SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 2, 2000
Commission File No. 1-15669
Gentiva Health Services, Inc.
(Exact name of Registrant as specified in its charter)
DELAWARE 36-433-5801
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
175 Broad Hollow Road, Melville, New York 11747-8905
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (631) 844-7800
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock, par value $.10 per share NASDAQ
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes No X
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
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The aggregate market value of the registrant's common equity held by
non-affiliates of the registrant as of March 16, 2000 was $102,663,816 based on
the closing price of the Common Stock on The Nasdaq National Market on such
date.
The number of shares outstanding of the registrant's Common Stock, as of
March 15, 2000 was 20,345,029.
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Information contained in this Report, other than historical information, should
be considered forward-looking and is subject to various risk factors and
uncertainties. For instance, the Company's strategies and operations involve
risks of competition, establishing itself as an independent company, changing
market conditions, changes in laws and regulations affecting it and its
industries and numerous other factors discussed in this Report and in the
Company's filings with the Securities and Exchange Commission. Accordingly,
actual results may differ materially from those in any forward-looking
statements.
PART I
Item 1. Business.
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Introduction
Gentiva Health Services, Inc. ("Gentiva" or the "Company") became an
independent publicly owned company on March 15, 2000, as a result of the
issuance of all of the common stock of the Company to the stockholders of Olsten
Corporation, a Delaware corporation ("Olsten"), and the former parent
corporation to the Company (the "split-off"). Prior to the split-off, all of the
assets and liabilities of the health services business of Olsten (formerly known
as Olsten Health Services) were transferred to the Company pursuant to a
separation agreement and other agreements between the Company, Olsten and Adecco
SA ("Adecco"). The Company was incorporated in the state of Delaware on August
6, 1999.
The Company operates its health services business in the United States and
Canada and provides specialty pharmaceutical services (including infusion
therapy), home care nursing services and staffing services.
Specialty Pharmaceutical Services
The Company's specialty pharmaceutical services business is coordinated
through its network of 38 pharmacies across the United States and generally
includes:
o the distribution of drugs and other biological and pharmaceutical
products and professional support services for individuals with
chronic diseases, such as hemophilia, primary pulmonary hypertension,
autoimmune deficiencies and growth disorders;
o the administration of antibiotics, chemotherapy, nutrients and other
medications for patients with acute or episodic disease states;
o marketing and distribution services for pharmaceutical, biotechnology
and medical service firms; and
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o delivery, management and administration of its products in the home
setting and evaluation of equipment needs of the patient.
The specialty pharmaceutical services business provides a wide range of
home infusion therapies. Home infusion therapy involves the administration of
medications intravenously (into veins), subcutaneously (under the skin),
intramuscularly (into muscle), intraecally or epidurally (via spinal routes) or
through feeding tubes into the digestive tract. Infusion therapy often begins
during hospitalization of a patient and continues in the home environment.
The Company's specialty pharmaceutical services business also addresses
therapeutic, socioeconomic, psychosocial and professional support needs for
individuals with some of the following rare, chronic diseases:
o Hemophilia, which is a hereditary bleeding disorder in which a plasma
protein, known as factor, necessary for normal blood clotting, is
either missing or dysfunctional. Hemophilia is treated by
intravenously infusing anti-hemophilic factor, consisting of factor
concentrates and sterile water, to replace deficient clotting factor.
This disease is diagnosed at birth and has no known cure, but
hemophiliacs can lead relatively long and healthy lives with proper
treatment.
o Primary pulmonary hypertension, which is a chronic pulmonary disease
for which there is no known cure. This disease is treated by the
infusion of Flolan, which is an epoprostenol sodium product, for a
patient's lifetime or until the patient receives a lung transplant.
o Immunodeficiency/autoimmune disorders, which are a classification of
chronic disorders arising when the body's immune system fails to
produce sufficient antibodies to protect against infection. These
disorders include multiple sclerosis, myasthenia gravis and lupus.
These disorders are generally incurable but the symptoms can be
treated with a therapy consisting of intravenous immune globulin
prepared from human plasma (IVIG).
o Growth disorders, which result from damage to or malformation of
either the hypothalamus or the pituitary gland. This disorder is
treated by injecting growth hormone therapy into the patient.
Some of the Company's other significant specialty pharmaceutical services
also include:
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o Antibiotic therapies, which are the infusion of antibiotic medications
into a patient's bloodstream. These medications are typically used to
treat a variety of serious infections and diseases.
o Total Parenteral Nutrition (TPN), which is the long-term provision of
nutrients for patients with chronic gastrointestinal conditions. These
nutrients are infused through surgically implanted central vein
catheters or through peripherally inserted central catheters. Enteral
nutrition is the infusion of nutrients through a feeding tube inserted
directly into a patient's digestive tract. This long-term therapy is
prescribed for patients who are unable to eat and drink normally.
o Chemotherapy, which is the infusion of drugs in a patient's
bloodstream to treat various forms of cancer.
o Pain management, which involves the infusion of certain drugs into the
bloodstream of patients suffering from acute or chronic pain.
As part of specialty pharmaceutical services, the Company also offers a
distribution network to manufacturers after Federal government approval of their
products is secured. Distribution programs currently include:
o the first new drug for rheumatoid arthritis in 20 years;
o a new hand-held device for monitoring blood clotting time; and
o pharmaceuticals for chemotherapy and white blood cell stimulation, the
treatment of primary pulmonary hypertension, and management of
amyotrophic lateral sclerosis (ALS or Lou Gehrig's disease), multiple
sclerosis and severe muscle wasting.
Home Care Nursing Services
The Company's home care nursing services business is conducted through more
than 300 locations and offers a broad range of services including:
o General skilled nursing care that is provided by registered nurses and
licensed practical nurses who assess the appropriateness of home
health care including the family and home environment for patients,
and perform clinical procedures and instruct the patient and family
regarding necessary treatments. Patients receiving this care typically
include stabilized post-operative patients in recovery at home,
patients who are acutely ill but who do not require hospitalization
and patients who are chronically or terminally ill.
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o Pediatric services consisting of nursing services specializing in care
for children. These services include early NICU discharge to the home,
prenatal, maternal/infant care and phototherapy.
o Rehabilitation services consisting of programs and services that
address a wide range of neurologic and orthopedic diagnoses, including
head or traumatic brain injuries, spinal cord injuries and other
complex rehabilitation cases.
o Other therapy services that consist of physical, occupational, speech
and respiratory therapy to patients recovering from strokes, traumas
or certain surgeries, services for high risk pregnancies, post-partum
care, mental health care, AIDS therapy and various medical social
services.
o Disease management programs that are administered by nurses who
provide specialty care regimens to patients in their home. These
nurses instruct patients and their families in the self-administration
of some therapies and procedures, such as wound care and infection
control, emergency procedures and the proper handling and usage of
medication, medical supplies and equipment as well as teach disease
state management programs at home to patients with asthma, diabetes
and other illnesses.
o Home health aide care that involves basic patient care from taking
temperatures and blood pressure to assisting with daily living
activities. The Company's home health aides must pass certain
competency tests and are supervised by registered nurses.
o Personal care services consisting of unskilled homemaker services
which are provided to the elderly or the disabled. These services may
include housekeeping, shopping and assistance with personal hygiene,
dressing and meals.
Through four regional centers in the United States, the Company provides
care management and coordination for managed care customers desiring referrals,
centralized intake and billing claims adjustment, utilization review, quality
assurance and data reporting and analysis.
Staffing Services
The Company's staffing services business provides services to institutions,
occupational and alternate site healthcare organizations by providing health
care professionals to meet supplemental staffing needs. Often, these
organizations use temporary healthcare professionals to maximize scheduling
flexibility and to monitor and control costs and to cover peak periods, illness
and vacation time of their permanent staff. The Company's healthcare
professionals include:
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o registered nurses;
o licensed practical nurses;
o physical, speech and occupational therapists;
o certified nursing assistants;
o medical assistants; and
o medical technologists.
These professionals typically work in hospitals, industrial settings,
long-term care facilities, clinics, schools, physicians' offices, laboratories,
home care agencies and insurance companies. The Company arranges for their
assignments from more than 40 locations throughout the United States.
Through the Company's Flying Nurses(R) division in Dallas, Texas, the
Company also makes special arrangements for healthcare professionals to travel
to virtually any location for special assignments. This provides health care
organizations in Florida, for example, with an economical way to manage peak
demand during the winter season.
Further, the Company assists drug companies with clinical trials of new
drug therapies awaiting U.S. Food and Drug Administration approval and in
distributing new products and meeting special distribution requirements. The
Company performs logistical and handling functions such as pharmacy mail order
services, and provides clinical support, reimbursement management and data
management.
Payors
In fiscal 1999, approximately 64 percent of the Company's revenues were
attributable to commercial pay sources, 20 percent of revenues were attributable
to Medicaid reimbursement, state reimbursed programs and other state/county
funding programs and 16 percent of revenues were attributable to Medicare
reimbursement. In fiscal 1999, Cigna Healthcare accounted for approximately 11
percent of revenues. The Company's three year contract with Cigna Healthcare had
an expiration date of December 31, 1998, but was amended to continue until
terminated by either party with 60 days, advance notice. Except for these
payors, no other payor accounts for as much as 10 percent of revenues. The
revenues from commercial payors are primarily generated under fee for service
contracts which are traditionally one year in term and renewable automatically
on an annual basis, unless terminated by either party.
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Source and Availability of Personnel
To maximize the cost effectiveness and productivity of caregivers, the
Company utilizes customized systems and procedures that have been developed and
refined over the years. These processes include the recruitment and selection of
applicants who fit the patients' individual parameters for skills, experience
and other criteria. Personalized matching is achieved through initial applicant
profiles, personal interviews, skill evaluations and background and reference
checks. The Company generally employs caregivers on an as-needed basis to meet
client demand. Specialized recruitment and retention programs are offered to
caregivers as incentives for them to remain in the Company's employ.
Caregivers are recruited through a variety of sources, including
advertising in local and national media, job fairs, solicitations on web sites,
direct mail and telephone solicitations, as well as referrals obtained directly
from clients and other caregivers. Caregivers are generally paid on an hourly
basis for time actually worked, subject to a four-hour daily minimum on the days
worked. The wages paid may vary in different geographic areas to reflect the
prevailing wages paid for the particular skills in the community where the
services are performed. In the northeastern and western regions of the United
States the Company is currently experiencing a shortage of licensed
professionals. A prolonged shortage of professionals could have a material
adverse effect on the Company's business.
Trademarks
The Company has various trademarks registered with the U.S. Patent and
Trademark Office, including Rehab Without Walls(R) and Chronicare(R) or in the
process of being registered with the U.S. Patent and Trademark Office, including
Care You Can Count On(SM) and Gentiva(SM). In addition, the Company has a
royalty-free license from Olsten which permits the Company to use, until March
15, 2001, some trademarks, service marks and names that were not transferred to
the Company in the split-off, including Olsten(R). Before the expiration of this
license, the Company intends to develop its Gentiva name and further develop its
health services business trademarks.
Business Environment
Factors that the Company believes have contributed and will contribute to
the development of home health care in particular include recognition that home
health care can be a cost-effective alternative to lengthy, more expensive
institutional care; an aging population; increasing consumer awareness and
interest in home health care; the psychological benefits of recuperating from an
illness or accident in one's own home and advanced technology that allows more
health care procedures to be provided at home.
The Company is actively pursuing relationships with managed care
organizations. The Company believes that its nationwide office network,
financial resources and the quality,
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range and cost-effectiveness of its services are important factors as it seeks
opportunities in its managed care relationships in a consolidating home health
care industry. The Company offers the direct and managed provision of care as a
single gatekeeper, thereby optimizing utilization.
Marketing and Sales
In general, the Company obtains clients through personal and corporate
sales presentations, telephone marketing calls, direct mail solicitation,
referrals from other clients and advertising in a variety of local and national
media, including the Yellow Pages, newspapers, magazines, trade publications and
television. Marketing efforts also involve personal contact with case managers
for managed health care programs, such as those involving health maintenance
organizations and preferred provider organizations, insurance company
representatives and employers with self-funded employee health benefit programs.
The Company does not seek reimbursement from government payors for unallowable
marketing and sales expenses.
Managed care and other non-governmental payors, which are an increasingly
significant source of referrals for home health care services, accounted for 64
percent of net revenues in fiscal 1999. The Joint Commission on Accreditation of
Healthcare Organizations (JCAHO) accredits about 98% of the locations. The
Company believes JCAHO accreditation enhances its ability to obtain contracts
with certain managed care organizations. The Company is also targeting referrals
from managed care organizations by offering disease management programs for the
treatment of asthma, diabetes and other chronic illnesses, as well as outcome
and utilization reports. The Company expects managed care contracts will
generate an increasing number of referrals as the penetration of managed care
accelerates in its markets. The Company believes that it has the local
relationships, the knowledge of the regional markets in which it operates, and
the cost-effective, comprehensive services and products required to compete
effectively for managed care contracts and other referrals.
The Company believes that its success in furnishing caregivers is based,
among other factors, on its reputation for quality and local market expertise
combined with the resources of extensive office network. The Company also
empowers its branch directors with a high level of responsibility, providing
strong incentives to manage the business effectively at the local level, one of
the central ingredients in a business where relationships are vital to success.
Competitive Position
The segments of the health care industry in which the Company operates are
highly competitive and fragmented. There are approximately 15,000 home care
agencies operating in the United States, in which the three largest providers
represented less than 15 percent of the national industry in revenues for 1999.
The industry is comprised of a few national companies, hundreds of regional
companies and thousands of locally based independent home health care
organizations. These companies range from facility-based (hospital, nursing
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home, rehabilitation facility, government agency) agencies to independent
companies to visiting nurse associations and nurse registries. They can be
not-for-profit organizations or for-profit organizations. In addition, there are
relatively few barriers to entry in some segments of the health care market in
which the Company operates. The Company could experience increased competition
in the future from existing competitors or new entrants that may limit the
Company's ability to maintain or increase its market share. The Company's
primary national competitors are Caremark Therapeutic Services and Coram
Healthcare Corp., and its primary regionally based competitors are
hospital-based home health agencies and visiting nurse associations.
The Company competes with other home health care providers on the basis of
availability of personnel, quality and expertise of services and the value and
price of services. The Company believes that it has a favorable competitive
position, attributable mainly to its widespread office network and the
consistently high quality and targeted services it has provided over the years
to its patients, as well as to its screening and evaluation procedures and
training programs for caregivers.
The Company may have existing competitors, as well as a number of potential
new competitors, who have greater name recognition, and significantly greater
financial, technical and marketing resources than the Company. This may allow
them to devote greater resources to the development and promotion of their
services. These competitors may also engage in more extensive research and
development, undertake more far-reaching marketing campaigns and adopt more
aggressive pricing policies and make more attractive offers to existing and
potential employees and clients.
The Company expects that industry forces will impact it and its
competitors. The Company's competitors will likely strive to improve their
service offerings and price competitiveness. The Company also expects its
competitors to develop new strategic relationships with providers, referral
sources and payors, which could result in increased competition. The
introduction of new and enhanced services, acquisitions and industry
consolidation and the development of strategic relationships by the Company's
competitors could cause a decline in sales or loss of market acceptance of the
Company's services or price competition, or make the Company's services less
attractive.
Number of Persons Employed
At January 2, 2000, the Company had approximately 5,100 full-time
administrative staff and 650 full time caregivers. The Company also employs
caregivers on a temporary basis, as needed, to provide home healthcare services.
In fiscal 1999, the average number of temporary caregivers employed on a weekly
basis was approximately 18,000.
In British Columbia some of the Company's caregivers are unionized by the
British Columbia Government Services' Employee Union under the master collective
bargaining
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agreement which applies to all home health agencies in British Columbia. In
addition, the Company is in the process of negotiating its first collective
bargaining agreement with all unionized caregivers in the Thunder Bay, Ontario
office with the Services' Employees International Union, Local 268. In the
Windsor, Ontario location, the Canadian Union of Public Workers filed an
application with the Ontario Labor Relations Board alleging that it is the
bargaining agent for the Company's caregivers. The Company has responded to
these allegations and a hearing has been set for November 4, 2000. In addition,
the Services' Employees International Union, Local 880 has filed a
representation petition with the National Labor Relations Board covering three
home health services offices in Chicago, Illinois with about 700 caregivers. An
election was held on November 5, 1999 at which the employees voted against the
representation. The union filed objections to the vote against the election.
These objections were upheld by the National Labor Relations Board Hearing
Officer; the Company intends to appeal this decision further. If the Company
loses the appeal, another election will be held. The Company believes that its
relationships with its employees are generally good.
With respect to administrative staff and caregivers, the Company pays the
employer's share of Social Security taxes, federal and state unemployment taxes,
workers' compensation insurance and other similar costs. Administrative staff
and caregivers are covered by professional medical liability insurance. The
Company believes that it maintains insurance coverages which are adequate for
the purposes of its business.
Canadian Operations
Through subsidiaries, the Company has provided home health services in
Canada for many years. In fiscal 1999, the Company's Canadian operations
represented about 3 percent of its revenues.
Item 2. Properties.
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Olsten agreed to provide office space to the Company without charge at 175
Broad Hollow Road, Melville, New York 11747-8905 for its corporate headquarters
until September 15, 2000. The Company agreed to use its best efforts to relocate
its corporate headquarters promptly, but in no event later than September 15,
2000. Other regional administrative offices leased by the Company are located in
Overland Park, Kansas and Tampa, Florida. The Company also maintains leases for
other offices and locations on various terms expiring on various dates. On March
15, 2000, the Company entered into an agreement with Olsten and a subsidiary of
Olsten pursuant to which the Company agreed to assume such subsidiary's
obligations under a lease for a property beginning on September 16, 2000. The
Company believes that its facilities are adequate for its immediate needs. The
Company does not anticipate that it will have great difficulty obtaining
additional or replacement space for the headquarters and other locations, as
needed in the future.
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Item 3. Legal Proceedings.
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Litigation
There is presently pending in the U.S. District Court for the Eastern
District of New York a class action filed by some Olsten stockholders against
Olsten and some of its directors and officers, captioned In re Olsten
Corporation Securities Litigation, No. 97-5056. The class action asserts claims
for violations of the Securities Act and the Securities Exchange Act, including
claims that the directors and officers of Olsten misrepresented information to
stockholders relating to the government investigations into Olsten's health
services business described in the "Government Investigations" section below.
There is also pending in the Delaware Chancery Court a purported derivative
lawsuit filed by some Olsten stockholders against some directors and officers of
Olsten (and Olsten, as nominal defendant), captioned Rubin v. May, No. 17135-NC.
This purported derivative lawsuit alleges that the Olsten directors and officers
breached their fiduciary duties to stockholders in connection with the
above-described class action and the below-described government investigations.
In July 1999, the Indiana Attorney General's Office filed a lawsuit against
Olsten in Indiana Superior Court, captioned State of Indiana v. Quantum Health
Resources, Inc. and Olsten Health Services, Inc., No. 49D029907CP001011,
alleging that Olsten was overpaid by Medicaid, failed to properly disclose
information to Medicaid and engaged in improper billing.
On January 14, 1999, Kimberly Home Health Care, Inc. ("Kimberly") initiated
three arbitration proceedings against hospitals owned by Columbia/HCA Healthcare
Corp. ("Columbia/HCA") with which Kimberly had management services agreements to
provide services to the hospitals' home health agencies. The basis for each of
the arbitrations is that Columbia/HCA sold the home health agencies without
assigning the management services agreements and, as a result, Columbia/HCA has
breached the management services agreements. In response to the arbitrations,
Columbia/HCA has asserted that the arbitration be consolidated and stayed, in
part based upon its alleged claims against Kimberly for breach of contract, and
requested indemnity and possibly return of management fees. Columbia/HCA has not
yet formally presented these claims in the arbitrations or other legal
proceedings, and has not yet quantified the claims. The parties agreed to
suspend the proceedings until June 2000.
Because the above lawsuits and arbitration proceedings are in relatively
preliminary stages and seek unspecified damages, penalties and/or reimbursement
for costs and expenses, the Company is unable at this time to assess the
probable outcome or potential liability arising from such litigation.
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Furthermore, in connection with the split-off, the Company agreed to
assume, to the extent permitted by law, and indemnify Olsten for, the above
lawsuits and arbitration proceedings, together with any other liabilities
arising out of the health services business before or after the split-off,
including any such liabilities arising after the split-off in connection with
the government investigations described below.
Government Investigations
The Company's business has been subject to extensive federal and state
governmental investigations regarding, among other things:
o the preparation of Medicare costs reports, which is referred to as the
"Cost Reports Investigation";
o the relationship between Columbia/HCA and the health services business
in connection with the purchase by Columbia/HCA of some home health
agencies that were owned by the health services business and
subsequently managed under contract by a unit of the health services
business, which is referred to as the "Columbia/HCA Investigation";
and
o some of the health care practices of Quantum Health Resources, Inc.
("Quantum"), including alleged improper billing and fraud against
various federally funded medical assistance programs, which largely
occurred during the period prior to Olsten's acquisition of Quantum in
June 1996, which is referred to as the "Quantum New Mexico
Investigation."
On July 19, 1999, Olsten entered into written civil and criminal agreements
with the U.S. Department of Justice (and, as to the civil agreement, the Office
of Inspector General of the U.S. Department of Health and Human Services)
finalizing the settlement of the civil and criminal aspects of the Cost Reports
Investigation and the Columbia/HCA Investigation. Under the settlement:
o Olsten paid on August 11, 1999 the sum of $61 million to the
U.S. Department of Justice, including approximately $10.1 million in
criminal fines and penalties;
o In connection with the Columbia/HCA Investigation, Kimberly, then a
subsidiary of Olsten, pled guilty in the United States District Courts
for the Northern District of Georgia, the Southern District of Florida
and the Middle District of Florida to criminal violations of the
federal mail fraud, conspiracy and kickback statutes;
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o In connection with the Columbia/HCA Investigation, Kimberly has been
permanently excluded from participation in Medicare, Medicaid and all
other federal health care programs as defined in 42 U.S.C.
ss.1320a-7b(f); and
o In connection with the Cost Reports Investigation and the Columbia/HCA
Investigation, Olsten signed a corporate integrity agreement with the
Office of Inspector General of the U.S. Department of Health and Human
Services.
In October 1998, Olsten entered into a final settlement agreement with
several government agencies investigating the past practices of Quantum, which
is referred to as the "Quantum Past Practices Investigation." The agreement was
entered into with the U.S. Department of Justice, the Office of the Inspector
General of the U.S. Department of Health and Human Services, the U.S. Secretary
of Defense (for the CHAMPUS/Tricare program), and the Attorneys General for the
States of New York and Oklahoma. Under the settlement, Olsten reimbursed the
government approximately $4.5 million for disputed claims under the Medicaid and
CHAMPUS programs and entered into a corporate integrity agreement.
In early December 1999, Olsten received a document subpoena from the
Department of Health and Human Services, Office of Inspector General, Office of
Investigations. After preliminary discussions with the Office of Inspector
General, the Company believes the subpoena relates to an investigation of
possible overpayments to it by the Medicare program. In early February 2000, the
Company received a document subpoena from the Department of Health and Human
Services, Office of Inspector General, and Office of Investigations. The Company
believes the subpoena relates to its agencies' cost reporting procedures
concerning contracted nursing and home health aide costs. The Company intends to
provide the Office of Inspector General with the requested documents and
cooperate fully with its investigations. At this time, the Company is unable to
assess the probable outcome or potential liability, if any, arising from these
subpoenas.
The Company has recently commenced discussions with the North Carolina
Attorney General's Office concerning questions that the Office has raised as to
the eligibility of a certain class of the Company's patients to receive
Medicaid-reimbursed home health services and, thus, the Company's entitlement to
Medicaid reimbursement in connection with those services. At this preliminary
stage, the Company is unable to assess the probable outcome of or potential
liability arising from this matter.
As noted above, in connection with the government's Cost Reports
Investigation and Columbia/HCA Investigation, Olsten executed a corporate
integrity agreement with the Office of Inspector General of the Department of
Health and Human Services. That corporate integrity agreement will be in effect
until August 18, 2004. In connection with the Quantum Past Practices
Investigation, Olsten executed a corporate integrity agreement in October 1998
with the U.S. Department of Justice, the Office of Inspector General of the U.S.
Department of
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Health and Human Services, the U.S. Secretary of Defense (for the
CHAMPUS/Tricare Program) and the Attorneys General for the States of New York
and Oklahoma that will be in effect until December 31, 2001. Under each of the
corporate integrity agreements, the Company is, for example, is required:
o to maintain a corporate compliance officer to develop and implement
compliance programs;
o to retain an independent review organization to perform annual
reviews; and
o to maintain a compliance program and reporting systems, as well as
provide certain training to employees.
The corporate integrity agreement entered into in connection with the
Quantum Past Practices Investigation applies to the Company's specialty
pharmaceutical services business and focuses on the training and billing of
blood factor products for hemophiliacs. The corporate integrity agreement
relating to the Cost Reports Investigation and the Columbia/HCA Investigation
applies to the Company's businesses that bill the federal government health
programs directly for services, such as its home care nursing business (but
excluding the specialty pharmaceutical services business). That corporate
integrity agreement focuses on issues and training related to cost report
preparation, contracting, medical necessity and billing of claims.
The Company's compliance program will be implemented for all newly
established or acquired business units if their type of business is covered by
the corporate integrity agreements. Reports under each integrity agreement are
to be filed annually with the Department of Health and Human Services, Office of
Inspector General. After each corporate integrity agreement expires, the Company
is to file a final annual report with the government. If the Company fails to
comply with the terms of either of its corporate integrity agreements, the
Company will be subject to penalties ranging from $1,500 to $2,500 for each day
of the breach.
In March 2000, Gentiva was notified by the U.S. Department of Justice that,
in light of the Adecco/Olsten merger and the split-off of Gentiva as an
independent public company, the Company has been substituted for Olsten in
connection with the civil settlement and corporate integrity agreements
referenced in this "Government Investigations" section.
Regulations
The Company's business is subject to extensive federal and state
regulations which govern, among other things:
o Medicare, Medicaid, CHAMPUS and other government-funded reimbursement
programs;
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o reporting requirements, certification and licensing standards for
certain home health agencies; and
o in some cases, certificate-of-need and pharmacy-licensing
requirements.
The Company's compliance with these regulations may affect its
participation in Medicare, Medicaid, CHAMPUS and other federal health care
programs. The Company is also subject to a variety of federal and state
regulations which prohibit fraud and abuse in the delivery of health care
services. These regulations include, among other things:
o prohibitions against the offering or making of direct or indirect
payments for the referral of patients;
o rules against physicians making referrals under Medicare for clinical
services to a home health agency with which the physician has certain
types of financial relationship; and
o laws against the filing of false claims.
As part of the extensive federal and state regulation of the home health
care business, and under the Company's corporate integrity agreements, the
Company is subject to periodic audits, examinations and investigations conducted
by, or at the direction of, governmental investigatory and oversight agencies.
Violation of the applicable federal and state health care regulations can result
in excluding a health care provider from participating in the Medicare, Medicaid
and/or CHAMPUS programs and can subject the provider to substantial civil and/or
criminal penalties. As noted in the "Government Investigations" section above,
one of the Company's subsidiaries, Kimberly, has been permanently excluded from
participation in Medicare, Medicaid and all other federal health care programs
pursuant to a plea agreement.
Periodic and random audits conducted by intermediaries may result in a
delay in receipt, or an adjustment to the amounts of reimbursement due or
received under Medicare, Medicaid, CHAMPUS and other federal health care
programs. In September 1999, the Company received a Notice of Amount of Program
Reimbursement for the 1997 Medicare cost reports from the Medicare fiscal
intermediary advising that it disagreed with the Company's methodology of
allocating a portion of its overhead. The Health Care Financing Administration
has indicated that it agrees with the fiscal intermediary. The notice indicates
a disallowance of approximately $7 million of costs in 1997 which the Company
would be required to pay if the fiscal intermediary is correct. Since the
Company used a similar methodology for allocating overhead costs in 1998 and
1999, an additional disallowance aggregating approximately $5 million could
result for these years. The Company believes its cost reports are accurate and
consistent with past practice accepted by the fiscal intermediary, and has
appealed the notice to the Provider Reimbursement Review Board. The Company is
unable to predict
14
<PAGE>
the outcome of this appeal and the final determination of revenue to be
ultimately recognized by the Medicare program; however the Company has made
adequate provision for such disallowance in its financial statements. In
connection with the split-off, the Company agreed to assume all liabilities
arising out of and associated with the health services business.
Item 4. Submission of Matters to a Vote of Security Holders.
- ------- ----------------------------------------------------
In the last fiscal quarter of the 1999 fiscal year, the following matters
were submitted for vote and approval of Olsten, as the sole shareholder of the
Company:
o the name of the Company;
o the Company's directors;
o the Company's amended and restated certificate of incorporation;
o the Company's amended and restated by-laws;
o the Company's form of severance agreements;
o the Company's form of change of control agreements;
o the Company's executive officers bonus plan;
o the Company's 1999 stock incentive plan;
o the Company's stock and deferred compensation plan for non-employee
directors; and
o the Company's employee stock purchase plan.
15
<PAGE>
PART II
Item 5. Market Price for Registrant's Common Equity and Related Stockholder
- ------- Matters.
-------------------------------------------------------------------
Market Information
During the period covered by this report, there was no established public
trading market for shares of the Company's common stock. As of March 16, 2000,
the Company's common stock was quoted on The Nasdaq National Market under the
symbol "GTIV".
Holders
Because the Company was a wholly-owned subsidiary of Olsten at January 2,
2000, Olsten was the only holder of the Company's common stock at that date. As
of March 16, 2000, the approximate number of holders of the Company's common
stock was 2,303.
Recent Sales of Unregistered Securities
The Company did not sell any equity securities during the period covered by
the report, other than the issuance of its common stock prior to the split-off,
to Olsten, its former parent corporation for consideration of par value per
share.
Dividends
The Company does not expect to pay any dividends on its common stock for
the foreseeable future. Any future payments of dividends and the amount of the
dividends will be determined by the board of directors from time to time based
on:
o results of operations;
o financial condition;
o cash requirements;
o future prospects; and
o other factors deemed relevant by the Company's board of directors.
In addition, some of the Company's debt instruments and other agreements
also contain restrictions of the Company's ability to declare and pay dividends.
See Item 7, Part II.
16
<PAGE>
Item 6. Selected Financial Data.
- ------- ------------------------
The following table provides selected historical consolidated financial
data of the Company as of and for each of the fiscal years in the five-year
period ended January 2, 2000. The data as of and for each of the fiscal years in
the four-year period ended January 2, 2000 have been derived from the Company's
audited consolidated financial statements. The consolidated financial data as of
and for the fiscal year ended December 31, 1995 have been derived from the
Company's unaudited financial statements and include, in the Company's opinion,
all adjustments, consisting of normal recurring adjustments, necessary for a
fair statement of the results for that year. The historical consolidated
financial information presents the Company's results of operations and financial
position as if the Company was a separate entity from Olsten for all years
presented. The historical financial information may not be indicative of the
Company's future performance and may not necessarily reflect what the financial
position and results of operations of the Company would have been if the Company
was a separate stand-alone entity during the years covered.
<TABLE>
<CAPTION>
Fiscal Year Ended
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
(53 weeks)
(In thousands except for share amount)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data
Net revenues.................. $1,369,382 $1,374,353 $1,433,854 $1,330,303 $1,489,822
Gross profit.................. 525,262 511,940 520,586 421,407 505,426
Selling, general and
Administrative expenses....... 436,674 421,222 460,254 552,528 509,658
Net income (loss)............. 45,163 (2,877)(1) 26,847 (101,465)(2) (15,086)(3)
Net income (loss) per share...
2.22 (.14) 1.32 (4.99) (.74)
Average shares out-
standing (4).................. 20,345 20,345 20,345 20,345 20,345
Balance Sheet Data (at
end of year):
Working capital............... $326,681 $334,512 $346,135 $367,915 $438,536
Total assets.................. 739,438 785,341 783,478 945,738 1,063,105
Long-term debt................ 86,250 86,250 86,250 86,250 --
Shareholders' equity.......... 516,716 541,737 530,270 561,859 705,291
</TABLE>
(1) Net loss in fiscal 1996 reflects merger, integration and other
non-recurring pre-tax charges totaling approximately $75 million. These
charges resulted from acquisition of Quantum for $39 million; $30 million
of allowances for a change in the methodology used by Medicare for
computing reimbursements in prior years related to our home health care
business; and Quantum's charge of $5.5 million related to the settlement of
shareholder litigation.
17
<PAGE>
(2) Net loss in fiscal 1998 reflects non-recurring pre-tax charges and other
adjustments totaling approximately $122 million. These charges resulted
from $66 million related to the restructuring of the Company's businesses
and a special charge of $56 million for the settlement of two federal
investigations. These provisions include a reduction in revenues of $14
million, a charge to cost of sales of $15 million and $93 million in
selling, general and administrative expenses. See Note 4 to the Company's
Consolidated Financial Statements.
(3) Net loss for fiscal 1999 reflects a special pre-tax charge of $15.2 million
for the realignment of business units as part of a new restructuring plan.
This charge is included in selling, general and administrative expenses.
See Note 4 to the Company's Consolidated Financial Statements.
(4) Historical earnings per share data has been computed based upon a
20,345,029 shares of common stock. Such amount is based on the number of
shares of the Company's common stock issued March 15, 2000, the date of the
split-off. Pursuant to the terms of the split-off, shareholders of Olsten
received .25 shares of Gentiva Health Services common stock for each share
of Olsten common stock or Class B common stock that they owned.
Item 7. Management's Discussion and Analysis of Financial Condition and
- ------- Results of Operations.
---------------------------------------------------------------
The historical consolidated financial information presents the results of
operations and financial position as if the Company was an independent company
for all years presented. The historical financial information may not be
indicative of future performance and may not necessarily reflect what the
Company's financial position and results of operations would have been if it
were a separate stand-alone entity during the years covered. As an independent
company, the Company expects to incur additional legal, risk management, tax,
treasury, human resources and administrative and other expenses that it did not
experience as a wholly-owned subsidiary of Olsten.
The Company provides home health care through its caregivers, including
licensed health care personnel, such as registered nurses. The Company offers a
broad range of services, including:
o treatments for patients with chronic diseases;
o intravenous and oral administration of drugs, nutrients and other
solutions;
o skilled nursing care;
o pediatric/maternal care programs;
18
<PAGE>
o rehabilitation and other therapies;
o disease management programs;
o home health aide and personal services care; and
o institutional, occupational and alternate site staffing.
The home health care industry in which the Company operates has undergone
significant changes due to government regulation. As part of the Balanced Budget
Act of 1997, the government enacted the Interim Payment System ("IPS") for
reimbursement of home care services provided under Medicare, which represents
approximately 16 percent of our business. Prior to enactment of the IPS, home
care services were reimbursed based on cost subject to a per-visit limit
determined by the Health Care Financing Administration. The IPS reimburses home
care services based on costs, subject to both a per-beneficiary limit and a
per-visit limit. Further, the IPS reduced the per-visit limit to 1994 levels. In
order to operate at the lowered reimbursement rates, home health care companies
reduced the services provided to patients by providing fewer patient visits. In
addition, the regulatory climate that ensued in home health care caused a lower
level of physician referrals.
As a result of these cuts, the amount the Company gets paid has been
reduced. Specifically, Medicare revenue, excluding acquisitions, was reduced as
compared to the preceding year by $127 million or 40% in fiscal 1998 and $36
million or 19% in fiscal 1999. These reductions have had a negative impact on
operations and liquidity.
Results of Operations
In the quarter ended April 4, 1999, the Company recorded a special charge
totaling $16.7 million for the realignment of business units as part of a new
restructuring plan, including:
o compensation and severance costs of $5 million to be paid to
operational support staff, branch administrative personnel and
management;
o asset write-offs of $6.5 million, related primarily to fixed assets
being disposed of in offices being closed and facilities being
consolidated as well as fixed assets and goodwill attributable to the
Company's exit from certain businesses; and
o integration costs of $5.2 million, primarily related to obligations
under lease agreements for offices and other facilities being closed.
19
<PAGE>
As of the end of fiscal 1999, substantially all of the closures and
consolidation of facilities and expected terminations had occurred. These
activities have resulted in lower costs than originally estimated and, as a
result, the Company recognized a benefit of $1.5 million in the fourth quarter
of 1999 to reflect the change in estimate. The realignment of the business units
achieved a reduction of expenses of about $3 million in 1999, due to reduced
employee, lease and depreciation expenses.
On March 30, 1999, the Company announced plans to take a special charge
totaling $56 million, which was recorded in the fourth quarter of fiscal 1998.
The charge was for the settlement of two federal investigations focusing on
Medicare home office cost reports and certain transactions with Columbia/HCA.
The agreements in connection with the settlement were finalized and signed on
July 19, 1999. On August 11, 1999 Olsten paid $61 million pursuant to the
settlement, about $5 million of which was previously accrued as part of the 1996
merger, integration and other non-recurring charges.
In 1998, the Company also recorded non-recurring charges and other
adjustments of $66 million, of which approximately $64 million was recorded in
the second quarter and $2 million was recorded in the third quarter both related
to the restructuring of business. These charges, which were primarily for 60
office closings and consolidations in the United States, were taken to help
position the Company to operate more efficiently under the new IPS. In addition,
significant technological investments were made in order to improve operational
efficiencies and employee retention levels. The benefit of the restructuring
began to be realized in the second quarter of 1998.
Included in this provision was $24 million charged to selling, general and
administrative expenses, which included lease payments of $3 million, employee
severance of $4 million, fixed asset and software write-offs of $5 million to
reflect the loss incurred upon the Company's decision to dispose of the assets
in some closed offices, and an increase in the allowance for doubtful accounts
of $12 million. All closures and consolidations of facilities and employee
terminations, related to this charge, have been completed. The allowance for
doubtful accounts was increased because receipt of payment is highly dependent
on the Company's ability to provide some evidence of service and authorization
documentation to a variety of third-party payors. The office closings,
consolidation of certain business service centers and the termination of
employees are all events that, in the Company's experience, impair its ability
to provide the documentation required to collect on receivables. The Company
also recorded other adjustments to selling, general and administrative expenses
of $13 million which included professional fees and related costs resulting from
the settlement with several government agencies regarding certain past business
practices of Quantum, the level of effort required to respond to the significant
inquiries conducted by the government, and costs incurred to redesign the credit
and collection process of the Company's business.
In addition, upon final announcement of the per-beneficiary limits by the
government, the Company recorded a reduction in revenues in the second quarter
of fiscal 1998 of $14 million in anticipation of lower Medicare reimbursements
resulting from the new per-visit and per-beneficiary limits that were imposed by
Medicare under the IPS.
20
<PAGE>
The Company recorded a charge to cost of sales of $15 million to reflect
the estimated increase in costs that have been incurred, but not yet reported,
based upon a change in the actuarial estimates utilized to determine the level
of service to patients covered under the Company's capitated contracts.
At January 2, 2000, about $2.8 million, consisting primarily of severance
and integration costs, remained unpaid and were included in accrued expenses.
Revenues
Revenues increased 12 percent, or $160 million, during fiscal 1999 compared
to fiscal 1998 driven by growth in specialty pharmaceutical services of 22
percent, or $128 million, staffing services of 28 percent, or $28 million, and
home care nursing services of 1 percent, or $4 million. Included in home care
nursing services revenues is an increase in revenue attributable to the
acquisition of Columbia/HCA's home health care operations in the state of
Florida, which was partially offset by declines in Medicare-related home care
visits and reimbursement due to the implementation of the IPS.
Revenues in fiscal 1998 had decreased 7 percent, or $104 million, compared
to fiscal 1997, primarily as a result of a 23 percent, or $197 million, decrease
in home care nursing services revenues resulting from the reduction in Medicare
related home care visits due to the implementation of IPS, partially offset by a
13 percent, or $68 million, increase in specialty pharmaceutical services
revenues and a 35 percent, or $25 million, increase in the staffing services
business.
Gross Profit
Gross profit margins increased in fiscal 1999 to 34 percent from 32 percent
for fiscal 1998 primarily as a result of productivity enhancements, rate
increases and a change of payor mix driven by the acquisition in the state of
Florida in the home care nursing services business, partially offset by greater
growth in the lower margin staffing services business.
Gross profit margins had decreased in fiscal 1998 to 32 percent from 36
percent in fiscal 1997 primarily as a result of a change in the business mix
reflecting growth in lower margin staffing services business and revenue decline
in the Medicare portion of the home care nursing business. The negative
influences on gross profit margins were partially offset by growth in the
specialty pharmaceutical services.
Selling, general and administrative expenses
Selling, general and administrative expenses decreased to $510 million, or
34 percent of revenues, for fiscal 1999 from $553 million, or 42 percent of
revenues, as compared to fiscal 1998. Excluding the effects of special charges,
non-recurring charges and other adjustments recorded in both years, selling,
general and administrative expenses were 33 percent of
21
<PAGE>
revenues during the fiscal 1999 as compared to 35 percent of revenues in fiscal
1998, primarily as a result of the impact of efficiency improvement efforts in
home care nursing services and corporate administrative support departments
partially offset by increased information systems costs.
Selling, general and administrative expenses for fiscal 1998 were $553
million, or 42 percent of revenues, as compared to $460 million, or 32 percent
of revenues, in fiscal 1997. Excluding the effects of the non-recurring charges
and other adjustments, selling, general and administrative expenses were $460
million, or 35 percent of revenues, for fiscal 1998. The increase in selling,
general and administrative expenses as a percent of revenues was primarily
attributable to investments in infrastructure, including new information systems
and increased expenses incurred to grow the specialty pharmaceutical services
and staffing services businesses. These increases were partially offset by the
cost reduction initiatives, including closing and consolidating offices in the
home care services business.
Interest expense
Interest expense of $17.0 million during fiscal 1999 was slightly lower
than interest expense of approximately $17.4 million for fiscal 1998 due to the
retirement of $7.7 million of Quantum's 4 3/4% convertible subordinated
debentures in January 1999. Interest expense for all years represented interest
on the debentures outstanding and intercompany borrowings with Olsten.
Income taxes
The effective income tax rates on income (loss) were 28.9 percent, 31.7
percent, 37.9 percent for fiscal 1999, fiscal 1998 and fiscal 1997 respectively.
The rates differ from statutory rates primarily because of non-deductible
goodwill amortization and other non-deductible items.
Year 2000
The technical infrastructure of the Company, encompassing all business
applications, is Year 2000 compliant. Systems not directly related to the
financial operations of the business, primarily voice communications, have also
been upgraded.
Systems critical to the Company's business, which were identified as
non-year 2000 compliant, have been replaced to increase efficiencies and improve
the Company's ability to provide services to customers. The new infrastructure,
which is Year 2000 compliant, was completely implemented in field offices before
January 1, 2000. Other systems, which required remediation, were completed
before January 1, 2000. The total cost of the Company's remediation plan was
about $2.5 million.
22
<PAGE>
The Company has not experienced any transactional or operational problems
due to Year 2000 issues during the month of January 2000 or in any subsequent
months.
Liquidity and Capital Resources
Historically, the Company has relied on cash flow from operations and
advances from Olsten to meet its operating and investing activities. In the
past, when liquidity needs exceeded cash flow, Olsten provided the necessary
funds. In connection with the split-off and in accordance with the separation
agreement governing the split-off, the Company received approximately $32
million in cash (referred to as the true-up amount) prior to the split-off date.
Following the split-off, the Company paid Olsten approximately $13 million to
settle the intercompany account balance which related primarily to management
fees, additional advances and interest expense on intercompany balances. The
Company is no longer able to use Olsten's resources to meet its needs and has
acquired third party financing, as described below, for such purposes.
The Company received $20 million of proceeds from the issuance by Gentiva
Trust, a Delaware statutory trust (the "Trust"), of 10% convertible trust
preferred securities on March 15, 2000. The Company owns all the common equity
in the Trust. The Trust's only asset is the 10% convertible subordinated
debentures of the Company. The Company entered into a credit facility, which
provides for up to $150 million in borrowings, including up to $30 million which
is available for letters of credit. The Company may borrow up to 80 percent of
eligible accounts receivable, as defined. The credit facility, which expires in
2004, includes covenants requiring the Company to maintain a minimum tangible
net worth and minimum earnings before interest, taxes, depreciation and
amortization. Other covenants in the credit facility include: limitations on
mergers, consolidations, acquisitions, indebtedness, liens, capital expenditures
and disposition of assets and other limitations with respect to the Company's
operations. The interest rate on borrowings under the credit facility is based
on the London Interbank Offered Rate (LIBOR) plus 2.5 percent or the lender's
prime rate plus 0.25 percent.
As of March 16, 2000, there were no borrowings under the credit facility
and approximately $19 million of standby letters of credit outstanding. As of
such date, the Company had borrowing capacity of approximately $131 million
under the credit facility. By October 2000, the Company will be required to
repay $78.6 million of its 4-3/4% convertible subordinated debentures which
mature on October 1, 2000. The Company is evaluating various options, including
use of the new credit facility, to repay these debentures.
Working capital at January 2, 2000 was $439 million, an increase of 19
percent versus $368 million at January 3, 1999. Net receivables increased to
$575 million, or 27 percent, predominantly due to growth in the specialty
pharmaceutical services, which historically has a longer collection period than
the Company's other businesses. The Company has recently made and will continue
to make investments in billing and accounts receivable systems and has realigned
its billing and collection units in an effort to improve cash flow from
operations.
23
<PAGE>
Management believes cash flows from operations, borrowings available under
the new credit facility and any remaining proceeds received from the issuance of
the 10% convertible trust preferred securities will be adequate to support the
ongoing operations and to meet debt service and principal repayment requirements
for the foreseeable future. The Company intends to make investments and other
expenditures to, among other things, upgrade its computer technology and system
infrastructure and relocate its headquarters. If cash flows from operations or
availability under the new credit facility fall below expectations, the Company
may be forced to delay planned capital expenditures, reduce operating expenses,
seek additional financing or consider alternatives designed to enhance
liquidity.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
- -------- -----------------------------------------------------------
The Company's exposure to the market risk for changes in interest rates
relates to the fair value of its fixed rate Quantum debentures. Generally, the
fair market value of fixed rate debt will increase as interest rates fall and
decrease as interest rates rise. Based on the overall interest rate exposure on
the fixed rate debentures at January 2, 2000, a 10 percent change in market
interest rates would not have a material effect on the fair value of long-term
debt.
Fluctuations in currency exchange rates may impact shareholder's equity.
Assets and liabilities of the Company's Canadian subsidiary are translated into
U.S. dollars at the exchange rates in effect at the balance sheet date. Revenues
and expenses are translated into U.S. dollars at the weighted average exchange
rate for the period. The resulting translation adjustments are recorded in
shareholder's equity as accumulated other comprehensive income (loss).
Although currency fluctuations impact reported results of operations, such
fluctuations generally do not affect cash flow or result in actual economic
gains or losses. Each of the Company's subsidiaries derives revenues and incurs
expenses within a single country and does not incur currency risks in connection
with the conduct of normal business operations.
Other than intercompany transactions between the United States and the
Company's Canadian subsidiary, the Company generally does not have significant
transactions that are denominated in a currency other than the functional
currency applicable to each entity. The Company does not engage in hedging
activities and did not hold any derivative instruments at January 2, 2000.
Item 8. Financial Statements and Supplementary Data.
- ------- --------------------------------------------
The following financial statements and financial schedule of the Company
are included in this report:
<TABLE>
<CAPTION>
Page(s) in this Report
----------------------------------------------------------------- ----------------------------
<S> <C>
Report of Independent Accountants F- 2
----------------------------------------------------------------- ----------------------------
Consolidated Balance Sheets as of January 2, 2000 and January
3, 1999 F- 3
----------------------------------------------------------------- ----------------------------
24
<PAGE>
Consolidated Statements of Income for the three years ended
January 2, 2000 F- 4
----------------------------------------------------------------- ----------------------------
Consolidated Statements of Changes in Shareholders' Equity for
the three years ended January 2, 2000 F- 5
----------------------------------------------------------------- ----------------------------
Consolidated Statements of Cash Flows for the three years ended
January 2, 2000 F- 6
----------------------------------------------------------------- ----------------------------
Notes to Consolidated Financial Statements F- 7
----------------------------------------------------------------- ----------------------------
Schedule II - Valuation and Qualifying Accounts for the three
years ended January 2, 2000 F-32
----------------------------------------------------------------- ----------------------------
</TABLE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
- ------- Financial Disclosure.
---------------------------------------------------------------
There have been no such changes or disagreements.
25
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant.
- -------- ---------------------------------------------------
The following table sets forth certain information regarding each of the
Company's directors and executive officers as of March 16, 2000:
<TABLE>
<CAPTION>
Director/Executive
Officer Position and Offices
Name Since Age with the Company
- ---- ----------------------- --- ----------------
<S> <C> <C> <C>
Victor F. Ganzi Nov. 1999 52 Director
Steven E. Grabowski Nov. 1999 45 Director
Stuart R. Levine Nov. 1999 52 Director
Stuart Olsten Nov. 1999 47 Director
Raymond S. Troubh Nov. 1999 73 Director
Josh S. Weston Nov. 1999 71 Director
Gail Wilensky Mar. 2000 56 Director
Edward A. Blechschmidt Nov. 1999 47 President, Chief
Executive Officer and
Chairman of the Board
of Directors
John J. Collura Nov. 1999 53 Executive Vice
President, Chief
Financial Officer
and Treasurer
Ronald A. Malone Mar. 2000 46 Executive Vice President
Robert J. Nixon Nov. 1999 43 Executive Vice President
Richard C. Christmas Nov. 1999 45 Senior Vice President
E. Rodney Hornbake Mar. 2000 49 Senior Vice President
and Chief Medical
Officer
26
<PAGE>
Director/Executive
Officer Position and Offices
Name Since Age with the Company
- ---- ----------------------- --- ----------------
Patricia C. Ma Nov. 1999 38 Senior Vice President,
General Counsel and
Secretary
Terry Mitchell Mar. 2000 49 Senior Vice President
Vernon A. Perry Nov. 1999 48 Senior Vice President
David C. Silver Mar. 2000 57 Senior Vice President
</TABLE>
The term of office for officers is until resignation or a succesor is
appointed, other than with respect to the term of office described below under
"Employment Agreement". The term of office for directors is as set forth under
the heading "Classified board of directors" below.
Victor F. Ganzi
Mr. Ganzi has served as a director of the Company since November 1999. He
served as a director of Olsten from 1998 until March 2000. He has been executive
vice president of The Hearst Corporation, a diversified communications company
with interests in magazine, newspaper and business publishing and television and
radio stations, since March 1997 and its chief operating officer since March
1998. From 1992 to 1997, at various times Mr. Ganzi served as Hearst's senior
vice president, chief financial officer and chief legal officer. From March 1995
until October 1999 he was group head of Hearst's Books/Business Publishing
Group. He is a director of Hearst-Argyle Television, Inc.
Steven E. Grabowski
Mr. Grabowski has served as a director of the Company since November 1999.
He is currently a Vice President in the Private Client Group of PaineWebber,
Inc., a member of the New York Stock Exchange, where he has worked since 1991.
Mr. Grabowski currently serves on the board of a not-for-profit entity named
VITA Education Services. Mr. Grabowski is the brother-in-law of Mr. Olsten, a
director of the Company.
Stuart R. Levine
Mr. Levine has served as a director of the Company since November 1999. He
served as a director of Olsten from 1995 until March 2000. Since June 1996 he
has served as the chairman and chief executive officer of Stuart Levine &
Associates LLC,
27
<PAGE>
an international training company. From September 1992 to June 1996 he was Chief
Executive Officer of Dale Carnegie & Associates, Inc., a global provider of
corporate training in leadership and personal development. Mr. Levine currently
serves as a Trustee of Long Island Jewish Health Care, and for 15 years, until
1995, he served as a Vice Chairman of North Shore Hospital. Mr. Levine is a
member of the board of directors of European American Bank.
Stuart Olsten
Mr. Olsten has served as a director of the Company since November 1999. He
served as a director of Olsten from 1986 to March 2000. From February 1999 until
March 2000 he was the chairman of the board of directors of Olsten. He was vice
chairman of Olsten from August 1994 to February 1999 and was president of Olsten
from April 1990 to February 1999. Mr. Olsten was appointed to the board of
directors of Adecco at the time of the merger of Olsten into a subsidiary of
Adecco. Mr. Olsten is the brother-in-law of Mr. Grabowski, a director of the
Company.
Raymond S. Troubh
Mr. Troubh has served as a director of the Company since November 1999. He
served as a director of Olsten from 1993 to March 2000. He has been a financial
consultant for more than five years. He is a director of ARIAD Pharmaceuticals,
Inc., Diamond Offshore Drilling, Inc., Foundation Health Systems, Inc., General
American Investors Company, Starwood Hotels and Resorts, Triarc Companies and
WHX Corporation.
Josh S. Weston
Mr. Weston has served as a director of the Company since November 1999. He
served as a director of Olsten from 1995 to March 2000. Since May 1998 he has
been honorary chairman of Automatic Data Processing, Inc., a provider of
computerized transaction processing, data communication and information
services. He was chairman of Automatic Data Processing, Inc. from 1982 to April
1998 and was chief executive officer of Automatic Data Processing, Inc. from
1982 to August 1996. He is a director of Automatic Data Processing, Inc., J.
Crew Inc., Russ Berri Corp. and Shared Medical Systems, Inc. and a trustee of
Atlantic Health Systems, Inc.
Dr. Gail Wilensky
Dr. Wilensky has served as a director of the Company since March 2000. She
has been the John M. Olin Senior Fellow at Project HOPE, an international health
foundation, since January of 1993, and Chair of the Medicare Payment Advisory
Commission. She served as deputy assistant to President Bush for policy
development from March of 1992 to January of 1993 and as administrator of the
Health Care Fi-
28
<PAGE>
nancing Administration from January of 1990 to March of 1992. Dr. Wilensky has
also served as vice president of health affairs at Project HOPE from 1983 to
1989, and has taught economics and public policy at the University of Michigan
and George Washington University. She is an elected member of the Institute of
Medicine and serves as a trustee of the Combined Benefits Fund of the United
Mineworkers of America and the Research Triangle Institute. She is an advisor to
the Robert Wood Johnson Foundation and The Commonwealth Fund. She is a director
of Advanced Tissue Sciences, ManorCare, Quest Diagnostics, St. Jude Medical,
Inc., Shared Medical Systems, Inc., Syncor International, and United HealthCare.
Edward A. Blechschmidt
Mr. Blechschmidt has served as chief executive officer and as a director of
the Company since November 1999. He served as the chief executive officer and a
director of Olsten from February 1999 until March 2000. He has also been the
president of Olsten since October 1998 and served as the chief operating officer
of Olsten from October 1998 to February 1999. From August 1996 to October 1998
he was president and chief executive officer of Siemens Nixdorf Americas, an
information technology company. From January 1996 to July 1996 he was senior
vice president and chief financial officer of Unisys Corporation, a provider of
information technology and consulting services. From January 1995 to December
1995 he was senior vice president and president of the United States and Canada
division of Unisys Corporation. From 1990 to December 1994 he was senior vice
president and president of the Pacific Asia Americas Division of Unisys
Corporation.
John J. Collura
Mr. Collura has served as the executive vice president, chief financial
officer and treasurer of the Company since November 1999. He served as senior
vice president and chief financial officer of Olsten Health Services from 1998
to March 2000. From 1996 to 1998, Mr. Collura was corporate director of
financial and business development operations of Partners Healthcare, an
integrated healthcare delivery system that manages 42 entities. From 1995 to
1996, Mr. Collura was the chief operating officer of the Port Authority of New
York and New Jersey. He also held several senior level finance positions at the
Port Authority and was assistant chief executive officer. Mr. Collura is a
member of the Institute of Management Accountants, where he has served as
president and national board member and a member of the Healthcare Financial
Management Association; he is also a board member of the Arthritis Foundation.
Ronald A. Malone
Mr. Malone has served as executive vice president of the Company since
March 2000. Prior to joining the Company, he served in various positions with
Olsten, including executive vice president of Olsten and president, Olsten
29
<PAGE>
Staffing Services, United States and Canada, from January 1999 to March 2000;
from March 1998 to December 1998, he served as executive vice president,
Operations; from March 1997 to February 1998 he served as senior vice president,
Operations and from July 1994 to February 1997 he served as senior vice
president, Southeast Division.
Robert J. Nixon
Mr. Nixon has served as a senior vice president of the Company since
November 1999. He had been a member of Olsten Health Services' senior management
team since joining Olsten in 1994. From 1994 to 1999, he has served in various
capacities, including as a senior vice president. Prior to joining Olsten, Mr.
Nixon held positions with PediatriCare America, Critical Care America and
Sherwood Medical.
Richard C. Christmas
Mr. Christmas has served as senior vice president of the Company since
November 1999. He joined Olsten in 1992 and has served as regional director,
area vice president and project manager-vice president for a business and
technology reengineering project for Olsten. Prior to joining Olsten, Mr.
Christmas was a regional director of Manpower Inc. and vice president of
Helpmates Temporary Services.
E. Rodney Hornbake, M.D.
Dr. Hornbake has served as senior vice president and chief medical officer
since March 2000. Before joining the Company, Dr. Hornbake served as vice
president and medical director of the North Shore-Long Island Jewish Health
System. Prior to that, Dr. Hornbake was chief medical officer for Aetna
Professional Management Corporation and chief of medicine for the Park Ridge
Health System.
Patricia C. Ma
Ms. Ma has served as the Company's senior vice president, general counsel
and secretary since November 1999. She joined Olsten in June 1994. Since 1998
she served as general counsel and vice president. From 1994 to 1998, Ms. Ma
served in various legal positions with the Company, including vice president,
assistant general counsel, assistant vice president and senior counsel. Prior to
joining Olsten, Ms. Ma served as assistant general counsel of National Medical
Care, Inc. from 1990 to 1994.
Terry Mitchell
Mr. Mitchell has served as senior vice president of the Company since March
2000. Mr. Mitchell served in numerous capacities for Olsten Health Services from
1993 to March 2000. Prior to joining the Company, Mr. Mitchell had an eighteen
year
30
<PAGE>
tenure at Marriott Corporation, including serving as senior vice president in
the management and facilities management divisions.
Vernon A. Perry, Jr.
Mr. Perry has served as senior vice president of the company since November
1999. He joined Olsten in 1994. From 1996 to 1999, he served as senior vice
president of network management. From 1994 to 1996, he served as vice president
of business development, primarily responsible for the health services business
development. Before joining Olsten, Mr. Perry spent twenty years in various
health care management positions, including senior positions at Georgetown
University Community Health Plan, Sierra Health Services and Principal Health
Care.
David C. Silver
Mr. Silver has served as senior vice president of the Company since March
2000. He joined Olsten in 1998 as director, Human Resources Planning and
Development. In April 1999 he was promoted to Vice President, Human Resources
for Olsten's staffing services business. Prior to joining Olsten he held senior
Human Resources positions with the Bank of Tokyo, Supermarkets General
Corporation, Chase Manhattan Bank and Amerada Hess. From 1989 to 1998 he served
as president of a human resources consulting firm delivering organizational
change, leadership development and general human resources consulting services.
Classified board of directors
The board of directors is divided into three classes. Victor F. Ganzi, Dr.
Gail Wilensky and Josh S. Weston, are the class 1 directors with an initial term
expiring at the first annual stockholders' meeting for election of directors.
Edward A. Blechschmidt, Steven E. Grabowski and Raymond S. Troubh, are the class
2 directors with an initial term expiring at the second annual stockholders'
meeting for election of directors. Stuart R. Levine and Stuart Olsten, are the
class 3 directors with an initial term expiring at the third annual stockholders
meeting for the election of directors. After their initial terms, directors will
generally serve for three years.
Committees of the board of directors
The board of directors has an audit committee, a human resources and
compensation committee and an executive committee. The audit committee
recommends the appointment of auditors and oversees accounting and audit
functions and other key financial matters of the Company. In addition, the audit
committee oversees compliance matters as well as the implementation of the
corporate integrity agreements described under the heading "Legal Proceedings".
Messrs. Ganzi and Troubh and Dr. Wilensky will serve as the audit committee's
members. The human resources and compensation
31
<PAGE>
committee oversees compensation and benefit programs. Messrs. Levine, Troubh and
Weston will serve as members of the human resources and compensation committee.
The executive committee acts for the entire board of directors between board
meetings. Messrs. Blechschmidt, Ganzi, Olsten and Weston serve as members of the
executive committee.
Director compensation
Each non-employee member of the board of directors will receive an annual
retainer of $25,000 up to half of which such director may elect to receive in
cash, paid quarterly, the remainder of which will be paid in shares of the
Company's common stock. In addition, any non-employee directors who act as chair
of a committee of the board will receive $2,000 annually for acting as a
chairperson. Non-employee directors will also receive $1,000 for each board or
committee meeting they attend ($500 if attendance is by telephone). All
directors, regardless of whether or not they are employees, will receive
reimbursement for out-of-pocket expenses incurred in connection with attending
meetings. Upon initial election to the board, each non-employee director will
receive stock options exercisable for up to 5,000 shares of the Company's common
stock with future grants to be determined by the board of directors.
Item 11. Executive Compensation.
- -------- -----------------------
Set forth below is information regarding the compensation during Olsten's
1999 fiscal year for the people who served as chief executive officer of or in a
similar capacity for the Company and the four other most highly compensated
officers of the Company (collectively referred to as the "named officers").
During this period, the named officers, other than Mr. Blechschmidt who was
employed by Olsten and paid by Olsten, were the Company's employees and all
compensation was paid by the Company. After March 15, 2000, all of the named
officers who continued with the Company, became employees of the Company and the
compensation of the named officers and all of the other officers was determined
by the human resources and compensation committee of the Company.
32
<PAGE>
<TABLE>
<CAPTION>
Long Term Compensation
Awards
-----------------------
Annual Compensation Securities
------------------- Restricted Underlying All Other
Other Annual Stock Options/ Compensation
Name and Principal Position Year (1) Salary($) Bonus($) Compensation($)(2) Award(s)($) SARS(#) ($)(3)
- --------------------------- -------- --------- -------- ------------------ ----------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Edward A. Blechschmidt 1999 721,538 400,000 19,194 0 311,604 101,547
President, Chief Executive
Officer and Chairman of
the Board
Robert A. Fusco (4) 1999 600,000 100,000 2,312 0 103,868 50,040
Former President
Robert J. Nixon 1999 357,885 80,000 0 0 41,547 28,250
Executive Vice President
John J. Collura 1999 311,346 90,000 154,374 0 41,547 23,727
Executive Vice President, Chief
Financial Officer and Treasurer
Terry Mitchell 1999 288,648 0 0 0 20,774 22,018
Senior Vice President
Richard Christmas 1999 186,004 60,000 0 0 6,232 18,180
Senior Vice President
</TABLE>
(1) Since the Company was not a reporting company during the three immediately
preceding fiscal years, information with respect to the 1999 fiscal year is
reflected in the table.
(2) Gross-up of taxable portion of fringe benefit.
(3) Represents profit sharing and matching contributions by Olsten for the
named officers pursuant to Olsten's Non-Qualified Retirement & Savings Plan
for selected management employees.
(4) Mr. Fusco resigned from his position as President of the health services
business of Olsten in late 1999. As of March 15, 2000, Mr. Fusco was no
longer employed by the Company.
Option Grants
- -------------
The table below sets forth further information concerning the grant of
stock options to the named officers by Olsten during Olsten's 1999 fiscal year.
33
<PAGE>
<TABLE>
<CAPTION>
Olsten Stock Option Grants in Fiscal 1999
Individual Grants POTENTIAL REALIZABLE VALUE AT
----------------- ASSUMED ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR OPTION
TERM(3)
------------------------------
Number of % of Total
Securities Options
Underlying Granted to Exercise
Options Employees in Price Expiration
Name Granted(#)(1) Fiscal Year(2) ($/Sh) Date 5%($) 10%($)
- ---- ------------- -------------- ------ ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Edward A.
Blechschmidt 311,604 30.1 $3.49 2/10/09 $683,923 $1,733,192
Robert A. Fusco 103,868 10.0 $3.61 3/15/01 $42,492 $87,484
Robert J. Nixon 41,547 4.0 $3.61 1/5/09 $94,335 $239,063
John J. Collura 41,547 4.0 $3.61 1/5/09 $94,335 $239,063
Terry Mitchell 20,774 2.0 $3.61 1/5/09 $41,289 $104,636
Richard Christmas 6,232 .6 $3.61 1/5/09 $14,150 $35,859
</TABLE>
(1) The options were originally granted as options to buy Olsten's common stock
at an exercise price equal to the fair market value of the Olsten common
stock on the date of the grant. At the time of the split-off, all options
to buy Olsten common stock held by the Company's employees were converted
to options to buy the Company's common stock. The numbers of securities
reflected in the table give effect to the conversion of Olsten options to
the Company's options on the date of the split-off.
(2) The percentages shown are based upon the total options granted to all of
the Company's employees in 1999, excluding grants awarded to Olsten
employees.
(3) The dollar amounts under the indicated columns are the result of
calculations at the 5% and 10% rates set forth by the Securities and
Exchange Commission and are not intended to forecast possible future
appreciation of the Company's stock price.
34
<PAGE>
Aggregated option exercises in Gentiva's 1999 fiscal year and 1999 fiscal year
end option values.
The table below sets forth information with respect to the named officers
concerning the exercise of stock options during the Company's 1999 fiscal year
and unexercised options held as of the end of that year.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying In-the-Money
Unexercised Options at 1999 Options at
Fiscal Year End (#) 1999 Fiscal Year End ($)
------------------- ------------------------
Shares
Acquired on Value
Name Exercise(#) realized Exercisable Unexercisable(1) Exercisable Unexercisable(1)
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Edward A. Blechschmidt 0 0 83,094 643,981 215,000 1,469,375
Robert A. Fusco 0 0 358,343 420,665 19,141 248,047
Robert J. Nixon 0 0 86,209 159,957 13,672 117,266
John J. Collura 0 0 12,983 80,497 13,672 117,266
Terry Mitchell 0 0 49,337 37,912 0 38,125
Richard Christmas 0 0 8,050 19,475 3,849 25,661
</TABLE>
(1) All such options were accelerated on March 15, 2000 in connection with the
split-off and in accordance with the 1994 Olsten Stock Option Plan.
Employment Agreement
On March 14, 2000, the Company entered into an employment agreement with
Mr. Blechschmidt, the current president, chief executive officer and chairman of
the board of directors. The agreement became effective on March 15, 2000 and
will be in effect for a period of three years. During the term of the agreement,
Mr. Blechschmidt will receive: (1) a base salary of $600,000 per year, and (2)
an annual bonus, based on the achievement of target levels of performance, with
target bonus equal to 80 percent of his base salary and the maximum bonus equal
to 120 percent of his salary. However, Mr. Blechschmidt's bonus will not be less
than 50 percent of his base salary for 2000. Mr. Blechschmidt will also receive
customary benefits, perquisites and reimbursement for expenses.
The agreement provides that Mr. Blechschmidt's employment will terminate:
o upon the death or disability of Mr. Blechschmidt,
o upon termination of his employment for cause,
o for termination of his employment without cause, or
o termination of his employment for good reason by Mr. Blechschmidt.
In the event his employment is terminated as a result of his death or
disability, he or his estate will be entitled to receive his earned salary,
vested benefits and accelerated vesting of his accrued pension benefits. He will
not be entitled to severance benefits. In the event the
35
<PAGE>
agreement is terminated for cause by the Company he will be entitled to receive
earned salary and vested benefits and will not be entitled to severance
benefits. In the event the agreement is terminated for good reason by Mr.
Blechschmidt or without cause by the Company he will be entitled to earned
salary, vested benefits, severance benefits and accelerated vesting of his
accrued pension benefits and continued medical benefits for up to two years.
