
-----------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF TYLER, INC.,
a Nevada corporation
By: /s/ James J. Pieczynski
-----------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF WHIGHAM, INC.,
a Nevada corporation
By: /s/ James J. Pieczynski
-----------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE RECEIVABLES, INC.,
a Nevada corporation
By: /s/ James J. Pieczynski
-----------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE ACQUISITION COMPANY, INC.,
a Nevada corporation
By: /s/ James J. Pieczynski
------------------------------
Name: James J. Pieczynski
Title: Treasurer
28
<PAGE>
LIST OF SCHEDULES
Schedule 1 - List of Guarantors
Schedule 2 - Closing Checklist
Schedule 3 - List of Collateral
Schedule 9(n) - Places of Business
Schedule 9(p) - Stock Ownership
Schedule 9(t) - Trade Names
Schedule 11(g) - Capital Structure
29
<PAGE>
SCHEDULE 1 - LIST OF GUARANTORS
LENOX HEALTHCARE, INC., a Delaware corporation,
SENIOR CARE MANAGEMENT GROUP, INC., a Delaware limited liability company
LENOX HEALTHCARE OF MILL VALLEY, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF CARMICHAEL, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF SAN LEANDRO, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF HAYWARD, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF SACRAMENTO, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF ANAHEIM, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF WOODLAND, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF CONCORD, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF SAN RAFAEL, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF SAN BERNARDINO, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF ROSEVILLE, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF CLAREMONT, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF SAN PABLO, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF SANTA PAULA-HEALTHCARE, LLC, a Delaware limited liability
company,
LENOX HEALTHCARE OF OAKLAND, LLC, a Delaware limited liability company, and
LENOX HEALTHCARE OF MODESTO, LLC, a Delaware limited liability company,
GREYLOCK HEALTH OF JOPLIN-MANOR, L.P., a Missouri limited partnership,
GREYLOCK HEALTH OF ST. CHARLES, L.P., a Missouri limited partnership,
GREYLOCK HEALTH OF SPRINGFIELD, L.P., a Missouri limited partnership,
GREYLOCK HEALTH OF BALLWIN, L.P., a Missouri limited partnership,
GREYLOCK HEALTH OF COLUMBIA, L.P., a Missouri limited partnership,
GREYLOCK HEALTH CORPORATION OF SEDGWICK, L.P., a Kansas limited partnership,
GREYLOCK HEALTH CORPORATION OF HAYSVILLE, L.P., a Kansas limited partnership,
GREYLOCK HEALTH CORPORATION OF COUNCIL GROVE, L.P., a Kansas limited
partnership,
GREYLOCK HEALTH CORPORATION OF CHANUTE, L.P., a Kansas limited partnership,
GREYLOCK HEALTH CORPORATION OF LARNED, L.P., a Kansas limited partnership,
LENOX HEALTHCARE OF SALEM, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF BROCKTON, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF BARTLESVILLE, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF KAILUA-KONA, L.P., a Delaware limited partnership,
LENOX HEALTHCARE OF PALMER, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF LURAY, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF YUMA, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF CHANUTE, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF COUNCIL GROVE, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF HAYSVILLE, LLC, a Delaware limited liability company,
30
<PAGE>
LENOX HEALTHCARE OF LARNED, LLC, a Delaware limited liability company, and
LENOX HEALTHCARE OF SEDGWICK, LLC, a Delaware limited liability company,
GREYLOCK HEALTH CORPORATION OF INDEPENDENCE TERRACE, L.P., a Kansas limited
partnership,
GREYLOCK HEALTH CORPORATION OF INDEPENDENCE LODGE, L.P., a Kansas limited
partnership,
GREYLOCK HEALTH CORPORATION OF WICHITA, L.P., a Kansas limited partnership,
GREYLOCK HEALTH CORPORATION OF TOPEKA, L.P., a Kansas limited partnership,
GREYLOCK HEALTH OF LAMAR, L.P., a Missouri limited partnership,
GREYLOCK HEALTH OF AVA, L.P., a Missouri limited partnership,
GREYLOCK HEALTH OF CLINTON, L.P., a Missouri limited partnership,
GREYLOCK HEALTH OF KANSAS CITY-BHM, L.P., a Missouri limited partnership,
GREYLOCK HEALTH OF KANSAS CITY, L.P., a Missouri limited partnership,
GREYLOCK HEALTH OF JOPLIN-HEALTHCARE, L.P., a Missouri limited partnership,
GREYLOCK HEALTH OF JEFFERSON CITY, L.P., a Missouri limited partnership,
GREYLOCK HEALTH OF THAYER, L.P., a Missouri limited partnership,
GREYLOCK HEALTH OF DES PERES, L.P., a Missouri limited partnership,
GREYLOCK HEALTH OF CRANE, L.P., a Missouri limited partnership and
GREYLOCK HEALTH OF KIMBERLING CITY-MANOR, L.P., a Missouri limited partnership,
LENOX HEALTHCARE REALTY OF JOPLIN, L.L.C., a Delaware limited liability company,
LENOX HEALTHCARE REALTY OF BROCKTON, L.L.C., a Delaware limited liability
company,
LENOX HEALTHCARE REALTY OF WOODLAND, L.L.C., a Delaware limited liability
company,
LENOX HEALTHCARE OF GOLDSBORO, L.L.C., a Delaware limited liability company,
LENOX HEALTHCARE OF EVANSVILLE, L.L.C., a Delaware limited liability company,
LENOX HEALTHCARE OF LOGANSPORT, L.L.C., a Delaware limited liability company,
LENOX HEALTHCARE OF WESTFIELD, L.L.C., a Delaware limited liability company, and
LENOX HEALTHCARE REALTY OF CARMICHAEL, L.L.C., a Delaware limited liability
company
31
<PAGE>
EXHIBIT 10.2
REVOLVING CREDIT NOTE
$5,000,000.00 September 30, 1999
FOR VALUE RECEIVED, the undersigned, LTC HEALTHCARE ACQUISITION
COMPANY, INC., a Nevada corporation, LTC HEALTHCARE OF ATLANTA, INC., a Nevada
corporation, LTC HEALTHCARE OF BONNER SPRINGS, INC., a Nevada corporation, LTC
HEALTHCARE OF CHICOPEE, INC., a Nevada corporation, LTC HEALTHCARE OF
COFFEYVILLE, INC., a Nevada corporation, LTC HEALTHCARE OF CONVERSE, INC., a
Nevada corporation, LTC HEALTHCARE OF FORT VALLEY, INC., a Nevada corporation,
LTC HEALTHCARE OF GARDNER, INC., a Nevada corporation, LTC HEALTHCARE OF
HOLYOKE, INC., a Nevada corporation, LTC HEALTHCARE OF JESSUP, INC., a Nevada
corporation, LTC HEALTHCARE OF NEW PORT RICHEY, INC., a Nevada corporation, LTC
HEALTHCARE OF SALINA, INC., a Nevada corporation, LTC HEALTHCARE OF SHEPARD,
INC., a Nevada corporation, LTC HEALTHCARE OF SOUTH HADLEY, INC., a Nevada
corporation, LTC HEALTHCARE OF SPRINGFIELD, INC., a Nevada corporation, LTC
HEALTHCARE OF STATESBORO, INC., a Nevada corporation, LTC HEALTHCARE OF TYLER,
INC., a Nevada corporation, LTC HEALTHCARE OF WHIGHAM, INC., a Nevada
corporation, LTC HEALTHCARE RECEIVABLES, INC., a Nevada corporation,
(collectively, "Borrower"), jointly and severally, promise to pay, in lawful
money of the United States, to the order of HELLER HEALTHCARE FINANCE, INC. , a
Delaware corporation (together with its successors and assigns, "Lender"), the
principal sum of Five Million and No/100 Dollars ($5,000,000.00), or so much of
such principal sum as shall be advanced or readvanced and shall remain unpaid
under the Loan established pursuant to that certain Loan and Security Agreement
dated as of even date with this Note by and among the undersigned and Lender (as
amended, modified, restated or replaced from time to time, the "Loan
Agreement"), plus interest on the unpaid balance thereof, computed on a 360-day
basis, at the rate per annum that is set forth in the Loan Agreement.
1. All capitalized terms used and not otherwise specifically
defined in this Revolving Credit Note (as amended, modified, restated or
replaced from time to time, the "Note") shall have the meanings given to them in
the Loan Agreement.
2. This Note shall evidence the undersigned's obligation to repay
all sums advanced by Lender from time to time under the Loan Agreement and as
part of the Loan. The actual amount due and owing from time to time under this
Note shall be evidenced by Lender's records of receipts and disbursements with
respect to the Loan, which shall be conclusive evidence of that amount, absent
manifest error.
3. Interest due pursuant to this Note shall be payable monthly,
in arrears, on the first Business Day of each month after the date of this Note
(for the previous month). For purposes of
<PAGE>
this Note, a "Business Day" shall mean any day on which banks are open for
business in Maryland, excluding Saturdays and Sundays.
4. This Note shall become due and payable upon the earlier to
occur of (i) the expiration of the Term, or (ii) the occurrence of any Event of
Default under the Loan Agreement, or any other event under any other Loan
Documents which would result in this Note becoming due and payable. At such
time, the entire principal balance of this Note and all other fees, costs and
expenses, if any, shall be due and payable in full. Lender shall then have the
option at any time and from time to time to exercise all of the rights and
remedies set forth in this Note and in the other Loan Documents, as well as all
rights and remedies otherwise available to Lender at law or in equity, to
collect the unpaid indebtedness under this Note and the other Loan Documents.
This Note is secured by the Collateral, as defined in and described in the Loan
Agreement.
5. Whenever any principal and/or interest and/or fee under this
Note shall not be paid when due, whether at the stated maturity or by
acceleration, interest on such unpaid amounts shall thereafter be payable at a
rate per annum equal to two (2) percentage points above the stated rate of
interest on this Note until such amounts shall be paid.
6. The undersigned and Lender intend to conform strictly to the
applicable usury laws in effect from time to time during the term of the Loan.
Accordingly, if any transaction contemplated by the Loan Agreement or this Note
would be usurious under such laws, then notwithstanding any other provision
hereof: (i) the aggregate of all interest that is contracted for, charged, or
received under this Note or under any other Loan Document shall not exceed the
maximum amount of interest allowed by applicable law, and any excess shall be
promptly credited to the undersigned by Lender (or, to the extent that such
consideration shall have been paid, such excess shall be promptly refunded to
the undersigned by Lender); (ii) neither the undersigned nor any other Person
(as defined in the Loan Agreement) now or hereafter liable hereunder shall be
obligated to pay the amount of such interest to the extent that it is in excess
of the maximum interest permitted by applicable law; and (iii) the effective
rate of interest shall be reduced to the Highest Lawful Rate (as defined in the
Loan Agreement). All sums paid, or agreed to be paid, to Lender for the use,
forbearance, and detention of the debt of Borrower to Lender shall, to the
extent permitted by applicable law, be allocated throughout the full term of
this Note until payment is made in full so that the actual rate of interest does
not exceed the Highest Lawful Rate in effect at any particular time during the
full term thereof. If at any time the rate of interest under this Note exceeds
the Highest Lawful Rate, the rate of interest to accrue pursuant to this Note
shall be limited, notwithstanding anything to the contrary in this Note, to the
Highest Lawful Rate, but any subsequent reductions in the Base Rate shall not
reduce the interest to accrue pursuant to this Note below the Highest Lawful
Rate until the total amount of interest accrued equals the amount of interest
that would have accrued if a varying rate per annum equal to the interest rate
under the Note had at all times been in effect. If the total amount of interest
paid or accrued pursuant to this Note under the foregoing provisions is less
than the total amount of interest that would have accrued if a varying rate per
annum equal to the interest rate under this Note had been in effect, then the
undersigned agrees to pay to Lender an amount equal to the difference between
(x) the lesser of (A) the amount of interest that would have accrued if the
Highest Lawful Rate had at all times been in
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<PAGE>
effect, or (B) the amount of interest that would have accrued if a varying
rate per annum equal to the interest rate under the Note had at all times
been in effect, and (y) the amount of interest accrued in accordance with the
other provisions of this Note and the Loan Agreement.
7. This Note is the "Note" referred to in the Loan Agreement, and
is issued pursuant to the Loan Agreement. Reference is made to the Loan
Agreement for a statement of the additional rights and obligations of the
undersigned and Lender. In the event of any conflict between the terms of this
Note and the terms of the Loan Agreement, the terms of the Loan Agreement shall
prevail. All of the terms, covenants, provisions, conditions, stipulations,
promises and agreements contained in the Loan Documents to be kept, observed
and/or performed by the undersigned are made a part of this Note and are
incorporated into this Note by this reference to the same extent and with the
same force and effect as if they were fully set forth in this Note; the
undersigned promises and agrees to keep, observe and perform them or cause them
to be kept, observed and performed, strictly in accordance with the terms and
provisions thereof.
8. Each party liable on this Note in any capacity, whether as
maker, endorser, surety, guarantor or otherwise, (i) waives presentment for
payment, demand, protest and notice of presentment, notice of protest, notice of
non-payment and notice of dishonor of this debt and each and every other notice
of any kind respecting this Note and all lack of diligence or delays in
collection or enforcement hereof; (ii) agrees that Lender at any time or times,
without notice to the undersigned or its consent, may grant extensions of time,
without limit as to the number of the aggregate period of such extensions, for
the payment of any principal, interest or other sums due hereunder; (iii) to the
extent permitted by law, waives all exemptions under the laws of the State of
Maryland and/or any state or territory of the United States; (iv) to the extent
permitted by law, waives the benefit of any law or rule of law intended for its
advantage or protection as an obligor under this Note or providing for its
release or discharge from liability on this Note, in whole or in part, on
account of any facts or circumstances other than full and complete payment of
all amounts due under this Note; and (v) agrees to pay, in addition to all other
sums of money due, all cost of collection and attorney's fees, whether suit be
brought or not, if this Note is not paid in full when due, whether at the stated
maturity or by acceleration.
9. No waiver by Lender of any one or more defaults by the
undersigned in the performance of any of its obligations under this Note shall
operate or be construed as a waiver of any future default or defaults, whether
of a like or different nature. No failure or delay on the part of Lender in
exercising any right, power or remedy under this Note (including, without
limitation, the right to declare this Note due and payable) shall operate as a
waiver of such right, power or remedy nor shall any single or partial exercise
of any such right, power or remedy preclude any other or further exercise of
such right, power or remedy or the exercise of any other right, power or remedy.
10. If any term, provision, covenant or condition of this Note or
the application of any term, provision, covenant or condition of this Note to
any party or circumstance shall be found by a court of competent jurisdiction to
be, to any extent, invalid or unenforceable, then the remainder of this Note and
the application of such term, provision, covenant, or condition to parties or
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<PAGE>
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby, and each term, provision, covenant or condition
shall be valid and enforced to the fullest extent permitted by law. Upon
determination that any such term, provision, covenant or condition is invalid,
illegal or unenforceable, Lender may, but is not obligated to, advance funds to
Borrower under this Note until Borrower and Lender amend this Note so as to
effect the original intent of the parties as closely as possible in a valid and
enforceable manner.
11. No amendment, supplement or modification of this Note nor any
waiver of any provision of this Note shall be made except in writing executed by
the party against whom enforcement is sought.
12. This Note shall be binding upon the undersigned and its
successors and assigns. Notwithstanding the foregoing, the undersigned may not
assign any of its rights or delegate any of its obligations under this Note
without the prior written consent of Lender, which may be withheld in its sole
discretion.
13. Each entity constituting Borrower shall be jointly and
severally liable for all of the obligations of Borrower under this Note.
14. THIS NOTE IS TO BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF MARYLAND WITHOUT RESPECT TO ANY OTHERWISE
APPLICABLE CONFLICTS-OF-LAWS PRINCIPLES, BOTH AS TO INTERPRETATION AND
PERFORMANCE, AND THE PARTIES EXPRESSLY CONSENT AND AGREE TO THE NON-EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF MARYLAND AND THE UNITED STATES
DISTRICT COURT FOR THE DISTRICT OF MARYLAND AND TO THE LAYING OF VENUE IN THE
STATE OF MARYLAND, WAIVING ALL CLAIMS OR DEFENSES BASED ON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE, INCONVENIENT FORUM OR THE LIKE. BORROWER HEREBY
CONSENTS TO SERVICE OF PROCESS BY MAILING A COPY OF THE SUMMONS TO BORROWER, BY
CERTIFIED OR REGISTERED MAIL, POSTAGE PREPAID, TO BORROWER'S ADDRESS SET FORTH
IN SECTION 9.4 OF THE LOAN AGREEMENT. BORROWER FURTHER WAIVES ANY CLAIM FOR
CONSEQUENTIAL DAMAGES IN RESPECT OF ANY ACTION TAKEN OR OMITTED TO BE TAKEN BY
LENDER IN GOOD FAITH.
15. THE UNDERSIGNED HEREBY (A) COVENANTS AND AGREES NOT TO ELECT A
TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND (B) WAIVES ANY RIGHT
TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER
EXIST. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY
BY THE UNDERSIGNED, AND THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH
INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE
ACCRUE. LENDER IS HEREBY AUTHORIZED AND REQUESTED TO SUBMIT THIS NOTE TO ANY
COURT HAVING JURISDICTION OVER THE SUBJECT
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<PAGE>
MATTER AND THE PARTIES HERETO, SO AS TO SERVE AS CONCLUSIVE EVIDENCE OF THE
UNDERSIGNED'S WAIVER OF THE RIGHT TO JURY TRIAL. FURTHER, THE UNDERSIGNED
HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF LENDER (INCLUDING
LENDER'S COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO ANY BORROWER
THAT LENDER WILL NOT SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL
PROVISION.
[SIGNATURES FOLLOW]
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Note as of the
date first above written.
LTC HEALTHCARE ACQUISITION COMPANY, INC.,
a Nevada corporation
By: /S/ JAMES J. PIECZYNSKI
---------------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF ATLANTA, INC.,
a Nevada corporation
By: /S/ JAMES J. PIECZYNSKI
---------------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF BONNER SPRINGS, INC.,
a Nevada corporation
By: /S/ JAMES J. PIECZYNSKI
---------------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF CHICOPEE, INC.,
a Nevada corporation
By:
---------------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF COFFEYVILLE, INC.,
a Nevada corporation
By: /S/ JAMES J. PIECZYNSKI
---------------------------------
Name: James J. Pieczynski
Title: Treasurer
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<PAGE>
LTC HEALTHCARE OF CONVERSE, INC.,
a Nevada corporation
By: /S/ JAMES J. PIECZYNSKI
---------------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF FORT VALLEY, INC.,
a Nevada corporation
By: /S/ JAMES J. PIECZYNSKI
---------------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF GARDNER, INC.,
a Nevada corporation
By: /S/ JAMES J. PIECZYNSKI
---------------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF HOLYOKE, INC.,
a Nevada corporation
By: /S/ JAMES J. PIECZYNSKI
---------------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF JESSUP, INC.,
a Nevada corporation
By: /S/ JAMES J. PIECZYNSKI
---------------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF NEW PORT RICHEY, INC.,
a Nevada corporation
By: /S/ JAMES J. PIECZYNSKI
---------------------------------
Name: James J. Pieczynski
Title: Treasurer
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<PAGE>
LTC HEALTHCARE OF SALINA, INC.,
a Nevada corporation
By: /S/ JAMES J. PIECZYNSKI
---------------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF SHEPARD, INC.,
a Nevada corporation
By: /S/ JAMES J. PIECZYNSKI
---------------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF SOUTH HADLEY, INC.,
a Nevada corporation
By: /S/ JAMES J. PIECZYNSKI
---------------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF SPRINGFIELD, INC.,
a Nevada corporation
By: /S/ JAMES J. PIECZYNSKI
---------------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF STATESBORO, INC.,
a Nevada corporation
By: /S/ JAMES J. PIECZYNSKI
---------------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF TYLER, INC.,
a Nevada corporation
By: /S/ JAMES J. PIECZYNSKI
---------------------------------
Name: James J. Pieczynski
Title: Treasurer
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<PAGE>
LTC HEALTHCARE OF WHIGHAM, INC.,
a Nevada corporation
By: /S/ JAMES J. PIECZYNSKI
---------------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE RECEIVABLES, INC.,
a Nevada corporation
By: /S/ JAMES J. PIECZYNSKI
---------------------------------
Name: James J. Pieczynski
Title: Treasurer
9
<PAGE>
EXHIBIT 10.3
$5,000,000.00
LOAN AND SECURITY AGREEMENT
by and between
LTC HEALTHCARE ACQUISITION COMPANY, INC.
LTC HEALTHCARE OF ATLANTA, INC.
LTC HEALTHCARE OF BONNER SPRINGS, INC.
LTC HEALTHCARE OF CHICOPEE, INC.
LTC HEALTHCARE OF COFFEYVILLE, INC.
LTC HEALTHCARE OF CONVERSE, INC.
LTC HEALTHCARE OF FORT VALLEY, INC.
LTC HEALTHCARE OF GARDNER, INC.
LTC HEALTHCARE OF HOLYOKE, INC.
LTC HEALTHCARE OF JESSUP, INC.
LTC HEALTHCARE OF NEW PORT RICHEY, INC.
LTC HEALTHCARE OF SALINA, INC.
LTC HEALTHCARE OF SHEPARD, INC.
LTC HEALTHCARE OF SOUTH HADLEY, INC.
LTC HEALTHCARE OF SPRINGFIELD, INC.
LTC HEALTHCARE OF STATESBORO, INC.
LTC HEALTHCARE OF TYLER, INC.
LTC HEALTHCARE OF WHIGHAM, INC.
LTC HEALTHCARE RECEIVABLES, INC.
(collectively, "Borrower")
and
HELLER HEALTHCARE FINANCE, INC.
("Lender")
September 30, 1999
<PAGE>
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (the "Agreement") is made as of
September 30, 1999, by and among LTC HEALTHCARE ACQUISITION COMPANY, INC. a
Nevada corporation, LTC HEALTHCARE OF ATLANTA, INC., a Nevada corporation,
LTC HEALTHCARE OF BONNER SPRINGS, INC., a Nevada corporation, LTC HEALTHCARE
OF CHICOPEE, INC., a Nevada corporation, LTC HEALTHCARE OF COFFEYVILLE, INC.,
a Nevada corporation, LTC HEALTHCARE OF CONVERSE, INC., a Nevada corporation,
LTC HEALTHCARE OF FORT VALLEY, INC., a Nevada corporation, LTC HEALTHCARE OF
GARDNER, INC., a Nevada corporation, LTC HEALTHCARE OF HOLYOKE, INC., a
Nevada corporation, LTC HEALTHCARE OF JESSUP, INC., a Nevada corporation, LTC
HEALTHCARE OF NEW PORT RICHEY, INC., a Nevada corporation, LTC HEALTHCARE OF
SALINA, INC., a Nevada corporation, LTC HEALTHCARE OF SHEPARD, INC., a Nevada
corporation, LTC HEALTHCARE OF SOUTH HADLEY, INC., a Nevada corporation, LTC
HEALTHCARE OF SPRINGFIELD, INC., a Nevada corporation, LTC HEALTHCARE OF
STATESBORO, INC., a Nevada corporation, LTC HEALTHCARE OF TYLER, INC., a
Nevada corporation, LTC HEALTHCARE OF WHIGHAM, INC., a Nevada corporation,
LTC HEALTHCARE RECEIVABLES, INC., a Nevada corporation (collectively,
"BORROWER"), and HELLER HEALTHCARE FINANCE, INC., a Delaware corporation
("Lender").
RECITALS
A. Borrower desires to establish certain financing arrangements with
and borrow funds from Lender, and Lender is willing to establish such
arrangements for and make loans and extensions of credit to Borrower, on the
terms and conditions set forth below.
B. The parties desire to define the terms and conditions of their
relationship and to reduce their agreements to writing.
<PAGE>
NOW, THEREFORE, in consideration of the promises and covenants
contained in this Agreement, and for other consideration, the receipt and
sufficiency of which are acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, unless otherwise specified, all
references to "Sections" shall be deemed to refer to Sections of this
Agreement, and the following terms shall have the meanings set forth below:
SECTION 1.1. ACCOUNT. "Account" means any right to payment for goods
sold or leased or services rendered, whether or not evidenced by an
instrument or chattel paper, and whether or not earned by performance,
including, without limitation, the right to payment of management fees.
SECTION 1.2. ACCOUNT DEBTOR. "Account Debtor" means any Person
obligated on any Account of Borrower, including without limitation, any
Insurer and any Medicaid/Medicare Account Debtor.
SECTION 1.3. AFFILIATE. "Affiliate" means, with respect to a
specified Person, any Person directly or indirectly controlling, controlled
by, or under common control with the specified Person, including without
limitation their stockholders and any Affiliates thereof. A Person shall be
deemed to control a corporation or other entity if the Person possesses,
directly or indirectly, the power to direct or cause the direction of the
management and business of the corporation or other entity, whether through
the ownership of voting securities, by contract, or otherwise.
SECTION 1.4. AGREEMENT. "Agreement" means this Loan and Security
Agreement, as it may be amended or supplemented from time to time.
SECTION 1.5. BASE RATE. "Base Rate" means a rate of interest equal
to three and three quarters percent (3.75%) above the "Prime Rate of
Interest" (provided, however, that in no event shall the Base Rate fall below
twelve percent ( 12%) so long as this Agreement remains in effect).
SECTION 1.6. BORROWED MONEY. "Borrowed Money" means any obligation
to repay money, any indebtedness evidenced by notes, bonds, debentures or
similar obligations, any obligation under a conditional sale or other title
retention agreement and the net aggregate rentals under any lease which under
GAAP would be capitalized on the books of Borrower or which is the
substantial equivalent of the financing of the property so leased.
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<PAGE>
SECTION 1.7. BORROWER. "Borrower" has the meaning set forth in the
Preamble.
SECTION 1.8. BORROWING BASE. "Borrowing Base" has the meaning set
forth in Section 2.1(d).
SECTION 1.9. BUSINESS DAY. "Business Day" means any day on which
financial institutions are open for business in the State of Maryland,
excluding Saturdays and Sundays.
SECTION 1.10. CLOSING; CLOSING DATE. "Closing" and "Closing Date"
have the meanings set forth in Section 5.3.
SECTION 1.11. COLLATERAL. "Collateral" has the meaning set forth in
Section 3.1.
SECTION 1.12. INTENTIONALLY DELETED.
SECTION 1.13. CONCENTRATION ACCOUNT. "Concentration Account" has the
meaning set forth in Section 2.3.
SECTION 1.14. CONTROLLED GROUP. "Controlled Group" means all
businesses that would be treated as a single employer under Section 4001(b)
of ERISA.
SECTION 1.15. COST REPORT SETTLEMENT ACCOUNT. "Cost Report
Settlement Account" means an "Account" owed to Borrower by a
Medicaid/Medicare Account Debtor pursuant to any cost report, either interim,
filed or audited, as the context may require.
SECTION 1.16. DEFAULT RATE. "Default Rate" means a rate per annum
equal to two percent (2%) above the then applicable Base Rate.
SECTION 1.16A. EXCESS CASH FLOW. "Excess Cash Flow" means the
following, as determined in accordance with GAAP: (i) net income (after
deducting management fees permitted under the terms of this Agreement), plus
(ii) depreciation and amortization, less (iii) actual capital expenditures
reasonably approved by Lender (except that capital expenditures less than
$250 in the aggregate per bed per year and capital expenditures required by
governmental authorities shall not require Lender's approval but Borrower
shall provide Lender with prior written notice of capital expenditure
required by governmental authorities); provided however, that gains or losses
relating to proceeds of the sale of a Released Asset (as defined in the Term
Note) shall not be included in the calculation of Excess Cash Flow.
SECTION 1.16B. ENVIRONMENTAL INDEMNITIES. "Environmental
Indemnities" means those certain Environmental Indemnity Agreements of even
date herewith made by each Borrower in favor of Lender.
SECTION 1.17. ERISA. "ERISA" has the meaning set forth in Section
4.12.
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<PAGE>
SECTION 1.18. EVENT OF DEFAULT. "Event of Default" and "Events of
Default" have the meanings set forth in Section 8.1.
SECTION 1.19. GAAP. "GAAP" means generally accepted accounting
principles applied in a consistent manner.
SECTION 1.20. GOVERNMENTAL AUTHORITY. "Governmental Authority" means
and includes any federal, state, District of Columbia, county, municipal, or
other government and any department, commission, board, bureau, agency or
instrumentality thereof, whether domestic or foreign.
SECTION 1.20A. GUARANTY. "Guaranty" means that certain Unconditional
Guaranty of Payment and Performance made by parties listed on SCHEDULE 1
hereof ("GUARANTOR" or "MANAGER") in favor of Lender and dated as of even
date with this Agreement.
SECTION 1.21. HAZARDOUS MATERIAL. "Hazardous Material" means any
substances defined or designated as hazardous or toxic waste, hazardous or
toxic material, hazardous or toxic substance, or similar term, by any
environmental statute, rule or regulation or any Governmental Authority
applicable to Borrower or its business, operations or assets.