Severance benefits as referred to in this section, are equal to two times Mr.
Blechschmidt's base salary, so long as Mr. Blechschmidt does not receive any
amounts under his change in control agreement.
The agreement also restricts Mr. Blechschmidt's ability to engage in any of
the Company's business lines in the United States and Canada for the term of the
agreement and during the nine months after termination of his employment, other
than termination without cause and termination for good reason. It also contains
confidentiality provisions and provisions for non-solicitation of the Company's
employees.
Mr. Blechschmidt has entered into a change in control agreement with the
Company, similar to the terms described below.
Change in Control Agreements
The following officers of the Company are parties to change in control
agreements in connection with their employment with the Company: Edward A.
Blechschmidt, John J. Collura, Ronald A. Malone, Robert J. Nixon, Richard C.
Christmas, Patricia C. Ma, Terry Mitchell, Vernon A. Perry and David Silver.
These agreements have a term of three years, commencing on March 15, 2000. They
generally provide benefits in the event: (1) the employee's employment is
terminated by the Company and the termination is not for cause or is by the
employee for good reason (as specified in the agreement) and (2) the termination
is within three years after a change in control of the Company. In addition,
these executive officers will receive the benefit of their agreements if they
were terminated by the Company without cause up to a year before a change in
control, if their termination arose in connection with the change in control.
The benefits conferred under these agreements generally will include the
following:
o a cash payment equal to either one or two times the employee's base
salary and target bonus;
o continued benefits for the lesser of two years following the
termination or until the employee obtains comparable benefits from
another employer;
o immediate vesting of any stock options held by the employee (those
options would remain exercisable for one year following the
termination, but not beyond the original full term); and
36
<PAGE>
o full vesting of retirement and deferred compensation benefits.
Under certain circumstances the benefits could be reduced in order to avoid
the incurrence of excise taxes by the employees.
Under the agreements, a change in control is defined to include the
following events:
o a person or group (with certain exceptions for the Olsten family)
beneficially owns at least 25 percent or more of the voting stock;
o either the directors (and their approved successors) cease to
constitute a majority of the board of directors or a majority of the
persons nominated by the board of directors for election fails to be
elected;
o a merger of the Company if the stockholders do not own a majority of
the stock of the surviving company or if the members of the board of
directors do not constitute a majority of the directors of the
surviving company's board;
o if the company is liquidated; or
o if all or substantially all of the assets are sold.
In addition, the change in control agreements provide that if an employee
substantially prevails in a dispute with the Company relating to their
agreement, the Company will pay that employee's attorney's fees which result
from their suit. The employees who have these agreements are not required to
seek other employment or otherwise mitigate any damages they are caused as a
result of a change in control, but they are required to keep the Company's
confidential information private.
Severance Agreements
The executive officers of the Company are parties to severance agreements
in connection with their employment with the Company. These severance agreements
generally provide that, in the event the executive officer is terminated other
than for cause or has his/her base salary reduced in a situation that is not
part of a general salary reduction, the executive officers have the right to
receive payments for periods ranging from one to two years in an amount based on
that executive's base salary at the time of termination. Additionally, the
severance agreements provide that the Company will provide these executive
officers with health benefits based on their benefit levels at the time of
termination for the same period or until they obtain similar health benefits
elsewhere.
37
<PAGE>
Executive Officers Bonus Plan
The board of directors of the Company adopted an executive officers bonus
plan under which the executive officers may be entitled to receive a bonus
contingent upon the achievement of performance goals. The purpose of the plan is
to provide the executives with an opportunity to earn a bonus as an incentive
and reward for their leadership, ability and exceptional service. The plan will
be administered by the human resources and compensation committee of the board
of directors. The committee will be able to:
o establish performance goals for the granting of bonuses for each year;
o determine the executives who are eligible to take part in the plan;
o determine whether the performance goals for any year have been
achieved;
o authorize payment of bonuses under the plan;
o adopt, alter and repeal the administrative rules, guidelines and
practices governing the plan; and
o interpret the terms and provisions of the plan.
Currently, all executives officers are eligible to participate in
the executive officers bonus plan.
The amount of any bonus granted to any of the executives for any year can
not be more than the lesser of 200 percent of the executive's annual base salary
or $2.5 million. Performance goals may vary from executive to executive and will
be based upon some of the following performance criteria, as the committee may
deem appropriate:
o appreciation in stock value, total stockholder return, earnings per
share;
o operating income, net income, pro forma net income;
o return on equity, return on designated assets, return on capital;
o economic value added, earnings, revenues, expenses;
o operating profit margin, operating cash flow, gross profit margin, net
profit margin;
o employee turnover, employee headcount, labor costs; and
o customer service and accounts receivable.
38
<PAGE>
A copy of the Executive Officers Bonus Plan is incorporated herein by
reference to Amendment No. 2 to the Registration Statement on Form S-4, dated
January 20, 2000.
1999 Stock Incentive Plan
The board of directors of the Company adopted a 1999 stock incentive plan.
The plan was adopted in order to enhance the Company's ability to attract and
retain highly qualified officers, employees, consultants and directors, and to
better enable those persons to participate in long-term success and growth. The
plan will provide for discretionary grants of stock options which may be either
incentive stock options or nonqualified options. The plan will be administered
by the human resources and compensation committee of the board of directors.
The committee has the power to select the eligible employees, consultants
and directors to whom stock options are to be granted under the plan and to
determine the terms and conditions of each stock option granted under the plan.
The committee will be able to determine the number of shares of common stock to
be covered by each award. The maximum total number of shares of common stock for
which grants may be made to any employee, consultant or director in any calendar
year, however, is 300,000. The chief executive officer may award options to
purchase up to 10,000 shares of common stock to employees who are not officers
or directors. A total of 5,000,000 shares of common stock are reserved for
issuance upon exercise of stock options granted under the plan.
A copy of the 1999 Stock Incentive Plan is attached as an exhibit hereto.
Stock & Deferred Compensation Plan
The board of directors of the Company adopted a stock & deferred
compensation plan for non-employee directors which provides for payment of
annual retainer fees of $25,000 for non-employee directors in a combination of
cash and shares of common stock. Non-employee directors may elect to receive up
to 50 percent of the total compensation in cash payable in quarterly
installments. The plan was adopted in order to enhance the Company's ability to
attract and retain highly qualified non-employee directors. About eight persons
are eligible to participate in this plan.
A total of 150,000 shares of common stock are reserved for issuance under
the plan. Each of the non-employee director's annual retainer fee will be paid
in shares of common stock in an amount (rounded to the nearest 100 shares)
determined by dividing the amount of compensation received in stock by the
average closing price of shares of common stock on The Nasdaq National Market
for the ten trading days immediately prior to the annual stockholders meeting at
which directors are elected or reelected. Non-employee directors can elect to
defer the retainer fee shares. Amounts deferred are credited in the form of
share units to a share unit account. If any dividends are payable on shares of
our common stock during the deferral period, non-employee directors shall have
dividend equivalents of an equal amount paid to them in cash.
39
<PAGE>
A copy of the 1999 Stock and Deferred Compensation Plan is attached as an
exhibit hereto.
Employee Stock Purchase Plan
The board of directors of the Company adopted an employee stock purchase
plan under which employees may be entitled to purchase common stock. The plan
was adopted in order to provide eligible employees the opportunity to purchase
common stock, enhance the Company's ability to attract and retain
highly-qualified personnel, and to better enable such persons to participate in
long-term success and growth. The plan will be administered by the human
resources and compensation committees;
All of the Company's employees and the employees of its subsidiaries who
have been employed for at least eight months (or another period determined by
the committee not in excess of two years) will be eligible to purchase stock
under this plan, except that employees whose customary employment is twenty
hours or less per week will be excluded. The committee has the power to
determine the terms and conditions of each offering of common stock to employees
under the plan. The committee may also determine the number of shares of common
stock to be covered by each offering. The maximum number of shares of common
stock which may be sold to any employee in any offering, however, will generally
be 10 percent of that employee's compensation during the period of the offering.
A total of 1,200,000 shares of common stock are reserved for issuance under the
employee stock purchase plan.
A copy of the 1999 Employee Stock Purchase Plan is incorporated by
reference to Amendment No. 2 to the Registration Statement on Form S-4, dated
January 20, 2000.
Item 12. Securities Ownership of Certain Beneficial Owners and Management.
- -------- -----------------------------------------------------------------
The following table sets forth as of March 16, 2000, the amount of common
stock beneficially owned by:
o each director of the Company;
o the named officers of the Company;
o all officers and directors of the Company as a group; and
o all persons who beneficially own more than five percent of common
stock.
40
<PAGE>
<TABLE>
<CAPTION>
Percent
Name of Beneficial Owner Number of Owned
------------------------ Shares Owned (if more than 1%)
------------ -----------------
<S> <C> <C>
Edward A. Blechschmidt(1)(2)..................................................... 755,075 3.58
Richard C. Christmas(2)(3)....................................................... 27,525
John J. Collura(2)(3)............................................................ 93,481
E. Rodney Hornbake(2)........................................................... 0
Patricia C. Ma(2)(3)............................................................. 34,068
Ronald A. Malone................................................................. 0
Terry Mitchell(2)(4)............................................................. 88,124
Robert J. Nixon(2)(5)............................................................ 248,666 1.21
Vernon A. Perry(2)(3)............................................................ 85,274
David C. Silver(2)(3)............................................................ 4,155
Victor F. Ganzi(2)............................................................... 750
Steven Grabowski(2)(6)........................................................... 1,311,277 6.45
Stuart Levine(2)................................................................. 2,063
Stuart Olsten(2)(7).............................................................. 1,559,998 7.67
Raymond S. Troubh(2)............................................................. 36,149
Josh S. Weston(2)................................................................ 2,487
Gail Wilensky.................................................................... 0
Cheryl Olsten(2)(8).............................................................. 1,311,277 6.45
Miriam Olsten(2)(9).............................................................. 1,020,578 5.02
Greenhaven Associates............................................................ 1,938,850 9.53
Three Manhattanville (12)
Purchase, NY 10577
Pacific Financial Research(13) .................................................. 1,533,350 7.5
9601 Wilshire Boulevard
Beverly Hills, CA
First Manhattan Co.(14) ......................................................... 879,347 5.1
437 Madison Avenue
New York, NY
All executive officers and directors as a group (17 persons)(11)................. 3,563,732(11) 16.46
</TABLE>
(1) Mr. Blechschmidt's holding includes 23,000 shares owned directly and 5,000
shares owned by his wife, as to which shares he disclaims beneficial
ownership, and 727,075 shares that may be acquired within 60 days through
the exercise of options.
(2) Excludes shares of convertible trust preferred securities that such person
has purchased. The convertible trust preferred securities are convertible
into our common stock based on a conversion price of 17.5 percent over the
average closing stock price of our common stock during the 10 trading days
following the first earnings announcement after the date of the split-off.
See "Certain Relationships and Related Transactions".
(3) Includes shares that may be acquired within 60 days through the exercise of
options.
(4) Includes 87,249 shares that may be acquired within 60 days through the
exercise of options.
(5) Includes 246,166 shares that may be acquired within 60 days through the
exercise of options.
41
<PAGE>
(6) Mr. Grabowski's holdings include 425 shares owned directly and 1,310,852
shares beneficially owned by his wife, Cheryl Olsten, as to which shares he
disclaims beneficial ownership. See footnote (8).
(7) Mr. Stuart Olsten's holdings include 874,008 shares owned of record and 300
shares owned of record by his wife, as to which shares he disclaims
beneficial ownership. Mr. Olsten has shared voting and investment power as
a trustee with respect to 630,709 shares owned by a trust for his and his
sister's benefit. He has shared voting and investment power as a trustee
with respect to 11,250 shares owned by a trust for the benefit of his son,
22,500 shares owned by two trusts for the benefit of his niece and nephew
and 20,901 shares owned by a trust for the benefit of his descendants, as
to which shares he disclaims beneficial ownership. His holdings further
include 330 shares held in a custodial account for his daughter, as to
which shares he disclaims beneficial ownership.
(8) Ms. Cheryl Olsten owns of record 625,492 shares and has shared voting and
investment power as a trustee with respect to 630,709 shares owned by a
trust for her and her brother's benefit. Ms. Olsten has shared voting and
investment power as a trustee with respect to 22,500 shares owned by two
trusts for the benefit of her two children, 11,250 shares held by a trust
for the benefit of her nephew, 20,901 shares owned by a trust for the
benefit of her descendants, as to which shares she disclaims beneficial
ownership. Ms. Olsten's holdings also include 425 shares beneficially owned
by her husband, Mr. Grabowski, as to which shares she disclaims beneficial
ownership.
(9) Mrs. Miriam Olsten owns 785,276 shares. She has sole voting and investment
power with respect to 234,202 shares held under a trust for the benefit of
one of her children, of which she is trustee, and as to which shares she
disclaims beneficial ownership.
(10) Includes shares that may be acquired by executive officers within 60 days
through the exercise of options.
(11) In order to avoid counting shares attributable to two person twice, in
calculating the amounts and percentage, 685,360 shares were deducted to
give effect to beneficial ownership reflected for both Mr. Grabowski and
Mr. Olsten.
(12) Based on a Schedule 13G/A dated March 16, 2000 and filed with the
Securities and Exchange Commission, Greenhaven Associates has sole voting
and dispositive power as to 732,900 shares and shared dispositive power as
to 1,205,850 shares.
(13) Based on a Schedule 13G dated February 11, 1999 and filed with the
Securites and Exchange Commission, Pacific Financial Research held sole
voting power and sole dispositive power as to all of such shares.
(14) Based on a Schedule 13G for Olsten dated February 9, 2000 and filed with
the Securites and Exchange Commission, First Manhattan Co. held sole
voting power and sole dispositive power as to 47,500 of such shares, shared
voting power as to 769,572 of such shares and shared dispositive power as
to 831,847 of such shares.
Item 13. Certain Relationships and Related Transactions.
- -------- -----------------------------------------------
In connection with the split-off, the Company entered into various
agreements with Olsten and Adecco governing the terms of the split-off,
including the separation agreement. Additionally, on March 15, 2000 the Company
entered into an agreement with Olsten and a subsidiary of Olsten, pursuant to
which the Company agreed to assume the obligations of a lease for a property of
such subsidiary on September 16, 2000. The rental payments under that lease
are as follows: from September 16, 2000 to December 31, 2000, $242,000; for
fiscal year 2001, $877,000; for fiscal year 2002, $906,000; for fiscal year
2003, $934,000; for fiscal year 2004, $964,000; and thereafter $2,732,000.
42
<PAGE>
On March 15, 2000 some of the Company's directors and officers, members of
the Olsten family and some other investors, purchased approximately $20 million
of 10% convertible trust preferred securities issued by the Trust. The
investments are in the following aggregate amounts: Miriam Olsten, $7.35
million; Mr. Blechschmidt, $1.25 million; Stuart Olsten and Cheryl Olsten, $1
million each; Mr. Troubh $650,000; Messrs. Ganzi and Weston, $600,000 each; Mr.
Levine $250,000; Mr. Fusco, $200,000; Messrs. Mitchell, Malone and Nixon,
$100,000 each; Mr. Collura and Dr. Hornbake, $50,000 each; Messrs. Christmas,
Perry and Silver and Ms. Ma, $25,000 each, other personnel an aggregate of
$50,000 and other investors, an aggregate of $6.55 million. The convertible
trust preferred securities were offered in a private placement exempt from the
registration requirements of the Securities Act. The Company made a $618,600
investment in the Trust to acquire its common securities. The Company issued
$20,618,600 of convertible subordinate debentures to the Trust on the same terms
as the 10% convertible preferred securities in exchange for $20,618,600.
The convertible trust preferred securities are mandatorily redeemable five
years after issuance and the trust may redeem the securities at any time after
issuance at a declining premium over face amount. Upon a change of control, the
holders of convertible trust preferred securities may require the trust to
purchase these securities at 100% of their face amount. Dividends are payable
quarterly in cash at the rate of 10 percent per annum, but the trust may defer
dividend payments for up to a total of twenty quarters, in which case dividends
will accrue. During any such deferral period, the Company's ability to, among
other things, pay dividends and redeem certain capital stock, may be restricted
under the terms of the convertible trust preferred securities. The convertible
trust preferred securities are convertible into the Company's common stock at a
conversion price on the basis of 17.5 percent over the average closing stock
price of the Company's common stock during the 10 trading days following the
first earnings announcement after the first quarter of 2000.
Mr. Stuart Olsten has agreed not to compete with the Company for a period
of four years from March 16, 2000. In return for this agreement, the Company
will pay him a lump sum of $250,000 in April 2000. Ms. Maureen McGurl, a former
executive officer of Olsten, has been retained as a consultant of the Company
for a payment of $200,000, payable during the term of her 6 month consulting
period. In addition, Mr. Robert A. Fusco, the past president of Olsten's health
services business, did not continue with the Company after March 15, 2000.
43
<PAGE>
The Company paid him $2.0 million on March 15, 2000 pursuant to his change in
control agreement.
Messrs. Blechschmidt and Olsten will be compensated by the Company, on an
after tax basis, for excise taxes (no more than $1.0 million in excise taxes in
the case of Mr. Olsten) imposed by reason of the receipt of amounts payable
under their separation, consulting and non-competition agreements with Olsten
and its parent company, Adecco. The base tax amount for Mr. Blechschmidt is
estimated to be approximately $815,000 and will be accrued in the first quarter
of 2000.
44
<PAGE>
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K.
- -------- ------------------------------------------------------------------
(a) (1) Financial Statements
- Report of Independent Accountants
- Consolidated Balance Sheets as of January 2, 2000 and January 3,
1999
- Consolidated Statements of Income for the three years ended
January 2, 2000
- Consolidated Statements of Changes in Shareholders' Equity for
the three years ended January 2, 2000
- Consolidated Statements of Cash Flows for the three years ended
January 2, 2000
- Notes to Consolidated Financial Statements
(a) (2) Financial Statement Schedules
- Schedule II - Valuation and Qualifying Accounts
(a) (3) Exhibits
Exhibit Number Description
- -------------- -----------
3.1 Restated Certificate of Incorporation of Company(1)
3.2 Restated By-Laws of Company(1)
4.1 Specimen of common stock(3)
4.2 Indenture dated October 8, 1993, between Quantum Health Resources Inc.
and First Trust National Association, as Trustee(1)
4.3 Supplemental Indenture dated June 28, 1996, between Quantum Health
Resources Inc. and First Trust National Association, as Trustee(1)
4.4 Form of Certificate of Designation of Series A Junior Participating
Preferred Stock(1)
4.5 Form of Certificate of Designation of Series A Cumulative Non-Voting
Redeemable Preferred Stock(2)
4.6 Second Supplemental Indenture dated March 15, 2000, between Quantum
Health Resources, Inc. and U.S. Bank Trust National Association
(formerly known as First Trust National Association) as Trustee
4.7 Trust Agreement among the Company, Wilmington Trust Company, the
Administrative Trustees named therein and the holders from time to
time of the convertible trust preferred securites dated March 9, 2000.
4.8 Indenture between the Company and Wilmington Trust Company dated March
15, 2000
10.1 Separation Agreement dated August 17, 1999, among Olsten Corporation,
Aaronco Corp. and Adecco SA(1)
10.2 Omnibus Amendment No. 1 dated October 7, 1999, by and among Olsten
Corporation, Aaronco Corp., Adecco SA and Olsten Health Services
Holding Corp.(1)
10.3 Form of Rights Agreement dated March 2, 2000 between the Registrant
and EquiServe Limited Partnership, as rights agent(1)
45
<PAGE>
10.4 Company's Executive Officers Bonus Plan(1)
10.5 Company's 1999 Stock Incentive Plan
10.6 Company's Stock & Deferred Compensation Plan for Non-Employee
Directors
10.7 Company's Employee Stock Purchase Plan(1)
10.8 Omnibus Amendment No. 2 dated January 18, 2000, by and among Olsten
Corporation, Adecco SA, Olsten Health Services Holding Corp., the
Company and Staffing Acquisition Corporation(1)
10.9 Loan and Security Agreement by and between Fleet Capital Corp., on
behalf of the lenders named therein, the Company, Olsten Health
Services Holding Corp. and the subsidiaries named therein, dated March
13, 2000
10.10 Form of Employment Agreement with Edward A. Blechschmidt(2)
10.11 Form of Change in Control Agreement with Executive Officers of
Company
10.12 Form of Change in Control Agreement with Edward A. Blechschmidt
10.13 Form of Severance Agreement with Executive Officers of Company(2)
21.1 List of Subsidiaries of Company(2)
23.1 Consent of PricewaterhouseCoopers LLP, independent accountants
27 Financial Data Schedule
(1) Incorporated by reference to Amendment No. 2 to the Registration
Statement on Form S-4, dated January 20, 2000 (File No. 333-88663).
(2) Incorporated by reference to Amendment No. 3 to the Registration
Statement on Form S-4, dated February 4, 2000 (File No. 333-88663).
(3) Incorporated by reference to Amendment No. 4 to the Registration
Statement on Form S-4, dated February 9, 2000 (File No. 333-88663).
(4) Incorporated by reference to the Post-Effective Amendment No. 1 on
Form S-8 to Form S-4 dated March 27, 2000 (File No. 333-88663)
B. Report on Form 8-K
------------------
No reports on Form 8-K have been filed during the last quarter for the
period covered by this report.
46
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
GENTIVA HEALTH SERVICES, INC.
Date: April 3, 2000 By: /s/ EDWARD A. BLECHSCHMIDT
---------------------------------
Edward A. Blechschmidt
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: April 3, 2000 By: /s/ EDWARD A. BLECHSCHMIDT
------------------------------
Edward A. Blechschmidt
President and Chief
Executive Officer
Date: April 3, 2000 By: /s/ JOHN J. COLLURA
------------------------------
John J. Collura
Executive Vice President, Chief
Financial Officer and Treasurer
(Principal Financial and
Accounting Officer)
Date: April 3, 2000 By: /s/ VICTOR F. GANZI
------------------------------
Victor F. Ganzi
Director
Date: April 3, 2000 By: /s/ STEVEN E. GRABOWSKI
------------------------------
Steven E. Grabowski
Director
47
<PAGE>
Date: April 3, 2000 By: /s/ STUART R. LEVINE
------------------------------
Stuart R. Levine
Director
Date: April , 2000 By:
------------------------------
Stuart Olsten
Director
Date: April 3, 2000 By: /s/ JOSH S. WESTON
------------------------------
Josh S. Weston
Director
Date: April 3, 2000 By: /s/ RAYMOND S. TROUBH
------------------------------
Raymond S. Troubh
Director
Date: April , 2000 By:
------------------------------
Gail Wilensky
Director
48
<PAGE>
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page No.
Report of Independent Accountants......................................... F-2
Consolidated Balance Sheets as of January 2, 2000 and January 3, 1999..... F-3
Consolidated Statements of Income for the three years
ended January 2, 2000................................................... F-4
Consolidated Statements of Changes in Shareholders'
Equity for the three years ended January 2, 2000 ....................... F-5
Consolidated Statements of Cash Flows for the three years
ended January 2, 2000................................................... F-6
Notes to Consolidated Financial Statements................................ F-7
Schedule II - Valuation and Qualifying Accounts for the
three years ended January 2, 2000....................................... F-32
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Gentiva Health Services, Inc. and Subsidiaries:
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Gentiva Health Services, Inc. and Subsidiaries at January 2, 2000
and January 3, 1999, and the results of their operations and their cash flows
for each of the three years in the period ended January 2, 2000, in conformity
with accounting principles generally accepted in the United States. In addition,
in our opinion, the financial statement schedule listed in the accompanying
index presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements. These financial statements and financial statement schedule are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
New York, New York
March 15, 2000
F-2
<PAGE>
<TABLE>
<CAPTION>
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
January 2, 2000 January 3, 1999
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 2,942 $ 799
Receivables, less allowance for doubtful
accounts of $36,759 and $25,596, respectively 575,460 452,318
Inventories 93,218 90,276
Prepaid expenses and other current assets 87,611 83,746
---------- ---------
Total current assets 759,231 627,139
Fixed assets, net 51,809 60,877
Intangibles, principally goodwill, net of accumulated amortization
of $95,898 and $85,305, respectively 250,297 256,116
Other assets 1,678 1,606
---------- ---------
$1,063,015 $945,738
========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt $ 78,562 $ --
Accounts payable 114,197 93,210
Accrued expenses 76,746 118,627
Payroll and related taxes 20,020 24,109
Insurance costs 31,170 23,278
---------- ---------
Total current liabilities 320,695 259,224
Long-term debt -- 86,250
Other liabilities 37,029 38,405
Shareholders' equity
Common stock, $.10 par value; authorized 100,000,000 shares;
issued and outstanding 20,345,029 shares 2,035 2,035
Additional paid-in capital 725,998 567,525
Accumulated deficit (20,370) (5,284)
Accumulated other comprehensive loss (2,372) (2,417)
---------- ---------
Total shareholders' equity 705,291 561,859
---------- ---------
$1,063,015 $945,738
========== ========
See notes to consolidated financial statements.
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
For the Fiscal Years Ended
1999 1998 1997
---- ---- ----
(53 Weeks)
<S> <C> <C> <C>
Net revenues $1,489,822 $1,330,303 $1,433,854
Cost of services sold 984,396 908,896 913,268
---------- ---------- ----------
Gross profit 505,426 421,407 520,586
Selling, general and administrative expenses 509,658 552,528 460,254
Interest expense, net 3,975 4,414 4,351
Interest expense on intercompany debt 13,000 13,000 13,000
---------- ---------- ----------
Income (loss) before income taxes and minority interest (21,207) (148,535) 42,981
Income tax expense (benefit) (6,121) (47,070) 16,298
---------- ---------- ----------
Income (loss) before minority interest (15,086) (101,465) 26,683
Minority interest -- -- 164
---------- ---------- ----------
Net income (loss) $ (15,086) $(101,465) $ 26,847
========== ========== ==========
SHARE INFORMATION:
Basic and diluted earnings (loss) per share
Net income (loss) $(.74) $(4.99) $ 1.32
========== ========== ==========
Average shares outstanding 20,345,029 20,345,029 20,345,029
========== ========== ==========
See notes to consolidated financial statements.
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
Retained Accumulated
Additional earnings other
Common Stock paid-in (accumulated comprehensive
Shares Amount capital deficit) loss Total
------ ------ ------- -------- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at December 29, 1996 20,345,029 $2,035 $472,426 $ 69,334 $(2,058) $541,737
Comprehensive income
(loss):
Net income and cumulative -- -- -- 26,847 (171) 26,676
translation adjustment
Net transactions with Olsten -- -- (38,143) -- -- (38,143)
----------- -------- --------- --------- ------- --------
Balance at December 28, 1997 20,345,029 2,035 434,283 96,181 (2,229) 530,270
Comprehensive income
(loss):
Net loss and cumulative
translation adjustment -- -- -- (101,465) (188) (101,653)
Net transactions with Olsten -- -- 133,242 -- -- 133,242
----------- -------- --------- -------- ------- --------
Balance at January 3, 1999 20,345,029 2,035 567,525 (5,284) (2,417) 561,859
Comprehensive income
(loss):
Net loss and cumulative
translation adjustment -- -- -- (15,086) 45 (15,041)
Net transactions with Olsten -- -- 158,473 -- -- 158,473
----------- -------- --------- -------- ------- --------
Balance at January 2, 2000 20,345,029 $2,035 $725,998 $(20,370) $(2,372) $705,291
=========== ======== ========= ======== ======= ========
See notes to consolidated financial statements.
</TABLE>
F-5
<PAGE>
<TABLE>
<CAPTION>
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
For the Fiscal Years Ended
1999 1998 1997
(53 Weeks)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $(15,086) $(101,465) $26,847
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 33,625 31,401 29,493
Provision for doubtful accounts 38,687 24,046 25,884
Loss on disposal of fixed assets 1,909 4,202 2,944
Deferred income taxes 13,047 (17,556) 2,679
Minority interest in results of operations of
consolidated subsidiaries -- -- 164
Changes in assets and liabilities, net of
effects from acquisitions and dispositions:
Accounts receivable (161,829) (53,454) (89,089)
Inventories (2,942) (33,383) (4,453)
Prepaid expenses and other current assets (18,219) 9,073 8,749
Current liabilities (29,755) 70,425 15,274
Other, net (902) 2,836 1,708
---------- --------- --------
Net cash provided by (used in) operating
activities (141,465) (63,875) 20,200
---------- --------- --------
INVESTING ACTIVITIES:
Acquisitions of businesses, net of cash acquired (1,724) (33,989) (4,256)
Purchases of fixed assets, net (19,001) (34,579) (23,072)
Proceeds from sale of investment securities -- -- 9,415
---------- --------- --------
Net cash used in investing activities (20,725) (68,568) (17,913)
---------- --------- --------
FINANCING ACTIVITIES:
Net transactions with Olsten 158,473 133,242 (38,143)
Book overdrafts 12,664 -- --
Retirement of long-term debt (6,804) -- --
---------- --------- --------
Net cash provided by (used in) financing
activities 164,333 133,242 (38,143)
---------- --------- --------
Net increase (decrease) in cash and cash equivalents 2,143 799 (35,856)
Cash and cash equivalents at beginning of year 799 -- 35,856
---------- --------- --------
Cash and cash equivalents at end of year
$ 2,942 $ 799 $ --
========== ========= ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments for interest $ 3,975 $ 4,096 $ 4,096
See notes to consolidated financial statements.
</TABLE>
F-6
<PAGE>
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Background and Basis of Presentation
Background
On August 18, 1999, Olsten Corporation ("Olsten") announced its intention
to create a separate publicly traded company (the "Split-off") of Olsten's
health services business and to merge its staffing and information technology
businesses with those of Adecco SA ("Adecco") pursuant to the Merger Agreement,
(the "Merger" and, together with the Split-off, the "Transactions"). Prior to
the Split-off, Gentiva Health Services, Inc. (the "Company") operated Olsten's
health services business. Upon the consummation of the Merger on March 15, 2000,
in exchange for each share of Olsten stock, Olsten issued all of the shares of
common stock of the Company to its shareholders and Adecco delivered to the
Olsten shareholders $8.75 in cash or .12472 Adecco American Depository Shares
(ADS - each ADS representing one-eighth of an Adecco common share), or a
combination thereof determined in accordance with the formula described in the
Merger Agreement, in exchange for the remaining portion of each Olsten share
held.
In connection with the Merger and Split-off, the Company entered into a
$150 million credit facility as discussed in Note 6, issued mandatorily
redeemable securities as discussed in Note 7, settled certain transactions with
Olsten as discussed in Note 8, and agreed to assume certain obligations and
commitments including those described in Note 10 and the shareholders of Olsten
approved various stock plans for the Company as described in Note 12.
Basis of Presentation
The accompanying consolidated financial statements reflect the results of
operations, financial position, changes in shareholders' equity and cash flows
of the Company as if it were a separate entity for all periods presented. The
consolidated financial statements have been prepared using the historical basis
in the assets and liabilities and historical results of operations related to
the Company. Additionally, the Company's selling, general and administrative
expenses include a management fee, which represents an allocation of certain
general corporate overhead expenses of $5 million in each year related to
Olsten's corporate headquarters. Management believes the allocations related to
general corporate overhead expenses are reasonable, however, the costs of these
items deemed to be charged to the Company are not necessarily indicative of the
costs that would have been incurred if the Company had been a stand-alone
entity. Subsequent to the Split-off, the Company will perform these functions
using its own resources or purchased services and will be responsible for the
costs and expenses associated with the management of a public corporation.
Management estimates that had the Company been a separate entity for each year
presented, selling, general and administrative expenses would have been
approximately $5 million greater than the amounts presented in these historical
financial statements.
F-7
<PAGE>
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Interest expense shown in the Consolidated Statements of Income reflects
the interest associated with the Convertible Subordinated Debentures discussed
in Note 6 and $13 million in all years presented relating to the intercompany
balances with Olsten. Such intercompany balances have been reflected as a
contribution to capital at the end of each year presented in these consolidated
financial statements.
Additionally, income taxes are calculated on a separate company basis. The
Company's financial statements include the costs experienced by the Olsten
benefit plans for employees for whom the Company will assume responsibility. As
part of the Transactions, the Company, Olsten and Adecco have entered into a
Separation Agreement, Tax Sharing Agreement and an Employee Benefits Allocation
Agreement, which address the allocation of assets and liabilities and govern
future relationships between them.
The financial information in these financial statements is not necessarily
indicative of results that would have occurred if the Company had been a
separate stand-alone entity during the years presented or of future results of
the Company.
Note 2. Summary of Significant Accounting Policies
Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned and majority-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated. The Company's
fiscal year ends on the Sunday nearest to December 31st, which was January 2,
2000 for 1999, January 3, 1999 for 1998 and December 28, 1997 for 1997.
Revenue Recognition
Revenues and related costs, including labor, payroll taxes, fringe benefits
and products and supplies, are recognized in the period in which the services
and products are provided. Revenues are recorded based on fee-for-service or
contractual arrangements, including capitated agreements, with customers and
third party payors, estimates of expected reimbursement under arrangements with
Medicare and state reimbursed programs, and management fees generated from
services provided to hospital based home health agencies and are adjusted in
future periods as final settlements are determined. Net revenues from state
reimbursed programs amounted to 20 percent, 23 percent and 20 percent of total
consolidated net revenues in 1999, 1998 and 1997, respectively.
Medicare reimbursement is based primarily on reasonable, allowable costs
incurred in providing services to eligible beneficiaries. These costs are
reported in annual cost reports which are filed with the Medicare fiscal
intermediary and are subject to audit. Net revenues attributable to the Medicare
program, including estimated reimbursement of allowable costs, amounted to 16
F-8
<PAGE>
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
percent, 14 percent and 22 percent of total consolidated net revenues in 1999,
1998 and 1997, respectively.
Under capitated agreements with managed care customers, the Company
recognizes revenue based on a predetermined contractual rate for each member of
the managed care plan. Costs are determined based on estimates of expected
service and product requirements. These estimates are developed by applying
actuarial assumptions and historical patterns of utilization to authorized
levels of service. Net revenues from capitated agreements with managed care
payors as a percentage of total consolidated net revenues represented 6 percent
for 1999 and 5 percent in 1998 and 1997.
One customer accounted for approximately 11 percent of total consolidated
net revenues in 1999.
Revenue adjustments result from differences between estimated and actual
reimbursement amounts, an inability to obtain appropriate billing documentation
or authorizations acceptable to the payor and other reasons unrelated to credit
risk. Revenue adjustments are deducted directly from gross accounts receivable.
Accounts receivable included approximately $9 million as of January 2, 2000 and
$1 million as of January 3, 1999 related to net contractual adjustments and
third party settlements. Management prepares various analyses to evaluate its
receivable valuation accounts. Such analyses include accounts receivable aging
trends, historical collection and write-off data and other statistical
information.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents deposited with banks and financial institutions
include highly liquid investments with original maturities of three months or
less.
Inventories
Inventories consist primarily of biological and pharmaceutical products and
supplies held for sale or distribution to patients through prescription. The
Company records inventories at the lower of cost or market. Cost represents the
weighted average cost of purchased products and supplies.
Fixed Assets
Fixed assets, including costs of Company developed software, are stated at
cost and depreciated over the estimated useful lives of the assets using the
straight-line method. Leasehold
F-9
<PAGE>
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
improvements are amortized over the shorter of the life of the lease or the life
of the improvement.
Intangibles
Intangibles, principally goodwill, associated with acquired businesses are
being amortized on a straight-line basis over periods ranging from 10 to 40
years. When events and circumstances so indicate, all long-term assets,
including intangibles, are assessed for recoverability based upon undiscounted
operating cash flow forecasts. If an asset is impaired, it is written down to
fair value which is based on discounted future cash flows.
Foreign Currency Translation
Financial statements of the Company's Canadian subsidiary are translated
into U.S. dollars using the exchange rate at each balance sheet date for assets
and liabilities and a weighted average exchange rate for each period for
revenues, expenses, gains and losses and cash flows. Translation adjustments are
recorded within accumulated other comprehensive income/loss. Transaction gains
and losses that arise from exchange rate fluctuations on transactions
denominated in a currency other than the functional currency are not
significant.
Earnings Per Share
Historical earnings per share data has been computed based upon 20,345,029
shares of common stock. Such amount is based on the number of shares of the
Company's stock issued on March 15, 2000, the date of the Split-off. Pursuant to
the terms of the Split-off, shareholders of Olsten received .25 shares of
Gentiva Health Services common stock for each share of Olsten common stock or
Class B common stock that they owned.
Income Taxes
The Company has been included, where applicable, in the consolidated income
tax returns of Olsten for the respective periods. The provisions for the income
taxes in the Consolidated Statements of Income have been calculated on a
separate company basis. The Company provides for taxes based on current taxable
income and the future tax consequences of temporary differences between the
financial reporting and income tax carrying values of its assets and
liabilities. Under Statement of Financial Accounting Standards ("SFAS") No. 109,
assets and liabilities acquired in purchase business combinations are assigned
their fair values, and deferred taxes are provided for lower or higher tax
bases.
Fair Value of Financial Instruments
The fair value of a financial instrument represents the amount at which the
instrument could be exchanged in a current transaction between willing parties,
other than in a forced sale or liquidation. Significant differences can arise
between the fair value and carrying amount of financial instruments that are
recognized at historical amounts.
F-10
<PAGE>
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The carrying amounts of the Company's cash and cash equivalents, accounts
receivable, accounts payable and accrued expenses approximate fair value because
of their short maturity. The estimated fair value of the Company's 4 3/4%
Convertible Subordinated Debentures, approximately $78 million and $83 million
at January 2, 2000 and January 3, 1999, respectively, was determined based on
quoted market prices for similar investments.
Note 3. Acquisitions
In 1999, the Company acquired several home care operations for an aggregate
purchase price of $1.7 million.
In 1998, the Company acquired all of Columbia/HCA Healthcare Corporation's
home health care operations in the state of Florida and several other companies
in asset transactions approximating $35 million in cash. Assets acquired in
these transactions related primarily to goodwill.
In 1997, the Company acquired several home care operations, providing
skilled nursing services for an aggregate purchase price of $4.6 million in cash
primarily related to goodwill.
Note 4. Special Charges, Non-Recurring Charges and Other Adjustments
In the quarter ended April 4, 1999, the Company recorded a special charge
aggregating $16.7 million. This charge was for the realignment of business units
as part of a new restructuring plan, including compensation and severance costs
of $5 million to be paid to operational support staff, branch administrative
personnel and management, asset write-offs of $6.5 million related primarily to
fixed assets being disposed of in offices being closed and facilities being
consolidated, as well as fixed assets and goodwill attributable to the Company's
exit from certain business previously acquired but not within the Company's
strategic objectives, and integration costs of $5.2 million, primarily related
to obligations under lease agreements for offices and other facilities being
closed. As of January 2, 2000, substantially all of the closures and
consolidations of facilities and expected terminations have occurred. These
activities have resulted in lower costs than originally estimated and, as a
result, the Company recognized a benefit of $1.5 million in the fourth quarter
of fiscal 1999 to reflect this change in estimate. Such benefit is included in
selling, general and administrative expenses.
On March 30, 1999, the Company announced plans to take a $56 million
special charge, which was recorded in the year ended January 3, 1999. This
charge was for the settlement of two federal investigations (described in Note
9), focusing on the Company's Medicare home office cost reports and certain
transactions with Columbia/HCA Healthcare Corporation ("Columbia/HCA") which was
finalized and signed on July 19, 1999. On August 11, 1999, Ol-
F-11
<PAGE>
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
sten paid $61 million pursuant to the settlement, approximately $5 million of
which was accrued as part of the Company's 1996 merger, integration and other
non-recurring charges.
As part of the Balanced Budget Act of 1997, the government enacted the
Interim Payment System ("IPS") for reimbursement of home care services provided
under Medicare effective October 1, 1997. Prior to enactment of the IPS, home
care services were reimbursed based on cost subject to a cap determined by the
Health Care Financing Administration. The IPS reimburses home care services
based on costs, subject to both a per-beneficiary limit and a per-visit limit.
Further, the IPS reduced the per-visit limit to 1994 levels. As a result of
these cuts in reimbursement, provider reimbursements have been reduced. In order
to operate at the lowered reimbursement rates, home health care companies
reduced the services provided to patients by providing fewer patient visits. In
addition, the regulatory climate that ensued in home health care caused a lower
level of physician referrals.
As a consequence of these circumstances, in 1998, the Company also recorded
non-recurring charges and other adjustments of $66 million, of which
approximately $64 million and $2 million were recorded in the second and third
quarters of 1998, respectively, related to the restructuring of the Company's
businesses. These charges, which were primarily for 60 office closings and
consolidations in the United States, were taken to help position the Company to
operate more efficiently under the new IPS. In addition, the Company has also
made significant technological investments in order to improve operational
efficiencies and employee retention levels. The benefit of the restructuring
began to be realized in the second quarter of 1998.
Included in this provision was $24 million charged to selling, general and
administrative expenses, which included lease payments of $3 million, employee
severance of $4 million, fixed asset and software write-offs of $5 million to
reflect the loss incurred upon the Company's decision to dispose of the assets
in certain closed offices, and an increase in the allowance for doubtful
accounts of $12 million. All closures and consolidations of facilities and
employee terminations related to this charge have been completed. The allowance
for doubtful accounts was increased because the collection of receivables is
highly dependent on the service provider's ability to provide certain evidence
of service and authorization documentation to a variety of third-party payors.
The office closings, consolidation of certain business service centers and the
termination of employees are all events that, in the Company's past experience,
impair the ability to provide the aforementioned documentation and to collect
receivables.
The Company also recorded other adjustments to selling, general and
administrative expenses of $13 million which included professional fees and
related costs resulting from the settlement with several government agencies
regarding certain past business practices of Quantum Health Resources, Inc.
("Quantum", a subsidiary of the Company acquired in 1996), the level of effort
required to respond to the significant inquiries conducted by the government,
and costs incurred to redesign the credit and collection process of the home
health services business.
F-12
<PAGE>
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In addition, upon final announcement of the per-beneficiary limits by the
government, the Company recorded a reduction in revenues of $14 million in the
second quarter of 1998 for the six month period ended June 28, 1998 in
anticipation of lower Medicare reimbursements resulting from the new per-visit
and per-beneficiary limits that have been imposed by Medicare under the IPS.
The Company recorded a charge to cost of sales of $15 million in the second
quarter of 1998 to reflect the estimated increase in costs that have been
incurred, but not yet reported, based upon a change in the actuarial estimates
utilized to determine the level of service to patients covered under the
Company's capitated contracts.
In 1996, the Company recorded merger, integration and other non-recurring
charges totalling approximately $75 million. At the beginning of fiscal year
1997, the balance of this charge aggregated $27.8 million.
F-13
<PAGE>
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The major components, as well as the activity during the years
ended 1999, 1998, and 1997 of the charges were as follows (in
thousands):
<TABLE>
<CAPTION>
Accounts
Receivable and Compensation
and Other and Severance Integration
Settlements Assets(1) Costs Costs Other Total
<S> <C> <C> <C> <C> <C> <C>
Charge - 1996
Balance at December 29, 1996 $ 5,200 $ 5,732 $5,989 $ 9,928 $985 $27,834
Cash expenditures -- -- (5,633) (9,021) (985) (15,639)
Non-cash write-offs -- (5,670) -- -- -- (5,670)
-------- -------- ------- ------- ------- -------
Balance at December 28, 1997 5,200 62 356 907 -- 6,525
Cash expenditures -- -- (356) (813) -- (1,169)
Non-cash write-offs -- (62) -- -- -- (62)
-------- -------- ------- ------- ------- -------
Balance at January 3, 1999 5,200 -- -- 94 -- 5,294
Cash expenditures (5,200) -- -- (94) -- (5,294)
Non-cash write-offs -- -- -- -- -- --
-------- -------- ------- ------- ------- -------
Balance at January 2, 2000 -- -- -- -- -- --
-------- -------- ------- ------- ------- -------
Charge - 1998 56,000 17,309 4,000 34,641 10,050 122,000
Cash expenditures -- -- (3,739) (33,839) (9,574) (47,152)
Non-cash write-offs -- (17,211) -- -- -- (17,211)
-------- -------- ------- ------- ------- -------
Balance at January 3, 1999 56,000 98 261 802 476 57,637
Cash expenditures (56,000) -- (261) (588) (476) (57,325)
Non-cash write-offs -- (98) -- -- -- (98)
-------- -------- ------- ------- ------- -------
Balance at January 2, 2000 -- -- -- 214 -- 214
-------- -------- ------- ------- ------- -------
Charge - 1999 -- 6,490 5,020 5,190 -- 16,700
Cash expenditures -- -- (2,787) (3,310) -- (6,097)
Non-cash write-offs -- (6,490) -- -- -- (6,490)
Adjustments -- -- (803) (697) -- (1,500)
-------- -------- ------- ------- ------- -------
Balance at January 2, 2000 -- -- 1,430 1,183 -- 2,613
-------- -------- ------- ------- ------- -------
Balance of all charges
combined at January 2, 2000 $ -- $ -- $ 1,430 $ 1,397 $ -- $ 2,827
======== ======== ======== ======== ======= ========
</TABLE>
1 Amounts represent contra assets.
F-14
<PAGE>
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Note 5. Fixed Assets, Net
(in thousands) January 2, 2000 January 3, 1999
--------------- ---------------
<S> <C> <C>
Computer equipment and software $ 67,414 $ 67,025
Furniture and fixtures 32,248 38,658
Buildings and improvements 16,816 15,850
Machinery and equipment 15,203 14,597
------- -------
131,681 136,130
Less accumulated depreciation (79,872) (75,253)
-------- --------
$ 51,809 $ 60,877
======== ========
</TABLE>
Depreciation expense was approximately $22 million in 1999, $21 million in
1998 and $19 million in 1997.
Note 6. Long-Term Debt
In 1993, the Company's Quantum subsidiary, issued $86.3 million of 4 3/4%
Convertible Subordinated Debentures maturing on October 1, 2000. The debentures
were convertible into Class B common stock of Olsten at $52.26 per share. As a
result of the Transactions, the debentures are exchangeable into shares of the
Company and the merger consideration as if the holder of the debenture held the
number of shares of Olsten's Class B common stock that the debentures would have
been convertible into immediately prior to the Transactions. For each share of
Class B common stock that would have been received had the holder converted
immediately prior to the Split-off, such holder will receive $8.75 and .25
shares of the Company's common stock upon conversion of the Quantum debentures.
In January 1999, $7.7 million of the convertible subordinated debentures
were retired at 88.5 percent of the principal amount, resulting in a gain of
approximately $900,000. Interest expense is net of interest income of $336,000
in 1999, $120,000 in 1998 and $310,000 in 1997.
On March 13, 2000, the Company entered into a credit facility, which
provides for up to $150 million in borrowings, including up to $30 million,
which is available for letters of credit. The Company may borrow up to a maximum
of 80 percent of eligible accounts receivable, as defined. At the Company's
option, the interest rate on borrowings under the credit facility is based on
the London Interbank Offered Rate (LIBOR) plus 2.5 percent or the lender's prime
rate plus 0.25 percent.
The credit facility, which expires in 2004, includes certain covenants
requiring the Company to maintain a minimum tangible net worth and minimum
earnings before interest, taxes, depreciation and amortization and provides
limitations on certain other activities. Loans under
F-15
<PAGE>
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the credit facility will be collateralized by all of the Company's tangible and
intangible personal property, other than equipment.
Note 7. Mandatorily Redeemable Securities
Cumulative Preferred Stock
The Company's authorized capital stock includes 25,000,000 shares of
preferred stock, $.01 par value, of which 1,000 shares have been designated
Series A Cumulative Non-voting Redeemable Preferred Stock ("cumulative preferred
stock"). On March 10, 2000, 100 shares of cumulative preferred stock were issued
for proceeds of $100,000.
Holders of the cumulative preferred stock will be entitled to receive
cumulative cash dividends at an annual rate of LIBOR plus 2% on the stated
liquidation preference of $1,000 per share, payable quarterly in arrears out of
assets legally available for payment of dividends, when and as declared by the
Company's board of directors on March 31, June 30, September 30 and December 31
of each year, commencing June 30, 2000. Dividends will accumulate and be
cumulative from the issue date. In the event of any voluntary or involuntary
liquidation, dissolution or other winding-up of the Company or, at the option of
the Company on or after March 10, 2005 or the holder on or after May 10, 2005,
the holders of cumulative preferred stock will be entitled to receive the stated
liquidation preference or a redemption price of $1,000 per share.
Gentiva Obligated Mandatorily Redeemable Preferred Securities of a Subsidiary
Trust
On March 15, 2000, certain of the Company's and Olsten's directors,
officers and management and other related parties and other investors purchased
$20 million of 10% convertible trust preferred securities issued by a trust, of
which the Company owns all the common equity. The Company purchased all of the
common equity of the trust for a sum of $618,600. The convertible trust
preferred securities are mandatorily redeemable five years from issuance and the
trust may redeem the securities at any time after issuance at a declining
premium over face amount. Upon a change of control, as defined, the holders of
convertible trust preferred securities may require the trust to purchase these
securities at 100 percent of their face amount. Dividends are payable quarterly
in cash at the rate of 10 percent per annum, but the trust may defer dividend
payments for up to a total of twenty quarters, in which case dividends will
accrue. The convertible trust preferred securities are convertible into the
Company's common stock at a conversion price on the basis of 17.5 percent over
the average closing stock price of the Company's common stock during the ten
trading days following the first earnings announcement after the first quarter
of 2000.
Simultaneously with, and in connection with the issuance by the trust of
the convertible trust preferred securities, the Company issued to the trust $20
million of 10% convertible subordinated debentures. The convertible subordinated
debentures have the same terms as the convertible trust preferred securities,
including but not limited to maturity, interest, conversion and redemption
price.
F-16
<PAGE>
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The trust which issued the convertible trust preferred securities is a
special purpose trust. The trust's operations are limited to issuing the
convertible trust preferred securities and holding the Company's convertible
subordinated debentures. The trust may pay dividends only to the extent that the
Company pays interest on its convertible subordinated debentures.
Note 8. Transactions with Olsten
Net transactions with Olsten, included in shareholders' equity, include the
accumulated excess of cash outlays made on the Company's behalf and management
fees charged to the Company by Olsten over cash receipts generated by the
Company. In accordance with the terms of the Separation Agreement, intercompany
balances at October 31, 1999 of approximately $507 million have been contributed
to the Company's capital in its entirety. The Separation Agreement provides that
on October 31, 1999 if the sum of (a) indebtedness for borrowed money, (b) the
deferred purchase price of property and (c) up to $10 million of transactions
fees related to the transactions contemplated by the Separation Agreement and
the Merger Agreement, less cash on hand (referred to as net debt) of Olsten and
its subsidiaries (excluding the Company and its subsidiaries) was (i) greater
than $750 million, then the new intercompany account would reflect a payable by
the Company to Olsten equal to the amount of excess, or (ii) less than $750
million, then the new intercompany account would reflect a payable by Olsten to
the Company, in an amount equal to the shortfall or (iii) equal to $750 million,
then no payment would be made in connection with the new debt calculation.
Pursuant to the Separation Agreement, on October 31, 1999, net debt of Olsten
and its subsidiaries (excluding the Company and its subsidiaries) was $718
million and accordingly, the Company was to receive approximately $32 million in
cash (referred to as the true-up amount) on or prior to the Split-off date. As
of January 2, 2000, the Company had received approximately $23 million of the
true-up amount; such amount is reflected in additional paid in capital in the
Consolidated Balance Sheet. Subsequent to year-end, the Company received the
remaining balance of the true-up amount and following the Split-off the Company
paid Olsten approximately $13 million to settle the intercompany account balance
which primarily related to advances for management fees, additional borrowings
and interest expense on intercompany balances.
Olsten used a centralized cash management system. As a result, cash and
cash equivalents (other than actual cash on hand) were not allocated to the
Company prior to October 31, 1999. On October 31, 1999, the Company ceased
participation in Olsten's cash management system and established its own cash
management system.
Included in selling, general and administrative expenses are $1.8 million,
$1.4 million and $1.6 million in 1999, 1998 and 1997, respectively, relating to
staffing services provided to the Company by Olsten.
F-17
<PAGE>
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9. Legal Matters
Government Investigations
The Company has been subject to several federal and state governmental
investigations. Some of those investigations are still pending, although
substantially all of them have been settled. In connection with the Split-off,
the Company has agreed to assume, to the extent permitted by operation of law
and the terms of the liabilities, and indemnify Olsten for all liabilities
associated with any pending or future governmental investigation of the health
services business and has also agreed to comply with and be subject to all
related settlement agreements and corporate integrity agreements or other
operational agreements with the government.
The Company has cooperated with the Office of Investigations section of the
Office of Inspector General (an agency within the U.S. Department of Health and
Human Services) and the U.S. Department of Justice in connection with the
government's investigation into the Company's preparation of Medicare cost
reports (the "Cost Reports Investigation"). The Company has also cooperated with
the U.S. Department of Justice and other federal agencies investigating the
relationship between Columbia/HCA and the Company in connection with the
purchase by Columbia/HCA of some home health agencies which had been owned by
the health services business and subsequently managed under contract by a unit
of Gentiva Health Services (the "Columbia/HCA Investigation").
The Company continues to cooperate with various state and federal agencies,
including the U.S. Department of Justice, the Office of the Attorney General of
New Mexico and the New Mexico Health Care Anti-Fraud Task Force in connection
with their investigations into certain health care practices of Quantum. Among
the matters the federal agencies are or were inquiring are allegations of
improper billing and fraud against various federally funded medical assistance
programs on the part of Quantum and its post-acquisition successor, the
Specialty Pharmaceutical Services business of Gentiva Health Services (the
"Quantum New Mexico Investigation"). Most of the time period that the Company
understands to be at issue in the Quantum New Mexico Investigation predates
Olsten's June 1996 acquisition of Quantum.
In December 1999, Olsten received a document subpoena from the Department
of Health and Human Services, Office of Inspector General, Office of
Investigations. After preliminary discussion with the Office of Inspector
General, the Company believes that the December 1999 subpoena relates to
possible overpayments to Olsten by the Medicare program. In early February 2000,
the Company received a document subpoena from the Department of Health and Human
Services, Office of Inspector General, Office of Investigations. The Company
believes the February 2000 subpoena relates to its agencies cost reporting
procedures concerning contracted nursing and home health aide costs. The Company
intends to provide the Office of Inspector General with the requested documents
and to cooperate fully with its investigations. At this time, the Company is
unable to assess the probable outcome or potential liability, if any, arising
from these subpoenas.
The Company has recently commenced discussions with the North Carolina
Attorney General's Office concerning questions that the Office has raised as to
the eligibility of a certain class of the Company's patients to receive
Medicaid-reimbursed home health services and, thus, the Company's entitlement to
Medicaid reimbursement in connection with those services. At this preliminary
stage, the Company is unable to assess the probable outcome of or potential
liability arising from this matter.
On July 19, 1999, Olsten entered into written civil and criminal agreements
with the U.S. Department of Justice (and, as to the civil agreement, the Office
of Inspector General of the U.S.
F-18
<PAGE>
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Department of Health and Human Services) finalizing the understanding that it
announced on March 30, 1999 to settle the civil and criminal aspects of the Cost
Reports Investigation and the Columbia/HCA Investigation. Pursuant to the
settlement, (a) Olsten paid on August 11, 1999 the sum of $61 million to the
U.S. Department of Justice, including approximately $10.1 million in criminal
fines and penalties; (b) in connection with the Columbia/HCA Investigation,
Kimberly Home Health Care, Inc., a subsidiary of Olsten, pled guilty in the
United States District Court for the Northern District of Georgia, the Southern
District of Florida and the Middle District of Florida, respectively, to a
criminal violation of the federal mail fraud, conspiracy and kickback statutes;
(c) Kimberly Home Health Care, Inc. has been permanently excluded from
participation in Medicare, Medicaid and all other federal health care programs
as defined in 42 U.S.C. ss. 1320a-7b(f); and (d) Olsten executed a corporate
integrity agreement with the Office of Inspector General of the U.S. Department
of Health and Human Services.
By letter dated June 30, 1999, the Medicare Fraud Control Unit of the New
Mexico Attorney General's Office notified Olsten that in connection with the
Quantum New Mexico Investigation, it had declined to criminally prosecute the
so-called "J-Code issue" relating to Quantum's past practices in seeking
government health care reimbursement.
On January 28, 1999, Olsten announced that it had been advised by the
United States Attorney's Office for the District of New Mexico ("New Mexico U.S.
Attorney's Office") that, in connection with the Quantum New Mexico
Investigation, it had dropped its criminal investigation into certain past
practices of Quantum. The criminal aspect of the Quantum New Mexico
Investigation had focused on allegations of improper billing and fraud against
various federally funded medical assistance programs on the part of Quantum
during the period between January 1992 and April 1997. By letter dated February
1, 1999, the New Mexico U.S. Attorney's Office advised Olsten that, having ended
its criminal inquiry, the Office has referred the Quantum matter to its
Affirmative Civil Enforcement Section. The Company continues to cooperate with
the civil inquiry into the Quantum matter and to explore with the New Mexico
U.S. Attorney's Office the possibility of reaching a negotiated monetary
resolution of the matter. Any negotiated amount could include multiple damages,
interest and civil penalties.
On October 28, 1998, Olsten announced that it entered into a final
settlement agreement with several government agencies investigating certain past
practices of Quantum. The agreement was entered into with the U.S. Department of
Justice, the Office of the Inspector General of the U.S. Department of Health
and Human Services, the U.S. Secretary of Defense (for the CHAMPUS/Tricare
program), and the Attorneys General for the States of New York and Oklahoma.
Pursuant to the settlement, Olsten reimbursed the government approximately $4.5
million for certain disputed claims under the Medicaid and CHAMPUS programs for
reimbursement for the provision of anti-hemophilia factor products to patients
covered by certain federal health care programs and entered into a corporate
integrity agreement.
F-19
<PAGE>
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Legal Proceedings
In connection with the Split-off, the Company has agreed to assume, to the
extent permitted by operation of law and the terms of the liabilities, and
indemnify Olsten for all liabilities arising out of the health services business
before or after the Split-off, including any such liabilities arising after the
Split-off in connection with the government investigations described above and
the litigations described below.
In April 1997, a purported class action captioned Gail Weichman v. Olsten
Corporation, et al., No. CV 97-1946, was filed in the United States District
Court for the Eastern District of New York against Olsten, Miriam Olsten, Frank
Liguori and Anthony Puglisi. In August 1997, two additional proposed class
action lawsuits, captioned Esta S. Goldman v. Olsten Corporation, et al., No. CV
97-4501, and Elliott Waldman v. Olsten Corporation, et al., No. CV 97-5056, were
filed in the United States District Court for the Eastern District of New York
against the same defendants named in the Weichman lawsuit, plus Stuart Olsten.
In September 1997, a fourth proposed class action lawsuit, captioned Michael
Cannold v. Olsten Corporation, et al., No. CV 97-5408, was filed in the United
States District Court for the Eastern District of New York against Olsten,
Miriam Olsten, Stuart Olsten, Frank Liguori and Anthony Puglisi. (The Weichman,
Goldman, Waldman and Cannold actions are referred to collectively as the "Class
Actions"). On or about September 8, 1998, a Consolidated Amended Class Action
Complaint (the "Amended Complaint") was filed in the U.S. District Court for the
Eastern District of New York, captioned In re Olsten Corporation Securities
Litigation, No. 97-5056, by above plaintiffs against Olsten, Miriam Olsten,
Stuart Olsten, Frank Liguori and Anthony Puglisi. The Amended Complaint asserts
claims under Sections 10(b) (including Rule 10b-5 promulgated thereunder), 14(a)
and 20(a) of the Securities Exchange Act of 1934 and Sections 11, 12(a)(2) and
15 of the Securities Act of 1933, alleging that, as a result of certain alleged
misstatements and omissions by certain of the defendants, Olsten's common stock
was artificially inflated during the proposed class period (which is defined in
the Amended Complaint as the period from February 5, 1996 though July 22, 1997).
On October 19, 1998, Olsten and the individual defendants served a motion
seeking an order dismissing the Amended Complaint. That motion was fully briefed
on December 23, 1998. Plaintiffs filed a submission in connection with
defendants' motion on October 12, 1999. Defendants filed a response to
plaintiffs' submission on October 14, 1999, plaintiffs responded to it on
October 21, 1999 and defendants filed a reply on October 21, 1999.
The Amended Complaint seeks certification of the proposed class, a judgment
declaring the conduct of the defendants to be in violation of the law,
unspecified compensatory damages and unspecified costs and expenses, including
attorneys' fees and experts' fees. While the Company is unable at this time to
assess the probable outcome of the Class Actions or the materiality of the risk
of loss in connection with the class action (given the preliminary stage of the
Class Actions and the fact that the Amended Complaint does not allege damages
with any specificity), the Company believes that Olsten acted responsibly with
respect to its shareholders and intends to continue to vigorously defend the
Class Action.
F-20
<PAGE>
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On or about May 11, 1999, a Complaint was filed in the Delaware Chancery
Court in a purported derivative lawsuit, captioned Rubin v. May, No. 17135-NC,
against certain current and former directors of Olsten (the "Derivative
Lawsuit"). The Complaint, which names Olsten as a nominal defendant, alleges a
claim for breach of fiduciary duties arising out of the Class Action and the
government investigations described above. The plaintiffs seek a judgment (1)
requiring the defendants to account to Olsten for unspecified alleged damages
resulting from the defendants' alleged conduct; (2) directing the defendants to
establish and maintain effective compliance programs; and (3) awarding
plaintiffs the costs and expenses of the lawsuit, including reasonable
attorneys' fees. On September 10, 1999, the defendants in the Derivative Lawsuit
filed a motion to dismiss or, in the alternative, stay the lawsuit.
On January 14, 1999, Kimberly Home Health Care, Inc. initiated three
arbitration proceedings against hospitals owned by Columbia/HCA with which one
of the Company's subsidiaries had management services agreements to provide
services to the hospitals' home health agencies. The basis for each of the
arbitrations is that Columbia/HCA sold the home health agencies without
assigning the management services agreements, while the management services
agreements had periods ranging from 18 to 42 months prior to expiration and that
as a result Columbia/HCA has breached the management services agreements. In
response to the arbitrations, Columbia/HCA has asserted that the arbitration be
consolidated and stayed, in part based upon its alleged claims against Kimberly
Home Health Care, Inc. for breach of contract and requests indemnity and
possibly return of management fees paid under the disallowance provision of the
management services agreements. Columbia/HCA has not yet fully presented these
claims in the arbitrations or other legal proceedings, and has not yet
quantified the claims. The parties agreed to suspend the proceedings until June
2000.
In July 1999, Olsten received notification that the Indiana Attorney
General's Office filed a civil complaint against Olsten requesting the court to
determine if Quantum violated Indiana law with respect to Medicaid claims. The
complaint alleges that (1) overpayment was made to Quantum due largely to
advances paid by Medicaid that were not properly credited by Quantum; (2)
Quantum supplied the Indiana Attorney General's Office with insufficient
documentation regarding services provided by one of our pharmacies; and (3)
deliveries exceeded the amounts of physicians' orders. The alleged violations
predate Olsten's acquisition of Quantum in June 1996.
Note 10. Commitments
The Company rents certain properties under noncancellable, long-term
operating leases, which expire at various dates. Certain of these leases require
additional payments for taxes, insurance and maintenance and, in many cases,
provide for renewal options. Rent expense under all leases was $22.5 million in
1999, $26.9 million in 1998 and $25.5 million in 1997.
F-21
<PAGE>
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Future minimum rental commitments for all noncancellable leases having a
remaining term in excess of one year at January 2, 2000, including the lease for
an Olsten subsidiary which the Company agreed to assume commencing September 16,
2000 under the terms of the Separation Agreement are as follows (in thousands
per year):
<TABLE>
<CAPTION>
Olsten Subsidiary
Fiscal Year Company Leases Lease Total
----------- -------------- ----- -----
<S> <C> <C> <C> <C>
2000 $20,610 $242 $20,852
2001 14,461 877 15,338
2002 8,675 906 9,581
2003 5,361 934 6,295
2004 3,701 964 4,665
Thereafter 1,548 2,732 4,280
</TABLE>
In connection with the Split-off, the Company has entered into an agreement
on March 16, 2000 pursuant to which a director of the Company and Olsten has
agreed not to compete with the Company for a four year period. In return for
this agreement, the Company agreed to pay a lump sum of $250,000. Following the
Split-off the Company paid its past president, who will not continue with the
Company, $2.0 million pursuant to a change in control agreement. Such amounts
will be charged to expense in 2000.
Under the terms of the Separation Agreement, a former executive officer of
Olsten (and current executive officer of the Company) will be compensated by the
Company for excise taxes imposed by reason of the receipt of amounts payable
under the executive's separation, consulting and non-competition agreements with
Adecco. Such amount is estimated to be approximately $815,000 and will be
accrued in the first quarter of 2000.
As discussed in Note 14, the Olsten non-qualified supplemental executive
retirement program was terminated prior to the Split-off. Prior to the
Split-off, the Company established its own non-qualified supplemental executive
retirement plan substantially similar to the Olsten plan and assumed all
liabilities of the program with respect to certain of its employees and former
employees of Olsten. The Company will be obligated for the funding of
liabilities of the program to the extent that such liabilities (approximately
$12 million on March 15, 2000) are in excess of assets transferred
(approximately $8.5 million on March 15, 2000).
Note 11. Accrued Expenses
As of January 2, 2000 and January 3, 1999, accrued expenses included
estimated costs under network service contracts of $48.5 million and $30.4
million, respectively. In addition, accrued expenses at January 3, 1999 included
a liability of $56 million for the settlement of federal investigations as
discussed in Notes 4 and 9.
F-22
<PAGE>
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12. Stock Plans
Olsten maintained various stock option incentive plans under which certain
employees of the Company were eligible for the grant of stock options. These
options were awarded in the form of incentive stock options ("ISOs") or
non-qualified stock options ("NQSOs"). The option price of an ISO was not less
than 100 percent, and the option price of the NQSO was not less than 85 percent
of the fair market value at the date of grant. Options under the Plans generally
have a term of ten years and generally became cumulatively exercisable
commencing one year after grant in four or five equal annual installments.
Effective as of the Split-off date, all options to purchase Olsten stock
("Olsten stock options") held by the Company's employees became options to
purchase the Company's common stock ("Gentiva stock options") and the Company's
employees became fully vested in the Gentiva stock options. Olsten stock options
were converted into Gentiva stock options at the ratio of 1 to 2.077; the
exercise price of a Gentiva stock option represents 48.1 percent of the
corresponding Olsten stock option exercise price.
A summary of Olsten stock options for the three years ended January 2, 2000
for employees assigned to the Company is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------------------- ------------------------- --------------------------
Weighted Weighted Weighted
average average average
exercise exercise exercise
Shares price Shares price Shares price
------ --------- -------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Olsten options outstanding,
beginning of year 1,446,067 $15.72 980,376 $20.50 1,002,194 $20.87
Granted 498,700 7.84 701,500 10.00 230,000 19.63
Exercised (6,467) 1.28 (2,076) 7.89 (107,511) 15.25
Cancelled (240,938) 16.18 (233,733) 18.60 (144,307) 25.65
--------- ----- --------- ----- --------- -----
Olsten options
outstanding, end of year 1,697,362 $13.15 1,446,067 $15.72 980,376 $20.50
========= ===== ========= ===== ======= =====
Olsten options
exercisable, end of year 633,597 $18.77 485,485 $22.07 518,450 $21.69
======= ===== ======= ===== ======= =====
Gentiva options substituted
for Olsten options, end of year
(outstanding and exercisable) 3,526,026 $6.33
========= ====
</TABLE>
The weighted average fair value of Olsten stock options, calculated using
the Black-Scholes option pricing model, granted during 1999, 1998 and 1997, is
$3.15, $3.57 and $8.19, respectively. The fair value of each option grant is
estimated on the date of grant with the following weighted-average assumptions
used for grants in 1999, 1998 and 1997, respectively: risk-free interest rates
of 4.7, 5.3 and 6.3 percent; dividend yield of 0 percent for 1999, 2 percent for
F-23
<PAGE>
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1998 and 1 percent for 1997; expected lives of six years for all; and volatility
of 35 percent for 1999 and 36 percent for 1998 and 1997.
The following table summarizes information about Gentiva stock options
outstanding at January 2, 2000 for employees assigned to the Company had the
Split-off occurred on such date.
<TABLE>
<CAPTION>
Options Outstanding
Number Weighted Weighted
Range of outstanding at average remaining average
exercise prices January 2, 2000 contractual life exercise price
--------------- --------------- ---------------- --------------
<S> <C> <C> <C>
$ 1.04 to $ 1.24 2,084 0.70 $1.23
2.86 to 3.49 727,075 8.93 3.13
3.50 to 3.65 622,480 9.02 3.61
3.66 to 4.98 496,488 8.58 4.39
6.80 to 8.30 665,944 7.36 7.00
8.92 to 11.95 927,203 6.59 10.21
14.01 to 17.84 62,944 4.34 14.74
20.54 to 29.05 21,808 4.05 25.21
---------------- ----------------- ------------------
$ 1.04 to $29.05 3,526,026 7.85 $6.33
================ ================= ==================
</TABLE>
In 1996, Olsten adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123 ("SFAS No. 123"), "Accounting for
Stock-Based Compensation." Accordingly, no compensation cost has been recognized
under the stock option plans. Had compensation cost for Olsten's stock option
plans been determined based on the fair value at the grant date for awards
consistent with the provisions of SFAS No. 123, the Company's net income (loss)
and net income (loss) per share would have been reduced (increased) to the pro
forma amounts indicated below (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net (loss) income - as reported $(15,086) $(101,465) $26,847
Net (loss) income - pro forma (16,864) (102,535) 26,287
Basic (loss) income per share - as reported (.74) (4.99) 1.32
Basic (loss) income per share - pro forma (.83) (5.04) 1.29
</TABLE>
The statement provides for pro forma amounts for options granted beginning
in 1995; therefore, the pro forma expense will likely increase in future years
as the new option grants become subject to the pricing model.
Prior to the Split-off, Olsten as sole shareholder of the Company approved
the adoption of the Company's 1999 Stock Incentive Plan ("1999 Plan") under
which 5 million shares of common stock were
F-24
<PAGE>
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
reserved for issuance upon exercise of options thereunder. The maximum total
number of shares of common stock for which grants may be made to any employee,
consultant or director under the 1999 plan in any calendar year is 300,000.
These options may be awarded in the form of ISOs or NQSOs. The option price of
an ISO cannot be less than 100 percent, and the option price of the NQSO cannot
be less than 85 percent of the fair market value at the date of grant.
Prior to the Split-off, Olsten as sole shareholder of the Company approved
the adoption of the Company's Stock and Deferred Compensation Plan for
Non-Employee Directors, which provides for payment of annual retainer fees to
non-employee directors, up to 50 percent of which such directors may elect to
receive in cash and the remainder of which will be paid in the form of shares of
common stock and also allows deferral of such payments until termination of
director's service. The total number of shares of common stock reserved for
issuance under this plan is 150,000.
Prior to the Split-off, Olsten as sole shareholder of the Company approved
the adoption of an employee stock purchase plan for the Company. All employees
of the Company, who have been employed for at least eight months and whose
customary employment exceeds twenty hours per week, will be eligible to purchase
stock under this plan. The human resource and compensation committee of the
Company's Board of Directors will administer the plan and has the power to
determine the terms and conditions of each offering of common stock. The maximum
number of shares of common stock, which may be sold to any employee in any
offering, however, will generally be 10 percent of that employee's compensation
during the period of the offering. A total of 1,200,000 shares of common stock
are reserved for issuance under the employee stock purchase plan.
Note 13. Income Taxes
Comparative analyses of the provision (benefit) for income taxes follows
(in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Current
Federal $(19,586) $(29,808) $14,166
State and local 170 294 (547)
Foreign 248 -- --
-------- -------- -------
(19,168) (29,514) 13,619
-------- -------- -------
Deferred
Federal 13,047 (17,556) 1,982
State and local -- -- 697
-------- -------- --------
13,047 (17,556) 2,679
-------- -------- --------
$(6,121) $(47,070) $16,298
======== ======== ========
</TABLE>
F-25
<PAGE>
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In accordance with the Tax Sharing Agreement, any net operating losses
generated up to the Split-off will be transferred to and utilized by Olsten. At
January 2, 2000, approximately $49 million relating to these net operating
losses was included in prepaid expenses and other current assets in the
consolidated balance sheet.
A reconciliation of the differences between income taxes computed at the
Federal statutory rate and provisions (benefits) for income taxes for each year
are as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Income taxes computed at Federal statutory tax rate $(7,422) $(51,987) $ 15,043
State income taxes, net of Federal
benefit 111 190 98
Nondeductible settlement of government
investigations -- 3,500 --
Amortization of intangibles 902 922 1,701
Nondeductible meals & entertainment 265 343 357
Other, net 23 (38) (901)
------- --------- ----------
$(6,121) $(47,070) $ 16,298
======= ======== =======
</TABLE>
Deferred tax assets, which are included in prepaid expenses and other
current assets, and deferred tax liabilities, which are included in other
liabilities in the consolidated balance sheet, are as follows (in thousands):
<TABLE>
<CAPTION>
January 2, 2000 January 3, 1999
--------------- ---------------
Deferred tax assets
<S> <C> <C>
Reserves and allowances $ 25,074 $ 40,320
Other 1,183 291
------ -------
26,257 40,611
------ ------
Deferred tax liabilities
Capitalized software (2,163) (2,281)
Intangible assets (22,047) (24,933)
Depreciation (2,821) (371)
Other -- (753)
-------- --------
(27,031) (28,338)
------- --------
Net deferred tax asset (liability) $ (774) $ 12,273
======== ========
</TABLE>
F-26
<PAGE>
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14. Benefit Plans for Permanent Employees
Olsten and its subsidiaries maintained qualified and non-qualified defined
contribution retirement plans for its salaried employees, which provide for a
partial match of employee savings under the plans and for discretionary
profit-sharing contributions based on employee compensation. The Company
established similar retirement plans and assumed the obligations under the
Olsten plans for those employees assigned to the Company at the date of the
Split-off.
Olsten also maintained a non-qualified supplemental executive retirement
program for key employees and officers, which provided supplemental retirement
benefits funded in part by profit-sharing contributions. Certain employees of
the Company were eligible to participate in the Olsten sponsored plan. Prior to
the Split-off the Company established its own non-qualified supplemental
executive retirement plan substantially similar to the Olsten plan. As discussed
in Note 10, the Olsten plan was terminated prior to the Split-off.
Company contributions under the defined contribution plans were
approximately $3.6 million in 1999, $3.4 million in 1998, and $3.5 million in
1997.
Note 15. Business Segment Information
The Company operates in the United States and Canada, servicing patients
and customers through the following business segments: Specialty Pharmaceutical
Services, Home Care Nursing Services and Staffing Services. These segments are
briefly described below.
Specialty Pharmaceutical Services includes (i) the distribution of drugs
and other biological and pharmaceutical products and professional support
services for individuals with chronic diseases, such as hemophilia, primary
pulmonary hypertension, autoimmune deficiencies and growth disorders, (ii) the
administration of antibiotics, chemotherapy, nutrients and other medications for
patients with acute or episodic disease states and (iii) distribution services
for pharmaceutical, biotechnology and medical service firms.
F-27
<PAGE>
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Home Care Nursing Services includes (i) professional and paraprofessional
services, including skilled nursing, rehabilitation and other therapies, home
health aide and personal care services, to individuals with acute illnesses,
long-term chronic health conditions, permanent disabilities, terminal illnesses
or post-procedural needs and (ii) care management and coordination for managed
care organizations and self-insured employees.
Staffing Services includes (i) services to institutional, occupational and
alternate site health care organizations by providing health care professionals
to meet supplemental staffing needs and (ii) clinical support services for
pharmaceutical and biotechnology firms.
As a result of the Split-off, the Company has changed the measurement
method used to determine reported segment profit or loss. In prior years, the
Company evaluated performance and allocated resources based on earnings (loss)
before interest, taxes, depreciation and amortization. The Company now evaluates
performance and allocates resources based on operating contributions of the
reportable segments, which excludes corporate expenses, depreciation,
amortization interest expense, but includes revenues and all other costs
directly attributable to the specific segment. Identifiable assets of the
segments reflect net accounts receivable and inventories associated with segment
activities. All other assets are assigned to the corporation for the benefit of
all segments. In prior years, clinical support services for pharmaceutical and
biotechnology firms were included in the Specialty Pharmaceutical Services
segment. The Company now considers these services to be part of its Staffing
Services segment. Prior year segment data has been reclassified to conform with
the current year presentation. The accounting policies of the reportable
segments are the same as those described in the summary of significant
accounting policies.
Information about the Company's operations is as follows (in thousands):
<TABLE>
<CAPTION>
Specialty Home Care
Pharmaceutical Nursing Staffing
Services Services Services Total
<S> <C> <C> <C> <C>
Year ended January 2, 2000
Net revenues $699,993 $662,477 $127,352 $1,489,822
======= ======= ======= =========
Operating contribution before special charges $98,590 $21,943 $10,088 $130,621
Special charges (1,730) (13,090) (380) (15,200)
-------- -------- -------- --------
Operating contribution $96,860 $8,853 $9,708 115,421
======= ======= ======
Corporate expenses (86,028)
---------
Earnings before interest expense, taxes,
depreciation and amortization 29,393
Depreciation and amortization (33,625)
Interest expense, net (16,975)
--------
Loss before income taxes $(21,207)
========
F-28
<PAGE>
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Segment assets $440,185 $201,978 $26,515 $668,678
======= ======= ====== =======
Year ended January 3, 1999
Net revenues $571,718 $658,745 $99,840 $1,330,303
======= ======= ====== =========
Operating contribution before special
charges, non-recurring charges and other
adjustments $81,250 $14,984 $8,179 $104,413
Special charges, non-recurring charges and
other adjustments (24,046) (97,954) -- 122,000
-------- -------- ------ -------
Operating contribution $57,204 $(82,970) $8,179 (17,587)
====== ======== ======
Corporate expenses (82,133)
--------
Loss before interest expense, taxes,
depreciation and amortization (99,720)
Depreciation and amortization (31,401)
Interest expense, net (17,414)
--------
Loss before income taxes $(148,535)
==========
Segment assets $342,862 $180,753 $18,979 $ 542,594
======= ======= ====== ========
Year ended December 28, 1997
Net revenues $503,762 $856,072 $74,020 $1,433,854
======= ======= ====== =========
Operating contribution $70,885 $83,689 $6,696 161,270
======= ======= ======
Corporate expenses (71,445)
--------
Earnings before interest expense, taxes,
depreciation and amortization 89,825
Depreciation and amortization (29,493)
Interest expense, net (17,351)
--------
Income before income taxes and minority
interest $ 42,981
=========
Segment assets $261,003 $187,261 $15,685 $ 463,949
======= ======= ====== =======
</TABLE>
Financial information, summarized by geographic area, is as follows (in
thousands):
<TABLE>
<CAPTION>
Net Long-lived
Revenues assets
<S> <C> <C>
Year ended January 2, 2000
United States $1,446,532 $302,601
F-29
<PAGE>
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Canada 43,290 1,183
---------- ----------
$1,489,822 $303,784
========= =======
Year ended January 3, 1999
United States $1,290,072 $317,849
Canada 40,231 750
---------- ---------
$1,330,303 $318,599
========= =======
Year ended December 28, 1997
United States $1,398,998 $286,008
Canada 34,856 628
----------- ---------
$1,433,854 $286,636
========= =======
</TABLE>
Note 16. Quarterly Financial Information (Unaudited)
<TABLE>
<CAPTION>
First Second Third Fourth
(in thousands, except share amounts) quarter quarter quarter quarter
------- ------- ------- -------
$ $ $ $
<S> <C> <C> <C> <C>
Year ended January 2, 2000
Net revenues 368,160 372,573 377,312 371,777
Gross profit 125,674 127,242 125,078 127,432
Net income (loss) (12,806) 2,435 (2,481) (2,234)
SHARE INFORMATION:
Basic and diluted income (loss) per share (.63) .12 (.12) (.11)
Year ended January 3, 1999
Net revenues 331,967 315,200 321,118 362,018
Gross profit 113,560 77,375 106,085 124,387
Net loss (1,743) (49,053) (7,675) (42,994)
SHARE INFORMATION:
Basic and diluted income (loss) per share (.09) (2.41) (.38) (2.11)
</TABLE>
F-30
<PAGE>
GENTIVA HEALTH SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The fourth quarters ended January 2, 2000 and January 3, 1999 include 13
weeks and 14 weeks, respectively.
The first quarter of 1999 includes $16.7 million of special charges and the
fourth quarter of 1999 includes a benefit of $1.5 million relating to these
special charges as indicated in Note 4. Additionally, during the fourth quarter
of 1999, the Company increased its allowance for doubtful accounts by
approximately $7 million.
F-31
<PAGE>
GENTIVE HEALTH SERVICES, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED JANUARY 2, 2000
<TABLE>
<CAPTION>
Col. B Col. C Col. D Col. E
------ ------ ------ ------
Balance at Additions Balance
Beginning charged to costs at end of
of period and expenses Deductions period
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts:
For the Year Ended January 2, 2000 $25,596 $38,687 $(27,524) $36,759
For the Year Ended January 3, 1999 $19,200 $24,046 $(17,650) $25,596
For the Year Ended December 28, 1997 $22,171 $25,884 $(28,855) $19,200
</TABLE>
F-32
QUANTUM HEALTH RESOURCES, INC.
AND
U.S. BANK TRUST NATIONAL ASSOCIATION,
Trustee
-------------------
Supplemental Indenture
Dated as of March 15, 2000
-------------------
To
Indenture, Dated as of October 8, 1993,
as supplemented and amended by the Supplemental Indenture,
Dated as of June 28, 1996,
Between Quantum Health Resources, Inc. and
U.S. Bank Trust National Association (formerly known as
First Trust National Association), as Trustee,
Relating to 4 3/4% Convertible Subordinated Debentures
Due October 1, 2000
- --------------------------------------------------------------------------------
<PAGE>
SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of March
15, 2000, between Quantum Health Resources, Inc., a Delaware corporation (the
"Company"), having its principal office at Two Parkwood Crossing, Suite 500, 310
East 96th Street, Suite 500, Indianapolis, Indiana, 46240, and U.S. Bank Trust
National Association (formerly known as First Trust National Association), a
Minnesota corporation, as Trustee (the "Trustee").
RECITALS OF THE COMPANY
WHEREAS, the Company and the Trustee heretofore executed and delivered an
Indenture, dated as of October 8, 1993 (the "Indenture") (capitalized terms used
but not otherwise defined in this Supplemental Indenture shall have the meanings
ascribed to such terms in the Indenture), and a Supplemental Indenture, dated as
of June 28, 1996 (the "First Supplemental Indenture"); and
WHEREAS, pursuant to the Indenture, the Company issued and the Trustee
authenticated and delivered $86,250,000 aggregate principal amount of the
Company's 4 3/4% Convertible Subordinated Debentures Due October 1, 2000 (the
"Debentures"); and
WHEREAS, pursuant to the First Supplemental Indenture, the Debentures were
convertible into the Class B Common Stock, par value $.10 per share ("Class B
Common Stock") of Olsten Corporation, a Delaware corporation ("Olsten"); and
WHEREAS, the Company has delivered, or caused to be delivered, to the
Trustee, an Opinion of Counsel and Officers' Certificate, each stating that this
Supplemental Indenture complies with the requirements of the Indenture; and
WHEREAS, pursuant to the Separation Agreement, dated as of August 17, 1999,
by and among Olsten, Gentiva Health Services, Inc., a Delaware corporation
(formerly known as Aaronco Corp.) ("Gentiva"), and Adecco SA, a societe anonyme
organized under the laws of Switzerland ("Adecco"), as amended (the "Separation
Agreement"), and the Agreement and Plan of Merger dated as of August 17, 1999,
by and among Olsten, Adecco and Staffing Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Adecco ("Merger Sub"), as amended
(the "Merger Agreement"), on the date of the Merger each issued and outstanding
share of Olsten's Class B Common Stock, other than shares held by stockholders
exercising dissenter's rights under the General Corporation Law of the State of
Delaware, will be converted into the right to receive (i) .25 of a share of
Gentiva common stock, par value $.10 per share and (ii) either (a) $8.75 in
cash, without interest, or (b) 0.12472
<PAGE>
-2-
of an Adecco American depositary share ("ADS") or (c) a combination of cash and
Adecco ADSs; and
WHEREAS, pursuant to Sections 9.1 and 13.11 of the Indenture, the parties
hereto are entering into this Supplemental Indenture to provide that the Holder
of each Debenture outstanding at the time of the merger shall have the right
thereafter, during the period such Debenture shall be convertible as specified
in Section 13.1 of the Indenture, to convert such Debenture only into the kind
and amount of securities and cash receivable upon such merger by a holder of the
number of shares of Class B Common Stock into which such Debenture might have
been converted immediately prior to such merger as if such holder had made a
Non-Election (as defined in the Merger Agreement); and
WHEREAS, this Supplemental Indenture has been duly authorized by all
necessary corporate action on the part of the Company.
NOW, THEREFORE, the Company hereby covenants and agrees with the Trustee
for the equal and proportionate benefit of all Holders of the Debentures, as
follows:
SECTION 1. Amendment of Certain Sections of Indenture. Subject to the other
provisions hereof, the Indenture is hereby amended and supplemented in the
following respects:
(a) Section 13.4 of the Indenture is hereby amended and supplemented
by adding the following at the end thereof:
"(k) From and after the effective time of the merger pursuant to the
Merger Agreement dated as of August 17, 1999, as amended, by and among
Olsten Corporation, a Delaware corporation ("Olsten"), Gentiva Health
Services, Inc. (formerly Aaronco Corp.), a Delaware corporation
("Gentiva"), Adecco SA, a societe anonyme organized under the laws of
Switzerland ("Adecco") and Staffing Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Adecco (the "Merger
Agreement"), the Holder of each Debenture then outstanding shall have the
right thereafter, during the period such Debenture shall be convertible as
specified in Section 13.1, to convert each such Debenture only into (i) the
number of shares of Gentiva Health Services Common Stock, par value $.10
per share, and (ii) the amount of (a) Adecco American Depositary Shares
("ADSs") or (b) cash or (c) a combination of cash and Adecco ADSs, in each
case into which such Debenture would have been converted if the Debenture
was converted into Olsten Class B Stock (as defined in the Merger
<PAGE>
-3-
Agreement) immediately prior to such merger and as if such holder had made
a Non-Election (as defined in the Merger Agreement), subject to such
further adjustments as may be required by the provisions of this
Indenture."
SECTION 2. Effect of Supplemental Indenture. Upon the execution and
delivery of this Supplemental Indenture by the Company and the Trustee, the
Indenture and the First Supplemental Indenture shall be supplemented in
accordance herewith, and this Supplemental Indenture shall form a part of the
Indenture for all purposes, and every Holder of Securities heretofore or
hereafter authenticated and delivered under the Indenture shall be bound
thereby.
SECTION 3. Indenture and First Supplemental Indenture Remains in Full Force
and Effect. Except as supplemented hereby, all provisions in the Indenture and
the First Supplemental Indenture shall remain in full force and effect.
SECTION 4. Indenture and Supplemental Indenture Construed Together. This
Supplemental Indenture is an indenture supplemental to the Indenture and the
First Supplemental Indenture, and forms a part of the Indenture and the First
Supplemental Indenture for all purposes.
SECTION 5. Conflict with Trust Indenture Act. If any provision of this
Supplemental Indenture limits, qualifies or conflicts with any provision of
Sections 310 through 317, inclusive, of the Trust Indenture Act, which provision
imposes duties on any Person, the applicable provisions of Sections 310 through
317, inclusive, of the Trust Indenture Act shall control.
SECTION 6. Separability Clause. In case any provision in this Supplemental
Indenture shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 7. Effect of Headings. The Article and Section headings herein are
for convenience only and shall not affect the construction hereof.
SECTION 8. Benefits of Supplemental Indenture, Etc. Nothing in this
Supplemental Indenture, express or implied, shall give to any Person, other than
the parties hereto and thereto and their successors hereunder, any benefit or
any legal or equitable right, remedy or claim under this Supplemental Indenture.
SECTION 9. Successors and Assigns. All covenants and agreements in this
Supplemental Indenture by the Company shall bind its successors and assigns,
whether so expressed or not.
<PAGE>
-4-
SECTION 10. Trustee Not Responsible for Recitals. The recitals contained
herein shall be taken as the statements of the Company, and the Trustee assumes
no responsibility for their correctness. The Trustee makes no representations as
to the validity or sufficiency of this Supplemental Indenture.
SECTION 11. Certain Duties and Responsibilities of the Trustee. In entering
into this Supplemental Indenture, the Trustee shall be entitled to the benefit
of every provision of the Indenture relating to the conduct or affecting the
liability of or affording protection to the Trustee, whether or not elsewhere
herein so provided.
SECTION 12. Governing Law. This Supplemental Indenture shall be governed by
and construed in accordance with the laws of the State of New York.
SECTION 13. Counterparts. This Supplemental Indenture may be executed in
counterparts, each of which, when so executed, shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date and year first
above written.
QUANTUM HEALTH RESOURCES, INC.
By: /s/ John J. Collura
--------------------------------------
Title: Senior Vice President
Attest:
/s/ Patricia C. Ma
- -----------------------------
Title: Senior Vice President
U.S. BANK TRUST NATIONAL
ASSOCIATION, as Trustee
By: /s/ Harry H. Hall
--------------------------------------
Title: Vice President
Attest:
/s/ Joe Conte
- ----------------------------
Title: Asst. Vice President
TRUST AGREEMENT
AMONG
GENTIVA HEALTH SERVICES, INC., AS DEPOSITOR
WILMINGTON TRUST COMPANY
AS PROPERTY TRUSTEE AND
AS DELAWARE TRUSTEE,
THE ADMINISTRATIVE TRUSTEES NAMED HEREIN,
AND
THE SEVERAL HOLDERS (AS DEFINED HEREIN)
DATED AS OF MARCH 9, 2000
<PAGE>
Certain Sections of this Trust Agreement relating to
Sections 310 through 318 of the Trust Indenture Act of 1939:
Trust
Trust Act Section Agreement Section
- -------------------------------------------------- -------------------------
(Section) 310 (a)(1).............................. 8.7
(a)(2)........................... 8.7
(a)(3)........................... 8.9
(a)(4)........................... 2.7(a)(ii)
(b).............................. 8.8
(Section) 311 (a)................................. 8.13
(b).............................. 8.13
(Section) 312 (a)................................. 5.7
(b).............................. 5.7
(c).............................. 5.7
(Section) 313 (a)................................. 8.14(a)
(a)(4)........................... 8.14(b)
(b).............................. 8.14(b)
(c).............................. 10.9
(d).............................. 8.14(c)
(Section) 314 (a)................................. 8.15
(b).............................. Not Applicable
(c)(1)........................... 8.16
(c)(2)........................... 8.16
(c)(3)........................... Not Applicable
(d).............................. Not Applicable
(e).............................. 1.1, 8.16
(Section) 315 (a)................................. 8.1(a), 8.3(a)
(b).............................. 8.2, 10.9
(c).............................. 8.1(a)
(d).............................. 8.1, 8.3
(e).............................. Not Applicable
(Section) 316 (a)................................. Not Applicable
(a)(1)(A)........................ Not Applicable
(a)(1)(B)........................ Not Applicable
(a)(2)........................... Not Applicable
(b).............................. 5.14
(c).............................. 6.7
(Section) 317 (a)(1).............................. Not Applicable
(a)(2)........................... Not Applicable
(b).............................. 5.9
(Section) 318 (a)................................. 10.11
Note: This reconciliation and tie sheet shall not, for any purpose, be deemed to
be a part of the Trust Agreement.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINED TERMS
SECTION 1.1. DEFINITIONS...................................................1
ARTICLE II
CONTINUATION OF TRUST
SECTION 2.1. NAME.........................................................11
SECTION 2.2. OFFICE OF DELAWARE TRUSTEE; PRINCIPAL PLACE OF BUSINESS......11
SECTION 2.3. INITIAL CONTRIBUTION OF TRUST PROPERTY;
ORGANIZATIONAL EXPENSES....................................12
SECTION 2.4. ISSUANCE OF PREFERRED SECURITIES.............................12
SECTION 2.5. ISSUANCE OF COMMON SECURITIES................................12
SECTION 2.6. SUBSCRIPTION AND PURCHASE OF DEBENTURES......................12
SECTION 2.7. DECLARATION OF TRUST.........................................13
SECTION 2.8. AUTHORIZATION TO ENTER INTO CERTAIN TRANSACTIONS.............13
SECTION 2.9. ASSETS OF TRUST..............................................17
SECTION 2.10. TITLE TO TRUST PROPERTY......................................17
ARTICLE III
PAYMENT ACCOUNT
SECTION 3.1. PAYMENT ACCOUNT..............................................17
ARTICLE IV
DISTRIBUTIONS; REDEMPTION; CONVERSION
SECTION 4.1. DISTRIBUTIONS................................................18
SECTION 4.2. REDEMPTION...................................................19
SECTION 4.3. CONVERSION...................................................21
SECTION 4.4. SUBORDINATION OF COMMON SECURITIES...........................25
SECTION 4.5. PAYMENT PROCEDURES...........................................26
SECTION 4.6. TAX RETURNS AND REPORTS......................................26
SECTION 4.7. PAYMENT OF EXPENSES OF TRUST.................................26
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<PAGE>
Page
SECTION 4.8. PAYMENTS UNDER INDENTURE OR PURSUANT TO DIRECT ACTIONS.......26
ARTICLE V
TRUST SECURITIES CERTIFICATES
SECTION 5.1. INITIAL OWNERSHIP............................................27
SECTION 5.2. TRUST SECURITIES CERTIFICATES................................27
SECTION 5.3. EXECUTION AND DELIVERY OF TRUST SECURITIES CERTIFICATES......27
SECTION 5.4. REGISTRATION OF TRANSFER AND EXCHANGE OF PREFERRED
SECURITIES.................................................28
SECTION 5.5. TRANSFER OF CERTIFICATES.....................................31
SECTION 5.6. DEEMED HOLDERS...............................................32
SECTION 5.7. ACCESS TO LIST OF HOLDERS' NAMES AND ADDRESSES...............32
SECTION 5.8. MAINTENANCE OF OFFICE OR AGENCY..............................32
SECTION 5.9. APPOINTMENT OF PAYING AGENT..................................33
SECTION 5.10. APPOINTMENT OF CONVERSION AGENT..............................33
SECTION 5.11. OWNERSHIP OF COMMON SECURITIES BY DEPOSITOR..................34
SECTION 5.12. MUTILATED, DESTROYED, LOST OR STOLEN TRUST SECURITIES
CERTIFICATES...............................................35
SECTION 5.13. RIGHTS OF HOLDERS............................................35
ARTICLE VI
ACTS OF HOLDERS; MEETINGS; VOTING
SECTION 6.1. LIMITATIONS ON VOTING RIGHTS.................................38
SECTION 6.2. NOTICE OF MEETINGS...........................................39
SECTION 6.3. MEETINGS OF HOLDERS..........................................39
SECTION 6.4. VOTING RIGHTS................................................40
SECTION 6.5. PROXIES, ETC.................................................40
SECTION 6.6. HOLDER ACTION BY WRITTEN CONSENT.............................40
SECTION 6.7. RECORD DATE FOR VOTING AND OTHER PURPOSES....................41
SECTION 6.8. ACTS OF HOLDERS..............................................41
SECTION 6.9. INSPECTION OF RECORDS........................................42
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<PAGE>
Page
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
SECTION 7.1. REPRESENTATIONS AND WARRANTIES OF PROPERTY TRUSTEE AND
DELAWARE TRUSTEE...........................................42
ARTICLE VIII
THE TRUSTEES
SECTION 8.1. CERTAIN DUTIES AND RESPONSIBILITIES..........................44
SECTION 8.2. CERTAIN NOTICES..............................................45
SECTION 8.3. CERTAIN RIGHTS OF PROPERTY TRUSTEE...........................46
SECTION 8.4. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.......48
SECTION 8.5. MAY HOLD SECURITIES..........................................49
SECTION 8.6. COMPENSATION; INDEMNITY; FEES................................49
SECTION 8.7. CORPORATE PROPERTY TRUSTEE REQUIRED; ELIGIBILITY OF
TRUSTEES...................................................50
SECTION 8.8. CONFLICTING INTERESTS........................................51
SECTION 8.9. CO-TRUSTEES AND SEPARATE TRUSTEE.............................51
SECTION 8.10. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR............53
SECTION 8.11. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.......................54
SECTION 8.12. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS...................................................55
SECTION 8.13. PREFERENTIAL COLLECTION OF CLAIMS AGAINST DEPOSITOR OR
TRUST......................................................55
SECTION 8.14. REPORTS BY PROPERTY TRUSTEE..................................56
SECTION 8.15. REPORTS TO PROPERTY TRUSTEE..................................56
SECTION 8.16. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.............57
SECTION 8.17. NUMBER OF TRUSTEES...........................................57
SECTION 8.18. DELEGATION OF POWER..........................................57
ARTICLE IX
DISSOLUTION, LIQUIDATION, TERMINATION AND MERGER
SECTION 9.1. TERMINATION UPON EXPIRATION DATE............................58
SECTION 9.2. EARLY TERMINATION...........................................58
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<PAGE>
Page
SECTION 9.3. TERMINATION.................................................59
SECTION 9.4. LIQUIDATION.................................................59
SECTION 9.5. MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS
OF TRUST..................................................61
ARTICLE X
RIGHT TO REQUIRE REPURCHASE
SECTION 10.1. RIGHT TO REQUIRE REPURCHASE.................................62
SECTION 10.2. NOTICE; METHOD OF EXERCISING REPURCHASE RIGHT...............62
SECTION 10.3. DEPOSIT OF REPURCHASE PRICE.................................63
SECTION 10.4. SECURITIES NOT REPURCHASED ON REPURCHASE DATE...............64
SECTION 10.5. SECURITIES REPURCHASED IN PART..............................64
SECTION 10.6. DEFINITIONS.................................................64
ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.1. LIMITATION OF RIGHTS OF HOLDERS.............................65
SECTION 11.2. LIABILITY...................................................65
SECTION 11.3. AMENDMENT...................................................66
SECTION 11.4. SEPARABILITY................................................67
SECTION 11.5. GOVERNING LAW...............................................67
SECTION 11.6. PAYMENTS DUE ON NON-BUSINESS DAY............................67
SECTION 11.7. SUCCESSORS..................................................68
SECTION 11.8. HEADINGS....................................................68
SECTION 11.9. REPORTS, NOTICES AND DEMANDS................................68
SECTION 11.10. AGREEMENT NOT TO PETITION...................................69
SECTION 11.11. TRUST INDENTURE ACT; CONFLICT WITH TRUST INDENTURE ACT......69
SECTION 11.12. ACCEPTANCE OF TERMS OF TRUST AGREEMENT, GUARANTEE AND
INDENTURE.................................................70
SECTION 11.13. HOLDERS ARE PARTIES.........................................70
SECTION 11.14. COUNTERPARTS................................................70
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<PAGE>
TRUST AGREEMENT
THIS TRUST AGREEMENT (this "Trust Agreement"), dated as of March 9, 2000
among (i) GENTIVA HEALTH SERVICES, INC., a Delaware corporation (including any
successors or assigns, the "Depositor"), (ii) Wilmington Trust Company, as
property trustee (in such capacity, the "Property Trustee" and, in its separate
corporate capacity and not in its capacity as Property Trustee, the "Bank") and
as Delaware trustee (the "Delaware Trustee"), (iii) Edward A. Blechshmidt, an
individual, John J. Collura, an individual, and Patricia C. Ma, an individual,
each of whose address is c/o Gentiva Health Services, Inc., 175 Broad Hollow
Road, Melville, New York 11747 (each an "Administrative Trustee" and
collectively the "Administrative Trustees") (the Property Trustee, the Delaware
Trustee and the Administrative Trustees are referred to individually as a
"Trustee" and collectively as the "Trustees") and (iv) the several Holders (as
hereinafter defined).
W I T N E S S E T H:
WHEREAS, THE DEPOSITOR AND CERTAIN OF THE TRUSTEES HAVE DULY DECLARED AND
ESTABLISHED A BUSINESS TRUST PURSUANT TO THE DELAWARE BUSINESS TRUST ACT BY
ENTERING INTO THIS TRUST AGREEMENT, DATED AS OF MARCH 9, 2000 AND BY THE
EXECUTION AND FILING WITH THE SECRETARY OF STATE OF THE STATE OF DELAWARE OF THE
CERTIFICATE OF TRUST, FILED ON MARCH 9, 2000, ATTACHED AS EXHIBIT A (THE
"CERTIFICATE OF TRUST"). NOW, THEREFORE, IN CONSIDERATION OF THE AGREEMENTS AND
OBLIGATIONS SET FORTH HEREIN AND FOR OTHER GOOD AND VALUABLE CONSIDERATION, THE
SUFFICIENCY OF WHICH IS HEREBY ACKNOWLEDGED, EACH PARTY, FOR THE BENEFIT OF THE
OTHER PARTIES AND FOR THE BENEFIT OF THE HOLDERS (AS HEREINAFTER DEFINED),
HEREBY AGREES AS FOLLOWS:
ARTICLE I
DEFINED TERMS
SECTION 1.1. DEFINITIONS.
For all purposes of this Trust Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
<PAGE>
(a) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(b) all other terms used herein that are defined in the Trust
Indenture Act (as hereinafter defined), either directly or by reference
therein, have the meanings assigned to them therein;
(c) unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the case may
be, of this Trust Agreement; and
(d) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Trust Agreement as a whole and not to any
particular Article, Section or other subdivision.
"Act" has the meaning specified in Section 6.8(a).
"Additional Amount" means, with respect to Trust Securities of a given
Liquidation Amount and/or a given period, the amount of Additional Interest (as
defined in the Indenture) paid by the Depositor on a Like Amount of Debentures
for such period.
"Administrative Trustee" means each of the individuals identified as an
"Administrative Trustee" in the preamble to this Trust Agreement, solely in such
individual's capacity as an Administrative Trustee of the Trust and not in such
individual's individual capacity, or such Administrative Trustee's successor in
interest in such capacity, and includes any Special Administrative Trustee (as
hereinafter defined) appointed as herein provided.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Appointment Event" has the meaning set forth in Section 6.1(d).
"Bank" has the meaning specified in the preamble to this Trust Agreement.
"BHCA Person" has the meaning set forth in Section 4.3(a).
"Bankruptcy Event" means, with respect to any Person:
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<PAGE>
(a) the entry of a decree or order by a court having jurisdiction in
the premises judging such Person a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement, adjudication
or composition of or in respect of such Person under any applicable federal
or state bankruptcy, insolvency, reorganization or other similar law, or
appointing a receiver, liquidator, assignee, trustee, sequestrator (or
other similar official) of such Person or of any substantial part of its
property or ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order unstayed and in effect for a period
of 60 consecutive days; or
(b) the institution by such Person of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of
bankruptcy or insolvency proceedings against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under any
applicable federal or state bankruptcy, insolvency, reorganization or other
similar law, or the consent by it to the filing of any such petition or to
the appointment of a receiver, liquidator, assignee, trustee, sequestrator
(or similar official) of such Person or of any substantial part of its
property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay its
debts generally as they become due and its willingness to be adjudicated a
bankrupt, or the taking of corporate action by such Person in furtherance
of any such action.
"Bankruptcy Laws" has the meaning specified in Section 11.10.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Depositor to have been duly adopted by the
Depositor's Board of Directors, or such committee of the Board of Directors or
officers of the Depositor to which authority to act on behalf of the Board of
Directors has been delegated, and to be in full force and effect on the date of
such certification, and delivered to the Trustees.
"Business Day" means a day other than (i) a Saturday or Sunday and (ii) a
day on which banking institutions in The City of New York or the State of
Delaware are authorized or required by law or executive order to remain closed.
"Certificate of Trust" has the meaning specified in the recitals hereof, as
amended from time to time.
"Certificated Preferred Security" or "Certificated Preferred Securities"
means a Preferred Security or Securities in the form set forth in Exhibit C
attached hereto.
"Closing Date" means March 15, 2000.
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<PAGE>
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act, or, if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Common Securities Certificate" means a certificate evidencing ownership of
Common Securities, substantially in the form attached as Exhibit B.
"Common Security" means an undivided common beneficial interest in the
assets of the Trust, having a Liquidation Amount of $50 and having the rights
provided therefor in this Trust Agreement, including the right to convert to
shares of the Common Stock and the right to receive Distributions and a
Liquidation Distribution as provided herein.
"Common Stock" means the common stock of the Depositor, par value $.10 per
share.
"Conversion Agent" has the meaning set forth in Section 4.3(d).
"Conversion Date" has the meaning set forth in Section 4.3(c).
"Conversion Price" has the meaning set forth in Section 4.3(a).
"Conversion Request" has the meaning set forth in Section 4.3(b).
"Corporate Trust Office" means (i) when used with respect to the Property
Trustee, the principal office of the Property Trustee located in Wilmington,
Delaware, and (ii) when used with respect to the Indenture Trustee, the
principal office of the Indenture Trustee located in Wilmington, Delaware.
"Debenture Purchase Agreement" means the purchase agreement between the
Trust and the Depositor relating to the purchase by the Trust of the Depositor's
Debentures and dated as of the Closing Date.
"Debenture Redemption Date" means, with respect to any Debentures to be
redeemed under the Indenture, the date fixed for redemption under the Indenture.
"Debenture Stated Maturity" means the date specified pursuant to the terms
of the Debentures as the date on which the principal of the Debentures is due
and payable.
"Debenture Tax Event" means a "Tax Event" as defined in the Indenture.
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<PAGE>
"Debentures" means the $20,618,600 aggregate principal amount of the
Depositor's 10% Convertible Subordinated Debentures due 2005 issued pursuant to
the Indenture.
"Delaware Business Trust Act" means Chapter 38 of Title 12 of the Delaware
Code, 12 Del. C. 3801, et seq., as it may be amended from time to time.
"Delaware Trustee" means the Person identified as the "Delaware Trustee" in
the preamble to this Trust Agreement solely in its capacity as Delaware Trustee
of the Trust and not in its individual capacity, or its successor in interest in
such capacity, or any successor trustee appointed as herein provided.
"Depositor" has the meaning specified in the preamble to this Trust
Agreement.
"Direct Action" has the meaning specified in Section 5.13(f).
"Distribution Date" has the meaning specified in Section 4.1(a).
"Distributions" has the meaning specified in Section 4.1(a).
"Early Termination Event" has the meaning specified in Section 9.2.
"Event of Default" means any one of the following events (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) the occurrence of a Indenture Event of Default; or
(b) default by the Property Trustee in the payment of any Distribution
when it becomes due and payable, and continuation of such default for a
period of 30 days; provided, however, that a valid extension of the
interest payment period by the Depositor pursuant to Section 3.11 of the
Indenture shall not constitute a default in the payment of Distributions);
or
(c) default by the Property Trustee in the payment of any Redemption
Price or Repurchase Price of any Trust Security when it becomes due and
payable; or
(d) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Trustees in this Trust Agreement (other
than a covenant or warranty a default in the performance or breach of which
is dealt with in clause (b) or (c) above) and continuation of such default
or breach for a period of 90 days after there
-5-
<PAGE>
has been given, by registered or certified mail, to the defaulting Trustee
or Trustees by the Holders of at least 25% in aggregate Liquidation Amount
of the Outstanding Preferred Securities, a written notice specifying such
default or breach and requiring it to be remedied and stating that such
notice is a "Notice of Default" hereunder; or
(e) the occurrence of a Bankruptcy Event with respect to the Property
Trustee and the failure by the Depositor to appoint a successor Property
Trustee within 90 days thereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expiration Date" has the meaning specified in Section 9.1.
"Guarantee" means the Guarantee Agreement executed and delivered by the
Depositor and Wilmington Trust Company, as trustee, on the Closing Date, for the
benefit of the Holders of the Preferred Securities, as amended from time to
time.
"Holder" means a Person in whose name a Trust Security is registered in the
Securities Register; any such Person shall be a beneficial owner within the
meaning of the Delaware Business Trust Act.
"Indenture" means the Indenture, dated as of March 15, 2000 between the
Depositor and the Indenture Trustee, as trustee, as amended or supplemented from
time to time.
"Indenture Event of Default" means an "Event of Default" as defined in the
Indenture.
"Indenture Trustee" means Wilmington Trust Company, a Delaware corporation,
as trustee under the Indenture, and any successor trustee appointed as provided
therein.
"Investment Company Event" means that the Administrative Trustees shall
have received an opinion from independent counsel to the effect that, as a
result of the occurrence of a change in law or regulation or a written change in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority (a "Change in 1940 Act Law"),
there is more than an insubstantial risk that the Trust is or will be considered
an "investment company" which is required to be registered under the Investment
Company Act of 1940, as amended, which Change in 1940 Act Law becomes effective
on or after the date hereof.
"Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of
trust, adverse ownership interest, hypothecation, assignment, security interest
or preference, priority or other security agreement or preferential arrangement
of any kind or nature whatsoever.
-6-
<PAGE>
"Like Amount" means (a) with respect to a redemption or repurchase of Trust
Securities, Trust Securities having a Liquidation Amount equal to the principal
amount of Debentures to be contemporaneously redeemed or repurchased in
accordance with the Indenture, the proceeds of which will be used to pay the
Redemption Price or Repurchase Price of such Trust Securities and (b) with
respect to a distribution of Debentures to Holders of Trust Securities in
connection with a dissolution or liquidation of the Trust, Debentures having a
principal amount equal to the Liquidation Amount of the Trust Securities of the
Holder to whom such Debentures are distributed.
"Liquidation Amount" means the stated amount of $50 per Trust Security.
"Liquidation Date" means the date on which Debentures are to be distributed
to Holders of Trust Securities in connection with a termination and liquidation
of the Trust pursuant to Section 9.4(a).
"Liquidation Distribution" has the meaning specified in Section 9.4(d).
"1940 Act" means the Investment Company Act of 1940, as amended.
"Officers' Certificate" means a certificate signed by the Chairman, Chief
Executive Officer, President or a Vice President, and by the Treasurer, an
Assistant Treasurer, the Controller, the Secretary or an Assistant Secretary, of
the Depositor, and delivered to the appropriate Trustee. One of the officers
signing an Officers' Certificate given pursuant to Section 8.16 shall be the
principal executive, financial or accounting officer of the Depositor. Any
Officers' Certificate delivered with respect to compliance with a condition or
covenant provided for in this Trust Agreement shall include:
(a) a statement that each officer signing the Officers' Certificate
has read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers'
Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
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<PAGE>
"Opinion of Counsel" means a written opinion of counsel, who may be
internal or external counsel for the Trust, the Property Trustee or the
Depositor, and who shall be reasonably acceptable to the Property Trustee.
"Outstanding" means, when used with respect to Trust Securities as of the
date of determination, all Trust Securities theretofore executed and delivered
under this Trust Agreement, except:
(a) Trust Securities theretofore canceled by the Securities Registrar
or delivered to the Securities Registrar for cancellation;
(b) Trust Securities for whose payment or redemption funds in the
necessary amount theretofore have been deposited with the Property Trustee
or any Paying Agent for the Holders of such Trust Securities; provided
that, if such Trust Securities are to be redeemed, notice of such
redemption has been duly given pursuant to this Trust Agreement;
(c) Trust Securities which have been converted pursuant to Section
4.3; and
(d) Trust Securities which have been paid or in exchange for or in
lieu of which other Trust Securities have been executed and delivered
pursuant to this Trust Agreement, including pursuant to Sections 5.4, 5.5,
5.11 and 5.16.
"Owner" means each Person who is the beneficial owner of a Certificated
Preferred Security.
"Paying Agent" means any paying agent or co-paying agent appointed pursuant
to Section 5.9 and initially shall be the Bank.
"Payment Account" means a segregated non-interest-bearing corporate trust
account maintained by the Property Trustee with the Bank in its corporate trust
department for the benefit of the Holders in which all amounts paid in respect
of the Debentures will be held and from which the Property Trustee, through the
Paying Agent, shall make payments to the Holders in accordance with Sections 4.1
and 4.2 and Article X.
"Person" means any individual, corporation, partnership, joint venture,
trust, limited liability company or corporation, unincorporated organization or
government or any agency or political subdivision thereof.
"Preferred Security" means an undivided preferred beneficial interest in
the assets of the Trust, having a Liquidation Amount of $50 and having the
rights provided therefor
-8-
<PAGE>
in this Trust Agreement, including the right to convert to shares of the Common
Stock and the right to receive Distributions and a Liquidation Distribution as
provided herein.
"Property Trustee" means the Person identified as the "Property Trustee" in
the preamble to this Trust Agreement solely in its capacity as Property Trustee
of the Trust and not in its individual capacity, or its successor in interest in
such capacity, or any successor property trustee appointed as herein provided.
"Purchase Agreement" means the Purchase Agreement, dated as of March 13,
2000, among the Trust, the Depositor and the Purchasers named therein.
"Purchasers" means the individuals named in the Purchase Agreement.
"Redemption Date" means, with respect to any Trust Security to be redeemed,
the date fixed for such redemption by or pursuant to this Trust Agreement;
provided that each Debenture Redemption Date and the Debenture Stated Maturity
shall be a Redemption Date for a Like Amount of Trust Securities.
"Redemption Price" means, with respect to any Trust Security, the
redemption price paid by the Depositor upon the concurrent redemption of a Like
Amount of Debentures, allocated on a pro rata basis (based on Liquidation
Amounts) among the Trust Securities.
"Regulation S" means Regulation S under the Securities Act.
"Relevant Trustee" shall have the meaning specified in Section 8.10(a).
"Repurchase Date" shall have the meaning specified in Section 10.1
"Repurchase Price" shall have the meaning specified in Section 10.1
"Resale Restriction Termination Date" means, with respect to any Preferred
Security, the later of the date which is two years after (i) the original issue
date of such Preferred Security and (ii) the last date on which the Depositor or
an Affiliate of the Depositor was the owner of such Preferred Security (or any
predecessor Trust Security).
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Register" shall have the meaning specified in Section 5.5.
"Securities Registrar" shall have the meaning specified in Section 5.5.
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<PAGE>
"Special Administrative Trustee" means an Administrative Trustee appointed
by the Holders of the Preferred Securities pursuant to the provisions of Section
6.1(d).
"Special Event" means an Investment Company Event or a Tax Event.
"Split-off" means the date of the issuance of all Common Stock of the
Depositor to stockholders of Olsten Corporation ("Olsten") in exchange for their
Olsten stock and the separation of the Depositor from its parent company,
Olsten, to become a separate publicly-traded company, pursuant to the separation
agreement, as amended, dated August 17, 1999 by and among Olsten, Adecco SA and
Aaronco Corp. (predecessor to the Depositor).
"Subscription Agreement" means the subscription agreement between the Trust
and the Depositor relating to the issuance by the Trust of the Common Securities
to the Depositor and dated as of the Closing Date.
"Tax Event" means the receipt by the Trust of an Opinion of Counsel
experienced in such matters to the effect that, as a result of (a) any amendment
to, or change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein or (b) any amendment to, or change in, an
interpretation or application of such laws or regulations, there is more than an
insubstantial risk that (i) the Trust would be subject to United States federal
income tax with respect to income accrued or received on the Convertible
Subordinated Debentures, (ii) interest payable to the Trust on the Convertible
Subordinated Debentures would not be deductible, in whole or in part, by the
Depositor for United States federal income tax purposes or (iii) the Trust would
be subject to more than a de minimis amount of other taxes, duties or other
governmental charges, which change or amendment becomes effective on or after
the date hereof.
"Trading Day" means each Monday, Tuesday, Wednesday, Thursday and Friday,
other than any day on which securities are generally not traded on the
applicable securities exchange or in the relevant market.
"Transfer Restricted Securities" means Preferred Securities that bear or
are required to bear the legend set forth in Section 5.4(e).
"Trust" means the Delaware business trust created and identified on the
cover page to this Trust Agreement.
"Trust Agreement" means this Trust Agreement, as the same may be modified,
amended or supplemented in accordance with the applicable provisions hereof,
including (i) all exhibits hereto and (ii) for all purposes of this Trust
Agreement and any such modifica-
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tion, amendment or supplement, the provisions of the Trust Indenture Act that
are deemed to be a part of and govern this Trust Agreement and any such
modification, amendment or supplement, respectively.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at
the date as of which this instrument was executed; provided, however, that in
the event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.
"Trust Property" means (a) the Debentures, (b) any funds on deposit in, or
owing to, the Payment Account and (c) all proceeds and rights in respect of the
foregoing.
"Trust Securities Certificate" means any one of the Common Securities
Certificates or the Certificated Preferred Securities.
"Trust Security" means any of the Common Securities and the Preferred
Securities.
"Trustees" means, collectively, the Property Trustee, the Delaware Trustee
and the Administrative Trustees.
ARTICLE II
CONTINUATION OF TRUST
SECTION 2.1. NAME.
The Trust hereby shall be known as "Gentiva Trust," as such name may be
modified from time to time by the Administrative Trustees following written
notice to the Holders and the other Trustees, in which name the Trustees engage
in the transactions contemplated hereby, make and execute contracts and other
instruments on behalf of the Trust and sue and be sued.
SECTION 2.2. OFFICE OF DELAWARE TRUSTEE; PRINCIPAL PLACE OF BUSINESS.
The address of the Delaware Trustee in the State of Delaware is Wilmington
Trust Company, 1100 North Market Street, Wilmington, Delaware 19801, Attention:
Corporate Trust Department, or such other address in the State of Delaware as
the Delaware Trustee may designate by written notice to the Holders and the
Depositor. The principal executive
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office of the Trust is c/o Gentiva Health Services, Inc., 175 Broad Hollow Road,
Melville, New York 11747.
SECTION 2.3. INITIAL CONTRIBUTION OF TRUST PROPERTY; ORGANIZATIONAL
EXPENSES.
The Property Trustee acknowledges receipt in trust from the Depositor of
the sum of $10, which constitutes the initial Trust Property. The Depositor will
pay organizational expenses of the Trust as they arise or, upon request of any
Trustee, promptly will reimburse such Trustee for any such expenses paid by such
Trustee. The Depositor will make no claim upon the Trust Property for the
payment of such expenses.
SECTION 2.4. ISSUANCE OF PREFERRED SECURITIES.
As of March 13, 2000, the Depositor, the Trust and the Purchasers will
execute and deliver the Purchase Agreement. On March 15, 2000, an Administrative
Trustee, on behalf of the Trust, will execute in accordance with Section 5.2 and
deliver to the Purchasers named in the Purchase Agreement the Certificated
Preferred Securities, registered in the name of the Purchasers, in the amount of
400,000 Preferred Securities having an aggregate Liquidation Amount of $50.00,
against receipt of an aggregate purchase price of $20,000,000, plus accrued
Distributions from March 15, 2000, if any.
SECTION 2.5. ISSUANCE OF COMMON SECURITIES.
On March 15, 2000, an Administrative Trustee, on behalf of the Trust, will
execute in accordance with Section 5.2 and deliver to the Depositor Common
Securities Certificates, registered in the name of the Depositor, in accordance
with the Subscription Agreement in an aggregate amount of 12,371 Common
Securities having an aggregate Liquidation Amount of $50.00 against payment by
the Depositor of an aggregate purchase price of $618,600, plus accrued
Distributions from March 15, 2000, if any.
SECTION 2.6. SUBSCRIPTION AND PURCHASE OF DEBENTURES.
Contemporaneously with the issuance of Preferred Securities and Common
Securities pursuant to Section 2.4(a) and Section 2.5(a), an Administrative
Trustee, on behalf of the Trust, will subscribe to and purchase from the
Depositor Debentures registered in the name of the Trust and having an aggregate
principal amount equal to $20,618,600 in accordance with the Debenture Purchase
Agreement. In satisfaction of the purchase price for such Debentures, the Trust
will deliver to the Depositor the sum of $20,618,600.
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SECTION 2.7. DECLARATION OF TRUST.
The exclusive purposes and functions of the Trust are (a) to issue and sell
Trust Securities, (b) to use the proceeds from such sale to acquire the
Debentures and (c) to engage in those activities necessary or incidental
thereto. The Depositor hereby appoints the Trustees as trustees of the Trust, to
have all the rights, powers and duties to the extent set forth herein, and the
Trustees hereby accept such appointment. The Property Trustee hereby declares
that it will hold the Trust Property in trust upon and subject to the conditions
set forth herein for the benefit of the Trust and the Holders. The
Administrative Trustees shall have all rights, powers and duties set forth
herein and in accordance with applicable law with respect to accomplishing the
purposes of the Trust. The Delaware Trustee shall not be entitled to exercise
any powers, nor shall the Delaware Trustee have any of the duties and
responsibilities, of the Property Trustee or the Administrative Trustees set
forth herein. The Delaware Trustee shall be one of the Trustees of the Trust for
the sole and limited purpose of fulfilling the requirements of Section 3807 of
the Delaware Business Trust Act.
SECTION 2.8. AUTHORIZATION TO ENTER INTO CERTAIN TRANSACTIONS.
(a) The Trustees shall conduct the affairs of the Trust in accordance with
the terms of this Trust Agreement. Subject to the limitations set forth in
Section 2.8(b) and Article VIII and in accordance with the following provisions
(i), (ii) and (iii), the Trustees shall have the authority to enter into all
transactions and agreements determined by the Trustees to be appropriate in
exercising the authority, express or implied, otherwise granted to the Trustees
under this Trust Agreement, and to perform all acts in furtherance thereof,
including the following:
(i) As among the Trustees, each Administrative Trustee, acting singly
or collectively, shall have the power and authority (except during any
period in which the Holders of the Preferred Securities shall have
appointed a Special Administrative Trustee pursuant to Section 6.1(d) and
except to the extent expressly provided by the terms hereof) to act on
behalf of the Trust with respect to the following matters:
(A) the issuance and sale of the Trust Securities; provided,
however, that the Trust may issue no more than one series of Preferred
Securities and no more than one series of Common Securities, and,
provided further, that there shall be no interests in the Trust other
than the Trust Securities, and the issuance of Trust Securities shall
be limited to simultaneous issuances of both Preferred Securities and
Common Securities on the Closing Date;
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(B) causing the Trust to enter into, and executing, delivering
and performing on behalf of the Trust, the Purchase Agreement, the
Subscription Agreement, the Debenture Purchase Agreement and such
other agreements as may be necessary or desirable in connection with
the purposes and function of the Trust and the issuance of the Trust
Securities;
(C) assisting in the listing, if any, of the Preferred Securities
upon the PORTAL Market;
(D) sending notices (other than notices of default) and other
information regarding the Trust Securities and the Debentures to the
Holders in accordance with this Trust Agreement;
(E) appointing a Paying Agent, Conversion Agent and Securities
Registrar in accordance with this Trust Agreement;
(F) registering transfer of the Trust Securities in accordance
with this Trust Agreement;
(G) to the extent provided in this Trust Agreement, the winding
up of the affairs of and liquidation of the Trust and executing and
filing the certificate of cancellation with the Secretary of State of
the State of Delaware;
(H) unless otherwise required by the Delaware Business Trust Act
or the Trust Indenture Act, executing on behalf of the Trust (either
acting alone or together with any or all of the Administrative
Trustees) any documents that the Administrative Trustees have the
power to execute pursuant to this Trust Agreement; and
(I) taking any action incidental to the foregoing as the
Administrative Trustees may from time to time determine is necessary
or advisable to give effect to the terms of this Trust Agreement for
the benefit of the Holders (without consideration of the effect of any
such action on any particular Holder).
(ii) As among the Trustees, the Property Trustee shall have the power,
duty and authority to act on behalf of the Trust with respect to the
following matters:
(A) establishing the Payment Account;
(B) receiving and holding the Debentures;
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(C) collecting principal of, premium, if any, and interest on,
and any other payments made in respect of, the Debentures in the
Payment Account;
(D) distributing, through the Paying Agent, amounts owed to the
Holders in respect of the Trust Securities;
(E) exercising all of the rights, powers and privileges of a
holder of the Debentures;
(F) sending notices of default and other information regarding
the Trust Securities and the Debentures to the Holders in accordance
with this Trust Agreement;
(G) distributing the Trust Property in accordance with the terms
of this Trust Agreement;
(H) to the extent provided in this Trust Agreement, winding up
the affairs of and liquidating the Trust and the executing and filing
the certificate of cancellation with the Secretary of State of the
State of Delaware; and
(I) except as otherwise provided in this Section 2.8(a)(ii), the
Property Trustee shall have none of the duties, liabilities, powers or
the authority of the Administrative Trustees set forth in Section
2.8(a)(i).
(iii) At such times as a Special Administrative Trustee shall have
been appointed by the Holders of the Preferred Securities pursuant to
Section 6.1(d), the Special Administrative Trustee shall have the power and
authority to act on behalf of the Trust jointly with the Administrative
Trustees, and the Administrative Trustees and the Special Administrative
Trustee shall act collectively as determined by a majority.
(b) So long as this Trust Agreement remains in effect, the Trust (or the
Trustees acting on behalf of the Trust) shall not undertake any business,
activities or transaction except as expressly provided herein or contemplated
hereby. In particular, the Trustees shall not: (i) acquire any investments or
engage in any activities not authorized by this Trust Agreement; (ii) sell,
assign, transfer, exchange, mortgage, pledge, set-off or otherwise dispose of
any of the Trust Property or interests therein, including to Holders, except as
expressly provided herein; (iii) take any action that would cause the Trust to
fail or cease to qualify as a "grantor trust" for United States federal income
tax purposes; (iv) incur any indebtedness for borrowed money or issue any other
debt; (v) take or consent to any action that would result in the creation of a
Lien on any of the Trust Property; (vi) invest any proceeds received by the
Trust from holding the Debentures, but shall distribute all such proceeds to
Holders of Trust
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Securities pursuant to the terms of this Trust Agreement and of the Trust
Securities; (vii) acquire any assets other than the Trust Property; (viii)
possess any power or otherwise act in such a way as to vary the Trust Property;
(ix) possess any power or otherwise act in such a way as to vary the terms of
the Trust Securities in any way whatsoever (except to the extent expressly
authorized in this Trust Agreement or by the terms of the Trust Securities); or
(x) issue any securities or other evidences of beneficial ownership of, or
beneficial interest in, the Trust other than the Trust Securities. The
Administrative Trustees shall defend all claims and demands of all Persons at
any time claiming any Lien on any of the Trust Property adverse to the interest
of the Trust or the Holders in their capacity as Holders.
(c) In connection with the issue and sale of the Preferred Securities, the
Depositor shall have the right and responsibility to assist the Trust with
respect to, or effect on behalf of the Trust, the following (and any actions
taken by the Depositor in furtherance of the following prior to the date of this
Trust Agreement are hereby ratified and confirmed in all respects):
(i) to determine the States in which to take appropriate action to
qualify or register for sale or resale all or part of the Preferred
Securities and to do any and all such acts, other than actions which must
be taken by the Trust, and advise the Trust of actions it must take, and
prepare for execution and filing any documents to be executed and filed by
the Trust, as the Depositor deems necessary or advisable in order to comply
with the applicable laws of any such States;
(ii) to negotiate the terms of and execute the Purchase Agreement
providing for the sale of the Preferred Securities;
(iii) to the extent applicable, to provide all annual and quarterly
reports and the information, documents and other reports that the Depositor
is required to file, if any, with the Commission pursuant to Section 13(a)
or 15(d) of the Exchange Act (the "SEC Reports") with the Indenture Trustee
and the Property Trustee within 15 days after it files them with the
Commission;
(d) The Administrative Trustees are authorized and directed to conduct the
affairs of the Trust and to operate the Trust so that the Trust will not be
deemed to be an "investment company" required to be registered under the 1940
Act, or fail to be classified as a grantor trust for United States federal
income tax purposes and so that the Debentures will be treated as indebtedness
of the Depositor for United States federal income tax purposes. In this
connection, the Depositor and the Administrative Trustees are authorized to take
any action, not inconsistent with applicable law, the Certificate of Trust or
this Trust Agreement, that each of the Depositor and any Administrative Trustee
determines in its discretion to
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be necessary or desirable for such purposes, as long as such action does not
adversely affect in any material respect the interests of the Holders of the
Preferred Securities.
SECTION 2.9. ASSETS OF TRUST.
The assets of the Trust shall consist solely of the Trust Property.
SECTION 2.10. TITLE TO TRUST PROPERTY.
Legal title to all Trust Property shall be vested at all times in the
Property Trustee (in its capacity as such) and shall be held and administered by
the Property Trustee for the benefit of the Trust and the Holders in accordance
with this Trust Agreement.
ARTICLE III
PAYMENT ACCOUNT
SECTION 3.1. PAYMENT ACCOUNT.
(a) On or prior to the Closing Date, the Property Trustee will establish
the Payment Account. The Property Trustee and any agent of the Property Trustee
will have exclusive control and sole right of withdrawal with respect to the
Payment Account for the purpose of making deposits in and withdrawals from the
Payment Account in accordance with this Trust Agreement. All funds and other
property deposited or held from time to time in the Payment Account will be held
by the Property Trustee in the Payment Account for the exclusive benefit of the
Holders and for distribution as provided herein, including (and subject to) any
priority of payments provided for herein.
(b) The Property Trustee will deposit in the Payment Account, promptly upon
receipt, all payments of principal of, premium, if any, or interest on, and any
other payments or proceeds with respect to the Debentures. Amounts held in the
Payment Account will not be invested by the Property Trustee.
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ARTICLE IV
DISTRIBUTIONS; REDEMPTION; CONVERSION
SECTION 4.1. DISTRIBUTIONS.
(a) The Trust Securities represent undivided beneficial ownership interests
in the Trust Property, and distributions (the "Distributions") will be made on
the Trust Securities at the rate and on the dates that payments of interest
(including Additional Interest, as defined in the Indenture) are made on the
Debentures.
Accordingly:
(i) Distributions on the Trust Securities will be cumulative, and will
accumulate whether or not there are funds of the Trust available for the
payment of Distributions. Distributions will accrue from March 15, 2000,
and, except in the event (and to the extent) that the Depositor exercises
its right to defer the payment of interest on the Debentures pursuant to
the Indenture, will be payable quarterly in arrears on January 1, April 1,
July 1 and October 1 of each year, commencing on July 1, 2000. If any date
on which a Distribution is otherwise payable on the Trust Securities is not
a Business Day, then the payment of such Distribution will be made on the
next succeeding day that is a Business Day (without any additional
Distributions or other payment in respect of such delay) except that, if
such Business Day is in the next succeeding calendar year, payment of such
Distribution shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date (each date
on which Distributions are payable in accordance with this Section 4.1(a),
a "Distribution Date").
(ii) Assuming payments of interest on the Debentures are made when due
(and before giving effect to Additional Amounts, if applicable),
Distributions on the Trust Securities shall be payable at an annual rate of
10% of the Liquidation Amount of the Trust Securities, the annual interest
rate for the Debentures. The amount of Distributions payable for any period
will be computed on the basis of a 360-day year of twelve 30-day months.
(iii) Distributions on the Trust Securities will be made by the
Property Trustee from the Payment Account and shall be payable on each
Distribution Date only to the extent that the Trust has funds then on hand
and available in the Payment Account for the payment of such Distributions.
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(b) Distributions on the Trust Securities with respect to a Distribution
Date shall be payable to the Holders thereof as they appear on the Securities
Register for the Trust Securities on the relevant record date, which shall be
the 15th day of the month preceding the month in which the relevant Distribution
Date occurs without giving effect to the third sentence of Section 4.1(a)(i)
(whether or not such record date is a Business Day).
SECTION 4.2. REDEMPTION.
(a) On each Debenture Redemption Date and on the Debenture Stated Maturity,
the Trust shall be required to redeem a Like Amount of Trust Securities at the
Redemption Price. In addition, in the case of the occurrence of a Tax Event, if
(i) the Depositor has received an opinion (a "Redemption Tax Opinion") from
independent tax counsel experienced in such matters that, as a result of a Tax
Event, there is more than an insubstantial risk that the Depositor would be
precluded from deducting the interest on the Debentures for United States
federal income tax purposes even after the Convertible Subordinated Debentures
were distributed to the holders of Preferred Securities in liquidation of such
holders' interests in the Trust Pursuant to Section 9.4 or (ii) the
Administrative Trustees shall have been informed by such tax counsel that an
opinion from independent tax counsel experienced in such matters to the effect
that the holders of the Preferred Securities will not recognize any gain or loss
for United States federal income tax purposes as a result of such dissolution
and distribution of Convertible Subordinated Debentures (a "No Recognition
Opinion") cannot be delivered, the Depositor shall have the right, upon not less
than 30 nor more than 60 days notice, to redeem the Convertible Subordinated
Debentures in whole or in part for cash within 90 days following the occurrence
of such Tax Event, and, following such redemption, Preferred Securities with an
aggregate liquidation amount equal to the aggregate principal amount of the
Convertible Subordinated Debentures so redeemed shall be redeemed by the Trust
at the Redemption Price on a pro rata basis or in such other manner as the
Property Trustee deems appropriate; provided, however, that, if at the time
there is available to the Depositor or the Trust the opportunity to eliminate,
within such 90 day period, the Tax Event by taking some ministerial action, such
as filing a form or making an election, or pursuing some other similar
reasonable measure which has no adverse effect on the Trust, the holders of the
Preferred Securities or the Depositor, the Trust will pursue such measure in
lieu of redemption.
(b) Notice of redemption shall be given by the Property Trustee by
first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days
prior to the Redemption Date to each Holder of Trust Securities to be redeemed,
at such Holder's address appearing in the Security Register. All notices of
redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
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(iii) if less than all the Outstanding Trust Securities are to be
redeemed, the identification and the total Liquidation Amount of the
particular Trust Securities to be redeemed;
(iv) that on the Redemption Date the Redemption Price shall become due
and payable upon each such Trust Security to be redeemed and that
Distributions thereon shall cease to accrue on and after said date; and
(v) the place and address where the Holders shall surrender their
Certificated Preferred Securities.
(c) The Trust Securities redeemed on each Redemption Date will be redeemed
at the Redemption Price with the proceeds from the contemporaneous redemption on
the Debenture Redemption Date or payment at the Debenture Stated Maturity.
Redemptions of the Trust Securities will be made and the Redemption Price will
be payable on each Redemption Date only to the extent that the Trust has funds
then on hand and available in the Payment Account for the payment of such
Redemption Price.