SECTION 1.22. HIGHEST LAWFUL RATE. "Highest Lawful Rate" means the
maximum lawful rate of interest referred to in Section 2.7 that may accrue
pursuant to this Agreement.
SECTION 1.23. INSURER. "Insurer" means a Person that insures a
Patient against certain of the costs incurred in the receipt by such Patient
of Medical Services, or that has an agreement with Borrower to compensate
Borrower for providing services to a Patient.
SECTION 1.24. LENDER. "Lender" means Heller Healthcare Finance,
Inc., a Delaware corporation.
SECTION 1.25. LOAN. "Loan" has the meaning set forth in Section
2.1(a).
SECTION 1.26. LOAN DOCUMENTS. "Loan Documents" means and includes
this Agreement, the Note, the Certificate of Validity, the Guaranty, the
Borrower Guaranty, the Environmental Indemnity, the Pledge Agreement, the
Mortgages and each and every other document now or hereafter delivered in
connection with this Agreement, as any of them may be amended, modified, or
supplemented from time to time.
SECTION 1.27. INTENTIONALLY DELETED.
SECTION 1.28. LOCKBOX. "Lockbox" has the meaning set forth in
Section 2.3.
SECTION 1.28 A. LOCKBOX ACCOUNT. "Lockbox Account" means an account
maintained by Borrower at the Lockbox Bank into which all collections of
Accounts are paid directly.
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<PAGE>
SECTION 1.29. LOCKBOX BANK. "Lockbox Bank" has the meaning set forth
in Section 2.3.
SECTION 1.29A. MATURITY DATE. "Maturity Date" has the meaning set
forth in Section 2.8.
SECTION 1.30. MAXIMUM LOAN AMOUNT. "Maximum Loan Amount" has the
meaning set forth in Section 2.1(a).
SECTION 1.31. MEDICAID/MEDICARE ACCOUNT DEBTOR. "Medicaid/ Medicare
Account Debtor" means any Account Debtor which is (i) the United States of
America acting under the Medicaid/Medicare program established pursuant to
the Social Security Act, (ii) any state or the District of Columbia acting
pursuant to a health plan adopted pursuant to Title XIX of the Social
Security Act or (iii) any agent, carrier, administrator or intermediary for
any of the foregoing.
SECTION 1.32. MEDICAL SERVICES. "Medical Services" means Medical and
health care services provided to a Patient, including, but not limited to,
medical and health care services provided to a Patient and performed by
Borrower which are covered by a policy of insurance issued by an Insurer, and
includes physician services, nurse and therapist services, dental services,
hospital services, skilled nursing facility services, comprehensive
outpatient rehabilitation services, home health care services, residential
and out-patient behavioral healthcare services, and medicine or health care
equipment provided by Borrower to a Patient for a necessary or specifically
requested valid and proper medical or health purpose.
SECTION 1.32A. MORTGAGES. "Mortgages" means those certain Mortgages,
Deeds of Trust and Deeds to Secure Debt, of even date herewith made by each
Borrower in favor of Lender.
SECTION 1.32B. NEWCARE. "NewCare" means NewCare Health Corporation
and its affiliates.
SECTION 1.33. NOTE. "Note" has the meaning set forth in Section
2.1(c).
SECTION 1.34. OBLIGATIONS. "Obligations" has the meaning set forth
in Section 3.1.
SECTION 1.35. PATIENT. "Patient" means any Person receiving Medical
Services from Borrower and all Persons legally liable to pay Borrower for
such Medical Services other than Insurers.
SECTION 1.36. PERMITTED LIENS. "Permitted Liens" means: (i) deposits
or pledges to secure obligations under workmen's compensation, social
security or similar laws, or under unemployment insurance; (ii) deposits or
pledges to secure bids, tenders, contracts (other than contracts for the
payment of money), leases, statutory obligations, surety and appeal bonds and
other obligations of like nature arising in the ordinary course of business;
(iii) mechanic's,
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<PAGE>
workmen's, materialmen's or other like liens arising in the ordinary course
of business with respect to obligations which are not due, or which are being
contested in good faith by appropriate proceedings which suspend the
collection thereof and in respect of which adequate reserves have been made
(provided that such proceedings do not, in Lender's sole discretion, involve
any substantial risk of the sale, loss or forfeiture of such property or
assets or any interest therein); (iv) liens and encumbrances in favor of
Lender; and (v) liens set forth on SCHEDULE 1.36.
SECTION 1.37. PERSON. "Person" means an individual, partnership,
corporation, trust, joint venture, joint stock company, limited liability
company, association, unincorporated organization, Governmental Authority, or
any other entity.
SECTION 1.38. PLAN. "Plan" has the meaning set forth in Section 4.12.
SECTION 1.38A. PLEDGE AGREEMENT "Pledge Agreement" means that
certain Security Agreement, Pledge and Assignment of Partnership Interests of
even date herewith made by LTC Healthcare of Tyler, Inc. in favor of Lender.
SECTION 1.39. PREMISES. "Premises" has the meaning set forth in
Section 4.14.
SECTION 1.40. PRIME RATE OF INTEREST. "Prime Rate of Interest" means
that rate of interest designated as such by Citibank, N.A., or any successor
thereto, as the same may from time to time fluctuate.
SECTION 1.41. PROHIBITED TRANSACTION. "Prohibited Transaction" means
a "prohibited transaction" within the meaning of Section 406 of ERISA or
Section 4975(c)(1) of the Internal Revenue Code that is not exempt under
Section 407 or Section 408 of ERISA or Section 4975(c)(2) or (d) of the
Internal Revenue code or under a class exemption granted by the U.S.
Department of Labor.
SECTION 1.42. QUALIFIED ACCOUNT. "Qualified Account" means an
Account of Borrower generated in the ordinary course of Borrower's business
from the sale of goods or rendition of Medical Services which Lender, in its
sole credit judgment, deems to be a Qualified Account. Without limiting the
generality of the foregoing, no Account shall be a Qualified Account if: (a)
the Account or any portion of the Account is payable by an individual
beneficiary, recipient or subscriber individually and not directly to
Borrower by a Medicaid/Medicare Account Debtor or commercial medical
insurance carrier acceptable to Lender in its sole discretion; (b) the
Account remains unpaid more than ninety (90) days past the claim or invoice
date (but in no event more than one hundred and five (105) days after the
applicable Medical Services have been rendered); (c) the Account is subject
to any defense, set-off, counterclaim, deduction, discount, credit,
chargeback, freight claim, allowance, or adjustment of any kind; (d) any part
of any goods the sale of which has given rise to the Account has been
returned, rejected, lost, or damaged; (e) if the Account arises from the sale
of goods by Borrower, the sale was not an absolute sale, or the sale was made
on consignment or on approval or on a sale-or-return basis, or the sale was
made subject to any other repurchase or return agreement, or the goods have
not been shipped to the
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<PAGE>
Account Debtor or its designee; (f) if the Account arises from the
performance of Medical Services, the Medical Services have not been actually
been performed or the Medical Services were undertaken in violation of any
law; (g) the Account is subject to a lien other than a Permitted Lien; (h)
Borrower knows or should have known of the bankruptcy, receivership,
reorganization, or insolvency of the Account Debtor; (i) the Account is
evidenced by chattel paper or an instrument of any kind, or has been reduced
to judgment; (j) the Account is an Account of an Account Debtor having its
principal place of business or executive office outside the United States;
(k) the Account Debtor is an Affiliate or Subsidiary of Borrower; (l) more
than ten percent (10%) of the aggregate balance of all Accounts owing from
the Account Debtor obligated on the Account are outstanding more than one
hundred and five (105) days past their invoice date; (m) fifty percent (50%)
or more of the aggregate unpaid Accounts from any single Account Debtor are
not deemed Qualified Accounts under this Agreement; (n) the total unpaid
Accounts of the Account Debtor, except for a Medicaid/Medicare Account
Debtor, exceed twenty percent (20%) of the net amount of all Qualified
Accounts (including Medicaid/Medicare Account Debtors); (o) any covenant,
representation or warranty contained in the Loan Documents with respect to
such Account has been breached; or (p) the Account fails to meet such other
specifications and requirements which may from time to time be established by
Lender.
SECTION 1.43. REPORTABLE EVENT. "Reportable Event" means a
"reportable event" as defined in Section 4043(c) of ERISA for which the
notice requirements of Section 4043(a) of ERISA are not waived..
SECTION 1.44. REVOLVING CREDIT LOAN. "Revolving Credit Loan" has the
meaning set forth in Section 2.1(b).
SECTION 1.45. TERM. "Term" has the meaning set forth in Section 2.8.
SECTION 1.46. TERM LOAN DOCUMENTS. "Term Loan Documents" means and
includes, the Term Note, the Guaranty, the Borrower Guaranty, the Mortgages,
the Environmental Indemnity, the Pledge Agreement and each and every other
document now or hereafter delivered in connection with Term Note, as any of
them may be amended, modified, or supplemented from time to time.
SECTION 1.47. TERM NOTE. "Term Note" means that Secured Term Note,
of even date herewith, in the principal amount of $13,675,000.00]made by
Borrower in favor of Lender.
ARTICLE II
LOAN
SECTION 2.1. TERMS.
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(a) The maximum aggregate principal amount of credit
extended by Lender to Borrower under this Agreement (the "Loan") that will be
outstanding at any time is Five Million and No/100 Dollars ($5,000,000.00)
(the "Maximum Loan Amount").
(b) The Loan shall be in the nature of a revolving line of
credit, and shall include sums advanced and other credit extended by Lender
to or for the benefit of Borrower from time to time under this Article II
(each a "Revolving Credit Loan") up to the Maximum Loan Amount depending upon
the availability in the Borrowing Base, the requests of Borrower pursuant to
the terms and conditions of Section 2.2, and on such other basis as Lender
may reasonably determine. The outstanding principal balance of the Loan may
fluctuate from time to time, to be reduced by repayments made by Borrower
(which may be made without penalty or premium), and to be increased by future
Revolving Credit Loans, advances and other extensions of credit to or for the
benefit of Borrower, and shall be due and payable in full upon the expiration
of the Term. For purposes of this Agreement, any determination as to whether
there is availability within the Borrowing Base for advances or extensions of
credit shall be made by Lender in its sole discretion and is final and
binding upon Borrower.
(c) At Closing, Borrower shall execute and deliver to
Lender a promissory note evidencing Borrower's unconditional obligation to
repay Lender for Revolving Credit Loans, advances, and other extensions of
credit made under the Loan, in the form of EXHIBIT A to this Agreement (as
amended, modified, restated or replaced from time to time, the "Note"), dated
the date of this Agreement, payable to the order of Lender in accordance with
the terms thereof. The Note shall bear interest on the outstanding principal
balance of the Note from the date of the Note until repaid, with interest
payable monthly in arrears on the first Business Day of each month, at a rate
per annum (on the basis of the actual number of days elapsed over a year of
360 days) equal to the Base Rate, provided that after the occurrence and
during the continuance of an Event of Default such rate shall be equal to the
Default Rate. Each Revolving Credit Loan, advance and other extension of
credit shall be deemed evidenced by the Note, which is deemed incorporated
into and made a part of this Agreement by this reference.
(d) Subject to the terms and conditions of this Agreement,
advances under the Loan shall be made against a borrowing base equal to
eighty percent (80%) of QualifiedAccounts due and owing from any
Medicaid/Medicare, Insurer or other Account Debtor (the "Borrowing Base").
SECTION 2.2. LOAN ADMINISTRATION. Borrowings under the Loan shall be
as follows:
(a) A request for a Revolving Credit Loan shall be made, or
shall be deemed to be made, in the following manner: (i) Borrower may give
Lender notice of its intention to borrow, in which notice Borrower shall
specify the amount of the proposed borrowing and the proposed borrowing date,
not later than 2:00 p.m. Eastern time two (2) Business Days before the
proposed borrowing date; PROVIDED, HOWEVER, that no such request may be made
at a time when there exists an Event of Default; and (ii) the becoming due of
any amount required to be paid under this Agreement, whether as interest or
for any other Obligation, shall be deemed
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irrevocably to be a request for a Revolving Credit Loan on the day following
the due date in the amount required to pay such interest or other Obligation
if such was not paid by Borrower on the due date.
(b) Borrower hereby irrevocably authorizes Lender to
disburse the proceeds of each Revolving Credit Loan requested, or deemed to
be requested, as follows: (i) the proceeds of each Revolving Credit Loan
requested under subsection 2.2(a)(i) shall be disbursed by Lender by wire
transfer to such bank account as may be agreed upon by Borrower and Lender
from time to time or elsewhere if pursuant to written direction from
Borrower; and (ii) the proceeds of each Revolving Credit Loan deemed to be
requested under subsection 2.2(a)(ii) shall be disbursed by Lender by way of
direct payment of the relevant interest or other Obligation.
(c) Lender will account to Borrower monthly with a
statement of Revolving Credit Loans, charges and payments made pursuant to
this Agreement, and such accounting rendered by Lender shall be deemed final,
binding and conclusive upon Borrower, absent manifest error, unless Lender is
notified by Borrower in writing to the contrary within thirty (30) days of
the date each accounting is mailed to Borrower. Such notice shall be deemed
an objection to those items specifically objected to in the notice.
(d) All Revolving Credit Loans, advances and other
extensions of credit to or for the benefit of Borrower shall constitute one
general Obligation of Borrower, and shall be secured by Lender's lien upon
all of the Collateral.
(e) Lender shall enter all Revolving Credit Loans as debits
to a loan account in the name of Borrower and shall also record in said loan
account all payments made by Borrower on any Obligations and all proceeds of
Collateral which are indefeasibly paid to Lender, and may record therein, in
accordance with customary accounting practice, other debits and credits,
including interest and all charges and expenses properly chargeable to
Borrower. All collections into the Concentration Account pursuant to Section
2.3 shall be applied first to fees agreed upon under the Loan Documents,
costs and expenses due and owing under the Loan Documents, then to interest
due and owing under the Loan Documents, and then to principal outstanding
with respect to Revolving Credit Loans.
SECTION 2.3. COLLECTIONS, DISBURSEMENTS, BORROWING
AVAILABILITY, AND LOCKBOX ACCOUNT. Borrower shall maintain a lockbox account
(the "Lockbox") with Bank One Arizona, N.A. (the "Lockbox Bank"), subject to
the provisions of this Agreement, and shall execute with the Lockbox Bank a
Lockbox Agreement in the form attached as EXHIBIT B, and such other
agreements related to the Lockbox Agreement as Lender may require. Borrower
shall ensure that all collections of Accounts are paid directly from Account
Debtors into the Lockbox, and that all funds paid into the Lockbox are
immediately transferred into a depository account maintained by Lender at
Bank One, N.A., or such other financial institution as determined by Lender
in its sole discretion and communicated to Borrower (the "Concentration
Account"). Lender shall apply, on a daily basis, all funds transferred into
the Concentration Account pursuant to this Section 2.3 to reduce the
outstanding indebtedness under the Loan (in accordance
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with Section 2.2(d)), and all future Revolving Credit Loans, advances and
other extensions of credit to be made by Lender under the conditions set
forth in this Article II. To the extent that any collections of Accounts or
proceeds of other Collateral are not sent directly to the Lockbox but are
received by Borrower, such collections shall be held in trust for the benefit
of Lender and immediately remitted, in the form received, to the Lockbox Bank
for transfer to the Concentration Account immediately upon receipt by
Borrower. Borrower acknowledges and agrees that its compliance with the terms
of this Section 2.3 is essential, and that upon its failure to comply with
any such terms Lender shall be entitled to assess a non-compliance fee which
shall operate to increase the Base Rate by two percent (2%) per annum during
any period of non-compliance. Lender shall be entitled to assess such fee
whether or not an Event of Default is declared or otherwise occurs. All funds
transferred from the Concentration Account for application to Borrower's
indebtedness to Lender shall be applied to reduce the Loan balance. If as the
result of collections of Accounts pursuant to the terms and conditions of
this Section 2.3 a credit balance exists with respect to the Concentration
Account, such credit balance shall not accrue interest in favor of Borrower,
but shall be available to Borrower at any time or times for so long as no
Event of Default exists.
SECTION 2.4. FEES.
(a) Intentionally Deleted.
(b) Intentionally Deleted.
(c) Intentionally Deleted.
(d) Borrower shall pay to Lender all out-of-pocket audit
fees in connection with audits of Borrower's books and records and such other
matters as Lender shall deem appropriate, which shall be due and payable on
the first Business Day of the month following the date of issuance by Lender
of a request for payment thereof to Borrower. Upon Lender's request,
Borrower, at its sole cost and expense, shall obtain appraisals in form
satisfactory to Lender.
(e) Borrower shall pay to Lender, on demand, any and all
fees, costs or expenses which Lender or any participant pays to a bank or
other similar institution (including, without limitation, any fees paid by
Lender to any participant) arising out of or in connection with (i) the
forwarding to Borrower or any other Person on behalf of Borrower, by Lender,
of proceeds of Revolving Credit Loans made by Lender to Borrower pursuant to
this Agreement, and (ii) the depositing for collection, by Lender or any
participant, of any check or item of payment received or delivered to Lender
or any participant on account of Obligations.
SECTION 2.5. PAYMENTS.
(a) Principal payable on account of Revolving Credit Loans
shall be payable by Borrower to Lender immediately upon the earliest of (i)
the receipt by Borrower or Lender of any payments on or proceeds from any of
the Collateral, to the extent of such proceeds, (ii) the
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occurrence of an Event of Default if the Loan and the maturity of the payment
of the Obligations are accelerated, or (iii) the termination of this
Agreement pursuant to Section 2.8 of this Agreement; PROVIDED, HOWEVER, that
if any advance made by Lender in excess of the Borrowing Base shall exist at
any time, Borrower shall, immediately upon demand, repay such overadvance.
Interest accrued on the Revolving Credit Loans shall be due on the earliest
of (i) the first Business Day of each month (for the immediately preceding
month), computed on the last calendar day of the preceding month, (ii) the
occurrence of an Event of Default if the Loan and the maturity of the payment
of the Obligations are accelerated, or (iii) the termination of this
Agreement pursuant to Section 2.8. Except to the extent otherwise set forth
in this Agreement, all payments of principal and of interest on the Loan, all
other charges and any other obligations of Borrower under this Agreement,
shall be made to Lender to the Concentration Account, in immediately
available funds.
(b) In addition, beginning on the first anniversary of the
Closing Date and at the end of each fiscal quarter thereafter, Borrower shall
deliver to Lender within thirty (30) days thereafter an amount equal to fifty
percent (50%) of Excess Cash Flow for the past fiscal quarter, to be applied
first, to pay any advances made under this Loan in excess of Borrower's
availability, if any, and then, to pay accrued interest and outstanding
principal under the Term Note . Borrower shall have the right to retain fifty
(50%) of Excess Cash Flow to be used entirely for working capital or other
operating expenses or capital improvements relating to the nursing home
facilities of Borrower.
SECTION 2.6. USE OF PROCEEDS. The proceeds of Lender's advances
under the Loan shall be used solely for working capital and for other costs
of Borrower arising in the ordinary course of Borrower's business.
SECTION 2.7. INTEREST RATE LIMITATION. The parties intend to conform
strictly to the applicable usury laws in effect from time to time during the
term of the Loan. Accordingly, if any transaction contemplated by this
Agreement would be usurious under such laws, then notwithstanding any other
provision of this Agreement: (i) the aggregate of all interest that is
contracted for, charged, or received under this Agreement or under any other
Loan Document shall not exceed the maximum amount of interest allowed by
applicable law (the "Highest Lawful Rate"), and any excess shall be promptly
credited to Borrower by Lender (or, to the extent that such consideration
shall have been paid, such excess shall be promptly refunded to Borrower by
Lender); (ii) neither Borrower nor any other Person now or hereafter liable
under this Agreement shall be obligated to pay the amount of such interest to
the extent that it is in excess of the Highest Lawful Rate; and (iii) the
effective rate of interest shall be reduced to the Highest Lawful Rate. All
sums paid, or agreed to be paid, to Lender for the use, forbearance, and
detention of the debt of Borrower to Lender shall, to the extent permitted by
applicable law, be allocated throughout the full term of the Note until
payment is made in full so that the actual rate of interest does not exceed
the Highest Lawful Rate in effect at any particular time during the full term
thereof. If at any time the rate of interest under the Note exceeds the
Highest Lawful Rate, the rate of interest to accrue pursuant to this
Agreement shall be limited, notwithstanding
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anything to the contrary in this Agreement, to the Highest Lawful Rate, but
any subsequent reductions in the Base Rate shall not reduce the interest to
accrue pursuant to this Agreement below the Highest Lawful Rate until the
total amount of interest accrued equals the amount of interest that would
have accrued if a varying rate per annum equal to the interest rate under the
Note had at all times been in effect. If the total amount of interest paid or
accrued pursuant to this Agreement under the foregoing provisions is less
than the total amount of interest that would have accrued if a varying rate
per annum equal to the interest rate under the Note had been in effect, then
Borrower agrees to pay to Lender an amount equal to the difference between
(x) the lesser of (A) the amount of interest that would have accrued if the
Highest Lawful Rate had at all times been in effect, or (B) the amount of
interest that would have accrued if a varying rate per annum equal to the
interest rate under the Note had at all times been in effect, and (y) the
amount of interest accrued in accordance with the other provisions of this
Agreement.
SECTION 2.8. TERM.
(a) Subject to Lender's right to cease making Revolving
Credit Loans to Borrower upon or after any Event of Default, this Agreement
shall be in effect from the Closing Date to September 27, 2002 (the "Maturity
Date"), unless terminated as provided in this Section 2.8 (the "Term"), and
this Agreement shall be renewed for one-year periods thereafter upon the
mutual written agreement of the parties.
(b) Notwithstanding anything in this Agreement to the
contrary, Lender may terminate this Agreement without notice upon or after
the occurrence of an Event of Default.
(c) Upon at least thirty (30) days prior written notice to
Lender (the "Termination Notice Period"), Borrower may terminate this
Agreement before the Maturity Date, provided that, at the effective date of
such termination, Borrower shall pay to Lender the then outstanding
principal, accrued interest and other Obligations owing under the terms of
this Agreement, the Term Note, the Borrower Guaranty and any other Loan
Documents.
(d) All of the Obligations shall be immediately due and
payable upon the termination date stated in any notice of termination of this
Agreement (the "Termination Date"); provided that, notwithstanding anything
in Section 2.8(c) to the contrary, the Termination Date shall be effective no
earlier than the first Business Day of the month following the expiration of
the Termination Notice Period. All undertakings, agreements, covenants,
warranties, and representations of Borrower contained in the Loan Documents
shall survive any such termination and Lender shall retain its liens in the
Collateral and all of its rights and remedies under the Loan Documents
notwithstanding such termination until Borrower has paid the Obligations to
Lender, in full, in immediately available funds.
(e) Notwithstanding any provision of this Agreement which
makes reference to the continuance of an Event of Default, nothing in this
Agreement shall be construed to permit Borrower to cure an Event of Default
following the lapse of the applicable cure period, and
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Borrower shall have no such right in any instance unless specifically granted
in writing by Lender.
SECTION 2.9. JOINT AND SEVERAL LIABILITY; BINDING OBLIGATIONS. EACH
ENTITY CONSTITUTING BORROWER SHALL BE JOINTLY AND SEVERALLY LIABLE FOR ALL OF
THE OBLIGATIONS OF BORROWER UNDER THIS NOTE. IN ADDITION, EACH ENTITY
COMPRISING BORROWER HEREBY ACKNOWLEDGES AND AGREES THAT ALL OF THE
REPRESENTATIONS, WARRANTIES, COVENANTS, OBLIGATIONS, CONDITIONS, AGREEMENTS
AND OTHER TERMS CONTAINED IN THIS AGREEMENT SHALL BE APPLICABLE TO AND SHALL
BE BINDING UPON EACH ENTITY COMPRISING BORROWER, AND SHALL BE BINDING UPON
ALL SUCH ENTITIES WHEN TAKEN TOGETHER. EACH BORROWER, INDIVIDUALLY, EXPRESSLY
UNDERSTANDS, AGREES AND ACKNOWLEDGES, THAT THE LOAN WOULD NOT BE MADE
AVAILABLE ON THE TERMS HEREIN IN THE ABSENCE OF THE COLLECTIVE CREDIT OF ALL
OF THE BORROWERS, THE JOINT AND SEVERAL LIABILITY OF ALL BORROWERS, AND THE
CROSS COLLATERALIZATION OF THE COLLATERAL OF ALL BORROWERS. ACCORDINGLY, EACH
BORROWER, INDIVIDUALLY ACKNOWLEDGES THAT THE BENEFIT TO EACH OF THE
PARTICIPANTS IN THE FACILITY AS A WHOLE CONSTITUTES REASONABLY EQUIVALENT
VALUE, REGARDLESS OF THE AMOUNT OF THE LOAN ACTUALLY BORROWED BY, ADVANCED
TO, OR THE AMOUNT OF COLLATERAL PROVIDED BY, ANY INDIVIDUAL BORROWER.
ARTICLE III
COLLATERAL
SECTION 3.1. GENERALLY. As security for the payment of all
liabilities of Borrower to Lender, including without limitation: (i)
indebtedness evidenced under the Note, repayment of Revolving Credit Loans,
advances and other extensions of credit, all fees and charges owing by
Borrower, and all other liabilities and obligations of every kind or nature
whatsoever of Borrower to Lender, whether now existing or hereafter incurred,
joint or several, matured or unmatured, direct or indirect, primary or
secondary, related or unrelated, due or to become due, including but not
limited to any extensions, modifications, substitutions, increases and
renewals thereof, (ii) the payment of all amounts advanced by Lender to
preserve, protect, defend, and enforce its rights under this Agreement and in
the following property in accordance with the terms of this Agreement, and
(iii) the payment of all expenses incurred by Lender in connection therewith
(collectively, the "Obligations"), and as further security for (iv) the
payment and performance of obligations of Borrwer under any and all loan and
security agreements, secured bridge or term notes or other loan documents
evidencing indebtedness of Borrower or any of its Affiliates to Lender or any
of its Affiliates including without limitation, the Term Note and the Term
Loan Documents, Borrower hereby assigns and grants to Lender a continuing
first priority lien on and security interest in, upon, and to the following
property (the "Collateral"):
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(a) All of Borrower's now-owned and hereafter acquired or
arising Accounts, accounts receivable and rights to payment of every kind and
description, and all of Borrower's contract rights, chattel paper, documents and
instruments with respect thereto, and all of Borrower's rights, remedies,
security and liens, in, to and in respect of the Accounts, including, without
limitation, rights of stoppage in transit, replevin, repossession and
reclamation and other rights and remedies of an unpaid vendor, lienor or secured
party, guaranties or other contracts of suretyship with respect to the Accounts,
deposits or other security for the obligation of any Account Debtor, and credit
and other insurance;
(b) All moneys, securities and other property and the proceeds
thereof, now or hereafter held or received by, in transit to, in possession of,
or under the control of Lender or a bailee or Affiliate of Lender, from or for
Borrower, whether for safekeeping, pledge, custody, transmission, collection or
otherwise, and all of Borrower's deposits (general or special), balances, sums
and credits with Lender at any time existing;
(c) All of Borrower's right, title and interest in, to and in
respect of all goods relating to, or which by sale have resulted in, Accounts,
including, without limitation, all goods described in invoices or other
documents or instruments with respect to, or otherwise representing or
evidencing, any Account, and all returned, reclaimed or repossessed goods;
(d) All of Borrower's now owned or hereafter acquired deposit
accounts into which Accounts are deposited, including the Lockbox Account;
(e) All of Borrower's now owned and hereafter acquired or
arising general intangibles and other property of every kind and description
with respect to, evidencing or relating to its Accounts, accounts receivable and
other rights to payment, including, but not limited to, all existing and future
customer lists, choses in action, claims, books, records, ledger cards,
contracts, licenses, formulae, tax and other types of refunds, returned and
unearned insurance premiums, rights and claims under insurance policies, and
computer programs, information, software, records, and data, as the same relates
to the Accounts;
(f) All of Borrower's other general intangibles (including,
without limitation, any proceeds from insurance policies after payment of prior
interests), patents, unpatented inventions, trade secrets, copyrights, contract
rights, goodwill, literary rights, rights to performance, rights under licenses,
choses-in-action, claims, information contained in computer media (such as data
bases, source and object codes, and information therein), things in action,
trademarks and trademarks applied for (together with the goodwill associated
therewith) and derivatives thereof, trade names (excluding, however, the name
"LTC Healthcare" and derivations thereof), including the right to make, use, and
vend goods utilizing any of the foregoing, and permits, licenses,
certifications, authorizations and approvals, and the rights of Borrower
thereunder, issued by any governmental, regulatory, or private authority,
agency, or entity whether now owned or hereafter acquired, together with all
cash and non-cash proceeds and products thereof;
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(g) All of Borrower's now owned or hereafter acquired
inventory of every description which is held by Borrower for sale or lease or is
furnished by Borrower under any contract of service or is held by Borrower as
raw materials, work in process or materials used or consumed in a business,
wherever located, and as the same may now and hereafter from time to time be
constituted, together with all cash and non-cash proceeds and products thereof;
(h) All of Borrower's now owned or hereafter acquired
machinery, equipment, computer equipment, tools, tooling, furniture, fixtures,
goods, supplies, materials, work in process, whether now owned or hereafter
acquired, together with all additions, parts, fittings, accessories, special
tools, attachments, and accessions now and hereafter affixed thereto and/or used
in connection therewith, all replacements thereof and substitutions therefor,
and all cash and non-cash proceeds and products thereof; and
(i) The Property and/or Mortgaged Property (as defined in
the Mortgages); and
(j) The proceeds (including, without limitation, insurance
proceeds) of all of the foregoing.
SECTION 3.2. LIEN DOCUMENTS. At Closing and thereafter as Lender deems
necessary in its sole discretion, Borrower shall execute and deliver to Lender,
or have executed and delivered (all in form and substance satisfactory to Lender
in its sole discretion):
(a) UCC-1 Financing Statements pursuant to the Uniform
Commercial Code in effect in the jurisdiction(s) in which Borrower operates,
which Lender may file in any jurisdiction where any Collateral is or may be
located and in any other jurisdiction that Lender deems appropriate; PROVIDED
that a carbon, photographic, or other reproduction or other copy of this
Agreement or of a financing statement is sufficient as and may be filed in lieu
of a financing statement; and
(b) Any other agreements, documents, instruments, and writings
deemed necessary by Lender or as Lender may otherwise request from time to time
in its sole discretion to evidence, perfect, or protect Lender's lien and
security interest in the Collateral required under this Agreement.
SECTION 3.3. COLLATERAL ADMINISTRATION.
(a) All Collateral (except deposit accounts) will at all times
be kept by Borrower at its principal office(s) as set forth on SCHEDULE 4.15 and
shall not be moved from such locations without the prior written consent of
Lender, which consent shall not be unreasonably withheld or delayed.
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(b) Borrower shall keep accurate and complete records of its
Accounts and all payments and collections thereon and shall submit to Lender on
such periodic basis as Lender shall request a sales and collections report for
the preceding period, in form satisfactory to Lender. In addition, if Accounts
in an aggregate face amount in excess of $200,000.00 become ineligible because
they fall within one of the specified categories of ineligibility set forth in
the definition of Qualified Accounts or otherwise, Borrower shall notify Lender
of such occurrence on the first Business Day following such occurrence and the
Borrowing Base shall thereupon be adjusted to reflect such occurrence. If
requested by Lender, Borrower shall execute and deliver to Lender formal written
assignments of all of its Accounts weekly or daily, which shall include all
Accounts that have been created since the date of the last assignment, together
with copies of claims, invoices or other information related thereto.
(c) Whether or not an Event of Default has occurred, any of
Lender's officers, employees or agents shall have the right, at any time or
times hereafter, in the name of Lender or any designee of Lender or Borrower, to
verify the validity, amount or any other matter relating to any Accounts by
mail, telephone, telegraph or otherwise. Borrower shall cooperate fully with
Lender in an effort to facilitate and promptly conclude such verification
process.
(d) To expedite collection, Borrower shall endeavor in the
first instance to make collection of its Accounts for Lender. Lender retains
the right at all times after the occurrence and during the continuance of an
Event of Default, subject to applicable law regarding Medicaid/Medicare
Account Debtors, to notify Account Debtors that Accounts have been assigned
to Lender and to collect Accounts directly in its own name and to charge the
collection costs and expenses, including attorneys' fees, to Borrower.
SECTION 3.4. OTHER ACTIONS. In addition to the foregoing, Borrower (i)
shall provide prompt written notice to each private indemnity, managed care or
other Insurer who either is currently an Account Debtor or becomes an Account
Debtor at any time following the date of this Agreement that Lender has been
granted a first priority lien and security interest in, upon and to all Accounts
applicable to such Insurer and directs each Account Debtor to make payments into
the Lockbox, and hereby authorizes Lender, upon Borrower's failure to send such
notices within ten (10) days after the date of this Agreement (or ten (10) days
after the Insurer becomes an Account Debtor), to send any and all similar
notices to such Insurers, and (ii) shall do anything further that may be
lawfully required by Lender to secure Lender and effectuate the intentions and
objects of this Agreement, including but not limited to the execution and
delivery of lockbox agreements, continuation statements, amendments to financing
statements, and any other documents required under this Agreement. At Lender's
request, Borrower shall also immediately deliver to Lender all items for which
Lender must receive possession to obtain a perfected security interest. Borrower
shall, on Lender's demand, deliver to Lender all notes, certificates, and
documents of title, chattel paper, warehouse receipts, instruments, and any
other similar instruments constituting Collateral.
SECTION 3.5. SEARCHES. Before Closing, and thereafter (as and when
determined by Lender in its sole discretion), Lender will perform the searches
described in clauses (a) and (b)
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below against Borrower (the results of which are to be consistent with
Borrower's representations and warranties under this Agreement), all at
Borrower's expense:
(a) Uniform Commercial Code searches with the Secretary of
State and local filing offices of each jurisdiction where Borrower maintains its
executive offices, a place of business, or assets;
(b) Judgment, federal tax lien and corporate and partnership
tax lien searches, in each jurisdiction searched under clause (a) above; and
In addition, prior to Closing, at Borrower's expense, Borrower shall
obtain and deliver to Lender good standing certificates showing Borrower to be
in good standing in its state of formation and in each other state in which it
is doing and currently intends to do business for which qualification is
required.
SECTION 3.6. POWER OF ATTORNEY. Each of the officers of Lender is
hereby irrevocably made, constituted and appointed the true and lawful
attorney for Borrower (without requiring any of them to act as such) with
full power of substitution to do the following if Borrower has failed to
deliver the same within ten (10) days written request from Lender or to
object in writing thereto (specifying in detail the grounds for Borrower's
objection): (i) endorse the name of Borrower upon any and all checks, drafts,
money orders, and other instruments for the payment of money that are payable
to Borrower and constitute collections on Borrower's Accounts; (ii) execute
in the name of Borrower any financing statements, schedules, assignments,
instruments, documents, and statements that Borrower is obligated to give
Lender under this Agreement; and (iii) do such other and further acts and
deeds in the name of Borrower that Lender may deem necessary or desirable to
enforce any Account or other Collateral or perfect Lender's security interest
or lien in any Collateral. In addition, if Borrower breaches its obligation
to direct payments of the proceeds of the Collateral to the Lockbox Account,
Lender, as the irrevocably made, constituted and appointed true and lawful
attorney for Borrower pursuant to this paragraph, may, by the signature or
other act of any of Lender's officers (without requiring any of them to do
so), direct any federal, state or private payor or fiscal intermediary to pay
proceeds of the Collateral to Borrower by directing payment to the Lockbox
Account.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Each entity comprising Borrower represents and warrants to Lender, and
shall be deemed to represent and warrant on each day on which any Obligations
shall be outstanding under this Agreement, that:
SECTION 4.1. SUBSIDIARIES. Except as set forth in SCHEDULE 4.1,
Borrower has no subsidiaries.
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SECTION 4.2. ORGANIZATION AND GOOD STANDING. Borrower is a corporation
duly organized, validly existing, and in good standing under the laws of its
state of incorporation, is (or within thirty (30) days from the date hereof,
shall be) in good standing as a foreign corporation in each jurisdiction in
which the character of the properties owned or leased by it therein or the
nature of its business makes such qualification necessary, has the corporate
power and authority to own its assets and transact the business in which it is
engaged, and has obtained all certificates, licenses (directly or through a
management agreement with NewCare) and qualifications required under all laws,
regulations, ordinances, or orders of public authorities necessary for the
ownership and operation of all of its properties and transaction of all of its
business.
SECTION 4.3. AUTHORITY. Borrower has full corporate power and
authority to enter into, execute, and deliver this Agreement and to perform
its obligations under this Agreement, to borrow the Loan, to execute and
deliver the Note, and to incur and perform the obligations provided for in
the Loan Documents, all of which have been duly authorized by all necessary
corporate. No consent or approval of shareholders of, or lenders to, Borrower
and no consent, approval, filing or registration with any Governmental
Authority is required as a condition to the validity of the Loan Documents or
the performance by Borrower of its obligations under the Loan Documents.
SECTION 4.4. BINDING AGREEMENT. This Agreement and all other Loan
Documents constitute, and the Note, when issued and delivered pursuant to this
Agreement for value received, will constitute, the valid and legally binding
obligations of Borrower, enforceable against Borrower in accordance with their
respective terms.
SECTION 4.5. LITIGATION. Except as disclosed in SCHEDULE 4.5, there are
no actions, suits, proceedings or investigations pending or threatened against
Borrower before any court or arbitrator or before or by any Governmental
Authority which, in any one case or in the aggregate, if determined adversely to
the interests of Borrower, could have a material adverse effect on the business,
properties, condition (financial or otherwise) or operations, current or
prospective, of Borrower, or upon its ability to perform its obligations under
the Loan Documents. Borrower is not in default with respect to any order of any
court, arbitrator, or Governmental Authority applicable to Borrower or its
properties.
SECTION 4.6. NO CONFLICTS. The execution and delivery by Borrower of
this Agreement and the other Loan Documents do not, and the performance of its
obligations under the Loan Documents will not, violate, conflict with,
constitute a default under, or result in the creation of a lien or encumbrance
upon the property of Borrower (other than for the benefit of Lender) under: (i)
any provision of Borrower's certificate of incorporation, (ii) any provision of
any law, rule, or regulation applicable to Borrower, or (iii) any of the
following: (A) any indenture or other agreement or instrument to which Borrower
is a party or by which Borrower or its property is bound; or (B) any judgment,
order or decree of any court, arbitration tribunal, or Governmental Authority
having jurisdiction over Borrower which is applicable to Borrower.
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SECTION 4.7. FINANCIAL CONDITION. The most recent annual financial
statements of Borrower audited by Ernst & Young and the most recent unaudited
financial statements of Borrower, certified by the chief financial officer of
Borrower, which have been delivered to Lender, fairly present the financial
condition of Borrower and the results of its operations and changes in financial
condition as of the dates and for the periods referred to, and have been
prepared in accordance with GAAP. There are no material unrealized or
anticipated liabilities, direct or indirect, fixed or contingent, of Borrower as
of the dates of such financial statements which are not reflected in such
financial statements or in the notes to such financial statements. There has
been no adverse change in the business, properties, condition (financial or
otherwise) or operations (present or prospective) of Borrower since the date of
the most recent unaudited financial statements. Borrower's fiscal year ends on
December 31. The federal tax identification number of each entity comprising
Borrower is as described on SCHEDULE 4.7.
SECTION 4.8. NO DEFAULT. Borrower is not in default under or with
respect to any obligation in any respect which could be adverse to its
business, operations, property or financial condition, or which could
adversely affect the ability of Borrower to perform its obligations under the
Loan Documents. No Event of Default or event which, with the giving of notice
or lapse of time, or both, could become an Event of Default, has occurred and
is continuing.
SECTION 4.9. TITLE TO PROPERTIES. Borrower has good and marketable
title to its properties and assets, including the Collateral and the properties
and assets reflected in the financial statements described in Section 4.7,
subject to no lien, mortgage, pledge, encumbrance or charge of any kind, other
than Permitted Liens. Borrower has not agreed or consented to cause any of its
properties or assets whether owned now or hereafter acquired to be subject in
the future (upon the happening of a contingency or otherwise) to any lien,
mortgage, pledge, encumbrance or charge of any kind other than Permitted Liens
or as otherwise disclosed to Lender prior to the date hereof.
SECTION 4.10. TAXES. Borrower has filed, or has obtained extensions for
the filing of, all federal, state and other tax returns which are required to be
filed, and has paid all taxes shown as due on those returns and all assessments,
fees and other amounts due as of the date of this Agreement. All tax liabilities
of Borrower are adequately provided for on Borrower's books. No tax liability
has been asserted by the Internal Revenue Service or other taxing authority
against Borrower for taxes in excess of those already paid.
SECTION 4.11. SECURITIES AND BANKING LAWS AND REGULATIONS.
(a) The use of the proceeds of the Loan and Borrower's
issuance of the Note will not directly or indirectly violate or result in a
violation of the Securities Act of 1933 or the Securities Exchange Act of 1934,
as amended, or any regulations issued pursuant thereto, including without
limitation Regulations U, T or X of the Board of Governors of the Federal
Reserve System. Borrower is not engaged in the business of extending credit for
the purpose of the purchasing or carrying "margin stock" within the meaning of
those regulations. No part of
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the proceeds of the Loan under this Agreement will be used to purchase or
carry any margin stock or to extend credit to others for such purpose.
(b) Borrower is not an investment company within the meaning
of the Investment Company Act of 1940, as amended, nor is it, directly or
indirectly, controlled by or acting on behalf of any Person which is an
investment company within the meaning of that Act.
SECTION 4.12. ERISA. No employee benefit plan (a "Plan") subject to
the Employee Retirement Income Security Act of 1974 ("ERISA") and regulations
issued pursuant to ERISA that is maintained by Borrower or under which
Borrower could have any material liability under ERISA (i) has failed to meet
minimum funding standards established in Section 302 of ERISA, (ii) has
failed to substantially comply with all applicable requirements of ERISA and
of the Internal Revenue Code, including all applicable rulings and
regulations thereunder, or (iii) has engaged in or been involved in a
prohibited transaction (as defined in ERISA) under ERISA or under the
Internal Revenue Code. Neither Borrower nor any member of a Controlled Group
that includes Borrower has not assumed, or received notice of a claim
asserted against Borrower or another member of the Controlled Group for,
withdrawal liability (as defined in the Multi- Employer Pension Plan
Amendments Act of 1980, as amended) with respect to any multi-employer
pension plan. Borrower has timely made when due all contributions with
respect to any multi-employer pension plan in which it participates and no
event has occurred triggering a material claim against Borrower for
withdrawal liability with respect to any multi-employer pension plan in which
Borrower participates.
SECTION 4.13. COMPLIANCE WITH LAW. Except as described in SCHEDULE
4.13, Borrower is not in violation of any statute, rule or regulation of any
Governmental Authority (including, without limitation, any statute, rule or
regulation relating to employment practices or to environmental, occupational
and health standards and controls). Borrower has obtained all licenses (directly
or through a management agreement with NewCare), permits, franchises, and other
governmental authorizations necessary for the ownership of its properties and
the conduct of its business. Borrower is current with all reports and documents
required to be filed with any state or federal securities commission or similar
Governmental Authority and is in full compliance with all applicable rules and
regulations of such commissions.
SECTION 4.14. ENVIRONMENTAL MATTERS. To the best of Borrower's
knowledge, no use, exposure, release, generation, manufacture, storage,
treatment, transportation or disposal of Hazardous Material has occurred or is
occurring on or from any real property on which the Collateral is located or
which is owned, leased or otherwise occupied by Borrower (the "Premises"), or
off the Premises as a result of any action of Borrower, except as described in
SCHEDULE 4.14. All Hazardous Material used, treated, stored, transported to or
from, generated or handled on the Premises, or off the Premises by Borrower, has
been disposed of on or off the Premises by or on behalf of Borrower in a lawful
manner. There are no underground storage tanks present on or under the Premises
owned or leased by Borrower. No other environmental, public health or safety
hazards exist with respect to the Premises.
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SECTION 4.15. PLACES OF BUSINESS. As of the Closing Date, the only
places of business of Borrower, and the places where it keeps and intends to
keep the Collateral and records concerning the Collateral, are at the addresses
set forth in SCHEDULE 4.15. SCHEDULE 4.15 also lists the owner of record of each
such property.
SECTION 4.16. INTELLECTUAL PROPERTY. Borrower exclusively owns or
possesses all the patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, franchises, licenses
(directly or through a management agreement with NewCare), and rights with
respect to the foregoing necessary for the current and planned future conduct of
its business, without any conflict with the rights of others. Borrower is not in
default of any obligation or undertaking with respect to such intellectual
property or rights. Borrower is not infringing on any patents, patent
applications, trademarks, trademark applications, service marks, trade names,
copyrights, franchises, licenses, any rights with respect to the foregoing, or
any other intellectual property rights of others and the Borrower is not aware
of any infringement by others of any such rights owned by Borrower.
SECTION 4.17. STOCK OWNERSHIP. The identity of the stockholders of
record of all classes of the outstanding stock of Borrower, together with the
respective ownership percentages held by such stockholders, are as set forth on
SCHEDULE 4.17.
SECTION 4.18. MATERIAL FACTS. Neither this Agreement nor any other Loan
Document nor any other agreement, document, certificate, or statement furnished
to Lender by or on behalf of Borrower in connection with the transactions
contemplated by this Agreement contains any untrue statement of material fact or
omits to state a material fact necessary to make the statements contained in
this Agreement or other Loan Document not misleading. There is no fact known to
Borrower that adversely affects or in the future may adversely affect the
business, operations, affairs or financial condition of Borrower, or any of its
properties or assets.
SECTION 4.19. INVESTMENTS, GUARANTEES, AND CERTAIN CONTRACTS. Borrower
does not own or hold any equity or long-term debt investments in, have any
outstanding advances to, have any outstanding guarantees for the obligations of,
or have any outstanding borrowings from, any Person, except as described on
SCHEDULE 4.19. Borrower is not a party to any contract or agreement, or subject
to any corporate restriction, which adversely affects its business.
SECTION 4.20. BUSINESS INTERRUPTIONS. Within five years before the date
of this Agreement, neither the business, property or assets, or operations of
Borrower has been adversely affected in any way by any casualty, strike,
lockout, combination of workers, or order of the United States of America or
other Governmental Authority, directed against Borrower. There are no pending or
threatened labor disputes, strikes, lockouts, or similar occurrences or
grievances against Borrower or its business.
SECTION 4.21. NAMES. Within five years before the date of this
Agreement, Borrower has not conducted business under or used any other name
(whether corporate, partnership or assumed) other than as shown on SCHEDULE
4.21. Borrower is the sole owner of all names listed
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on that Schedule and any and all business done and invoices issued in such
names are Borrower's sales, business, and invoices. Each trade name of
Borrower represents a division or trading style of Borrower and not a
separate Person or independent Affiliate.
SECTION 4.22 JOINT VENTURES. Borrower is not engaged in any joint
venture or partnership with any other Person, except as set forth on SCHEDULE
4.22.
SECTION 4.23 ACCOUNTS. Lender may rely, in determining which Accounts
are Qualified Accounts, on all statements and representations made by Borrower
with respect to any Account or Accounts. Unless otherwise indicated in writing
to Lender, with respect to each Qualified Account, Borrower represents that:
(a) The Account is genuine and in all respects what it
purports to be, and is not evidenced by a judgment;
(b) The Account arises out of a completed, BONA FIDE sale and
delivery of goods or rendition of Medical Services by Borrower in the ordinary
course of its business and in accordance with the terms and conditions of all
purchase orders, contracts, certification, participation, certificate of need,
or other documents relating thereto and forming a part of the contract between
Borrower and the Account Debtor;
(c) The Account is for a liquidated amount maturing as stated
in a duplicate claim or invoice covering such sale or rendition of Medical
Services, a copy of which has been furnished or is available to Lender;
(d) The Account, and Lender's security interest in such
Account, is not, and will not (by voluntary act or omission by Borrower), be in
the future, subject to any offset, lien, deduction, defense, dispute,
counterclaim or any other adverse condition, and each such Account is absolutely
owing to Borrower and is not contingent in any respect or for any reason;
(e) There are no facts, events or occurrences which in any way
impair the validity or enforceability of any Accounts or tend to reduce the
amount payable thereunder from the face amount of the claim or invoice and
statements delivered to Lender with respect thereto;
(f) To the best of Borrower's knowledge, (i) the Account
Debtor under the Account had the capacity to contract at the time any contract
or other document giving rise to the Account was executed and (ii) such Account
Debtor is solvent;
(g) To the best of Borrower's knowledge, there are no
proceedings or actions which are threatened or pending against any Account
Debtor under the Account which might result in any material adverse change in
such Account Debtor's financial condition or the collectibility of such Account;
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(h) The Account has been billed and forwarded to the Account
Debtor for payment in accordance with applicable laws and compliance and
conformance with any and requisite procedures, requirements and regulations
governing payment by such Account Debtor with respect to such Account, and such
Account if due from a Medicaid/Medicare Account Debtor is properly payable
directly to Borrower; and
(i) Borrower has obtained and currently has all certificates
of need, Medicaid and Medicare provider numbers, licenses (directly or through a
management agreement with NewCare), permits and authorizations that are
necessary in the generation of such Accounts.
SECTION 4.24. INTENTIONALLY DELETED.
SECTION 4.25. YEAR 2000 COMPLIANCE.
(a) All devices, systems, machinery, information technology,
computer software and hardware, and other date sensitive technology
(collectively, the "Systems") necessary for Borrower to carry on its business as
currently conducted and as expected to be conducted in the future are Year 2000
Compliant or will be Year 2000 Compliant within a period of time calculated to
result in no material disruption of any of Borrower's business operations. For
purposes of these provisions, "Year 2000 Compliant" means that such Systems are
designed to be used before, during and after the Gregorian calendar year 2000
A.D. and will operate during each such time period without error related to date
data, specifically including any error relating to, or the product of, date data
that represents or refers to different centuries or more than one century.
(b) Borrower has: (i) undertaken a detailed inventory, review,
and assessment of all areas within its business and operations that could be
adversely affected by the failure of Borrower to be Year 2000 Compliant on a
timely basis; (ii) developed a detailed plan and time line for becoming Year
2000 Compliant on a timely basis; and (iii) to date, implemented that plan in
accordance with the timetable in all material respects.
ARTICLE V
CLOSING AND CONDITIONS OF LENDING
SECTION 5.1. CONDITIONS PRECEDENT TO AGREEMENT. The obligation of
Lender to enter into and perform this Agreement and to make Revolving Credit
Loans is subject to the following conditions precedent:
(a) Lender shall have received two (2) originals of this
Agreement, the Certificate of Validity, the Guaranty, the Environmental
Indemnity, the Mortgages, the Pledge Agreement and all other Loan Documents and
Term Loan Documents required to be executed and delivered at or before Closing
(other than the Note and the Term Note, as to which Lender
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shall receive only one original), executed by Borrower and any other required
Persons, as applicable.
(b) Lender shall have received all searches and good standing
certificates required by Section 3.5.
(c) Borrower shall have complied and shall then be in
compliance with all the terms, covenants and conditions of the Loan Documents.
(d) There shall have occurred and be continuing no Event of
Default and no event which, with the giving of notice or the lapse of time, or
both, could constitute such an Event of Default.
(e) The representations and warranties contained in Article IV
shall be true and correct.
(f) Lender shall have received copies of all consents of
shareholders, and other action taken by Borrower to authorize the execution,
delivery and performance of the Loan Documents and the borrowing of the Loan
under the Loan Documents, as well as the names and signatures of the
shareholders and officers of Borrower authorized to execute documents on its
behalf in connection with the Loan, all as also certified as of the date of this
Agreement by Borrower's chief financial officer, or equivalent, and such other
papers as Lender may require.
(g) Lender shall have received copies, certified as true,
correct and complete by a corporate officer of each Borrower, of the certificate
of formation of each Borrower, with any amendments to any of the foregoing, and
all other documents necessary for performance of the obligations of Borrower
under this Agreement and the other Loan Documents.
(h) Lender shall have received a written opinion of counsel
for Borrower, dated the date of this Agreement, substantially in the form of
EXHIBIT C.
(i) Lender shall have received such financial statements,
reports, certifications, and other operational information required to be
delivered under this Agreement, including without limitation an initial
borrowing base certificate calculating the Borrowing Base.
(j) The Lockbox, Lockbox Account and the Concentration Account
shall have been established.
(k) Lender shall have received two (2) originals of that
certain Secured Unconditional Guaranty of Payment and Performance of even date
herewith made by Borrower in favor of Lender (the "BORROWER GUARANTY");
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(l) Lender shall have received a certificate of Borrower's
chief financial officer, dated the Closing Date, certifying that all of the
conditions specified in this Section have been fulfilled.;
(m) Entry of a Bankruptcy Court order satisfactory to Lender
which contains the provisions set forth in paragraph 10 of the commitment letter
dated as of September 29, 1999 between Lender, Borrower and Lenox Healthcare,
Inc;
(n) Borrower shall have paid to Lender the purchase price, in
cash, to be applied to satisfy NewCare's outstanding obligations to Lender; and
(o) Borrower shall have entered into (x) management agreements
with Manager, and (y) interim management agreements with NewCare, in form and
substance satisfactory to Lender.
SECTION 5.2. CONDITIONS PRECEDENT TO ADVANCES. Notwithstanding any
other provision of this Agreement, no Loan proceeds, Revolving Credit Loans,
advances or other extensions of credit under the Loan shall be disbursed under
this Agreement unless the following conditions have been satisfied or waived
immediately before such disbursement:
(a) The representations and warranties on the part of Borrower
contained in Article IV of this Agreement shall be true and correct in all
respects at and as of the date of disbursement or advance, as though made on and
as of such date (except to the extent that such representations and warranties
expressly relate solely to an earlier date and except that the references in
Section 4.7 to financial statements shall be deemed to be a reference to the
then most recent annual and interim financial statements of Borrower furnished
to Lender pursuant to Section 6.1).
(b) No Event of Default or event which, with the giving of
notice of the lapse of time, or both, could become an Event of Default shall
have occurred and be continuing or would result from the making of the
disbursement or advance.
(c) No adverse change in the condition (financial or
otherwise), properties, business, or operations of Borrower shall have occurred
and be continuing with respect to Borrower since the date of this Agreement.
SECTION 5.3. CLOSING. Subject to the conditions of this Article V, the
Loan shall be made available on the date as is mutually agreed by the parties
(the "Closing Date") at such time as may be mutually agreeable to the parties
upon the execution of this Agreement (the "Closing") at such place as may be
requested by Lender.
SECTION 5.4. WAIVER OF RIGHTS. By completing the Closing under this
Agreement, or by making advances under the Loan, Lender does not waive a breach
of any representation or warranty of Borrower under this Agreement or under any
other Loan Document, and all of
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Lender's claims and rights resulting from any breach or misrepresentation by
Borrower are specifically reserved by Lender.
ARTICLE VI
AFFIRMATIVE COVENANTS
Each entity comprising Borrower covenants and agrees that for so long
as Borrower may borrow under this Agreement and until payment in full of the
Note and performance of all other obligations of Borrower under the Loan
Documents:
[SECTION 6.1. FINANCIAL STATEMENTS AND COLLATERAL REPORTS. Borrower
will furnish to Lender (i) a sales and collections report and accounts
receivable aging schedule on a form acceptable to Lender within fifteen (15)
days after the end of each calendar month, which shall include, but not be
limited to, a report of sales, credits issued, and collections received;
(ii) payables aging schedules within fifteen (15) days after the end of each
calendar month; (iii) internally prepared monthly financial statements for
Borrower, certified by the chief financial officer of Borrower, within
forty-five (45) days of the end of each calendar month, accompanied by
management analysis and actual vs. budget variance reports for each nursing
home generating Accounts; (iv) to the extent prepared by Borrower, annual
projections, profit and loss statements, balance sheets, and cash flow reports
(prepared on a monthly basis) for the succeeding fiscal year within thirty
(30) days before the end of each of Borrower's fiscal years; (v) i4nternally
prepared annual financial statements for Borrower within sixty (60)
days after the end of each of Borrower's fiscal years; (vi) annual audited
financial statements for Borrower prepared by ___________________, or another
firm of independent public accountants satisfactory to Lender, within one
hundred thirty-five (135) days after the end of each of Borrower's fiscal years;
(vii) promptly upon receipt thereof, copies of any reports submitted to Borrower
by the independent accountants in connection with any interim audit of the books
of Borrower and copies of each management control letter provided to Borrower by
independent accountants; (viii) as soon as available, copies of all financial
statements and notices provided by Borrower to all of its stockholders; and (ix)
such additional information, reports or statements as Lender may from time to
time request. Annual financial statements shall set forth in comparative form
figures for the corresponding periods in the prior fiscal year. All financial
statements shall include a balance sheet and statement of earnings and shall be
prepared in accordance with GAAP.] The financial reporting required pursuant to
this Section 6.1 shall satisfy the financial reporting requirements set forth in
the Mortgages.
SECTION 6.2. PAYMENTS UNDER THIS AGREEMENT. Borrower will make all
payments of principal, interest, fees, and all other payments required under
this Agreement and under the Loan, and under any other agreements with Lender to
which Borrower is a party, as and when due.
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SECTION 6.3. EXISTENCE, GOOD STANDING, AND COMPLIANCE WITH LAWS.