(d) If the Property Trustee gives a notice of redemption in respect of any
Preferred Securities, then, by 12:00 noon, New York City time, on the Redemption
Date, subject to Section 4.2(c), the Property Trustee will irrevocably deposit
with the Paying Agent funds sufficient to pay the applicable Redemption Price
and will give the Paying Agent irrevocable instructions and authority to pay the
Redemption Price to the Holders thereof upon surrender of their Preferred
Securities Certificates. Notwithstanding the foregoing, Distributions payable on
or prior to the Redemption Date for any Trust Securities called for redemption
will be payable to the Holders of such Trust Securities as they appear on the
Securities Register for the Trust Securities on the relevant record dates for
the related Distribution Dates. If notice of redemption shall have been given
and funds deposited as required, then upon the date of such deposit all rights
of Holders holding Trust Securities so called for redemption shall cease, except
(i) the right of such Holders to receive the Redemption Price and any
Distribution payable on or prior to the Redemption Date, but without interest
thereon and (ii) any right of the Holders to cause the Conversion Agent to
convert the Trust Securities, and such Trust Securities will cease to be
Outstanding. In the event that any date on which any Redemption Price is payable
is not a Business Day, then payment of the Redemption Price payable on such date
shall be made on the next succeeding day that is a Business Day (and without any
interest or other payment in respect of any such delay), except that, if such
Business Day falls in the next calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date. In the event that payment of the Redemption Price in
respect of any Trust Securities called for redemption is improperly withheld or
refused and not paid either by the Trust or by the Depositor pursuant to the
Guarantee, Distributions on such Trust Securities shall continue to accrue, at
the then applicable
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rate, from the Redemption Date originally established by the Trust for such
Trust Securities to the date such Redemption Price is actually paid, in which
case the actual payment date shall be the date fixed for redemption for purposes
of calculating the Redemption Price.
(e) Payment of the Redemption Price on the Trust Securities shall be made
to the recordholders thereof as they appear on the Securities Register for the
Trust Securities on the relevant record date, which shall be 15 days prior to
the relevant Redemption Date.
(f) Subject to Section 4.4(a), if less than all of the Outstanding Trust
Securities are to be redeemed on a Redemption Date, then the aggregate
Liquidation Amount of Trust Securities to be redeemed shall be allocated among
the Common Securities and the Preferred Securities. The particular Preferred
Securities to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Property Trustee from the Outstanding Preferred
Securities not previously called for redemption on a pro rata basis or by such
other method as the Property Trustee shall deem fair and appropriate and which
may provide for the selection for redemption of portions (equal to $50 or an
integral multiple of $50 in excess thereof) of the Liquidation Amount of
Preferred Securities of a denomination larger than $50. The Property Trustee
shall promptly notify the Security Registrar in writing of the Preferred
Securities selected for redemption and, in the case of any Preferred Securities
selected for partial redemption, the Liquidation Amount thereof to be redeemed.
For all purposes of this Trust Agreement, unless the context otherwise requires,
all provisions relating to the redemption of Preferred Securities shall relate,
in the case of any Preferred Securities redeemed or to be redeemed only in part,
to the portion of the Liquidation Amount of Preferred Securities that has been
or is to be redeemed.
SECTION 4.3. CONVERSION.
The Holders shall have the right at any time prior to 5:00 p.m. (New York
City time) on the second Business Day immediately preceding the date of
repayment of such Trust Securities, whether at maturity or upon redemption
(either at the option of the Depositor or pursuant to a Tax Event), at their
option, to cause the Conversion Agent to convert Trust Securities, on behalf of
the converting Holders, into shares of the Common Stock in the manner described
herein on and subject to the following terms and conditions:
(a) The Trust Securities shall be convertible at the office of the
Conversion Agent into fully paid and nonassessable shares of Common Stock
pursuant to the Holder's direction to the Conversion Agent to exchange such
Trust Securities for a portion of the Debentures theretofore held by the
Trust on the basis of one Trust Security per $50 principal amount of
Debentures, and immediately convert such amount of Debentures (or any
portion thereof that is an integral multiple of $50) into fully paid and
nonassessable shares of Common Stock at an initial conversion premium of
17.5%
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above the average closing price of the Common Stock during the ten (10)
Trading Days after the Depositor's first earnings announcement after the
Split-off, subject to certain adjustments set forth in the terms of the
Debentures and the Indenture (as so adjusted, "Conversion Price").
Notwithstanding the foregoing, no holder of Preferred Securities that is
subject to the restrictions of Section 4 of the Bank Holding Company Act of
1956, as amended (the "BHCA") (a "BHCA Person"), shall have the right to convert
any Preferred Securities if, after giving effect to such conversion, the BHCA
Person, its affiliates and transferees would own or be deemed to own shares of
Common Stock in excess of either the maximum number of shares of Common Stock
which the BHCA Person is permitted to own under the BHCA and the regulations of
the Board of Governors of the Federal Reserve thereunder or such lower number as
the relevant BHCA Person may have requested in writing to the Conversion Agent.
No BHCA Person shall have the right to assign or transfer its Preferred
Securities (other than to an Affiliate) unless such Preferred Securities are
assigned or transferred (i) to the public in an offering registered under the
Securities Act, (ii) in a transaction pursuant to Rule 144 or 144A under the
Securities Act in which no person acquires Preferred Securities convertible into
more than 2% of the outstanding Common Stock, (iii) in a single transaction to a
third party who acquires a majority of the Common Stock without regard to the
conversion of any Preferred Securities so transferred or (iv) in any other
manner permitted under the BHCA. The Conversion Agent may rely on the
representation of the relevant BHCA Person that a transfer has been made in the
foregoing manner.
(b) In order to convert Trust Securities into Common Stock, the Holder
shall submit to the Conversion Agent an irrevocable request to convert
Trust Securities on behalf of such Holder (the "Conversion Request"),
together with such Trust Security Certificates. The Conversion Request
shall: (i) set forth the number of Trust Securities to be converted and the
name or names, if other than the Holder, in which the shares of Common
Stock should be issued; and (ii) direct the Conversion Agent (A) to
exchange such Trust Securities for a portion of the Debentures held by the
Trust (at the rate of exchange specified in Section 4.3(a)) and (B) to
immediately convert such Debentures on behalf of such Holder into Common
Stock (at the Conversion Price specified in Section 4.3(a)). The Conversion
Agent shall notify the Trust of the Holder's election to exchange Trust
Securities for a portion of the Debentures held by the Trust and the
Property Trustee on behalf of the Trust shall, upon receipt of such notice,
deliver to the Conversion Agent the appropriate principal amount of
Debentures for exchange in accordance with this Section 4.3. The Conversion
Agent shall thereupon notify the Depositor of the Holder's election to
convert such Debentures into shares of Common Stock.
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(c) Accrued Distributions shall not be paid on Preferred Securities
that are converted, nor will any payment, allowance or adjustment be made
for accumulated and unpaid Distributions, whether or not in arrears, on
converted Preferred Securities except that if any Preferred Security is
converted (i) on or after a record date for payment of Distributions
thereon, the amount of the Distributions payable on the related payment
date with respect to such Preferred Security shall be paid to the
converting Holder by the Trust and the Distributions payable on the related
payment date with respect to such Preferred Security shall be distributed
on such payment date to the Holder as of such record date, despite such
conversion, and (ii) during an Extension Period and after the Property
Trustee mails a notice of redemption with respect to the Preferred
Securities that are converted, accrued and unpaid Distributions through the
date of conversion on such Preferred Securities called for redemption shall
be distributed to the Holder who converts such Preferred Securities, which
Distribution shall be made on the redemption date fixed for redemption.
Except as provided above, neither the Trust nor the Depositor shall make,
or be required to make, any payment, allowance or adjustment upon any
conversion on account of any accumulated and unpaid Distributions accrued
on the Trust Securities (including Additional Amounts, if applicable)
surrendered for conversion, or on account of any accumulated and unpaid
dividends, if any, on the shares of Common Stock issued upon such
conversion. The Depositor shall make no payment or allowance for
distributions on the shares of Common Stock issued upon such conversion,
except to the extent that such shares of Common Stock are held of record on
the record date for any such distributions and except as provided in
Section 13.9 of the Indenture. Trust Securities shall be deemed to have
been converted immediately prior to 5:00 p.m. (New York City time) on the
day on which a Conversion Request relating to such Trust Securities is
received by the Trust in accordance with the foregoing provisions of this
Section 4.3 (the "Conversion Date"). The Person or Persons entitled to
receive the Common Stock issuable upon conversion of the Debentures shall
be treated for all purposes as the record holder or holders of such Common
Stock at such time. As promptly as practicable on or after the Conversion
Date, the Depositor shall issue and deliver at the office of the Conversion
Agent a certificate or certificates for the number of full shares of Common
Stock issuable upon such conversion, together with the cash payment, if
any, in lieu of any fraction of any share to the Person or Persons entitled
to receive the same as provided in Section 4.3(e), unless otherwise
directed by the Holder in the Conversion Request, and the Conversion Agent
shall distribute such certificate or certificates to such Person or
Persons.
(d) Each Holder of a Trust Security by his acceptance thereof appoints
the Bank (the "Conversion Agent") for the purpose of effecting the
conversion of Trust Securities in accordance with this Section 4.3. In
effecting the conversion and trans-
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actions described in this Section 4.3, the Conversion Agent shall be acting
as agent of the Holders directing it to effect such conversion
transactions. The Conversion Agent is hereby authorized (i) to exchange
Trust Securities from time to time for Debentures held by the Trust in
connection with the conversion of such Trust Securities in accordance with
this Section 4.3 and (ii) to convert all or a portion of the Debentures
into Common Stock and thereupon to deliver such shares of Common Stock in
accordance with the provisions of this Section 4.3 and to deliver to the
Trust a new Debenture or Debentures for any resulting unconverted principal
amount.
(e) No fractional shares of Common Stock shall be issued as a result
of conversion, but in lieu thereof, such fractional interest shall be paid
in cash (based on the last reported sale price of the Common Stock on the
Conversion Date) by the Depositor to the Trust, which in turn shall make
such payment to the Holder or Holders of Trust Securities so converted.
(f) The Depositor shall at all times reserve and keep available out of
its authorized and unissued Common Stock, solely for issuance upon the
conversion of the Debentures, free from any preemptive or other similar
rights, such number of shares of Common Stock as shall from time to time be
issuable upon the conversion of all of the Debentures then outstanding.
Notwithstanding the foregoing, the Depositor shall be entitled to deliver,
upon conversion of Debentures, shares of Common Stock reacquired and held
in the treasury of the Depositor (in lieu of the issuance of authorized and
unissued shares of Common Stock), so long as any such treasury shares are
free and clear of all liens, charges, security interests or encumbrances.
Any shares of Common Stock issued upon conversion of the Debentures shall
be duly authorized, validly issued, fully paid and nonassessable. The Trust
shall deliver the shares of Common Stock received upon conversion of the
Debentures to the converting Holder free and clear of all liens, charges,
security interests and encumbrances, except for United States withholding
taxes. Each of the Depositor and the Trust shall prepare and shall use its
best efforts to obtain and keep in force such governmental or regulatory
permits or other authorizations as may be required by law, and shall comply
with all applicable requirements as to registration or qualification of the
Common Stock (and all requirements to list the Common Stock issuable upon
conversion of Debentures that are at the time applicable), in order to
enable the Depositor to lawfully issue Common Stock to the Trust upon
conversion of the Debentures and the Trust to lawfully deliver the Common
Stock to each Holder upon conversion of the Trust Securities.
(g) The Depositor will pay any and all taxes that may be payable in
respect of the issue or delivery of shares of Common Stock on conversion of
Debentures and the
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delivery of the shares of Common Stock by the Trust upon conversion of the
Trust Securities. The Depositor shall not, however, be required to pay any
tax that may be payable in respect of any transfer involved in the issue
and delivery of shares of Common Stock in a name other than that in which
the Trust Securities so converted were registered, and no such issue or
delivery shall be made unless and until the person requesting such issue
has paid to the Trust the amount of any such tax or has established to the
satisfaction of the Trust that such tax has been paid.
(h) Nothing in this Section 4.3 shall limit the requirement of the
Trust to withhold taxes pursuant to the terms of the Trust Securities or as
set forth in this Trust Agreement or otherwise require the Property Trustee
or the Trust to pay any amount on account of such withholdings.
SECTION 4.4. SUBORDINATION OF COMMON SECURITIES.
(a) Payment of Distributions (including Additional Amounts) on, and the
Redemption Price of, the Trust Securities, as applicable, shall be made, subject
to Section 4.2(f), pro rata among the Common Securities and the Preferred
Securities based on the Liquidation Amount of the Trust Securities; provided,
however, that if on any Distribution Date or Redemption Date any Event of
Default resulting from an Indenture Event of Default shall have occurred and be
continuing, no payment of any Distribution (including Additional Amounts, if
applicable) on, or Redemption Price of, any Common Security, and no other
payment on account of the redemption, liquidation or other acquisition of Common
Securities, shall be made unless payment in full in cash of all accumulated and
unpaid Distributions (including Additional Amounts, if applicable) on all
Outstanding Preferred Securities for all Distribution periods terminating on or
prior thereto, or in the case of payment of the Redemption Price the full amount
of such Redemption Price on all Outstanding Preferred Securities then called for
redemption, shall have been made or provided for, and all funds available to the
Property Trustee shall first be applied to the payment in full in cash of all
Distributions (including Additional Amounts, if applicable) on, or the
Redemption Price of, Preferred Securities then due and payable.
(b) In the case of the occurrence of any Event of Default resulting from
any Indenture Event of Default, the Holder of Common Securities shall be deemed
to have waived any right to act with respect to any such Event of Default under
this Trust Agreement until the effect of all such Events of Default with respect
to the Preferred Securities shall have been cured, waived or otherwise
eliminated. Until any such Event of Default under this Trust Agreement with
respect to the Preferred Securities has been so cured, waived or otherwise
eliminated, the Property Trustee shall act solely on behalf of the Holders of
the Preferred Securities and not the Holder of the Common Securities, and only
the Holders of the Preferred Securities shall have the right to direct the
Property Trustee to act on their behalf.
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SECTION 4.5. PAYMENT PROCEDURES.
Payments of Distributions (including Additional Amounts, if applicable) in
respect of the Preferred Securities shall be made by check mailed to the address
of the Person entitled thereto as such address shall appear on the Securities
Register. Payments in respect of the Common Securities shall be made in such
manner as shall be mutually agreed in writing between the Property Trustee and
the Holder of the Common Securities.
SECTION 4.6. TAX RETURNS AND REPORTS.
The Administrative Trustees shall prepare (or cause to be prepared), at the
Depositor's expense, and file all United States federal, state and local tax and
information returns and reports required to be filed by or in respect of the
Trust. In this regard, the Administrative Trustees shall (a) prepare and file
(or cause to be prepared and filed) the appropriate Internal Revenue Service
Form required to be filed in respect of the Trust in each taxable year of the
Trust and (b) prepare and furnish (or cause to be prepared and furnished) to
each Holder the appropriate Internal Revenue Service form and the information
required to be provided on such form. The Administrative Trustees shall provide
the Depositor and the Property Trustee with a copy of all such returns and
reports promptly after such filing or furnishing. The Trustees shall comply with
United States federal withholding and backup withholding tax laws and
information reporting requirements with respect to any payments to Holders under
the Trust Securities.
SECTION 4.7. PAYMENT OF EXPENSES OF TRUST.
Pursuant to Section 10.6 of the Indenture, the Depositor, as borrower, has
agreed to pay to the Trust, and reimburse the Trust for, the full amount of any
costs, expenses or liabilities of the Trust (other than obligations of the Trust
to pay the Holders of any Preferred Securities or other similar interests in the
Trust the amounts due such Holders pursuant to the terms of the Preferred
Securities or such other similar interests, as the case may be), including any
taxes, duties or other governmental charges of whatever nature (other than
withholding taxes) imposed on the Trust by the United States or any other taxing
authority. Such payment obligation includes any such costs, expenses or
liabilities of the Trust that are required by applicable law to be satisfied in
connection with a termination of the Trust.
SECTION 4.8. PAYMENTS UNDER INDENTURE OR PURSUANT TO DIRECT ACTIONS.
Any amount payable hereunder to any Holder of Preferred Securities shall be
reduced by the amount of any corresponding payment such Holder (or an Owner with
respect
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to the Holder's Preferred Securities) has directly received pursuant to Section
5.8 of the Indenture or Section 5.13 of this Trust Agreement.
ARTICLE V
TRUST SECURITIES CERTIFICATES
SECTION 5.1. INITIAL OWNERSHIP.
Upon the creation of the Trust and the contribution by the Depositor
pursuant to Section 2.3 and until the issuance of the Trust Securities, and at
any time during which no Trust Securities are Outstanding, the Depositor shall
be the sole beneficial owner of the Trust.
SECTION 5.2. TRUST SECURITIES CERTIFICATES.
The Trust Securities Certificates shall be issued in minimum denominations
of $50 Liquidation Amount and integral multiples of $50 in excess thereof. The
Trust Securities Certificates shall be executed on behalf of the Trust by manual
or facsimile signature of at least one Administrative Trustee and, if executed
on behalf of the Trust by facsimile, countersigned by a transfer agent or its
agent. The Certificated Preferred Securities shall be authenticated by the
Property Trustee by manual or facsimile signature of an authorized signatory
thereof and, if executed by such authorized signatory of the Property Trustee by
facsimile, countersigned by a transfer agent or its agent. Trust Securities
Certificates bearing the manual signatures of individuals who were, at the time
when such signatures shall have been affixed, authorized to sign on behalf of
the Trust or the Property Trustee or, if executed on behalf of the Trust or the
Property Trustee by facsimile, countersigned by a transfer agent or its agent,
shall be validly issued and entitled to the benefits of this Trust Agreement,
notwithstanding that such individuals or any of them shall have ceased to be so
authorized prior to the delivery of such Trust Securities Certificates or did
not hold such offices at the date of delivery of such Trust Securities
Certificates. A transferee of a Trust Securities Certificate shall become a
Holder, and shall be entitled to the rights and subject to the obligations of a
Holder hereunder, upon due registration of such Trust Securities Certificate in
such transferee's name pursuant to Sections 5.4, 5.12 and 5.15.
SECTION 5.3. EXECUTION AND DELIVERY OF TRUST SECURITIES CERTIFICATES.
On the Closing Date, (i) the Administrative Trustees shall cause Trust
Securities Certificates, in an aggregate Liquidation Amount as provided in, or
determined in accor-
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dance with, Sections 2.4 and 2.5, to be executed on behalf of the Trust and
delivered to or upon the written order of the Depositor, signed by its chairman
of the board, its president, any executive vice president or any vice president
and its treasurer or assistant treasurer or controller without further corporate
action by the Depositor, in authorized denominations and (ii) the Property
Trustee shall authenticate the Certificated Preferred Securities in accordance
with an order of the Depositor.
SECTION 5.4. REGISTRATION OF TRANSFER AND EXCHANGE OF PREFERRED SECURITIES.
(a) Trust Securities may only be transferred, in whole or in part, in
accordance with the terms and conditions set forth in this Trust Agreement and
in the terms of the Preferred Securities. Any transfer or purported transfer of
any Trust Security not made in accordance with this Trust Agreement shall, to
the fullest extent permitted by applicable law, be null and void.
(b) Upon issuance of the Common Securities, the Depositor shall acquire and
retain beneficial and record ownership of the Common Securities and, for so long
as the Preferred Securities remain outstanding, the Depositor shall maintain
100% ownership of the Common Securities, provided that any permitted successor
of the Depositor under the Indenture may succeed to the Depositor's ownership of
the Common Securities; and provided further, that the Depositor and any
wholly-owned subsidiary may transfer Common Securities to the Depositor or
wholly-owned subsidiary of the Depositor or any entity owning all of the
outstanding Common Stock of the Depositor, with any such transfer being subject
to the condition precedent that the transferor obtain Opinion of Counsel that
such transfer would not cause more than an insubstantial risk that:
(i) the Trust would not be classified for United States federal income
tax purposes as a grantor trust; or
(ii) the Trust would be an investment company required to register
under the Investment Company Act or the transferee would become an
investment company required to register under the Investment Company Act.
(c) Subject to this Article 5, Preferred Securities shall be freely
transferable; provided that, any Holder which is a BHCA Person shall be subject
to the restrictions set forth in Section 4.3(a) hereof.
(d) The Trust shall not be required (i) to issue, register the transfer of
or exchange any Preferred Securities during a period beginning at the opening of
business 15 days before the day of any selection of Preferred Securities for
redemption and ending at the close
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of business on the earliest date on which the relevant notice of redemption is
deemed to have been given to all Holders of Preferred Securities to be redeemed,
or (ii) to register the transfer or exchange of any Preferred Security so
selected for redemption in whole or in part, except the unredeemed portion of
any Preferred Security being redeemed in part. Furthermore, the Trust shall
refuse to register any transfer of any Preferred Security (and the Depositor
shall refuse to register any transfer of Common Stock issued upon the conversion
or exchange of a Preferred Security) if such transfer is not made pursuant to
registration under the Securities Act or pursuant to Rule 144A or Regulation S
under the Securities Act or pursuant to another available exemption from
registration.
(e) Each Trust Security that bears or is required to bear the legend set
forth in this Section 5.4(e) (a "Transfer Restricted Security") shall be subject
to the restrictions on transfer provided in the legend set forth in this Section
5.4(e), unless such restrictions on transfer shall be waived by the written
consent of the Administrative Trustees, and the Holder of each Transfer
Restricted Security, by such Holder's acceptance thereof, agrees to be bound by
such restrictions on transfer. As used in this Section 5.4, the term "transfer"
encompasses any sale, pledge, transfer or other disposition of any Transfer
Restricted Security.
Prior to the Resale Restriction Termination Date, any certificate
representing Preferred Securities shall bear the following legend (unless such
Preferred Securities have been sold pursuant to a registration statement that
has been declared effective under the Securities Act):
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE SECURITIES LAWS OF
ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, RESOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
SUCH REGISTRATION.
THE HOLDER HEREOF MAY NOT ENGAGE IN HEDGING TRANSACTIONS IN THIS
SECURITY UNLESS SUCH TRANSACTIONS ARE IN COMPLIANCE WITH THE SECURITIES
ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
RESELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS THE LATER OF (X) TWO YEARS AFTER
THE LATER OF THE ORIGINAL ISSUE DATE
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HEREOF AND THE LAST DATE ON WHICH GENTIVA HEALTH SERVICES, INC. (THE
"COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY
(OR ANY PREDECESSOR OF SUCH SECURITY), AND (Y) SUCH LATER DATE, IF ANY, AS
MAY BE REQUIRED BY APPLICABLE LAW ONLY (A) TO THE COMPANY, (B) PURSUANT TO
A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE
IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR
OUTSIDE THE UNITED STATES IN ACCORDANCE WITH REGULATION S UNDER THE
SECURITIES ACT, OR (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S
AND THE TRANSFER AGENT'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF
THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE
RESALE RESTRICTION TERMINATION DATE. ANY TRANSFER OF THIS SECURITY IS
REQUIRED TO BE MADE IN COMPLIANCE WITH THE APPLICABLE STATE SECURITIES LAWS
AND APPLICABLE SECURITIES LAWS OF OTHER JURISDICTIONS.
EACH PURCHASER OR HOLDER OF THE SECURITY EVIDENCED HEREBY WILL BE
DEEMED TO HAVE REPRESENTED EITHER THAT IT IS NOT AN EMPLOYEE BENEFIT PLAN
SUBJECT TO PART 4 OF SUBTITLE B OF TITLE I OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED, ("ERISA") OR A PLAN DESCRIBED IN
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"),
OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE THE ASSETS OF ANY SUCH ERISA
PLAN OR OTHER PLAN.
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THE HOLDER OF THIS SECURITY AGREES THAT IT WILL DELIVER TO EACH PERSON
TO WHOM THIS CAPITAL SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND.
In the case of a purchaser of Preferred Securities in the State of Georgia,
for a period of one year from the Closing Date, the Preferred Securities shall
contain the following additional legend:
THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH
(13) OF CODE SECTION 10-5-9 OF THE `GEORGIA SECURITIES ACT OF 1973', AND
MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT
UNDER SUCH ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT.
Following the Resale Restriction Termination Date, any Trust Security or
security issued in exchange or substitution therefor (other than (i) Trust
Securities acquired by the Depositor or any Affiliate of the Depositor and (ii)
Common Stock issued upon the conversion or exchange of any Trust Security
described in clause (i) above) may, upon surrender of such Trust Security for
exchange to any Administrator on behalf of the Trust in accordance with the
provisions of this Section 5.4, be exchanged for a new Trust Security or Trust
Securities, of like tenor and aggregate liquidation amount, which shall not bear
the restrictive legend required by this Section 5.4(e).
(f) Any Preferred Security or Common Stock issued upon the conversion or
exchange of a Preferred Security that, prior to the Resale Restriction
Termination Date, is purchased or owned by the Depositor or any Affiliate
thereof may not be resold by the Depositor or such Affiliate unless registered
under the Securities Act or resold pursuant to an exemption from the
registration requirements of the Securities Act in a transaction that results in
such Preferred Securities or Common Stock, as the case may be, no longer being
"restricted securities" (as defined under Rule 144).
SECTION 5.5. TRANSFER OF CERTIFICATES.
The Trust shall maintain an office or agency in The City of New York or
Wilmington, Delaware where Securities may be presented for transfer, exchange or
conversion. The Trust shall keep or cause to be kept at such office or agency a
register for the purpose of registering Preferred Securities and transfers and
exchanges of Preferred Securities (the "Securities Register"), such register to
be held by a registrar (the "Securities Registrar"). The Securities Registrar
shall provide for the registration of Trust Securities Certificates and of
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transfers of Trust Securities Certificates, which will be effected without
charge, but only upon payment (with such indemnity as the Securities Registrar
may require) in respect of any tax or other government charges that may be
imposed in relation to it. Upon surrender for registration of transfer of any
Trust Securities Certificate, the Trust shall cause one or more new Trust
Securities Certificates to be issued in the name of the designated transferee or
transferees. Every Trust Securities Certificate surrendered for registration of
transfer shall be accompanied by a written instrument of transfer in the form
attached hereto as Exhibit D and which is satisfactory to the Securities
Registrar and duly executed by the Holder or such Holder's attorney duly
authorized in writing. Each Trust Securities Certificate surrendered for
registration of transfer shall be canceled by the Securities Registrar. A
transferee of a Trust Securities Certificate shall be entitled to the rights and
subject to the obligations of a Holder hereunder upon the receipt by such
transferee of a Trust Securities Certificate. By acceptance of a Trust
Securities Certificate, each transferee shall be deemed to have agreed to be
bound by this Trust Agreement.
SECTION 5.6. DEEMED HOLDERS.
The Trustees or the Securities Registrar may treat the Person in whose name
any Trust Securities Certificate shall be registered on the books and records of
the Trust as the sole Holder of such Trust Securities Certificate and of the
Trust Securities represented by such Trust Securities Certificate for purposes
of receiving Distributions and for all other purposes whatsoever and,
accordingly, shall not be bound to recognize any equitable or other claim to or
interest in such Trust Securities Certificate or in the Trust Securities
represented by such Trust Securities Certificate on the part of any Person,
whether or not the Trustees or the Securities Registrar shall have actual or
other notice thereof.
SECTION 5.7. ACCESS TO LIST OF HOLDERS' NAMES AND ADDRESSES.
Each Holder and each Owner shall be deemed to have agreed not to hold the
Depositor, the Property Trustee or the Administrative Trustees accountable by
reason of the disclosure of its name and address, regardless of the source from
which such information was derived.
SECTION 5.8. MAINTENANCE OF OFFICE OR AGENCY.
The Administrative Trustees shall maintain an office or offices or agency
or agencies where Trust Securities Certificates may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Trustees in respect of the Trust Securities Certificates may be served. The
Administrative Trustees initially designate the corporate trust office of
Wilmington Trust Company, a Delaware banking Corporation, Attn: Cor-
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porate Trust Department, as their principal corporate trust office for such
purposes. The Administrative Trustees shall give prompt written notice to the
Depositor, the Property Trustee and to the Holders of any change in the location
of the Securities Register or any such office or agency.
SECTION 5.9. APPOINTMENT OF PAYING AGENT.
The Paying Agent shall make Distributions to Holders from the Payment
Account and shall report the amounts of such Distributions to the Property
Trustee and the Administrative Trustees. Any Paying Agent shall have the
revocable power to withdraw funds from the Payment Account for the purpose of
making the Distributions referred to above. The Administrative Trustees may
revoke such power and remove the Paying Agent if such Trustees determine in
their sole discretion that the Paying Agent shall have failed to perform its
obligations under this Trust Agreement in any material respect. The Paying Agent
shall initially be the Bank and any co-paying agent chosen by the Bank and
acceptable to the Administrative Trustees and the Depositor. Any Person acting
as Paying Agent shall be permitted to resign as Paying Agent upon giving 30 days
written notice to the Administrative Trustees, the Property Trustee and the
Depositor. In the event that the Bank shall no longer be the Paying Agent or a
successor Paying Agent shall resign or its authority to act be revoked, the
Administrative Trustees shall appoint a successor that is acceptable to the
Property Trustee and the Depositor to act as Paying Agent (which shall be a bank
or trust company). The Administrative Trustees shall cause such successor Paying
Agent or any additional Paying Agent appointed by the Administrative Trustees to
execute and deliver to the Trustees an instrument in which such successor Paying
Agent or additional Paying Agent shall agree with the Trustees that, as Paying
Agent, such successor Paying Agent or additional Paying Agent will hold all
sums, if any, held by it for payment to the Holders in trust for the benefit of
the Holders entitled thereto until such sums shall be paid to such Holders. The
Paying Agent shall return all unclaimed funds to the Property Trustee and upon
resignation or removal of a Paying Agent such Paying Agent shall also return all
funds in its possession to the Property Trustee. The provisions of Sections 8.1,
8.3 and 8.6 shall apply to the Bank also in its role as Paying Agent, for so
long as the Bank shall act as Paying Agent and, to the extent applicable, to any
other paying agent appointed hereunder. Any Paying Agent shall be bound by the
requirements of the Trust Indenture Act with respect to paying agents of
securities. Any reference in this Trust Agreement to the Paying Agent shall
include any co-paying agent unless the context requires otherwise. The Paying
Agent shall be entitled to the rights and protections extended to the Property
Trustee when acting in such capacity.
SECTION 5.10. APPOINTMENT OF CONVERSION AGENT.
The Conversion Agent shall convert the Trust Securities of the Holders in
accordance with Section 4.3. The Administrative Trustees may revoke such power
and remove
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the Conversion Agent if such Trustees determine in their sole discretion that
the Conversion Agent shall have failed to perform its obligations under this
Trust Agreement in any material respect. The Conversion Agent shall initially be
the Bank. Any Person acting as Conversion Agent shall be permitted to resign as
Conversion Agent upon giving 30 days written notice to the Administrative
Trustees, the Property Trustee and the Depositor. In the event that the Bank
shall no longer be the Conversion Agent or a successor Conversion Agent shall
resign or its authority to act be revoked, the Administrative Trustees shall
appoint a successor (which shall be a bank or trust company) that is acceptable
to the Property Trustee and the Depositor to act as Conversion Agent. The
provisions of Sections 8.1, 8.3 and 8.6 shall apply to the Bank also in its role
as Conversion Agent for so long as the Bank shall act as Conversion Agent and,
to the extent applicable, to any other conversion agent appointed hereunder. Any
Conversion Agent shall be bound by the requirements with respect to conversion
agents of securities issued pursuant to the Trust Indenture Act. Any reference
in this Trust Agreement to the Conversion Agent shall include any co-paying
agent unless the context requires otherwise. The Conversion Agent shall be
entitled to the rights and protections extended to the Property Trustee when
acting in such capacity.
SECTION 5.11. OWNERSHIP OF COMMON SECURITIES BY DEPOSITOR.
On the Closing Date, the Depositor shall acquire and retain beneficial and
record ownership of the Common Securities. To the fullest extent permitted by
law, other than a transfer in connection with a consolidation or merger of the
Depositor into another Person, or any conveyance, transfer or lease by the
Depositor of its properties and assets substantially as an entirety to any
Person, pursuant to Section 8.1 of the Indenture, any attempted transfer of the
Common Securities shall be void. The Administrative Trustees shall cause each
Common Securities Certificate issued to the Depositor to contain a legend
stating:
"THIS CERTIFICATE IS NOT TRANSFERABLE TO ANY PERSON, EXCEPT THAT THE HOLDER
AND ANY WHOLLY-OWNED SUBSIDIARY MAY TRANSFER THIS SECURITY TO GENTIVA
HEALTH SERVICES, INC. OR A WHOLLY-OWNED SUBSIDIARY OF GENTIVA HEALTH
SERVICES, INC. OR ANY ENTITY OWNING ALL OF THE OUTSTANDING COMMON STOCK OF
GENTIVA HEALTH SERVICES, INC., SUBJECT TO RECEIPT BY THE TRUST OF AN
OPINION OF COUNSEL THAT SUCH TRANSFER WOULD NOT CAUSE MORE THAN AN
INSUBSTANTIAL RISK THAT (I) THE TRUST WOULD NOT BE CLASSIFIED FOR UNITED
STATES FEDERAL INCOME TAX PURPOSES AS A GRANTOR TRUST; OR (II) THE TRUST
WOULD BE AN INVESTMENT COMPANY REQUIRED TO REGISTER UNDER THE INVESTMENT
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COMPANY ACT OR THE TRANSFEREE WOULD BECOME AN INVESMENT COMPANY REQUIRED TO
REGISTER UNDER THE INVESTMENT COMPANY ACT."
SECTION 5.12. MUTILATED, DESTROYED, LOST OR STOLEN TRUST SECURITIES
CERTIFICATES.
If (a) any mutilated Trust Securities Certificate shall be surrendered to
the Securities Registrar, or if the Securities Registrar shall receive evidence
to its satisfaction of the destruction, loss or theft of any Trust Securities
Certificate, and (b) there shall be delivered to the Securities Registrar and
the Administrative Trustees such security or indemnity as may be required by
them to save each of them harmless, then in the absence of notice that such
Trust Securities Certificate shall have been acquired by a bona fide purchaser,
the Administrative Trustees, or any one of them, on behalf of the Trust shall
execute by manual or facsimile signature and, if executed on behalf of the Trust
by facsimile signature, such certificate shall be countersigned by a transfer
agent, and make available for delivery, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Trust Securities Certificate, a new Trust
Securities Certificate of like class, tenor and denomination. In connection with
the issuance of any new Trust Securities Certificate under this Section 5.12,
the Administrative Trustees or the Securities Registrar may require the payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection therewith. Any duplicate Trust Securities Certificate
issued pursuant to this Section 5.12 shall constitute conclusive evidence of an
undivided beneficial interest in the Trust Property, as if originally issued,
whether or not the lost, stolen or destroyed Trust Securities Certificate shall
be found at any time.
SECTION 5.13. RIGHTS OF HOLDERS.
(a) The legal title to the Trust Property is vested exclusively in the
Property Trustee (in its capacity as such) in accordance with Section 2.10, and
the Holders shall not have any right or title therein other than the undivided
beneficial ownership interest in the assets of the Trust conferred by their
Trust Securities, and they shall have no right to call for any partition or
division of property, profits or rights of the Trust except as described below.
The Trust Securities shall be personal property giving only the rights
specifically set forth therein and in this Trust Agreement. The Trust Securities
shall have no preemptive or similar rights and when issued and delivered to
Holders against payment of the purchase price therefor shall be fully paid and
nonassessable by the Trust. The Holders of the Preferred Securities, in their
capacities as such, shall be entitled to the same limitation of personal
liability extended to stockholders of private corporations for profit organized
under the General Corporation Law of the State of Delaware.
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(b) For so long as any Preferred Securities remain Outstanding, if, upon a
Indenture Event of Default, the Indenture Trustee fails or the holders of not
less than 25% in principal amount of the outstanding Debentures fail to declare
the principal of all of the Debentures to be immediately due and payable, the
Holders of at least 25% in Liquidation Amount of the Preferred Securities then
Outstanding shall have such right by a notice in writing to the Depositor and
the Indenture Trustee; and upon any such declaration such principal amount of
and the accrued interest on all of the Debentures shall become immediately due
and payable as set forth in the Indenture, provided that the payment of
principal and interest on such Debentures shall remain subordinated to the
extent provided in the Indenture. At any time after such a declaration of
acceleration with respect to the Debentures has been made and before a judgment
or decree for payment of the money due has been obtained by the Indenture
Trustee as described in the Indenture, the Holders of a majority in Liquidation
Amount of the Preferred Securities, by written notice to the Property Trustee,
the Depositor and the Indenture Trustee, may rescind and annul such declaration
and its consequences if: (i) the Depositor has paid or deposited with the
Indenture Trustee a sum sufficient to pay (A) all overdue installments of
interest (including any Additional Interest (as defined in the Indenture)) on
all of the Debentures, (B) the principal of any Debentures which have become due
otherwise than by such declaration of acceleration and interest thereon at the
rate borne by the Debentures and (C) all sums paid or advanced by the Indenture
Trustee under the Indenture and the reasonable compensation, expenses,
disbursements and advances of the Indenture Trustee and the Property Trustee,
their agents and counsel; and (ii) all Events of Default with respect to the
Debentures, other than the non-payment of the principal of the Debentures which
has become due solely by such acceleration, have been cured or waived as
provided in Section 5.13 of the Indenture.
(c) The Holders of a majority in aggregate Liquidation Amount of the
Preferred Securities may, on behalf of the Holders of all the Preferred
Securities, waive any past default under the Indenture, except a default in the
payment of principal or interest (unless all Events of Default with respect to
the Debentures, other than the non-payment of the principal of the Debentures
which has become due solely by such acceleration, have been cured or annulled as
provided in Section 5.13 of the Indenture and the Depositor has paid or
deposited with the Indenture Trustee a sum sufficient to pay all overdue
installments of interest (including any Additional Interest) on the Debentures,
the principal of any Debentures which have become due otherwise than by such
declaration of acceleration and interest thereon at the rate borne by the
Debentures, and all sums paid or advanced by the Indenture Trustee under the
Indenture and the reasonable compensation, expenses, disbursements and advances
of the Indenture Trustee and the Property Trustee, their agents and counsel) or
a default in respect of a covenant or provision which under the Indenture cannot
be modified or amended without the consent of the holder of each outstanding
Debenture. No such rescission shall affect any subsequent default or impair any
right consequent thereon.
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(d) Upon receipt by the Property Trustee of written notice declaring such
an acceleration, or rescission and annulment thereof, by Holders of the
Preferred Securities all or part of which is represented by Preferred Securities
Certificates, a record date shall be established for determining Holders of
Outstanding Preferred Securities entitled to join in such notice, which record
date shall be at the close of business on the day the Property Trustee receives
such notice. The Holders of Outstanding Preferred Securities on such record
date, or their duly designated proxies, and only such Persons, shall be entitled
to join in such notice, whether or not such Holders remain Holders after such
record date; provided, that, unless such declaration of acceleration, or
rescission and annulment, as the case may be, shall have become effective by
virtue of the requisite percentage having joined in such notice prior to the day
which is 90 days after such record date, such notice of declaration of
acceleration, or rescission and annulment, as the case may be, shall
automatically and without further action by any Holder be canceled and of no
further effect. Nothing in this paragraph shall prevent a Holder, or a proxy of
a Holder, from giving, after expiration of such 90-day period, a new written
notice of declaration of acceleration, or rescission and annulment thereof, as
the case may be, that is identical to a written notice that has been canceled
pursuant to the proviso to the preceding sentence, in which event a new record
date shall be established pursuant to the provisions of this Section 5.13(d).
(e) Without limiting the generality of the foregoing, the Holders of a
majority in aggregate Liquidation Amount of the Preferred Securities will have
the right to appoint a Special Administrative Trustee under the circumstances
described in Section 6.1(d), who shall have the same rights, powers and
privileges as the other Administrative Trustees.
(f) For so long as any Preferred Securities remain Outstanding, to the
fullest extent permitted by law and subject to the terms of this Trust Agreement
and the Indenture, upon an Indenture Event of Default specified in Section
5.1(1) or 5.1(2) of the Indenture, any Holder of Preferred Securities shall have
the right to institute a proceeding directly against the Depositor, pursuant to
Section 5.8 of the Indenture, for enforcement of payment to such Holder of the
principal amount of or interest on Debentures having a principal amount equal to
the Liquidation Amount of the Preferred Securities of such Holder (a "Direct
Action"). Except as set forth in this Section 5.13, the Holders of Preferred
Securities shall have no right to exercise directly any right or remedy
available to the holders of, or in respect of, the Debentures.
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ARTICLE VI
ACTS OF HOLDERS; MEETINGS; VOTING
SECTION 6.1. LIMITATIONS ON VOTING RIGHTS.
(a) Except as provided in this Section 6.1, in Sections 5.13, 8.10 and 11.3
of the Trust Agreement and as otherwise required by law, no Holder of Preferred
Securities shall have any right to vote or in any manner otherwise control the
administration, operation and management of the Trust or the obligations of the
parties hereto, nor shall anything herein set forth, or contained in the terms
of the Trust Securities Certificates, be construed so as to constitute the
Holders from time to time as partners or members of an association.
(b) So long as any Debentures are held by the Property Trustee, the
Trustees, without obtaining the prior approval of the Holders of at least a
majority in Liquidation Amount of all Outstanding Preferred Securities, shall
not: (i) direct the time, method and place of conducting any proceeding for any
remedy available to the Indenture Trustee, or executing any trust or power
conferred on the Indenture Trustee with respect to such Debentures; (ii) waive
any past default which is waiveable under Section 5.13 of the Indenture; (iii)
exercise any right to rescind or annul a declaration that the principal of all
the Debentures shall be due and payable; or (iv) consent to any amendment,
modification or termination of the Indenture or the Debentures, where such
consent shall be required; provided, however, that where a consent under the
Indenture would require the consent of each holder of Debentures affected
thereby, no such consent shall be given by the Property Trustee without the
prior written consent of each Holder of Preferred Securities. The Trustees shall
not revoke any action previously authorized or approved by a vote of the Holders
of Preferred Securities, except by a subsequent vote of the Holders of Preferred
Securities. The Property Trustee shall notify all Holders of the Preferred
Securities of any notice of default received from the Indenture Trustee with
respect to the Debentures. In addition to obtaining the foregoing approvals of
the Holders of the Preferred Securities, prior to taking any of the foregoing
actions, the Administrative Trustees shall, at the expense of the Depositor,
obtain an Opinion of Counsel experienced in such matters to the effect that such
action shall not cause the Trust to fail to be classified as a grantor trust for
United States federal income tax purposes.
(c) If any proposed amendment to the Trust Agreement provides for, or the
Trustees otherwise propose to effect, (i) any action that would adversely affect
in any material respect the powers, preferences or special rights of the
Preferred Securities, whether by way of amendment to the Trust Agreement or
otherwise, or (ii) the dissolution, winding-up or termination of the Trust,
other than pursuant to the terms of this Trust Agreement, then the Holders of
Outstanding Preferred Securities as a class shall be entitled to vote on such
amendment or
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proposal and such amendment or proposal shall not be effective except with the
approval of the Holders of at least a majority in Liquidation Amount of the
Outstanding Preferred Securities. Notwithstanding any other provision of this
Trust Agreement, no amendment to this Trust Agreement may be made if, as a
result of such amendment, the Trust would fail to be classified as a grantor
trust for United States federal income tax purposes.
(d) If a Trust Agreement Event of Default occurs and is continuing (each,
an "Appointment Event"), then the holders of the Preferred Securities, acting as
a single class, will be entitled by the majority vote of such holders to appoint
a Special Administrative Trustee. Any holder of Preferred Securities (other than
the Depositor or any of its affiliates) shall be entitled to nominate any person
to be appointed as Special Administrative Trustee. Not later than 30 days after
such right to appoint a Special Administrative Trustee arises, the
Administrative Trustees shall convene a meeting of the holders of Preferred
Securities for the purpose of appointing a Special Administrative Trustee. If
the Administrative Trustees fail to convene such meeting within such 30-day
period, the holders of not less than 10% of the aggregate stated liquidation
amount of the outstanding Preferred Securities will be entitled to convene such
meeting. The provisions of this Agreement relating to the convening and conduct
of the meetings of the holders will apply with respect to any such meeting. Any
Special Administrative Trustee so appointed shall cease to be a Special
Administrative Trustee if the Appointment Event pursuant to which the Special
Administrative Trustee was appointed and all other Appointment Events cease to
be continuing.
SECTION 6.2. NOTICE OF MEETINGS.
Notice of all meetings of the Holders, stating the time, place and purpose
of the meeting, shall be given by the Property Trustee pursuant to Section 11.9
to each Holder of record, at his registered address, at least 15 days and not
more than 90 days before the meeting. At any such meeting, any business properly
before the meeting may be so considered whether or not stated in the notice of
the meeting. Any adjourned meeting may be held as adjourned without further
notice.
SECTION 6.3. MEETINGS OF HOLDERS.
(a) No annual meeting of Holders is required to be held. The Administrative
Trustees, however, shall call a meeting of Holders to vote on any matter upon
the written request of the Holders holding of record of 25% of the Outstanding
Preferred Securities (based upon their Liquidation Amount) and the
Administrative Trustees or the Property Trustee may, at any time in their
discretion, call a meeting of Holders to vote on any matters as to which Holders
are entitled to vote.
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(b) Holders holding of record of 50% of the Outstanding Preferred
Securities (based upon their Liquidation Amount), present in person or by proxy,
shall constitute a quorum at any meeting of Holders.
(c) If a quorum is present at a meeting, an affirmative vote by the Holders
of record present, in person or by proxy, holding more than a majority of the
Outstanding Preferred Securities (based upon their Liquidation Amount) held by
Holders of record of Outstanding Preferred Securities present, either in person
or by proxy, at such meeting shall constitute the action of the Holders, unless
this Trust Agreement requires a greater number of affirmative votes.
SECTION 6.4. VOTING RIGHTS.
Holders shall be entitled to one vote for each $50 of Liquidation Amount
represented by their Trust Securities in respect of any matter as to which such
Holders are entitled to vote.
SECTION 6.5. PROXIES, ETC.
At any meeting of Holders, any Holder entitled to vote thereat may vote by
proxy, provided that no proxy shall be voted at any meeting unless it shall have
been placed on file with the Administrative Trustees, or with such other officer
or agent of the Trust as the Administrative Trustees may direct, for
verification prior to the time at which such vote shall be taken. Pursuant to a
resolution of the Property Trustee, proxies may be solicited in the name of the
Property Trustee or one or more officers of the Property Trustee. Only Holders
of record shall be entitled to vote. When Trust Securities are held jointly by
several Persons, any one of them may vote at any meeting in person or by proxy
in respect of such Trust Securities, but if more than one of them shall be
present at such meeting in person or by proxy, and such joint owners or their
proxies so present disagree as to any vote to be cast, such vote shall not be
received in respect of such Trust Securities. A proxy purporting to be executed
by or on behalf of a Holder shall be deemed valid unless challenged at or prior
to its exercise, and the burden of proving invalidity shall rest on the
challenger. No proxy shall be valid more than three years after its date of
execution.
SECTION 6.6. HOLDER ACTION BY WRITTEN CONSENT.
Any action which may be taken by Holders at a meeting may be taken without
a meeting if Holders holding a majority of all Outstanding Trust Securities
(based upon their Liquidation Amount) entitled to vote in respect of such action
(or such larger proportion thereof as shall be required by any express provision
of this Trust Agreement) shall consent to the action in writing. Prompt notice
of the action taken shall be given by the Holders to the
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Property Trustee and the Depositor, and the Property Trustee shall give notice
within 90 days of its receipt thereof by regular mail to all Holders entitled to
vote who have not consented in writing.
SECTION 6.7. RECORD DATE FOR VOTING AND OTHER PURPOSES.
For the purposes of determining the Holders who are entitled to notice of
and to vote at any meeting or by written consent, or to participate in any
Distribution on the Trust Securities in respect of which a record date is not
otherwise provided for in this Trust Agreement, or for the purpose of any other
action, the Administrative Trustees may from time to time fix a date, not more
than 90 days prior to the date of any meeting of Holders or the payment of a
Distribution or other action, as the case may be, as a record date for the
determination of the identity of the Holders of record for such purposes.
SECTION 6.8. ACTS OF HOLDERS.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided or permitted by this Trust Agreement to be given, made
or taken by Holders or Owners may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders or Owners in
person or by an agent duly appointed in writing; and, except as otherwise
expressly provided herein, such action shall become effective when such
instrument or instruments are delivered to an Administrative Trustee. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders or Owners
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Trust Agreement and (subject to Section 8.1) conclusive in favor
of the Trustees, if made in the manner provided in this Section 6.8.
(b) The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a signer acting in a capacity other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority. The fact and date of the execution of any such instrument or writing,
or the authority of the Person executing the same, may also be proved in any
other manner which any Trustee receiving the same deems sufficient.
(c) The ownership of Preferred Securities shall be proved by the Securities
Register.
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(d) Any request, demand, authorization, direction, notice, consent, waiver
or other Act of a Holder of any Trust Security shall bind every future Holder of
the same Trust Security and the Holder of every Trust Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustees or the
Trust in reliance thereon, whether or not notation of such action is made upon
such Trust Security.
(e) Without limiting the foregoing, a Holder entitled hereunder to take any
action hereunder with regard to any particular Trust Security may do so with
regard to all or any part of the Liquidation Amount of such Trust Security or by
one or more duly appointed agents each of which may do so pursuant to such
appointment with regard to all or any part of such Liquidation Amount.
(f) If any dispute shall arise between the Holders and the Administrative
Trustees or among such Holders or Trustees with respect to the authenticity,
validity or binding nature of any request, demand, authorization, direction,
consent, waiver or other Act of such Holder or Trustee under this Article VI,
then the determination of such matter by the Property Trustee shall be
conclusive with respect to such matter.
SECTION 6.9. INSPECTION OF RECORDS.
Upon reasonable notice to the Administrative Trustees and the Property
Trustee, the records of the Trust shall be open to inspection by Holders during
normal business hours for any purpose reasonably related to such Holder's
interest as a Holder.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
SECTION 7.1. REPRESENTATIONS AND WARRANTIES OF PROPERTY TRUSTEE AND
DELAWARE TRUSTEE.
The Property Trustee and the Delaware Trustee each on behalf of and as to
itself, hereby represents and warrants for the benefit of the Depositor and the
Holders that:
(a) the Delaware Trustee is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware;
(b) the Delaware Trustee has full corporate power, authority and legal
right to execute, deliver and perform its obligations under this Trust
Agreement and has taken
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all necessary action to authorize the execution, delivery and performance
by it of this Trust Agreement;
(c) the Property Trustee is a Delaware banking corporation duly
organized, validly existing and in good standing in the State of Delaware;
(d) the Property Trustee has full corporate power, authority and legal
right to execute, deliver and perform its obligations under this Trust
Agreement and has taken all necessary action to authorize the execution,
delivery and performance by it of this Trust Agreement;
(e) this Trust Agreement has been duly authorized, executed and
delivered by the Property Trustee and, assuming due authorization,
execution and delivery by the other parties hereto, constitutes the valid
and legally binding agreement of the Property Trustee enforceable against
it in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles;
(f) the execution, delivery and performance of this Trust Agreement
has been duly authorized by all necessary corporate or other action on the
part of the Property Trustee does not require any approval of stockholders
of the Property Trustee and such execution, delivery and performance will
not (i) violate the charter or by-laws of the Property Trustee, (ii)
violate any provision of, or constitute, with or without notice or lapse of
time, a default under, or result in the creation or imposition of, any Lien
on any properties included in the Trust Property (other than as
contemplated by this Trust Agreement) pursuant to the provisions of, any
indenture, mortgage, credit agreement, license or other agreement or
instrument to which the Property Trustee is a party or by which it is
bound, or (iii) violate any law, governmental rule or regulation of the
State of Delaware, as the case may be, governing the banking, trust or
general powers of the Property Trustee (as appropriate in context) or any
order, judgment or decree applicable to the Property Trustee;
(g) neither the authorization, execution or delivery by the Property
Trustee of this Trust Agreement nor the consummation of any of the
transactions by the Property Trustee contemplated herein or therein
requires the consent or approval of, the giving of notice to, the
registration with or the taking of any other action with respect to any
governmental authority or agency under any existing law or regulation or
Delaware law governing the banking, trust or general powers of the Property
Trustee, as the case may be; and
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(h) there are no proceedings pending or, to the best of the Property
Trustee's knowledge, threatened against or affecting the Property Trustee
in any court or before any governmental authority, agency or arbitration
board or tribunal which, individually or in the aggregate, would materially
and adversely affect the Trust or would question the right, power and
authority of the Property Trustee, as the case may be, to enter into or
perform its obligations as one of the Trustees under this Trust Agreement.
ARTICLE VIII
THE TRUSTEES
SECTION 8.1. CERTAIN DUTIES AND RESPONSIBILITIES.
(a) The duties and responsibilities of the Trustees shall be as provided by
this Trust Agreement and, in the case of the Property Trustee, by the Trust
Indenture Act. Notwithstanding the foregoing, no provision of this Trust
Agreement shall require the Trustees to expend or risk their own funds or
otherwise incur any financial liability in the performance of any of their
duties hereunder, or in the exercise of any of their rights or powers, if they
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
them. Whether or not therein expressly so provided, every provision of this
Trust Agreement relating to the conduct or affecting the liability of or
affording protection to the Trustees shall be subject to the provisions of this
Section 8.1. Nothing in this Trust Agreement shall be construed to release an
Administrative Trustee from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct. To the extent that, at
law or in equity, an Administrative Trustee has duties (including fiduciary
duties) and liabilities relating thereto to the Trust or to the Holders, such
Administrative Trustee shall not be liable to the Trust or to any Holder for
such Trustee's good faith reliance on the provisions of this Trust Agreement.
The provisions of this Trust Agreement, to the extent that they restrict the
duties and liabilities of the Administrative Trustees otherwise existing at law
or in equity, replace such other duties and liabilities of the Administrative
Trustees.
(b) All payments made by the Property Trustee or a Paying Agent in respect
of the Trust Securities shall be made only from the revenue and proceeds from
the Trust Property and only to the extent that there shall be sufficient revenue
or proceeds from the Trust Property to enable the Property Trustee or a Paying
Agent to make payments in accordance with the terms hereof. Each Holder, by its
acceptance of a Trust Security, agrees that it shall look solely to the revenue
and proceeds from the Trust Property to the extent legally available for
distribution to it as herein provided and that the Trustees are not personally
liable to it for any
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amount distributable in respect of any Trust Security or for any other liability
in respect of any Trust Security. This Section 8.1(b) does not limit the
liability of the Trustees expressly set forth elsewhere in this Trust Agreement
or, in the case of the Property Trustee, in the Trust Indenture Act.
(c) No provision of this Trust Agreement shall be construed to relieve the
Property Trustee from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that:
(i) the Property Trustee shall not be liable for any error of judgment
made in good faith by an authorized officer of the Property Trustee, unless
it shall be proved that the Property Trustee was negligent in ascertaining
the pertinent facts;
(ii) the Property Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with
the direction of the Holders of not less than a majority in Liquidation
Amount of the Trust Securities relating to the time, method and place of
conducting any proceeding for any remedy available to the Property Trustee,
or exercising any trust or power conferred upon the Property Trustee under
this Trust Agreement;
(iii) the Property Trustee's sole duty with respect to the custody,
safe keeping and physical preservation of the Debentures and the Payment
Account shall be to deal with such property in a similar manner as the
Property Trustee deals with similar property for its own account, subject
to the protections and limitations on liability afforded to the Property
Trustee under this Trust Agreement and the Trust Indenture Act;
(iv) the Property Trustee shall not be liable for any interest on any
money received by it except as it may otherwise agree in writing with the
Depositor; and money held by the Property Trustee need not be segregated
from other funds held by it except in relation to the Payment Account
maintained by the Property Trustee pursuant to Section 3.1 and except to
the extent otherwise required by law; and
(v) the Property Trustee shall not be responsible for monitoring the
compliance by the Administrative Trustees or the Depositor with their
respective duties under this Trust Agreement, nor shall the Property
Trustee be liable for the default or misconduct of the Administrative
Trustees or the Depositor.
SECTION 8.2. CERTAIN NOTICES.
(a) Within ten Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit, in
the manner and to
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the extent provided in Section 11.9, notice of such Event of Default to the
Holders, the Administrative Trustees and the Depositor, unless such Event of
Default shall have been cured or waived.
(b) Within five Business Days after the receipt of notice of the
Depositor's exercise of its right to defer the payment of interest on the
Debentures pursuant to the Indenture, the Administrative Trustee shall transmit,
in the manner and to the extent provided in Section 11.9, notice of such
exercise to the Holders and the Property Trustee, unless such exercise shall
have been revoked.
SECTION 8.3. CERTAIN RIGHTS OF PROPERTY TRUSTEE.
Subject to the provisions of Section 8.1:
(a) the Property Trustee may rely and shall be protected in acting or
refraining from acting in good faith upon any resolution, Opinion of
Counsel, certificate, written representation of a Holder or transferee,
certificate of auditors or any other certificate, statement, instrument,
opinion, report, notice, request, consent, order, appraisal, bond,
debenture, note, other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed or presented by the
proper party or parties;
(b) if (i) in performing its duties under this Trust Agreement the
Property Trustee is required to decide between alternative courses of
action, (ii) in construing any of the provisions of this Trust Agreement
the Property Trustee finds the same ambiguous or inconsistent with any
other provisions contained herein or (iii) the Property Trustee is unsure
of the application of any provision of this Trust Agreement, then, except
as to any matter as to which the Holders are entitled to vote under the
terms of this Trust Agreement, the Property Trustee shall deliver a notice
to the Depositor requesting written instructions of the Depositor as to the
course of action to be taken and the Property Trustee shall take such
action, or refrain from taking such action, as the Property Trustee shall
be instructed in writing to take, or to refrain from taking, by the
Depositor; provided, however, that if the Property Trustee does not receive
such instructions of the Depositor within ten Business Days after it has
delivered such notice, or such reasonably shorter period of time set forth
in such notice (which to the extent practicable shall not be less than two
Business Days), it may, but shall be under no duty to, take or refrain from
taking such action not inconsistent with this Trust Agreement as it shall
deem advisable and in the best interests of the Holders, in which event the
Property Trustee shall have no liability except for its own bad faith,
negligence or willful misconduct;
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(c) any direction or act of the Depositor or the Administrative
Trustees contemplated by this Trust Agreement shall be sufficiently
evidenced by an Officers' Certificate;
(d) whenever in the administration of this Trust Agreement, the
Property Trustee shall deem it desirable that a matter be established
before undertaking, suffering or omitting any action hereunder, the
Property Trustee (unless other evidence is herein specifically prescribed)
may, in the absence of bad faith on its part, request and rely upon an
Officers' Certificate which, upon receipt of such request, shall be
promptly delivered by the Depositor or the Administrative Trustees;
(e) the Property Trustee shall have no duty to see to any recording,
filing or registration of any instrument (including any financing or
continuation statement or any filing under tax or securities laws) or any
rerecording, refiling or reregistration thereof;
(f) the Property Trustee may consult with counsel of its selection
(which counsel may be counsel to the Depositor or any of its Affiliates,
and may include any of its employees) and the advice of such counsel shall
be full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in reliance
thereon and in accordance with such advice; and the Property Trustee shall
have the right at any time to seek instructions concerning the
administration of this Trust Agreement from any court of competent
jurisdiction;
(g) the Property Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Trust Agreement at the request
or direction of any of the Holders pursuant to this Trust Agreement, unless
such Holders shall have offered to the Property Trustee reasonable security
or indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(h) the Property Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
bond, debenture, note or other evidence of indebtedness or other paper or
document, unless requested in writing to do so by one or more Holders, but
the Property Trustee may make such further inquiry or investigation into
such facts or matters as it may see fit;
(i) the Property Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
its agents or attorneys,
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provided that the Property Trustee shall be responsible for its own
negligence or recklessness with respect to selection of any agent or
attorney appointed by it hereunder;
(j) whenever in the administration of this Trust Agreement the
Property Trustee shall deem it desirable to receive written instructions
with respect to enforcing any remedy or right or taking any other action
hereunder, the Property Trustee (i) may request written instructions from
the Holders of the Trust Securities, which written instructions may only be
given by the Holders of the same proportion in Liquidation Amount of the
Trust Securities as would be entitled to direct the Property Trustee under
the terms of the Trust Securities in respect of such remedy, right or
action, (ii) may refrain from enforcing such remedy or right or taking such
other action until such written instructions are received and (iii) shall
be protected in acting in accordance with such written instructions;
(k) except as otherwise expressly provided by this Trust Agreement,
the Property Trustee shall not be under any obligation to take any action
that is discretionary under the provisions of this Trust Agreement; and
(l) any action taken by the Property Trustee or its agents hereunder
shall bind the Trust and the Holders, and the signature of the Property
Trustee or its agents alone shall be sufficient and effective to perform
any such action and no third party shall be required to inquire as to the
authority of the Property Trustee to so act or as to its compliance with
any of the terms and provisions of this Trust Agreement, both of which
shall be conclusively evidenced by the Property Trustee's or its agent's
taking such action.
No provision of this Trust Agreement shall be deemed to impose any duty or
obligation on the Property Trustee to perform any act or acts or exercise any
right, power, duty or obligation conferred or imposed on it, in any jurisdiction
in which it shall be illegal, or in which the Property Trustee shall be
unqualified or incompetent in accordance with applicable law, to perform any
such act or acts, or to exercise any such right, power, duty or obligation. No
permissive power or authority available to the Property Trustee shall be
construed to be a duty.
SECTION 8.4. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The recitals contained herein and in the Trust Securities Certificates
shall be taken as the statements of the Trust, and the Trustees do not assume
any responsibility for their correctness. The Trustees shall not be accountable
for the use or application by the Depositor of the proceeds of the Debentures.
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SECTION 8.5. MAY HOLD SECURITIES.
Any Trustee or any other agent of any Trustee or the Trust, in its
individual or any other capacity, may become the owner or pledgee of Trust
Securities and, subject to Sections 8.8 and 8.13, except as provided in the
definition of the term "Outstanding" in Article I, may otherwise deal with the
Trust with the same rights it would have if it were not a Trustee or such other
agent.
SECTION 8.6. COMPENSATION; INDEMNITY; FEES.
The Depositor, as borrower, agrees:
(a) to pay to the Trustees from time to time such compensation as
shall be agreed in writing with the Depositor for all services rendered by
them hereunder (which compensation shall not be limited by any provision of
law in regard to the compensation of a trustee of an express trust);
(b) except as otherwise expressly provided herein, to reimburse the
Trustees upon request for all reasonable expenses, disbursements and
advances incurred or made by the Trustees in accordance with any provision
of this Trust Agreement (including the reasonable compensation and the
expenses and disbursements of its agents and counsel), except any such
expense, disbursement or advance as may be attributable to its negligence
or bad faith; and
(c) to the fullest extent permitted by applicable law, to indemnify
and hold harmless (i) each Trustee, (ii) any Affiliate of any Trustee,
(iii) any officer, director, shareholder, employee, representative or agent
of any Trustee and (iv) any employee or agent of the Trust or its
Affiliates (referred to herein as an "Indemnified Person") from and against
any and all loss, damage, liability, tax, penalty, expense or claim of any
kind or nature whatsoever incurred by such Indemnified Person by reason of
the creation, operation or termination of the Trust or any act or omission
performed or omitted by such Indemnified Person in good faith on behalf of
the Trust and in a manner such Indemnified Person reasonably believed to be
within the scope of authority conferred on such Indemnified Person by this
Trust Agreement, except that no Indemnified Person shall be entitled to be
indemnified in respect of any loss, damage or claim incurred by such
Indemnified Person by reason of negligence or willful misconduct with
respect to such acts or omissions. When the Property Trustee incurs
expenses or renders services in connection with an Event of Default
specified in Section 5.1(4) or Section 5.1(5) of the Indenture, the
expenses (including the reasonable charges and expenses of its counsel) and
the compensation for the services are intended to constitute ex-
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penses of administration under any applicable federal or state bankruptcy,
insolvency or other similar law.
(d) The provisions of this Section 8.6 shall survive the termination
of this Trust Agreement.
(e) No Trustee may claim any lien or charge on any Trust Property as a
result of any amount due pursuant to this Section 8.6.
(f) The Depositor and any Trustee (in the case of the Property
Trustee, subject to Section 8.8 hereof) may engage in or possess an
interest in other business ventures of any nature or description,
independently or with others, similar or dissimilar to the business of the
Trust, and the Trust and the Holders of Trust Securities shall have no
rights by virtue of this Trust Agreement in and to such independent
ventures or the income or profits derived therefrom, and the pursuit of any
such venture, even if competitive with the business of the Trust, shall not
be deemed wrongful or improper. Neither the Depositor nor any Trustee shall
be obligated to present any particular investment or other opportunity to
the Trust even if such opportunity is of a character that, if presented to
the Trust, could be taken by the Trust, and the Depositor and any Trustee
shall have the right to take for its own account (individually or as a
partner or fiduciary) or to recommend to others any such particular
investment or other opportunity. Any Trustee may engage or be interested in
any financial or other transaction with the Depositor or any Affiliate of
the Depositor, or may act as depository for, trustee or agent for, or act
on any committee or body of Holders of, securities or other obligations of
the Depositor or its Affiliates.
SECTION 8.7. CORPORATE PROPERTY TRUSTEE REQUIRED; ELIGIBILITY OF TRUSTEES.
(a) There shall at all times be a Property Trustee hereunder with respect
to the Trust Securities. The Property Trustee shall be a Person that is eligible
pursuant to the Trust Indenture Act to act as such and has a combined capital
and surplus of at least $50,000,000. If any such Person publishes reports of
condition at least annually, pursuant to law or to the requirements of its
supervising or examining authority, then for the purposes of this Section 8.7,
the combined capital and surplus of such Person shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time the Property Trustee with respect to the Trust
Securities shall cease to be eligible in accordance with the provisions of this
Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article VIII. The Property Trustee may also act as
the Delaware Trustee if so eligible under clause (c) of this Section 8.7.
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(b) There shall at all times be one or more Administrative Trustees
hereunder with respect to the Trust Securities. Each Administrative Trustee
shall be either a natural person who is at least 21 years of age or a legal
entity that shall act through one or more persons authorized to bind that
entity.
(c) There shall at all times be a Delaware Trustee with respect to the
Trust Securities. The Delaware Trustee shall either be (i) a natural person who
is at least 21 years of age and a resident of the State of Delaware or (ii) a
legal entity with its principal place of business in the State of Delaware and
that otherwise meets the requirements of applicable Delaware law that shall act
through one or more persons authorized to bind such entity. The Delaware Trustee
may also act as the Property Trustee if so eligible under clause (a) if this
Section 8.7.
SECTION 8.8. CONFLICTING INTERESTS.
If the Property Trustee has or shall acquire a conflicting interest within
the meaning of the Trust Indenture Act, the Property Trustee shall either
eliminate such interest or resign, to the extent and in the manner provided by,
and subject to the provisions of, the Trust Indenture Act and this Trust
Agreement.
SECTION 8.9. CO-TRUSTEES AND SEPARATE TRUSTEE.
(a) Unless an Event of Default shall have occurred and be continuing, at
any time or times, for the purpose of meeting the legal requirements of the
Trust Indenture Act or of any jurisdiction in which any part of the Trust
Property may at the time be located, the Depositor and the Administrative
Trustees, by agreed action of the majority of such Trustees, shall have power to
appoint, and upon the written request of the Administrative Trustees, the
Depositor shall for such purpose join with the Administrative Trustees in the
execution, delivery and performance of all instruments and agreements necessary
or proper to appoint, one or more Persons approved by the Property Trustee
either to act as co-trustee, jointly with the Property Trustee, of all or any
part of such Trust Property, or to the extent required by law to act as separate
trustee of any such property, in either case with such powers as may be provided
in the instrument of appointment, and to vest in such Person or Persons in the
capacity aforesaid, any property, title, right or power deemed necessary or
desirable, subject to the other provisions of this Section 8.9. If the Depositor
does not join in such appointment within 15 days after the receipt by it of a
request so to do, or in case an Indenture Event of Default has occurred and is
continuing, the Property Trustee alone shall have power to make such
appointment. Any co-trustee or separate trustee appointed pursuant to this
Section 8.9 shall either be (i) a natural person who is at least 21 years of age
and a resident of the United States or (ii) a legal entity with its principal
place of business in the United States that shall act through one or more
persons authorized to bind such entity. Should any written instrument from the
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Depositor be required by any co-trustee or separate trustee so appointed for
more fully confirming to such co-trustee or separate trustee such property,
title, right, or power, any and all such instruments shall, on request, be
executed, acknowledged and delivered by the Depositor.