Borrower will do or cause to be done all things necessary (i) to obtain and keep
in full force and effect a corporate existence, rights, licenses (directly or
through a management agreement with Newcare), privileges, and franchises of
Borrower necessary to the ownership of its property or the conduct of its
business, and comply with all applicable current and future laws, ordinances,
rules, regulations, orders and decrees of any Governmental Authority having or
claiming jurisdiction over Borrower; and (ii) to maintain and protect the
properties used or useful in the conduct of the operations of Borrower, in a
prudent manner, including without limitation the maintenance at all times of
such insurance upon its insurable property and operations as required by law or
by Section 6.7.
SECTION 6.4. LEGALITY. The making of the Loan and each disbursement
or advance under the Loan shall not be subject to any penalty or special tax,
shall not be prohibited by any governmental order or regulation applicable to
Borrower, and shall not violate any rule or regulation of any Governmental
Authority, and necessary consents, approvals and authorizations of any
Governmental Authority to or of any such disbursement or advance shall have
been obtained.
SECTION 6.5. LENDER'S SATISFACTION. All instruments and legal documents
and proceedings in connection with the transactions contemplated by this
Agreement shall be satisfactory in form and substance to Lender and its counsel,
and Lender shall have received all documents, including records of corporate
proceedings and opinions of counsel, which Lender may have requested in
connection therewith.
SECTION 6.6. TAXES AND CHARGES. Borrower will timely file all tax
reports and pay and discharge all taxes, assessments and governmental charges or
levies imposed upon Borrower, or its income or profits or upon its properties or
any part thereof, before the same shall be in default and before the date on
which penalties attach thereto, as well as all lawful claims for labor,
material, supplies or otherwise which, if unpaid, might become a lien or charge
upon the properties or any part thereof of Borrower; PROVIDED, HOWEVER, that
Borrower shall not be required to pay and discharge or cause to be paid and
discharged any such tax, assessment, charge, levy or claim so long as the
validity or amount thereof shall be contested in good faith and by appropriate
proceedings by Borrower, and Borrower shall have set aside on their books
adequate reserve therefor; and PROVIDED FURTHER, that such deferment of payment
is permissible only so long as Borrower's title to, and its right to use, the
Collateral is not adversely affected thereby and Lender's lien and priority on
the Collateral are not adversely affected, altered or impaired thereby.
SECTION 6.7. INSURANCE. Borrower will carry adequate public liability
and professional liability insurance with responsible companies reasonably
satisfactory to Lender in such amounts and against such risks as is customarily
maintained by similar businesses and by owners of similar property in the same
general area. In the event of a casualty or loss in excess of $500,000 at a
facility owned or leased by Borrower, all insurance proceeds shall be disbursed
to Lender
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and shall be applied, at Lender's discretion, to the Obligations or to
the reconstruction of the damaged facility.
SECTION 6.8. GENERAL INFORMATION. Borrower will furnish to Lender such
information as Lender may, from time to time, request with respect to the
business or financial affairs of Borrower, and permit any officer, employee or
agent of Lender to visit and inspect any of the properties, to examine the
minute books, books of account and other records, including management letters
prepared by Borrower's auditors, of Borrower, and make copies thereof or
extracts therefrom, and to discuss its and their business affairs, finances and
accounts with, and be advised as to the same by, the accountants and officers of
Borrower, all at such times and as often as Lender may reasonably require.
SECTION 6.9. MAINTENANCE OF PROPERTY. Borrower will maintain, keep
and preserve all of its properties in good repair, working order and
condition and from time to time make all necessary repairs, renewals,
replacements, betterments and improvements thereto, so that the business
carried on in connection therewith may be properly conducted at all times.
SECTION 6.10. NOTIFICATION OF EVENTS OF DEFAULT AND ADVERSE
DEVELOPMENTS. Borrower promptly will notify Lender upon the occurrence of: (i)
any Event of Default; (ii) any event which, with the giving of notice or lapse
of time, or both, could constitute an Event of Default; (iii) any event,
development or circumstance whereby the financial statements previously
furnished to Lender fail in any material respect to present fairly, in
accordance with GAAP, the financial condition and operational results of
Borrower; (iv) any judicial, administrative or arbitration proceeding pending
against Borrower, and any judicial or administrative proceeding known by
Borrower to be threatened against it which, if adversely decided, could
adversely affect its condition (financial or otherwise) or operations (present
or prospective) or which may expose Borrower to uninsured liability of
$25,000.00 or more; (v) any default claimed by any other creditor for Borrowed
Money of Borrower other than Lender; and (vi) any other development in the
business or affairs of Borrower which may be adverse; in each case describing
the nature of the event or development. In the case of notification under
clauses (i) and (ii)), Borrower should set forth the action Borrower proposes to
take with respect to such event.
SECTION 6.11. EMPLOYEE BENEFIT PLANS. Borrower will (i) comply with the
funding requirements of ERISA with respect to the Plans for its employees, or
will promptly satisfy any accumulated funding deficiency that arises under
Section 302 of ERISA; (ii) furnish Lender, promptly after filing the same, with
copies of all reports or other statements filed with the United States
Department of Labor, the Pension Benefit Guaranty Corporation, or the Internal
Revenue Service with respect to all Plans, or which Borrower, or any member of a
Controlled Group, may receive from such Governmental Authority with respect to
any such Plans, and (iii) promptly advise Lender of the occurrence of any
Reportable Event or Prohibited Transaction with respect to any such Plan and the
action which Borrower proposes to take with respect thereto. Borrower will make
all contributions when due with respect to any multi-employer pension plan in
which it participates and will promptly advise Lender: (x) upon its receipt of
notice of the assertion
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against Borrower of a claim for withdrawal liability; (y) upon the occurrence
of any event which could trigger the assertion of a claim for withdrawal
liability against Borrower; and (z) upon the occurrence of any event which
would place Borrower in a Controlled Group as a result of which any member
(including Borrower) thereof may be subject to a claim for withdrawal
liability, whether liquidated or contingent.
SECTION 6.12. FINANCING STATEMENTS. Borrower shall provide to Lender
evidence satisfactory to Lender as to the due recording of termination
statements, releases of collateral, and Forms UCC-3, and shall cause to be
recorded financing statements on Form UCC-1, duly executed by Borrower and
Lender, in all places necessary to release all existing security interests and
other liens in the Collateral (other than as permitted by this Agreement) and to
perfect and protect Lender's first priority lien and security interest in the
Collateral, as Lender may request.
SECTION 6.13. FINANCIAL RECORDS. Borrower shall keep current and
accurate books of records and accounts in which full and correct entries will be
made of all of its business transactions, and will reflect in its financial
statements adequate accruals and appropriations to reserves, all in accordance
with GAAP.
SECTION 6.14. COLLECTION OF ACCOUNTS. Borrower shall continue to
collect its Accounts in the ordinary course of business.
SECTION 6.15. PLACES OF BUSINESS. Borrower shall give thirty (30) days'
prior written notice to Lender of any change in the location of any of its
places of business, of the places where its records concerning its Accounts are
kept, of the places where the Collateral is kept, or of the establishment of any
new, or the discontinuance of any existing, places of business.
SECTION 6.16. BUSINESS CONDUCTED. Borrower shall continue in the
business currently conducted by it using its best efforts to maintain its
customers and goodwill. Borrower shall not engage, directly or indirectly, in
any line of business substantially different from the business conducted by it
immediately before the Closing Date, or engage in business or lines of business
which are not reasonably related thereto.
SECTION 6.17. LITIGATION AND OTHER PROCEEDINGS. Borrower shall give
prompt notice to Lender of any litigation, arbitration, or other proceeding
before any Governmental Authority against or affecting Borrower if the amount
claimed is more than $25,000.00.
SECTION 6.18. BANK ACCOUNTS. Borrower shall assign to Lender all of its
depository and disbursement accounts into which collections of Accounts are
deposited.
SECTION 6.19. SUBMISSION OF COLLATERAL DOCUMENTS. Borrower will, on
demand of Lender, make available to Lender copies of shipping and delivery
receipts evidencing the shipment of goods that gave rise to an Account, medical
records, insurance verification forms, assignment of benefits, in-take forms or
other proof of the satisfactory performance of services that gave rise to an
Account, a copy of the claim or invoice for each Account and copies of any
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written contract or order from which the Account arose. Borrower shall promptly
notify Lender if an Account becomes evidenced or secured by an instrument or
chattel paper and upon request of Lender, will promptly deliver any such
instrument or chattel paper to Lender.
SECTION 6.20. LICENSURE; MEDICAID/MEDICARE COST REPORTS. Borrower will
maintain (directly or through a management agreement with Newcare) all
certificates of need, provider numbers and licenses necessary to conduct its
business as currently conducted, and take any steps required to comply with any
such new or additional requirements that may be imposed on providers of medical
products and Medical Services. If required, all Medicaid/Medicare cost reports
will be properly filed. Borrower shall obtain all such certificates of need,
provider numbers and licenses issued in its name on or before March 29, 2000.
SECTION 6.21. OFFICER'S CERTIFICATES. Together with the monthly
financial statements delivered pursuant to clause (iii) of Section 6.1, and
together with the audited annual financial statements delivered pursuant to
clause (vi) of that Section, Borrower shall deliver to Lender a certificate of
its chief financial officer, in form and substance satisfactory to Lender:
(a) Setting forth the information (including detailed
calculations) required to establish whether Borrower is in compliance with the
requirements of Articles VI and VII as of the end of the period covered by the
financial statements then being furnished; and
(b) Stating that the signer has reviewed the relevant terms of
this Agreement, and has made (or caused to be made under his supervision) a
review of the transactions and conditions of Borrower from the beginning of the
accounting period covered by the income statements being delivered to the date
of the certificate, and that such review has not disclosed the existence during
such period of any condition or event which constitutes an Event of Default or
which is then, or with the passage of time or giving of notice or both, could
become an Event of Default, and if any such condition or event existed during
such period or now exists, specifying the nature and period of existence thereof
and what action Borrower has taken or proposes to take with respect thereto.
SECTION 6.22. VISITS AND INSPECTIONS. Borrower agrees to permit
representatives of Lender, from time to time, as often as may be reasonably
requested, but only during normal business hours, to visit and inspect the
properties of Borrower, and to inspect, audit and make extracts from its books
and records, and discuss with its officers, its employees and its independent
accountants, Borrower's business, assets, liabilities, financial condition,
business prospects and results of operations.
ARTICLE VII
NEGATIVE COVENANTS
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Each entity comprising Borrower covenants and agrees that so long as
Borrower may borrow under this Agreement and until payment in full of the Note
and performance of all other obligations of Borrower under the Loan Documents:
SECTION 7.1. BORROWING. Borrower will not create, incur, assume or
suffer to exist any liability for Borrowed Money except: (i) indebtedness to
Lender; (ii) indebtedness of Borrower secured by mortgages, encumbrances or
liens expressly permitted by Section 7.3; (iii) accounts payable to trade
creditors and current operating expenses (other than for borrowed money)
which are recognized in Borrower's accounting system and not aged more than
one hundred twenty (120) days from the billing date or more than thirty (30)
days from the due date, in each case incurred in the ordinary course of
business and paid within such time period, unless the same are being
contested in good faith and by appropriate and lawful proceedings, and
Borrower shall have set aside such reserves, if any, with respect thereto as
are required by GAAP and deemed adequate by Borrower and its independent
accountants; and (iv) borrowings incurred in the ordinary course of its
business and not exceeding $200,000.00 in the aggregate outstanding at any
one time. Borrower will not make prepayments on any existing or future
indebtedness for Borrowed Money in excess of $200,000.00 to any Person (other
than Lender, to the extent permitted by this Agreement or any subsequent
agreement between Borrower and Lender).
SECTION 7.2. JOINT VENTURES. Borrower will not invest directly or
indirectly in any joint venture for any purpose without the prior written notice
to, and the prior written consent of, Lender, which consent shall not be
unreasonably withheld.
SECTION 7.3. LIENS AND ENCUMBRANCES. Borrower will not create, incur,
assume or suffer to exist any mortgage, pledge, lien or other encumbrance of any
kind (including the charge upon property purchased under a conditional sale or
other title retention agreement) upon, or any security interest in, any of its
Collateral, whether now owned or hereafter acquired, except for Permitted Liens.
SECTION 7.4. RESTRICTION ON FUNDAMENTAL CHANGES; NO CHANGE IN OPERATION
OR CONTROL. Except as permitted pursuant to Paragraph 27 of the Term Note,
Borrower will not, without prior written notice to, and the prior written
consent of Lender: (i) enter into any transaction of merger or consolidation;
(ii) liquidate, wind-up or dissolve itself (or suffer any liquidation or
dissolution); (iii) convey, sell, lease, sublease, transfer or otherwise dispose
of, in one transaction or a series of transactions, any of its assets, or the
capital stock of any subsidiary of Borrower, whether now owned or hereafter
acquired; or (iv) acquire by purchase or otherwise all or any substantial part
of the business or assets of, or stock or other evidence of beneficial ownership
of, any Person. Borrower agrees that in addition to all other remedies available
to Lender, Lender shall be entitled to specific enforcement of the covenants in
this Section 7.4, including injunctive relief. Consistent with the foregoing,
until the Obligations are repaid in full, none of the entities comprising
Borrower shall transfer, assign, convey or grant to any other Person the right
to operate or control any of the nursing homes listed on SCHEDULE 4.15, whether
by lease, sublease, management agreement, joint venture agreement or otherwise.
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SECTION 7.5. SALE AND LEASEBACK. Except as permitted pursuant to
Paragraph 27 of the Term Note, Borrower will not, directly or indirectly, enter
into any arrangement whereby Borrower sells or transfers all or any part of its
assets and thereupon and within one year thereafter rents or leases the assets
so sold or transferred without prior written notice to and the prior written
consent of Lender, which consent shall not be unreasonably withheld.
SECTION 7.6. DIVIDENDS, DISTRIBUTIONS AND MANAGEMENT FEES. Borrower
will not make, declare or pay any dividends or distributions with respect to,
purchase, redeem or otherwise acquire for value any of its outstanding stock
now or hereafter outstanding, or return any capital of its stockholders,
other than Excess Proceeds (as defined in the Term Note) and such other
amounts as may be approved by Lender. Borrower will not pay management fees
or fees of a similar nature to any person other than a management fee to
Guarantor equal to (i) five percent (5%) of revenues prior to the existence
of a monetary Event of Default or a material Event of Default and (ii) the
lesser of (x) Guarantor's actual costs to operate the facilities and (y) two
and one half percent (2.5%) of revenues of the facilities following any such
default. Neither Borrower nor Manager shall terminate any management
agreement without Lender's consent (and the termination of any such
management agreement shall not be effective until Lender has consented
thereto).
SECTION 7.7. LOANS. Borrower will not make loans or advances to any
Person, other than (i) trade credit extended in the ordinary course of its
business, and (ii) advances for business travel and similar temporary advances
made in the ordinary course of business to officers, stockholders, directors,
and employees.
SECTION 7.8. CONTINGENT LIABILITIES. Borrower will not assume,
guarantee, endorse, contingently agree to purchase or otherwise become liable
upon the obligation of any Person, except by the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business.
SECTION 7.9. SUBSIDIARIES. Borrower will not form any subsidiary, or
make any investment in or any loan in the nature of an investment to, any other
Person.
SECTION 7.10. COMPLIANCE WITH ERISA. Borrower will not permit with
respect to any Plan covered by Title IV of ERISA any Prohibited Transaction or
any Reportable Event.
SECTION 7.11. CERTIFICATES OF NEED. Borrower will not amend, alter or
suspend or terminate or make provisional in any material way, any certificate of
need or provider number other than in connection with the closing of the Elms
Nursing Home, the Oak Manor Nursing Home and the Pine Manor Nursing Home (the
"Closed Homes") without the prior written consent of Lender, which consent shall
not be unreasonably withheld.
SECTION 7.12. TRANSACTIONS WITH AFFILIATES. Borrower will not enter
into any transaction, including without limitation the purchase, sale, or
exchange of property, or the loaning or giving of funds to any Affiliate or
subsidiary, except in the ordinary course of business
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and pursuant to the reasonable requirements of Borrower's business and upon
terms substantially the same and no less favorable to Borrower as it would
obtain in a comparable arm's length transaction with any Person not an
Affiliate or subsidiary, and so long as the transaction is not otherwise
prohibited under this Agreement. For purposes of the foregoing, Lender
consents to the transactions described on SCHEDULE 7.12.
SECTION 7.13. USE OF LENDER'S NAME. Borrower will not use Lender's
name (or the name of any of Lender's affiliates) in connection with any of
its business operations. Borrower may disclose to third parties that Borrower
has a borrowing relationship with Lender. Nothing contained in this Agreement
is intended to permit or authorize Borrower to make any contract on behalf of
Lender.
SECTION 7.14. CHANGE IN CAPITAL STRUCTURE. There shall occur no change
in the ownership of Borrower's stock or in Borrower's capital structure, both as
set forth in SCHEDULE 4.17.
SECTION 7.15. CONTRACTS AND AGREEMENTS. Borrower will not become or be
a party to any contract or agreement which would breach this Agreement, or
breach any other instrument, agreement, or document to which Borrower is a party
or by which it is or may be bound.
SECTION 7.16. MARGIN STOCK. Borrower will not carry or purchase any
"margin security" within the meaning of Regulations U, T or X of the Board of
Governors of the Federal Reserve System.
SECTION 7.17. TRUTH OF STATEMENTS AND CERTIFICATES. Borrower will not
furnish to Lender any certificate or other document that contains any untrue
statement of a material fact or that omits to state a material fact necessary to
make it not misleading in light of the circumstances under which it was
furnished.
SECTION 7.18. CENSUS. With respect to any twelve (12) month period
during the Term, Borrower will not allow the average patient census for such
12-month period, for the nursing homes listed on SCHEDULE 4.15 when taken as a
whole, to fall below ninety percent (90%) of the aggregate patient census of
such nursing homes as of the Closing Date, as reflected on SCHEDULE 4.15
ARTICLE VIII
EVENTS OF DEFAULT
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SECTION 8.1. EVENTS OF DEFAULT. Each of the following (individually, an
"Event of Default" and collectively, the "Events of Default") shall constitute
an event of default under this Agreement:
(a) A default in the payment of any installment of principal
of, or interest upon, the Note when due and payable, whether at maturity or
otherwise, or any breach of Section 2.3, which default or breach, as applicable,
shall have continued unremedied for a period of five (5) days after written
notice of the default or breach from Lender to Borrower;
(b) A default in the payment of any other charges, fees, or
other monetary obligations owing to Lender arising out of or incurred in
connection with this Agreement when such payment is due and payable, which
default shall have continued unremedied for a period of five (5) days after
written notice of the default from Lender to Borrower, provided, however, that
with respect to any payments which are being disputed by Borrower, the failure
to make such payment shall not constitute a default hereunder so long as the
disputed amount is placed in an escrow acceptable to Borrower and Lender;
(c) A default in the due observance or performance by Borrower
of any other term, covenant or agreement contained in any of the Loan Documents,
which default shall have continued unremedied for a period of ten (10) days
after written notice of the default from Lender to Borrower;
(d) Any representation or warranty made by Borrower in this
Agreement or in any of the other Loan Documents, any financial statement, or any
statement or representation made in any other certificate, report or opinion
delivered in connection with this Agreement or the other Loan Documents proves
to have been incorrect or misleading in any material respect when made, which
default shall have continued unremedied for a period of ten (10) days after
written notice of the default from Lender to Borrower, provided, however, that
with respect to asserted liens or security interests in the Collateral which
arose or accrued prior to the date hereof, the Borrower shall have a cure period
of 60 days after written notice from Lender of such default;
(e) Any obligation of Borrower (other than its Obligations
under this Agreement) for the payment of Borrowed Money in excess of $200,000 in
the aggregate is not paid when due or within any applicable grace period, or
such obligation becomes or is declared to be due and payable before the
expressed maturity of the obligation, or there shall have occurred an event
which, with the giving of notice or lapse of time, or both, would cause any such
obligation to become, or allow any such obligation to be declared to be, due and
payable;
(f) Borrower makes an assignment for the benefit of creditors,
offers a composition or extension to creditors, or makes or sends notice of an
intended bulk sale of any business or assets now or hereafter conducted by
Borrower;
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(g) (i) Borrower files a petition in bankruptcy, (ii)
Borrower is adjudicated insolvent or bankrupt, petitions or applies to any
tribunal for any receiver of or any trustee for itself or any substantial
part of its property, (iii) Borrower commences any proceeding relating to
itself under any reorganization, arrangement, readjustment or debt,
dissolution or liquidation law or statute of any jurisdiction, whether now or
hereafter in effect, (iv) any such proceeding is commenced against Borrower
and such proceeding remains undismissed for a period of sixty (60) days, (v)
Borrower by any act indicates its consent to, approval of, or acquiescence
in, any such proceeding or the appointment of any receiver of or any trustee
for a Borrower or any substantial part of its property, or suffers any such
receivership or trusteeship to continue undischarged for a period of sixty
(60) days;
(h) One or more final judgments against Borrower or
attachments against its property not fully and unconditionally covered by
insurance in excess of $200,000 in the aggregate shall be rendered by a court of
record and shall remain unpaid, unstayed on appeal, undischarged, unbonded and
undismissed for a period of ten (10) days;
(i) A Reportable Event which might constitute grounds for
termination of any Plan covered by Title IV of ERISA or for the appointment by
the appropriate United States District Court of a trustee to administer any such
Plan or for the entry of a lien or encumbrance to secure any deficiency, has
occurred and is continuing thirty (30) days after its occurrence, or any such
Plan is terminated, or a trustee is appointed by an appropriate United States
District Court to administer any such Plan, or the Pension Benefit Guaranty
Corporation institutes proceedings to terminate any such Plan or to appoint a
trustee to administer any such Plan, or a lien or encumbrance is entered to
secure any deficiency or claim;
(j) Any outstanding stock in Borrower is sold or otherwise
transferred by the Person owning such stock on the date of this Agreement;
(k) Intentionally Deleted;
(l) Borrower breaches or violates the terms of, or a default
or an event which could, whether with notice or the passage of time, or both,
constitute a default, occurs under any other existing or future agreement
(related or unrelated) between Borrower and Lender;
(m) Upon the issuance of any execution or distraint process
against Borrower or any of its property or assets which has a material adverse
effect thereon;
(n) Borrower ceases any material portion of its business
operations as currently conducted other than as permitted in Paragraph 27 of the
Term Note and in connection with the closing of the Closed Homes;
(o) Any indication or evidence is received by Lender that
Borrower may have directly or indirectly been engaged in any type of activity
which, in Lender's reasonably business judgement, may result in the forfeiture
of any property of Borrower to any Governmental
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Authority, which default shall have continued unremedied for a period of ten
(10) days after written notice from Lender;
(p) Borrower or any Affiliate of Borrower, shall challenge or
contest, in any action, suit or proceeding, the validity or enforceability of
this Agreement, or any of the other Loan Documents, the legality or the
enforceability of any of the Obligations or the perfection or priority of any
Lien granted to Lender;
(q) Borrower shall be criminally convicted under any law that
could lead to a forfeiture of any Collateral; or
(r) There shall occur a material adverse change in the
financial condition or business prospects of Borrower, or if Lender in good
faith deems itself insecure as a result of acts or events bearing upon the
financial condition of Borrower or the repayment of the Note, which default
shall have continued unremedied for a period of ten (10) days after written
notice from Lender.
(s) An Event of Default shall have occurred under the Term
Note or any other Term Loan Documents.
(t) An Event of Default shall have occurred under any
Mortgage, Environmental Indemnity, Guaranty, or the Pledge Agreement.
(u) A default or event of default occurs under any other note,
instrument, deed of trust, mortgage, loan agreement, security agreement, letter
agreement or other document executed and delivered by any Borrower or Guarantor,
or any Affiliate of Borrower or Guarantor, in connection with any financing
provided by Lender or Lender's Affiliate to any such parties.
SECTION 8.2. ACCELERATION. Upon the occurrence of any of the foregoing
Events of Default, the Note shall become and be immediately due and payable upon
declaration to that effect delivered by Lender to Borrower; provided that, upon
the happening of any event specified in Section 8.1(g), the Note shall be
immediately due and payable without declaration or other notice to Borrower.
SECTION 8.3. REMEDIES.
(a) Upon the occurrence of and during the continuance of an
Event of Default under this Agreement or the other Loan Documents, Lender, in
addition to all other rights, options, and remedies granted to Lender under this
Agreement or at law or in equity, may take any of the following steps (which
list is given by way of example and is not intended to be an exhaustive list of
all such rights and remedies):
(i) Terminate the Loan, whereupon all
outstanding Obligations shall be immediately due and payable;
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(ii) Exercise all other rights granted to it
under this Agreement and all rights under the UCC in effect in the applicable
jurisdiction(s) and under any other applicable law; and
(iii) Exercise all rights and remedies under all
Loan Documents now or hereafter in effect, including but not limited to:
(A) The right to take possession of,
send notices regarding, and collect directly the Collateral, with or without
judicial process;
(B) The right to (by its own means or
with judicial assistance) enter any of Borrower's premises and take possession
of the Collateral, or render it unusable, or dispose of the Collateral on such
premises in compliance with subsection (C) below, without any liability for
rent, storage, utilities, or other sums, and Borrower shall not resist or
interfere with such action;
(C) The right to require Borrower at
Borrower's expense to assemble all or any part of the Collateral and make it
available to Lender at any place designated by Lender; and
(D) The right to reduce the Maximum
Loan Amount or to use the Collateral and/or funds in the Concentration Account
in amounts up to the Maximum Loan Amount for any reason.
(b) Borrower agrees that a notice received by it at least five
(5) business days before the time of any intended public sale, or the time after
which any private sale or other disposition of the Collateral is to be made,
shall be deemed to be reasonable notice of such sale or other disposition. If
permitted by applicable law, any perishable Collateral which threatens to
speedily decline in value or which is sold on a recognized market may be sold
immediately by Lender without prior notice to Borrower. At any sale or
disposition of Collateral, Lender may (to the extent permitted by applicable
law) purchase all or any part of the Collateral, free from any right of
redemption by Borrower, which right is hereby waived and released. Borrower
covenants and agrees not to interfere with or impose any obstacle to Lender's
exercise of its rights and remedies with respect to the Collateral.
SECTION 8.4. NATURE OF REMEDIES. Lender shall have the right to proceed
against all or any portion of the Collateral to satisfy (i) the liabilities and
Obligations of Borrower to Lender or (ii) upon the occurrence of an Event of
Default under the Term Note or Term Loan Documents, the liabilities and
obligations of Borrower under the Term Note or Term Loan Documents.
All rights and remedies granted Lender under this Agreement and under any
agreement referred to in this Agreement, or otherwise available at law or in
equity, shall be deemed concurrent and cumulative, and not alternative remedies,
and Lender may proceed with any number of remedies at the same time until the
Loans, and all other existing and future liabilities and obligations of Borrower
to Lender, are satisfied in full. The exercise of any one right or remedy shall
not be
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deemed a waiver or release of any other right or remedy, and Lender, upon the
occurrence of an Event of Default, may proceed against Borrower, and/or the
Collateral, at any time, under any agreement, with any available remedy and
in any order.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. EXPENSES AND TAXES.
(a) Borrower agrees to pay, whether or not the Closing occurs,
a reasonable documentation preparation fee, together with actual audit and
appraisal fees and all other out-of-pocket charges and expenses incurred by
Lender in connection with the negotiation, preparation, legal review and
execution of each of the Loan Documents, including but not limited to UCC and
judgment lien searches and UCC filings and fees for post-Closing UCC and
judgment lien searches. In addition, Borrower shall pay all such fees associated
with any amendments to the Loan Documents following Closing.
(b) Borrower also agrees to pay all out-of-pocket charges and
expenses incurred by Lender (including the fees and expenses of Lender's
counsel) in connection with the enforcement, protection or preservation of any
right or claim of Lender and the collection of any amounts due under the Loan
Documents. If Lender uses in-house counsel for any of these purposes (i.e., for
any task in connection with the enforcement, protection or preservation of any
right or claim of Lender and the collection of any amounts due under its Loan
Documents), Borrower further agrees that its Obligations under the Loan
Documents include reasonable charges for such work commensurate with the fees
that would otherwise be charged by outside legal counsel selected by Lender for
the work performed.
(c) Borrower shall pay all taxes (other than taxes based upon
or measured by Lender's income or revenues or any personal property tax), if
any, in connection with the issuance of the Note and the recording of the
security documents therefor. The obligations of Borrower under this clause (c)
shall survive the payment of Borrower's indebtedness under this Agreement and
the termination of this Agreement.
SECTION 9.2. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the other
Loan Documents constitute the full and entire understanding and agreement among
the parties with regard to their subject matter and supersede all prior written
or oral agreements, understandings, representations and warranties made with
respect thereto. No amendment, supplement or modification of this Agreement nor
any waiver of any provision thereof shall be made except in writing executed by
the party against whom enforcement is sought.
SECTION 9.3. NO WAIVER; CUMULATIVE RIGHTS. No waiver by any party to
this Agreement of any one or more defaults by the other party in the performance
of any of the
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provisions of this Agreement shall operate or be construed as a waiver of any
future default or defaults, whether of a like or different nature. No failure
or delay on the part of any party in exercising any right, power or remedy
under this Agreement shall operate as a waiver of such right, power or remedy
nor shall any single or partial exercise of any such right, power or remedy
preclude any other or further exercise of such right, power or remedy or the
exercise of any other right, power or remedy. The remedies provided for in
this Agreement are cumulative and are not exclusive of any remedies that may
be available to any party to this Agreement at law, in equity or otherwise.
SECTION 9.4. NOTICES. Any notice or other communication required or
permitted under this Agreement shall be in writing and personally delivered,
mailed by registered or certified mail (return receipt requested and postage
prepaid), sent by telecopier (with a confirming copy sent by regular mail), or
sent by prepaid overnight courier service, and addressed to the relevant party
at its address set forth below, or at such other address as such party may, by
written notice, designate as its address for purposes of notice under this
Agreement:
(a) If to Lender, at:
Heller Healthcare Finance, Inc.
2 Wisconsin Circle, 4th floor
Chevy Chase, Maryland 20815
Attention: Steven M. Curwin, Deputy General Counsel
Telephone: (301) 961-1640
Telecopier: (301) 664-9860
(b) If to Borrower, at:
LTC Healthcare Acquisition Company, Inc.
300 Esplanade Drive, Suite 1860
Oxnard, CA 93030
Attention: Andre C. Dimitriadis
Telephone: (805) 981-8655
Telecopier: (805) 981-8663
with a copy to: Cohn & Kelakos, LLP
101 Arch Street
Boston, MA 02110
Telephone: (617) 951-2505
Telecopier: (617) 951-0679
Attention: George M. Kelakos, Esq.
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If mailed, notice shall be deemed to be given five (5) days after being sent,
and if sent by personal delivery, telecopier or prepaid courier, notice shall be
deemed to be given when delivered.
SECTION 9.5. SEVERABILITY. If any term, covenant or condition of this
Agreement, or the application of such term, covenant or condition to any party
or circumstance shall be found by a court of competent jurisdiction to be, to
any extent, invalid or unenforceable, the remainder of this Agreement and the
application of such term, covenant, or condition to parties or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each term, covenant or condition shall be valid and
enforced to the fullest extent permitted by law. Upon determination that any
such term is invalid, illegal or unenforceable, Lender may, but is not obligated
to, advance funds to Borrower under this Agreement until the parties to this
Agreement amend this Agreement so as to effect the original intent of the
parties as closely as possible in a valid and enforceable manner.
SECTION 9.6. SUCCESSORS AND ASSIGNS. This Agreement, the Note, and the
other Loan Documents shall be binding upon and inure to the benefit of Borrower
and Lender and their respective successors and assigns. Notwithstanding the
foregoing, Borrower may not assign any of its rights or delegate any of its
obligations under this Agreement without the prior written consent of Lender,
which may be withheld in its sole discretion. Lender may sell, assign, transfer,
or participate any or all of its rights or obligations under this Agreement
without notice to or consent of Borrower.
SECTION 9.7. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one instrument.
SECTION 9.8. INTERPRETATION. No provision of this Agreement or any
other Loan Document shall be interpreted or construed against any party because
that party or its legal representative drafted that provision. The titles of the
paragraphs of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement. Any pronoun used in this
Agreement shall be deemed to include singular and plural and masculine, feminine
and neuter gender as the case may be. The words "herein," "hereof," and
"hereunder" shall be deemed to refer to this entire Agreement, except as the
context otherwise requires.
SECTION 9.9. SURVIVAL OF TERMS. All covenants, agreements,
representations and warranties made in this Agreement, any other Loan Document,
and in any certificates and other instruments delivered in connection with this
Agreement shall be considered to have been relied upon by Lender and shall
survive the making by Lender of the Loans contemplated by this Agreement and the
execution and delivery to Lender of the Note, and shall continue in full force
and effect until all liabilities and obligations of Borrower to Lender are
satisfied in full.
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SECTION 9.10. RELEASE OF LENDER. Borrower releases Lender, its
officers, employees, and agents, of and from any claims for loss or damage
resulting from acts or conduct of any or all of them, unless caused by Lender's
recklessness, gross negligence, or willful misconduct.
SECTION 9.11. TIME. Whenever Borrower is required to make any payment
or perform any act on a Saturday, Sunday, or a legal holiday under the laws of
the State of Maryland (or other jurisdiction where Borrower is required to make
the payment or perform the act), the payment may be made or the act performed on
the next Business Day. Time is of the essence in Borrower's performance under
this Agreement and all other Loan Documents.
SECTION 9.12. COMMISSIONS. The transaction contemplated by this
Agreement was brought about by Lender and Borrower acting as principals and
without any brokers, agents, or finders being the effective procuring cause.
Borrower represents that it has not committed Lender to the payment of any
brokerage fee, commission, or charge in connection with this transaction. If any
such claim is made on Lender by any broker, finder, or agent or other person,
Borrower will indemnify, defend, and hold Lender harmless from and against the
claim and will defend any action to recover on that claim, at Borrower's cost
and expense, including Lender's counsel fees. Borrower further agrees that until
any such claim or demand is adjudicated in Lender's favor, the amount demanded
will be deemed a liability of Borrower under this Agreement, secured by the
Collateral.
SECTION 9.13. THIRD PARTIES. No rights are intended to be created under
this Agreement or under any other Loan Document for the benefit of any third
party donee, creditor, or incidental beneficiary of Borrower. Nothing contained
in this Agreement shall be construed as a delegation to Lender of Borrower's
duty of performance, including without limitation Borrower's duties under any
account or contract in which Lender has a security interest.
SECTION 9.14. DISCHARGE OF BORROWER'S OBLIGATIONS. Lender, in its sole
discretion, shall have the right at any time, and from time to time, without
prior notice to Borrower if Borrower fails to do so, to: (i) obtain insurance
covering any of the Collateral as required under this Agreement; (ii) pay for
the performance of any of Borrower's obligations under this Agreement; (iii)
discharge taxes, liens, security interests, or other encumbrances at any time
levied or placed on any of the Collateral in violation of this Agreement unless
Borrower is in good faith with due diligence by appropriate proceedings
contesting those items; and (iv) pay for the maintenance and preservation of any
of the Collateral. Expenses and advances shall be added to the Loan, until
reimbursed to Lender and shall be secured by the Collateral. Any such payments
and advances by Lender shall not be construed as a waiver by Lender of an Event
of Default.
SECTION 9.15. INFORMATION TO PARTICIPANTS. Lender may divulge to any
participant it may obtain in the Loan, or any portion of the Loan, all
information, and furnish to such participant copies of reports, financial
statements, certificates, and documents obtained under any provision of this
Agreement or any other Loan Document.
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SECTION 9.16. INDEMNITY. Borrower hereby agrees to indemnify and hold
harmless Lender, its partners, officers, agents and employees (collectively,
"Indemnitee") from and against any liability, loss, cost, expense, claim,
damage, suit, action or proceeding ever suffered or incurred by Lender
(including reasonable attorneys' fees and expenses) arising from Borrower's
failure to observe, perform or discharge any of its covenants, obligations,
agreements or duties under this Agreement, or from the breach of any of the
representations or warranties contained in Article IV of this Agreement. In
addition, Borrower shall defend Indemnitee against and save it harmless from all
claims of any Person with respect to the Collateral. Notwithstanding any
contrary provision in this Agreement, the obligation of Borrower under this
Section 9.16 shall survive the payment in full of the Obligations and the
termination of this Agreement.
SECTION 9.17. CHOICE OF LAW; CONSENT TO JURISDICTION. THIS AGREEMENT
AND THE NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF MARYLAND, WITHOUT REGARD TO ANY OTHERWISE APPLICABLE PRINCIPLES OF
CONFLICTS OF LAWS. IF ANY ACTION ARISING OUT OF THIS AGREEMENT OR THE NOTE IS
COMMENCED BY LENDER IN THE STATE COURTS OF THE STATE OF MARYLAND OR IN THE U.S.
DISTRICT COURT FOR THE DISTRICT OF MARYLAND, BORROWER HEREBY CONSENTS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUCH ACTION AND TO THE LAYING OF VENUE IN
THE STATE OF MARYLAND. ANY PROCESS IN ANY SUCH ACTION SHALL BE DULY SERVED IF
MAILED BY REGISTERED MAIL, POSTAGE PREPAID, TO BORROWER AT ITS ADDRESS DESCRIBED
IN SECTION 9.4.
SECTION 9.18. WAIVER OF TRIAL BY JURY. BORROWER HEREBY (A) COVENANTS
AND AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY A JURY,
AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH
RIGHT SHALL NOW OR HEREAFTER EXIST. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS
SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY, BY BORROWER, AND THIS WAIVER IS
INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE
RIGHT TO A JURY TRIAL WOULD OTHERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED AND
REQUESTED TO SUBMIT THIS AGREEMENT TO ANY COURT HAVING JURISDICTION OVER THE
SUBJECT MATTER AND THE PARTIES TO THIS AGREEMENT, SO AS TO SERVE AS CONCLUSIVE
EVIDENCE OF BORROWER'S WAIVER OF THE RIGHT TO JURY TRIAL. FURTHER, BORROWER
HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF LENDER (INCLUDING LENDER'S
COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO BORROWER THAT LENDER WILL
NOT SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.
9.19 NO LIABILITY OF BORROWER'S AFFILIATES. No affiliate of Borrower,
including all parents, subsidiaries and other affiliates of Borrower (the
"Affiliates"), including all officers and directors of the Borrower or of the
Affiliates shall have any responsibility or liability for the
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payment or performance of any obligations or duties under this Agreement, the
Borrower Guaranty or any other agreement or transaction provided or
contemplated in the Loan Documents or the Term Loan Documents.
9.20. RELEASE. (a) So long as no monetary Event of Default or material
Event of Default has occurred under this Loan Agreement, the Term Note, the Loan
Documents or the Term Loan Documents, Collateral listed on SCHEDULE 3 shall be
released from Lender's lien (a "RELEASED ASSET") upon payment by Borrower of (a)
an amount equal to one hundred percent (100%) of the value allocated to such
item on SCHEDULE 3, and (b) if the sale price for the Released Asset exceeds the
Release Price (the "EXCESS PROCEEDS"), an amount equal to portion of the Excess
Proceeds Lender is entitled to as set forth below ((a) and (b) being referred to
herein as the "RELEASE PRICE"). The Excess Proceeds shall be distributed as
follows: (i) an amount equal to taxes owed by Borrower in connection with the
sale of such Released Asset (the "Tax Payment"), shall be paid to Borrower to be
used exclusively to pay for such taxes, and (ii) the balance of the Excess
Proceeds less the Tax Payment (the "Balance") shall be distributed as follows:
(x) if the Released Asset is sold during the first nine (9) months following the
Closing Date, seventy five percent (75%) of the Excess Proceeds shall be paid to
Lender, fifteen percent (15%) shall be retained by Borrower to be used
exclusively for working capital or other operating expenses or capital
improvements relating to the nursing home facilities of Borrower, five percent
(5%) shall be paid to Manager, and five percent (5%) shall be paid to LTC
Healthcare, Inc.; and (y) if the Released Asset is sold after the first nine (9)
months following the Closing Date, seventy five percent (75%) of the Excess
Proceeds shall be paid to Lender and twenty five percent (25%) of the Excess
Proceeds shall be retained by Borrower to be used exclusively for working
capital or other operating expenses or capital improvements relating to the
nursing home facilities of Borrower. The Release Price received by Lender shall
be applied to pay down the outstanding principal sum under the Term Note.
(b) On or after July 1, 2000, upon payment of all of the outstanding
principal, accrued interest and other Obligations owing under the Term Note
(including any Obligations arising in connection with the Borrower Guaranty),
provided no Event of Default has occurred under the Loan Documents or the Term
Loan Documents and no advances have been made under the Loan which currently
exceed Borrower's availability thereunder, Lender shall release its interest in
(i) the Collateral described in Paragraph 3(f) through (i) of this Agreement,
(ii) the Collateral described in the Pledge Agreement, and (iii) in the Property
or Mortgaged Property set forth in: (w) that certain Deed to Secured Debt of
even date herewith made by LTC Healthcare of Fort Valley, Inc. in favor of
Lender, (x) that certain Deed to Secure Debt of even date herewith made by LTC
Healthcare of Jessup, Inc. in favor of Lender, (y) that certain Deed to Secure
Debt of even date herewith made by LTC Healthcare of Atlanta, Inc. in favor of
Lender, (z) that certain Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filings of even date herewith made by LTC Healthcare of
Gardner, Inc. in favor of Lender, and any other Mortgages granted by Borrower to
Lender under the Term Note. In no event however, shall Lender release its
interest in the Collateral described in Paragraph 3(a) through (e) and (j) of
this Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of
the date first written above.
LENDER:
HELLER HEALTHCARE FINANCE, INC.
a Delaware corporation
By: /s/ MARK CENTOLA
-----------------------------
Name:
Title: Vice President
BORROWER:
LTC HEALTHCARE ACQUISITION COMPANY,
INC.,
a Nevada corporation
By:
-----------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF ATLANTA, INC.,
a Nevada corporation
By:
-----------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF BONNER SPRINGS, INC.,
a Nevada corporation
By:
-----------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF CHICOPEE, INC.,
a Nevada corporation
By:
-----------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF COFFEYVILLE, INC.,
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a Nevada corporation
By:
-----------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF CONVERSE, INC.,
a Nevada corporation
By:
-----------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF FORT VALLEY, INC.,
a Nevada corporation
By:
-----------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF GARDNER, INC.,
a Nevada corporation
By:
-----------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF HOLYOKE, INC.,
a Nevada corporation
By:
-----------------------------
Name: James J. Pieczynski
Title: Treasurer
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LTC HEALTHCARE OF JESSUP, INC.,
a Nevada corporation
By:
-----------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF NEW PORT RICHEY, INC.,
a Nevada corporation
By:
-----------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF SALINA, INC.,
a Nevada corporation
By:
-----------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF SHEPARD, INC.,
a Nevada corporation
By:
-----------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF SOUTH HADLEY, INC.,
a Nevada corporation
By:
-----------------------------
Name: James J. Pieczynski
Title: Treasurer
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LTC HEALTHCARE OF SPRINGFIELD, INC.,
a Nevada corporation
By:
-----------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF STATESBORO, INC.,
a Nevada corporation
By:
-----------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF TYLER, INC.,
a Nevada corporation
By:
-----------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE OF WHIGHAM, INC.,
a Nevada corporation
By:
-----------------------------
Name: James J. Pieczynski
Title: Treasurer
LTC HEALTHCARE RECEIVABLES, INC.,
a Nevada corporation
By:
-----------------------------
Name: James J. Pieczynski
Title: Treasurer
48
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LIST OF EXHIBITS
Exhibit A - Form of Revolving Credit Note
Exhibit B - Form of Lockbox Agreement
Exhibit C - Form of Legal Opinion
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LIST OF SCHEDULES
Schedule 1 - Guarantors
Schedule 1.36 - Permitted Liens
Schedule 3 - List of Released Assets
Schedule 4.1 - Subsidiaries
Schedule 4.5 - Litigation
Schedule 4.7 - Tax Identification Numbers
Schedule 4.13 - Non-Compliance with Law
Schedule 4.14 - Environmental Matters
Schedule 4.15 - Places of Business with patient census
Schedule 4.17 - Stock Ownership
Schedule 4.19 - Borrowings and Guarantees
Schedule 4.21 - Trade Names
Schedule 4.22 - Joint Ventures
Schedule 7.12 - Transactions with Affiliates
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SCHEDULE 1 - LIST OF GUARANTORS
LENOX HEALTHCARE, INC., a Delaware corporation,
LENOX HEALTHCARE OF MILL VALLEY, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF CARMICHAEL, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF SAN LEANDRO, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF HAYWARD, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF SACRAMENTO, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF ANAHEIM, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF WOODLAND, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF CONCORD, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF SAN RAFAEL, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF SAN BERNARDINO, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF ROSEVILLE, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF CLAREMONT, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF SAN PABLO, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF SANTA PAULA-HEALTHCARE, LLC, a Delaware limited
liability company,
LENOX HEALTHCARE OF OAKLAND, LLC, a Delaware limited liability company, and
LENOX HEALTHCARE OF MODESTO, LLC, a Delaware limited liability company,
GREYLOCK HEALTH OF JOPLIN-MANOR, L.P., a Missouri limited partnership,
GREYLOCK HEALTH OF ST. CHARLES, L.P., a Missouri limited partnership,
GREYLOCK HEALTH OF SPRINGFIELD, L.P., a Missouri limited partnership,
GREYLOCK HEALTH OF BALLWIN, L.P., a Missouri limited partnership,
GREYLOCK HEALTH OF COLUMBIA, L.P., a Missouri limited partnership,
GREYLOCK HEALTH CORPORATION OF SEDGWICK, L.P., a Kansas limited partnership,
GREYLOCK HEALTH CORPORATION OF HAYSVILLE, L.P., a Kansas limited partnership,
GREYLOCK HEALTH CORPORATION OF COUNCIL GROVE, L.P., a Kansas limited
partnership,
GREYLOCK HEALTH CORPORATION OF CHANUTE, L.P., a Kansas limited partnership,
GREYLOCK HEALTH CORPORATION OF LARNED, L.P., a Kansas limited partnership,
LENOX HEALTHCARE OF SALEM, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF BROCKTON, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF BARTLESVILLE, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF KAILUA-KONA, L.P., a Delaware limited partnership,
LENOX HEALTHCARE OF PALMER, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF LURAY, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF YUMA, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF CHANUTE, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF COUNCIL GROVE, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF HAYSVILLE, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF LARNED, LLC, a Delaware limited liability company, and
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LENOX HEALTHCARE OF SEDGWICK, LLC, a Delaware limited liability company,
GREYLOCK HEALTH CORPORATION OF INDEPENDENCE TERRACE, L.P., a Kansas
limited partnership,
GREYLOCK HEALTH CORPORATION OF INDEPENDENCE LODGE, L.P., a Kansas
limited partnership,
GREYLOCK HEALTH CORPORATION OF WICHITA, L.P., a Kansas limited partnership,
GREYLOCK HEALTH CORPORATION OF TOPEKA, L.P., a Kansas limited partnership,
GREYLOCK HEALTH OF LAMAR, L.P., a Missouri limited partnership,
GREYLOCK HEALTH OF AVA, L.P., a Missouri limited partnership,
GREYLOCK HEALTH OF CLINTON, L.P., a Missouri limited partnership,
GREYLOCK HEALTH OF KANSAS CITY-BHM, L.P., a Missouri limited partnership,
GREYLOCK HEALTH OF KANSAS CITY, L.P., a Missouri limited partnership,
GREYLOCK HEALTH OF JOPLIN-HEALTHCARE, L.P., a Missouri limited partnership,
GREYLOCK HEALTH OF JEFFERSON CITY, L.P., a Missouri limited partnership,
GREYLOCK HEALTH OF THAYER, L.P., a Missouri limited partnership,
GREYLOCK HEALTH OF DES PERES, L.P., a Missouri limited partnership,
GREYLOCK HEALTH OF CRANE, L.P., a Missouri limited partnership and
GREYLOCK HEALTH OF KIMBERLING CITY-MANOR, L.P., a Missouri limited
partnership,
LENOX HEALTHCARE REALTY OF JOPLIN, L.L.C., a Delaware limited liability company,
LENOX HEALTHCARE REALTY OF BROCKTON, L.L.C., a Delaware limited liability
company,
LENOX HEALTHCARE REALTY OF WOODLAND, L.L.C., a Delaware limited liability
company,
LENOX HEALTHCARE OF GOLDSBORO, L.L.C., a Delaware limited liability company,
LENOX HEALTHCARE OF EVANSVILLE, L.L.C., a Delaware limited liability company,
LENOX HEALTHCARE OF LOGANSPORT, L.L.C., a Delaware limited liability company,
LENOX HEALTHCARE OF WESTFIELD, L.L.C., a Delaware limited liability company, and
LENOX HEALTHCARE REALTY OF CARMICHAEL, L.L.C., a Delaware limited liability
company
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EXHIBIT 10.4
AGREEMENT TO PROVIDE MANAGEMENT SERVICES
This Agreement made as of this 30th day of September, 1999,
by and between Senior Care Management Group, LLC, a Delaware limited
liability company ("SCMG") (SCMG is sometimes hereinafter referred to as
"Manager"), on the one hand, and LTC Healthcare, Inc., a Nevada corporation
("LTI"), and its subsidiaries LTC Healthcare of Fort Valley, Inc., a Nevada
corporation ("LTI-Fort Valley"), LTC Healthcare of Statesboro, Inc., a Nevada
corporation ("LTI-Statesboro"), LTC Healthcare of Jessup, Inc., a Nevada
corporation ("LTI-Jessup"), LTC Healthcare of Atlanta, Inc., a Nevada
corporation ("LTI-Atlanta"), LTC Healthcare of Whigham, Inc., a Nevada
corporation ("LTI-Whigham"), LTC Healthcare of New Port Richey, Inc., a
Nevada corporation ("LTI-New Port Richey"), LTC Healthcare of Tyler, Inc., a
Nevada corporation ("LTI-Tyler"), LTC Healthcare of Converse, Inc., a Nevada
corporation ("LTI-Converse"), LTC Healthcare of Shepard, Inc., a Nevada
corporation ("LTI-Shepard"), LTC Healthcare of Coffeyville, Inc., a Nevada
corporation ("LTI-Coffeyville"), LTC Healthcare of Salina, Inc., a Nevada
corporation ("LTI-Salina"), LTC Healthcare of Bonner Springs, Inc., a Nevada
corporation ("LTI-Bonner Springs"), LTC Healthcare of Gardner, Inc., a Nevada
corporation ("LTI-Gardner"), LTC Healthcare of Chicopee, Inc., a Nevada
corporation ("LTI-Chicopee"), LTC Healthcare of Holyoke, Inc., a Nevada
corporation ("LTI-Holyoke"), LTC Healthcare of Springfield, Inc., a Nevada
corporation ("LTI-Springfield"), LTC Healthcare of South Hadley, Inc., a
Nevada corporation ("LTI-South Hadley") and LTC Healthcare Receivables, Inc.,
a Nevada corporation ("LTI-Receivables") (LTI, LTI-Fort Valley,
LTI-Statesboro, LTI-Jessup, LTI-Atlanta, LTI-Whigham, LTI-New Port Richey,
LTI-Tyler, LTI-Converse, LTI-Shepard, LTI-Coffeyville, LTI-Salina, LTI-Bonner
Springs, LTI-Gardner, LTI-Chicopee, LTI-Holyoke, LTI-Springfield and
LTI-South Hadley are sometimes hereinafter individually and collectively
referred to as "Tenant"), on the other hand.
WHEREAS, Tenant anticipates acquiring certain interests in
and to certain skilled nursing or assisted living facilities (individually,
each a "Facility" and collectively, the "Facilities"), which interests and
Facilities are more particularly described on Exhibit "A" attached hereto and
incorporated herein, and LTI-Receivables anticipates acquiring certain
accounts receivable generated from the operation of certain skilled nursing
facilities, as more particularly described on Exhibit "B" attached hereto and
incorporated herein;
WHEREAS, in such event, Tenant desires to retain a
qualified party to manage all of the Facilities on Tenant's behalf;
WHEREAS, Manager is experienced and qualified in the field
of health care management;
WHEREAS, Tenant has determined that Manager's fee is
economical in light of the range of services which it provides; and
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WHEREAS, Manager is willing to operate all of the
Facilities on Tenant's behalf and to collect certain accounts receivables on
behalf of LTI-Receivables, pursuant to the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the foregoing premises
and the mutual covenants herein contained, IT IS AGREED AS FOLLOWS:
0. DELEGATION OF DUTIES AND OBLIGATIONS: Effective as of 11:59
p.m. September 30, 1999, Tenant hereby assigns and delegates to Manager all
duties and obligations of Tenant under those certain Interim Management
Agreements of approximately even date herewith, each by and between one of
Tenant and William A. Brandt, Jr., the duly appointed Examiner of NewCare
Health Corporation, et al., Case No. 99-44161-HJB, U.S. Bankruptcy Court,
District of Massachusetts (Western Division) ("Examiner") (collectively, the
"Interim Agreements"), and Manager hereby accepts and assumes such
assignments and each and every duty and obligation of Tenant under, pursuant
to and in accordance with the Interim Agreements.
1. MANAGEMENT AND CONSULTING RESPONSIBILITIES OF MANAGER:
Effective upon Tenant's licensure with respect to each Facility, Tenant
hereby engages Manager and Manager hereby accepts such engagement and agrees
to provide management, consulting and advisory services to Tenant in
connection with the operation of the Facilities, upon the terms and
conditions set forth in this Agreement. By entering into this Agreement,
Tenant grants to Manager a right to possession of the Facilities but does not
delegate to Manager any powers, duties or responsibilities which it is
prohibited by law from delegating but Tenant does hereby grant to Manager the
exclusive right to possession of the Facilities, subject to Tenant's right to
enter the Facilities from time to time to ensure Manager's compliance with
its obligations under this Agreement. Tenant also retains such other
authority as shall not have been expressly delegated to Manager pursuant to
this Agreement. Subject to the foregoing, Manager shall provide the following
services:
a. OPERATIONAL POLICIES AND FORMS: Manager shall
develop and implement such operational policies and procedures as may be
necessary to ensure the initial and ongoing licensure of the Facilities and
for the efficient and effective operation of the Facilities from and after
the date of the issuance of licenses to operate the Facilities (individually,
each a "License" and collectively, the "Licenses") and the Facilities from
and after the commencement of the operation thereof and shall from time to
time during the term hereof develop such new policies and procedures as shall
be necessary to ensure the establishment and maintenance of operations
standards appropriate for the nature of the Facilities.
b. CHARGES: In accordance with the annual budgets and
projects approved by Tenant pursuant to Section 1(l), Manager shall establish
the schedules of recommended charges, including any and all special charges
for services rendered to the residents at the Facilities. Tenant shall have
the right to approve the charge schedules established by Manager, which
approval shall not be unreasonably withheld.
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c. INFORMATION: Manager shall develop any
informational material, mass media releases, and other related publicity
materials, which are necessary or appropriate in securing the Licenses and/or
for the operation of the Facilities.
d. REGULATORY COMPLIANCE: Manager shall assist Tenant
in securing the initial licensure of the Facilities and shall thereafter
maintain all licenses, permits, qualifications and approvals from any
applicable governmental or regulatory authority for the operation of the
Facilities, including but not limited to maintaining the Licenses and quality
assessment and assurance committees as required for Medicare and Medicaid
certification as skilled nursing facilities. Accordingly, Manager shall
manage the operations of the Facilities in full compliance with all
applicable laws and regulations as an expense of the Facilities and shall
promptly correct all deficiencies related to the operation of the Facilities
issued by any governmental or regulatory authority; provided, however, that
in the event that any such deficiencies require expenditures in excess of
Fifty Thousand Dollars ($50,000.00), then Manager shall be required to
consult with, and seek the approval of, Tenant prior to correcting any such
deficiencies. In addition to the foregoing, to the extent permitted by law,
Manager agrees as follows:
i. to represent the Facilities (A) in their
day-to-day dealings with regulatory and rate-setting authorities, creditors,
patients, patient families, representatives of the State Ombudsman, consumer
organizations, personnel, agents for collection and insurers and (B) in all
formal or informal proceedings before state and federal agencies engaged in
the regulation, payment rate-setting and licensing of skilled nursing or
assisted living facilities (as applicable); provided, however, that Tenant
retains the right, but not the obligation, to attend and participate in any
and all hearings, interviews and proceedings of any kind and nature
concerning the Facilities or their operations or concerning Manager which
might have an impact on the Facilities or their operations, including but not
limited to any violation of any statute or regulation that may result in the
impositions of penalties, fines, court or administrative orders or licensure
revocation; and
ii. to provide Tenant, within five (5)
business days of receipt, all correspondence, notices, rulings, written
summaries of oral communications, announcements or any other communication of
any sort from any regulatory agency, including public, quasi-public and
private entities, regarding the Facilities, their operations or related to
matters which might have a material impact on the operations of the
Facilities, such as announcements of the establishment of accreditation
committees, new oversight policies and other matters, or which may impact
Manager's performance of its obligations hereunder.
e. EQUIPMENT AND IMPROVEMENTS: From and after the
issuance of the Licenses and from and after the commencement of operations,
Manager shall make all necessary and approved repairs, replacements and
maintenance within the budgetary limits set forth in the annual capital
budget prepared by Manager pursuant to Paragraph 1(l), in a workmanlike and
lien free manner and in compliance with the requirements of any governmental
or regulatory authority.