(b) Every co-trustee or separate trustee shall, to the extent permitted by
law, but to such extent only, be appointed subject to the following terms,
namely:
(i) The Trust Securities shall be executed and delivered and all
rights, powers, duties, and obligations hereunder in respect of the custody
of securities, cash and other personal property held by, or required to be
deposited or pledged with, the Trustees specified hereunder shall be
exercised solely by such Trustees and not by such co-trustee or separate
trustee.
(ii) The rights, powers, duties, and obligations hereby conferred or
imposed upon the Property Trustee in respect of any property covered by
such appointment shall be conferred or imposed upon and exercised or
performed by the Property Trustee or by the Property Trustee and such
co-trustee or separate trustee jointly, as shall be provided in the
instrument appointing such co-trustee or separate trustee, except to the
extent that under any law of any jurisdiction in which any particular act
is to be performed, the Property Trustee shall be incompetent or
unqualified to perform such act, in which event such rights, powers, duties
and obligations shall be exercised and performed by such co-trustee or
separate trustee.
(iii) The Property Trustee at any time, by an instrument in writing
executed by it, with the written concurrence of the Depositor, may accept
the resignation of or remove any co-trustee or separate trustee appointed
under this Section 8.9, and, in case an Indenture Event of Default has
occurred and is continuing, the Property Trustee shall have power to accept
the resignation of, or remove, any such co-trustee or separate trustee
without the concurrence of the Depositor. Upon the written request of the
Property Trustee, the Depositor shall join with the Property Trustee in the
execution, delivery and performance of all instruments and agreements
necessary or proper to effectuate such resignation or removal. A successor
to any co-trustee or separate trustee so resigned or removed may be
appointed in the manner provided in this Section 8.9.
(iv) No co-trustee or separate trustee hereunder shall be personally
liable by reason of any act or omission of the Property Trustee or any
other trustee hereunder.
(v) The Property Trustee shall not be liable by reason of any act of a
co-trustee or separate trustee.
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(vi) Any Act of Holders delivered to the Property Trustee shall be
deemed to have been delivered to each such co-trustee and separate trustee.
SECTION 8.10. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of any Trustee (the "Relevant Trustee") and
no appointment of a successor Trustee pursuant to this Article VIII shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 8.11.
(b) Subject to Section 8.10(a), the Relevant Trustee may resign at any time
by giving written notice thereof to the Holders. If the instrument of acceptance
by the successor Trustee required by Section 8.11 shall not have been delivered
to the Relevant Trustee within 30 days after the giving of such notice of
resignation, the Relevant Trustee may petition, at the expense of the Trust, any
court of competent jurisdiction for the appointment of a successor Relevant
Trustee.
(c) Unless an Indenture Event of Default shall have occurred and be
continuing, any Trustee may be removed at any time by Act of the Holders of
Common Securities (which such removal shall not constitute an amendment of this
Trust Agreement). If an Indenture Event of Default shall have occurred and be
continuing, the Property Trustee may be removed at such time by Act of the
Holders of a majority in Liquidation Amount of the Preferred Securities,
delivered to the Relevant Trustee (in its individual capacity and on behalf of
the Trust). An Administrative Trustee may be removed by the Holder of Common
Securities at any time. If the instrument of acceptance by the successor Trustee
required by Section 8.11 shall not have been delivered to the Relevant Trustee
within 30 days after such removal, the Relevant Trustee may petition, at the
expense of the Trust, any court of competent jurisdiction for the appointment of
a successor Relevant Trustee.
(d) If any Trustee shall resign, be removed or become incapable of acting
as Trustee, or if a vacancy shall occur in the office of any Trustee for any
cause, at a time when no Indenture Event of Default shall have occurred and be
continuing, the Holder of Common Securities, by Act of the Holder of Common
Securities delivered to the retiring Trustee, shall promptly appoint a successor
Trustee or Trustees, and the retiring Trustee shall comply with the applicable
requirements of Section 8.11. If the Property Trustee shall resign, be removed
or become incapable of continuing to act as the Property Trustee at a time when
a Indenture Event of Default shall have occurred and be continuing, the Holders,
by Act of the Holders holding a majority in Liquidation Amount of the Preferred
Securities then Outstanding delivered to the retiring Relevant Trustee, shall
promptly appoint a successor Relevant Trustee or Trustees, and such successor
Trustee shall comply with the applicable requirements of Section
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8.11. If an Administrative Trustee shall resign, be removed or become incapable
of acting as Administrative Trustee, at a time when an Indenture Event of
Default shall have occurred and be continuing, the Holder of Common Securities
by Act of the Holder of Common Securities delivered to the Administrative
Trustee shall promptly appoint a successor Administrative Trustee or
Administrative Trustees and such successor Administrative Trustee or Trustees
shall comply with the applicable requirements of Section 8.11. If no successor
Relevant Trustee shall have been so appointed by the Holder of Common Securities
or the Holders and accepted appointment in the manner required by Section 8.11,
any Holder who has been a Holder of Trust Securities for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the appointment of a successor Relevant Trustee.
(e) The Property Trustee shall give notice of each resignation and each
removal of a Trustee and each appointment of a successor Trustee to all Holders
in the manner provided in Section 11.9 and shall give notice to the Depositor.
Each notice shall include the name of the successor Relevant Trustee and the
address of its Corporate Trust Office if it is the Property Trustee.
(f) Notwithstanding the foregoing or any other provision of this Trust
Agreement, in the event any Administrative Trustee who is a natural person dies
or becomes, in the opinion of the Depositor, incompetent or incapacitated, the
vacancy created by such death, incompetence or incapacity may be filled by (i)
the unanimous act of the remaining Administrative Trustees if there are at least
two of them or (ii) otherwise by the Depositor (with the successor in each case
being a Person who satisfies the eligibility requirement for Administrative
Trustees set forth in Section 8.7).
SECTION 8.11. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
In case of the appointment hereunder of a successor Relevant Trustee, the
retiring Relevant Trustee and each successor Relevant Trustee with respect to
the Trust Securities shall execute and deliver an amendment hereto wherein each
successor Relevant Trustee shall accept such appointment and which (a) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Relevant Trustee all the rights,
powers, trusts and duties of the retiring Relevant Trustee with respect to the
Trust Securities and the Trust and (b) shall add to or change any of the
provisions of this Trust Agreement as shall be necessary to provide for or
facilitate the administration of the Trust by more than one Relevant Trustee, it
being understood that nothing herein or in such amendment shall constitute such
Relevant Trustees co-trustees and upon the execution and delivery of such
amendment the resignation or removal of the retiring Relevant Trustee shall
become effective to the extent provided therein and each such successor Relevant
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and
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duties of the retiring Relevant Trustee; but, on written request of the Trust or
any successor Relevant Trustee such retiring Relevant Trustee shall duly assign,
transfer and deliver to such successor Relevant Trustee all Trust Property, all
proceeds thereof and funds held by such retiring Relevant Trustee hereunder with
respect to the Trust Securities and the Trust. Upon written request of any such
successor Relevant Trustee, the Trust shall execute any and all instruments for
more fully and certainly vesting in and confirming to such successor Relevant
Trustee all such rights, powers and trusts referred to in this Section 8.11. No
successor Relevant Trustee shall accept its appointment unless at the time of
such acceptance such successor Relevant Trustee shall be qualified and eligible
under this Article.
SECTION 8.12. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any Person into which the Property Trustee may be merged or converted or
with which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which such Relevant Trustee shall be a party, or
any Person succeeding to all or substantially all the corporate trust business
of such Relevant Trustee, shall be the successor of such Relevant Trustee
hereunder, provided such Person shall be otherwise qualified and eligible under
this Article VIII, without the execution or filing of any paper or any further
act on the part of any of the parties hereto.
SECTION 8.13. PREFERENTIAL COLLECTION OF CLAIMS AGAINST DEPOSITOR OR TRUST.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
similar judicial proceeding relative to the Trust or any other obligor upon the
Trust Securities or the property of the Trust or of such other obligor or their
creditors, the Property Trustee (irrespective of whether any Distributions on
the Trust Securities shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Property Trustee shall
have made any demand on the Trust for the payment of any past due Distributions)
shall be entitled and empowered, to the fullest extent permitted by law, by
intervention in such proceeding or otherwise:
(i) to file and prove a claim for the whole amount of any
Distributions owing and unpaid in respect of the Trust Securities and to
file such other papers or documents as may be necessary or advisable in
order to have the claims of the Property Trustee (including any claim for
the reasonable compensation, expenses, disbursements and advances of the
Property Trustee, its agents and counsel) and of the Holders allowed in
such judicial proceeding, and
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(ii) to collect and receive any money or other property payable or
deliverable on any such claims and to distribute the same; and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Property Trustee and, in the event
the Property Trustee shall consent to the making of such payments directly
to the Holders, to pay to the Property Trustee any amount due it for the
reasonable compensation, expenses, disbursements and advances of the
Property Trustee, its agents and counsel, and any other amounts due the
Property Trustee. Nothing herein contained shall be deemed to authorize the
Property Trustee to authorize or consent to or accept or adopt on behalf of
any Holder any plan of reorganization, arrangement adjustment or
compensation affecting the Trust Securities or the rights of any Holder
thereof or to authorize the Property Trustee to vote in respect of the
claim of any Holder in any such proceeding.
SECTION 8.14. REPORTS BY PROPERTY TRUSTEE.
(a) The Property Trustee shall transmit to Holders such reports concerning
the Property Trustee and its actions under this Trust Agreement as may be
required pursuant to the Trust Indenture Act at the times and in the manner
provided pursuant thereto. If required by Section 313(a) of the Trust Indenture
Act, the Property Trustee shall, within 60 days after each May 15 following the
date of this Trust Agreement, deliver to Holders a brief report, dated as of
such May 15, which complies with the provisions of such Section 313(a).
(b) A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Property Trustee with each national stock exchange, the
Nasdaq National Market or such other interdealer quotation system or
self-regulatory organization upon which the Preferred Securities are listed or
traded, if any, with the Commission and with the Depositor. The Depositor will
promptly notify the Property Trustee of any such listing or trading.
SECTION 8.15. REPORTS TO PROPERTY TRUSTEE.
The Depositor and the Administrative Trustees on behalf of the Trust shall
provide to the Property Trustee such documents, reports and information as
required by Section 314 of the Trust Indenture Act (if any) and the compliance
certificate required by Section 314(a) of the Trust Indenture Act in the form,
in the manner and at the times required by Section 314 of the Trust Indenture
Act. Delivery of such reports, information and documents to the Property Trustee
is for informational purposes only and the Property Trustee's receipt of such
shall not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Trust's
compliance with any of its
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covenants hereunder (as to which the Property Trustee is entitled to rely
exclusively on Officers' Certificates).
SECTION 8.16. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.
Each of the Depositor and the Administrative Trustees on behalf of the
Trust shall provide to the Property Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this Trust Agreement that relate
to any of the matters set forth in Section 314(c) of the Trust Indenture Act.
Any certificate or opinion required to be given by an officer pursuant to
Section 314(c)(1) of the Trust Indenture Act shall be given in the form of an
Officers' Certificate.
SECTION 8.17. NUMBER OF TRUSTEES.
(a) The number of Trustees shall be five (four if the Property Trustee and
the Delaware Trustee are the same Person), provided that the Holder of all of
the Common Securities by written instrument may increase or decrease the number
of Administrative Trustees and provided that the number of Trustees may be
increased to add a Special Administrative Trustee. The Property Trustee and the
Delaware Trustee may be the same Person.
(b) If a Trustee ceases to hold office for any reason and the number of
Administrative Trustees is not reduced pursuant to Section 8.17(a), or if the
number of Trustees is increased pursuant to Section 8.17(a), a vacancy shall
occur. The vacancy shall be filled with a Trustee appointed in accordance with
Section 8.10.
(c) The death, resignation, retirement, removal, bankruptcy, incompetence
or incapacity to perform the duties of a Trustee shall not operate to dissolve,
terminate or annul the Trust. Whenever a vacancy in the number of Administrative
Trustees shall occur, until such vacancy is filled by the appointment of an
Administrative Trustee in accordance with Section 8.10, the Administrative
Trustees in office, regardless of their number (and notwithstanding any other
provision of this Trust Agreement), shall have all the powers granted to the
Administrative Trustees and shall discharge all the duties imposed upon the
Administrative Trustees by this Trust Agreement.
SECTION 8.18. DELEGATION OF POWER.
(a) Any Administrative Trustee may, by power of attorney consistent with
applicable law, delegate to any other natural person over the age of 21 his or
her power for the purpose of executing any documents contemplated in Section
2.8, including any registration
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statement or amendment thereto filed with the Commission, or making any other
governmental filing.
(b) The Administrative Trustees shall have power to delegate from time to
time to such of their number or to the Depositor the doing of such things and
the execution of such instruments either in the name of the Trust or the names
of the Administrative Trustees or otherwise as the Administrative Trustees may
deem expedient, to the extent such delegation is not prohibited by applicable
law or contrary to the provisions of this Trust Agreement, as set forth herein.
ARTICLE IX
DISSOLUTION, LIQUIDATION, TERMINATION AND MERGER
SECTION 9.1. TERMINATION UPON EXPIRATION DATE.
Unless earlier terminated, the Trust shall automatically dissolve on July
1, 2005 (the "Expiration Date"), following the distribution of the Trust
Property in accordance with Section 9.4.
SECTION 9.2. EARLY TERMINATION.
The first to occur of any of the following events is an "Early Termination
Event":
(a) the occurrence of a Bankruptcy Event in respect of the Holder of
the Common Securities, or the filing by the Holder of Common Securities of
a certificate of dissolution or its equivalent with respect to the Holder
of Common Securities (except for permitted mergers, consolidations or
reorganizations of the Holder of Common Securities) or the revocation of
the charter of the Holder of Common Securities and the expiration of 90
days after the date of such revocation without reinstatement thereof;
(b) the occurrence of (i) a Tax Event, but only if the Administrative
Trustees shall have received an opinion from independent tax counsel
experienced in such matters, which opinion may rely on published revenue
rulings of the Internal Revenue Service, to the effect that the holders of
the Preferred Securities will not recognize any gain or loss for United
States federal income tax purposes as a result of such Early Termination
Event and distribution of Debentures; unless at the time there is available
to the Trust the opportunity to eliminate, within such 90 day period, the
Tax Event by
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taking some ministerial action, such as filing a form or making an
election, or pursuing some other similar reasonable measure, which has no
adverse effect on the Trust, Gentiva Health Services, Inc. or the holders
of the Preferred Securities, and the Trust pursues such measure in lieu of
dissolution; or (ii) an Investment Company Event;
(c) the redemption of all of the Preferred Securities in connection
with the redemption of all of the Debentures;
(d) the entry of an order for dissolution of the Trust by a court of
competent jurisdiction; and
(e) the distribution of Common Stock to all Holders upon conversion of
all outstanding Preferred Securities.
SECTION 9.3. TERMINATION.
The respective obligations and responsibilities of the Trustees and, to the
fullest extent permitted by applicable law, the Trust created and continued
hereby shall terminate upon the latest to occur of the following: (a) the
distribution by the Property Trustee to Holders upon the liquidation of the
Trust pursuant to Section 9.4, or upon the redemption of all of the Trust
Securities pursuant to Section 4.2 or repurchase of all the Trust Securities
pursuant to Article X, of all amounts required to be distributed hereunder upon
the final payment of the Trust Securities; (b) the payment of any expenses owed
by the Trust; and (c) the discharge of all administrative duties of the
Administrative Trustees, including the performance of any tax reporting
obligations with respect to the Trust or the Holders. Upon the completion of the
liquidation of the Trust and its termination, the Property Trustee and
Administrative Trustee shall execute and file a Certificate of Cancellation of
the Trust with the Secretary of State of the State of Delaware.
SECTION 9.4. LIQUIDATION.
(a) If an Early Termination Event specified in clause (a), (b) or (d) of
Section 9.2 occurs or upon the Expiration Date, the Trust shall be liquidated by
the Trustees as expeditiously as the Trustees determine to be possible by
distributing, after satisfaction or the making of reasonable provisions for the
payment of liabilities to creditors of the Trust as provided by applicable law,
to each Holder a Like Amount of Debentures, subject to Section 9.4(d). Notice of
liquidation shall be given by the Property Trustee by first-class mail, postage
prepaid mailed not later than 30 nor more than 60 days prior to the Liquidation
Date to each Holder of Trust Securities at such Holder's address appearing in
the Securities Register. All notices of liquidation shall:
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(i) state the Liquidation Date;
(ii) state that from and after the Liquidation Date, the Trust
Securities will no longer be deemed to be Outstanding and any Trust
Securities Certificates not surrendered for exchange will be deemed to
represent a Like Amount of Debentures; and
(iii) provide such information with respect to the mechanics by which
Holders may exchange Trust Securities Certificates for Debentures or, if
Section 9.4(d) applies, receive a Liquidation Distribution, as the
Administrative Trustees or the Property Trustee shall deem appropriate.
(b) Except where Section 9.2(c) or 9.2(e) applies, in order to effect the
liquidation of the Trust and distribution of the Debentures to Holders, the
Property Trustee shall establish a record date for such distribution (which
shall be not more than 45 days prior to the Liquidation Date) and, either itself
acting as exchange agent or through the appointment of a separate exchange
agent, shall establish such procedures as it shall deem appropriate to effect
the distribution of Debentures in exchange for the Outstanding Trust Securities
Certificates.
(c) Except where Section 9.2(c) or 9.2(e) applies, after the Liquidation
Date, (i) the Trust Securities shall no longer be deemed to be Outstanding, (ii)
certificates representing a Like Amount of Debentures shall be issued to Holders
of Trust Securities Certificates, upon surrender of such certificates to the
Administrative Trustees or their agent for exchange, (iii) the Depositor shall
use its best efforts to have the Debentures listed on any exchange, interdealer
quotation system or self-regulatory organization as the Preferred Securities are
then listed or traded, (iv) any Trust Securities Certificates not so surrendered
for exchange shall be deemed to represent a Like Amount of Debentures, accruing
interest at the rate provided for in the Debentures from the last Distribution
Date on which a Distribution was made on such Trust Securities Certificates
until such certificates are so surrendered (and until such certificates are so
surrendered, no payments of interest or principal will be made to Holders of
Trust Securities Certificates with respect to such Debentures), and (v) all
rights of Holders holding Trust Securities shall cease, except the right of such
Holders to receive Debentures upon surrender of Trust Securities Certificates.
(d) In the event that, notwithstanding the other provisions of this Section
9.4, whether because of an order for dissolution entered by a court of competent
jurisdiction or otherwise, distribution of the Debentures in the manner provided
herein is determined by the Property Trustee not to be practical, the Trust
Property shall be liquidated, and the Trust shall be wound-up or terminated, by
the Property Trustee. In such event, Holders will be entitled to receive out of
the assets of the Trust available for distribution to Holders, after
satisfaction of liabilities to creditors of the Trust as provided by applicable
law, an amount equal to the Liquidation Amount per Trust Security plus
accumulated and unpaid Distributions thereon to the
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date of payment (such amount being the "Liquidation Distribution"). If, upon any
such winding up or termination, the Liquidation Distribution can be paid only in
part because the Trust has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then, subject to the next succeeding
sentence, the amounts payable by the Trust on the Trust Securities shall be paid
on a pro rata basis (based upon Liquidation Amounts). The Holder of the Common
Securities shall be entitled to receive Liquidation Distributions upon any such
winding-up or termination pro rata (determined as aforesaid) with Holders of
Preferred Securities, except that, if a Indenture Event of Default has occurred
and is continuing, the Preferred Securities shall have a priority over the
Common Securities.
SECTION 9.5. MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF
TRUST.
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other Person, except pursuant
to this Article IX. At the request of the Depositor, with the consent of the
Administrative Trustees and without the consent of the Holders of the Preferred
Securities, the Property Trustee or the Delaware Trustee, the Trust may
consolidate, amalgamate, merge with or into, or be replaced by or convey,
transfer or lease its properties and assets substantially as an entirety to a
trust organized as such under the laws of any State; provided, that (i) such
successor entity either (a) expressly assumes all of the obligations of the
Trust with respect to the Preferred Securities or (b) substitutes for the
Preferred Securities other securities having substantially the same terms as the
Preferred Securities (the "Successor Securities") so long as the Successor
Securities rank the same as the Preferred Securities rank in priority with
respect to Distributions and payments upon liquidation, redemption and
otherwise, (ii) the Depositor expressly appoints a trustee of such successor
entity possessing the same powers and duties as the Property Trustee as the
holder of the Debentures, (iii) the Successor Securities are listed or traded,
or any Successor Securities shall be listed upon notification of issuance, on
any national securities exchange or other organization on which the Preferred
Securities are then listed or traded, if any, (iv) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not cause the
Preferred Securities (including any Successor Securities) to be downgraded by
any nationally recognized statistical rating organization, (v) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does not
adversely affect the rights, preferences and privileges of the Holders of the
Preferred Securities (including any Successor Securities) in any material
respect, (vi) such successor entity has a purpose substantially identical to
that of the Trust, (vii) prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Depositor has received an
Opinion of Counsel to the effect that (a) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the Holders of the Preferred
Securities (including any
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Successor Securities) in any material respect, and (b) following such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease, neither
the Trust nor such successor entity will be required to register as an
investment company under the 1940 Act, and (viii) the Depositor owns all of the
common securities of such successor entity and guarantees the obligations of
such successor entity under the Successor Securities at least to the extent
provided by the Guarantee. Notwithstanding the foregoing, the Trust shall not,
except with the consent of Holders of 100% in Liquidation Amount of the
Preferred Securities, consolidate, amalgamate, merge with or into, or be
replaced by or convey, transfer or lease its properties and assets substantially
as an entirety to any other Person or permit any other Person to consolidate,
amalgamate, merge with or into, or replace it if such consolidation,
amalgamation, merger, replacement, conveyance, transfer or lease would cause the
Trust or the successor entity to be classified as other than a grantor trust for
United States federal income tax purposes.
ARTICLE X
RIGHT TO REQUIRE REPURCHASE
SECTION 10.1. RIGHT TO REQUIRE REPURCHASE.
In the event that there shall occur a Change of Control (as defined in
Section 10.6), then each Holder shall have the right, at such Holder's option,
to require the Trust to purchase, and upon the exercise of such right, the Trust
shall, subject to the provisions of Section 14.3 of the Indenture, purchase, all
or any part of such Holder's Preferred Securities on the date (the "Repurchase
Date") that is 30 days after the date the Depositor gives notice of the Change
of Control as contemplated in Section 10.2(a) at a price (the "Repurchase
Price") equal to $50 per Preferred Security, together with accrued and unpaid
Distributions, if any, to the Repurchase Date.
SECTION 10.2. NOTICE; METHOD OF EXERCISING REPURCHASE RIGHT.
(a) Within 30 days following a Change of Control (as defined in Section
10.6), the Depositor, or at the written request of the Depositor received by the
Property Trustee at least 40 days prior to the Repurchase Date, the Property
Trustee (in the name and at the expense of the Depositor), in its capacity as
tender agent (for which services it shall be reasonably compensated), shall give
notice of the occurrence of the Change of Control and of the repurchase right
set forth herein arising as a result thereof by first-class mail, postage
prepaid, to
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the Property Trustee and to each Holder of the Preferred Securities at such
Holder's address appearing in the Security Register.
Each notice of a repurchase right shall state:
(1) the event constituting the Change of Control and the date thereof,
(2) the Repurchase Date,
(3) the date by which the repurchase right must be exercised,
(4) the Repurchase Price, and
(5) the instructions a Holder must follow to exercise a repurchase
right.
No failure of the Depositor to give the foregoing notice shall limit any
Holder's right to exercise a repurchase right. The Property Trustee shall have
no affirmative obligation to determine if there shall have occurred a Repurchase
Event.
(b) To exercise a repurchase right, a Holder shall deliver to the
Depositor, the Trust (or an agent designated by the Depositor for such purpose
in the notice referred to in (a) above) and to the Property Trustee on or before
the close of business on the second Business Day preceding the Repurchase Date
(i) written notice of the Holder's exercise of such right, in the form attached
hereto as Exhibit E, and (ii) the Preferred Security or Preferred Securities
with respect to which the repurchase right is being exercised, duly endorsed for
transfer to the Trust. Such written notice shall be irrevocable.
In the event a repurchase right shall be exercised in accordance with the
terms hereof, the Depositor shall on the Repurchase Date cause to be paid in
cash by the Trust to the Holder thereof the Repurchase Price of the Preferred
Security or Preferred Securities as to which the repurchase right had been
exercised. In the event that a repurchase right is exercised with respect to
less than the entire amount of Preferred Securities represented by a
Certificated Preferred Security, the Trust shall cause to be issued and executed
in the name of the Holder a new Certificated Preferred Security representing the
unrepurchased portion of such surrendered Certificated Preferred Security.
SECTION 10.3. DEPOSIT OF REPURCHASE PRICE.
On or prior to the Repurchase Date, the Depositor shall redeem Debentures
equal in aggregate principal amount to the Liquidation Amount of Preferred
Securities to be repurchased on the Repurchase Date and cause to be deposited
with the Property Trustee or with a Paying Agent an amount of money in same day
funds sufficient to pay the redemption
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price therefor. The Trust shall cause such funds to be applied to the payment of
the Repurchase Price of the Preferred Securities which are to be repaid on the
Repurchase Date.
SECTION 10.4. SECURITIES NOT REPURCHASED ON REPURCHASE DATE.
If any Preferred Security surrendered for repurchase shall not be so paid
on the Repurchase Date, such Preferred Security shall, until paid, accrue
Distributions to the extent permitted by applicable law from the Repurchase Date
at the Distribution rate per annum applicable to such Preferred Security.
SECTION 10.5. SECURITIES REPURCHASED IN PART.
Any Preferred Securities, only a portion of which are to be repurchased,
shall be surrendered at any office or agency of the Property Trustee designated
for that purpose (with, if the Trust or the Property Trustee so requires, due
endorsement by, or written instrument of transfer in form satisfactory to the
Trust and the Property Trustee duly executed by, the Holder thereof or his
attorney duly authorized in writing), and the Trust shall issue to the Holder,
without service charge, a Certificated Preferred Security of any authorized
denomination as requested by such Holder, in aggregate amount equal to and in
exchange for the unrepurchased portion of Preferred Securities so surrendered.
SECTION 10.6. DEFINITIONS.
(a) A "Change in Control" shall occur when: (a) the sale, lease, transfer,
conveyance or other disposition (other than by way of merger or consolidation),
in one or a series of related transactions, or all or substantially all of the
assets of the Depositor and its subsidiaries, taken as a whole, (b) the adoption
of a plan relating to the liquidation or dissolution of the Depositor, (c) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" or "group" (as such
terms are used in Section 13(d)(3) of the Exchange Act) becomes the "beneficial
owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act), directly or indirectly through one or more intermediaries, of more than
50% of the voting power of the outstanding voting stock of the Depositor, (d)
the Depositor consolidates with, or merges with or into, any person, or any
person consolidates with, or merges with or into, the Depositor, other than any
such transaction where the beneficial owners of the outstanding common stock of
the Depositor immediately prior to such transaction beneficially own a majority
of the outstanding shares of voting stock of the surviving person immediately
after such transaction, or (e) the first day on which more than a majority of
the members of the Board of Directors of the Depositor are not Continuing
Directors; provided, however, that a Change of Control shall not be deemed to
have occurred if the last reported sale price per share of the Common Stock for
any
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ten Trading Days (as defined) within the period of twenty consecutive Trading
Days (x) ending immediately after the later of the Change of Control and the
public announcement of the Change in Control (in the case of a Change in Control
under clause (a), (b), (c) or (e) above) or (y) ending immediately before the
Change in Control (in the case of a Change in Control under clause (d) above)
shall equal or exceed 105% of the Conversion Price in effect on each such
Trading Day. If not earlier made, the Company shall make a public announcement
of a Change of Control within five Business Days of the occurrence of such
Change of Control.
(b) "Continuing Directors" means as of any date of determination, any
member of the board of directors of the Depositor who (a) was a member of the
board of directors on the date of original issuance of the Preferred Securities
or (b) was nominated for election to the board of directors with the approval
of, or whose election was ratified by, at least two-thirds of the Continuing
Directors who were members of the board of directors at the time of such
nomination or election.
ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.1. LIMITATION OF RIGHTS OF HOLDERS.
The death, incapacity, liquidation, dissolution, termination or bankruptcy
of any Person having an interest, beneficial or otherwise, in Trust Securities
shall not operate to terminate this Trust Agreement, nor entitle the legal
representatives or heirs of such Person or any Holder for such Person, to claim
an accounting, take any action or bring any proceeding in any court for a
partition or winding up of the arrangements contemplated hereby, nor otherwise
affect the rights, obligations and liabilities of the parties hereto or any of
them.
SECTION 11.2. LIABILITY.
(a) Except as expressly set forth in this Trust Agreement, the Guarantee
and the terms of the Trust Securities, the Depositor shall not be:
(i) personally liable for the return of any portion of the capital
contributions (or any return thereon) of the Holders, which shall be made
solely from assets of the Trust; or
(ii) required to pay to any Holder any deficit upon dissolution of the
Trust or otherwise.
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(b) The Holder of the Common Securities shall be liable for all of the
debts and obligations of the Trust (other than with respect to the Trust
Securities) to the extent not satisfied out of the Trust's assets.
(c) Pursuant to Section 3803(a) of the Business Trust Act, the Holders of
the Preferred Securities shall be entitled to the same limitation of personal
liability extended to stockholders of private corporations for profit organized
under the General Corporation Law of the State of Delaware.
SECTION 11.3. AMENDMENT.
(a) This Trust Agreement may be amended from time to time by the Property
Trustee, the Administrative Trustees and the Depositor, without the consent of
any Holders, (i) to cure any ambiguity, correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to make any
other provisions with respect to matters or questions arising under this Trust
Agreement, which shall not be inconsistent with the other provisions of this
Trust Agreement, or to add to the covenants of the Trust for the benefit of the
Holders or to surrender any right or power herein conferred upon the Trust, (ii)
to modify, eliminate or add to any provisions of this Trust Agreement to such
extent as shall be necessary to ensure that the Trust will be classified for
United States federal income tax purposes as a grantor trust at all times that
any Trust Securities are Outstanding or to ensure that the Trust will not be
required to register as an investment company under the 1940 Act or (iii) to
cause this Trust Agreement to be qualified under the Trust Indenture Act;
provided, however, that in the case of clause (i), (ii) or (iii), such action
shall not adversely affect in any material respect the interests of any Holder,
and any such amendments of this Trust Agreement shall become effective when
notice thereof is given to the Holders.
(b) Except as provided in Section 11.3(c) hereof, any provision of this
Trust Agreement may be amended by the Trustees and the Depositor with (i) the
consent of Holders representing not less than a majority (based upon Liquidation
Amounts) of the Trust Securities then Outstanding, and (ii) receipt by the
Trustees of an Opinion of Counsel to the effect that such amendment or the
exercise of any power granted to the Trustees in accordance with such amendment
will not affect the Trust's status as a grantor trust for United States federal
income tax purposes or the Trust's exemption from status of an investment
company under the 1940 Act.
(c) In addition to and notwithstanding any other provision in this Trust
Agreement, without the consent of each affected Holder (such consent being
obtained in accordance with Section 6.3 or 6.6 hereof), this Trust Agreement may
not be amended to (i) change the amount or timing of any Distribution on the
Trust Securities or otherwise adversely affect the amount of any Distribution
required to be made in respect of the Trust Secu-
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rities as of a specified date, or (ii) restrict the right of a Holder to
institute suit for the enforcement of any such payment on or after such date;
notwithstanding any other provision herein, without the unanimous consent of the
Holders (such consent being obtained in accordance with Section 6.3 or 6.6
hereof), this Section 11.3(c) may not be amended.
(d) Notwithstanding any other provisions of this Trust Agreement, no
Trustee shall enter into or consent to any amendment to this Trust Agreement
which would cause the Trust to fail or cease to qualify for the exemption from
status of an investment company under the 1940 Act or fail or cease to be
classified as a grantor trust for United States federal income tax purposes.
(e) Notwithstanding anything in this Trust Agreement to the contrary,
without the consent of the Depositor, this Trust Agreement may not be amended in
a manner which imposes any additional obligation on the Depositor.
(f) In the event that any amendment to this Trust Agreement is made, the
Administrative Trustees shall promptly provide to the Depositor a copy of such
amendment.
(g) Neither the Property Trustee nor the Delaware Trustee shall be required
to enter into any amendment to this Trust Agreement which affects its own
rights, duties or immunities under this Trust Agreement. The Property Trustee
shall be entitled to receive an Opinion of Counsel and an Officers' Certificate
stating that any amendment to this Trust Agreement is in compliance with this
Trust Agreement.
SECTION 11.4. SEPARABILITY.
In case any provision in this Trust Agreement or in the Trust Securities
Certificates shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 11.5. GOVERNING LAW.
THIS TRUST AGREEMENT AND TILE RIGHTS AND OBLIGATIONS OF EACH OF THE
HOLDERS, THE TRUST AND THE TRUSTEES WITH RESPECT TO THIS TRUST AGREEMENT AND THE
TRUST SECURITIES SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF DELAWARE (WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES).
SECTION 11.6. PAYMENTS DUE ON NON-BUSINESS DAY.
If the date fixed for any payment on any Trust Security shall be a day that
is not a Busi-
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ness Day, then such payment shall be made on the next succeeding day that is a
Business Day (and without any interest or other payment in respect of any such
delay) (except as otherwise provided in Sections 4.1(a) and 4.2(d)), with the
same force and effect as though made on the date fixed for such payment.
SECTION 11.7. SUCCESSORS.
This Trust Agreement shall be binding upon and shall inure to the benefit
of any successor to the Depositor, the Trust or the Relevant Trustee, including
any successor by operation of law. Except in connection with a consolidation,
merger or sale involving the Depositor that is permitted under Article Eight of
the Indenture and pursuant to which the assignee agrees in writing to perform
the Depositor's obligations hereunder, the Depositor shall not assign its
obligations hereunder.
SECTION 11.8. HEADINGS.
The Article and Section headings are for convenience only and shall not
affect the construction of this Trust Agreement.
SECTION 11.9. REPORTS, NOTICES AND DEMANDS.
(a) Any report, notice, demand or other communication which by any
provision of this Trust Agreement is required or permitted to be given or served
to or upon any Holder or the Depositor may be given or served in writing by
deposit thereof, first-class postage prepaid, in the United States mail, hand
delivery or facsimile transmission, in each case, addressed: (i) in the case of
a Holder, to such Holder as such Holder's name and address may appear on the
Securities Register; and (ii) in the case of the Holder of Common Securities or
the Depositor, to Gentiva Health Services, Inc. 175 Broad Hollow Road, Melville,
New York 11747, Attention: Chief Financial Officer, facsimile no.: (631)
844-7335. Such notice, demand or other communication to or upon a Holder shall
be deemed to have been sufficiently given or made, for all purposes, upon hand
delivery, mailing or transmission. Such notice, demand or other communication to
or upon the Depositor shall be deemed to have been sufficiently given or made
only upon actual receipt of the writing by the Depositor.
(b) Any notice, demand or other communication which by any provision of
this Trust Agreement is required or permitted to be given or served to or upon
the Trust, the Property Trustee or the Administrative Trustees shall be given in
writing addressed (until another address is published by the Trust) as follows:
(i) with respect to the Property Trustee to Wilmington Trust Company, 1100 N.
Market Street, Wilmington, Delaware 19801, Attention: Corporate Trust
Administration; and (ii) with respect to the Administrative Trustees, to them at
the address above for notices to the Depositor, marked "Attention Administrative
Trustees of Gentiva Trust." Such notice, demand or other communication to or
upon the Trust or the
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Property Trustee shall be deemed to have been sufficiently given or made only
upon actual receipt of the writing by the Trust or the Property Trustee.
SECTION 11.10. AGREEMENT NOT TO PETITION.
Each of the Trustees and the Depositor agree for the benefit of the Holders
that, until at least one year and one day after the Trust has been terminated in
accordance with Article IX, they shall not file, or join in the filing of, a
petition against the Trust under any bankruptcy, insolvency, reorganization or
other similar law (including the United States Bankruptcy Code) (collectively,
"Bankruptcy Laws") or otherwise join in the commencement of any proceeding
against the Trust under any Bankruptcy Law. In the event the Depositor takes
action in violation of this Section 11.10, the Property Trustee agrees, for the
benefit of Holders, that at the expense of the Depositor, it shall file an
answer with the bankruptcy court or otherwise properly contest the filing of
such petition by the Depositor against the Trust or the commencement of such
action and raise the defense that the Depositor has agreed in writing not to
take such action and should be stopped and precluded therefrom and such other
defenses, if any, as counsel for the Property Trustee or the Trust may assert.
The provisions of this Section 11.10 shall survive the termination of this Trust
Agreement.
SECTION 11.11. TRUST INDENTURE ACT; CONFLICT WITH TRUST INDENTURE ACT.
(a) This Trust Agreement shall be subject to the provisions of the Trust
Indenture Act whether or not such provisions are required or deemed to be part
of this Trust Agreement and shall, to the extent applicable, be governed by such
provisions.
(b) The Property Trustee shall be the only Trustee which is a trustee for
the purposes of the Trust Indenture Act.
(c) If any provision hereof limits, qualifies or conflicts with another
provision hereof which is or would be required or deemed to be included in this
Trust Agreement by any of the provisions of the Trust Indenture Act, such
required or deemed provision shall control. If any provision of this Trust
Agreement modifies or excludes any provision of the Trust Indenture Act which
may be so modified or excluded, the latter provision shall be deemed to apply to
this Trust Agreement as so modified or excluded, as the case may be.
(d) The application of the Trust Indenture Act to this Trust Agreement
shall not affect the nature of the Trust Securities as equity securities
representing undivided beneficial interests in the assets of the Trust.
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SECTION 11.12. ACCEPTANCE OF TERMS OF TRUST AGREEMENT, GUARANTEE AND
INDENTURE.
THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN BY
OR ON BEHALF OF A HOLDER OR ANY BENEFICIAL OWNER, WITHOUT ANY SIGNATURE OR
FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE UNCONDITIONAL ACCEPTANCE
BY ALL HOLDERS HAVING A BENEFICIAL INTEREST IN SUCH TRUST SECURITY OF ALL THE
TERMS AND PROVISIONS OF THIS TRUST AGREEMENT AND AGREEMENT TO THE SUBORDINATION
PROVISIONS AND OTHER TERMS OF THE GUARANTEE AND THE INDENTURE, AND SHALL
CONSTITUTE THE AGREEMENT OF THE TRUST, SUCH HOLDER AND SUCH OTHERS THAT THE
TERMS AND PROVISIONS OF THIS TRUST AGREEMENT SHALL BE BINDING, OPERATIVE AND
EFFECTIVE AS BETWEEN THE TRUST AND SUCH HOLDER AND SUCH OTHERS.
SECTION 11.13. HOLDERS ARE PARTIES.
Notwithstanding that Holders have not executed and delivered this Trust
Agreement or any counterpart thereof, Holders shall be deemed to be parties to
this Trust Agreement and shall be bound by all of the terms and conditions
hereof and of the Trust Securities by acceptance and delivery of the Trust
Securities.
SECTION 11.14. COUNTERPARTS.
This Trust Agreement may contain more than one counterpart of the signature
page and this Trust Agreement may be executed by the affixing of the signature
of each of the Trustees of one of such counterpart signature pages. All of such
counterpart signature pages shall be read as though one, and they shall have the
same force and effect as though all of the signers had signed a single signature
page.
GENTIVA HEALTH SERVICES, INC.
By:
--------------------------------
Name:
Title:
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Wilmington Trust Company, as Property
Trustee and Delaware Trustee
By:
--------------------------------
Name:
Title:
Edward A. Blechshmidt, as
Administrative Trustee
By:
--------------------------------
John J. Collura, as Administrative Trustee
By:
--------------------------------
Patricia C. Ma, as Administrative Trustee
By:
--------------------------------
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EXHIBIT A
CERTIFICATE OF TRUST OF GENTIVA TRUST
THIS Certificate of Trust of Gentiva Trust (the "Trust") is being duly
executed and filed on behalf of the Trust by the undersigned, as trustees, to
form a business trust under the Delaware Business Trust Act (12 Del. C.ss.3801
et seq.) (the "Act").
Name. The name of the business trust formed by this Certificate of Trust is
Gentiva Trust.
Delaware Trustee. The name and business address of the trustee of the Trust
in the State of Delaware are Wilmington Trust Company, 1100 North Market Street,
Wilmington, Delaware 19801, Attn: Corporate Trust Administration.
Effective Date. This Certificate of Trust shall be effective upon filing.
A-1
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Certificate of
Trust in accordance with Section 3811(a)(1) of the Act.
Edward A. Blechschmidt, not
in its individual capacity but solely as Trustee
By:
----------------------------------------------
Name:
Title:
Patricia C. Ma, not
in its individual capacity but solely as Trustee
By:
----------------------------------------------
Name:
Title:
John J. Collura, not
in its individual capacity but solely as Trustee
By:
----------------------------------------------
Name:
Title:
Wilmington Trust Company, not
in its individual capacity but solely as Trustee
By:
----------------------------------------------
Name:
Title:
A-2
<PAGE>
EXHIBIT B
FORM OF COMMON SECURITY
THIS CERTIFICATE IS NOT TRANSFERABLE TO ANY PERSON, EXCEPT THAT THE HOLDER
AND ANY WHOLLY-OWNED SUBSIDIARY MAY TRANSFER THIS SECURITY TO GENTIVA HEALTH
SERVICES, INC. OR A WHOLLY-OWNED SUBSIDIARY OF GENTIVA HEALTH SERVICES, INC. OR
ANY ENTITY OWNING ALL OF THE OUTSTANDING COMMON STOCK OF GENTIVA HEALTH
SERVICES, INC., SUBJECT TO RECEIPT BY THE TRUST OF AN OPINION OF COUNSEL THAT
SUCH TRANSFER WOULD NOT CAUSE MORE THAN AN INSUBSTANTIAL RISK THAT (I) THE TRUST
WOULD NOT BE CLASSIFIED FOR UNITED STATES FEDERAL INCOME TAX PURPOSES AS A
GRANTOR TRUST; OR (II) THE TRUST WOULD BE AN INVESTMENT COMPANY REQUIRED TO
REGISTER UNDER THE INVESTMENT COMPANY ACT OR THE TRANSFEREE WOULD BECOME AN
INVESTMENT COMPANY REQUIRED TO REGISTER UNDER THE INVESTMENT COMPANY ACT.
CERTIFICATE NUMBER: NUMBER OF COMMON SECURITIES:
Certificate Evidencing Common Securities of
GENTIVA TRUST
(Liquidation Amount $50 per Common Security)
Gentiva Trust, a statutory business trust created under the laws of the
State of Delaware (the "Trust"), hereby certifies that Gentiva Health Services,
Inc. (the "Holder") is the registered owner of common securities of the Trust
representing beneficial ownership interests of the Trust and designated the
Common Securities (Liquidation Amount $50 per Common Security) (the "Common
Securities"). In accordance with Section 5.11 of the Trust Agreement (as defined
below) the Common Securities are not transferable except in limited
circumstances and any attempted transfer, except in such limited circumstances,
shall be void. The designations, rights, privileges, restrictions, preferences
and other terms and provisions of the Common Securities are set forth in, and
this certificate and the Common Securities represented hereby are issued and
shall in all respects be subject to the terms and provisions of, the Trust
Agreement of the Trust dated as of March 9, 2000, as the same may be amended
from time to time (the "Trust Agreement") including the designation of the terms
of the Common Securities as set forth therein. The Trust will furnish a copy of
the Trust Agree-
B-1
<PAGE>
ment to the Holder without charge upon written request to the
Trust at its principal place of business or registered office.
Upon receipt of this certificate, the Holder is bound by the Trust
Agreement and is entitled to the benefits thereunder and by acceptance hereof
agrees to the provisions of (i) the Guarantee Agreement entered into by Gentiva
Health Services, Inc., a Delaware corporation ("Gentiva"), and Wilmington Trust
Company, as guarantee trustee, dated as of March 15, 2000, and (ii) the
Indenture entered into by Gentiva and Wilmington Trust Company, as trustee,
dated as of March 15, 2000.
This Certificate shall be construed in accordance with and governed by the
laws of the State of Delaware (without regard to conflict of laws principles).
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has
executed this certificate on this day of .
GENTIVA TRUST
By:
--------------------------------------------
Name:
Title:
B-2
<PAGE>
EXHIBIT C
FORM OF PREFERRED SECURITY
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE OR
OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, RESOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER HEREOF MAY NOT ENGAGE IN HEDGING TRANSACTIONS IN THIS SECURITY
UNLESS SUCH TRANSACTIONS ARE IN COMPLIANCE WITH THE SECURITIES ACT. THE HOLDER
OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, RESELL OR OTHERWISE
TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION
DATE") WHICH IS THE LATER OF (X) TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE
DATE HEREOF AND THE LAST DATE ON WHICH GENTIVA HEALTH SERVICES, INC. (THE
"COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR
ANY PREDECESSOR OF SUCH SECURITY), AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE
REQUIRED BY APPLICABLE LAW ONLY (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE
144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS
AND SALES THAT OCCUR OUTSIDE THE UNITED STATES IN ACCORDANCE WITH REGULATION S
UNDER THE SECURITIES ACT, OR (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S
AND THE TRANSFER AGENT'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND
WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE. ANY TRANSFER OF THIS SECURITY IS REQUIRED TO BE MADE IN
COMPLIANCE WITH
C-1
<PAGE>
THE APPLICABLE STATE SECURITIES LAWS AND APPLICABLE SECURITIES LAWS OF OTHER
JURISDICTIONS.
EACH PURCHASER OR HOLDER OF THE SECURITY EVIDENCED HEREBY WILL BE DEEMED TO
HAVE REPRESENTED EITHER THAT IT IS NOT AN EMPLOYEE BENEFIT PLAN SUBJECT TO PART
4 OF SUBTITLE B OF TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED, ("ERISA") OR A PLAN DESCRIBED IN SECTION 4975 OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE") OR AN ENTITY WHOSE UNDERLYING
ASSETS INCLUDE THE ASSETS OF ANY SUCH ERISA PLAN OR OTHER PLAN.
In the case of a purchaser of Preferred Securities in the State of Georgia,
for a period of one year from the Closing Date, the Preferred Securities shall
contain the following additional legend:
THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH
(13) OF CODE SECTION 10-5-9 OF THE `GEORGIA SECURITIES ACT OF 1973', AND
MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT
UNDER SUCH ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT.
THE HOLDER OF THIS SECURITY AGREES THAT IT WILL DELIVER TO EACH PERSON
TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND.
C-2
<PAGE>
CERTIFICATE NUMBER:
NUMBER OF PREFERRED SECURITIES:
Certificate Evidencing Preferred Securities
of
GENTIVA TRUST
10% Shared Preference Redeemable Preferred Securities,
(Liquidation Amount $50 per Preferred Security)
Gentiva Trust, a statutory business trust created under the laws of the
State of Delaware (the "Trust"), hereby certifies that (the "Holder") is the
registered owner of preferred securities of the Trust representing an undivided
beneficial ownership interest in the assets of the Trust and designated the
Gentiva Trust Shared Preference Redeemable Securities (SPuRSSM) (Liquidation
Amount $50 per Preferred Security) (the "Preferred Securities"). The Preferred
Securities are transferable on the books and records of the Trust, in person by
a duly authorized attorney, upon surrender of this certificate duly endorsed and
in proper form for transfer as provided in Section 5.4 of the Trust Agreement
(as defined below). The designations, rights, privileges, restrictions,
preferences and other terms and provisions of the Preferred Securities are set
forth in, and this certificate and the Preferred Securities represented hereby
are issued and shall in all respects be subject to, the terms and provisions of,
the Trust Agreement of the Trust dated as of March 9, 2000, as the same may be
amended from time to time (the "Trust Agreement") including the designation of
the terms of Preferred Securities as set forth herein. The Holder is entitled to
the benefits of the Guarantee Agreement entered into by Gentiva Health Services,
Inc., a Delaware corporation ("Gentiva"), and Wilmington Trust Company
("Preferred Guaranty Trustee"), as guarantee trustee, dated as of March 15, 2000
(the "Guarantee"). The Trust will furnish a copy of the Trust Agreement and the
Guarantee to the Holder without charge upon written request to the Trust at its
principal place of business or registered office.
Upon receipt of this certificate, the Holder is bound by the Trust
Agreement and is entitled to the benefits thereunder and by acceptance hereof
agrees to the provisions of (i) the Guarantee, and (ii) the Indenture entered
into by Gentiva and Wilmington Trust Company, as trustee, dated as of March 15,
2000.
This Certificate shall be construed in accordance with and governed by the
laws of the State of Delaware (without regard to conflict of laws principles).
C-3
<PAGE>
IN WITNESS WHEREOF, one of the Administrative Trustees of the Trust has
executed this certificate.
Dated:
GENTIVA TRUST
By:
---------------------------------------
Name:
Title:
C-4
<PAGE>
This is one of the Securities referred to in the within mentioned Trust
Agreement.
Date of Authentication:
Wilmington Trust Company,
as Property Trustee
By:
--------------------------------------------
Name:
Title:
C-5
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Trust
Security to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
agent to transfer this Preferred Securities Certificate on the books of the
Trust. The agent may substitute another to act for him or her.
Date: _______________ Signature:______________________________
(Sign exactly as your name appears on the
other side of this Trust Security
certificate)
Signature Guarantee*:
*(Signature must be guaranteed by an
"eligible guarantor institution" that is,
a bank, stockbroker, savings and loan
association or credit union meeting the
requirements of the Registrar, which
requirements include membership or
participation in the Securities Transfer
Agents Medallion Program ("STAMP") or
such other "signature guarantee program"
as may be determined by the Registrar in
addition to, or in substitution for,
STAMP, all in accordance with the
Securities Exchange Act of 1934, as
amended)
C-6
<PAGE>
CONVERSION REQUEST
To: Wilmington Trust Company, as Conversion Agent under the Trust Agreement of
Gentiva Trust
The undersigned owner of these Preferred Securities hereby irrevocably
exercises the option to convert these Preferred Securities, or the portion below
designated, into common stock of GENTIVA HEALTH SERVICES, INC., par value $.10
per share (the "Common Stock"), in accordance with the terms of the Trust
Agreement. Pursuant to the aforementioned exercise of the option to convert
these Preferred Securities, the undersigned hereby directs the Conversion Agent
(as that term is defined in the Trust Agreement) to (i) exchange such Preferred
Securities for a portion of the Debentures (as that term is defined in the Trust
Agreement) held by the Trust at the Conversion Price specified in the Trust
Agreement, and (ii) immediately convert such Debentures on behalf of the
undersigned, into Common Stock at the Conversion Price specified in the Trust
Agreement. The number of shares issuable upon conversion of Preferred Securities
shall be determined by (i) multiplying the number of Preferred Securities to be
converted by $50 and (ii) dividing such amount by the Conversion Price in effect
on the Conversion Date.
The undersigned also hereby directs the Conversion Agent that the shares
issuable and deliverable upon conversion, together with any check in payment for
fractional shares, be issued in the name of and delivered to the undersigned,
unless a different name has been indicated in the assignment below. If shares
are to be issued in the name of a person other than the undersigned, the
undersigned will pay all transfer taxes payable with respect thereto.
If the undersigned is a BHCA Person (as that term is defined in the Trust
Agreement, the undersigned certifies that it is in compliance with Section
4.3(a) of the Trust Agreement.
Date: ___________________
Number of Preferred Securities to be converted: _____________
C-7
<PAGE>
If a name or names other than the undersigned, please indicate in the spaces
below the name or names in which the shares of Common Stock are to be issued,
along with the address or addresses of such person or persons.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Sign exactly as your name appears on the other side of this Trust Security
certificate) (for conversion of definitive Preferred Securities only)
Please Print or Typewrite Name and Address, Including Zip Code, and Social
Security or Other Identifying Number.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature Guarantee*:___________________________________________________________
*(Signature must be guaranteed by an
"eligible guarantor institution" that is,
a bank, stockbroker, savings and loan
association or credit union meeting the
requirements of the Registrar, which
requirements include membership or
participation in the Securities Transfer
Agents Medallion Program ("STAMP") or
such other "signature guarantee program"
as may be determined by the Registrar in
addition to, or in substitution for,
STAMP, all in accordance with the
Securities Exchange Act of 1934, as
amended)
C-8
<PAGE>
CERTIFICATE FOR EXCHANGE OR TRANSFER
Re: 10% Shared Preference Redeemable Securities ("SPuRS" or "Preferred
Securities)
This Certificate relates to _________ Preferred Securities held by
_________ (the "Transferor").
The Transferor has requested the Trustee by written order to exchange or
register the transfer of a Preferred Security or Preferred Securities.
In connection with such request and in respect of each such security, the
Transferor does hereby certify to the Depositor and the Trustee that Transferor
is familiar with the Trust Agreement relating to the above captioned Preferred
Securities and, as provided in Section 5.4 and Section 5.5 of such Trust
Agreement, the transfer of this Preferred Security does not require registration
under the Securities Act (as defined below) because:
[ ] Such Preferred Security is being acquired for the Transferor's own
account, without transfer.
[ ] Such Preferred Security is being transferred pursuant to an effective
registration statement under the Securities Act.
[ ] Such Preferred Security is being transferred to a "qualified
institutional buyer" (as defined in Rule 144A under the Securities Act of 1933,
as amended (the "Securities Act")) in reliance on Rule 144A.
[ ] Such Preferred Security is being transferred in reliance on and in
compliance with an exemption from the registration requirements of the
Securities Act pursuant to Regulation S, Rule 144 or otherwise (other than
pursuant to Rule 144A) under the Securities Act. An opinion of counsel to the
effect that such transfer does not require registration under the Securities Act
accompanies this Certificate.
If this certificate is being delivered in connection with a transfer or
exchange of Preferred Securities held by a BHCA Person (as that term is defined
in the Trust Agreement), such BHCA Person certifies that this transfer or
exchange complies with Section 4.3(a) of the Trust Agreement.
C-9
<PAGE>
You are entitled to rely upon this certificate and you are irrevocably
authorized to produce this certificate or a copy hereof to any interested party
in any administrative or legal proceeding or official inquiry with respect to
the matters covered hereby.
____________________________________
[INSERT NAME OF TRANSFEROR]
By:_________________________________
Date:
C-10
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have Preferred Securities represented by this certificate
purchased by the Depositor pursuant to Article X of the Trust Agreement, check
the Box: [ ]
If you wish to have a portion of the Preferred Securities represented by
this certificate purchased by the Depositor pursuant to Article X of the Trust
Agreement, state the number of Preferred Securities you wish to have purchased:
_____________
Date: ___________________
Your Signature(s):
(Sign exactly as your name appears on the face of this Security)
Tax Identification No.: _____________________
Signature Guarantee*:__________________________________________________________
*(Signature must be guaranteed by an
"eligible guarantor institution" that is,
a bank, stockbroker, savings and loan
association or credit union meeting the
requirements of the Registrar, which
requirements include membership or
participation in the Securities Transfer
Agents Medallion Program ("STAMP") or
such other "signature guarantee program"
as may be determined by the Registrar in
addition to, or in substitution for,
STAMP, all in accordance with the
Securities Exchange Act of 1934, as
amended)
C-11
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE TO BE DELIVERED
UPON EXCHANGE OR REGISTRATION OF TRANSFER
OF PREFERRED SECURITIES
CERTIFICATE FOR EXCHANGE OR TRANSFER
Re: 10.0% Shared Preference Redeemable Securities ("SpuRS" or "Preferred
Securities)
This Certificate relates to _________ Preferred Securities held by
_________ (the "Transferor").
The Transferor has requested the Trustee by written order to exchange or
register the transfer of a Preferred Security or Preferred Securities.
In connection with such request and in respect of each such security, the
Transferor does hereby certify to the Depositor and the Trustee that Transferor
is familiar with the Trust Agreement relating to the above captioned Preferred
Securities and, as provided in Section 5.4 and Section 5.5 of such Trust
Agreement, the transfer of this Preferred Security does not require registration
under the Securities Act (as defined below) because:
/ / Such Preferred Security is being acquired for the Transferor's own
account, without transfer.
/ / Such Preferred Security is being transferred pursuant to an
effective registration statement under the Securities Act.
/ / Such Preferred Security is being transferred to a "qualified
institutional buyer" (as defined in Rule 144A under the Securities Act of
1933, as amended (the "Securities Act")) in reliance on Rule 144A.
/ / Such Preferred Security is being transferred in reliance on and in
compliance with an exemption from the registration requirements of the
Securities Act pursuant to Regulation S, Rule 144 or otherwise (other than
pursuant to Rule 144A) under the Securities Act. An opinion of counsel to the
effect that such transfer does not require registration under the Securities Act
accompanies this Certificate.
If this certificate is being delivered in connection with a transfer or
exchange of Preferred Securities held by a BHCA Person (as that term is defined
in the Trust Agree-
D-1
<PAGE>
ment), such BHCA Person certifies that this transfer or exchange complies with
Section 4.3(a) of the Trust Agreement.
You are entitled to rely upon this certificate and you are irrevocably
authorized to produce this certificate or a copy hereof to any interested party
in any administrative or legal proceeding or official inquiry with respect to
the matters covered hereby.
- --------------------------------------------------------------------------------
[INSERT NAME OF TRANSFEROR]
By:
Date: __________________________
D-2
<PAGE>
EXHIBIT E
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have Preferred Securities represented by this certificate
purchased by the Depositor pursuant to Article X of the Trust Agreement, check
the Box: / /
If you wish to have a portion of the Preferred Securities represented by
this certificate purchased by the Depositor pursuant to Article X of the Trust
Agreement, state the number of Preferred Securities you wish to have purchased:
- --------------------
Date: ___________________ Your Signature(s):_________________________
Tax Identification No.:
(Sign exactly as your name appears on the face of this Security)
Signature Guarantee:_______________________________________________
E-1
GENTIVA HEALTH SERVICES, INC.
to
WILMINGTON TRUST COMPANY,
as Trustee
INDENTURE
Dated as of March 15, 2000
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.1. Definitions......................................................2
SECTION 1.2. Compliance Certificate and Opinions.............................10
SECTION 1.3. Forms of Documents Delivered to Trustee.........................10
SECTION 1.4. Acts of Holders.................................................11
SECTION 1.5. Notices, etc. to Trustee and Company............................13
SECTION 1.6. Notice to Holders; Waiver.......................................14
SECTION 1.7. Conflict with Trust Indenture Act...............................14
SECTION 1.8. Effect of Headings and Table of Contents........................14
SECTION 1.9. Successors and Assigns..........................................14
SECTION 1.10. Separability Clause.............................................14
SECTION 1.11. Benefits of Indenture...........................................15
SECTION 1.12. Governing Law...................................................15
SECTION 1.13. Non-Business Days...............................................15
ARTICLE II
DEBENTURE FORMS
SECTION 2.1. Forms Generally.................................................15
SECTION 2.2. Form of Face of Debenture.......................................16
SECTION 2.3. Form of Reverse Debenture.......................................21
SECTION 2.4. Form of Trustee's Certificate of Authentication.................25
SECTION 2.5. Form of Conversion Notice.......................................25
ARTICLE III
DEBENTURES
SECTION 3.1. Title and Terms; Paying Agent...................................26
SECTION 3.2. Denominations...................................................27
SECTION 3.3. Execution, Authentication, Delivery and Dating..................27
SECTION 3.4. Temporary Debentures............................................28
SECTION 3.5. Registration, Transfer and Exchange.............................29
SECTION 3.6. Mutilated, Destroyed, Lost and Stolen Debentures................30
SECTION 3.7. Payment of Interest; Interest Rights Preserved..................31
SECTION 3.8. Persons Deemed Owners...........................................32
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<PAGE>
Page
SECTION 3.9. Cancellation....................................................33
SECTION 3.10. Computation of Interest.........................................33
SECTION 3.11. Deferrals of Interest Payment Dates.............................33
SECTION 3.12. Right of Set-Off................................................34
SECTION 3.13. Agreed Tax Treatment............................................35
SECTION 3.14. Shortening of Stated Maturity...................................35
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1. Satisfaction and Discharge of Indenture.........................35
SECTION 4.2. Application of Trust Money......................................36
ARTICLE V
REMEDIES
SECTION 5.1. Events of Default...............................................37
SECTION 5.2. Acceleration of Maturity; Rescission and Annulment..............38
SECTION 5.3. Collection of Indebtedness and Suits for Enforcement
by Trustee....................................................39
SECTION 5.4. Trustee May File Proofs of Claim................................40
SECTION 5.5. Trustee May Enforce Claims Without Possession of Debentures.....41
SECTION 5.6. Application of Money Collected..................................41
SECTION 5.7. Limitation on Suits.............................................41
SECTION 5.8. Unconditional Right of Holders to Receive Principal,
Premium and Interest; Direct Action by Holders
of Preferred Securities.......................................42
SECTION 5.9. Restoration of Rights and Remedies..............................43
SECTION 5.10. Rights and Remedies Cumulative..................................43
SECTION 5.11. Delay or Omission Not Waiver....................................43
SECTION 5.12. Control by Holders..............................................43
SECTION 5.13. Waiver of Past Defaults.........................................44
SECTION 5.14. Undertaking for Costs...........................................44
ARTICLE VI
TRUSTEE
SECTION 6.1. Certain Duties and Responsibilities.............................45
SECTION 6.2. Notice of Defaults..............................................46
SECTION 6.3. Certain Rights of Trustee.......................................47
SECTION 6.4. Not Responsible for Recitals or Issuance of Debentures..........48
SECTION 6.5. May Hold Debentures.............................................48
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<PAGE>
Page
SECTION 6.6. Money Held in Trust.............................................48
SECTION 6.7. Compensation and Reimbursement..................................48
SECTION 6.8. Disqualification; Conflicting Interests.........................49
SECTION 6.9. Corporate Trustee Required; Eligibility.........................49
SECTION 6.10. Resignation and Removal; Appointment of Successor...............50
SECTION 6.11. Acceptance of Appointment by Successor..........................51
SECTION 6.12. Merger, Conversion, Consolidation or Succession to Business.....51
SECTION 6.13. Preferential Collection of Claims Against Company...............52
SECTION 6.14. Appointment of Authenticating Agent.............................52
ARTICLE VII
HOLDER'S LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 7.1. Company to Furnish Trustee Names and Addresses of Holders.......54
SECTION 7.2. Preservation of Information, Communications to Holders..........54
SECTION 7.3. Reports by Trustee..............................................54
SECTION 7.4. Reports by Company..............................................55
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 8.1. Company May Consolidate, etc., Only on Certain Terms............55
SECTION 8.2. Successor Corporation Substituted...............................56
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.1. Supplemental Indentures without Consent of Holders..............57
SECTION 9.2. Supplemental Indentures with Consent of Holders.................58
SECTION 9.3. Execution of Supplemental Indentures............................59
SECTION 9.4. Effect of Supplemental Indentures...............................59
SECTION 9.5. Conformity with Trust Indenture Act.............................60
SECTION 9.6. Reference in Debentures to Supplemental Indentures..............60
ARTICLE X
COVENANTS
SECTION 10.1. Payment of Principal, Premium and Interest......................60
SECTION 10.2. Maintenance of Office or Agency.................................60
SECTION 10.3. Money for Debenture Payments to be Held in Trust................61
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<PAGE>
Page
SECTION 10.4. Statement as to Compliance......................................62
SECTION 10.5. Waiver of Certain Covenants.....................................62
SECTION 10.6. Payment of Trust Costs and Expenses.............................63
SECTION 10.7. Additional Covenants............................................63
ARTICLE XI
REDEMPTION OF SECURITIES AT THE OPTION OF THE COMPANY
SECTION 11.1. Applicability of Article........................................64
SECTION 11.2. Election to Redeem; Notice to Trustee...........................64
SECTION 11.3. Selection of Debentures to be Redeemed..........................64
SECTION 11.4. Notice of Redemption............................................65
SECTION 11.5. Deposit of Redemption Price.....................................66
SECTION 11.6. Payment of Debentures Called for Redemption.....................66
SECTION 11.7. Right of Redemption of Debentures...............................67
ARTICLE XII
MANDATORY REDEMPTION
SECTION 12.1. Mandatory Redemption............................................67
SECTION 12.2. Notice of Redemption............................................67
SECTION 12.3. Deposit of Repurchase Price.....................................67
SECTION 12.4. Right to Require Repurchase of Debentures.......................68
SECTION 12.5. Definitions.....................................................68
ARTICLE XIII
CONVERSION OF SECURITIES
SECTION 13.1. Conversion Rights...............................................69
SECTION 13.2. Conversion Procedures...........................................70
SECTION 13.3. Conversion Price Adjustments....................................72
SECTION 13.4. Reclassification, Consolidation, Merger or Sale of Assets.......76
SECTION 13.5. Notice of Adjustments of Conversion Price.......................77
SECTION 13.6. Prior Notice of Certain Events..................................77
SECTION 13.7. Certain Defined Terms...........................................78
SECTION 13.8. Dividend or Interest Reinvestment Plans.........................79
SECTION 13.9. Certain Additional Rights.......................................79
SECTION 13.10.Trustee Not Responsible for Determining Conversion
Price or Adjustments..........................................80
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<PAGE>
Page
ARTICLE XIV
SUBORDINATION OF SECURITIES
SECTION 14.1. Debentures Subordinate to Senior Indebtedness...................80
SECTION 14.2. Payment Over of Proceeds Upon Dissolution, etc..................80
SECTION 14.3. Prior Payment to Senior Indebtedness Upon Acceleration
of Debentures.................................................81
SECTION 14.4. No Payment when Senior Indebtedness in Default..................82
SECTION 14.5. Payment Permitted if No Default.................................82
SECTION 14.6. Subrogation to Rights of Holders of Senior Indebtedness.........83
SECTION 14.7. Provisions Solely to Define Relative Rights.....................83
SECTION 14.8. Trustee to Effectuate Subordination.............................84
SECTION 14.9. No Waiver of Subordination Provisions...........................84
SECTION 14.10.Notice to Trustee...............................................84
SECTION 14.11.Reliance on Judicial Order or Certificate of
Liquidating Agent.............................................85
SECTION 14.12.Trustee Not Fiduciary for Holders of Senior Indebtedness........85
SECTION 14.13.Rights of Trustee as Holder of Senior Indebtedness..............86
SECTION 14.14.Article Applicable to Paying Agents.............................86
SECTION 14.15.Certain Conversions or Exchanges Deemed Payment.................86
SECTION 14.16.Trust Funds Not Subordinated....................................86
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<PAGE>
Reconciliation and tie between the Trust Indenture Act of 1939 (including
cross-references to provisions of Sections 310 to and including 317 which,
pursuant to Section 318(c) of the Trust Indenture Act of 1939, as amended by the
Trust Reform Act of 1990, are a part of and govern the Indenture whether or not
physically contained therein) and the Indenture, dated as of March 15, 2000.