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f. ACCOUNTING: Manager shall, at its expense, provide
home office and accounting support to the Facilities. All accounting
procedures and systems utilized in providing said support shall be in
accordance with the operating capital and cash programs developed by Manager,
and approved by Tenant, which approval shall not unreasonably be withheld,
which programs shall conform to generally accepted accounting principles and
shall not materially distort income or loss. In addition, as a cost of
operating the Facilities, Manager shall prepare or cause to be prepared all
tax returns, including payroll tax returns and shall cause all local, state
and federal taxes to be timely paid or contested, as appropriate. The taxes
and amounts due with respect to any cost reports shall be deemed to be
operating expenses of the Facilities and shall be paid out of the revenues of
the Facilities. Nothing herein shall preclude Manager from delegating to a
third party a portion of the accounting and cost reporting duties provided
for in this section; provided, that such delegation shall not relieve Manager
from ultimate liability for the timely and complete performance of the
obligations provided for herein or for the expense thereof, to the extent
such expense is to be borne hereunder by Manager. Tenant shall sign any and
all Medicare and Medicaid cost reports which may be due in connection with
operation of the Facilities.
Tenant shall have the right from time to time to have its
accountants or representatives audit the books and operations of the
Facilities and, in connection with such audits, to examine Manager's records
with respect thereto (including supporting data, income tax and sales tax
returns), subject to any prohibitions or limitations on disclosure of any
such data under applicable law or regulations, including without limitation,
any duly enacted "Patients' Bill of Rights" or similar legislation, including
such limitations as may be necessary to preserve the confidentiality of any
Facility-patient relationship and any physician-patient privilege. If any
such audit discloses an overstatement of Revenues (defined in Section 10,
below) of the Facilities and corresponding overpayment to Manager of the
Management Fee (defined in Section 10, below) and either Manager agrees with
the result of such audit or the matter is compromised, Manager shall pay to
Tenant the amount of such overpayment of the Management Fee within ten (10)
days of Tenant's demand.
g. REPORTS: Manager shall prepare and provide to the
Tenant any reasonable operational information which may from time to time be
specifically requested by Tenant, including any information needed to assist
Tenant in completing its tax returns and cost reports and in complying with
any reporting obligations imposed by the terms of any debt documents to which
the Facilities may be subject. All cost reports which may be due in
connection with the operation of the Facilities shall be prepared by Manager,
unless Tenant elects otherwise, but all such cost reports shall be signed by
Tenant in its capacity as the Medicare or Medicaid certified provider, as
required by law. In addition, (i) within fifteen (15) business days after the
end of each calendar month, Manager shall provide Tenant with an unaudited
balance sheet of the Facilities, dated the last day of such month, and an
unaudited statement of income and expenses for such month relating to the
operation of the Facilities and (ii) within forty-five (45) days after the
end of the fiscal year of the Facilities, Manager shall provide Tenant with
unaudited financial statements including a balance sheet of the Facilities,
dated the last day of said fiscal year, and a statement of income and expense
for the year then ended relating to the operation of the
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Facilities. Such financial statements shall be prepared in accordance with
GAAP, consistently applied, this Agreement, and the procedures and practices
provided for in this Agreement and shall be certified to be accurate by the
Chief Financial Officer of Manager. All information relating to the
Facilities and their operations shall constitute part of the books and
records of the Facilities and shall be the sole and exclusive property of
Tenant.
h. BANK ACCOUNTS: On Tenant's behalf, Manager shall
establish and maintain a depository account in the name of Tenant at Fleet
Bank or other depository institution designated by Tenant and shall deposit
therein all money received during the term of this Agreement in the course of
the operation of the Facilities; provided, however, that during the term
hereof, withdrawals and payments from this account shall be made only on
checks signed or wire transfer authorized by a person or persons designated
by Manager (the "Depository Account"). Manager shall have no right, title or
interest in and to the Depository Account, and Manager shall cause the funds
held in the Depository Account to be invested overnight for the benefit and
credit of Tenant. In addition, Manager shall establish and maintain a payroll
account in the name of Tenant (the "Payroll Account") and a controlled
disbursement account in the name of Tenant (the "Disbursement Account"), both
of which shall be zero balance accounts from which Manager shall pay the
payroll of the employees and the operating expenses of the Facilities,
respectively. Finally, Manager shall establish an administrative account in
the name of Tenant (the "Administrative Account"), which shall in no event
contain a balance in excess of Ten Thousand Dollars ($10,000.00) and shall be
used by the administrators of the Facilities to pay for necessary emergency
disbursements. Manager shall have no right, title or interest in and to the
Payroll Account, the Disbursement Account and/or the Administrative Account.
Tenant shall be given notice as to the identity of the authorized signatories
on the Depository Account, the Payroll Account, the Disbursement Account and
the Administrative Account. Tenant shall further be permitted to designate an
authorized signatory with respect to the Depository Account, the Payroll
Account, the Disbursement Account and the Administrative Account in order to
enable Tenant to withdraw funds therefrom in accordance with the terms of
this Agreement; provided, however, Manager shall not be required to secure
Tenant's signature on any checks drawn or wire transfers authorized on the
Depository Account, the Payroll Account, the Disbursement Account and the
Administrative Account in connection with Manager's operation of the
Facilities. All operating expenses incurred from and after the Commencement
Date (defined in Section 4, below) in connection with the operation of the
Facilities, including, but not limited to, payroll and employee benefits and
payment of Manager's Management Fee (defined in Section 10, below), shall be
paid by check drawn or wire transfer authorized on the Depository Account.
Withdrawals from the Depository Account shall be made to make payments in the
following order or priority:
i. Nondeferrable operating expenses of the
Facilities, which shall include, without
limitation, the following:
(A) payroll of all employees of the
Facilities;
(B) payroll-related expenses, employee
benefits and employment taxes;
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ii. Debt service (principal and interest) on the
Facilities, including under the $5,000,000
revolving credit loan from Heller Healthcare
Finance, Inc. to Tenant;
iii. One-half (1/2) of the Management Fee
iv. All other undisputed and nondeferrable
operating expenses and accrued liabilities
of the Facilities which have been posted or
accounted for in Manager's accounting
system;
v. Rent and other Lease-required payments to
Tenant's landlord under the Leases;
vi. The remaining one-half (1/2) of the
Management Fee; and
vii. Capital expenditures incurred in accordance
with the annual capital expenditure budget.
i. FACILITY PERSONNEL: On behalf of Tenant, Manager
shall recruit, train, promote, direct, discipline, suspend and discharge
personnel of the Facilities; establish salary levels, personnel policies and
employee benefits; and establish employee performance standards, all as
needed during the term of this Agreement to secure the initial licensure of
the Facilities and to ensure the efficient operation of all departments
within and services offered by the Facilities. All of the personnel of the
Facilities, including an on-site administrator, shall be the employees of the
applicable Tenant and the salaries, bonuses, commissions and benefits paid to
such employees shall be deemed to be a Facility operating expense. Manager
shall use best efforts to assure compliance with all applicable employment,
wrongful discharge, anti-discrimination, occupational safety and health and
other similar laws and regulations affecting the employment of all such
personnel. In addition, Manager shall only negotiate any collective
bargaining agreement or other agreement with any labor union lawfully
entitled to represent all or any employees after consulting with and upon the
advice of Tenant.
j. SUPPLIES AND EQUIPMENT: Manager shall purchase
supplies and non-capital equipment needed to operate the Facilities. In
purchasing said supplies and equipment, if possible, Manager shall take
advantage of any national or group purchasing agreements to which Manager may
be a party.
k. LEGAL PROCEEDINGS: Manager, through its legal
counsel, shall coordinate with Tenant's counsel on all legal matters and
proceedings necessary or proper in connection with the operation of the
Facilities.
l. BUDGETS: On or before January 2, 2000 with respect
to fiscal year 2000 and within thirty (30) days prior to the start of each
subsequent fiscal year, Manager shall prepare and submit to Tenant for its
review and approval, which approval shall not be unreasonably withheld, an
annual operating budget, an annual capital expenditure budget, and an annual
summary of profit and loss statement. These budgets and projections shall be
prepared with adequate detail to allow Tenant to comprehend fully the
operating plans of Manager and should:
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i. provide a monthly breakdown of revenues,
expenses and profitability;
ii. be zero-based;
iii. be prepared on a line-item and departmental
basis;
iv. contain a marketing plan which details
targets, assumptions and detailed
descriptions of strategies and tasks to
executed the goals of the marketing plan;
and
v. include narrative descriptions of
assumptions used in formulating the budget
and forecast any potential need for capital
from Tenant.
Manager acknowledges and agrees that no such budget shall include expenses
related to Manager's corporate or regional overhead costs, it being
understood and agreed that such costs shall not be deemed to be permitted
operating expenses which may be paid from revenues of the Facilities. In the
event a budget has not been agreed upon by the beginning of the fiscal year,
the budget in effect for the prior fiscal year shall continue in effect until
the new budget is agreed upon. Thereafter, Manager shall use best efforts to
ensure that any operating expenditures in total made during any given month,
quarter or year (as applicable) shall not exceed the operating expenditures
reflected on the approved operating budget, and as soon as Manager becomes
aware that any such total operating expenditures exceed the approved
operating budget by more than five percent (5%), then Manager shall notify
Tenant in writing of such budget variance within five (5) days. Any
unbudgeted operating expenditures shall be subject to Tenant's prior written
approval. Manager shall not be entitled to vary capital budgets without
Tenant's prior written approval. Each Facility shall be operated on a fiscal
year of January 1 through December 31.
m. COLLECTION OF ACCOUNTS: Manager shall issue bills
and use diligence and best business practices to collect accounts and monies
owed for goods and services furnished by the Facilities, including, but not
limited to, enforcing the rights of Tenant and the Facilities as creditor
under any contract or in connection with the rendering of any services;
provided, however, that any expenses incurred by Manager in so doing shall be
treated as operating expenses of the Facilities, which shall be payable out
of funds deposited in the Depository Account described in Section 1(h).
n. POSSESSION. Tenant and Manager acknowledge and
agree that during the term of this Agreement, Manager has the exclusive right
to possession of the Facilities, subject to Tenant's right to enter into the
Facilities from time to time to ensure Manager's compliance with the terms of
this Agreement.
o. SERVICE CONTRACTS. Manager shall negotiate and
enter into service contracts which are necessary or desirable in the ordinary
course of business in operating the Facilities, including, without
limitation, contracts for provisions of electricity, gas, water, telephone
and other utility services, cleaning services, security services, vermin
extermination, trash removal, elevator and boiler maintenance, air
conditioning maintenance, master television service, laundry and dry
cleaning, entertainment satellite systems and other services which Manager
deems advisable; provided, however, that (i) all such contracts shall provide
that they
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are terminable on no more than thirty (30) days notice without penalty or
premium, (ii) Manager shall be required to ensure that all such contracts are
on commercially reasonable terms, (iii) no such contracts shall be entered
into if doing so would be inconsistent with the reimbursement principles, if
and to the extent applicable to the operation of the Facilities, under the
Medicare prospective payment system and (iv) Manager shall provide Tenant
with copies of any and all such service contracts substantially concurrently
with their execution.
p. LENDER REQUIREMENTS. Manager agrees to perform any
obligations under any mortgage or other debt instrument encumbering the
Facilities which are applicable to the operation and management of the
Facilities and to pay, as and when due, all payments due under any present or
future loans on the Facilities. Further, Manager confirms that this Agreement
and all of Manager's rights hereunder are, and shall be, completely
subordinate to the lien of any present or future loan encumbering the
Facilities and agrees to execute and notarize a subordination,
non-disturbance and attornment agreement on the lender's form within ten (10)
days after delivery to Manager of such form confirming such subordination of
Manager's interest.
q. PATIENT TRUST ACCOUNT. Manager shall establish and
maintain records and procedures to account for all patient funds deposited
with the Facilities. A "Patient Trust Account" shall be established in
accordance with the terms hereof and all disbursements therefrom and records
and procedures relating thereto shall conform with the requirements of third
party reimbursement, licensure and all other applicable requirements and the
terms hereof.
r. TENANT'S PRIOR WRITTEN APPROVAL. Manager shall not
do any of the following without first obtaining Tenant's prior written
approval:
i. Borrow money, guaranty the debts of any
third person, or mortgage, pledge, grant a security interest in or otherwise
encumber all or any part of the Facilities; provided, however, that Manager
shall be entitled to encumber the Facilities with mechanics' liens,
materialmen's liens or laborers' liens necessary in connection with the
performance of Manager's obligations under this Agreement, so long as any
such liens are discharged in a timely manner in accordance with applicable
state law;
ii. Enter into any lease or other financing
agreement for the use of any item of furniture, fixtures and equipment or
other property in an amount which would require monthly payments, in the
aggregate, in excess of One Thousand Five Hundred Dollars ($1,500.00) per
Facility;
iii. Enter into any agreement, lease, license
or concession agreement for space at the Facilities;
iv. Incur any liabilities or obligations to
third parties which are unrelated to the operation, maintenance and security
of the Facilities or to the performance of Manager's responsibilities under
this Agreement;
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v. Except for any Excluded Transaction
(defined below) and subject to the provisions of this Agreement regarding
contracts with affiliates of Manager, Manager shall not, without the written
consent of Tenant, enter into any contract or other arrangement (or series of
related contracts or arrangements) if the expenditures thereunder would, or
are reasonably anticipated to, exceed Twenty-Five Thousand Dollars
($25,000.00) in the aggregate, or if the term of such contract has a term in
excess of one (1) year. For purposes hereof, the term "Excluded Transaction"
shall mean (A) any contracts subject to competitive bidding in which the
lowest bid is accepted; and (B) contracts or expenditures required in cases
of emergency or casualty, which expenditures are required to protect life and
safety, or in order to comply with legal requirements, in an amount not to
exceed Twenty-Five Thousand Dollars ($25,000.00) in any twelve (12) month
period;
vi. Institute or defend any legal or
equitable proceedings with respect to the Facilities, including the selection
of counsel, other than routine collection litigation and similar matters
involving ordinary day-to-day operations of the Facilities involving amounts
in controversy of less than Ten Thousand Dollars ($10,000.00);
vii. Employ any professional firm (other than
legal counsel and accountants) for more than Ten Thousand Dollars
($10,000.00) in the aggregate except as set forth in the annual operation
budget, or enter into any arrangement for the employment of any attorney or
accountant (other than legal counsel retained to collect accounts receivable);
viii. Prosecute or settle any tax claims or
appeals;
ix. Purchase goods, supplies and services
from Manager or any affiliate of Manager, or enter into any other transaction
with an affiliate of Manager, unless prior to the consummation of such
transaction all of the prices and other terms thereof and the identity of the
vendor and its relationship to Manager shall have been disclosed to and
approved by Tenant, which may be withheld in Tenant's sole and absolute
discretion, it being agreed that any such proposed transaction shall be
submitted to independent third parties for competitive bidding, and Manager
shall promptly provide the results of such bidding to Tenant;
x. Acquire on behalf of Tenant any land or
any interest therein;
xi. Acquire any capital assets of the
Facilities or any interest therein;
xii. Consent to any condemnation or
participate in any condemnation proceeding relating to the Facilities or any
portion thereof;
xiii. Sell, transfer or otherwise dispose of
all or any portion of the Facilities;
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xiv. Perform any alterations to the Facilities
or any portion thereof, except as is necessary in connection with the
performance of Manager's obligations under this Agreement; or
xv. Take any other action which, under the
terms of this Agreement, is prohibited or requires the approval of Tenant.
s. COLLECTION OF ACCOUNTS RECEIVABLE: On behalf of
LTI-Receivables, Manager agrees to collect LTI-Receivables' interest in the
accounts receivable generated from the operation of the skilled nursing
facilities set forth on Exhibit "B" attached hereto, which interest
LTI-Receivables acquired from the Examiner, and deposit any such collections
into the Depository Account.
2. INSURANCE: Tenant, as a cost of operating the Facilities,
shall arrange for and maintain all necessary and proper hazard insurance
covering the Facilities, the furniture, fixtures, and equipment situated
thereon, and all necessary and proper malpractice and public liability
insurance for Tenant's protection and for the protection of Tenant's
officers, agents and employees. All such policies of insurance shall also
name Manager as additional insured and the holder of any debt secured by the
Facilities as additional insured and loss payee thereunder. In addition,
Tenant, as a cost of operating the Facilities, shall provide all employee
health and worker's compensation insurance for Tenant's employees and all
other personnel working at the Facilities. Any insurance provided pursuant to
this paragraph shall comply with the requirements of any debt documents to
which the Facilities may be subject. All insurance shall be in form, with
companies, with limits and coverages as Tenant shall determine, and Tenant
may maintain an umbrella policy for all such insurance in amounts as Tenant
deems appropriate. In the event of any casualty or condemnation of any
Facility, Tenant shall have the sole right to determine the disposition of
any insurance or condemnation proceeds, including but not limited to the
right to decide whether any such Facility shall be rebuilt in the same manner
or type as the original Facility. Each party shall give prompt notice to the
others of any third party claims made, or third party legal proceedings
commenced, against any one of them and shall cooperate fully with each other,
each's counsel and with any insurance carrier to the end that all such claims
will be properly investigated, defended and adjusted.
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3. TAXES AND RENT: Manager agrees as follows:
a. Manager shall cause to be paid as an expense of the
Facilities when due: (i) all taxes, assessments, levies, fees, water and sewer
rents and charges, and all other governmental charges, general and special,
ordinary and extraordinary, which are, at any time prior to or during the term
hereof, imposed or levied upon or assessed against (A) the Facilities, (B) any
Rent (as defined in any Lease for a Facility), Additional Rent (as defined in
any Lease for a Facility) under the Lease or other sum payable under the Lease
or (C) the Lease or the leasehold estate thereby created, or which arise in
respect of the operation, possession or use of the Facilities; (ii) all gross
receipts or similar taxes imposed or levied upon, assessed against or measured
by any Rent (as defined in a Lease), Additional Rent (as defined in a Lease) or
other sum payable under a Lease; (iii) all sales, use or similar taxes and all
withholdings and payroll taxes, at any time levied, assessed or payable on
account of the acquisition, leasing, use or operation of the Facilities; and
(iv) all charges for utilities serving the Facilities. If any such tax or
assessment may legally be paid in installments, Manager may pay such tax or
assessment in installments.
b. Manager shall deliver to Tenant a copy of any
assessment, tax notice or tax bill received by Manager and shall pay the same as
and when due; provided, Manager shall not cause such payment to be made if (i)
same is in good faith being contested by Tenant at its sole expense and without
cost to Manager, (ii) enforcement thereof is stayed, and (iii) Tenant shall have
given Manager written notice of such contest and stay and authorized the
non-payment thereof, not less than ten (10) days prior to the date on which such
tax assessment, or charge is due and payable.
4. TERM OF AGREEMENT: With respect to each Facility, the Term of
this Agreement shall commence effective as of the issuance of a License to
Tenant to operate said Facility (with respect to each Facility, a "Commencement
Date"), and with respect to all Facilities, the term of this Agreement shall
terminate upon the first to occur of (i) the occurrence of an Event of Default
hereunder and the exercise by Manager or Tenant of its right to terminate this
Agreement as a result thereof; (ii) the termination without cause of this
Agreement by Tenant or Manager on no less than ninety (90) days written notice
to the other party specifying the effective date of such termination; or (iii)
midnight on September 30, 2004; provided, however, that so long as that certain
acquisition term loan in the amount of $12,543,594 from Heller Healthcare
Finance, Inc. ("Lender") to Tenant and that certain revolving credit loan in the
maximum principal amount of $5,000,000 from Lender to Tenant remain outstanding,
Manager and Tenant agree not to terminate this Agreement without the prior
written consent of Lender; provided, further, that in the event that Tenant
sells its interest in any of the Facilities to an unaffiliated third party, then
Tenant shall provide reasonable prior written notice to Manager of the closing
date of such sale, and this Agreement shall terminate as to each such Facility
immediately upon the consummation of such sale. In the event of the termination
of this Agreement the following provisions shall apply:
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a. Concurrently with a termination of this Agreement
that does not result from Manager having committed an Event of Default
hereunder, Tenant shall pay to Manager any management fees then due and owing.
b. Upon termination of this Agreement, Manager shall
cooperate with any party designated by Tenant to effect a smooth transition of
operational responsibility for the Facilities from Manager to said third party,
including but not limited to turning over to Tenant, or its designee, all files
and records relating to the operation of the Facilities.
c. Manager agrees not to solicit any of Tenant's
employees for a period of three (3) years following any termination of this
Agreement.
5. DEFAULT: Either party may terminate this Agreement, as
specified in this Section 5, in the event of a default ("Event of Default") by
the other party.
a. With respect to Manager, it shall be an "Event of
Default" hereunder:
1) If Manager shall fail to pay any monetary
obligation arising out of or incurred in connection with this
Agreement when such payment is due and payable, which failure
shall continue for a period of ten (10) days after the due
date; or
2) If Manager shall fail to keep, observe or
perform any non-monetary agreement, term or provision of this
Agreement, and such default shall continue for a period of
thirty (30) days after notice thereof shall have been given to
Manager by Tenant, which notice shall specify in detail the
event or events constituting the default; provided, however,
in the event such failure cannot be cured within such thirty
(30) day period but Manager commences the cure within such
thirty (30) day period and diligently prosecutes the same to
completion, Manager shall have an additional thirty (30) days
or such additional time as is reasonably necessary in which to
complete such cure; or
3) If any Facility's license or Medicare or
Medicaid certification is suspended, revoked, rescinded,
terminated or not renewed and such action is not stayed
pending the appeal thereof; or
4) If Manager assigns or attempts to assign
this Management Agreement in violation of the requirements of
Section 11 hereof.
b. With respect to Tenant, it shall be an Event of
Default hereunder:
1) If Tenant shall fail to make or cause to be
made any payment to Manager required to be made hereunder and
such failure shall continue for a
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period of ten (10) days after notice which notice shall
specify the payment or payments which Tenant has failed
to make; or
2) If Tenant shall fail to keep, observe or
perform any agreement, term or provision of this Agreement and
such default shall continue for a period of thirty (30) days
after notice, which notice shall specify in detail the event
or events constituting the default thereof by Manager to
Tenant; provided, however, in the event such failure cannot be
cured within such thirty (30) day period but Manager commences
the cure within such thirty (30) day period and diligently
prosecutes the same to completion, Manager shall have an
additional sixty (60) days or such additional time as is
reasonably necessary in which to complete such cure.
6. REMEDIES UPON DEFAULT:
a. If any Event of Default by Tenant shall occur,
Manager may, in addition to any other remedy available to it in law or equity on
account of such Event of Default, forthwith terminate this Agreement, and
neither party shall have any further obligations whatsoever under this Agreement
except for Manager's right to receive the payments due from Tenant pursuant to
Section 4 hereof, if and to the extent due in accordance with the terms thereof,
and damages from Tenant and except any settlement and payment obligations and
other obligations that by their nature survive termination of this Agreement.
b. If any Event of Default by Manager shall occur,
Tenant may, in addition to any other remedy available to it in law or equity on
account of such Event of Default, forthwith terminate this Agreement and the
exclusive right to possession of the Facilities granted to Manager hereunder,
and neither party shall have any further obligation whatsoever under this
Agreement; except for Tenant's right to receive payment of damages from Manager
and except for settlement and payment obligations and other obligations that by
their nature survive termination of this Agreement.
7. TENANT'S INSPECTION: During the term hereof, Tenant, or its
designated agents or representatives, shall have the right, upon request and at
reasonable times, to inspect and to permit the holder of any debt secured by the
Facilities to inspect the Facilities and to inspect and/or audit all books and
records pertaining to the operation thereof and shall have the right to conduct
and to permit the holder of any debt secured by the Facilities to conduct
telephonic or personal interviews with the Administrator of the Facilities
and/or with any of Manager's regional personnel involved in the operation of the
Facilities with respect to any matters related to the operation thereof.
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8. FACILITY OPERATIONS:
a. NO GUARANTEE OF PROFITABILITY: Manager does not
guarantee that operation of the Facilities will be profitable, but Manager shall
use its best efforts to operate the Facilities in as cost efficient and
profitable a manner as possible.
b. STANDARD OF PERFORMANCE: In performing its
obligations under this Agreement, Manager shall use its best efforts and act in
good faith and with professionalism in accordance with acceptable and prevailing
standards of health care and the policies adopted by, and resources available
to, the Facilities.
c. FORCE MAJEURE: Manager will not be deemed to be in
violation of this Agreement if it is prevented from performing any of its
obligations hereunder for any reason beyond its control, including, without
limitation, strikes, shortages, war or acts of God.
9. WITHDRAWAL OF FUNDS BY TENANT; MINIMUM BANK BALANCE:
a. Tenant may withdraw the then accumulated operating
cash surplus from the Depository Account pursuant to Tenant's written
instructions with concurrent notice thereof to Manager.
10. MANAGEMENT FEE: Manager shall receive a monthly fee equal to
five percent (5%) of the Revenues (defined below) generated each month by the
Facilities, as more particularly set forth in Section 1(h), above ("Management
Fee"). The first (1st) one-half of the Management Fee shall be payable in
advance on the first (1st) day of each month based upon the previous month's
Revenues, and the second (2nd) one-half of the Management Fee shall be payable
during each month in accordance with Section 1(h), above, to the extent that
adequate Revenues are generated each month by the Facilities. No later than
thirty (30) days following any fiscal year of the Facilities, Tenant shall have
the right to reconcile the monthly Management Fees paid to Manager for such
fiscal year with the annual Revenues generated by the Facilities, and Tenant
shall have the right to offset any overpayment of Management Fees against future
Management Fees owing to Manager or to recover any such overpayments directly
from Manager. For purposes hereof, "Revenues" shall mean "Gross Revenues" less
contractual adjustments, and "Gross Revenues" shall mean all revenues generated
by the Facilities, directly or indirectly from residents of the Facilities,
including without limitation fees and other amounts received directly from
residents, amounts received from concessionaires, subcontractors, agencies,
etc., but shall specifically exclude the proceeds from the sale of the
Facilities or any portion thereof including any Facility equipment, any interest
or investment income of Tenant, capital contributions by Tenant, tax refunds not
relating to the current year (not accounted for in prior years), any insurance
and condemnation proceeds, extraordinary gains or losses unrelated to the
operations of the Facilities and any and all pass through amounts for which
Manager is merely acting as the collection agent.
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a. PRORATION OF FEE. If the services of Manager commence
or terminate other than on the first day of the month, the revenues upon which
the fee is calculated shall be prorated in proportion to the number of days for
which services are actually rendered.
b. PAYMENT OF FEE. The Management Fee provided for
herein shall be disbursed by Manager to itself out of the Depository Account in
accordance with the provisions of this Agreement.
11. ASSIGNMENT: Except as otherwise provided herein, this
Agreement shall not be assigned by either party without the prior written
consent of the other party, provided that, subject to the limitations of the
applicable state laws with respect to the licensure of the Facilities, Tenant
may assign this Agreement to a subsidiary or parent corporation without the
consent of, but upon written notice to, Manager; and provided, further, that
Tenant may assign this Agreement to an entity which is owned or controlled by,
or under common control with, Tenant in connection with the financing of the
Facilities or for any other reason deemed necessary or appropriate by Tenant
without the consent of, but upon written notice to, Manager. Any assignment of
this Agreement by Manager in violation of the terms of this Section 11 shall be
null and void and of no force or effect and shall result in the automatic
termination of this Agreement effective upon the purported effective date of
such assignment; provided, however, that SCMG may add designated affiliates of
SCMG as parties to this Agreement upon the written consent of Tenant, not to be
unreasonably withheld, so long as SCMG remains primarily liable for all of
Manager's obligations hereunder.
12. NOTICES: All notices required or permitted hereunder shall be
given in writing by hand delivery, by registered or certified mail, postage
prepaid, by overnight delivery or by facsimile transmission (with receipt
confirmed with the recipient). Notice shall be delivered or mailed to the
parties at the following addresses or at such other places as either party shall
designate in writing. All notices shall be deemed duly given when delivery is
received or refused by party.
To Manager: Senior Care Management Group, LLC
75 South Church Street, Suite 650
Pittsfield, MA 01201
Phone: (413) 448-2111
Fax: (413) 448-2120
Attn: Mark E. Fortier, Esq.
To Tenant: LTC Healthcare, Inc.
300 Esplanade Drive, Suite 1860
Oxnard, CA 93030
Phone: (805) 981-3611
Fax: (805) 981-3616
Attn: Raad K. Shawaf, Esq.
15
<PAGE>
13. RELATIONSHIP OF THE PARTIES: The relationship of the parties
shall be that of principal and independent contractor and all acts performed by
Manager during the term hereof as Manager of the Facilities shall be deemed to
be performed in its capacity as an independent contractor. Nothing contained in
this Agreement is intended to or shall be construed to give rise to or create a
partnership or joint venture or lease between Tenant, its successors and assigns
on the one hand, and Manager, its successors and assigns on the other hand.
14. INDEMNIFICATION: Manager shall indemnify, defend and hold
harmless Tenant from any loss incurred by or damage to Tenant where such loss or
damage results from the negligence or willful misconduct of Manager in
performing its obligations under this Agreement or from a breach of this
Agreement by Manager. Tenant shall indemnify, defend and hold Manager harmless
from any loss incurred by or damage to Manager where such loss or damage results
from the negligence or willful misconduct of Tenant in performing its
obligations under the Agreement or from a breach of this Agreement by Tenant.
The rights and obligations of the parties under this Section 14 shall survive
the expiration of the term or other termination of this Agreement.
15. WAIVER OF SUBROGATION: Manager and Tenant each hereby waive
any rights of recovery against the other, or against the officers, employees,
agents and representatives of the other, for loss or damages to such waiving
party's property or the property of others under its control, where and to the
extent that such loss or damage is insured against under any insurance policy in
force at the time of such loss or damage. Upon obtaining the policies of
insurance required hereunder, Manager and Tenant shall give notice to the
insurance carriers that the foregoing mutual waiver of subrogation is contained
in this Agreement.
16. PATIENT RECORDS: Manager and Tenant shall preserve the
confidentiality of the records of all patients of the Facilities as required by
all applicable federal and state statutes, regulations, and rules of accrediting
organizations for skilled nursing or assisted living facilities, and use the
information in such records solely for the limited purposes necessary to perform
their respective obligations hereunder.
17. ENTIRE AGREEMENT: This Agreement contains the entire agreement
between the parties relating to the operation of the Facilities and shall be
binding upon and inure to the benefit of their successors and assigns. This
Agreement may not be modified or amended except by written instrument signed by
both of the parties hereto.
18. CAPTIONS: The captions used herein are for convenience of
reference only and shall not be construed in any manner to limit or modify any
of the terms hereof.
19. ATTORNEY'S FEES: In the event either party brings an action to
enforce this Agreement, the prevailing party in such action shall be entitled to
recover from the other all costs incurred in connection therewith, including
reasonable attorney's fees.
16
<PAGE>
20. SEVERABILITY: In the event one or more of the provisions
contained in this Agreement is deemed to be invalid, illegal or unenforceable in
any respect under applicable law, the validity, legality and enforceability of
the remaining provisions hereof shall not in any way be impaired thereby.
21. CUMULATIVE; NO WAIVER: No right or remedy herein conferred
upon or reserved to either of the parties hereto is intended to be exclusive of
any other right or remedy, and each and every right and remedy shall be
cumulative and in addition to any other right or remedy given hereunder, or now
or hereafter legally existing upon the occurrence of an Event of Default
hereunder. The failure of either party hereto to insist at any time upon the
strict observance or performance of any of the provisions of this Agreement or
to exercise any right or remedy as provided in this Agreement shall not impair
any such right or remedy or be construed as a waiver or relinquishment thereof
with respect to subsequent defaults. Every right and remedy given by this
Agreement to the parties hereof may be exercised from time to time and as often
as may be deemed expedient by the parties thereto, as the case may be.
22. GOVERNING LAW; VENUE: This Agreement shall be construed and
enforced in accordance with, and the performance of its terms shall be governed
by, the laws of the State of Delaware, without giving effect to conflict of laws
principles. Any legal proceeding with respect to this Agreement shall be
conducted in the state or federal courts located in California.
23. AUTHORIZATION FOR AGREEMENT: The execution and performance of
this Agreement by Tenant and Manager have been duly authorized by all necessary
laws, resolutions or corporate action, and this Agreement constitutes the valid
and enforceable obligations of Tenant and Manager in accordance with its terms.
24. COUNTERPARTS: This Agreement may be executed in any number of
counterparts, each of which shall be an original, and each such counterpart
shall together constitute but one and the same Agreement.
25. CONDITIONS PRECEDENT: It shall be express conditions precedent
to Tenant's obligations hereunder with respect to each Facility that Tenant
acquires the applicable interest in said Facility and that Tenant is issued a
License to operate each such Facility.
[SIGNATURES ON FOLLOWING PAGE]
17
<PAGE>
IN WITNESS WHEREOF, the parties have hereto caused this
Agreement to be duly executed, as of the day an year first above written.
MANAGER:
SENIOR CARE MANAGEMENT GROUP, LLC,
a Delaware limited liability company
By: /s/ Thomas M. Clarke as attorney in fact for
Linda M. Clarke, as Trustee of
The Danielle Lee Clarke Revocable Trust,
Its Managing Member
TENANT:
LTC HEALTHCARE, INC.,
a Nevada corporation
By: /s/ Raad K. Shawaf
Its: Senior Vice President and General Counsel
LTC HEALTHCARE OF FORT VALLEY, INC.,
a Nevada corporation
By: /s/ Raad K. Shawaf
Its: Secretary
LTC HEALTHCARE OF STATESBORO, INC.,
a Nevada corporation
By: /s/ Raad K. Shawaf
Its: Secretary
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<PAGE>
LTC HEALTHCARE OF JESSUP, INC.,
a Nevada corporation
By: /s/ Raad K. Shawaf
Its: Secretary
LTC HEALTHCARE OF ATLANTA, INC.,
a Nevada corporation
By: /s/ Raad K. Shawaf
Its: Secretary
LTC HEALTHCARE OF WHIGHAM, INC.,
a Nevada corporation
By: /s/ Raad K. Shawaf
Its: Secretary
LTC HEALTHCARE OF NEW PORT RICHEY, INC.,
a Nevada corporation
By: /s/ Raad K. Shawaf
Its: Secretary
LTC HEALTHCARE OF TYLER, INC.,
a Nevada corporation
By: /s/ Raad K. Shawaf
Its: Secretary
19
<PAGE>
LTC HEALTHCARE OF CONVERSE, INC.,
a Nevada corporation
By: /s/ Raad K. Shawaf
Its: Secretary
LTC HEALTHCARE OF SHEPARD, INC.,
a Nevada corporation
By: /s/ Raad K. Shawaf
Its: Secretary
LTC HEALTHCARE OF COFFEYVILLE, INC.,
a Nevada corporation
By: /s/ Raad K. Shawaf
Its: Secretary
LTC HEALTHCARE OF SALINA, INC.,
a Nevada corporation
By: /s/ Raad K. Shawaf
Its: Secretary
LTC HEALTHCARE OF BONNER SPRINGS, INC.,
a Nevada corporation
By: /s/ Raad K. Shawaf
Its: Secretary
20
<PAGE>
LTC HEALTHCARE OF GARDNER, INC.,
a Nevada corporation
By: /s/ Raad K. Shawaf
Its: Secretary
LTC HEALTHCARE OF CHICOPEE, INC.,
a Nevada corporation
By: /s/ Raad K. Shawaf
Its: Secretary
LTC HEALTHCARE OF HOLYOKE, INC.,
a Nevada corporation
By: /s/ Raad K. Shawaf
Its: Secretary
LTC HEALTHCARE OF SPRINGFIELD, INC.,
a Nevada corporation
By: /s/ Raad K. Shawaf
Its: Secretary
LTC HEALTHCARE OF SOUTH HADLEY, INC.,
a Nevada corporation
By: /s/ Raad K. Shawaf
Its: Secretary
21
<PAGE>
LTC HEALTHCARE RECEIVABLES, INC.,
a Nevada corporation
By: Raad K. Shawaf
Its: Secretary
22
<PAGE>
EXHIBIT "A"
FACILITIES TO BE MANAGED BY
SENIOR CARE MANAGEMENT GROUP, LLC
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
- ----------------------- --------------------- ------------------------ ---------------------- --------------- --------
TENANT MANAGER FACILITY NAME LOCATION INTEREST IN # BEDS
FACILITY
- ----------------------- --------------------- ------------------------ ---------------------- --------------- --------
LTC Healthcare of Senior Care Fort Valley Nursing Fort Valley, GA Fee simple 75
Fort Valley, Inc. Management Group, Home
LLC
- ----------------------- --------------------- ------------------------ ---------------------- --------------- --------
LTC Healthcare of Senior Care Pecan Manor Statesboro, GA Leasehold 60
Statesboro, Inc. Management Group,
LLC
- ----------------------- --------------------- ------------------------ ---------------------- --------------- --------
LTC Healthcare of Senior Care Rest Awhile Nursing Jessup, GA Fee simple 72
Jessup, Inc. Management Group, Home
LLC
- ----------------------- --------------------- ------------------------ ---------------------- --------------- --------
LTC Healthcare of Senior Care Emory Nursing Center Atlanta, GA Fee simple 40
Atlanta, Inc. Management Group,
LLC
- ----------------------- --------------------- ------------------------ ---------------------- --------------- --------
LTC Healthcare of Senior Care Whigham Health & Whigham, GA Leasehold 142
Whigham, Inc. Management Group, Rehabilitiation
LLC
- ----------------------- --------------------- ------------------------ ---------------------- --------------- --------
LTC Healthcare of New Senior Care Remington House-New New Port Richey, FL Leasehold 170
Port Richey, Inc. Management Group, Port Richey
LLC
- ----------------------- --------------------- ------------------------ ---------------------- --------------- --------
LTC Healthcare of Senior Care Park Place Nursing Tyler, TX Partnership 120
Tyler, Inc. Management Group, Center
LLC
- ----------------------- --------------------- ------------------------ ---------------------- --------------- --------
LTC Healthcare of Senior Care Rosewood Converse, TX Leasehold 100
Converse, Inc. Management Group, Rehabilitation & Care
LLC Center
- ----------------------- --------------------- ------------------------ ---------------------- --------------- --------
LTC Healthcare of Senior Care Woodland Park Shepard, TX Leasehold 100
Shepard, Inc. Management Group,
LLC
- ----------------------- --------------------- ------------------------ ---------------------- --------------- --------
LTC Healthcare of Senior Care Coffeyville Nursing Coffeyville, KS Leasehold 45
Coffeyville, Inc. Management Group, Home
LLC
- ----------------------- --------------------- ------------------------ ---------------------- --------------- --------
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
- ----------------------- --------------------- ------------------------ ---------------------- --------------- --------
TENANT MANAGER FACILITY NAME LOCATION INTEREST IN # BEDS
FACILITY
- ----------------------- --------------------- ------------------------ ---------------------- --------------- --------
LTC Healthcare of Senior Care Salina Nursing Home Salina, KS Leasehold 60
Salina, Inc. Management Group,
LLC
- ----------------------- --------------------- ------------------------ ---------------------- --------------- --------
LTC Healthcare of Senior Care Great Plains Bonner Springs, KS Leasehold 50
Bonner Springs, Inc. Management Group, Rehabilitation &
LLC Nursing Center of
Bonner Springs
- ----------------------- --------------------- ------------------------ ---------------------- --------------- --------
LTC Healthcare of Senior Care Meadowbrook Gardner, KS Fee simple 84
Gardner, Inc. Management Group, Rehabilitation Hospital
LLC
- ----------------------- --------------------- ------------------------ ---------------------- --------------- --------
LTC Healthcare of Senior Care Elms Nursing Home Chicopee, MA Fee simple 82
Chicopee, Inc. Management Group,
LLC
- ----------------------- --------------------- ------------------------ ---------------------- --------------- --------
LTC Healthcare of Senior Care Oak Manor Nursing Home Holyoke, MA Fee simple 60
Holyoke, Inc. Management Group,
LLC
- ----------------------- --------------------- ------------------------ ---------------------- --------------- --------
LTC Healthcare of Senior Care Pine Manor Nursing Home Springfield, MA Fee simple 100
Springfield, Inc. Management Group,
LLC
- ----------------------- --------------------- ------------------------ ---------------------- --------------- --------
LTC Healthcare of Senior Care Meadowood Nursing Home South Hadley, MA Leasehold 120
South Hadley, Inc. Management Group,
LLC
- ----------------------- --------------------- ------------------------ ---------------------- --------------- --------
</TABLE>
24
<PAGE>
EXHIBIT "B"
FACILITIES IN WHICH LTI-RECEIVABLES HAS
AN INTEREST IN THE ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
- ----------------------- --------------------- ----------------------------- -------------------- ------------ --------
TENANT MANAGER (UNDER FACILITY NAME LOCATION FACILITY # BEDS
SEPARATE AGREEMENT) TYPE
- ----------------------- --------------------- ----------------------------- -------------------- ------------ --------
LTC Healthcare of Senior Care Venice Nursing & Venice, FL SNF 120
Venice, Inc. Management Group, Rehabilitation Center
LLC
- ----------------------- --------------------- ----------------------------- -------------------- ------------ --------
LTC Healthcare of Senior Care Wakulla Manor Crawfordville, FL SNF 120
Crawfordville, Inc. Management Group,
LLC
- ----------------------- --------------------- ----------------------------- -------------------- ------------ --------
LTC Healthcare of Senior Care Great Plains Nursing & Olathe, KS SNF 104
Olathe, Inc. Management Group, Rehabilitation Center of
LLC Olathe
- ----------------------- --------------------- ----------------------------- -------------------- ------------ --------
</TABLE>
25
<PAGE>
EXHIBIT 10.5
AGREEMENT TO PROVIDE MANAGEMENT SERVICES
This Agreement made as of this 30th day of September, 1999, by and
between Senior Care Management Group, LLC, a Delaware limited liability
company ("SCMG") (SCMG is sometimes hereinafter referred to as "Manager"), on
the one hand, and LTC Healthcare, Inc., a Nevada corporation ("LTI"), and its
subsidiaries LTC Healthcare of Venice, Inc., a Nevada corporation
("LTI-Venice"), LTC Healthcare of Crawfordville, Inc., a Nevada corporation
("LTI-Crawfordville"), LTC Healthcare of Olathe, Inc., a Nevada corporation
("LTI-Olathe"), LTC Healthcare of Tiptonville, Inc., a Nevada corporation
("LTI-Tiptonville"), LTC Healthcare of Roberta, Inc., a Nevada corporation
("LTI-Roberta"), LTC Healthcare of Jonesboro, Inc., a Nevada corporation
("LTI-Jonesboro"), LTC Healthcare of Richmond, Inc., a Nevada corporation
("LTI-Richmond"), LTC Healthcare of Tappahannock, Inc., a Nevada corporation
("LTI-Tappahannock"), and LTC Healthcare of Fayetteville, Inc., a Nevada
corporation ("LTI-Fayetteville") (LTI, LTI-Venice, LTI-Crawfordville,
LTI-Olathe, LTI-Tiptonville, LTI-Roberta, LTI-Jonesboro, LTI-Richmond,
LTI-Tappahannock and LTI-Fayetteville are sometimes hereinafter individually
and collectively referred to as "Tenant"), on the other hand.
WHEREAS, LTC Properties, Inc., a Maryland corporation, or its
designated subsidiary or affiliate ("LTC"), anticipates acquiring the fee simple
interest in and to certain parcels of real property, each improved with a
skilled nursing facility (individually, each a "Facility" and collectively, the
"Facilities"), as more particularly described on Exhibit "A" attached hereto and
incorporated herein, and entering into triple-net leases (each a "Lease") with
Tenant demising the Facilities;
WHEREAS, in such event, Tenant desires to retain a qualified party to
manage all of the Facilities on Tenant's behalf;
WHEREAS, Manager is experienced and qualified in the field of health
care management;
WHEREAS, Tenant has determined that Manager's fee is economical in
light of the range of services which it provides; and
WHEREAS, Manager is willing to operate all of the Facilities on
Tenant's behalf, pursuant to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants herein contained, IT IS AGREED AS FOLLOWS:
0. DELEGATION OF DUTIES AND OBLIGATIONS: Effective as of 11:59 p.m.
on September 30, 1999, LTI-Olathe, LTI-Crawfordville and LTI-Venice
(collectively, "Assignors") hereby assign and delegate to Manager all duties
and obligations of Assignors under those certain Interim Management
Agreements of even date herewith, each by and between one of Assignors and
William A. Brandt, Jr., the duly appointed Examiner of NewCare Health
Corporation, et al.,
1
<PAGE>
Case No. 99-44161-HJB, U.S. Bankruptcy Court, District of Massachusetts
(Western Division) (collectively, the "Interim Agreements"), and Manager
hereby accepts and assumes such assignments and each and every duty and
obligation of Assignors under, pursuant to and in accordance with the Interim
Agreements.
1. MANAGEMENT AND CONSULTING RESPONSIBILITIES OF MANAGER: Effective upon
Tenant's licensure with respect to each Facility, Tenant hereby engages Manager
and Manager hereby accepts such engagement and agrees to provide management,
consulting and advisory services to Tenant in connection with the operation of
the Facilities, upon the terms and conditions set forth in this Agreement. By
entering into this Agreement, Tenant grants to Manager a right to possession of
the Facilities but does not delegate to Manager any powers, duties or
responsibilities which it is prohibited by law from delegating but Tenant does
hereby grant to Manager the exclusive right to possession of the Facilities,
subject to Tenant's right to enter the Facilities from time to time to ensure
Manager's compliance with its obligations under this Agreement. Tenant also
retains such other authority as shall not have been expressly delegated to
Manager pursuant to this Agreement. Subject to the foregoing, Manager shall
provide the following services:
a. OPERATIONAL POLICIES AND FORMS: Manager shall develop and
implement such operational policies and procedures as may be necessary to ensure
the initial and ongoing licensure of the Facilities and for the efficient and
effective operation of the Facilities from and after the date of the issuance of
licenses to operate the Facilities (individually, each a "License" and
collectively, the "Licenses") and the Facilities from and after the commencement
of the operation thereof and shall from time to time during the term hereof
develop such new policies and procedures as shall be necessary to ensure the
establishment and maintenance of operations standards appropriate for the nature
of the Facilities.
b. CHARGES: In accordance with the annual budgets and projects
approved by Tenant pursuant to Section 1(l), Manager shall establish the
schedules of recommended charges, including any and all special charges for
services rendered to the residents at the Facilities. Tenant shall have the
right to approve the charge schedules established by Manager, which approval
shall not be unreasonably withheld.
c. INFORMATION: Manager shall develop any informational material,
mass media releases, and other related publicity materials, which are necessary
or appropriate in securing the Licenses and/or for the operation of the
Facilities.
d. REGULATORY COMPLIANCE: Manager shall assist Tenant in securing
the initial licensure of the Facilities and shall thereafter maintain all
licenses, permits, qualifications and approvals from any applicable governmental
or regulatory authority for the operation of the Facilities, including but not
limited to maintaining the Licenses and quality assessment and assurance
committees as required for Medicare and Medicaid certification as skilled
nursing facilities. Accordingly, Manager shall manage the operations of the
Facilities in full compliance with all applicable laws and regulations as an
expense of the Facilities and shall promptly correct
2
<PAGE>
all deficiencies related to the operation of the Facilities issued by any
governmental or regulatory authority; provided, however, that in the event
that any such deficiencies require expenditures in excess of Fifty Thousand
Dollars ($50,000.00), then Manager shall be required to consult with, and
seek the approval of, Tenant prior to correcting any such deficiencies. In
addition to the foregoing, to the extent permitted by law, Manager agrees as
follows:
i. to represent the Facilities (A) in their day-to-day
dealings with regulatory and rate-setting authorities, creditors, patients,
patient families, representatives of the State Ombudsman, consumer
organizations, personnel, agents for collection and insurers and (B) in all
formal or informal proceedings before state and federal agencies engaged in
the regulation, payment rate-setting and licensing of skilled nursing or
assisted living facilities (as applicable); provided, however, that Tenant
retains the right, but not the obligation, to attend and participate in any
and all hearings, interviews and proceedings of any kind and nature
concerning the Facilities or their operations or concerning Manager which
might have an impact on the Facilities or their operations, including but not
limited to any violation of any statute or regulation that may result in the
impositions of penalties, fines, court or administrative orders or licensure
revocation; and
ii. to provide Tenant, within five (5) business days of
receipt, all correspondence, notices, rulings, written summaries of oral
communications, announcements or any other communication of any sort from any
regulatory agency, including public, quasi-public and private entities,
regarding the Facilities, their operations or related to matters which might
have a material impact on the operations of the Facilities, such as
announcements of the establishment of accreditation committees, new oversight
policies and other matters, or which may impact Manager's performance of its
obligations hereunder.
e. EQUIPMENT AND IMPROVEMENTS: From and after the issuance of
the Licenses and from and after the commencement of operations, Manager shall
make all necessary and approved repairs, replacements and maintenance within
the budgetary limits set forth in the annual capital budget prepared by
Manager pursuant to Paragraph 1(l), in a workmanlike and lien free manner and
in compliance with the requirements of any governmental or regulatory
authority.
f. ACCOUNTING: Manager shall, at its expense, provide home
office and accounting support to the Facilities. All accounting procedures
and systems utilized in providing said support shall be in accordance with
the operating capital and cash programs developed by Manager, and approved by
Tenant, which approval shall not unreasonably be withheld, which programs
shall conform to generally accepted accounting principles and shall not
materially distort income or loss. In addition, as a cost of operating the
Facilities, Manager shall prepare or cause to be prepared all tax returns,
including payroll tax returns and shall cause all local, state and federal
taxes to be timely paid or contested, as appropriate. The taxes and amounts
due with respect to any cost reports shall be deemed to be operating expenses
of the Facilities and shall be paid out of the revenues of the Facilities or
the working capital provided by Tenant. Nothing herein shall preclude
Manager from delegating to a third party a portion of the accounting and
3
<PAGE>
cost reporting duties provided for in this section; provided, that such
delegation shall not relieve Manager from ultimate liability for the timely
and complete performance of the obligations provided for herein or for the
expense thereof, to the extent such expense is to be borne hereunder by
Manager. Tenant shall sign any and all Medicare and Medicaid cost reports
which may be due in connection with operation of the Facilities.
Tenant shall have the right from time to time to have its
accountants or representatives audit the books and operations of the Facilities
and, in connection with such audits, to examine Manager's records with respect
thereto (including supporting data, income tax and sales tax returns), subject
to any prohibitions or limitations on disclosure of any such data under
applicable law or regulations, including without limitation, any duly enacted
"Patients' Bill of Rights" or similar legislation, including such limitations as
may be necessary to preserve the confidentiality of any Facility-patient
relationship and any physician-patient privilege. If any such audit discloses
an overstatement of Revenues (defined in Section 10, below) of the Facilities
and corresponding overpayment to Manager of the Management Fee (defined in
Section 10, below) and either Manager agrees with the result of such audit or
the matter is compromised, Manager shall pay to Tenant the amount of such
overpayment of the Management Fee within ten (10) days of Tenant's demand.
g. REPORTS: Manager shall prepare and provide to the Tenant any
reasonable operational information which may from time to time be specifically
requested by Tenant, including any information needed to assist Tenant in
completing its tax returns and cost reports and in complying with any reporting
obligations imposed by the terms of any debt documents to which the Facilities
may be subject. All cost reports which may be due in connection with the
operation of the Facilities shall be prepared by Manager, unless Tenant elects
otherwise, but all such cost reports shall be signed by Tenant in its capacity
as the Medicare or Medicaid certified provider, as required by law. In addition,
(i) within fifteen (15) business days after the end of each calendar month,
Manager shall provide Tenant with an unaudited balance sheet of the Facilities,
dated the last day of such month, and an unaudited statement of income and
expenses for such month relating to the operation of the Facilities and
(ii) within forty-five (45) days after the end of the fiscal year of the
Facilities, Manager shall provide Tenant with unaudited financial statements
including a balance sheet of the Facilities, dated the last day of said fiscal
year, and a statement of income and expense for the year then ended relating to
the operation of the Facilities. Such financial statements shall be prepared in
accordance with GAAP, consistently applied, this Agreement, and the procedures
and practices provided for in this Agreement and shall be certified to be
accurate by the Chief Financial Officer of Manager. All information relating to
the Facilities and their operations shall constitute part of the books and
records of the Facilities and shall be the sole and exclusive property of
Tenant.
h. BANK ACCOUNTS: On Tenant's behalf, Manager shall establish and
maintain a depository account in the name of Tenant at Fleet Bank or other
depository institution designated by Tenant and shall deposit therein all money
received during the term of this Agreement in the course of the operation of the
Facilities and/or from Tenant in satisfaction of its working capital obligation
as described more fully herein; provided, however, that during the
4
<PAGE>
term hereof, withdrawals and payments from this account shall be made only on
checks signed or wire transfer authorized by a person or persons designated
by Manager (the "Depository Account"). Manager shall have no right, title or
interest in and to the Depository Account, and Manager shall cause the funds
held in the Depository Account to be invested overnight for the benefit and
credit of Tenant. In addition, Manager shall establish and maintain a
payroll account in the name of Tenant (the "Payroll Account") and a
controlled disbursement account in the name of Tenant (the "Disbursement
Account"), both of which shall be zero balance accounts from which Manager
shall pay the payroll of the employees and the operating expenses of the
Facilities, respectively. Finally, Manager shall establish an administrative
account in the name of Tenant (the "Administrative Account"), which shall in
no event contain a balance in excess of Ten Thousand Dollars ($10,000.00) and
shall be used by the administrators of the Facilities to pay for necessary
emergency disbursements. Manager shall have no right, title or interest in
and to the Payroll Account, the Disbursement Account and/or the
Administrative Account. Tenant shall be given notice as to the identity of
the authorized signatories on the Depository Account, the Payroll Account,
the Disbursement Account and the Administrative Account. Tenant shall
further be permitted to designate an authorized signatory with respect to the
Depository Account, the Payroll Account, the Disbursement Account and the
Administrative Account in order to enable Tenant to withdraw funds therefrom
in accordance with the terms of this Agreement; provided, however, Manager
shall not be required to secure Tenant's signature on any checks drawn or
wire transfers authorized on the Depository Account, the Payroll Account, the
Disbursement Account and the Administrative Account in connection with
Manager's operation of the Facilities. All operating expenses incurred from
and after the Commencement Date (defined in Section 4, below) in connection
with the operation of the Facilities, including, but not limited to, payroll
and employee benefits and payment of Manager's Management Fee (defined in
Section 10, below), shall be paid by check drawn or wire transfer authorized
on the Depository Account. Withdrawals from the Depository Account shall be
made to make payments in the following order or priority:
i. Nondeferrable operating expenses of the Facilities, which
shall include, without limitation, the following:
(A) payroll of all employees of the Facilities;
(B) payroll-related expenses, employee benefits and
employment taxes;
ii. Debt service (principal and interest) on the Facilities,
including under the accounts receivable line of credit from
Tenant to Manager;
iii. One-half (1/2) of the Management Fee
iv. All other undisputed and nondeferrable operating expenses
and accrued liabilities of the Facilities which have been
posted or accounted for in Manager's accounting system;
v. Rent and other Lease-required payments to Tenant's landlord
under the Leases;
vi. Any Working Capital Advances (defined below) made by
Tenant, if any;
5
<PAGE>
vii. The remaining one-half (1/2) of the Management Fee; and
viii. Capital expenditures incurred in accordance with the annual
capital expenditure budget.
Manager and Tenant acknowledge that the cash flow of the Facilities may not be
sufficient to pay operating expenses of the Facilities incurred from and after
the Commencement Date. In the event the cash flow of the Facilities are at any
time insufficient to pay all of the operating expenses of the Facilities from
and after the Commencement Date, Tenant shall, within ten (10) days of its
receipt of a written request by Manager, deposit in the Depository Account the
amount Tenant determines is necessary for the continuing operation of the
Facilities (each a "Working Capital Advance"). Manager agrees that it shall not
make a request for a Working Capital Advance more frequently than one time per
month and that Manager shall not be entitled to request a Working Capital
Advance to pay the remaining one-half (1/2) of the Management Fee described in
item vii, above.
i. FACILITY PERSONNEL: On behalf of Tenant, Manager shall recruit,
train, promote, direct, discipline, suspend and discharge personnel of the
Facilities; establish salary levels, personnel policies and employee benefits;
and establish employee performance standards, all as needed during the term of
this Agreement to secure the initial licensure of the Facilities and to ensure
the efficient operation of all departments within and services offered by the
Facilities. All of the personnel of the Facilities, including an on-site
administrator, shall be the employees of the applicable Tenant and the salaries,
bonuses, commissions and benefits paid to such employees shall be deemed to be a
Facility operating expense. Manager shall use best efforts to assure compliance
with all applicable employment, wrongful discharge, anti-discrimination,
occupational safety and health and other similar laws and regulations affecting
the employment of all such personnel. In addition, Manager shall only negotiate
any collective bargaining agreement or other agreement with any labor union
lawfully entitled to represent all or any employees after consulting with and
upon the advice of Tenant.
j. SUPPLIES AND EQUIPMENT: Manager shall purchase supplies and
non-capital equipment needed to operate the Facilities. In purchasing said
supplies and equipment, if possible, Manager shall take advantage of any
national or group purchasing agreements to which Manager may be a party.
k. LEGAL PROCEEDINGS: Manager, through its legal counsel, shall
coordinate with Tenant's counsel on all legal matters and proceedings necessary
or proper in connection with the operation of the Facilities.
l. BUDGETS: On or before January 2, 2000 with respect to fiscal year
2000 and within thirty (30) days prior to the start of each subsequent fiscal
year, Manager shall prepare and submit to Tenant for its review and approval,
which approval shall not be unreasonably withheld, an annual operating budget,
an annual capital expenditure budget, and an annual summary of profit and loss
statement. These budgets and projections shall be prepared with adequate detail
to allow Tenant to comprehend fully the operating plans of Manager and should:
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i. provide a monthly breakdown of revenues, expenses and
profitability;
ii. be zero-based;
iii. be prepared on a line-item and departmental basis;
iv. contain a marketing plan which details targets, assumptions
and detailed descriptions of strategies and tasks to
executed the goals of the marketing plan; and
v. include narrative descriptions of assumptions used in
formulating the budget and forecast any potential need for
capital from Tenant.