Trust Indenture Act Section Indenture Section
- --------------------------- -----------------
Section 310 (a)(1), (2) and(5)............. 6.9
(a)(3)......................... Not Applicable
(a)(4)......................... Not Applicable
(b)............................ 6.8, 6.10
(c)............................ Not Applicable
Section 311 (a)............................ 6.13
(b)............................ 6.13
Section 312 (a)............................ 7.1, 7.2(a)
(b)............................ 7.2(b)
(c)............................ 7.2(c)
Section 313 (a)............................ 7.3(a)
(b)............................ 7.3(b)
(c)............................ 7.3(a)
(d)............................ 7.3(b)
Section 314 (a)(1), (2) and(3)............. 7.4
(a)(4)......................... 10.4
(b)............................ Not Applicable
(c)(1)......................... 1.2
(c)(2)......................... 1.2
(c)(3)......................... Not Applicable
(d)............................ Not Applicable
(e)............................ 1.2
(f)............................ Not Applicable
Section 315 (a)............................ 6.1(a)
(b)............................ 6.2
(c)............................ 6.1(b)
(d)............................ 6.1(c)
(d)(1)......................... 6.1(a)(1) and 6.1(a)(2)
(d)(2)......................... 6.1(c)(2)
(d)(3)......................... 6.1(c)(3)
(e)............................ 5.14
Section 316 (a)(1)(A)................... 5.12
(a)(1)(B)................... 5.13
(a)(2)...................... Not Applicable
(b)......................... 5.8
(c)......................... 1.4(f)
Section 317 (a)(1)...................... 5.3
(a)(2)...................... 5.4
(b)......................... 10.3
Section 318 (a)......................... 1.7
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Junior Subordinated Indenture.
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<PAGE>
INDENTURE, dated as of March 15, 2000 between GENTIVA HEALTH SERVICES,
INC., a Delaware corporation (the "Company") having its principal office at 175
Broad Hollow Road, Melville, New York 11747, and Wilmington Trust Company, a
Delaware corporation, as Trustee (the "Trustee").
RECITALS
A. For its lawful corporate purposes, the Company has duly authorized the
execution and delivery of this Indenture to provide for the issuance of
securities to be known as its 10% Convertible Subordinated Debentures due 2005
(the "Debentures"), the form and substance of such Debentures and the terms,
provisions and conditions thereof to be set forth as provided in this Indenture.
B. Gentiva Trust, a Delaware statutory business trust (the "Trust"), has
offered to the investors $20,000,000 aggregate liquidation amount of preferred
interests in such Trust (the "Preferred Securities") and proposes to invest the
proceeds from such offering, together with the proceeds of the issuance and sale
by the Trust to the Company of $618,600 aggregate liquidation amount of common
interests in such Trust (the "Common Securities" and collectively with the
Preferred Securities, the "Trust Securities"), in $20,618,600 aggregate
principal amount of the Debentures.
C. The Company has requested that the Trustee execute and deliver this
Indenture.
D. All requirements necessary to make this Indenture a valid instrument in
accordance with its terms, and to make the Debentures, when executed by the
Company and authenticated and delivered by the Trustee, the valid obligations of
the Company, have been performed, and the execution and delivery of this
Indenture have been duly authorized in all respects.
E. To provide the terms and conditions upon which the Debentures are to be
authenticated, issued and delivered, the Company has duly authorized the
execution of this Indenture.
F. All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
NOW THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the
promises and the purchase of the Debentures by the Holders (as defined herein)
thereof, it is mutually covenanted and agreed, for the equal and proportionate
benefit of all of the Holders of the Debentures, as follows:
<PAGE>
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.1. Definitions.
For all purposes of this Indenture, except as otherwise expressly provided
or unless the context otherwise requires:
(1) The terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(2) All other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) All accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles, and the term "generally accepted accounting principles" with
respect to any computation required or permitted hereunder means such
accounting principles which are generally accepted at the date or time of
such computation; provided that when two or more principles are so
generally accepted, it means that set of principles consistent with those
in use by the Company; and
(4) The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"Act" when used with respect to any Holder has the meaning specified in
Section 1.4.
"Additional Interest" means the interest, if any, that shall accrue on any
interest on the Debentures the payment of which has not been made on the
applicable Interest Payment Date and which shall accrue at the rate of 10.0% per
annum compounded quarterly.
"Additional Taxes" means the sum of any additional taxes, duties and other
governmental charges to which the Trust has become subject from time to time as
a result of a Tax Event.
"Administrative Trustee" means each Person identified as an "Administrative
Trustee" in the Trust Agreement, solely in such Person's capacity as
Administrative Trustee of the Trust under such Trust Agreement and not in such
Person's individual capacity, or any successor administrative trustee appointed
as therein provided.
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"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person; provided, however, the Trust shall not be
deemed to be an Affiliate of the Company. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Authenticating Agent" means any Person authorized by the Trustee pursuant
to Section 6.14 to act on behalf of the Trustee to authenticate Debentures.
"BHCA Person" has the meaning set forth in Section 13.1.
"Board of Directors" means either the board of directors of the Company or
any committee of the board duly authorized to act hereunder.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors, or such committee of the Board of Directors or officers of the
Company to which authority to act on behalf of the Board of Directors has been
delegated, and to be in full force and effect on the date of such certification,
and delivered to the Trustee.
"Business Day" means any day other than (i) a Saturday or Sunday, (ii) a
day on which banking institutions in The City of New York or the State of
Delaware are authorized or required by law or executive order to remain closed.
"Closing Prices" has the meaning specified in Section 13.7(a).
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act, or if at any time after the
execution of this Indenture such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Common Securities" has the meaning specified in the Recitals of this
Indenture.
"Common Stock" means the common stock, par value $.10 per share, of the
Company.
"Company" means the Person named as the "Company" in the first paragraph of
this Indenture until a successor Person shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor Person.
"Company Request" and "Company Order" mean, respectively, the written
request or order signed in the name of the Company by the Chairman of the Board
of Directors,
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its President or a Vice President, and by its Treasurer, an Assistant Treasurer,
its Secretary or an Assistant Secretary of the Company, and delivered to the
Trustee.
"Conversion Agent" means the Person appointed to act on behalf of the
holders of Preferred Securities in effecting the conversion of Preferred
Securities to Debentures and Debentures to Common Stock as and in the manner set
forth in the Trust Agreement and this Indenture.
"Conversion Price" has the meaning specified in Section 13.1.
"Conversion Request" means (a) the irrevocable request to be given by a
Holder to the Conversion Agent directing the Conversion Agent to convert the
Holder's Debenture into shares of Common Stock, and (b) the irrevocable request
to be given by a holder of Preferred Securities to the Conversion Agent
directing the Conversion Agent to exchange such Preferred Securities for
Debentures and to convert such Debentures into Common Stock on behalf of such
holder.
"Corporate Trust Office" means the principal office of the Trustee at which
at any particular time its corporate trust business shall be administered, which
at the date hereof is 1100 N. Market Street, Wilmington, Delaware 19801
Attention: Corporate Trust Administration.
"Corporation" includes a corporation, association, company, joint-stock
company or business trust.
"Current Market Price" has the meaning specified in Section 13.3(f).
"Debentures" or "Debenture" has the meaning specified in the Recitals to
this Indenture.
"Debenture Register" and "Debenture Registrar" have the respective meanings
specified in Section 3.5.
"Defaulted Interest" has the meaning specified in Section 3.7.
"Distributions," with respect to the Trust Securities, means amounts
payable in respect of such Trust Securities as provided in the Trust Agreement
and referred to therein as "Distributions."
"Dollar" means the currency of the United States of America that, as at the
time of payment, is legal tender for the payment of public and private debts.
"Event of Default" has the meaning specified in Article V.
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"Exchange Act" means the Securities Exchange Act of 1934 and any statute
successor thereto, in each case as amended from time to time.
"Expiration Date" has the meaning specified in Section 1.4(h).
"Extension Period" has the meaning specified in Section 2.2.
"Guarantee," with respect to the Trust Securities, means the guarantee by
the Company of Distributions on such Trust Securities to the extent provided in
the Guarantee Agreement.
"Guarantee Agreement," with respect to the Trust Securities, means the
Preferred Securities Guarantee Agreement, dated as of March 15, 2000, between
the Company and Wilmington Trust Company, as guarantee trustee, as amended from
time to time.
"Holder" means a Person in whose name a Debenture is registered in the
Register.
"Indenture" means this instrument as originally executed or as it may from
time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Debentures.
"Junior Subordinated Payment" has the meaning specified in Section 14.2.
"Like Amount" means with respect to a redemption of Debentures pursuant to
Article XII in connection with a Change of Control, Debentures having a
principal amount equal to the Liquidation Amount of Trust Securities to be
redeemed in accordance with Article X of the Trust Agreement.
"Liquidation Amount" means the stated amount of $50 per Trust Security.
"Maturity" when used with respect to the Debentures means the date on which
the principal of the Debentures becomes due and payable as therein or herein
provided, whether at the Stated Maturity or by declaration of acceleration, call
for redemption, in connection with a Change of Control or otherwise.
"Notice of Default" means a written notice of the kind specified in Section
6.2.
"Officers' Certificate" means a certificate signed by the Chairman of the
Board of Directors, the President or a Vice President, and by the Treasurer, an
Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company and
delivered to the Trustee.
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"Opinion of Counsel" means a written opinion of counsel, who may be counsel
for the Company, and who shall be acceptable to the Trustee.
"Original Issue Date" means March 15, 2000.
"Outstanding" means, as of the date of determination, all Debentures
theretofore authenticated and delivered under this Indenture, except:
(i) Debentures theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(ii) Debentures for whose payment or redemption price money in the
necessary amount has been theretofore deposited with the Trustee or any
Paying Agent in trust for the Holders of such Debentures; and (iii)
Debentures in substitution for or in lieu of which other Debentures have
been authenticated and delivered or which have been paid pursuant to
Section 3.6, unless proof satisfactory to the Trustee is presented that any
such Debentures are held by Holders in whose hands such Debentures are
valid, binding and legal obligations of the Company. Debentures so owned
which have been pledged in good faith may be regarded as Outstanding if the
pledgee establishes to the satisfaction of the Trustee the pledgee's right
so to act with respect to such Debentures and that the pledgee is not the
Company or any other obligor upon the Debentures or any Affiliate of the
Company or such other obligor. Upon the written request of the Trustee, the
Company promptly shall furnish to the Trustee an Officers' Certificate
listing and identifying all Debentures, if any, known by the Company to be
owned or held by or for the account of the Company or any other obligor on
the Debentures or any Affiliate of the Company or such obligor, and,
subject to the provisions of Section 6.1, the Trustee shall be entitled to
accept such Officers' Certificate as conclusive evidence of the facts
therein set forth and of the fact that all Debentures not listed therein
are Outstanding for the purpose of any such determination.
"Paying Agent" means the Trustee or any Person authorized by the Company to
pay the principal of, premium, if any, or interest on the Debentures on behalf
of the Company.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Place of Payment" means, with respect to the Debentures, the place or
places where the principal of, premium, if any, and interest on the Debentures
are payable pursuant to Section 3.11.
"Predecessor Debenture" of any particular Debenture means every previous
Debenture evidencing all or a portion of the same debt as that evidenced by such
particular Debenture; and, for the purposes of this definition, any Debenture
authenticated and delivered
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under Section 3.6 in lieu of a lost, destroyed or stolen Debenture shall be
deemed to evidence the same debt as the lost, destroyed or stolen Debenture.
"Preferred Securities" has the meaning specified in the Recitals of this
Indenture.
"Proceeding" has the meaning specified in Section 14.2.
"Property Trustee" means the commercial bank or trust company identified as
the "Property Trustee" in the Trust Agreement, solely in its capacity as
Property Trustee of such Trust under such Trust Agreement and not in its
individual capacity, or its successor in interest in such capacity, or any
successor property trustee appointed as therein provided.
"Purchased Shares" has the meaning specified in Section 13.3(e).
"Redemption Date," when used with respect to any Debenture to be redeemed,
means the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price," when used with respect to any Debenture to be redeemed,
means the price at which it is to be redeemed pursuant to this Indenture.
"Regular Record Date" for the interest payable on any Interest Payment Date
means the date which is 15 days next preceding such Interest Payment Date
(whether or not a Business Day).
"Responsible Officer" when used with respect to the Trustee means any
officer of the Trustee assigned by the Trustee from time to time to administer
its corporate trust matters.
"Rights Plan" means a plan of the Company, if any, providing for the
issuance by the Company to all holders of Common Stock of rights entitling the
holders thereof to subscribe for or purchase shares of Common Stock or any class
or series of preferred stock of the Company, which rights (i) are deemed to be
transferred with such shares of Common Stock, (ii) are not exercisable and (iii)
are also issued in respect of future issuances of Common Stock, in each case
until the occurrence of a specified event or events.
"SEC Reports" shall have the meaning specified in Section 7.4.
"Senior Indebtedness" means, with respect to the Company, whether
outstanding at the date of execution of this Indenture or thereafter incurred,
created or assumed the (i) principal, premium, if any, and interest (including
any interest accruing after the filing of any bankruptcy or insolvency
proceeding whether or not such interest constitutes an allowable claim in such
proceeding) of (A) indebtedness of such obligor for money borrowed under any
credit agreements, notes, guarantees or similar documents and (B) indebtedness
evidenced by securities, debentures, bonds or other similar instruments issued
by such obligor, (ii) all capi-
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tal lease obligations of such obligor, (iii) all obligations of such obligor
issued or assumed as the deferred purchase price of property, all conditional
sale obligations of such obligor and all obligations of such obligor under any
title retention agreement (but excluding trade accounts payable arising in the
ordinary course of business), (iv) all obligations of such obligor for the
reimbursement on any letter of credit bankers' acceptance, security purchase
facility or similar credit transaction, (v) all obligations of such obligor
(contingent or otherwise) with respect to an interest rate or other swap, cap or
collar agreements, commodity hedge transactions or other similar instruments or
agreements or foreign currency hedge, exchange, purchase or similar instruments
or agreements, (vi) all obligations of the types referred to in clauses (i)
through (v) above of other persons for the payment of which such obligor is
responsible or liable as obligor, guarantor or otherwise and (vii) all
obligations of the types referred to in clauses (i) through (vi) above of other
persons secured by any lien on any property or asset of such obligor (whether or
not such obligation is assumed by such obligor); provided, however, that Senior
Indebtedness shall not include (1) any such indebtedness that is by its terms
expressly subordinated to or pari passu with the Convertible Subordinated
Debentures and (2) any indebtedness between or among the Company and its
Affiliates, including all debt securities and guarantees in respect of those
debt securities, issued to any trust, or a trustee of such trust, partnership or
other entity affiliated with the Company that is a financing vehicle of the
Company (a "financing entity") in connection with the issuance by such financing
entity of preferred securities or other securities that rank pari passu with, or
junior to, the Preferred Securities. Such Senior Indebtedness shall continue to
be Senior Indebtedness and be entitled to the benefits of the subordination
provisions irrespective of any deferrals, renewals, extensions or refundings of,
or amendments, modifications, supplements or waivers of any term of such Senior
Indebtedness.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 3.7.
"Split-off" means the date of the issuance of all Common Stock of the
Company to stockholders of Olsten Corporation ("Olsten") in exchange for their
Olsten stock and separation of Gentiva Health Services, Inc. from its parent
company, Olsten, to become a separate publicly-traded company pursuant to the
separation Agreement dated August 17, 1999 by and among Olsten, Adecco SA and
the Company (formerly known as Aaronco Corp.).
"Stated Maturity" when used with respect to any Debenture or any
installment of principal thereof or interest thereon means the date specified
pursuant to the terms of such Debenture as the date on which the principal of
such Debenture or such installment of interest is due and payable, in the case
of such principal, as such date may be shortened or extended as provided
pursuant to the terms of such Debenture and this Indenture.
"Subsidiary" means a corporation more than 50% of the outstanding voting
stock of which is owned, directly or indirectly, by the Company or by one or
more other Subsidiaries, or by the Company and one or more other Subsidiaries.
For purposes of this defini-
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tion, "voting stock" means stock which ordinarily has voting power for the
election of directors, whether at all times or only so long as no senior class
of stock has such voting power by reason of any contingency.
"Tax Event" means the receipt by the Trust of an Opinion of Counsel (as
defined in the Trust Agreement) experienced in such matters to the effect that,
as a result of any amendment to, or change (including any announced proposed
change) in, the laws (or any regulations thereunder) of the United States or any
political subdivision or taxing authority thereof or therein, or as a result of
any official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
which proposed change, pronouncement or decision is announced on or after the
date of issuance of the Preferred Securities, there is more than an
insubstantial risk that: (i) the Trust is, or will be within 90 days of the date
of such Opinion of Counsel, subject to United States federal income tax with
respect to income received or accrued on the Debentures; (ii) interest payable
by the Company on the Debentures is not, or within 90 days of the date of such
Opinion of Counsel, will not be, deductible by the Company, in whole or in part,
for United States federal income tax purposes; or (iii) such Trust is, or will
be within 90 days of the date of such Opinion of Counsel, subject to more than a
de minimis amount of other taxes, duties or other governmental charges.
"Trading Day" means each Monday, Tuesday, Wednesday, Thursday and Friday,
other than any day on which securities are generally not traded on the
applicable securities exchange or in the applicable securities market.
"Trust" has the meaning specified in the second recital of this Indenture.
"Trust Agreement" means the Trust Agreement dated as of March 9, 2000
between the Company, as depositor, Edward A. Blechschmidt, John J. Collura and
Patricia C. Ma, as Administrative Trustees, Wilmington Trust Company as Delaware
Trustee and as Property Trustee, as amended from time to time.
"Trust Indenture Act" means the Trust Indenture Act of 1939 (15 U.S.C.
ss.ss. 77aaa-77bbb), as amended and as in effect on the date as of this
Indenture, except as provided in Section 9.5.
"Trust Securities" has the meaning specified in the second recital of this
Indenture.
"Trust Securities Repurchase Price" means, with respect to any Trust
Security, the Liquidation Amount of such Trust Security, plus accrued and unpaid
Distributions, if any, to the Repurchase Date, paid by the Trust upon the
repurchase of Trust Securities pursuant to Article X of the Trust Agreement in
connection with the Change of Control.
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"Trustee" means the Person named as the "Trustee" in the first paragraph of
this instrument until a successor Trustee shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Trustee" shall mean or
include such successor Trustee.
"Vice President," when used with respect to the Company means any duly
appointed vice president, whether or not designated by a number or a word or
words added before or after the title "vice president."
SECTION 1.2. Compliance Certificate and Opinions.
Upon any application or request by the Company to the Trustee to take any
action under any provision of this Indenture, the Company will furnish to the
Trustee an Officers' Certificate stating that all conditions precedent
(including covenants, compliance with which constitutes a condition precedent),
if any, provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent (including covenants, compliance with
which constitute a condition precedent), if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than the certificates provided
pursuant to Section 10.5) shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made or caused to be made such examination or investigation as is necessary
to enable him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 1.3. Forms of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or
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covered by the opinion of, only one such Person, or that they be so certified or
covered by only one document, but one such Person may certify or give an opinion
with respect to some matters and one or more other such Persons as to other
matters, and any such Person may certify or give an opinion as to such matters
in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer or counsel knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his or her certificate or
opinion is based are erroneous. Any Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel rendering such Opinion of Counsel knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.4. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given to or taken by Holders
may be embodied in and evidenced by one or more instruments of substantially
similar tenor signed by such Holders in person or by an agent or proxy duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments is or are
delivered to the Trustee, and, where it is hereby expressly required, to the
Company. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the Holders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent or proxy shall be
sufficient for any purpose of this Indenture and (subject to Section 6.1)
conclusive in favor of the Trustee and the Company, if made in the manner
provided in this Section 1.4.
(b) The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by
the certificate of any notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a Person acting in a capacity other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority.
(c) The fact and date of the execution by any Person of any such instrument
or writing, or the authority of the Person executing the same, may also be
proved in any other
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manner which the Trustee deems sufficient and in accordance with such reasonable
rules as the Trustee may determine.
(d) The ownership of Debentures shall be proved by the Debenture Register.
(e) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Debenture shall bind every future Holder of
the same Debenture and the Holder of every Debenture issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Debenture.
(f) The Company may set any day as a record date for the purpose of
determining the Holders of Outstanding Debentures entitled to give, make or take
any request, demand, authorization, direction, notice, consent, waiver or other
action provided or permitted by this Indenture to be given, made or taken by
Holders of Debentures, provided that the Company may not set a record date for,
and the provisions of this paragraph shall not apply with respect to, the giving
or making of any notice, declaration, request or direction referred to in the
next paragraph. If any record date is set pursuant to this paragraph, the
Holders of the relevant Outstanding Debentures on such record date, and no other
Holders, shall be entitled to take the relevant action, whether or not such
Holders remain Holders after such record date, provided that no such action
shall be effective hereunder unless taken on or prior to the applicable
Expiration Date by Holders of the requisite principal amount of the relevant
Outstanding Debentures on such record date. Nothing in this paragraph shall be
construed to prevent the Company from setting a new record date for any action
for which a record date has previously been set pursuant to this paragraph
(whereupon the record date previously set shall automatically and with no action
by any Person be canceled and of no effect), and nothing in this paragraph shall
be construed to render ineffective any action taken by Holders of the requisite
principal amount of the relevant Outstanding Debentures on the date such action
is taken. Promptly after any record date is set pursuant to this paragraph, the
Company, at its own expense, shall cause notice of such record date, the
proposed action by Holders and the applicable Expiration Date to be given to the
Trustee in writing and to each Holder of the relevant Debentures in the manner
set forth in Section 1.6.
(g) The Trustee may set any day as a record date for the purpose of
determining the Holders of Outstanding Debentures entitled to join in the giving
or making of (i) any Notice of Default, (ii) any declaration of acceleration
referred to in Section 5.2, (iii) any request to institute proceedings referred
to in Section 5.7(2) or (iv) any direction referred to in Section 5.12. If any
record date is set pursuant to this paragraph, the Holders of the Outstanding
Debentures on such record date shall be entitled to join in such notice,
declaration, request or direction, whether or not such Holders remain Holders
after such record date, provided that no such action shall be effective
hereunder unless taken on or prior to the applicable Expiration Date by Holders
of the requisite principal amount of the Outstanding Debentures on such record
date. Nothing in this paragraph shall be construed to prevent the Trustee from
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setting a new record date for any action for which a record date has previously
been set pursuant to this paragraph (whereupon the record date previously set
shall automatically and with no action by any Person be canceled and of no
effect), and nothing in this paragraph shall be construed to render ineffective
any action taken by Holders of the requisite principal amount of the Outstanding
Debentures on the date such action is taken. Promptly after any record date is
set pursuant to this paragraph, the Trustee, at the Company's expense, shall
cause notice of such record date, the proposed action by Holders and the
applicable Expiration Date to be given to the Company in writing and to each
Holder of the Debentures in the manner set forth in Section 1.6.
(h) With respect to any record date set pursuant to this Section, the party
hereto which sets such record dates may designate any day as the "Expiration
Date" and from time to time may change the Expiration Date to any earlier or
later day, provided that no such change shall be effective unless notice of the
proposed new Expiration Date is given to the other party hereto in writing, and
to each Holder of the Outstanding Debentures in the manner set forth in Section
10.6 on or prior to the existing Expiration Date. If an Expiration Date is not
designated with respect to any record date set pursuant to this Section 1.4, the
party hereto which set such record date shall be deemed to have initially
designated the 180th day after such record date as the Expiration Date with
respect thereto, subject to its right to change the Expiration Date as provided
in this Section 1.4(h). Notwithstanding the foregoing, no Expiration Date shall
be later than the 180th day after the applicable record date.
(i) Without limiting the foregoing, a Holder entitled hereunder to take any
action hereunder with regard to any Debenture may do so with regard to all or
any part of the principal amount of such Debenture or by one or more duly
appointed agents each of which may do so pursuant to such appointment with
regard to all or any part of such principal amount.
SECTION 1.5. Notices, etc. to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver or
Act of Holders or other document provided or permitted by this Indenture to be
made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder, any holder of Preferred Securities or
the Company shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Trustee at its Corporate Trust
Office, or
(2) the Company by the Trustee, any Holder or any holder of Preferred
Securities shall be sufficient for every purpose hereunder (except as
otherwise provided in Section 5.1) if in writing and mailed, first class,
postage prepaid, to the Company addressed to it at the address of its
principal office specified in the first paragraph of this instrument or at
any other address previously furnished in writing to the Trustee by the
Company.
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SECTION 1.6. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first class postage prepaid, to each Holder affected
by such event, at the address of such Holder as it appears in the Debenture
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. In any case where notice to
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Where this Indenture
provides for notice in any manner, such notice may be waived in writing by the
Person entitled to receive such notice, either before or after the event, and
such waiver shall be the equivalent of such notice. Waivers of notice by Holders
shall be filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver.
SECTION 1.7. Conflict with Trust Indenture Act.
(a) This Indenture shall be subject to the provisions of the Trust
Indenture Act whether or not such provisions are required or deemed to be part
of this Indenture and shall, to the extent applicable, be governed by such
provisions.
(b) If any provision hereof limits, qualifies or conflicts with another
provision hereof which is or would be required or deemed to be included in this
Indenture by any of the provisions of the Trust Indenture Act, such required or
deemed provision shall control. If any provision of this Indenture modifies or
excludes any provision of the Trust Indenture Act which may be so modified or
excluded, the latter provision shall be deemed to apply to this Indenture as so
modified or excluded, as the case may be.
SECTION 1.8. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 1.9. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall bind
its successors and assigns, whether so expressed or not.
SECTION 1.10. Separability Clause.
In case any provision of this Indenture or in the Debentures shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
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SECTION 1.11. Benefits of Indenture.
Nothing in this Indenture or in the Debentures, express or implied, shall
give to any Person, other than the parties hereto and their successors and
assigns, the holders of Senior Indebtedness, the Holders of the Debentures and,
to the extent expressly provided in Sections 5.2, 5.8, 5.9, 5.11, 5.13, 9.1 and
9.2, the holders of Preferred Securities, any benefit or any legal or equitable
right, remedy or claim under this Indenture.
SECTION 1.12. Governing Law.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS
OF LAW PRINCIPLES THEREOF.
SECTION 1.13. Non-Business Days.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Debenture shall not be a Business Day, then (notwithstanding any
other provision of this Indenture or the Debentures) payment of principal of,
premium, if any, and interest thereon need not be made on such date, but may be
made on the next succeeding Business Day (and no interest shall accrue for the
period from and after such Interest Payment Date, Redemption Date or Stated
Maturity, as the case may be, until such next succeeding Business Day) except
that, if such Business Day is in the next succeeding calendar year, such payment
shall be made on the immediately preceding Business Day (in each case with the
same force and effect as if made on the Interest Payment Date or Redemption Date
or at the Stated Maturity).
ARTICLE II
DEBENTURE forms
SECTION 2.1. Forms Generally.
The Debentures and the Trustee's certificate of authentication shall be in
substantially the forms set forth in this Article II, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may be
required to comply with applicable tax laws or the rules of any securities
exchange or automated quotation system on which the Debentures may be listed or
traded or as may, consistently herewith, be determined by the officers executing
such Debentures, as evidenced by their execution of the Debentures.
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The definitive Debentures shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods, if required by any
securities exchange or automated quotation system on which the Debentures may be
listed or traded, on a steel engraved border or steel engraved borders or may be
produced in any other manner permitted by the rules of any securities exchange
or automated quotation system on which the Debentures may be listed or traded,
all as determined by the officers executing such Debentures, as evidenced by
their execution of such Debentures.
SECTION 2.2. Form of Face of Debenture.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE SECURITIES LAWS OF
ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, RESOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
SUCH REGISTRATION. THE HOLDER HEREOF MAY NOT ENGAGE IN HEDGING TRANSACTIONS
IN THIS SECURITY UNLESS SUCH TRANSACTIONS ARE IN COMPLIANCE WITH THE
SECURITIES ACT.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
RESELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS THE LATER OF (X) TWO YEARS AFTER
THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH
GENTIVA HEALTH SERVICES, INC. (THE "COMPANY") OR ANY AFFILIATE OF THE
COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH
SECURITY), AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY
APPLICABLE LAW ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C)
FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE
144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO
WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES
IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT, OR (E) PURSUANT
TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES
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ACT, SUBJECT TO THE COMPANY'S AND THE TRANSFER AGENT'S RIGHT PRIOR TO ANY
SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST
OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. ANY TRANSFER
OF THIS SECURITY IS REQUIRED TO BE MADE IN COMPLIANCE WITH THE APPLICABLE
STATE SECURITIES LAWS AND APPLICABLE SECURITIES LAWS OF OTHER
JURISDICTIONS.
IN THE CASE OF A PURCHASER OF DEBENTURES IN THE STATE OF GEORGIA, FOR
A PERIOD OF ONE YEAR FROM THE CLOSING DATE, THE PREFERRED SECURITIES SHALL
CONTAIN THE FOLLOWING LANGUAGE:
THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH
(13) OF CODE SECTION 10-5-9 OF THE 'GEORGIA SECURITIES ACT OF 1973,'
AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS
EXEMPT UNDER SUCH ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER
SUCH ACT.
THE HOLDER OF THIS SECURITY AGREES THAT IT WILL DELIVER TO EACH PERSON
TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND.
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GENTIVA HEALTH SERVICES, INC.
10.0% Convertible Subordinated Debentures
No. _____ $
GENTIVA HEALTH SERVICES, INC., a corporation organized and existing under
the laws of the state of Delaware (the "Company," which term includes any
successor corporation under the Indenture hereinafter referred to), for value
received, hereby promises to pay to Gentiva Trust, or registered assigns, the
principal sum of Dollars on March 15, 2005; provided that the Company, subject
to certain conditions set forth in Section 3.14 of the Indenture, may shorten
the Stated Maturity of the principal of this Debenture. The Company further
promises to pay interest on said principal sum from March 15, 2000, or from the
most recent interest payment date (each such date, an "Interest Payment Date")
on which interest has been paid or duly provided for, quarterly (subject to
deferral as set forth herein) in arrears on January 1, April 1, July 1 and
October 1 of each year, commencing July 1, 2000, at the rate of 10.0% per annum,
until the principal hereof shall have become due and payable, plus Additional
Interest, if any, until the principal hereof is paid or duly provided for or
made available for payment and on any overdue principal and (without duplication
and to the extent that payment of such interest is enforceable under applicable
law) on any overdue installment of interest at the rate of 10.0% per annum,
compounded quarterly. The amount of interest payable for any period shall be
computed on the basis of twelve 30-day months and a 360-day year. The amount of
interest payable for any partial period shall be computed on the basis of the
number of days elapsed in a 360-day year of twelve 30-day months. In the event
that any date on which interest is payable on this Debenture is not a Business
Day, then a payment of the interest payable on such date will be made on the
next succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on the date the payment was originally payable. A "Business Day" shall mean any
day other than (i) a Saturday or Sunday or (ii) a day on which banking
institutions in The City of New York or the State of Delaware are authorized or
required by law or executive order to remain closed. The interest installment so
payable, and punctually paid or duly provided for, on any Interest Payment Date
shall, as provided in the Indenture, be paid to the Person in whose name this
Debenture (or one or more Predecessor Debentures) is registered at the close of
business on the Regular Record Date for such interest installment, which shall
be the 15th day of the month next preceding such Interest Payment Date (whether
or not a Business Day). Any such interest installment not so punctually paid,
duly provided or deferred (as provided below) for shall forthwith cease to be
payable to the Holder on such Regular Record Date and may either be paid to the
Person in whose name this Debenture (or one or more Predecessor Debentures) is
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Debentures not less than ten days prior to such Special
Record Date, or be paid at any time in any
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other lawful manner not inconsistent with the requirements of any securities
exchange or automated quotation system on which the Debentures may be listed or
traded, and upon such notice as may be required by such exchange or
self-regulatory organization, all as more fully provided in the Indenture.
So long as no Event of Default has occurred and is continuing, the Company
shall have the right at any time during the term of this Debenture to defer
payment of interest on this Debenture, at any time or from time to time, for up
to 20 consecutive quarterly interest payment periods with respect to each
deferral (each an "Extension Period"), during which Extension Periods the
Company shall have the right to make partial payments of interest on any
Interest Payment Date, and at the end of such Extension Periods the Company
shall pay all interest then accrued and unpaid (together with Additional
Interest thereon to the extent permitted by applicable law); provided, however,
that no Extension Period shall extend beyond the Stated Maturity of the
principal of this Debenture; and provided, further, that during any such
Extension Period, the Company shall not, and shall not permit any Subsidiary of
the Company to, (i) declare or pay any dividends or distributions on or redeem,
purchase, acquire or make a liquidation payment with respect to, any of the
Company's capital stock, (ii) make any payment of principal of, premium, if any,
or interest or on or repay, repurchase or redeem any debt security of the
Company that ranks pari passu with or junior in interest to this Debenture or
(iii) make any guarantee payments with respect to any guarantee by the Company
of the debt securities of any Subsidiary of the Company if such guarantee ranks
pari passu with or junior in interest to this Debenture (other than (a)
dividends or distributions in the Company's capital stock, (b) any declaration
of a dividend in connection with the implementation of a Rights Plan or the
redemption or repurchase of any rights distributed pursuant to a Rights Plan,
(c) payments under the Guarantee with respect to this Debenture and (d)
purchases of Common Stock related to the issuance of Common Stock or rights
under any of the Company's benefit plans for its directors, officers or
employees, related to the issuance of Common Stock or rights under a dividend
reinvestment and stock purchase plan or related to the issuance of Common Stock
(or securities convertible or exchangeable for Common Stock) as consideration in
an acquisition transaction that was entered into prior to the commencement of
such Extension Period). Prior to the termination of any such Extension Period,
the Company may further defer the payment of interest, provided that no
Extension Period shall exceed 20 consecutive quarters or extend beyond the
Stated Maturity of the principal of this Debenture. Upon the termination of any
such Extension Period and upon the payment of all accrued and unpaid interest
and any Additional Interest then due, the Company may elect to begin a new
Extension Period, subject to the above requirements. No interest shall be due
and payable during an Extension Period except at the end thereof. If the Trust
is the sole Holder of this Debenture, the Company shall give the Trustees notice
of its selection of such Extension Period at least one Business Day prior to the
earlier of (i) the next succeeding date on which Distributions on the Preferred
Securities would be payable but for such deferral or (ii) the date the
Administrative Trustees are required to give notice to any securities exchange
or other applicable self-regulatory organization or to holders of such Preferred
Securities of the record date or the date such Distributions are payable, if
any, but in any event not less than one Busi-
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ness Day prior to such record date. If the Trustee shall not be the sole Holder
of this Debenture, the Company shall give the Holders of this Debenture notice
of its selection of such Extension Period at least ten Business Days prior to
the earlier of (i) the next Interest Payment Date or (ii) the date the Company
is required to give notice to any applicable securities exchange or
self-regulatory organization, if any, or to the Holders of this Debenture of the
record or payment date of such related interest payment.
Payment of principal of, premium, if any, and interest on this Debenture
shall be made at the office or agency of the Company maintained for that purpose
in the United States, in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts; provided, however, that at the option of the Company payment of interest
may be made, except in the case of Debentures in global form, by check mailed to
the address of the Person entitled thereto as such address shall appear in the
Debenture Register.
The indebtedness evidenced by this Debenture is, to the extent provided in
the Indenture, subordinate and subject in right of payments to the prior payment
in full of all Senior Indebtedness, and this Debenture is issued subject to the
provisions of the Indenture with respect thereto. Each Holder of this Debenture,
by accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee on his behalf to take such actions as may be
necessary or appropriate to effectuate the subordination so provided and (c)
appoints the Trustee his attorney-in-fact for any and all such purposes. Each
Holder hereof, by his acceptance hereof, waives all notice of the acceptance of
the subordination provisions contained herein and in the Indenture by each
holder of Senior Indebtedness, whether now outstanding or hereafter incurred,
and waives reliance by each such holder upon said provisions.
Reference is hereby made to the further provisions of this Debenture set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Debenture
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
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IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
GENTIVA HEALTH SERVICES, INC.
By: ___________________________________
Attest: _________________________________
SECTION 2.3. Form of Reverse Debenture.
This Debenture is one of a duly authorized issue of securities of the
Company, designated as its 10.0% Convertible Subordinated Debentures (the
"Debentures"), limited in aggregate principal amount to $20,618,600 issued under
an Indenture, dated as of March 15, 2000 (the "Indenture"), between the Company
and Wilmington Trust Company, as Trustee (the "Trustee," which term includes any
successor trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights, limitations of rights, duties and immunities thereunder of the Trustee,
the Company and the Holders of the Debentures, and of the terms upon which the
Debentures are, and are to be, authenticated and delivered. All capitalized
terms used but not defined in this Debenture that are defined in the Indenture
or in the Trust Agreement, dated as of March 9, 2000 (the "Trust Agreement"),
among Gentiva Health Services, Inc., as Depositor, and the Trustees named
therein, shall have the meanings assigned to them in the Indenture or the Trust
Agreement, as the case may be.
The Company may at any time, at its option, on or after March 15, 2001, and
subject to the terms and conditions of Article XI of the Indenture, redeem this
Debenture in whole at any time or in part from time to time at the redemption
prices set forth below (as expressed as a percentage of the principal amount of
the Debentures), in each case, together with accrued and unpaid interest,
including Additional Interest, if any, to the Redemption Date, upon not less
than 30 nor more than 60 days' prior written notice, if redeemed during the
12-month period commencing on March 15 of each of the years set forth below.
Year Redemption Price
- ---- ----------------
2001........................................... 108%
2002........................................... 106%
2003........................................... 104%
2004........................................... 102%
Upon the occurrence and during the continuation of a Tax Event, the Company
may, at its option, at any time within 90 days of the occurrence of such Tax
Event redeem this
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Debenture, in whole or in part, subject to the provisions of Section 11.7 and
the other provisions of Article XI of the Indenture, at a redemption price equal
to 100% of the principal amount thereof plus accrued and unpaid interest,
including Additional Interest, if any, to the Redemption Date. Upon the
occurrence of a Change in Control, the Company is required to redeem Debentures
issued under the Indenture equal in aggregate principal amount to the
Liquidation Amount of Preferred Securities required to be repurchased by the
Trust upon such a Change of Control in accordance with Article X of the Trust
Agreement. In the event of redemption of this Debenture in part only, a new
Debenture or Debentures for the unredeemed portion hereof shall be issued in the
name of the Holder hereof upon the cancellation hereof. If at any time
Debentures are distributed to Holders of Preferred Securities upon a liquidation
of the Trust permitted by the Trust Agreement, such Holders shall have the right
to require the Company to repurchase Debentures upon a Change of Control in
accordance with Article XII of the Indenture.
The Indenture contains provisions for satisfaction and discharge of the
entire indebtedness of this Debenture upon compliance by the Company with
certain conditions set forth in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
Company and the Trustee at any time to enter into a supplemental indenture or
indentures for the purpose of modifying in any manner the rights and obligations
of the Company and of the Holders of the Debentures, with the consent of the
Holders of not less than a majority in principal amount of the Outstanding
Debentures. The Indenture also contains provisions permitting Holders of
specified percentages in principal amount of the Debentures at the time
Outstanding, on behalf of the Holders of all Debentures, to waive compliance by
the Company with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the
Holder of this Debenture shall be conclusive and binding upon such Holder and
upon all future Holders of this Debenture and of any Debenture issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Debenture.
As provided in and subject to the provisions of the Indenture, if an Event
of Default occurs and is continuing, then and in every such case the Trustee or
the Holders of not less than 25% in principal amount of the Outstanding
Debentures may declare the principal amount of all the Debentures to be due and
payable immediately, by a notice in writing to the Company (and to the Trustee
if given by Holders), provided that, in the case of the Debentures issued to the
Trust, if upon an Event of Default the Trustee or the Holders of not less than
25% in principal amount of the Outstanding Debentures fail to declare the
principal of all the Debentures to be immediately due and payable, the holders
of at least 25% in aggregate Liquidation Amount of the Preferred Securities then
outstanding shall have such right by a notice in writing to the Company and the
Trustee; and upon any such declaration the principal amount of and the accrued
interest, including Additional Interest, if any, on all the Debentures shall
become immediately due and payable, provided that the payment of principal and
inter-
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est, including Additional Interest, if any, on such Debentures shall remain
subordinated to the extent provided in Article XIV of the Indenture.
Subject to Section 13.1(a) of the Indenture, the Holder of any Debenture
has the right, exercisable at any time on or before 5:00 p.m. (New York City
time) on the second Business Day immediately preceding the date of repayment of
the Debentures, whether at maturity or upon redemption (either at the option of
the Company or pursuant to a Tax Event), to convert the principal amount thereof
(or any portion thereof that is an integral multiple of $50) into fully paid and
nonassessable shares of Common Stock at an initial conversion premium of 17.5%
above the average closing price of the Common Stock during the ten (10) Trading
Days after the Company's first earnings announcement after the Split-off (the
"Conversion Price"), subject to adjustment under certain circumstances. The
number of shares issuable upon conversion of a Debenture is determined by
dividing the principal amount of the Debenture to be converted by the Conversion
Price in effect on the Conversion Date. No fractional shares of Common Stock
shall be issued upon conversion and, in lieu thereof, a cash payment shall be
made for any fractional interest. The outstanding principal amount of any
Debenture shall be reduced by the portion of the principal amount thereof
converted into shares of Common Stock.
To convert a Debenture, a Holder shall (i) complete and sign a Conversion
Request substantially in the form attached hereto, (ii) surrender the Debenture
to the Conversion Agent, (iii) furnish appropriate endorsements or transfer
documents if required by the Debenture Registrar or Conversion Agent and (iv)
pay any transfer or similar tax, if required. If a Conversion Request is
delivered on or after the Regular Record Date and prior to the subsequent
Interest Payment Date, the Holder shall be required to pay to the Company the
interest payment to be made on the subsequent Interest Payment Date, and shall
be entitled to receive the interest payable on the subsequent Interest Payment
Date, on the portion of Debentures to be converted notwithstanding the
conversion thereof prior to such Interest Payment Date. Notwithstanding the
foregoing, if, during an Extension Period, a notice of redemption is mailed
pursuant to Section 11.4 of the Indenture and a Debenture is converted after
such mailing but prior to the relevant Redemption Date, all accrued but unpaid
interest (including Additional Interest, if any) through the date of conversion
shall be paid to the holder of such Debenture on the Redemption Date. Except as
otherwise provided in the immediately preceding two sentences, in the case of
any Debenture which is converted, interest with a Stated Maturity which is after
the date of conversion of such Debenture shall not be payable, and the Company
shall not make nor be required to make any other payment, adjustment or
allowance with respect to accrued but unpaid interest (including Additional
Interest, if any) on the Debentures being converted, which shall be deemed to be
paid in full. If any Debenture called for redemption is converted, any money
deposited with the Trustee or with any Paying Agent or so segregated and held in
trust for the redemption of such Debenture shall (subject to any right of the
Holder of such Debenture or any Predecessor Debenture to receive interest as
provided in the last paragraph of Section 3.7 of the Indenture and this
paragraph) be paid to the Company upon Company Request or, if then held by the
Company, shall be discharged from such trust.
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No reference herein to the Indenture and no provision of this Debenture or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, premium, if any, and
interest on this Debenture at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Debenture is registrable in the Debenture Register,
upon surrender of this Debenture for registration of transfer at the office or
agency of the Company maintained under Section 10.2 of the Indenture duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Debenture Registrar duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Debentures, of authorized denominations and for the same aggregate
principal amount, shall be issued to the designated transferee or transferees.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Debenture for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Debenture is registered as the owner hereof for
all purposes, whether or not this Debenture be overdue, and neither the Company,
the Trustee nor any such agent shall be affected by notice to the contrary.
The Debentures are issuable only in registered form without coupons in
denominations of $50 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Debentures are
exchangeable for a like aggregate principal amount of Debentures of a different
authorized denomination, as requested by the Holder surrendering the same.
The Company and, by its acceptance of this Debenture or a beneficial
interest therein, the Holder of, and any Person that acquires a beneficial
interest in, this Debenture agree that for United States federal, state and
local tax purposes it is intended that this Debenture constitute indebtedness.
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF
LAWS PRINCIPLES THEREOF.
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SECTION 2.4. Form of Trustee's Certificate of Authentication.
This is one of the Debentures referred to in the within mentioned
Indenture.
Dated:
WILMINGTON TRUST COMPANY
--------------------------------------
as Trustee
By: __________________________________
Authorized Signatory
SECTION 2.5. Form of Conversion Notice.
CONVERSION REQUEST
To: Gentiva Health Services, Inc.
The undersigned owner of these Debentures hereby irrevocably elects to
convert these Debentures, or the portion below designated, into Common Stock of
the Company (the "Common Stock") in accordance with the terms of the Indenture
(the "Indenture"), dated as of March 15, 2000, between the Company and
Wilmington Trust Company, as Trustee.
The undersigned owner of these Debentures hereby directs the Conversion
Agent to convert such Debentures on behalf of the undersigned into Common Stock
at the Conversion Price specified in the Indenture. The undersigned owner of
these Debentures also hereby notifies the Conversion Agent that the shares
issuable and deliverable upon conversion, together with any check in payment for
fractional shares, should be issued in the name of and delivered to the
undersigned, unless a different name has been indicated in the assignment below.
If shares are to be issued in the name of a person other than the undersigned,
the undersigned will pay all transfer taxes payable with respect thereto.
Date: _________________
Principal Amount of Debentures to be converted ($50 or integral multiples
thereof): _____________
If a name or names other than the undersigned, please indicate in the spaces
below the name or names in which the shares of Common Stock are to be issued,
along with the address or addresses of such person or persons.
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(Sign exactly as your name appears on the other side of this Debenture) (for
conversion only)
Please print or type name and address, including zip code, and social security
or other identifying number:
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Signature Guarantee:*____________________________________
ARTICLE III
DEBENTURES
SECTION 3.1. Title and Terms; Paying Agent.
The aggregate principal amount of Debentures which may be authenticated and
delivered under this Indenture is limited to $20,618,600, except for Debentures
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Debentures pursuant to Section 3.4, 3.5, 3.6, 9.6,
11.6 or 12.1 and except for any Debentures which, pursuant to the last paragraph
of Section 3.3, are deemed never to have been authenticated and delivered
hereunder.
The Debentures shall be known and designated as the "10.0% Convertible
Subordinated Debentures due 2005" of the Company. Their Stated Maturity shall be
March
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* Signature must be guaranteed by an "eligible guarantor institution" that is
a bank, stockbroker, savings and loan association or credit union meeting
requirements of the Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance
with the Securities and Exchange Act of 1934, as amended.
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15, 2005, or if the Company elects to accelerate the maturity date in
accordance with Section 5.2 hereof, such earlier date as the Company selects.
The Debentures shall bear interest at the rate of 10.0% per annum, from
March 15, 2000 or from the most recent Interest Payment Date to which interest
has been paid or duly provided for, as the case may be, payable quarterly
(subject to deferral as set forth herein), in arrears, on January 1, April 1,
July 1 and October 1 of each year, commencing July 1, 2000 until the principal
thereof is paid or made available for payment. Accrued interest that is not paid
on the applicable Interest Payment Date (even if unpaid due to an extension of
an interest payment period as set forth below in this Section 3.1) shall bear
Additional Interest on the amount thereof. In the event that any date on which
interest is payable on the Debentures is not a Business Day, then a payment of
the interest payable on such date shall be made on the next succeeding day which
is a Business Day (except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding Business
Day) (and without any interest or other payment in respect of any such delay),
in each case with the same force and effect as if made on the date the payment
was originally payable.
The principal of, premium, if any, and interest on the Debentures shall be
payable at the office of the Paying Agent or Paying Agents as the Company may
designate for such purpose from time to time, in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts; provided, however, that at the option of the
Company payment of interest may be made, except in the case of Global
Debentures, by check mailed to the address of the Person entitled thereto as
such address shall appear in the Debenture Register.
The Company designates the Trustee as the initial Paying Agent with respect
to the Debentures. The Company may at any time designate additional Paying
Agents or rescind the designation of any Paying Agent or approve a change in the
office through which any Paying Agent acts pursuant to Section 10.2.
The Debentures shall be subordinated in right of payment to Senior
Indebtedness as provided in Article XIV.
SECTION 3.2. Denominations.
The Debentures shall be in registered form without coupons and shall be
issuable in denominations of $50 and any integral multiple thereof.
SECTION 3.3. Execution, Authentication, Delivery and Dating.
The Debentures shall be executed on behalf of the Company by its Chief
Executive Officer, President or one of its Vice Presidents under its corporate
seal reproduced or impressed thereon and attested by its Secretary or one of its
Assistant Secretaries. The signa-
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ture of any of these officers on the Debentures may be manual or facsimile.
Debentures bearing the manual or facsimile signatures of individuals who were at
any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Debentures or did not
hold such offices at the date of such Debentures. The Debentures may contain
such notations, legends or endorsements required by law, stock exchange rule or
usage. Each Debenture shall be dated the date of its authentication by the
Trustee.
A Debenture shall not be valid until manually authenticated by an
authorized signatory of the Trustee, or by an Authenticating Agent. Such
signature shall be conclusive evidence that the Debenture so authenticated has
been duly authenticated and delivered hereunder and that the holder is entitled
to the benefits of this Indenture. Notwithstanding the foregoing, if any
Debenture shall have been authenticated and delivered hereunder but never issued
and sold by the Company, and the Company shall deliver such Debenture to the
Trustee for cancellation as provided in Section 3.9, for all purposes of this
Indenture such Debenture shall be deemed never to have been authenticated and
delivered hereunder and shall not be entitled to the benefits of this Indenture.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Debentures executed by the Company to the
Trustee for authentication, together with a written order of the Company for the
authentication and delivery of such Debentures signed by its Chief Executive
Officer, President or any Vice President and its Treasurer or any Assistant
Treasurer, and the Trustee in accordance with such written order shall
authenticate and deliver such Debentures.
In authenticating such Debentures and accepting the additional
responsibilities under this Indenture in relation to such Debentures, the
Trustee shall be entitled to receive, and shall be fully protected in relying
upon, an Opinion of Counsel stating that the form and terms thereof have been
established in conformity with the provisions of this Indenture.
The Trustee shall not be required to authenticate such Debentures if the
issue of such Debentures pursuant to this Indenture shall affect the Trustee's
own rights, duties or immunities under the Debentures and this Indenture or
otherwise in a manner that is not reasonably acceptable to the Trustee.
Each Debenture shall be dated the date of its authentication.
SECTION 3.4. Temporary Debentures.
Pending the preparation of definitive Debentures, the Company may execute,
and upon Company Order the Trustee shall authenticate and make available for
delivery, temporary Debentures which are printed, lithographed, typewritten,
mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Debentures in lieu of which they
are issued and with such appropriate insertions, omissions, substi-
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tutions and other variations as the officers executing such Debentures may
determine, as evidenced by their execution of such Debentures.
If temporary Debentures are issued, the Company will cause definitive
Debentures to be prepared without unreasonable delay. After the preparation of
definitive Debentures, the temporary Debentures shall be exchangeable for
definitive Debentures upon surrender of the temporary Debentures at the office
or agency of the Company designated for that purpose without charge to the
Holder. Upon surrender for cancellation of any one or more temporary Debentures,
the Company shall execute and the Trustee shall authenticate and make available
for delivery in exchange therefor one or more definitive Debentures, of any
authorized denominations having the same Original Issue Date and Stated Maturity
and having the same terms as such temporary Debentures. Until so exchanged, the
temporary Debentures shall in all respects be entitled to the same benefits
under this Indenture as definitive Debentures.
SECTION 3.5. Registration, Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a register (the "Debenture Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Debentures and of transfers of Debentures. The Trustee is hereby
appointed "Debenture Registrar" for the purpose of registering Debentures and
transfers of Debentures as herein provided.
Upon surrender for registration of transfer of any Debenture at the office
or agency of the Company designated for that purpose the Company shall execute,
and the Trustee shall authenticate and make available for delivery, in the name
of the designated transferee or transferees, one or more new Debentures of any
authorized denominations, of a like aggregate principal amount, of the same
Original Issue Date and Stated Maturity and having the same terms.
At the option of the Holder, Debentures may be exchanged for other
Debentures of any authorized denominations, of a like aggregate principal
amount, of the same Original Issue Date and Stated Maturity and having the same
terms, upon surrender of the Debentures to be exchanged at such office or
agency; provided that, any Holder which is a BHCA Person shall be subject to the
transfer restrictions set forth in Section 13.1(a) hereof. Whenever any
Debentures are so surrendered for exchange, the Company shall execute, and the
Trustee shall authenticate and make available for delivery, the Debentures which
the Holder making the exchange is entitled to receive.
All Debentures issued upon any registration of transfer or exchange of
Debentures shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Debentures
surrendered upon such registration of transfer or exchange.
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Every Debenture presented or surrendered for registration of transfer or
exchange shall (if so required by the Company or the Debenture Registrar) be
duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Debenture Registrar, duly executed by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made to a Holder for any transfer or exchange of
Debentures, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with any
transfer or exchange of Debentures.
Neither the Company nor the Trustee shall be required, pursuant to the
provisions of this Section 3.5, (a) to issue, register the transfer of or
exchange any Debenture during a period beginning at the opening of business 15
days before the day of selection for redemption of Debentures pursuant to
Article XI and ending at the close of business on the day of mailing of notice
of redemption or (b) to register the transfer of or exchange any Debenture so
selected for redemption in whole or in part, except, in the case of any
Debenture to be redeemed in part, any portion thereof not to be redeemed.
SECTION 3.6. Mutilated, Destroyed, Lost and Stolen Debentures.
If any mutilated Debenture is surrendered to the Trustee together with such
security or indemnity as may be required by the Company or the Trustee to save
each of them harmless, the Company shall execute and the Trustee shall
authenticate and make available for delivery in exchange therefor a new
Debenture of like tenor and principal amount, having the same Original Issue
Date and Stated Maturity and bearing the same interest rate as such mutilated
Debenture, and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and to the Trustee (i) evidence
to their satisfaction of the destruction, loss or theft of any Debenture and
(ii) such security or indemnity as may be required by them to save each of them
harmless, then, in the absence of notice to the Company or the Trustee that such
Debenture has been acquired by a bona fide purchaser, the Company shall execute
and upon its request the Trustee shall authenticate and make available for
delivery, in lieu of any such destroyed, lost or stolen Debenture, a new
Debenture of like tenor and principal amount, having the same Original Issue
Date and Stated Maturity and bearing the same interest rate as such destroyed,
lost or stolen Debenture and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Debenture has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Debenture, pay such Debenture.
Upon the issuance of any new Debenture under this Section 3.6, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge
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that may be imposed in relation thereto and any other expenses (including the
fees and expenses of the Trustee) connected therewith.
Every new Debenture issued pursuant to this Section 3.6 in lieu of any
destroyed, lost or stolen Debenture shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Debenture shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Debentures duly issued hereunder.
The provisions of this Section 3.6 are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Debentures.
SECTION 3.7. Payment of Interest; Interest Rights Preserved.
Interest on any Debenture which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date, shall be paid to the Person in whose
name that Debenture (or one or more Predecessor Debentures) is registered at the
close of business on the Regular Record Date for such interest payment, except
that, unless otherwise provided in the Debentures, interest payable on the
Stated Maturity of the principal of a Debenture shall be paid to the Person to
whom principal is paid. The initial payment of interest on any Debenture which
is issued between a Regular Record Date and the related Interest Payment Date
shall be payable as provided in such Debenture. At the option of the Company,
interest on any Debentures may be paid (i) by check mailed to the address of the
Person entitled thereto as it shall appear on the Debenture Register or (ii) by
wire transfer in immediately available funds at such place and to such account
as designated by the Person entitled thereto as specified in the Debenture
Register.
Any interest on any Debenture which is payable, but is not timely paid or
duly provided for, on any Interest Payment Date ("Defaulted Interest"), shall
forthwith cease to be payable to the registered Holder on the relevant Regular
Record Date by virtue of having been such Holder, and such Defaulted Interest
may be paid by the Company, at its election in each case, as provided in clause
(1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Debentures (or their respective Predecessor
Debentures) are registered at the close of business on a Special Record
Date for the payment of such Defaulted Interest, which shall be fixed in
the following manner. The Company shall notify the Trustee in writing of
the amount of Defaulted Interest proposed to be paid on each Debenture and
the date of the proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date
of the proposed payment, such money when deposited to be held in trust for
the benefit of the
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Persons entitled to such Defaulted Interest as in this clause provided.
Thereupon the Trustee shall fix a Special Record Date for the payment of
such Defaulted Interest which shall be not more than 15 days and not less
than ten days prior to the date of the proposed payment and not less than
ten days after the receipt by the Trustee of the notice of the proposed
payment. The Trustee shall promptly notify the Company of such Special
Record Date and, in the name and at the expense of the Company, shall cause
notice of the proposed payment of such Defaulted Interest and the Special
Record Date therefor to be mailed, first class, postage prepaid, to each
Holder of a Debenture at the address of such Holder as it appears in the
Debenture Register not less than ten days prior to such Special Record
Date. The Trustee may, in its discretion, in the name and at the expense of
the Company, cause a similar notice to be published at least once in a
newspaper, customarily published in the English language on each Business
Day and of general circulation in New York City, but such publication shall
not be a condition precedent to the establishment of such Special Record
Date. Notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor having been mailed as aforesaid, such
Defaulted Interest shall be paid to the Persons in whose names the
Debentures (or their respective Predecessor Debentures) are registered on
such Special Record Date and shall no longer be payable pursuant to the
following clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange or automated quotation system on which the Debentures
may be listed or traded and, upon such notice as may be required by such
exchange (or by the Trustee if the Debentures are not listed), if, after
notice given by the Company to the Trustee of the proposed payment pursuant
to this clause, such payment shall be deemed practicable by the Trustee.
Any interest on any Debenture which is deferred or extended pursuant to
Section 3.11 shall not be Defaulted Interest for the purposes of this Section
3.7.
Subject to the foregoing provisions of this Section 3.7, each Debenture
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Debenture shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Debenture.
SECTION 3.8. Persons Deemed Owners.
The Company, the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name any Debenture is registered on the Debenture
Register as the owner of such Debenture for the purpose of receiving payment of
principal of, premium, if any, and (subject to Section 3.7) interest on such
Debenture and for all other purposes whatsoever, whether or not such Debenture
be overdue, and neither the Company, the Trustee nor any agent of the Company or
the Trustee shall be affected by notice to the contrary.
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SECTION 3.9. Cancellation.
All Debentures surrendered for payment, redemption, registration of
transfer, conversion or exchange shall, if surrendered to any Person other than
the Trustee, be delivered to the Trustee, and any such Debentures and Debentures
surrendered directly to the Trustee for any such purpose shall be promptly
canceled by it. The Company may at any time deliver to the Trustee for
cancellation any Debentures previously authenticated and delivered hereunder
which the Company may have acquired in any manner whatsoever, and all Debentures
so delivered shall be promptly canceled by the Trustee. No Debentures shall be
authenticated in lieu of or in exchange for any Debentures canceled as provided
in this Section 3.9, except as expressly permitted by this Indenture. All
canceled Debentures shall be returned by the Trustee to the Company and
destroyed by the Company.
SECTION 3.10. Computation of Interest.
Interest on the Debentures payable for any full quarterly period shall be
computed on the basis of a 360-day year of twelve 30-day months and interest on
the Debentures for any partial period shall be computed on the basis of the
number of days elapsed in a 360-day year of twelve 30-day months.
SECTION 3.11. Deferrals of Interest Payment Dates.
So long as no Event of Default has occurred and is continuing, the Company
shall have the right, at any time during the term of the Debentures, from time
to time to defer the payment of interest on the Debentures for up to 20
consecutive quarterly interest payment periods with respect to each deferral
period (each, an "Extension Period"), during which Extension Periods the Company
shall have the right to make partial payments of interest on any Interest
Payment Date. No Extension Period shall end on a date other than an Interest
Payment Date. At the end of any such Extension Period the Company shall pay all
interest then accrued and unpaid on the Debentures (together with Additional
Interest thereon, if any, at the rate of 10.0%, to the extent permitted by
applicable law) to the Persons in whose names the Debentures are registered at
the close of business on the Regular Record Date with respect to the Interest
Payment Date at the end of such Extension Period; provided, however, that no
Extension Period shall extend beyond the Stated Maturity of the principal of the
Debentures; and provided, further, that during any such Extension Period, the
Company shall not, and shall not permit any Subsidiary to, (i) declare or pay
any dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Company's capital stock, (ii)
make any payment of principal of, premium, if any, or interest on or repay,
repurchase or redeem any debt security of the Company that ranks pari passu with
or junior in interest to the Debentures or (iii) make any guarantee payments
with respect to any guarantee by the Company of the debt securities of any
Subsidiary of the Company that by their terms rank pari passu with or junior in
interest to the Debentures (other than (a) dividends or distributions in the
Company's capital stock, (b) any declaration of a dividend in connection with
the implementation of a Rights Plan, or the redemption or repurchase of any
rights distributed
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pursuant to a Rights Plan, (c) payments under the Guarantee with respect to such
Debenture and (d) purchases of Common Stock related to the issuance of Common
Stock or rights under any of the Company's benefit plans for its directors,
officers or employees, related to the issuance of Common Stock or rights under a
dividend reinvestment and stock purchase plan or related to the issuance of
Common Stock (or securities convertible or exchangeable for Common Stock) as
consideration in an acquisition transaction that was entered into prior to the
commencement of such Extension Period). Prior to the termination of any such
Extension Period, the Company may further defer the payment of interest,
provided that no Extension Period shall exceed 20 consecutive quarterly periods
or extend beyond the Stated Maturity of the principal of the Debentures. Upon
termination of any Extension Period and upon the payment of all accrued and
unpaid interest and any Additional Interest then due on any Interest Payment
Date, the Company may elect to begin a new Extension Period, subject to the
above requirements. No interest shall be due and payable during an Extension
Period, except at the end thereof. If the Property Trustee shall be the sole
Holder of the Debentures, the Company shall give the Administrative Trustees and
the Property Trustee written notice of its election to begin any such Extension
Period at least one Business Day prior to the earlier of (i) the next succeeding
date on which Distributions on the Preferred Securities of the Trust would be
payable but for such deferral or (ii) the date the Administrative Trustees of
the Trust are required to give notice to any securities exchange or other
applicable self-regulatory organization or to holders of such Preferred
Securities of the record date or the date such Distributions are payable, but in
any event not less than one Business Day prior to such record date. If the
Property Trustee shall not be the sole Holder of the Debentures, the Company
shall give Holders written notice of its election to begin any such Extension
Period at least ten Business Days prior to the earlier of (i) the next
succeeding date Interest Payment Date or (ii) the date the Company is required
to give notice to any securities exchange or other applicable self-regulatory
organization or to Holders of the record date or the date of such Interest
Payment Date. Notwithstanding any other provision of this Indenture, for all
purposes under this Indenture Distributions on the Debentures shall not be
deemed payable, and the deferral of Distributions shall not constitute an Event
of Default, at any time during which an Extension Period is in effect.
The Trustee shall promptly give notice, in the name and at the expense of
the Company, of the Company's election to begin any such Extension Period to the
Holders of the Outstanding Debentures.
SECTION 3.12. Right of Set-Off.
Notwithstanding anything to the contrary in the Indenture, the Company
shall have the right to set-off any payment it is otherwise required to make
thereunder in respect of any Debenture to the extent the Company has theretofore
made, or is concurrently on the date of such payment making, a payment under the
Guarantee or under Section 5.8 of this Indenture.
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SECTION 3.13. Agreed Tax Treatment.
Each Debenture issued hereunder shall provide that the Company and, by its
acceptance of a Debenture or a beneficial interest therein, the Holder of, and
any Person that acquires a beneficial interest in, such Debenture intend that
such Debenture constitutes indebtedness and agree to treat such Debenture as
indebtedness for United States federal, local and state tax purposes.
SECTION 3.14. Shortening of Stated Maturity.
Upon the occurrence of a Tax Event and subject to (i) the receipt by the
Company of an opinion of independent tax counsel experienced in such matters
that after advancing the Stated Maturity, interest paid on the Debentures will
be deductible for United States income tax purposes and (ii) advancing the
Stated Maturity shall not result in a taxable event to holders of the Preferred
Securities, the Company shall have the right, prior to the termination of the
Trust, to advance the Stated Maturity of the Debentures to the minimum extent
required in order to allow for the payments of interest in respect of the
Debentures to be tax deductible. In the event that the Company elects to shorten
the Stated Maturity of the Debentures pursuant to this Section 3.14, it shall
give written notice to the Trustee, and the Trustee shall give notice of such
shortening to the Holders, no less than 30 and no more than 60 days prior to the
effectiveness thereof.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1. Satisfaction and Discharge of Indenture.
This Indenture shall, upon Company Request, cease to be of further effect
(except as to any surviving rights of registration of transfer or exchange of
Debentures herein expressly provided for and as otherwise provided in this
Section 4.1) and the Trustee, on demand of and at the expense of the Company,
shall execute proper instruments acknowledging satisfaction and discharge of
this Indenture, when
(1) either
(A) all Debentures theretofore authenticated and delivered (other than
(i) Debentures which have been destroyed, lost or stolen and which have
been replaced or paid as provided in Section 3.6 and (ii) Debentures for
whose payment money has theretofore been deposited in trust or segregated
and held in trust by the Company and thereafter repaid to the Company or
discharged from such trust, as provided in Section 10.3) have been
delivered to the Trustee for cancellation; or
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(B) all such Debentures not theretofore delivered to the Trustee for
cancellation.
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity within
one year of the date of deposit, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the
Company,
and the Company, in the case of clause (B)(i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as trust funds in
trust for such purpose an amount in the currency or currencies in which the
Debentures are payable sufficient to pay and discharge the entire
indebtedness on such Debentures not theretofore delivered to the Trustee
for cancellation, for principal, premium, if any and interest (including
any Additional Interest) to the date of such deposit (in the case of
Debentures which have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture
have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.7, the obligations of
the Company to any Authenticating Agent under Section 6.14 and, if money shall
have been deposited with the Trustee pursuant to Section 4.2(1)(B), the
obligations of the Trustee under Section 4.2 and the last paragraph of Section
10.3 shall survive.
SECTION 4.2. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 10.3, all money
deposited with the Trustee pursuant to Section 4.1 shall be held in trust and
applied by the Trustee, in accordance with the provisions of the Debentures and
this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal, premium, if any,
and interest for the payment of which such money has been deposited with or
received by the Trustee.
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ARTICLE V
REMEDIES
SECTION 5.1. Events of Default.
"Event of Default," wherever used herein, means any one of the following
events (whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) default in the payment of any interest upon the Debentures,
including any Additional Interest in respect thereof, when it becomes due
and payable, and continuance of such default for a period of 30 days;
provided, however, that the deferral of any Distributions at any time an
Extension Period is in effect shall not constitute and Event of Default;
(2) default in the payment of the principal of or premium, if any, on
the Debentures at their Maturity;
(3) default in the performance, or breach, in any material respect, of
any covenant or warranty of the Company in this Indenture (other than a
covenant or warranty a default in the performance of which or the breach of
which is elsewhere in this Section 5.1 specifically dealt with), and
continuance of such default or breach for a period of 90 days after there
has been given, by registered or certified mail, to the Company by the
Trustee or to the Company and the Trustee by the Holders of at least 25% in
principal amount of the Outstanding Debentures a written notice specifying
such default or breach and requiring it to be remedied;
(4) the entry of a decree or order by a court having jurisdiction in
the premises adjudging the Company a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement, adjustment
or composition of or in respect of the Company under any applicable federal
or state bankruptcy, insolvency, reorganization or other similar law, or
appointing a receiver, liquidator, assignee, trustee, sequestrator (or
other similar official) of the Company or of any substantial part of its
property or ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order unstayed and in effect for a period
of 60 consecutive days;
(5) the institution by the Company of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of
bankruptcy or insolvency proceedings against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under any
applicable federal or state bankruptcy, insolvency, re-
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organization or other similar law, or the consent by it to the filing of
any such petition or to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the Company
or of any substantial part of its' property, or the making by it of an
assignment for the benefit for creditors, or the admission by it in writing
of its inability to pay its debts generally as they become due and its
willingness to be adjudicated a bankrupt, or the taking of corporate action
by the Company in furtherance of any such action; or
(6) the voluntary or involuntary dissolution, winding-up or
termination of the Trust, except in connection with the distribution of the
Debentures to the holders of Preferred Securities in liquidation of the
Trust and in connection with certain mergers, consolidations or
amalgamations permitted by the Trust Agreement.
SECTION 5.2. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in Section
5.1(4) or 5.1(5)) occurs and is continuing, then and in every such case the
Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Debentures may declare the principal amount of all the Debentures to
be due and payable immediately, by a notice in writing to the Company (and to
the Trustee if given by Holders), provided that, in the case of the Debentures
issued to the Trust, if, upon an Event of Default, the Trustee or the Holders of
not less than 25% in principal amount of the Outstanding Debentures fail to
declare the principal amount of all the Debentures to be immediately due and
payable, the holders of at least 25% in aggregate liquidation amount of the
corresponding Preferred Securities then outstanding shall have such right by a
notice in writing to the Company and the Trustee; and upon any such declaration
such principal amount (or specified portion thereof) of and the accrued interest
(including any Additional Interest) on all the Debentures shall become
immediately due and payable. Payment of principal and interest (including any
Additional Interest) on such Debentures shall remain subordinated to the extent
provided in Article XIV notwithstanding that such amount shall become
immediately due and payable as herein provided. If an Event of Default specified
in Section 5.1(4) or 5.1(5) occurs, the principal amount of all the Debentures
shall automatically, and without any declaration or other action on the part of
the Trustee or any Holder, become immediately due and payable.
At any time after such a declaration of acceleration with respect to
Debentures has been made and before a judgment or decree for payment of the
money due has been obtained by the Trustee as hereinafter in this Article V
provided, the Holders of a majority in principal amount of the Outstanding
Debentures, by written notice to the Company and the Trustee, may rescind and
annul such declaration and its consequences if:
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay:
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(A) all overdue installments of interest (including any
Additional Interest) on all of the Debentures,
(B) the principal of and premium, if any, on any Debentures which
have become due otherwise than by such declaration of acceleration and
interest thereon at the rate borne by the Debentures, and
(C) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel; and
(2) all Events of Default, other than the non-payment of the principal
of Debentures which has become due solely by such acceleration, have been
cured or waived as provided in Section 5.13;
provided that, in the case of Debentures held by the Trust, if the Holders of at
least a majority in principal amount of the Outstanding Debentures fail to
rescind and annul such declaration and its consequences, the holders of a
majority in aggregate Liquidation Amount of the Preferred Securities then
outstanding shall have such right by written notice to the Company and the
Trustee, subject to the satisfaction of the conditions set forth in Clauses (1)
and (2) above of this Section 5.2.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Company covenants that if:
(1) default is made in the payment of any installment of interest
(including any Additional Interest) on any Debenture when such interest
becomes due and payable and such default continues for a period of 30 days,
or
(2) default is made in the payment of the principal of and premium, if
any, on any Debenture at the Maturity thereof,
the Company shall, upon demand of the Trustee, pay to the Trustee, for the
benefit of the Holders of such Debentures, the whole amount then due and payable
on such Debentures for principal, premium, if any, and interest (including any
Additional Interest); and, in addition thereto, all amounts owing the Trustee
under Section 6.7.
If the Company fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the amounts so due and unpaid, and may
prosecute such proceeding to
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judgment or final decree, and may enforce the same against the Company or any
other obligor upon the Debentures and collect the money adjudged or decreed to
be payable in the manner provided by law out of the property of the Company or
any other obligor upon the Debentures, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 5.4. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Debentures or the property of the Company or of such other obligor or their
creditors,
(a) the Trustee (irrespective of whether the principal of the
Debentures shall then be due and payable as therein expressed or by
declaration of acceleration or otherwise and irrespective of whether the
Trustee shall have made any demand on the Company for the payment of
overdue principal, premium, if any, or interest (including any Additional
Interest)) shall be entitled and empowered, by intervention in such
proceeding or otherwise,
(i) to file and prove a claim for the whole amount of principal,
premium, if any, and interest (including any Additional Interest)
owing and unpaid in respect to the Debentures and to file such other
papers or documents as may be necessary or advisable and to take any
and all actions as are authorized under the Trust Indenture Act in
order to have the claims of the Holders and any predecessor to the
Trustee under Section 6.7 allowed in any such judicial proceedings;
and
(ii) in particular, the Trustee shall be authorized to collect
and receive any money or other property payable or deliverable on any
such claims and to distribute the same in accordance with Section 5.6;
and
(b) any custodian, receiver, assignee, trustee, liquidator,
sequestrator (or other similar official) in any such judicial proceeding is
hereby authorized by each Holder to make such payments to the Trustee for
distribution in accordance with Section 5.6, and in the event that the
Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due to it and any predecessor
Trustee under Section 6.7.
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Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Debentures
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding; provided, however,
that the Trustee may, on behalf of the Holders, vote for the election of a
trustee in bankruptcy or similar official and be a member of a creditors' or
other similar committee.
SECTION 5.5. Trustee May Enforce Claims Without Possession of Debentures.
All rights of action and claims under this Indenture or the Debentures may
be prosecuted and enforced by the Trustee without the possession of any of the
Debentures or the production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment shall, after provision
for the payment of all the amounts owing the Trustee and any predecessor Trustee
under Section 6.7, its agents and counsel, be for the ratable benefit of the
Holders of the Debentures in respect of which such judgment has been recovered.
SECTION 5.6. Application of Money Collected.
Any money or property collected or to be applied by the Trustee pursuant to
this Article V shall be applied in the following order, at the date or dates
fixed by the Trustee and, in case of the distribution of such money or property
on account of principal, premium, if any, or interest (including any Additional
Interest), upon presentation of the Debentures and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee and any
predecessor Trustee under Section 6.7;
SECOND: Subject to Article XIV, to the payment of the amounts then due
and unpaid upon the Debentures for principal (and premium, if any),
interest (including any Additional Interest) and Additional Taxes, in
respect of which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the
amounts due and payable on the Debentures for principal, premium, if any,
and interest (including any Additional Interest), respectively; and
THIRD: The balance, if any, to the Person or Persons entitled thereto.
SECTION 5.7. Limitation on Suits.
Subject to Section 5.8, no Holder of any Debenture shall have any right to
institute any proceeding, judicial or otherwise, with respect to this Indenture
or for the appoint-
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ment of a receiver, assignee, trustee, liquidator, sequestrator (or other
similar official) or for any other remedy hereunder, unless:
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Debentures shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of security or indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Outstanding Debentures;
it being understood and intended that no one or more of the Holders shall have
any right in any manner whatever by virtue of, or by availing itself of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders, or to obtain or to seek to obtain priority or preference over any
other Holders or to enforce any right under this Indenture, except in the manner
herein provided and for the equal and ratable benefit of all Holders.
SECTION 5.8. Unconditional Right of Holders to Receive Principal, Premium
and Interest; Direct Action by Holders of Preferred
Securities.
Notwithstanding any other provision in this Indenture, the Holder of any
Debenture shall have the right which is absolute and unconditional to receive
payment of the principal of, premium, if any, and (subject to Section 3.7)
interest (including any Additional Interest) on such Debenture on the respective
Stated Maturities expressed in such Debenture (or, in the case of redemption, on
the Redemption Date) and to institute suit for the enforcement of any such
payment, and such right shall not be impaired without the consent of such
Holder. In the case of Debentures held by the Trust, any holder of the Preferred
Securities shall have the right, upon the occurrence of an Event of Default
described in Section 5.1(1) or 5.1(2), to institute a suit directly against the
Company for enforcement of payment to such holder of principal of, premium, if
any, and (subject to Section 3.7) interest (including any Additional Interest)
on the Debentures having a principal amount equal to the aggregate Liquidation
Amount of such Preferred Securities held by such holder.
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SECTION 5.9. Restoration of Rights and Remedies.
If the Trustee, any Holder or any holder of Preferred Securities has
instituted any proceeding to enforce any right or remedy under this Indenture
and such proceeding has been discontinued or abandoned for any reason, or has
been determined adversely to the Trustee, such Holder or such holder of
Preferred Securities, then and in every such case the Company, the Trustee, the
Holders and such holder of Preferred Securities shall, subject to any
determination in such proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of the
Trustee, the Holders and the holders of Preferred Securities shall continue as
though no such proceeding had been instituted.
SECTION 5.10. Rights and Remedies Cumulative.
Except as otherwise provided in the last paragraph of Section 3.6, no right
or remedy herein conferred upon or reserved to the Trustee or to the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 5.11. Delay or Omission Not Waiver.
No delay or omission of the Trustee, any Holder of any Debenture or any
holder of any Preferred Security to exercise any right or remedy accruing upon
any Event of Default shall impair any such right or remedy or constitute a
waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article V or by law to the Trustee or
to the Holders and the right and remedy given to the holders of Preferred
Securities by Section 5.8 may be exercised from time to time, and as often as
may be deemed expedient, by the Trustee, the Holders or the holders of Preferred
Securities, as the case may be.
SECTION 5.12. Control by Holders.
The Holders of a majority in principal amount of the Outstanding Debentures
shall have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee, provided that:
(1) such direction shall not be in conflict with any rule of law or
with this Indenture,
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(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction, and
(3) subject to the provisions of Section 6.1, the Trustee shall have
the right to decline to follow such direction if a Responsible Officer or
Officers of the Trustee shall, in good faith, determine that the proceeding
so directed would be unjustly prejudicial to the Holders not joining in any
such direction or would involve the Trustee in personal liability.
SECTION 5.13. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Debentures and, in the case of any Debentures issued to the Trust,
the holders of a majority in Liquidation Amount of Preferred Securities issued
by the Trust may waive any past default hereunder and its consequences, except a
default:
(1) in the payment of the principal of, premium, if any, or interest
(including any Additional Interest) on any Debenture (unless all Events of
Default, other than the non-payment of the principal of Debentures which
has become due solely by such acceleration, have been cured or annulled as
provided in Section 5.3 and the Company has paid or deposited with the
Trustee a sum sufficient to pay all overdue installments of interest
(including any Additional Interest) on all Debentures, the principal of and
premium, if any, on any Debentures which have become due otherwise than by
such declaration of acceleration and interest thereon at the rate borne by
the Debentures, and all sums paid or advanced by the Trustee hereunder and
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel), or
(2) in respect of a covenant or provision hereof which under Article
IX cannot be modified or amended without the consent of the Holder of each
Outstanding Debenture affected.
Any such waiver shall be deemed to be on behalf of the Holders of all the
Debentures or, in the case of a waiver by holders of Preferred Securities, by
all holders of Preferred Securities.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon.
SECTION 5.14. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Debenture by
his acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require,
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in any suit for the enforcement of any right or remedy under this Indenture, or
in any suit against the Trustee for any action taken or omitted by it as
Trustee, the filing by any party litigant in such suit of an undertaking to pay
the costs of such suit, and that such court may in its discretion assess
reasonable costs, including reasonable attorneys' fees and expenses, against any
party litigant in such suit, having due regard to the merits and good faith of
the claims or defenses made by such party litigant; but the provisions of this
Section 5.14 shall not apply to any suit instituted by the Trustee, to any suit
instituted by any Holder or group of Holders holding in the aggregate more than
10% in principal amount of the Outstanding Debentures, to any suit instituted
pursuant to Section 5.8 by any holder or group of holders holding in the
aggregate more than 10% in aggregate Liquidation Amount of Preferred Securities,
or to any suit instituted by any Holder for the enforcement of the payment of
the principal of, premium, if any, or interest (including any Additional
Interest) on any Debenture on or after the respective Stated Maturities
expressed in such Debenture.
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any usury, stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE VI
TRUSTEE
SECTION 6.1. Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture; but in the case of any such certificates or
opinions which by any provisions hereof are specifically required to
be furnished to the Trustee, the Trustee shall be under a duty to
examine the same to determine whether or not they conform to the
requirements of this Indenture.
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(b) In case an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in their exercise, as a prudent person
would exercise or use under the circumstances in the conduct of his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct except that
(1) this subsection (c) shall not be construed to limit the
effect of subsection (a) of this Section 6.1;
(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it shall be proved
that the Trustee was negligent in ascertaining the pertinent facts;
and
(3) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with
the direction of Holders pursuant to Section 5.12 relating to the
time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred
upon the Trustee, under this Indenture.
(d) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if there shall be reasonable grounds for believing that repayment of
such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(e) Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section
6.1.
SECTION 6.2. Notice of Defaults.
Within 90 days after actual knowledge by a Responsible Officer of the
Trustee of the occurrence of any default hereunder, the Trustee shall transmit
by mail to all Holders of Debentures, as their names and addresses appear in the
Debenture Register, notice of such default, unless such default shall have been
cured or waived; provided, however, that, except in the case of a default in the
payment of the principal of, premium, if any, or interest (including any
Additional Interest) on any Debenture, the Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee or a trust committee of directors and/or Responsible Officers of the
Trustee in good faith determines that the withholding of such notice is in the
interests of the Holders of Debentures; and provided, further, that, in the case
of any default of the character specified in Section 5.1(3), no such notice to
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Holders shall be given until at least 30 days after the occurrence thereof. For
the purpose of this Section 6.2, the term "default" means any event which is, or
after notice or lapse of time or both would become, an Event of Default.
SECTION 6.3. Certain Rights of Trustee.
Subject to the provisions of Section 6.1:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, Debenture or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or
parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad
faith on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel of its selection and the
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, indenture, Debenture or other paper or document, but the Trustee in
its discretion may make such inquiry or investigation into such facts or
matters as it may see fit, and, if the Trustee shall determine to make such
inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Company, personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trus-
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tee shall not be responsible for any misconduct or negligence on the part
of any agent or attorney appointed with due care by it hereunder; and
(h) the Trustee shall not be liable for any action taken, suffered, or
omitted to be taken by it in good faith and reasonably believed by it to be
authorized or within the discretion or rights or powers conferred upon it
by this Indenture.
SECTION 6.4. Not Responsible for Recitals or Issuance of Debentures.
The Recitals contained herein and in the Debentures, except the Trustee's
certificates of authentication, shall be taken as the statements of the Company,
and neither the Trustee nor any Authenticating Agent assumes any responsibility
for their correctness. The Trustee makes no representations as to the validity
or sufficiency of this Indenture or of the Debentures. Neither the Trustee nor
any Authenticating Agent shall be accountable for the use or application by the
Company of the Debentures or the proceeds thereof.
SECTION 6.5. May Hold Debentures.
The Trustee, any Authenticating Agent, any Paying Agent, any Debenture
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Debentures and, subject to Sections
6.8 and 6.13, may otherwise deal with the Company with the same rights it would
have if it were not Trustee, Authenticating Agent, Paying Agent, Debenture
Registrar or such other agent.
SECTION 6.6. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed in writing with the Company.
SECTION 6.7. Compensation and Reimbursement.
The Company, as borrower, agrees
(1) to pay to the Trustee from time to time such compensation as shall
be agreed in writing between the Company and the Trustee for all services
rendered by it hereunder (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust);
(2) to reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the reasonable
compensation and the expenses
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and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad
faith; and
(3) to indemnify the Trustee for, and to hold it harmless against, any
and all loss, liability, damage, claim or expense (including the reasonable
compensation and the expenses and disbursements of its agents and counsel)
incurred without negligence or bad faith, arising out of or in connection
with the acceptance or administration of this trust or the performance of
its duties hereunder, including the costs and expenses of defending itself
against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder. This indemnification
shall survive the termination of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 5.1(4) or (5) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under the Bankruptcy Reform Act of 1978 or any successor statute.
SECTION 6.8. Disqualification; Conflicting Interests.
The Trustee shall be subject to the provisions of Section 310(b) of the
Trust Indenture Act. Nothing herein shall prevent the Trustee from filing with
the Commission the application referred to in said Section 310(b).
SECTION 6.9. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be:
(a) a corporation organized and doing business under the laws of the
United States of America or of any state or territory or the District of
Columbia, authorized under such laws to exercise corporate trust powers and
subject to supervision or examination by federal, state, territorial or
District of Columbia authority, or
(b) a corporation or other Person organized and doing business under
the laws of a foreign government that is permitted to act as Trustee
pursuant to a rule, regulation or order of the Commission, authorized under
such laws to exercise corporate trust powers, and subject to supervision or
examination by authority of such foreign government or a political
subdivision thereof substantially equivalent to supervision or examination
applicable to United States institutional trustees, in either case having a
combined capital and surplus of at least $50,000,000. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then, for
the purposes of this Section 6.9, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published. If at any time
the Trustee shall cease to be eligible in accordance with the pro-
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visions of this Section 6.9, it shall resign immediately in the manner and
with the effect hereinafter specified in this Article VI. Neither the
Company nor any Person directly or indirectly controlling, controlled by or
under common control with the Company shall serve as Trustee.
SECTION 6.10. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article VI shall become effective until the
acceptance of appointment by the successor Trustee under Section 6.11.
(b) The Trustee may resign at any time by giving written notice thereof to
the Company. If an instrument of acceptance by a successor Trustee shall not
have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the Outstanding Debentures, delivered to the
Trustee and to the Company. If an instrument of acceptance by a successor
Trustee shall not have been delivered to the Trustee within 30 days after such
removal, the Trustee being removed may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 6.8 after written
request therefor by the Company or by any Holder who has been a bona fide
Holder of a Debenture for at least six months,
(2) the Trustee shall cease to be eligible under Section 6.9 and shall
fail to resign after written request therefor by the Company or by any such
Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company, acting pursuant to the authority of a
Board Resolution, may remove the Trustee or (ii) subject to Section 5.14, any
Holder who has been a bona fide Holder of a Debenture for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee and the appointment of
a successor Trustee or Trustees.
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(e) If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause, the Company,
by a Board Resolution, shall promptly appoint a successor Trustee. If, within
one year after such resignation, removal or incapability, or the occurrence of
such vacancy, a successor Trustee shall be appointed by Act of the Holders of a
majority in principal amount of the Outstanding Debentures delivered to the
Company and the retiring Trustee, the successor Trustee so appointed shall,
forthwith upon its acceptance of such appointment, become the successor Trustee
and supersede the successor Trustee appointed by the Company. If no successor
Trustee shall have been so appointed by the Company or the Holders and accepted
appointment in the manner hereinafter provided, any Holder who has been a bona
fide Holder of a Debenture for at least six months may, subject to Section 5.14,
on behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each removal of
the Trustee and each appointment of a successor Trustee by mailing written
notice of such event by first-class mail, postage prepaid, to the Holders of
Debentures as their names and addresses appear in the Debenture Register. Each
notice shall include the name of the successor Trustee and the address of its
Corporate Trust Office.
SECTION 6.11. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Trustee, every such
successor Trustee so appointed shall execute, acknowledge and deliver to the
Company and to the retiring Trustee an instrument accepting such appointment,
and thereupon the resignation or removal of the retiring Trustee shall become
effective and such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee; but, on the request of the Company or the successor
Trustee, such retiring Trustee shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor Trustee all the rights,
powers and trusts of the retiring Trustee and shall duly assign, transfer and
deliver to such successor Trustee all property and money held by such retiring
Trustee hereunder.
(b) Upon request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all rights, powers and trusts referred to in Section
6.11(a).
(c) No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article VI.
SECTION 6.12. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or
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consolidation to which the Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article VI,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Debentures shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Debentures so authenticated, and in case any
Debentures shall not have been authenticated, any successor to the Trustee may
authenticate such Debentures either in the name of any predecessor Trustee or in
the name of such successor Trustee, and in all cases the certificate of
authentication shall have the full force which it is provided anywhere in the
Debentures or in this Indenture that the certificate of the Trustee shall have.
SECTION 6.13. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company (or
any other obligor upon the Debentures), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
SECTION 6.14. Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents which shall be
authorized to act on behalf of the Trustee to authenticate Debentures issued
upon original issue and upon exchange, registration of transfer or partial
redemption thereof or pursuant to Section 3.6. Debentures so authenticated shall
be entitled to the benefits of this Indenture and shall be valid and obligatory
for all purposes as if authenticated by the Trustee hereunder. Wherever
reference is made in this Indenture to the authentication and delivery of
Debentures by the Trustee or the Trustee's certificate of authentication, such
reference shall be deemed to include authentication and delivery on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all times be a corporation organized and
doing business under the laws of the United States of America, or of any state
or territory or the District of Columbia, authorized under such laws to act as
Authenticating Agent, having a combined capital and surplus of not less than
$50,000,000 and subject to supervision or examination by federal or state
authority. If such Authenticating Agent publishes reports of condition at least
annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section 6.14 the combined
capital and surplus of such Authenticating Agent shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time an Authenticating Agent shall cease to be eligible
in accordance with the provisions of this Section 6.14, such Authenticating
Agent shall resign immediately in the manner and with the effect specified in
this Section 6.14.
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Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to all or substantially all of
the corporate trust business of an Authenticating Agent shall be the successor
Authenticating Agent hereunder, provided such corporation shall be otherwise
eligible under this Section 6.14, without the execution or filing of any paper
or any further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 6.14, the Trustee may appoint a successor
Authenticating Agent which shall be acceptable to the Company and shall give
notice of such appointment in the manner provided in Section 1.6 to all Holders.
Any successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provision of this Section 6.14.
The Company agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section 6.14.
If an appointment is made pursuant to this Section 6.14, the Debentures may
have endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternative certificate of authentication in the following
form:
This is one of the Debentures referred to in the within mentioned
Indenture.
Dated:
WILMINGTON TRUST COMPANY
--------------------------------------
As Trustee
By: __________________________________
As Authenticating Agent
By: __________________________________
As Authorized Officer
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ARTICLE VII
HOLDER'S LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 7.1. Company to Furnish Trustee Names and Addresses of Holders.
The Company shall furnish or cause to be furnished to the Trustee:
(a) semi-annually, not more than 15 days after January 15 and July 15
in each year, a list, in such form as the Trustee may reasonably require,
of the names and addresses of the Holders as of such January 1 and July 1,
and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the
time such list is furnished, excluding from any such list names and
addresses received by the Trustee in its capacity as Debenture Registrar.
SECTION 7.2. Preservation of Information, Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.1 and the names and
addresses of Holders received by the Trustee in its capacity as Debenture
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 7.1 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with respect to
their rights under this Indenture or under the Debentures, and the corresponding
rights and privileges of the Trustee, shall be as provided in the Trust
Indenture Act.
(c) Every Holder of Debentures, by receiving and holding the same, agrees
with the Company and the Trustee that neither the Company nor the Trustee nor
any agent of either of them shall be held accountable by reason of the
disclosure of information as to the names and addresses of the Holders made
pursuant to the Trust Indenture Act.
SECTION 7.3. Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto. If
required by Section 313(a) of the Trust Indenture Act, the Trustee shall, within
60 days after each May 15 following the date of
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this Indenture deliver to Holders a brief report, dated as of such May 15, which
complies with the provisions of such Section 313(a).
(b) A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each stock exchange upon which any
Debentures are listed and with the Commission. The Company will promptly notify
the Trustee when any Debentures are listed on any stock exchange.
SECTION 7.4. Reports by Company.
The Company shall file all annual and quarterly reports and the
information, documents and other reports that the Company is required to file
with the Commission pursuant to Section 13(a) or Section 15(d) of the Exchange
Act ("SEC Reports") with the Trustee and the Property Trustee within 15 days
after the same is filed with the Commission. Notwithstanding that the Company
may not be required or shall cease to be required to remain subject to the
reporting requirements of Section 13(a) or 15(d) of the Exchange Act, the
Company shall continue to file the SEC Reports with the Commission, unless the
Commission shall not accept such a filing. The Company shall, for so long as any
Debentures or Preferred Securities are outstanding, (i) furnish copies of the
SEC Reports to Holders of the Preferred Securities and Debentures, respectively,
at the time the Company is required to make such information available to the
Trustee and the Property Trustee and to prospective investors who request it in
writing, whether or not required by the Exchange Act to file SEC Reports with
the Commission and (ii) furnish to the Holders and prospective investors, upon
their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 8.1. Company May Consolidate, etc., Only on Certain Terms.
The Company shall not consolidate with or merge into any other Person or
convey, transfer or lease its properties and assets substantially as an entirety
to any Person, and no Person shall consolidate with or merge into the Company or
convey, transfer or lease its properties and assets substantially as an entirety
to the Company, unless:
(1) in case the Company shall consolidate with or merge into another
Person or convey, transfer or lease its properties and assets substantially
as an entirety to any Person, the Person formed by such consolidation or
into which the Company is merged or the Person which acquires by conveyance
or transfer, or which leases, the properties and assets of the Company
substantially as an entirety shall be a corporation, partnership or trust
organized and existing under the laws of the United States of
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America or any State or the District of Columbia and shall expressly
assume, by an indenture supplemental hereto, executed and delivered to the
Trustee, in form satisfactory to the Trustee, the due and punctual payment
of the principal of, premium, if any, and interest (including any
Additional Interest) on all the Debentures and the performance of every
covenant of this Indenture on the part of the Company to be performed or
observed;
(2) immediately after giving effect to such transaction, no Event of
Default, and no event which, after notice or lapse of time, or both, would
become an Event of Default, shall have happened and be continuing;
(3) in the case of Debentures held by the Trust, such consolidation,
merger, conveyance, transfer or lease is permitted under the Trust
Agreement and Guarantee and does not give rise to any breach or violation
of the Trust Agreement or Guarantee; and
(4) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger,
conveyance, transfer or lease and any such supplemental indenture complies
with this Article VIII and that all conditions precedent herein provided
for relating to such transaction have been complied with; and the Trustee,
subject to Section 6.1, may rely upon such Officers' Certificate and
Opinion of Counsel as conclusive evidence that such transaction complies
with this Section 8.1.
SECTION 8.2. Successor Corporation Substituted.
Upon any consolidation or merger by the Company with or into any other
Person, or any conveyance, transfer or lease by the Company of its properties
and assets substantially as an entirety to any Person in accordance with Section
8.1, the successor Person formed by such consolidation or into which the Company
is merged or to which such conveyance, transfer or lease is made shall succeed
to, and be substituted for, and may exercise every right and power of, the
Company under this Indenture with the same effect as if such successor Person
had been named as the Company herein; and in the event of any such conveyance,
transfer or lease the Company shall be discharged from all obligations and
covenants under the Indenture and the Debentures and may be dissolved and
liquidated.
Such successor Person may cause to be signed, and may issue either in its
own name or in the name of the Company, any or all of the Debentures issuable
hereunder which theretofore shall not have been signed by the Company and
delivered to the Trustee; and, upon the written order of such successor Person
instead of the Company and subject to all the terms, conditions and limitations
prescribed herein, the Trustee shall authenticate and shall make available for
delivery any Debentures which previously shall have been signed and delivered by
the officers of the Company to the Trustee for authentication pursuant to such
provisions and any Debentures which such successor Person thereafter shall cause
to be signed
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and delivered to the Trustee on its behalf for the purpose pursuant to such
provisions. All the Debentures so issued shall in all respects have the same
legal rank and benefit under this Indenture as the Debentures theretofore or
thereafter issued in accordance with the terms of this Indenture as though all
of such Debentures had been issued at the date of the execution hereof.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.1. Supplemental Indentures without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a Board
Resolution, and the Trustee, at any time and from time to time, may enter into
one or more indentures supplemental hereto, in form reasonably satisfactory to
the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company, and
the assumption by any such successor of the covenants of the Company
contained herein and in the Debentures;
(2) to convey, transfer, assign, mortgage or pledge any property to or
with the Trustee or to surrender any right or power herein conferred upon
the Company;
(3) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the
Company;
(4) to add any additional Events of Default;
(5) to change or eliminate any of the provisions of this Indenture,
provided that any such change or elimination shall become effective only
when there is no Outstanding Debenture created prior to the execution of
such supplemental indenture which is entitled to the benefit of such
provision;
(6) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture, provided that such action pursuant
to this clause (6) shall not adversely affect the interest of the Holders
in any material respect or, in the case of the Debentures issued to the
Trust and for so long as any of the corresponding Preferred Securities
issued by the Trust shall remain outstanding, the holders of such Preferred
Securities;
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(7) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee and to add to or change any of the
provisions of this Indenture as shall be necessary to provide for or
facilitate the administration of the trust hereunder by more than one
Trustee, pursuant to the requirements of Section 6.11(b);
(8) to comply with the requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the Trust
Indenture Act;
(9) to provide for the right of Holders to require the Company to
repurchase Debentures in accordance with Section XII of this Indenture upon
a Change of Control; or
(10) to provide for the issuance of Debentures to Holders of Preferred
Securities in connection with the liquidation of the Trust permitted by the
Trust Agreement.
SECTION 9.2. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in principal
amount of the Outstanding Debentures, by Act of said Holders delivered to the
Company and the Trustee, the Company, when authorized by a Board Resolution, and
the Trustee may enter into an indenture or indentures supplemental hereto for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Indenture or of modifying in any manner the rights
of the Holders under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Debenture affected thereby,
(1) except to the extent permitted by Section 3.11 or as otherwise
specified as contemplated by Section 2.1 with respect to the deferral of
the payment of interest on the Debentures, change the Stated Maturity of
the principal of, or any installment of interest (including any Additional
Interest) on, any Debenture, or reduce the principal amount thereof or the
rate of interest thereon or reduce any premium payable upon the redemption
thereof, or change the place of payment where, or the coin or currency in
which, any Debenture or interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment on or after the
Stated Maturity thereof (or, in the case of redemption, on or after the
Redemption Date);
(2) reduce the percentage in principal amount of the Outstanding
Debentures, the consent of the Holders of which is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences) provided for in this Indenture;
(3) modify any of the provisions of this Section 9.2, Section 5.13 or
Section 10.5, except to increase any such percentage or to provide that
certain other provi-
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sions of this Indenture cannot be modified or waived without the consent of
the Holder of each Debenture affected thereby; or
(4) modify the provisions in Article XIV with respect to the
subordination of Outstanding Debentures in a manner adverse to the Holders;
provided, further, that, in the case of Debentures issued to the Trust, so long
as any of the Preferred Securities issued by the Trust remains outstanding, (i)
no such amendment shall be made that adversely affects the holders of such
Preferred Securities in any material respect, and no termination of this
Indenture shall occur, and no waiver of any Event of Default or compliance with
any covenant under this Indenture shall be effective, without the prior consent
of the holders of at least a majority of the aggregate Liquidation Amount of the
Preferred Securities then outstanding unless and until the principal of,
premium, if any, and all accrued and, subject to Section 3.7, unpaid interest
(including any Additional Interest) on the Debentures have been paid in full,
and (ii) no amendment shall be made to Section 5.8 that would impair the rights
of the holders of Preferred Securities provided therein without the prior
consent of the holders of each Preferred Security then outstanding unless and
until the principal of, premium, if any, and all accrued and (subject to Section
3.7) unpaid interest (including any Additional Interest) on the Debentures have
been paid in full.
It shall not be necessary for any Act of Holders under this Section 9.2 to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
SECTION 9.3. Execution of Supplemental Indentures.
In executing or accepting the additional trusts created by any supplemental
indenture permitted by this Article IX or the modifications thereby of the
trusts created by this Indenture, the Trustee shall be entitled to receive, and
(subject to Section 6.1) shall be fully protected in relying upon, an Officers'
Certificate and an Opinion of Counsel stating that the execution of such
supplemental indenture is authorized or permitted by this Indenture, and that
all conditions precedent have been complied with.
The Trustee may, but shall not be obligated to, enter into any such
supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
SECTION 9.4. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article IX,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Debentures theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
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SECTION 9.5. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article IX shall
conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 9.6. Reference in Debentures to Supplemental Indentures.
Debentures authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article IX may, and shall if required by
the Company, bear a notation in form approved by the Company as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Debentures so modified as to conform, in the opinion of the Company, to any
such supplemental indenture may be prepared and executed by the Company and
authenticated and delivered by the Trustee in exchange for Outstanding
Debentures.
ARTICLE X
COVENANTS
SECTION 10.1. Payment of Principal, Premium and Interest.
The Company covenants and agrees for the benefit of the Holders that it
shall duly and punctually pay the principal of, premium, if any, and interest
(including Additional Interest) on the Debentures in accordance with the terms
of the Debentures and this Indenture.
SECTION 10.2. Maintenance of Office or Agency.
The Company shall maintain in each Place of Payment for the Debentures an
office or agency where Debentures may be presented or surrendered for payment
and an office or agency where Debentures may be surrendered for registration of
transfer, conversion or exchange and where notices and demands to or upon the
Company in respect of the Debentures and this Indenture may be served. The
Company initially appoints the Trustee, acting through its Corporate Trust
Office, as its agent for said purposes. The Company shall give prompt written
notice to the Trustee of any change in the location of any such office or
agency. If at any time the Company shall fail to maintain such office or agency
or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more other offices
or agencies where the Debentures may be presented or surrendered for any or all
of such purposes, and may from time to time rescind such designations; provided,
however, that no such
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designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in each Place of Payment for
Debentures for such purposes. The Company shall give prompt written notice to
the Trustee of any such designation and any change in the location of any such
office or agency.
SECTION 10.3. Money for Debenture Payments to be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it shall, on
or before each due date of the principal of, premium, if any, or interest on any
of the Debentures, segregate and hold in trust for the benefit of the Persons
entitled thereto a sum sufficient to pay the principal, premium, if any, or
interest so becoming due until such sums shall be paid to such Persons or
otherwise disposed of as herein provided, and shall promptly notify the Trustee
of its failure so to act.
Whenever the Company shall have one or more Paying Agents, it shall, prior
to 10:00 a.m. New York City time on each due date of the principal of or
interest on any Debentures, deposit with a Paying Agent a sum sufficient to pay
the principal, premium, if any, or interest so becoming due, such sum to be held
in trust for the benefit of the Persons entitled to such principal, premium, if
any, or interest, and (unless such Paying Agent is the Trustee) the Company
shall promptly notify the Trustee of its failure so to act.
The Company shall cause each Paying Agent other than the Trustee to execute
and deliver to the Trustee an instrument in which such Paying Agent shall agree
with the Trustee, subject to the provisions of this Section 10.3, that such
Paying Agent shall:
(1) hold all sums held by it for the payment of the principal of,
premium, if any, or interest (including Additional Interest) on Debentures
in trust for the benefit of the Persons entitled thereto until such sums
shall be paid to such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Debentures) in the making of any payment of
principal, premium, if any, or interest (including Additional Interest);
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent; and
(4) comply with the provisions of the Trust Indenture Act applicable
to it as a Paying Agent.
The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Company or such Paying Agent, such sums to be held by the Trustee upon the
same trusts as those upon which such
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sums were held by the Company or such Paying Agent; and, upon such payment by
the Company or any Paying Agent to the Trustee, such Paying Agent shall be
released from all further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of, premium, if any, or
interest (including Additional Interest) on any Debenture and remaining
unclaimed for two years after such principal, premium, if any, or interest has
become due and payable shall (unless otherwise required by mandatory provision
of applicable escheat or abandoned or unclaimed property law) be paid on Company
Request to the Company, or (if then held by the Company) shall (unless otherwise
required by mandatory provision of applicable escheat or abandoned or unclaimed
property law) be discharged from such trust; and the Holder of such Debenture
shall thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in The City of New York, notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such publication, any unclaimed balance of such money then
remaining will be repaid to the Company.
SECTION 10.4. Statement as to Compliance.
The Company shall deliver to the Trustee, within 120 days after the end of
each fiscal year of the Company ending after the date hereof, an Officers'
Certificate, one of the signatories of which shall be the principal executive,
principal financial or principal accounting officer of the Company, covering the
preceding fiscal year, stating whether or not to the best knowledge of the
signers thereof the Company is in default in the performance, observance or
fulfillment of or compliance with any of the terms, provisions, covenants and
conditions of this Indenture, and if the Company shall be in default, specifying
all such defaults and the nature and status thereof of which they may have
knowledge. For the purpose of this Section 10.4, compliance shall be determined
without regard to any grace period or requirement of notice provided pursuant to
the terms of this Indenture.
SECTION 10.5. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any covenant
or condition provided pursuant to Section 9.1(3) or 9.1(4), if before or after
the time for such compliance the Holders of at least a majority in principal
amount of the Outstanding Debentures shall, by Act of such Holders, either waive
such compliance in such instance or generally waive compliance with such
covenant or condition, but no such waiver shall extend to or affect such
covenant or condition except to the extent so expressly waived, and, until such
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waiver shall become effective, the obligations of the Company in respect of any
such covenant or condition shall remain in full force and effect.
SECTION 10.6. Payment of Trust Costs and Expenses.
Since the Trust is being formed solely to facilitate an investment in the
Debentures, the Company, in its capacity as the issuer of the Debentures, hereby
covenants to pay all debts and obligations (other than with respect to the
Preferred Securities and Common Securities) and all costs and expenses of the
Trust (including all costs and expenses relating to the organization of the
Trust, the fees and expenses of the Trustees and all costs and expenses relating
to the operation of the Trust) and to pay any and all taxes, duties, assessments
or governmental charges of whatever nature (other than withholding taxes)
imposed on the Trust by the United States or any other taxing authority, so that
the net amounts received and retained by the Trust and the Property Trustee
after paying such expenses shall be equal to the amounts the Trust and the
Property Trustee would have received had no such costs or expenses been incurred
by or imposed on the Trust. The obligations of the Company to pay all debts,
obligations, costs and expenses of the Trust (other than with respect to the
Preferred Securities and Common Securities) shall constitute additional
indebtedness hereunder and shall survive the satisfaction and discharge of this
Indenture.
SECTION 10.7. Additional Covenants.
The Company covenants and agrees with each Holder of Debentures that it
shall not, and it shall not permit any Subsidiary of the Company to, (i) declare
or pay any dividends or distributions on, or redeem purchase, acquire or make a
liquidation payment with respect to, any shares of the Company's capital stock,
(ii) make any payment of principal of, premium, if any, or interest on or repay,
repurchase or redeem any debt securities of the Company that rank pari passu
with or junior in interest to the Debentures or (iii) make any guarantee
payments with respect to any guarantee by the Company of debt securities of any
subsidiary of the Company if such guarantee ranks pari passu with or junior in
interest to the Debentures (other than (a) dividends or distributions in the
Company's capital stock, (b) any declaration of a dividend in connection with
the implementation of a Rights Plan or the redemption or repurchase of any
rights distributed pursuant to a Rights Plan, (c) payments under the Guarantee
and (d) purchases of Common Stock related to the issuance of Common Stock or
rights under any of the Company's benefit plans for its directors, officers or
employees, related to the issuance of Common Stock or rights under a dividend
reinvestment and stock purchase plan, or related to the issuance of Common Stock
(or securities convertible or exchangeable for Common Stock) as consideration in
an acquisition transaction that was entered into prior to the commencement of
such Extension Period) if at such time (x) there shall have occurred any event
of which the Company has actual knowledge that (A) with the giving of notice or
the lapse of time or both, would constitute an Event of Default with respect to
the Debentures and (B) in respect of which the Company shall not have taken
reasonable steps to cure, (y) if the Debentures are held by the Trust, the
Company shall be in default with respect to its payment of any obligations under
the Guarantee or (z) the Company shall have given
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notice of its election to begin an Extension Period with respect to the
Debentures as provided herein and shall not have rescinded such notice, or such
Extension Period or any extension thereof shall be continuing.
The Company also covenants: (i) to maintain directly or indirectly 100%
ownership of the Common Securities; provided, however, that any permitted
successor of the Company hereunder may succeed to the Company's ownership of the
Common Securities; (ii) not to voluntarily terminate, wind-up or liquidate the
Trust, except (a) in connection with a distribution of the Debentures to the
holders of the Trust Securities in a liquidation of the Trust permitted by the
Trust Agreement or (b) in connection with certain mergers, consolidations or
amalgamations permitted by the Trust Agreement; and (iii) to use its reasonable
efforts, consistent with the terms and provisions of the Trust Agreement, to
cause the Trust to remain classified as a grantor trust and not an association
taxable as a corporation for United States federal income tax purposes.
ARTICLE XI
REDEMPTION OF SECURITIES AT THE OPTION OF THE COMPANY
SECTION 11.1. Applicability of Article.
Redemption of Debentures as permitted or required by any form of Debenture
issued pursuant to this Indenture shall be made in accordance with such form of
Debenture and this Article XI; provided, however, that if any provision of any
such form of Debenture shall conflict with any provision of this Article XI, the
provision of such form of Debenture shall govern. Except as otherwise set forth
in the form of Debenture, each Debenture shall be subject to partial redemption
only in the amount of $50 or integral multiples thereof.
SECTION 11.2. Election to Redeem; Notice to Trustee.
The Company's election to redeem any Debentures shall be evidenced by or
pursuant to a Board Resolution. In case of any redemption of the Debentures at
the election of the Company, the Company shall, not less than 45 nor more than
60 days prior to the Redemption Date (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee of such date and of the
principal amount of Debentures to be redeemed. In the case of any redemption of
Debentures prior to the expiration of any restriction on such redemption
provided in the terms of such Debentures, the Company shall furnish the Trustee
with an Officers' Certificate and an Opinion of Counsel evidencing compliance
with such restriction.
SECTION 11.3. Selection of Debentures to be Redeemed.
If less than all the Debentures are to be redeemed, the particular
Debentures to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the
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Trustee, from the Outstanding Debentures not previously called for redemption,
pro rata or by such other method as the Trustee shall deem fair and appropriate
and which may provide for the selection for redemption of a portion of the
principal amount of any Debenture, provided that the unredeemed portion of the
principal amount of any Debenture shall be in an authorized denomination (which
shall not be less than the minimum authorized denomination) for such Debenture.
If less than all the Debentures are to be redeemed, the particular Debentures to
be redeemed shall be selected not more than 60 days prior to the Redemption Date
by the Trustee, from the Outstanding Debentures of such specified tenor not
previously called for redemption in accordance with the preceding sentence.
The Trustee shall promptly notify the Company in writing of the Debentures
selected for partial redemption and the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires, all
provisions relating to the redemption of Debentures shall relate, in the case of
any Debenture redeemed or to be redeemed only in part, to the portion of the
principal amount of such Debenture which has been or is to be redeemed. If the
Company shall so direct, Debentures registered in the name of the Company, any
Affiliate or any Subsidiary thereof shall not be included in the Debentures
selected for redemption.
SECTION 11.4. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage prepaid,
mailed not later than the 30th day, and not earlier than the 60th day, prior to
the Redemption Date, to each Holder of Debentures to be redeemed, at the address
of such Holder as it appears in the Debenture Register.
Each notice of redemption shall identify the Debentures to be redeemed and
shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) if less than all Outstanding Debentures are to be redeemed, the
identification (and, in the case of partial redemption, the respective
principal amounts) of the particular Debentures to be redeemed;
(d) that on the Redemption Date, the Redemption Price shall become due
and payable upon each such Debenture or portion thereof, and that interest
thereon shall cease to accrue on and after said date; and
(e) the place or places where such Debentures are to be surrendered
for payment of the Redemption Price.
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Notice of redemption of Debentures to be redeemed at the election of the
Company, shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company and shall not be
irrevocable. The notice if mailed in the manner herein provided shall be
conclusively presumed to have been duly given, whether or not the Holder
receives such notice. In any case, a failure to give such notice by mail or any
defect in the notice to the Holder of any Debenture designated for redemption as
a whole or in part shall not affect the validity of the proceedings for the
redemption of any other Debenture.
SECTION 11.5. Deposit of Redemption Price.
Prior to 10:00 a.m. New York City time on the Redemption Date specified in
the notice of redemption given as provided in Section 11.4, the Company shall
deposit with the Trustee or with one or more Paying Agents (or if the Company is
acting as its own Paying Agent, the Company will segregate and hold in trust as
provided in Section 10.3) an amount of money sufficient to pay the Redemption
Price of, and any accrued interest (including Additional Interest) on, all the
Debentures which are to be redeemed on that date.
SECTION 11.6. Payment of Debentures Called for Redemption.
If any notice of redemption has been given as provided in Section 11.4, the
Debentures or portion of Debentures with respect to which such notice has been
given shall become due and payable on the date and at the place or places stated
in such notice at the applicable Redemption Price. On presentation and surrender
of such Debentures at a Place of Payment specified in such notice, such
Debentures or the specified portions thereof shall be paid and redeemed by the
Company at the applicable Redemption Price, together with accrued interest
(including any Additional Interest) to the Redemption Date; provided, however,
that installments of interest whose Stated Maturity is on or prior to the
Redemption Date shall be payable to the Holders of such Debentures, or one or
more Predecessor Debentures, registered as such at the close of business on the
relevant Record Dates according to their terms and the provisions of Section
3.7.
Upon presentation of any Debenture redeemed in part only, the Company shall
execute and the Trustee shall authenticate and make available for delivery to
the Holder thereof, at the expense of the Company, a new Debenture or
Debentures, of authorized denominations, in aggregate principal amount equal to
the unredeemed portion of the Debenture so presented and having the same
Original Issue Date, Stated Maturity and terms. If a Global Debenture is so
surrendered, such new Debenture shall also be a new Global Debenture.
If any Debenture called for redemption shall not be so paid upon surrender
thereof for redemption, the principal of and premium, if any, on such Debenture
shall, until paid, bear interest from the Redemption Date at the rate prescribed
therefor in the Debenture.
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SECTION 11.7. Right of Redemption of Debentures.
The Company, at its option, may redeem the Debentures, in whole or in part,
(i) on or after March 15, 2001 at the redemption prices specified in the form of
the Debenture herein before set forth, together with accrued and unpaid
interest, including Additional Interest, if any, to the Redemption Date, or (ii)
upon the occurrence and during the continuation of a Tax Event, at any time
within 90 days following the occurrence of such Tax Event in respect of the
Trust, at a redemption price equal to 100% of the principal amount thereof, plus
any accrued and unpaid interest, including Additional Interest, if any, to the
Redemption Date; provided that, in either case, if a partial redemption of the
Debentures would result in the delisting of the Preferred Securities or
Debentures from any securities exchange on which the Preferred Securities or
Debentures are then listed, the Company may redeem the Debentures only in whole.
ARTICLE XII
MANDATORY REDEMPTION
SECTION 12.1. Mandatory Redemption.
In the event that the Trust shall be required to repurchase Preferred
Securities pursuant to Article X of the Trust Agreement, the Company shall be
required to redeem a Like Amount of Debentures on a pro rata basis at a
Redemption Price per $50 principal amount of Debentures equal to the Trust
Securities Repurchase Price.
SECTION 12.2. Notice of Redemption.
The Company shall give notice of its obligation to redeem Debentures
pursuant to this Article XII, which notice shall specify the Redemption Date
(but need not specify the principal amount to be redeemed at such time), to the
Trustee no later than the date on which the Trust is required to give notice to
the Property Trustee of a Change of Control and the right of Holders to require
repurchase of Preferred Securities pursuant to Article X of the Trust Agreement.
SECTION 12.3. Deposit of Repurchase Price.
On or prior to the Repurchase Date, the Company shall notify the Trustee of
the principal amount of Debentures to be redeemed on the Redemption Date and the
Company shall redeem Debentures equal in aggregate principal amount to the
Liquidation Amount of Preferred Securities to be repurchased on the Repurchase
Date and cause to be deposited with the Property Trustee or with a Paying Agent
an amount of money in same day funds sufficient to pay the redemption price
therefor.
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SECTION 12.4. Right to Require Repurchase of Debentures.
In the event Debentures are distributed to Holders of Preferred Securities
upon a liquidation of the Trust permitted by the Trust Agreement, the Company
and the Trustee shall cause this Indenture to be amended (which amendment shall
not require the consent of Holders of Debentures) to provide Holders of
Debentures with a right to require the Company to repurchase Debentures upon a
Change of Control substantially similar to the right of Holders of Preferred
Securities to require such a repurchase of Preferred Securities pursuant to
Article X of the Trust Agreement.
SECTION 12.5. Definitions.
For purposes of this Section:
(a) A "Change in Control" shall occur when : (a) the sale, lease,
transfer, conveyance or other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, or all or
substantially all of the assets of the Company and its subsidiaries, taken
as a whole, (b) the adoption of a plan relating to the liquidation or
dissolution of the Company, (c) the consummation of any transaction
(including, without limitation, any merger or consolidation) the result of
which is that any "person" or "group" (as such terms are used in Section
13(d)(3) of the Exchange Act) becomes the "beneficial owner" (as such term
is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly
or indirectly through one or more intermediaries, of more than 50% of the
voting power of the outstanding voting stock of the Company, (d) the
Company consolidates with, or merges with or into, any person, or any
person consolidates with, or merges with or into, the Company, other than
any such transaction where the beneficial owners of the outstanding common
stock of the Company immediately prior to such transaction beneficially own
a majority of the outstanding shares of voting stock of the surviving
person immediately after such transaction, or (e) the first day on which
more than a majority of the members of the Board of Directors of the
Company are not Continuing Directors; provided, however, that a Change of
Control shall not be deemed to have occurred if the last reported sale
price per share of the Common Stock for any ten Trading Days (as defined)
within the period of twenty consecutive Trading Days (x) ending immediately
after the later of the Change of Control and the public announcement of the
Change in Control (in the case of a Change in Control under clause (a),
(b), (c) or (e) above) or (y) ending immediately before the Change in
Control (in the case of a Change in Control under clause (d) above) shall
equal or exceed 105% of the Conversion Price in effect on each such Trading
Day. If not earlier made, the Company shall make a public announcement of a
Change of Control within five Business Days of the occurrence of such
Change of Control.
(b) "Continuing Directors" means as of any date of determination, any
member of the board of directors of the Company who (a) was a member of the
board of direc-
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tors on the date of original issuance of the Debentures or (b) was
nominated for election to the board of directors with the approval of, or
whose election was ratified by, at least two-thirds of the Continuing
Directors who were members of the board of directors at the time of such
nomination or election.
ARTICLE XIII
CONVERSION OF SECURITIES
SECTION 13.1. Conversion Rights.
Subject to and upon compliance with the provisions of this Article XIII,
the Debentures are convertible, at the option of the Holder, and on or before
5:00 p.m. (New York City time) on the second Business Day immediately preceding
the date of repayment of such Debentures, whether at maturity or upon
redemption, into fully paid and nonassessable shares of Common Stock at an
initial conversion premium of 17.5% above the average closing price of the
Common Stock during the ten (10) Trading Days after the Company's first earnings
announcement after the Split-off, as adjusted pursuant to Section 13.3 hereof
(as so adjusted, the "Conversion Price"). A Holder of Debentures may convert any
portion of the principal amount of the Debentures into that number of fully paid
and nonassessable shares of Common Stock (calculated as to each conversion to
the nearest 1/100th of a share) obtained by dividing the principal amount of the
Debentures to be converted by the Conversion Price. In case a Debenture or
portion thereof is called for redemption, such conversion right in respect of
the Debenture or portion so called shall expire at 5:00 p.m. (New York City
time) on the second Business Day immediately preceding the corresponding
Redemption Date, unless the Company defaults in making the payment due upon
redemption.
Notwithstanding the foregoing, no holder of Debentures that is subject to
the restrictions of Section 4 of the Bank Holding Company Act of 1956, as
amended (the "BHCA") (a "BHCA Person"), shall have the right to convert any
Debentures if, after giving effect to such conversion, the BHCA Person, its
affiliates and transferees would own or be deemed to own shares of Common Stock
in excess of either the maximum number of shares of Common Stock which the BHCA
Person is permitted to own under the BHCA and the regulations of the Board of
Governors of the Federal Reserve thereunder or such lower number as the relevant
BHCA Person may have requested in writing to the Conversion Agent. No BHCA
Person shall have the right to assign or transfer its Debentures (other than to
an affiliate) unless such Debentures are assigned or transferred (i) to the
public in an offering registered under the Securities Act, (ii) in a transaction
pursuant to Rule 144 or 144A under the Securities Act in which no person
acquires Debentures convertible into more than 2% of the outstanding Common
Stock, (iii) in a single transaction to a third party who acquires a majority of
the Common Stock without regard to the conversion of any Debentures so
transferred or (iv) in any other manner permitted under the BHCA. The Conversion
Agent may rely on the
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representation of the relevant BHCA Person that a transfer has been made in the
foregoing manner.
SECTION 13.2. Conversion Procedures.
(a) To convert all or a portion of the Debentures, the Holder thereof shall
deliver to the Conversion Agent an irrevocable Conversion Request setting forth
the principal amount of Debentures to be converted, together with the name or
names, if other than the Holder, in which the shares of Common Stock should be
issued upon conversion and, if such Debentures are definitive Debentures,
surrender to the Conversion Agent the Debentures to be converted, duly endorsed
or assigned to the Company or in blank. In addition, a holder of Preferred
Securities may exercise its right under the Trust Agreement to exchange such
Preferred Securities for Debentures which shall be converted into Common Stock
by delivering to the Conversion Agent an irrevocable Conversion Request setting
forth the information called for by the preceding sentence and directing the
Conversion Agent (i) to exchange such Preferred Security for a portion of the
Debentures held by the Trust (at an exchange rate of $50 principal amount of
Debentures for each Preferred Security) and (ii) to immediately convert such
Debentures, on behalf of such Holder, into Common Stock pursuant to this Article
XIII and, if such Preferred Securities are in definitive form, surrendering such
Preferred Securities, duly endorsed or assigned to the Company or in blank. So
long as any Preferred Securities are outstanding, the Trust shall not convert
any Debentures except pursuant to a Conversion Request delivered to the
Conversion Agent by a holder of Preferred Securities.
If a Conversion Request is delivered on or after the Regular Record Date
and prior to the subsequent Interest Payment Date, the Holder shall be required
to pay to the Company the interest payable to the Holder on the subsequent
Interest Payment Date prior to receiving the shares of Common Stock, and shall
be entitled to receive the interest payable on the subsequent Interest Payment
Date, on the portion of Debentures to be converted notwithstanding the
conversion thereof prior to such Interest Payment Date. Except as provided in
the immediately preceding sentence, the Company shall not make, or be required
to make, any payment, allowance or adjustment for accumulated and unpaid
interest, whether or not in arrears, on converted Debentures; provided, however,
that if, during an Extension Period, a notice of redemption of Debentures is
mailed or otherwise given to Holders of Debentures pursuant to Section 11.6 of
this Indenture and a Holder of Debentures converts any Debentures into Common
Stock after the date on which such notice of redemption is mailed or otherwise
given but prior to the relevant Redemption Date, all accrued but unpaid interest
(including Additional Interest, if applicable) through the date of conversion
shall be paid the Holder of such Debenture on the Redemption Date. Except as
otherwise provided in the immediately preceding two sentences, in the case of
any Debenture converted by a Holder of such Debenture, interest with a Stated
Maturity which is after the date of conversion of such Debenture shall not be
payable, and the Company shall not make nor be required to make any other
payment, adjustment or allowance with respect to accrued but unpaid interest
(including Additional Interest, if applicable) on the Debentures being
converted, which shall be deemed to be paid in full. If any Debenture called for
redemption is converted, any money deposited with
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Trustee or with any Paying Agent or so segregated and held in trust for the
redemption of such Debenture shall (subject to any right of the Holder of such
Debenture or any Predecessor Debenture to receive interest as provided in the
last paragraph of Section 3.7 of this Indenture and this paragraph) be paid to
the Company upon Company Request, or if then held by the Company, shall be
discharged from such trust.
Each conversion shall be deemed to have been effected immediately prior to
5:00 p.m. (New York City time) on the day on which the Conversion Request was
received (the "Conversion Date") by the Conversion Agent from the Holder or from
a holder of the Preferred Securities effecting a conversion thereof pursuant to
its conversion rights under the Trust Agreement, as the case may be. The Person
or Persons entitled to receive the Common Stock issuable upon such conversion
shall be treated for all purposes as a record holder or holders of such Common
Stock as of the Conversion Date. As promptly as practicable on or after the
Conversion Date, the Company shall issue and deliver at the office of the
Conversion Agent, unless otherwise directed by the Holder in the Conversion
Request, a certificate or certificates for the number of full shares of Common
Stock issuable upon such conversion, together with the cash payment, if any, in
lieu of any fraction of any share to the Person or Persons entitled to receive
the same. The Conversion Agent shall deliver such certificate or certificates to
each Person or Persons.
(b) Subject to any right of the Holder of such Debenture or any Predecessor
Debenture to receive interest as provided in Section 13.2(a), the Company's
delivery upon conversion of the fixed number of shares of Common Stock into
which the Debentures are convertible (together with the cash payment, if any, in
lieu of fractional shares) shall be deemed to satisfy the Company's obligation
to pay the principal amount at maturity of the portion of Debentures so
converted and any unpaid interest (including Additional Interest, if any)
accrued on such Debentures at the time of such conversion and any interest
payments which would have otherwise accrued after such conversion.
(c) No fractional shares of Common Stock shall be issued as a result of
conversion, but in lieu thereof, the Company shall pay to the Conversion Agent a
cash adjustment in an amount equal to the same fraction of the last reported
sale price of such fractional interest on the date on which the Debentures or
Preferred Securities, as the case may be, were duly surrendered to the
Conversion Agent for conversion, or, if such day is not a Trading Day, on the
next Trading Day, and the Conversion Agent in turn shall make such payment, if
any, to the Holder of the Debentures or the holder of the Preferred Securities
so converted.
(d) In the event of the conversion of any Debenture in part only, a new
Debenture or Debentures for the unconverted portion thereof will be issued in
the name of the Holder thereof upon the cancellation thereof in accordance with
Section 3.6.
(e) In effecting the conversion transactions described in this Section
13.2, the Conversion Agent is acting as agent of the holders of Preferred
Securities (in the exchange of Preferred Securities for Debentures) and as agent
of the Holders of Debentures (in the conver-
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sion of Debentures into Common Stock), as the case may be, directing it to
effect such conversion transactions. The Conversion Agent is hereby authorized
(i) to exchange Preferred Securities for Debentures held by the Trust from time
to time in connection with the conversion of such Preferred Securities in
accordance with this Article XIII and (ii) to convert all or a portion of the
Debentures into Common Stock and thereupon to deliver such shares of Common
Stock in accordance with the provisions of this Article XIII and to deliver to
the Trust a new Debenture or Debentures for any resulting unconverted principal
amount.
SECTION 13.3. Conversion Price Adjustments.
The Conversion Price shall be subject to adjustment (without duplication)
from time to time as follows:
(a) If the Company shall (i) pay a dividend or make a distribution
with respect to the Common Stock in shares of Common Stock, (ii) subdivide
the outstanding shares of Common Stock, (iii) combine the outstanding
shares of Common Stock into a smaller number of shares or (iv) issue by
reclassification of the shares of Common Stock any shares of capital stock
of the Company, then the Conversion Price in effect immediately prior to
such action shall be adjusted so that the Holder of any Debentures
thereafter surrendered for conversion shall be entitled to receive the
number of shares of capital stock of the Company which he would have owned
immediately following such action had such Debentures been converted
immediately prior thereto. An adjustment made pursuant to this Section
13.3(a) shall become effective immediately after the record date in the
case of a dividend or other distribution and shall become effective
immediately after the effective date in case of a subdivision, combination
or reclassification (or immediately after the record date if a record date
shall have been established for such event). If, as a result of an
adjustment made pursuant to this Section 13.3(a), the Holder of any
Debenture thereafter surrendered for conversion shall become entitled to
receive shares of two or more classes or series of capital stock of the
Company, the Board of Directors (whose determination shall be conclusive
and shall be described in a Board Resolution filed with the Trustee) shall
determine the allocation of the adjusted Conversion Price between or among
shares of such classes or series of capital stock.
(b) Other than in connection with a Rights Plan, if the Company shall
issue rights or warrants to all holders of the Common Stock entitling them
(for a period expiring within 45 days after the record date mentioned in
this Section 13.3) to subscribe for or purchase shares of Common Stock at a
price per share less than the Current Market Price per share of Common
Stock on such record date, then the Conversion Price for the Debentures
shall be adjusted to equal the price determined by multiplying the
Conversion Price in effect immediately prior to the date of issuance of
such rights or warrants by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding on the date of issuance of
such rights or warrants plus the number of shares which the aggregate
offering price of the total number of shares so
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offered for subscription or purchase would purchase at such Current Market
Price, and the denominator of which shall be the number of shares of Common
Stock outstanding on the date of issuance of such rights or warrants plus
the number of additional shares of Common Stock offered for subscription or
purchase. Such adjustment shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
rights or warrants. For the purposes of this Section 13.3(b), the number of
shares of Common Stock at any time outstanding shall not include shares
held in the treasury of the Company. The Company shall not issue any rights
or warrants in respect of the shares of Common Stock held in the treasury
of the Company. In case any rights or warrants referred to in this Section
13.3(b) in respect of which an adjustment shall have been made shall expire
unexercised within 45 days after the same shall have been distributed or
issued by the Company, the Conversion Price shall be readjusted at the time
of such expiration to the Conversion Price that would have been in effect
if no adjustment had been made on account of the distribution or issuance
of such expired rights or warrants.
(c) Subject to the last sentence of this Section 13.3(c), if the
Company shall, by dividend or otherwise, distribute to all holders of
Common Stock evidences of its indebtedness, shares of any class or series
of capital stock, cash or assets (including securities, but excluding any
rights or warrants referred to in Section 13.3(b), any dividend or
distribution paid exclusively in cash that may be declared by the Board of
Directors and any dividend or distribution referred to in Section 13.3(a)),
then the Conversion Price shall be reduced to the price determined by
multiplying the Conversion Price in effect immediately prior to the
effectiveness of the Conversion Price reduction contemplated by Section
13.3(c) by a fraction, the numerator of which shall be the Current Market
Price per share of the Common Stock on the date fixed for the payment of
such distribution (the "Reference Date") less the fair market value (as
determined in good faith by the Board of Directors, whose determination
shall be conclusive and described in a Board Resolution), on the Reference
Date, of the portion of the evidences of indebtedness, shares of capital
stock, cash and assets so distributed applicable to one share of Common
Stock and the denominator of which shall be such Current Market Price per
share of Common Stock, such reduction to become effective immediately prior
to the opening of business on the day following the Reference Date. In the
event that such dividend or distribution is not so paid or made, the
Conversion Price shall again be adjusted to be the Conversion Price which
would then be in effect if such dividend or distribution had not occurred.
If the Board of Directors determines the fair market value of any
distribution for purposes of this Section 13.3(c) by reference to the
actual or when issued trading market for any securities comprising such
distribution, it must in doing so consider the prices in such market over
the same period used in computing the Current Market Price per share of
Common Stock. For purposes of this Section 13.3(c), any dividend or
distribution that includes shares of Common Stock or rights or warrants to
subscribe for or purchase shares of Common Stock shall be deemed instead to
be (1) a dividend or distribution of the evidences of
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indebtedness, shares of capital stock, cash or assets other than such
shares of Common Stock or such rights or warrants (making any Conversion
Price reduction required by this Section 13.3(c)) immediately followed by
(2) a dividend or distribution of such shares of Common Stock or such
rights or warrants (making any further Conversion Price reduction required
by Section 13.3(a) or 13.3(b)), except (A) the Reference Date of such
dividend or distribution as defined in this Section 13.3(c) shall be
substituted as (a) "the record date in the case of a dividend or other
distribution," and (b) "the record date for the determination of
stockholders entitled to receive such rights or warrants" and (c) "the date
fixed for such determination" within the meaning of Sections 13.3(a) and
13.3(b), and (B) any shares of Common Stock included in such dividend or
distribution shall not be deemed outstanding for purposes of computing any
adjustment of the Conversion Price in Section 13.3(a).
(d) If the Company shall pay or make a dividend or other distribution
on the Common Stock exclusively in cash (excluding all cash dividends paid
out of the retained earnings of the Company), then the Conversion Price
shall be reduced to equal the price determined by multiplying the
Conversion Price in effect immediately prior to the effectiveness of the
Conversion Price reduction contemplated by this Section 13.3(d) by a
fraction, the numerator of which shall be the Current Market Price per
share of Common Stock on the date fixed for the payment of such
distribution less the amount of cash so distributed (and not excluded as
provided in the above parenthetical phrase) applicable to one share of
Common Stock and the denominator of which shall be such Current Market
Price per share of the Common Stock, such reduction to become effective
immediately prior to the opening of business on the day following the date
fixed for the payment of such distribution; provided, however, that in the
event the portion of the cash so distributed applicable to one share of
Common Stock is equal to or greater than the Current Market Price per share
of the Common Stock on the record date mentioned above, in lieu of the
foregoing adjustment, adequate provision shall be made so that each Holder
of Debentures shall have the right to receive upon conversion the amount of
cash such Holder would have received had such Holder converted each
Debenture immediately prior to the record date for the distribution of the
cash. In the event that such dividend or distribution is not so paid or
made, the Conversion Price shall again be adjusted to be the Conversion
Price which would then be in effect if such record date had not been fixed.
(e) If the Company or any of its subsidiaries shall make a tender or
exchange offer (other than an odd-lot offer) for all or any portion of the
Common Stock and such tender or exchange offer shall involve the payment by
the Company or such subsidiary of consideration per share of Common Stock
having a fair market value (as determined in good faith by the Board of
Directors, whose determination shall be conclusive and described in a Board
Resolution) at the last time (the "Expiration Time") tenders or exchanges
may be made pursuant to such tender or exchange offer that exceeds 110% of
the Current Market Price per share of Common Stock on the Trading Day next
succeeding the Expiration Time, then the Conversion Price shall be reduced
to equal the
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price determined by multiplying the Conversion Price in effect immediately
prior to the effectiveness of the Conversion Price reduction contemplated
by this Section 13.3(e) by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding (including any tendered or
exchanged shares) at the Expiration Time multiplied by the Current Market
Price per share of Common Stock on the Trading Day next succeeding the
Expiration Time and the denominator of which shall be the sum of (x) the
fair market value (determined as aforesaid) of the aggregate consideration
payable to stockholders based on the acceptance (up to any maximum
specified in the terms of the tender or exchange offer) of all shares
validly tendered or exchanged and not withdrawn as of the Expiration Time
(the shares deemed so accepted, up to any such maximum, being referred to
as the "Purchased Shares"), and (y) the product of the number of shares of
Common Stock outstanding (less any Purchased Shares) at the Expiration Time
and the Current Market Price per share of Common Stock on the Trading Day
next succeeding the Expiration Time, such reduction to become effective
immediately prior to the opening of business on the day following the
Expiration Time.
(f) For the purpose of any computation under Sections 13.3(b), (c),
(d) or (e), the "Current Market Price" per share of Common Stock on any
date in question shall be deemed to be the average of the daily Closing
Prices for the five consecutive Trading Days selected by the Company
commencing not more than 20 Trading Days before, and ending not later than
the earlier of the day in question or, if applicable, the day before the
"ex" date with respect to the issuance or distribution requiring such
computation; provided, however, that if another event occurs that would
require an adjustment pursuant to Sections 13.3(a) through (e), inclusive,
the Board of Directors may make such adjustments to the Closing Prices
during such five Trading Day period as it deems appropriate to effectuate
the intent of the adjustments in this Section 13.3, in which case any such
determination by the Board of Directors shall be set forth in a Board
Resolution and shall be conclusive. For purposes of this Section 13.3(f),
the term "ex" date, (i) when used with respect to any issuance or
distribution, means the first date on which the Common Stock is quoted on
the NASDAQ National Market or on such successor securities exchange as the
Common Stock may be listed or in the relevant market from which the Closing
Prices were obtained without the right to receive such issuance or
distribution, and (ii) when used with respect to any tender or exchange
offer, means the first date on which the Common Stock trades regular way on
such securities exchange or in such market after the Expiration Time of
such offer.