Manager acknowledges and agrees that no such budget shall include expenses
related to Manager's corporate or regional overhead costs, it being understood
and agreed that such costs shall not be deemed to be permitted operating
expenses which may be paid from revenues of the Facilities. In the event a
budget has not been agreed upon by the beginning of the fiscal year, the budget
in effect for the prior fiscal year shall continue in effect until the new
budget is agreed upon. Thereafter, Manager shall use best efforts to ensure
that any operating expenditures in total made during any given month, quarter or
year (as applicable) shall not exceed the operating expenditures reflected on
the approved operating budget, and as soon as Manager becomes aware that any
such total operating expenditures exceed the approved operating budget by more
than five percent (5%), then Manager shall notify Tenant in writing of such
budget variance within five (5) days. Any unbudgeted operating expenditures
shall be subject to Tenant's prior written approval. Manager shall not be
entitled to vary capital budgets without Tenant's prior written approval. Each
Facility shall be operated on a fiscal year of January 1 through December 31.
m. COLLECTION OF ACCOUNTS: Manager shall issue bills and use
diligence and best business practices to collect accounts and monies owed for
goods and services furnished by the Facilities, including, but not limited to,
enforcing the rights of Tenant and the Facilities as creditor under any contract
or in connection with the rendering of any services; provided, however, that any
expenses incurred by Manager in so doing shall be treated as operating expenses
of the Facilities, which shall be payable out of funds deposited in the
Depository Account described in Section 1(h).
n. POSSESSION. Tenant and Manager acknowledge and agree that during
the term of this Agreement, Manager has the exclusive right to possession of the
Facilities, subject to Tenant's right to enter into the Facilities from time to
time to ensure Manager's compliance with the terms of this Agreement.
o. SERVICE CONTRACTS. Manager shall negotiate and enter into
service contracts which are necessary or desirable in the ordinary course of
business in operating the Facilities, including, without limitation, contracts
for provisions of electricity, gas, water, telephone and other utility services,
cleaning services, security services, vermin extermination, trash removal,
elevator and boiler maintenance, air conditioning maintenance, master television
service, laundry and dry cleaning, entertainment satellite systems and other
services which
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Manager deems advisable; provided, however, that (i) all such contracts shall
provide that they are terminable on no more than thirty (30) days notice
without penalty or premium, (ii) Manager shall be required to ensure that all
such contracts are on commercially reasonable terms, (iii) no such contracts
shall be entered into if doing so would be inconsistent with the
reimbursement principles, if and to the extent applicable to the operation of
the Facilities, under the Medicare prospective payment system and (iv)
Manager shall provide Tenant with copies of any and all such service
contracts substantially concurrently with their execution.
p. LENDER REQUIREMENTS. Manager agrees to perform any
obligations under any mortgage or other debt instrument encumbering the
Facilities which are applicable to the operation and management of the
Facilities and to pay, as and when due, all payments due under any present or
future loans on the Facilities. Further, Manager confirms that this Agreement
and all of Manager's rights hereunder are, and shall be, completely
subordinate to the lien of any present or future loan encumbering the
Facilities and agrees to execute and notarize a subordination,
non-disturbance and attornment agreement on the lender's form within ten (10)
days after delivery to Manager of such form confirming such subordination of
Manager's interest.
q. PATIENT TRUST ACCOUNT. Manager shall establish and maintain
records and procedures to account for all patient funds deposited with the
Facilities. A "Patient Trust Account" shall be established in accordance with
the terms hereof and all disbursements therefrom and records and procedures
relating thereto shall conform with the requirements of third party
reimbursement, licensure and all other applicable requirements and the terms
hereof.
r. TENANT'S PRIOR WRITTEN APPROVAL. Manager shall not do any of the
following without first obtaining Tenant's prior written approval:
i. Borrow money (excluding the accounts receivable line of
credit from Tenant to Manager), guaranty the debts of any third person, or
mortgage, pledge, grant a security interest in or otherwise encumber all or any
part of the Facilities; provided, however, that Manager shall be entitled to
encumber the Facilities with mechanics' liens, materialmen's liens or laborers'
liens necessary in connection with the performance of Manager's obligations
under this Agreement, so long as any such liens are discharged in a timely
manner in accordance with applicable state law;
ii. Enter into any lease or other financing agreement for the
use of any item of furniture, fixtures and equipment or other property in an
amount which would require monthly payments, in the aggregate, in excess of One
Thousand Five Hundred Dollars ($1,500.00) per Facility;
iii. Enter into any agreement, lease, license or concession
agreement for space at the Facilities;
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iv. Incur any liabilities or obligations to third parties which
are unrelated to the operation, maintenance and security of the Facilities or to
the performance of Manager's responsibilities under this Agreement;
v. Except for any Excluded Transaction (defined below) and
subject to the provisions of this Agreement regarding contracts with
affiliates of Manager, Manager shall not, without the written consent of
Tenant, enter into any contract or other arrangement (or series of related
contracts or arrangements) if the expenditures thereunder would, or are
reasonably anticipated to, exceed Twenty-Five Thousand Dollars ($25,000.00)
in the aggregate, or if the term of such contract has a term in excess of one
(1) year. For purposes hereof, the term "Excluded Transaction" shall mean (A)
any contracts subject to competitive bidding in which the lowest bid is
accepted; and (B) contracts or expenditures required in cases of emergency or
casualty, which expenditures are required to protect life and safety, or in
order to comply with legal requirements, in an amount not to exceed
Twenty-Five Thousand Dollars ($25,000.00) in any twelve (12) month period;
vi. Institute or defend any legal or equitable proceedings with
respect to the Facilities, including the selection of counsel, other than
routine collection litigation and similar matters involving ordinary day-to-day
operations of the Facilities involving amounts in controversy of less than Ten
Thousand Dollars ($10,000.00);
vii. Employ any professional firm (other than legal counsel and
accountants) for more than Ten Thousand Dollars ($10,000.00) in the aggregate
except as set forth in the annual operation budget, or enter into any
arrangement for the employment of any attorney or accountant (other than legal
counsel retained to collect accounts receivable);
viii. Prosecute or settle any tax claims or appeals;
ix. Purchase goods, supplies and services from Manager or any
affiliate of Manager, or enter into any other transaction with an affiliate of
Manager, unless prior to the consummation of such transaction all of the prices
and other terms thereof and the identity of the vendor and its relationship to
Manager shall have been disclosed to and approved by Tenant, which may be
withheld in Tenant's sole and absolute discretion, it being agreed that any such
proposed transaction shall be submitted to independent third parties for
competitive bidding, and Manager shall promptly provide the results of such
bidding to Tenant;
x. Acquire on behalf of Tenant any land or any interest
therein;
xi. Acquire any capital assets of the Facilities or any
interest therein;
xii. Consent to any condemnation or participate in any
condemnation proceeding relating to the Facilities or any portion thereof;
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xiii. Sell, transfer or otherwise dispose of all or any portion
of the Facilities;
xiv. Perform any alterations to the Facilities or any portion
thereof, except as is necessary in connection with the performance of Manager's
obligations under this Agreement; or
xv. Take any other action which, under the terms of this
Agreement, is prohibited or requires the approval of Tenant.
2. INSURANCE: Tenant, as a cost of operating the Facilities, shall
arrange for and maintain all necessary and proper hazard insurance covering the
Facilities, the furniture, fixtures, and equipment situated thereon, and all
necessary and proper malpractice and public liability insurance for Tenant's
protection and for the protection of Tenant's officers, agents and employees.
All such policies of insurance shall also name Manager as additional insured and
the holder of any debt secured by the Facilities as additional insured and loss
payee thereunder. In addition, Tenant, as a cost of operating the Facilities,
shall provide all employee health and worker's compensation insurance for
Tenant's employees and all other personnel working at the Facilities. Any
insurance provided pursuant to this paragraph shall comply with the requirements
of any debt documents to which the Facilities may be subject. All insurance
shall be in form, with companies, with limits and coverages as Tenant shall
determine, and Tenant may maintain an umbrella policy for all such insurance in
amounts as Tenant deems appropriate. In the event of any casualty or
condemnation of any Facility, Tenant shall have the sole right to determine the
disposition of any insurance or condemnation proceeds, including but not limited
to the right to decide whether any such Facility shall be rebuilt in the same
manner or type as the original Facility. Each party shall give prompt notice to
the others of any third party claims made, or third party legal proceedings
commenced, against any one of them and shall cooperate fully with each other,
each's counsel and with any insurance carrier to the end that all such claims
will be properly investigated, defended and adjusted.
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3. TAXES AND RENT: Manager agrees as follows:
a. Manager shall cause to be paid as an expense of the Facilities
when due: (i) all taxes, assessments, levies, fees, water and sewer rents and
charges, and all other governmental charges, general and special, ordinary and
extraordinary, which are, at any time prior to or during the term hereof,
imposed or levied upon or assessed against (A) the Facilities, (B) any Rent (as
defined in any Lease for a Facility), Additional Rent (as defined in any Lease
for a Facility) under the Lease or other sum payable under the Lease or (C) the
Lease or the leasehold estate thereby created, or which arise in respect of the
operation, possession or use of the Facilities; (ii) all gross receipts or
similar taxes imposed or levied upon, assessed against or measured by any Rent
(as defined in a Lease), Additional Rent (as defined in a Lease) or other sum
payable under a Lease; (iii) all sales, use or similar taxes and all
withholdings and payroll taxes, at any time levied, assessed or payable on
account of the acquisition, leasing, use or operation of the Facilities; and
(iv) all charges for utilities serving the Facilities. If any such tax or
assessment may legally be paid in installments, Manager may pay such tax or
assessment in installments.
b. Manager shall deliver to Tenant a copy of any assessment, tax
notice or tax bill received by Manager and shall pay the same as and when due;
provided, Manager shall not cause such payment to be made if (i) same is in good
faith being contested by Tenant at its sole expense and without cost to Manager,
(ii) enforcement thereof is stayed, and (iii) Tenant shall have given Manager
written notice of such contest and stay and authorized the non-payment thereof,
not less than ten (10) days prior to the date on which such tax assessment, or
charge is due and payable.
4. TERM OF AGREEMENT: With respect to each Facility, the Term of this
Agreement shall commence effective as of the issuance of a License to Tenant to
operate said Facility (with respect to each Facility, a "Commencement Date"),
and with respect to all Facilities, the term of this Agreement shall terminate
upon the first to occur of (i) the occurrence of an Event of Default hereunder
and the exercise by Manager or Tenant of its right to terminate this Agreement
as a result thereof; (ii) the termination without cause of this Agreement by
Tenant or Manager on no less than ninety (90) days written notice to the other
party specifying the effective date of such termination; or (iii) midnight on
September 30, 2004; provided, however, that in the event that LTC or Tenant
sells its interest in any of the Facilities to an unaffiliated third party, then
LTC or Tenant (as applicable) shall provide reasonable prior written notice to
Manager of the closing date of such sale, and this Agreement shall terminate as
to each such Facility immediately upon the consummation of such sale. In the
event of the termination of this Agreement the following provisions shall apply:
a. Concurrently with a termination of this Agreement that does not
result from Manager having committed an Event of Default hereunder, Tenant shall
pay to Manager any management fees then due and owing.
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b. Upon termination of this Agreement, Manager shall cooperate with
any party designated by Tenant to effect a smooth transition of operational
responsibility for the Facilities from Manager to said third party, including
but not limited to turning over to Tenant, or its designee, all files and
records relating to the operation of the Facilities.
c. Manager agrees not to solicit any of Tenant's employees for a
period of three (3) years following any termination of this Agreement.
5. DEFAULT: Either party may terminate this Agreement, as specified in
this Section 5, in the event of a default ("Event of Default") by the other
party.
a. With respect to Manager, it shall be an "Event of Default"
hereunder:
1) If Manager shall fail to pay any monetary obligation
arising out of or incurred in connection with this Agreement when such
payment is due and payable, which failure shall continue for a period
of ten (10) days after the due date; or
2) If Manager shall fail to keep, observe or perform any
non-monetary agreement, term or provision of this Agreement, and such
default shall continue for a period of thirty (30) days after notice
thereof shall have been given to Manager by Tenant, which notice shall
specify in detail the event or events constituting the default;
provided, however, in the event such failure cannot be cured within
such thirty (30) day period but Manager commences the cure within such
thirty (30) day period and diligently prosecutes the same to
completion, Manager shall have an additional thirty (30) days or such
additional time as is reasonably necessary in which to complete such
cure; or
3) If any Facility's license or Medicare or Medicaid
certification is suspended, revoked, rescinded, terminated or not
renewed and such action is not stayed pending the appeal thereof; or
4) If Manager assigns or attempts to assign this Management
Agreement in violation of the requirements of Section 11 hereof.
b. With respect to Tenant, it shall be an Event of Default
hereunder:
1) If Tenant shall fail to make or cause to be made any
payment to Manager required to be made hereunder (other than its
working capital obligation which is addressed in clause (2), below)
and such failure shall continue for a period of ten (10) days after
notice which notice shall specify the payment or payments which Tenant
has failed to make; or
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2) If Tenant shall fail to keep, observe or perform any
agreement, term or provision of this Agreement and such default shall
continue for a period of thirty (30) days after notice, which notice
shall specify in detail the event or events constituting the default
thereof by Manager to Tenant; provided, however, in the event such
failure cannot be cured within such thirty (30) day period but Manager
commences the cure within such thirty (30) day period and diligently
prosecutes the same to completion, Manager shall have an additional
sixty (60) days or such additional time as is reasonably necessary in
which to complete such cure; provided, further, that in the case of
Tenant's failure to provide necessary working capital upon demand by
Manager, it shall be deemed to be an Event of Default hereunder if the
same is not paid within the time provided in Section 1(h), and such
failure continues uncured for ten (10) days after Manager gives Tenant
written notice of such failure.
6. REMEDIES UPON DEFAULT:
a. If any Event of Default by Tenant shall occur, Manager may, in
addition to any other remedy available to it in law or equity on account of such
Event of Default, forthwith terminate this Agreement, and neither party shall
have any further obligations whatsoever under this Agreement except for
Manager's right to receive the payments due from Tenant pursuant to Section 4
hereof, if and to the extent due in accordance with the terms thereof, and
damages from Tenant and except any settlement and payment obligations and other
obligations that by their nature survive termination of this Agreement.
b. If any Event of Default by Manager shall occur, Tenant may, in
addition to any other remedy available to it in law or equity on account of such
Event of Default, forthwith terminate this Agreement and the exclusive right to
possession of the Facilities granted to Manager hereunder, and neither party
shall have any further obligation whatsoever under this Agreement; except for
Tenant's right to receive payment of damages from Manager and except for
settlement and payment obligations and other obligations that by their nature
survive termination of this Agreement.
7. TENANT'S INSPECTION: During the term hereof, Tenant, or its
designated agents or representatives, shall have the right, upon request and at
reasonable times, to inspect and to permit the holder of any debt secured by the
Facilities to inspect the Facilities and to inspect and/or audit all books and
records pertaining to the operation thereof and shall have the right to conduct
and to permit the holder of any debt secured by the Facilities to conduct
telephonic or personal interviews with the Administrator of the Facilities
and/or with any of Manager's regional personnel involved in the operation of the
Facilities with respect to any matters related to the operation thereof.
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8. FACILITY OPERATIONS:
a. NO GUARANTEE OF PROFITABILITY: Manager does not guarantee that
operation of the Facilities will be profitable, but Manager shall use its best
efforts to operate the Facilities in as cost efficient and profitable a manner
as possible.
b. STANDARD OF PERFORMANCE: In performing its obligations under
this Agreement, Manager shall use its best efforts and act in good faith and
with professionalism in accordance with acceptable and prevailing standards of
health care and the policies adopted by, and resources available to, the
Facilities.
c. FORCE MAJEURE: Manager will not be deemed to be in violation of
this Agreement if it is prevented from performing any of its obligations
hereunder for any reason beyond its control, including, without limitation,
strikes, shortages, war or acts of God.
9. WITHDRAWAL OF FUNDS BY TENANT; MINIMUM BANK BALANCE:
a. Tenant may withdraw the then accumulated operating cash surplus
from the Depository Account pursuant to Tenant's written instructions with
concurrent notice thereof to Manager.
10. MANAGEMENT FEE: Manager shall receive a monthly fee equal to five
percent (5%) of the Revenues (defined below) generated each month by the
Facilities, as more particularly set forth in Section 1(h), above ("Management
Fee"). The first (1st) one-half of the Management Fee shall be payable in
advance on the first (1st) day of each month based upon the previous month's
Revenues, and the second (2nd) one-half of the Management Fee shall be payable
during each month in accordance with Section 1(h), above, to the extent that
adequate Revenues are generated each month by the Facilities. No later than
thirty (30) days following any fiscal year of the Facilities, Tenant shall have
the right to reconcile the monthly Management Fees paid to Manager for such
fiscal year with the annual Revenues generated by the Facilities, and Tenant
shall have the right to offset any overpayment of Management Fees against future
Management Fees owing to Manager or to recover any such overpayments directly
from Manager. For purposes hereof, "Revenues" shall mean "Gross Revenues" less
contractual adjustments, and "Gross Revenues" shall mean all revenues generated
by the Facilities, directly or indirectly from residents of the Facilities,
including without limitation fees and other amounts received directly from
residents, amounts received from concessionaires, subcontractors, agencies,
etc., but shall specifically exclude the proceeds from the sale of the
Facilities or any portion thereof including any Facility equipment, any interest
or investment income of Tenant, capital contributions by Tenant, tax refunds not
relating to the current year (not accounted for in prior years), any insurance
and condemnation proceeds, extraordinary gains or losses unrelated to the
operations of the Facilities and any and all pass through amounts for which
Manager is merely acting as the collection agent.
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a. PRORATION OF FEE. If the services of Manager commence or
terminate other than on the first day of the month, the revenues upon which the
fee is calculated shall be prorated in proportion to the number of days for
which services are actually rendered.
b. PAYMENT OF FEE. The Management Fee provided for herein shall be
disbursed by Manager to itself out of the Depository Account in accordance with
the provisions of this Agreement.
11. ASSIGNMENT: Except as otherwise provided herein, this Agreement shall
not be assigned by either party without the prior written consent of the other
party, provided that, subject to the limitations of the applicable state laws
with respect to the licensure of the Facilities, Tenant may assign this
Agreement to a subsidiary or parent corporation without the consent of, but upon
written notice to, Manager; and provided, further, that Tenant may assign this
Agreement to an entity which is owned or controlled by, or under common control
with, Tenant in connection with the financing of the Facilities or for any other
reason deemed necessary or appropriate by Tenant without the consent of, but
upon written notice to, Manager. Any assignment of this Agreement by Manager in
violation of the terms of this Section 11 shall be null and void and of no force
or effect and shall result in the automatic termination of this Agreement
effective upon the purported effective date of such assignment; provided,
however, that SCMG may add designated affiliates of SCMG as parties to this
Agreement upon the written consent of Tenant, not to be unreasonably withheld,
so long as SCMG remains primarily liable for all of Manager's obligations
hereunder.
12. NOTICES: All notices required or permitted hereunder shall be given
in writing by hand delivery, by registered or certified mail, postage prepaid,
by overnight delivery or by facsimile transmission (with receipt confirmed with
the recipient). Notice shall be delivered or mailed to the parties at the
following addresses or at such other places as either party shall designate in
writing. All notices shall be deemed duly given when delivery is received or
refused by party.
To Manager: Senior Care Management Group, LLC
75 South Church Street, Suite 650
Pittsfield, MA 01201
Phone: (413) 448-2111
Fax: (413) 448-2120
Attn: Mark E. Fortier, Esq.
To Tenant: LTC Healthcare, Inc.
300 Esplanade Drive, Suite 1860
Oxnard, CA 93030
Phone: (805) 981-3611
Fax: (805) 981-3616
Attn: Raad K. Shawaf, Esq.
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13. RELATIONSHIP OF THE PARTIES: The relationship of the parties shall be
that of principal and independent contractor and all acts performed by Manager
during the term hereof as Manager of the Facilities shall be deemed to be
performed in its capacity as an independent contractor. Nothing contained in
this Agreement is intended to or shall be construed to give rise to or create a
partnership or joint venture or lease between Tenant, its successors and assigns
on the one hand, and Manager, its successors and assigns on the other hand.
14. INDEMNIFICATION: Manager shall indemnify, defend and hold harmless
Tenant from any loss incurred by or damage to Tenant where such loss or damage
results from the negligence or willful misconduct of Manager in performing its
obligations under this Agreement or from a breach of this Agreement by Manager.
Tenant shall indemnify, defend and hold Manager harmless from any loss incurred
by or damage to Manager where such loss or damage results from the negligence or
willful misconduct of Tenant in performing its obligations under the Agreement
or from a breach of this Agreement by Tenant. The rights and obligations of the
parties under this Section 14 shall survive the expiration of the term or other
termination of this Agreement.
15. WAIVER OF SUBROGATION: Manager and Tenant each hereby waive any rights
of recovery against the other, or against the officers, employees, agents and
representatives of the other, for loss or damages to such waiving party's
property or the property of others under its control, where and to the extent
that such loss or damage is insured against under any insurance policy in force
at the time of such loss or damage. Upon obtaining the policies of insurance
required hereunder, Manager and Tenant shall give notice to the insurance
carriers that the foregoing mutual waiver of subrogation is contained in this
Agreement.
16. PATIENT RECORDS: Manager and Tenant shall preserve the confidentiality
of the records of all patients of the Facilities as required by all applicable
federal and state statutes, regulations, and rules of accrediting organizations
for skilled nursing or assisted living facilities, and use the information in
such records solely for the limited purposes necessary to perform their
respective obligations hereunder.
17. ENTIRE AGREEMENT: This Agreement contains the entire agreement
between the parties relating to the operation of the Facilities and shall be
binding upon and inure to the benefit of their successors and assigns. This
Agreement may not be modified or amended except by written instrument signed by
both of the parties hereto.
18. CAPTIONS: The captions used herein are for convenience of reference
only and shall not be construed in any manner to limit or modify any of the
terms hereof.
19. ATTORNEY'S FEES: In the event either party brings an action to
enforce this Agreement, the prevailing party in such action shall be entitled to
recover from the other all costs incurred in connection therewith, including
reasonable attorney's fees.
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20. SEVERABILITY: In the event one or more of the provisions contained in
this Agreement is deemed to be invalid, illegal or unenforceable in any respect
under applicable law, the validity, legality and enforceability of the remaining
provisions hereof shall not in any way be impaired thereby.
21. CUMULATIVE; NO WAIVER: No right or remedy herein conferred upon or
reserved to either of the parties hereto is intended to be exclusive of any
other right or remedy, and each and every right and remedy shall be cumulative
and in addition to any other right or remedy given hereunder, or now or
hereafter legally existing upon the occurrence of an Event of Default hereunder.
The failure of either party hereto to insist at any time upon the strict
observance or performance of any of the provisions of this Agreement or to
exercise any right or remedy as provided in this Agreement shall not impair any
such right or remedy or be construed as a waiver or relinquishment thereof with
respect to subsequent defaults. Every right and remedy given by this Agreement
to the parties hereof may be exercised from time to time and as often as may be
deemed expedient by the parties thereto, as the case may be.
22. GOVERNING LAW; VENUE: This Agreement shall be construed and
enforced in accordance with, and the performance of its terms shall be governed
by, the laws of the State of Delaware, without giving effect to conflict of laws
principles. Any legal proceeding with respect to this Agreement shall be
conducted in the state or federal courts located in California.
23. AUTHORIZATION FOR AGREEMENT: The execution and performance of this
Agreement by Tenant and Manager have been duly authorized by all necessary laws,
resolutions or corporate action, and this Agreement constitutes the valid and
enforceable obligations of Tenant and Manager in accordance with its terms.
24. COUNTERPARTS: This Agreement may be executed in any number of
counterparts, each of which shall be an original, and each such counterpart
shall together constitute but one and the same Agreement.
25. CONDITIONS PRECEDENT: It shall be express conditions precedent to
Tenant's obligations hereunder with respect to each Facility that LTC acquires
said Facility and leases said Facility to Tenant and that Tenant is issued a
License to operate each such Facility.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties have hereto caused this Agreement
to be duly executed, as of the day an year first above written.
MANAGER:
SENIOR CARE MANAGEMENT GROUP, LLC,
a Delaware limited liability company
By: /s/ Thomas M. Clarke as attorney in fact
Linda M. Clarke, as Trustee of
The Danielle Lee Clarke Revocable Trust,
Its Managing Member
TENANT:
LTC HEALTHCARE, INC.,
a Nevada corporation
By: /s/ Raad K. Shawaf
Its: Senior Vice President and General Counsel
LTC HEALTHCARE OF VENICE, INC.,
a Nevada corporation
By: /s/ Raad K. Shawaf
Its: Secretary
LTC HEALTHCARE OF CRAWFORDVILLE, INC.,
a Nevada corporation
By: /s/ Raad K. Shawaf
Its: Secretary
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LTC HEALTHCARE OF OLATHE, INC.,
a Nevada corporation
By: /s/ Raad K. Shawaf
Its: Secretary
LTC HEALTHCARE OF TIPTONVILLE, INC.,
a Nevada corporation
By: /s/ Raad K. Shawaf
Its: Secretary
LTC HEALTHCARE OF ROBERTA, INC.,
a Nevada corporation
By: /s/ Raad K. Shawaf
Its: Secretary
LTC HEALTHCARE OF JONESBORO, INC.,
a Nevada corporation
By: /s/ Raad K. Shawaf
Its: Secretary
LTC HEALTHCARE OF RICHMOND, INC.,
a Nevada corporation
By: /s/ Raad K. Shawaf
Its: Secretary
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LTC HEALTHCARE OF TAPPAHANNOCK, INC.,
a Nevada corporation
By: /s/ Raad K. Shawaf
Its: Secretary
LTC HEALTHCARE OF FAYETTEVILLE, INC.,
a Nevada corporation
By: /s/ Raad K. Shawaf
Its: Secretary
20
<PAGE>
EXHIBIT "A"
FACILITIES TO BE MANAGED BY LENOX HEALTHCARE, INC.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
TENANT MANAGER FACILITY NAME LOCATION FACILITY #
TYPE BEDS
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LTC Lenox Venice Nursing & Venice, FL SNF 120
Healthcare of Healthcare, Inc. Rehabilitation Center
Venice, Inc.
- -----------------------------------------------------------------------------------------------
LTC Lenox Wakulla Manor Crawfordville, SNF 120
Healthcare of Healthcare, Inc. FL
Crawfordville,
Inc.
- -----------------------------------------------------------------------------------------------
LTC Lenox Great Plains Nursing & Olathe, KS SNF 104
Healthcare of Healthcare, Inc. Rehabilitation Center
Olathe, Inc. of Olathe
- -----------------------------------------------------------------------------------------------
LTC Lenox Tiptonville Nursing & Tiptonville, SNF 120
Healthcare of Healthcare, Inc. Rehabilitation Center TN
Tiptonville,
Inc.
- -----------------------------------------------------------------------------------------------
LTC Lenox Roberta Nursing & Roberta, GA SNF 100
Healthcare of Healthcare, Inc. Rehabilitation Center
Roberta, Inc.
- -----------------------------------------------------------------------------------------------
LTC Lenox Jonesboro Nursing & Jonesboro, GA SNF 116
Healthcare of Healthcare, Inc. Rehabilitation Center
Jonesboro, Inc.
- -----------------------------------------------------------------------------------------------
LTC Lenox West Hampton Health & Richmond, VA SNF 195
Healthcare of Healthcare, Inc. Rehabilitation Center
Richmond, Inc.
- -----------------------------------------------------------------------------------------------
LTC Lenox Tappahannock Health & Tappahannock, SNF 128
Healthcare of Healthcare, Inc. Rehabilitation Center VA
Tappahannock,
Inc.
- -----------------------------------------------------------------------------------------------
LTC Lenox Fayetteville Nursing & Fayetteville, SNF 100
Healthcare of Healthcare, Inc. Rehabilitation Center NC
Fayetteville,
Inc.
- -----------------------------------------------------------------------------------------------
</TABLE>
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