(g) The Company may make such reductions in the Conversion Price, in
addition to those required by Sections 13(a) through (e), as it considers
to be advisable to avoid or diminish any income tax to holders of Common
Stock or rights to purchase Common Stock resulting from any dividend or
distribution of stock (or rights to acquire stock) or from any event
treated as such for income tax purposes. The Company from time to time may
reduce the Conversion Price by any amount for any period of time if the
period is at least 20 days, the reduction is irrevocable during the period,
and
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the Board of Directors shall have made a determination that such reduction
would be in the best interest of the Company, which determination shall be
conclusive. Whenever the Conversion Price is reduced pursuant to the
preceding sentence, the Company shall mail to Holders a notice of the
reduction at least 15 days prior to the date the reduced Conversion Price
takes effect. Such notice shall state the reduced Conversion Price and the
period it shall be in effect.
(h) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in the
Conversion Price; provided, however, that any adjustments which by reason
of this Section 13.3(h) are not required to be made shall be carried
forward and taken into account in determining whether any subsequent
adjustment shall be required.
(i) If any action would require adjustment of the Conversion Price
pursuant to more than one of the provisions described above, only one
adjustment shall be made and such adjustment shall be the amount of
adjustment that has the highest absolute value to the Holder of the
Debentures.
SECTION 13.4. Reclassification, Consolidation, Merger or Sale of Assets.
In the event that the Company shall be a party to any transaction involving
(a) any recapitalization or reclassification of the Common Stock (other than a
change in par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination of the Common Stock),
(b) any consolidation of the Company with or merger of the Company into any
other Person, any merger of another Person into the Company (other than a merger
which does not result in a reclassification, conversion, exchange or
cancellation of outstanding shares of Common Stock), (c) any sale, transfer or
lease of all or substantially all of the assets of the Company or (d) any
compulsory share exchange, in each case pursuant to which the Common Stock is
converted into the right to receive other securities, cash or other property,
then lawful provision shall be made as part of the terms of such transaction
whereby the Holder of each Outstanding Debenture shall have the right thereafter
to convert each Debenture only into the kind and amount of securities, cash or
other property receivable upon consummation of such transaction by a holder of
the number of shares of Common Stock into which such Debenture could have been
converted immediately prior to such transaction.
The Company or the Person formed by such consolidation or resulting from
such merger or which acquired such assets or which acquires the shares of the
Company, as the case may be, shall make provision in its certificate or articles
of incorporation or other constituent document to establish such right. Such
certificate or articles of incorporation or other constituent document shall
provide for adjustments which, for events subsequent to the effective date of
such certificate or articles of incorporation or other constituent document,
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shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Article XIII.
SECTION 13.5. Notice of Adjustments of Conversion Price.
Whenever the Conversion Price is adjusted as herein provided:
(a) the Company shall compute the adjusted Conversion Price and shall
prepare a certificate signed by the Chairman of the Board, President or a
Vice President of the Company and by its Treasurer or an Assistant
Treasurer of the Company setting forth the adjusted Conversion Price and
showing in reasonable detail the facts upon which such adjustment is based,
and such certificate shall forthwith be filed with the Trustee, the
Conversion Agent, the Debenture Registrar and the registrar for the
Preferred Securities; and
(b) notice stating that the Conversion Price has been adjusted and
setting forth the adjusted Conversion Price shall as soon as practicable be
mailed by the Company to all record holders of Preferred Securities and
Holders of Debentures at their last addresses as they appear upon the
Debenture Registrar and the securities register for the Trust Securities.
SECTION 13.6. Prior Notice of Certain Events.
In case:
(a) the Company shall (i) declare any dividend (or any other
distribution) on the Common Stock, other than (A) a dividend payable in
shares of Common Stock or (B) a dividend payable in cash that would not
require an adjustment pursuant to Section 13.3(c) or (d), or (ii) authorize
a tender or exchange offer that would require an adjustment pursuant to
Section 13.3(e);
(b) the Company shall authorize the granting to all holders of Common
Stock of rights or warrants to subscribe for or purchase any shares of
stock of any class or series or of any other rights or warrants;
(c) of any reclassification of Common Stock (other than a subdivision
or combination of the outstanding Common Stock, or a change in par value,
or from par value to no par value, or from no par value to par value), or
of any consolidation or merger to which the Company is a party and for
which approval of any stockholders of the Company shall be required, or the
sale or transfer of all or substantially all of the assets of the Company
or of any compulsory share exchange whereby the Common Stock is converted
into other securities, cash or other property; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
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then the Company shall (1) if any Preferred Securities are outstanding, cause to
be filed with the transfer agent for the Preferred Securities, and shall cause
to be mailed to the holders of record of the Preferred Securities, at their last
addresses as they shall appear upon the securities register of the Trust or (2)
cause to be mailed to all Holders at their last addresses as they shall appear
in the Debenture Register, at least 15 days prior to the applicable record or
effective date hereinafter specified, a notice stating (x) the date on which a
record (if any) is to be taken for the purpose of such dividend, distribution,
rights or warrants or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such dividend, distribution,
rights or warrants are to be determined, or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer, share exchange, dissolution, liquidation or winding up (but no failure
to mail such notice or any defect therein or in the mailing thereof shall affect
the validity of the corporate action required to be specified in such notice).
SECTION 13.7. Certain Defined Terms.
The following definitions shall apply to terms used in this Article XIII:
(a) "Closing Prices" of any security on any day means the last
reported sale price for such security, regular way, on such day or, if no
sale takes place on such day, the average of the reported closing bid and
asked prices on such day, regular way, of such security, in either case as
reported on the NYSE Composite Tape or, if the security is not listed or
admitted to trading on the NYSE, on the principal national securities
exchange on which such security is listed or admitted to trading, or, if
not listed or admitted to trading on a national securities exchange, on the
National Market System of the National Association of Securities Dealers,
Inc., or, if such security is not quoted or admitted to trading on such
quotation system, on the principal quotation system on which such security
is listed or admitted to trading or quoted, or, if not listed or admitted
to trading or quoted on any national securities exchange or quotation
system, the average of the closing bid and asked prices of such security in
the over-the-counter market on the day in question as reported by the
National Quotation Bureau Incorporated, or a similar generally accepted
reporting service, or, if not so available in such manner, as furnished by
any NYSE member firm selected from time to time by the Board of Directors
for that purpose or, if not so available in such manner, as otherwise
determined in good faith by the Board of Directors.
(b) "Trading Day" means a day on which securities are traded on the
national securities exchange or quotation system used to determine the
Closing Price.
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SECTION 13.8. Dividend or Interest Reinvestment Plans.
Notwithstanding the foregoing provisions, the issuance of any shares of
Common Stock pursuant to any plan providing for the reinvestment of dividends or
interest payable on securities of the Company and the investment of additional
optional amounts in shares of Common Stock under any such plan, and the issuance
of any shares of Common Stock or options or rights to purchase such shares
pursuant to any employee benefit plan or program of the Company pursuant to any
option, warrant, right or exercisable, exchangeable or convertible security
outstanding as of the date the Debentures were first issued, shall not be deemed
to constitute an issuance of Common Stock or exercisable, exchangeable or
convertible securities by the Company to which any of the adjustment provisions
described above shall apply. There also shall be no adjustment of the Conversion
Price in case of the issuance of any stock (or securities convertible into or
exchangeable for stock) of the Company except as specifically described in this
Article XIII.
SECTION 13.9. Certain Additional Rights.
In case the Company shall, by dividend or otherwise, declare or make a
distribution on the Common Stock referred to in Section 13.3(c) or (d)
(including dividends or distributions referred to in the last sentence of
Section 13.3(c)), then the Holders, upon the conversion thereof subsequent to
5:00 p.m. (New York City time) on the date fixed for the determination of
stockholders entitled to receive such distribution and prior to the
effectiveness of the Conversion Price adjustment in respect of such
distribution, also shall be entitled to receive for each share of Common Stock
into which the Debentures are converted, the portion of the shares of Common
Stock, rights, warrants, evidences of indebtedness, shares of capital stock,
cash and assets so distributed applicable to one share of Common Stock;
provided, however, that, at the election of the Company (whose election shall be
evidenced by a Board Resolution) with respect to all Holders so converting, the
Company may, in lieu of distributing to such Holders any portion of such
distribution not consisting of cash or securities of the Company, pay such
Holders an amount in cash equal to the fair market value thereof (as determined
in good faith by the Board of Directors, whose determination shall be conclusive
and described in a Board Resolution). If any conversion of Debentures described
in the immediately preceding sentence occurs prior to the payment date for a
distribution to holders of Common Stock which the Holder so converted is
entitled to receive in accordance with the immediately preceding sentence, the
Company may elect (such election to be evidenced by a Board Resolution) to
distribute to such Holder a due bill for the shares of Common Stock, rights,
warrants, evidences of indebtedness, shares of capital stock, cash or assets to
which such Holder is so entitled, provided that such due bill (i) meets any
applicable requirements of the principal national securities exchange or other
market on which the Common Stock is then traded and (ii) requires payment or
delivery of such shares of Common Stock, rights, warrants, evidences of
indebtedness, shares of capital stock, cash or assets no later than the date of
payment or delivery thereof to holders of shares of Common Stock receiving such
distribution.
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SECTION 13.10. Trustee Not Responsible for Determining Conversion Price or
Adjustments.
Neither the Trustee nor any Conversion Agent shall at any time be under any
duty or responsibility to any Holder to determine whether any facts exist which
may require any adjustment of the Conversion Price, or with respect to the
nature or extent of any such adjustment when made, or with respect to the method
employed, or herein or in any supplemental indenture provided to be employed, in
making the same. Neither the Trustee nor any Conversion Agent shall be
accountable with respect to the validity or value (or the kind of account) of
any shares of Common Stock or of any securities or property, which may at any
time be issued or delivered upon the conversion of any Debenture; and neither
the Trustee nor any Conversion Agent makes any representation with respect
thereto. Neither the Trustee nor any Conversion Agent shall be responsible for
any failure of the Company to make any cash payment or to issue, transfer or
deliver any shares of Common Stock or stock certificates or other securities or
property upon the surrender of any Debenture for the purpose of conversion, or,
except as expressly herein provided, to comply with any of the covenants of the
Company contained in Article X or this Article XIII.
ARTICLE XIV
SUBORDINATION OF SECURITIES
SECTION 14.1. Debentures Subordinate to Senior Indebtedness.
The Company covenants and agrees, and each Holder of a Debenture, by its
acceptance thereof, likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this Article XIV, the payment of the
principal of, premium, if any, and interest (including any Additional Interest)
on each and all of the Debentures are hereby expressly made subordinate and
subject in right of payment to the prior payment in full of all Senior
Indebtedness.
SECTION 14.2. Payment Over of Proceeds Upon Dissolution, etc.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company (a "Proceeding"), then the holders
of Senior Indebtedness shall be entitled to receive payment in full of all
amounts due or to become due on such Senior Indebtedness, or provision shall be
made for such payment in cash or cash equivalents or otherwise in a manner
satisfactory to the holders of Senior Indebtedness, before the Holders are
entitled to receive or retain any payment or distribution of any kind or
character, whether in cash, property or securities (including any payment or
distribution which may be payable or deliverable by reason of the payment of any
other indebtedness or obligations of the Company subor-
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dinated to the payment of the Debentures, such payment or distribution being
hereinafter referred to as a "Junior Subordinated Payment"), on account of
principal of, premium, if any, or interest (including any Additional Interest)
on the Debentures or on account of the purchase or other acquisition of
Debentures by the Company or any Subsidiary and to that end the holders of
Senior Indebtedness shall be entitled to receive, for application to the payment
thereof, any payment or distribution of any kind or character, whether in cash,
property or securities, including any Junior Subordinated Payment, which may be
payable or deliverable in respect of the Debentures in any such Proceeding.
In the event that, notwithstanding the foregoing provisions of this Section
14.2, the Trustee or the Holder of any Debenture shall have received any payment
or distribution of assets of the Company of any kind or character, whether in
cash, property or securities, including any Junior Subordinated Payment, before
all amounts due or to become due on all Senior Indebtedness are paid in full or
payment thereof is provided for in cash or cash equivalents or otherwise in a
manner satisfactory to the holders of Senior Indebtedness, and if such fact
shall, at or prior to the time of such payment or distribution, have been made
known to the Trustee or such Holder, then and in such event such payment or
distribution shall be paid over or delivered forthwith to the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other
Person making payment or distribution of assets of the Company for application
to the payment of all amounts due or to become due on all Senior Indebtedness
remaining unpaid, to the extent necessary to pay all amounts due or to become
due on all Senior Indebtedness in full, after giving effect to any concurrent
payment or distribution to or for the holders of Senior Indebtedness.
The consolidation of the Company with, or the merger of the Company into,
another Person or the liquidation or dissolution of the Company following the
sale of all or substantially all of its properties and assets as an entirety to
another Person upon the terms and conditions set forth in Article VIII shall not
be deemed a Proceeding for the purposes of this Section 14.2 if the Person
formed by such consolidation or into which the Company is merged or the Person
which acquires by sale such properties and assets as an entirety, as the case
may be, shall, as a part of such consolidation, merger, or sale comply with the
conditions set forth in Article VIII.
SECTION 14.3. Prior Payment to Senior Indebtedness Upon Acceleration of
Debentures.
In the event that any Debentures are declared due and payable before their
Stated Maturity, then and in such event the holders of the Senior Indebtedness
outstanding at the time such Debentures so become due and payable shall be
entitled to receive payment in full of all amounts due on or in respect of such
Senior Indebtedness (including any amounts due upon acceleration), or provision
shall be made for such payment in cash or cash equivalents or otherwise in a
manner satisfactory to the holders of Senior Indebtedness, before the Holders of
the Debentures are entitled to receive any payment or distribution of any kind
or character, whether in cash, properties or securities (including any Junior
Subordinated Pay-
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ment) by the Company on account of the principal of, premium, if any, or
interest (including any Additional Interest) on the Debentures or on account of
the purchase or other acquisition of Debentures by the Company or any
Subsidiary.
In the event that, notwithstanding the foregoing, the Company shall make
any payment to the Trustee or the Holder of any Debenture prohibited by the
foregoing provisions of this Section 14.3, as the case may be, such Holder, then
and in such event such payment shall be paid over and delivered forthwith to the
Company.
The provisions of this Section 14.3 shall not apply to any payment with
respect to which Section 14.2 would be applicable.
SECTION 14.4. No Payment when Senior Indebtedness in Default.
In the event and during the continuation of any default in the payment of
principal of, premium, if any, or interest on any Senior Indebtedness, or in the
event that any event of default with respect to any Senior Indebtedness shall
have occurred and be continuing and shall have resulted in such Senior
Indebtedness becoming or being declared due and payable prior to the date on
which it would otherwise have become due and payable, unless and until such
event of default shall have been cured or waived or shall have ceased to exist
and such acceleration shall have been rescinded or annulled, or (b) in the event
any judicial proceeding shall be pending with respect to any such default in
payment or such event or default, then no payment or distribution of any kind or
character, whether in cash, properties or securities (including any Junior
Subordinated Payment) shall be made by the Company on account of principal of,
premium, if any, or interest (including any Additional Interest), if any, on the
Debentures or on account of the purchase or other acquisition of Debentures by
the Company or any Subsidiary, in each case unless and until all amounts due or
to become due on such Senior Indebtedness are paid in full.
In the event that, notwithstanding the foregoing, the Company shall make
any payment to the Trustee or the Holder of any Debenture prohibited by the
foregoing provisions of this Section 14.4, and if such fact shall, at or prior
to the time of such payment, have been made known to the Trustee or, as the case
may be, such Holder, then and in such event such payment shall be paid over and
delivered forthwith to the Company.
The provisions of this Section 14.4 shall not apply to any payment with
respect to which Section 14.2 would be applicable.
SECTION 14.5. Payment Permitted if No Default.
Nothing contained in this Article XIV or elsewhere in this Indenture or in
any of the Debentures shall prevent (a) the Company, at any time except during
the pendency of any Proceeding referred to in Section 14.2 or under the
conditions described in Sections 14.3 and 14.4, from making payments at any time
of principal of, premium, if any, or interest
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(including Additional Interest) on the Debentures or (b) the application by the
Trustee , at any time except during the pendency of any proceeding referred to
in Section 14.2 or under the conditions described in Section 14.3 and 14.4, of
any money deposited with it hereunder to the payment of or on account of the
principal of, premium, if any, or interest (including any Additional Interest)
on the Debentures or the retention of such payment by the Holders, if, at the
time of such application by the Trustee.
SECTION 14.6. Subrogation to Rights of Holders of Senior Indebtedness.
Subject to the payment in full of all amounts due or to become due on all
Senior Indebtedness, or the provision for such payment in cash or cash
equivalents or otherwise in a manner satisfactory to the holders of Senior
Indebtedness, the Holders shall be subrogated to the extent of the payments or
distributions made to the holders of such Senior Indebtedness pursuant to the
provisions of this Article XIV (equally and ratably with the holders of all
indebtedness of the Company which by its express terms is subordinated to Senior
Indebtedness of the Company to substantially the same extent as the Debentures
are subordinated to the Senior Indebtedness and is entitled to like rights of
subrogation by reason of any payments or distributions made to holders of such
Senior Indebtedness) to the rights of the holders of such Senior Indebtedness to
receive payments and distributions of cash, property and securities applicable
to the Senior Indebtedness until the principal of, premium, if any, and interest
on the Debentures shall be paid in full. For purposes of such subrogation, no
payments or distributions to the holders of the Senior Indebtedness of any cash,
property or securities to which the Holders or the Trustee would be entitled
except for the provisions of this Article XIV, and no payments over pursuant to
the provisions of this Article XIV to the holders of Senior Indebtedness by
Holders or the Trustee, shall, as among the Company, its creditors other than
holders of Senior Indebtedness and the Holders, be deemed to be a payment or
distribution by the Company to or on account of the Senior Indebtedness.
SECTION 14.7. Provisions Solely to Define Relative Rights.
The provisions of this Article XIV are and are intended solely for the
purpose of defining the relative rights of the Holders, on the one hand, and the
holders of Senior Indebtedness, on the other hand. Nothing contained in this
Article XIV or elsewhere in this Indenture or in the Debentures is intended to
or shall (a) impair, as between the Company and the Holders, the obligations of
the Company, which are absolute and unconditional, to pay to the Holders the
principal of, premium, if any, and interest (including any Additional Interest)
on the Debentures as and when the same shall become due and payable in
accordance with their terms, (b) affect the relative rights against the Company
of the Holders and creditors of the Company other than their rights in relation
to the holders of Senior Indebtedness or (c) prevent the Trustee or the Holder
of any Debenture from exercising all remedies otherwise permitted by applicable
law upon default under this Indenture, including filing and voting claims in any
Proceeding, subject to the rights, if any, under this Article XIV of the holders
of
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Senior Indebtedness to receive cash, property and securities otherwise payable
or deliverable to the Trustee or such Holder.
SECTION 14.8. Trustee to Effectuate Subordination.
Each Holder of a Debenture by his or her acceptance thereof authorizes and
directs the Trustee on his or her behalf to take such action as may be necessary
or appropriate to acknowledge or effectuate the subordination provided in this
Article XIV and appoints the Trustee his or her attorney-in-fact for any and all
such purposes.
SECTION 14.9. No Waiver of Subordination Provisions.
No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof that any such holder may have or
be otherwise charged with.
Without in any way limiting the generality of the immediately preceding
paragraph, the holders of Senior Indebtedness may, at any time and from to time,
without the consent of or notice to the Trustee or the Holders, without
incurring responsibility to the Holders and without impairing or releasing the
subordination provided in this Article XIV or the obligations hereunder of the
Holders to the holders of Senior Indebtedness, do any one or more of the
following: (i) change the manner, place or terms of payment or extend the time
of payment of, or renew or alter, Senior Indebtedness, or otherwise amend or
supplement in any manner Senior Indebtedness or any instrument evidencing the
same or any agreement under which Senior Indebtedness is outstanding; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing Senior Indebtedness; (iii) release any Person liable in any
manner for the collection of Senior Indebtedness; and (iv) exercise or refrain
from exercising any rights against the Company and any other Person.
SECTION 14.10. Notice to Trustee.
The Company shall give prompt written notice to the Trustee of any fact
known to the Company which would prohibit the making of any payment to or by the
Trustee in respect of the Debentures. Notwithstanding the provisions of this
Article XIV or any other provision of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts which would prohibit the
making of any payment to or by the Trustee in respect of the Debentures, unless
and until the Trustee shall have received written notice thereof from the
Company or a holder of Senior Indebtedness or from any trustee, agent or
representative therefor; provided, however, that if the Trustee shall not have
received the notice provided for in this Section 14.10 at least two Business
Days prior to the date upon which by the terms hereof any money may become
payable for any purpose (including the payment of the princi-
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pal of, premium, if any, or interest (including any Additional Interest) on any
Debenture), then, anything herein contained to the contrary notwithstanding, the
Trustee shall have full power and authority to receive such money and to apply
the same to the purpose for which it was received and shall not be affected by
any notice to the contrary which may be received by it within two Business Days
prior to such date.
Subject to the provisions of Section 6.1, the Trustee shall be entitled to
rely on the delivery to it of a written notice by a Person representing himself
to be a holder of Senior Indebtedness (or a trustee therefor) to establish that
such notice has been given by a holder of Senior Indebtedness (or a trustee
therefor). In the event that the Trustee determines in good faith that further
evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness to participate in any payment or distribution pursuant to
this Article XIV, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Article XIV, and if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
SECTION 14.11. Reliance on Judicial Order or Certificate of Liquidating
Agent.
Upon any payment or distribution of assets of the Company referred to in
this Article XIV, the Trustee, subject to the provisions of Section 6.1, and the
Holders shall be entitled to rely upon any order or decree entered by any court
of competent jurisdiction in which such Proceeding is pending, or a certificate
of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee
for the benefit of creditors, agent or other Person making such payment or
distribution, delivered to the Trustee or to the Holders, for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of the Senior Indebtedness and other indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article
XIV.
SECTION 14.12. Trustee Not Fiduciary for Holders of Senior Indebtedness.
The Trustee, in its capacity as trustee under this Indenture, shall not be
deemed to owe any fiduciary duty to the holders of Senior Indebtedness and shall
not be liable to any such holders if it shall in good faith mistakenly pay over
or distribute to Holders or to the Company or to any other Person cash, property
or securities to which any holders of Senior Indebtedness shall be entitled by
virtue of this Article XIV or otherwise. With respect to the holders of Senior
Indebtedness, the Trustee undertakes to perform or to observe only such of its
covenants or obligations as are specifically set forth in this Article XIV and
no implied
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<PAGE>
covenants or obligations with respect to holders of Senior Indebtedness shall be
read into this Indenture against the Trustee.
SECTION 14.13. Rights of Trustee as Holder of Senior Indebtedness.
The Trustee in its individual capacity shall be entitled to all the rights
set forth in this Article XIV with respect to any Senior Indebtedness which may
at any time be held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of
its rights as such holder. Nothing in this Article XIV shall apply to claims of,
or payments to, the Trustee under or pursuant to Section 6.7.
In case at any time any Paying Agent other than the Trustee shall have been
appointed by the Company and be then acting hereunder, the term "Trustee" as
used in this Article XIV shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article XIV in addition to or in place of the Trustee.
SECTION 14.14. Article Applicable to Paying Agents.
If at any time any Paying Agent other than the Trustee shall have been
appointed by the Company and be then acting hereunder, the term "Trustee" as
used in this Article XIV shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article XIV in addition or in place of the Trustee.
SECTION 14.15. Certain Conversions or Exchanges Deemed Payment.
For the purposes of this Article XIV only, (a) the issuance and delivery of
Common Stock of the Company upon conversion of Debentures in accordance with
their terms shall not be deemed to constitute a payment or distribution on
account of the principal of, premium, if any, or interest (including any
Additional Interest) on Debentures or on account of the purchase or other
acquisition of Debentures, and (b) the payment, issuance or delivery of cash,
property or securities (other than as provided in clause (a) of this sentence)
upon conversion or exchange of a Debenture shall be deemed to constitute payment
on account of the principal of such security.
SECTION 14.16. Trust Funds Not Subordinated.
Notwithstanding anything contained herein to the contrary, payments from
funds held in trust under Article IV by the Trustee for the payment of principal
of, premium, if any, and interest on the Debentures shall not be subordinated to
the prior payment of any Senior Indebtedness of the Company or subject to the
restrictions set forth in this Article XIV
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and no Holder shall be obligated to pay over any such funds to the Company or
any holder of Senior Indebtedness of the Company or any other creditor of the
Company.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the day and year first above written.
GENTIVA HEALTH SERVICES, INC.
By: __________________________________
Name:
Title:
WILMINGTON TRUST COMPANY,
as Trustee
By: __________________________________
Name:
Title:
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GENTIVA HEALTH SERVICES, INC.
1999 STOCK INCENTIVE PLAN
1. Purpose.
The purpose of the Gentiva Health Services, Inc. 1999 Stock Incentive Plan
(the "Plan"), is to enable Gentiva Health Services, Inc. (the "Company") and
Related Companies (as defined below) to attract and retain employees, Directors
(as defined below) and Consultants (as defined below) who contribute to the
Company's success by their ability, ingenuity and industry, and to enable such
employees, Directors and Consultants to participate in the long-term success and
growth of the Company by giving them an equity interest in the Company. For
purposes of the Plan, a "Related Company" means any corporation, partnership,
joint venture or other entity in which the Company owns, directly or indirectly,
at least a 20% beneficial ownership interest.
2. Types of Awards.
Awards under the Plan may be in the form of (i) incentive stock options
("Incentive Stock Options") within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (hereinafter, including applicable regulations
thereunder, the "Code") or any successor provisions thereto, and (ii) options
that do not qualify as Incentive Stock Options ("Non-Qualified Stock Options")
(collectively, "Stock Options").
3. Administration.
3.1 The Plan shall be administered by a committee (the "Committee") of the
Company's Board of Directors (the "Board") consisting of not less than two
"non-employee directors" (as such term is defined in Rule 16b-3 under the
Securities Exchange Act of 1934 (the "Exchange Act") or any successor rule) who,
to the extent required to satisfy the exception for performance-based
compensation under Section 162(m) of the Code, are also "outside directors"
(within the meaning of Section 162(m) of the Code). The members of the Committee
shall serve at the pleasure of the Board.
3.2 The Committee shall have the authority to grant awards to eligible
employees, Directors and Consultants under the Plan; to adopt, alter and repeal
such administrative rules, guidelines and practices governing the Plan as it
shall deem advisable; to interpret the terms and provisions of the Plan and any
award granted under the Plan; and to otherwise supervise the administration of
the Plan. Subject to the terms of the Plan, the Committee's authority shall
include, but not be limited to, the authority:
(a) to determine whether and to what extent any award will be granted
hereunder;
(b) to select the employees, Directors and Consultants to whom awards
will be granted;
<PAGE>
(c) to determine the number of shares of the common stock, par value
$.10 per share of the Company (the "Common Stock") to be covered by each
award granted hereunder; provided, however, that no more than 300,000
shares (subject to adjustment as provided in Section 4.3 herein) may be
awarded under the Plan to any employee, Director or Consultant in any
calendar year;
(d) to determine the form and the terms and conditions of any award
granted hereunder, including, but not limited to, any restrictions based on
performance and such other factors as the Committee may determine, and to
determine whether the terms and conditions of the award are satisfied;
(e) to determine pursuant to a formula or otherwise the fair market
value of the Common Stock on a given date; provided, however, that if the
Committee fails to make such a determination, fair market value shall mean
the closing sale price of the Common Stock on the principal stock exchange
or stock market on which the Common Stock may be listed or admitted to
trading on a given date;
(f) to amend the terms of any award, prospectively or retroactively;
provided, however, that no amendment shall impair the rights of the award
holder without his or her consent; and
(g) to substitute new Stock Options for previously granted Stock
Options, or for options granted under other plans, in each case including
previously granted options having higher option prices.
3.3 All determinations made by the Committee pursuant to the provisions of
the Plan shall be final and binding on all persons, including the Company and
Plan participants.
3.4 The Committee may delegate to officers or managers of the Company or
any Related Company the authority, subject to such terms as the Committee shall
determine, to perform administrative functions and, with respect to awards
granted to persons not subject to Section 16 of the Exchange Act, to perform
such other functions (including making awards hereunder) as the Committee may
determine, to the extent permitted under Rule 16b-3 of the Exchange Act (if
applicable) and applicable law. Without limiting the foregoing, unless otherwise
determined by the Committee, the Company's Chief Executive Officer, in
consultation with the head of the Company's Human Resources Department, may make
awards of Stock Options to newly hired employees and recently promoted employees
who, in either case, are not subject to Section 16 of the Exchange Act;
provided, however, that the maximum number of shares of Common Stock subject to
any such Stock Option shall be 10,000 shares (subject to adjustment as provided
in Section 4.3 below).
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<PAGE>
4. Stock Subject to Plan.
4.1 The total number of shares of Common Stock reserved and available for
distribution under the Plan shall be 5,000,000 (subject to adjustment as
provided in Section 4.3 below). Such shares may consist of authorized but
unissued shares or treasury shares.
4.2 To the extent an option terminates without having been exercised, the
shares subject to such award shall again be available for distribution in
connection with future awards under the Plan.
4.3 In the event of any merger, reorganization, consolidation, sale of
substantially all assets, recapitalization, Common Stock dividend, Common Stock
split, spin-off, split-up, split-off, distribution of assets or other change in
corporation structure affecting the Common Stock, a substitution or adjustment,
as may be determined to be appropriate by the Committee in its sole discretion,
shall be made in the aggregate number of shares reserved for issuance under the
Plan, the number of shares available for any individual awards, the number and
kind of shares, other securities or other consideration subject to outstanding
awards and the exercise price to be paid by employees, Directors and Consultants
with respect to outstanding awards; provided, however, that no such adjustment
shall increase the aggregate value of any outstanding award.
5. Eligibility.
Officers and other employees of the Company or a Related Company, members
of the Board who are not employees of the Company or a Related Company
("Directors"), and Consultants to the Company or a Related Company are eligible
to be granted awards under the Plan; provided, however, that, to the extent
required under Section 422 of the Code, Incentive Stock Options may be granted
only to officers and other employees of the Company or any subsidiary
corporation in which the Company owns, directly or indirectly, stock having 50%
or more of the total combined voting power of all classes of stock, within the
meaning of Section 424(f) of the Code. For purposes hereof, "Consultant" means
an individual who furnishes services to the Company or a Related Company and (i)
is neither an employee of the Company or any Related Company nor a Director and
(ii) in the determination of the Committee, has made a significant contribution
to the growth and development of the Company.
The participants under the Plan shall be selected from time to time by the
Committee, in its sole discretion, from among those eligible.
6. Terms of Stock Options.
6.1 Option Price. The option price per share of Common Stock purchasable
under a Stock Option shall be determined by the Committee; provided, however,
that the option price of Non-Qualified Stock Options shall not be less than 85%,
and the
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<PAGE>
option price of Incentive Stock Options shall not be less than 100%, of the fair
market value of the Common Stock on the date of award of each such Stock Option.
6.2 Option Term. The term of each Stock Option shall be ten years from the
date of grant thereof, unless a shorter term is provided for by the Committee at
the time of grant, subject to earlier termination as provided in Sections 6.7
and 6.8 hereof.
6.3 Exercisability. Except as otherwise provided by the Committee at the
time of grant, or as provided in Section 9 hereof, (i) Stock Options granted to
employees of the Company or a Related Company shall vest and be first
exercisable in annual installments of 25% of the shares originally subject
thereto, commencing on the first anniversary of the date of grant of the Stock
Option, and an additional 25% of such shares each year thereafter, (ii) Stock
Options granted to Directors shall vest and become first exercisable one year
after the date of grant, and (iii) Stock Options granted to Consultants of the
Company or a Related Company shall vest and become first exercisable no earlier
than six months nor later than five years from the date of grant, as determined
by the Committee. The Committee may accelerate an exercise date of any Stock
Option or otherwise waive the installment exercise provisions at any time
(including at time of grant) in whole or in part. Except as provided in Section
6.7 and 6.8 or otherwise determined by the Committee at any time (including at
the time of grant), a Stock Option shall not be exercisable unless the optionee
is an employee of the Company or a Related Company, or is a Director of the
Company or Consultant to the Company or a Related Company, at the time of
exercise.
6.4 Method of Exercise. Stock Options may be exercised in whole or in part
at any time during the option term by giving written notice of exercise to the
Company specifying the number of shares to be purchased, accompanied by payment
of the option price. Payment of the option price shall be made in cash or cash
equivalents or, if permitted by the Committee (either in the option agreement or
at the time of exercise), by delivery of shares of Common Stock already owned by
the optionee or withholding of shares subject to awards hereunder (in each case,
such shares having a fair market value on the date of exercise equal to the
aggregate option price), or in any other manner permitted by law and as
determined by the Committee, or any combination of the foregoing.
6.5 No Shareholder Rights. An optionee shall have neither rights to
dividends or other rights of a shareholder with respect to shares subject to a
Stock Option until the optionee has given written notice of exercise and has
paid for such shares.
6.6 Non-transferability. Except as otherwise determined by the Committee,
(i) no Stock Option shall be transferable by the optionee other than by will or
by the laws of descent and distribution, and (ii) during the optionee's
lifetime, all Stock Options shall be exercisable only by the optionee.
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<PAGE>
6.7 Effect of Termination of Employment Under Certain Circumstances. If an
optionee who is an employee of the Company or a Related Company ceases to be so
employed, for any reason other than death, retirement, or permanent disability,
any Stock Option held by such optionee under the Plan shall terminate 90 days
after termination of employment. If any such optionee ceases to be an employee
of the Company or a Related Company, by reason of retirement (at age 55 or later
with ten or more years of service, at age 62 or later with five or more years of
service, at age 65 or later, or at such other age as the Committee may
determine) or permanent disability, any Stock Option held by such optionee may
be exercised, to the extent exercisable on the day preceding the date of such
cessation of employment, at any time within one year after such cessation of
employment, at the end of which period the Stock Option shall terminate.
Notwithstanding the foregoing, the Committee in its sole discretion may provide,
at the time of grant or otherwise, for different rules to apply to the
exercisability of Stock Options held by an optionee at the time of each
optionee's cessation of employment. In no event shall a Stock Option be
exercised after the expiration of the term thereof.
6.8 Death of Employee Optionees. If an optionee dies while an employee of
the Company or a Related Company, or within one year after the optionee has
ceased to be an employee by reason of retirement, or by reason of such
optionee's permanent disability, such Stock Option may be exercised, to the
extent exercisable on the day preceding the date such optionee ceases to be an
employee by the estate of such deceased optionee, or by a person or persons who
acquire the right to exercise such option by bequest or inheritance or by reason
of the death of such optionee, at any time within one year after such optionee's
death, or within such shorter period of time as shall be prescribed in the
option agreement, at the end of which period such Stock Option shall terminate.
In no event shall a Stock Option be exercised after the expiration of the term
thereof.
6.9 Termination of Director and Consultant Options. Unless otherwise
provided by the Committee at the time of grant or otherwise, Stock Options
granted to Directors and Consultants shall be subject to the following events of
termination:
(a) in the event a Director is removed from the Board, all unexercised
Stock Options held by such Director on the date of such removal (whether or
not vested) shall expire immediately;
(b) in the event a Director ceases to be a member of the Board, other
than by reason of removal, all unexercised Stock Options held by such
Director at the time the Director ceases to be a member of the Board shall
expire, unless vested, and if vested must be exercised within one year of
the Director's last day as a member of the Board; and
(c) in the event a Consultant no longer furnishes services to the
Company or a Related Company, all unexercised Stock Options held by such
Consultant at the
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<PAGE>
time such Consultant ceases to furnish such services shall expire, unless
vested, and if vested must be exercised within ninety (90) days of the time
such Consultant so ceases to furnish services to the Company.
Notwithstanding the foregoing, in no event shall a Stock Option be exercised
after the expiration of the term thereof.
7. Tax Withholding.
7.1 Each optionee shall, no later than the date as of which the value of an
award first becomes includible in the optionee's gross income for applicable tax
purposes, pay to the Company, or make arrangements satisfactory to the Committee
regarding payment of, any federal, state, local or other taxes of any kind
required by law to be withheld with respect to the award. The obligations of the
Company under the Plan shall be conditional on such payment or arrangements, and
the Company (and, where applicable, any Related Company), shall to the extent
permitted by law, have the right to deduct any such taxes from any payment of
any kind otherwise due to the optionee.
7.2 To the extent permitted by the Committee, and subject to such terms and
conditions as the Committee may provide, an optionee may elect to have the
withholding tax obligation, or any additional tax obligation with respect to any
awards hereunder, satisfied by (i) having the Company withhold shares of Common
Stock (at its fair market value) otherwise deliverable to the optionee with
respect to the award, or (ii) delivering to the Company shares of Common Stock
(at its fair market value) already owned by the optionee.
8. Amendments and Termination.
The Plan shall terminate on November 11, 2009, and no Stock Option shall be
awarded under the Plan on or after such date. The Board may discontinue the Plan
at any time and may amend it from time to time. No amendment or discontinuation
of the Plan shall adversely affect any award previously granted without the
written consent of the employee, non-employee director or Consultant. Amendments
may be made without shareholder approval except as required to satisfy Section
162(m) of the Code or, with respect to Incentive Stock Options, Section 422 of
the Code.
9. Change of Control.
9.1 In the event of a Change of Control, unless otherwise determined by the
Committee at the time of grant or by amendment (with the holder's consent) of
such grant, all outstanding Stock Options awarded under the Plan shall become
fully exercisable and vested.
9.2 A "Change of Control" shall be deemed to occur on the date that any of
the following events occur:
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<PAGE>
(a) any person or persons acting together which would constitute a
"group" for purposes of Section 13(d) of the Exchange Act (other than the
Company or any subsidiary and other than Permitted Holders) shall
beneficially own (as defined in Rule 13d-3 of the Exchange Act), directly
or indirectly, at least 25% of the total voting power of all classes of
capital stock of the Company entitled to vote generally in the election of
the Board;
(b) either (i) Current Directors (as herein defined) shall cease for
any reason to constitute at least a majority of the members of the Board
(for these purposes, a "Current Director" shall mean any member of the
Board as of the effective date of the Plan, and any successor of a Current
Director whose election, or nomination for election by the Company's
shareholders, was approved by at least two-thirds of the Current Directors
then on the Board) or (ii) at any meeting of the shareholders of the
Company called for the purpose of electing directors, a majority of the
persons nominated by the Board for election as directors shall fail to be
elected;
(c) consummation of (i) a plan of complete liquidation of the Company,
or (ii) a merger or consolidation of the Company (A) in which the Company
is not the continuing or surviving corporation (other than a consolidation
or merger with a wholly owned subsidiary of the Company in which all shares
of Common Stock outstanding immediately prior to the effectiveness thereof
are changed into or exchanged for common stock of the subsidiary) or (B)
pursuant to which the Common Stock is converted into cash, securities or
other property, except a consolidation or merger of the Company in which
the holders of the Common Stock immediately prior to the consolidation or
merger have, directly or indirectly, at least a majority of the common
stock of the continuing or surviving corporation immediately after such
consolidation or merger or in which the Board immediately prior to the
merger or consolidation would, immediately after the merger or
consolidation, constitute a majority of the board of directors of the
continuing or surviving corporation; or
(d) consummation of a sale or other disposition (in one transaction or
a series of transactions) of all or substantially all of the assets of the
Company.
9.3 For purposes of this Section 9 under the Plan, "Permitted Holders"
shall mean Miriam Olsten, Stuart Olsten, and Cheryl Olsten, and each of their
spouses, their lineal descendants and their estates and their Affiliates or
Associates (as defined in Rule 12b-2 of the Exchange Act) (collectively the
"Olsten Stockholders"), so long as the Olsten Stockholders beneficially own 20%
or less of the voting power of all classes of capital stock of the Company
entitled to vote generally in the election of the Board; provided, however, such
percentage shall be increased on a percentage basis (rounded to the nearest
whole percent) to the extent the Olsten Stockholders acquire any such capital
stock on conversion of the convertible trust preferred securities which they
hold on March 15, 2000.
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<PAGE>
10. General Provisions.
10.1 Each award under the Plan shall be subject to the requirement that, if
at any time the Committee shall determine that (i) the listing, registration or
qualification of the Common Stock subject or related thereto upon any securities
exchange or under any state or federal law, or (ii) the consent or approval of
any government regulatory body or (iii) an agreement by the recipient of an
award with respect to the disposition of Common Stock is necessary or desirable
(in connection with any requirement or interpretation of any federal or state
securities law, rule or regulation) as a condition of, or in connection with,
the granting of such award or the issuance, purchase or delivery of Common Stock
thereunder, such award shall not be granted or exercised, in whole or in part,
unless such listing, registration, qualification, consent, approval or agreement
shall have been effected or obtained free of any conditions not acceptable to
the Committee.
10.2 Nothing set forth in this Plan shall prevent the Board from adopting
other or additional compensation arrangements. Neither the adoption of the Plan
nor any award hereunder shall confer upon: (i) any employee of the Company, or
of a Related Company, any right to continued employment; (ii) any Director of
the Company any right to continued service on the Board; or (iii) any Consultant
to the Company or a Related Company any right to continued service as a
consultant.
10.3 Determinations by the Committee under the Plan relating to the form,
amount and terms and conditions of awards need not be uniform, and may be made
selectively among persons, who receive or are eligible to receive awards under
the Plan, whether or not such persons are similarly situated.
10.4 With respect to persons subject to Section 16 of the Exchange Act,
transactions under the Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successor under the Exchange Act. To the extent
that any provision of the Plan or action by the Committee fails to so comply, it
shall be deemed null and void, to the extent permitted by law and deemed
advisable by the Committee.
10.5 No member of the Board or the Committee, nor any officer or employee
of the Company acting on behalf of the Board or the Committee, shall be
personally liable for any action, determination or interpretation taken or made
with respect to the Plan, and all members of the Board or the Committee and all
officers or employees of the Company acting on their behalf shall, to the extent
permitted by law, be fully indemnified and protected by the Company in respect
of any such action, determination or interpretation.
11. Effective Date of Plan.
The Plan was originally adopted by the Board on November 11, 1999.
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GENTIVA HEALTH SERVICES, INC.
STOCK & DEFERRED COMPENSATION PLAN
FOR NON-EMPLOYEE DIRECTORS
(As Amended and Restated as of April 1, 2000)
SECTION 1. Introduction.
The Gentiva Health Services, Inc. Stock & Deferred Compensation Plan for
Non-Employee Directors (the "Plan") provides for the payment of annual retainer
fees of non-employee directors of Gentiva Health Services, Inc. in the form of
Shares or, at the election of a non-employee director, in up to 50% in cash and
the remainder in the form of Shares. It also provides an opportunity for the
non-employee directors to defer the portion of their annual retainer fees
payable in Shares and have them deemed invested in Shares. The Plan is intended
to encourage qualified individuals to accept nominations as directors of Gentiva
Health Services, Inc. and to strengthen the mutuality of interest between the
non-employee directors and Gentiva Health Services, Inc.'s other shareholders.
SECTION 2. Definitions.
For purposes of the Plan, the following terms shall be defined as set forth
below:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended from time to
time. References to any provision of the Code shall be deemed to include
successor provisions thereto and regulations thereunder.
(c) "Company" means Gentiva Health Services, Inc., a corporation organized
under the laws of Delaware, or any successor corporation.
(d) "Director" means a member of the Board who is not employed by the
Company or any of its subsidiaries.
(e) "Plan" means this Stock & Deferred Compensation Plan for Non-Employee
Directors.
<PAGE>
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(f) "Plan Benefits" means the benefits payable in Shares described in
Sections 5 and 6 hereof.
(g) "Plan Year" means a period of approximately twelve months beginning on
the date of the Company's annual general meeting of shareholders for a year and
ending on the day immediately preceding the Company's annual general meeting of
shareholders for the following year; provided, however, that the first Plan Year
shall begin on the Effective Date and end on the day immediately preceding the
Company's annual general meeting of shareholders during calendar year 2001.
(h) "Shares" means Common Stock, $0.10 par value per share, of the Company.
SECTION 3. Administration.
The Plan shall be administered by the Board. The Board shall have full
authority to construe and interpret the Plan, and any action of the Board with
respect to the Plan shall be final, conclusive, and binding on all persons.
Subject to adjustment as provided in Section 7(g) hereof, the total number of
Shares reserved for issuance under the Plan shall be 150,000.
SECTION 4. Annual Retainer.
(a) On and after the Effective Date of this Plan, each Director's annual
retainer fee for a Plan Year shall, subject to any deferral election made
pursuant to Section 5 below and subject to any election to be paid currently in
cash under Section 4(c) below, be the number of Shares (rounded to the nearest
100 Shares) determined by dividing $25,000 by the average closing price of
Shares on the principal stock exchange or stock market on which the Shares may
be listed or admitted to trading for the ten trading days immediately preceding
the date of the Company's annual general meeting of shareholders on the first
day of the Plan Year at which Directors are elected or reelected. Such annual
retainer fee shall be payable on an annual basis 30 days following such annual
general meeting of shareholders. The annual retainer fee payable to a person who
becomes a Director other than at an annual general meeting of shareholders
shall, subject to any deferral election made pursuant to Section 5 below and
subject to any election to be paid currently in cash under Section 4(c) below,
be the number of Shares (rounded up to the nearest Share) determined by
multiplying the number of Shares determined pursuant to the first sentence of
this Section 4(a) for the Plan Year during which such person becomes a Director
by a fraction, the numerator of which is 365 minus the number of days elapsed
since the last annual general meeting of shareholders and the denominator of
which is 365. Such Shares shall be payable on the 30th day following the day on
which the person becomes a Director.
<PAGE>
-3-
(b) Shares distributed to a Director shall be vested in full at the time of
distribution.
(c) Each Director may make an irrevocable election on or before the
December 31 immediately preceding the beginning of a Plan Year by written notice
to the Company to receive payment in cash of up to 50% (in increments of 5%) of
the compensation otherwise payable during the Plan Year as his or her annual
retainer fee for service as a Director. Notwithstanding the foregoing, a
Director may make such an election within ten days after the later of the
Effective Date or first becoming eligible to participate in the Plan, with
respect to compensation payable after the effective date of the election. An
election under this Section 4(c) shall continue in effect until the Director
notifies the Company in writing, on or prior to the December 31 immediately
preceding the commencement of any Plan Year, that the Director wishes to change
his or her election hereunder for compensation payable during such Plan Year and
succeeding periods. All compensation which a Director elects to be paid in cash
pursuant to this Section 4(c) shall be payable quarterly in advance. If a
Director elects to receive a portion of his or her annual retainer fee in cash
hereunder, the remainder of the annual retainer fee shall be payable, subject to
any deferral election made pursuant to Section 5 below, in Shares in accordance
with Section 4(a) above, with the number of such Shares determined and set forth
in Section 4(a) above but substituting the amount of the annual retainer fee not
payable in cash for $25,000 therein.
SECTION 5. Share Unit Accounts.
The Company shall maintain a Share unit account (an "Account") for each
Director. Share units will be credited to each such Account as follows:
(a) Each Director may make an irrevocable election on or before the
December 31 immediately preceding the beginning of a Plan Year by written notice
to the Company, to defer payment of all of the compensation otherwise payable in
the form of Shares pursuant to Section 4 above during the Plan Year as his or
her annual retainer fee for service as a Director. Notwithstanding the
foregoing, a Director may make such an election within 10 days after the later
of the Effective Date or first becoming eligible to participate in the Plan,
with respect to compensation payable after the effective date of the election.
All compensation which a Director elects to defer pursuant to this Section 5(a)
shall be credited in the form of Share units to the Director's Account. The
number of units so credited will be equal to the number of Shares deferred by
the Director in his or her deferral election. Deferrals of compensation
hereunder shall continue until the Director notifies the Company in writing, on
or prior to the December 31 immediately preceding the commencement of any Plan
Year, that the Director wishes his or her compensation payable during such Plan
Year and succeeding periods to be distributed as Shares or, in part, cash on a
current basis, as provided above.
<PAGE>
-4-
(b) If any dividends are payable on Shares during the deferral period,
dividend equivalents equal to the dividend that would have been payable on the
units credited to a Director's Account if such units had constituted Shares
shall be paid to the Director in cash at the time the corresponding dividends
are paid on Shares.
SECTION 6. Plan Benefits.
(a) Form. The Plan Benefit of a Director shall consist of Shares equal in
number to the Share units in the Director's Account. Such Share units shall be
fully vested at all times. Any fractional Share unit shall be paid in cash.
(b) Distribution.
(i) The Plan Benefit of a Director shall be distributed either (x) in
single lump sum at the time of termination of the Director's service on the
Board or (y) in up to three annual installments beginning at the time of
termination of the Director's service on the Board. Each Director may elect
the form of distribution, and such election must be made in the form
designated by the Company from time to time, must be made within 10 days
after the Director first becomes eligible to participate in the Plan, and
shall be irrevocable once filed with the Company; provided, however, that
Director may file a new election as to the form of distribution if such
election is filed at least one year in advance of termination of service on
the Board. In the absence of a timely election by a Director hereunder, the
Director shall be deemed to have elected to have his or her Plan Benefit
distributed in a single lump sum at the time of termination of the
Director's service on the Board.
(ii) In the case of the death of a Director, the Director's Plan
Benefit shall be distributed, within a reasonable time as determined by the
Company, after the Director's death to the Director's beneficiary or
beneficiaries, as specified by the Director on a form furnished by and
filed with the Secretary of the Company. If no beneficiary has been
designated by the Director or if no beneficiary survives the Director, the
undistributed balance of his or her Plan Benefit shall be distributed to
the Director's surviving spouse as beneficiary if such spouse is still
living or, if not living, in equal shares to the then living children of
the Director as beneficiaries or, if none, to the Director's estate as
beneficiary.
SECTION 7. General.
(a) Nontransferability. Except as provided in Section 6(b)(ii), no payment
of any Plan Benefit of a Director shall be anticipated, assigned, attached,
garnished, optioned, transferred or made subject to any creditor's process,
whether voluntarily or involuntarily or by operation of law. Any act in
violation of this subsection shall be void.
<PAGE>
-5-
(b) Compliance with Legal and Trading Requirements. The Plan shall be
subject to all applicable laws, rules and regulations, including, but not
limited to, federal and state laws, rules and regulations, and to such approvals
by any regulatory or governmental agency as may be required. No provision of the
Plan shall be interpreted or construed to obligate the Company to register any
Shares under federal or state securities laws. The transfer by a Director of
Shares distributed pursuant to the Plan will be subject to such restrictions as
the Company deems necessary or desirable in connection with federal or state
securities laws, and Share certificates will bear a legend setting forth any
such restriction.
(c) Taxes. The Company is authorized to withhold from any payment made
under this Plan any amounts of withholding and other taxes due in connection
therewith, and to take such other action as the Company may deem advisable to
enable the Company and a Director to satisfy obligations for the payment of any
withholding taxes and other tax obligations relating thereto.
(d) Amendment. The Board may amend, alter, suspend, discontinue, or
terminate the Plan (including, without limitation, amending the dollar amount
set forth in Section 4(a) hereof) without the consent of shareholders of the
Company or individual Directors; provided, however, that, without the consent of
an affected Director, no amendment, alteration, suspension, discontinuation, or
termination of the Plan may materially impair the rights or, in any other
manner, materially and adversely affect the rights of such Director hereunder.
(e) Unfunded Status of Awards. This Plan (other than Section 4 hereof) is
intended to constitute an "unfunded" plan of deferred compensation. With respect
to any payments not yet made to a Director, nothing contained in the Plan shall
give any such Director any rights that are greater than those of a general
creditor of the Company; provided, however, that the Company may authorize the
creation of trusts or make other arrangements to meet the Company's obligations
under the Plan to deliver Shares, or other property pursuant to any award, which
trusts or other arrangements shall be consistent with the "unfunded" status of
the Plan unless the Company otherwise determines with the consent of each
affected Director.
(f) Nonexclusivity of the Plan. The adoption of the Plan by the Board shall
not be construed as creating any limitations on the power of the Board to adopt
such other compensation arrangements as it may deem desirable, including,
without limitation, the granting of options on Shares and other awards otherwise
than under the Plan, and such arrangements may be either applicable generally or
only in specific cases.
(g) Adjustments. In the event that subsequent to the Effective Date any
dividend in Shares, recapitalization, Share split, reverse split,
reorganization, merger, consolidation, spin-off, combination, repurchase, or
share exchange, or other such change, affects the Shares such that they are
increased or decreased or changed into or exchanged for a different number or
kind of Shares, other securities of the Company or of another corporation or
other
<PAGE>
-6-
consideration, then in order to maintain the proportionate interest of the
Directors and preserve the value of the Directors' Share units and to maintain
the value of the Plan, there shall automatically be substituted (i) for each
Share unit a new unit and (ii) for the number of Shares set forth in Section 3
above a number of Shares or other consideration, in the case of (i) and (ii)
above, representing the number and kind of Shares, other securities or other
consideration into which each outstanding Share shall be changed or for which
each such Share shall be exchanged. The substituted units shall be subject to
the same terms and conditions as the original Share units.
(h) No Right to Remain on the Board. Neither the Plan nor the crediting of
Share units under the Plan shall be deemed to give any individual a right to
remain a director of the Company or create any obligation on the part of the
Board to nominate any Director for reelection by the shareholders of the
Company.
(i) Governing Law. The validity, construction, and effect of the Plan shall
be determined in accordance with the laws of the State of New York, without
giving effect to principles of conflict of laws thereof.
(j) Effective Date. The Plan shall become effective on April 1, 2000 (the
"Effective Date").
(k) Titles and Headings. The titles and headings of the Sections in the
Plan are for convenience of reference only. In the event of any conflict, the
text of the Plan, rather than such titles or headings, shall control.
--------------------------------------------------
GENTIVA HEALTH SERVICES, INC.
OLSTEN HEALTH SERVICES HOLDING CORP.,
AND EACH OF THE SUBSIDIARY BORROWING CORPORATIONS
LISTED ON THE SIGNATURE PAGES HERETO,
as Borrower,
THE LENDING INSTITUTIONS LISTED IN ANNEX I ATTACHED HERETO, and
FLEET CAPITAL CORPORATION,
as Administrative Agent
and
FleetBoston Robertson Stephens Inc.,
as Arranger
==================================================
LOAN AND SECURITY AGREEMENT
Dated: March ___, 2000
Amount: $150,000,000.00
==================================================
<PAGE>
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT, is made this day of March, 2000, by and among
the lending institutions listed in Annex I attached hereto and incorporated
herein by reference (each a "Lender", and collectively, "Lenders"), Fleet
Capital Corporation , a Rhode Island corporation with an office at 200
Glastonbury Boulevard, Glastonbury, CT 06033, as administrative agent for the
Lenders ("Agent"), and Gentiva Health Services, Inc., a Delaware corporation
with its chief executive office at 175 Broad Hollow Road, Melville, NY 11747
(the "Company"), Olsten Health Services Holding Corp., a Delaware corporation
with its chief executive office at 175 Broad Hollow Road, Melville, NY 11747
("OHS")and each of the Subsidiary Borrowing Corporations listed on the signature
pages hereto, each with a state of incorporation and chief executive office as
listed on the exhibits hereto (each of the Company, OHS and each Subsidiary
Borrowing Corporation is a "Borrower," and collectively, "Borrower").
Capitalized terms used in this Loan and Security Agreement ("Agreement")
have the meanings assigned to them in Appendix A, General Definitions.
Accounting terms not otherwise specifically defined herein shall be construed in
accordance with GAAP, consistently applied.
SECTION 1. CREDIT FACILITY
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in this Agreement and the other Loan
Documents, Agent and Lenders agree to make credit facilities of up to One
Hundred and Fifty Million Dollars ($150,000,000.00) ("Total Revolving Credit
Facility") available upon Borrower's request therefor, as follows:
1.1 Revolving Credit Loans.
1.1.1 Loans and Reserves. Each Lender agrees, severally, for so long as no
Default or Event of Default exists, to make Revolving Credit Loans to Borrower
from time to time until the Revolving Credit Maturity Date, as requested by
Borrower in the manner set forth in subsection 3.1.1 hereof, up to a maximum
principal amount at any time outstanding equal to such Lender's Pro Rata
Percentage multiplied by the sum of (i) the Borrowing Base at such time minus
(ii) the sum of the LC Amount and reserves, if any, established pursuant to this
subsection 1.1.1. No Lender's portion of the Revolving Credit Loans shall at any
time exceed its respective Pro Rata Share. Agent shall have the right to
establish reserves in such amounts and with respect to the following matters, as
Agent shall deem necessary or appropriate against the amount of Revolving Credit
Loans which Borrower may otherwise request under this subsection 1.1.1: (i) sums
chargeable against Borrower's Loan Account as Revolving Credit Loans under any
section of this Agreement; (ii) amounts owing by Borrower to any Person to the
extent secured by a Lien on, or trust over, any Property of Borrower (except for
amounts secured by Liens permitted under subsections 8.2.5 (d) and (e)); and
(iii) such other matters, events, conditions or contingencies as to which Agent
reasonably determines in accordance with Agent's customary practices reserves
should be established from time to time hereunder.
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<PAGE>
1.2 Use of Proceeds. The Revolving Credit Loans shall be used solely for
the following purposes: (i) certain costs incurred in connection with Borrower's
divestiture from its parent, (ii) the Borrower's working capital needs, in a
manner consistent with the provisions of this Agreement and all applicable laws,
and (iii) Permitted Acquisitions. Notwithstanding the foregoing, the Revolving
Credit Loans may be used for acquisitions other than Permitted Acquisitions if
such acquisitions are approved in advance in writing by the Majority Lenders.
1.3 Letters of Credit; LC Guaranties. Each Lender agrees, severally, that a
letter of credit subfacility shall be made available to Borrower as part of the
Total Revolving Credit Facility as set forth in this section. In order to
implement this letter of credit subline, Agent agrees, for so long as no Default
or Event of Default exists, and if requested by Borrower, to: (i) issue its, or
cause to be issued by its Affiliate, standby Letters of Credit for the account
of Borrower or (ii) execute LC Guaranties by which Agent or its Affiliate shall
guaranty the payment or performance by Borrower of its reimbursement obligations
with respect to standby Letters of Credit and standby letters of credit issued
for Borrower's account by other Persons in support of Borrower's obligations
(other than obligations for the repayment of Money Borrowed), provided that the
LC Amount at any time shall not exceed the lesser of (i) Thirty Million Dollars
($30,000,000.00) and (ii) the Borrowing Base minus the sum of outstanding
Revolving Credit Loans and reserves permitted by subsection 1.1.1 hereof, if
any. No Letter of Credit or LC Guaranty may have an expiration date that is
after the last day of the Original Term except to the extent that Borrower
provides Agent, for the ratable benefit of the Lenders, at the time of and as a
condition to the issuance thereof with collateral acceptable to Agent in the
face amount thereof. Any amounts paid by Agent or Issuer under any LC Guaranty
or in connection with any Letter of Credit shall be treated as Revolving Credit
Loans, shall be secured by all of the Collateral and shall bear interest and be
payable at the same rate and in the same manner as Revolving Credit Loans. Each
Lender shall be directly and unconditionally obligated to Agent, according to
its Pro Rata Percentage, to reimburse Agent, without setoff or deduction of any
kind of nature, for honoring any drawing under any Letter of Credit or making
any payment under any LC Guaranty (without regard to the occurrence of a Default
or an Event of Default including, without limitation, following the commencement
of any bankruptcy, reorganization, insolvency, liquidation or dissolution
proceeding). The amount of Agent's payment (and the respective reimbursements of
the Lenders to Agent, as applicable) shall automatically constitute a Revolving
Credit Loan without regard to any borrowing condition herein and without any
request, consent or other action of Borrower.
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<PAGE>
SECTION 2. INTEREST, FEES AND CHARGES
2.1 Interest.
2.1.1 Revolving Credit Interest:
(a) Rate Options. At the time of each Revolving Credit Loan under the
Revolving Credit Facility, and thereafter from time to time, Borrower shall have
the right, subject to the terms and conditions of this Agreement, and provided
no Default or Event of Default has occurred and is continuing, to designate to
Agent in writing that all or a portion of the Revolving Credit Loans shall bear
interest at either the (i) Revolving Credit LIBOR Rate or (ii) Revolving Credit
Base Rate. Interest on each portion thereof shall accrue and be paid at the time
and rate applicable to the respective option selected by Borrower or otherwise
governing under the terms of this Agreement. If for any reason the Revolving
Credit LIBOR Rate option is unavailable, the Revolving Credit Base Rate shall
apply.
(i) Base Rate Option:
If Borrower desires to have the Revolving Credit Base Rate apply to a
Loan being requested under the facility established pursuant to Section 1.1
hereof, a request for a Revolving Credit Base Rate Loan may be made in the
manner specified in subsection 3.1.1(a). The rate of interest on Revolving
Credit Base Rate Loans shall increase or decrease by an amount equal to any
increase or decrease in the Base Rate effective as of the opening of
business on the day that any such change in the Base Rate occurs. There
shall be no minimum amount applicable to requests for a Revolving Credit
Base Rate Loan.
(ii) Revolving Credit LIBOR Rate Option:
(A) Requests. Provided no Default or Event of Default has occurred and
is continuing, and subject to the provisions of this subsection
2.1.1(a)(ii) hereof, if Borrower desires to have the Revolving Credit LIBOR
Rate apply to all or a portion of the Revolving Credit Loans, Borrower
shall give Agent a written irrevocable request no later than 11:00 A.M.
Eastern time on the second (2nd) London Business Day prior to the requested
borrowing date specifying (i) the date the Revolving Credit LIBOR Rate
shall apply (which shall be a London Business Day), (ii) the LIBOR Interest
Period, and (iii) the amount to be subject to the Revolving Credit LIBOR
Rate provided that such amount shall be an integral multiple of One Million
Dollars ($1,000,000.00). In no event may Borrower have outstanding at any
time LIBOR Rate Loans with more than five (5) different LIBOR Interest
Periods.
(B) LIBOR Interest Periods. Revolving Credit LIBOR Rate Loans shall be
selected by Borrower for a LIBOR Interest Period during
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<PAGE>
which the Revolving Credit LIBOR Rate is applicable; provided, however,
that if the LIBOR Interest Period would otherwise end on a day which is not
a London Business Day, such LIBOR Interest Period shall be extended to the
next succeeding London Business Day as is the Bank's custom in the market
to which such Revolving Credit LIBOR Rate Loan relates. All accrued and
unpaid interest on a Revolving Credit LIBOR Rate Loan shall be paid in
accordance with Section 3.2.2. No LIBOR Interest Period with respect to the
Revolving Credit LIBOR Rate Loans may end after the Revolving Credit
Maturity Date. Subject to all of the terms and conditions applicable to a
request to convert all or a portion of the Revolving Credit Loans to a
Revolving Credit LIBOR Rate Loan, Borrower may extend a Revolving Credit
LIBOR Rate Loan as of the last day of the LIBOR Interest Period to a new
Revolving Credit LIBOR Rate Loan. If Borrower fails to notify Agent of the
LIBOR Interest Period for a subsequent Revolving Credit LIBOR Rate Loan at
least two (2) London Business Days prior to the last day of the then
current LIBOR Interest Period of an outstanding Revolving Credit LIBOR Rate
Loan, or if an Event of Default has occurred and is outstanding two (2)
London Business Days prior to the last day of the then current LIBOR
Interest Period of any outstanding Revolving Credit LIBOR Rate Loan, then
such outstanding Revolving Credit LIBOR Rate Loan shall, at the end of the
applicable LIBOR Interest Period, accrue interest as a Revolving Credit
Base Rate Loan as provided in subsection 2.1.1(i) hereof.
(C) Adjustments. The Adjusted LIBOR Rate may be automatically adjusted
by Agent on a prospective basis to take into account the additional or
increased cost to any Lender of maintaining any necessary reserves for
Eurodollar deposits or increased costs due to changes in applicable United
States law or regulation or the interpretation thereof occurring subsequent
to the commencement of the then applicable LIBOR Interest Period, including
but not limited to changes in tax laws (except changes of general
applicability in corporate income tax laws) and changes in the reserve
requirements imposed by the Board of Governors of the Federal Reserve
System (or any successor or other applicable governing body), that increase
the cost to any Lender of funding the Revolving Credit LIBOR Rate Loan.
Agent shall promptly give Borrower notice of such a determination and
adjustment, which determination shall be prima facie evidence of the
correctness of the fact and the amount of such adjustment.
(D) Unavailability. If Borrower shall have requested the rate based on
the Adjusted LIBOR Rate in accordance with this subsection 2.1.1(a)(ii) and
Agent shall have determined, in good faith, that Eurodollar deposits equal
to the amount of the principal of the requested Revolving Credit LIBOR Rate
Loan and for the LIBOR Interest Period specified are unavailable, or that
the rate based on the Adjusted LIBOR Rate will not adequately and fairly
reflect the cost of the Adjusted LIBOR Rate applicable to the specified
LIBOR Interest Period, of making or maintaining the principal amount of the
requested Revolving Credit LIBOR Rate Loan during the LIBOR Interest Period
specified,
5
<PAGE>
or that by reason of circumstances affecting Eurodollar markets, adequate
means do not exist for ascertaining the rate based on the Adjusted LIBOR
Rate applicable to the specified LIBOR Interest Period, Agent shall
promptly give notice of such determination to Borrower that the rate based
on the Adjusted LIBOR Rate is not available. A determination, in good
faith, by Agent hereunder shall be prima facie evidence of the correctness
of the fact and amount of such additional costs or unavailability. Upon
such a determination, (i) the obligation to convert to, or maintain a
Revolving Credit LIBOR Rate Loan at the rate based on the Adjusted LIBOR
Rate shall be suspended until Agent shall have notified Borrower that such
conditions shall have ceased to exist, and (ii) the portion of the
Revolving Credit Loans subject to the request or requested conversion shall
accrue interest at the Revolving Credit Base Rate.
2.1.2 Default Rate of Interest. Upon the occurrence and during the
continuation of an Event of Default (i) the principal amount of all Loans shall
bear interest at a rate per annum equal to two (2) percentage points above the
interest rate otherwise applicable thereto (the "Default Rate") and (ii) the
Letters of Credit and LC Guaranty Fee referred to in Section 2.4 hereof shall
automatically increase to three percent (3%) per annum.
2.1.3 Maximum Interest. In no event whatsoever shall the aggregate of all
amounts deemed interest hereunder or under any of the other Loan Documents and
charged or collected pursuant to the terms of this Agreement or pursuant to any
of the other Loan Documents exceed the highest rate permissible under any law
which a court of competent jurisdiction shall, in a final determination, deem
applicable hereto. If any provisions of this Agreement or any of the other Loan
Documents are in contravention of any such law, such provisions shall be deemed
amended to conform thereto.
2.2 Computation of Interest and Fees. Interest and Letter of Credit fees
and unused Line Fees, termination charges and collection charges hereunder shall
be calculated daily and shall be computed on the actual number of days elapsed
over a year of 360 days. For the purpose of computing interest hereunder, all
items of payment received by Agent shall be deemed applied by Agent on account
of the Obligations (subject to final payment of such items) on the Business Day
of receipt by Agent (determined in accordance with Section 3.4 hereof) of fully
collected funds, including fully collected funds received from the Dominion
Account.
2.3 Commitment Fee. Borrower shall pay to Agent the commitment fee provided
for in the Fee Letter dated January 19, 2000 among Agent, the Company and OHS,
which shall be fully earned and non-refundable and payable on the Closing Date.
2.4 Letter of Credit and LC Guaranty Fees. Borrower shall pay to Agent, for
the ratable benefit of Lenders, for standby Letters of Credit and LC Guaranties,
a fee equal to 2.25% per annum of the aggregate face amount of such Letters of
Credit and LC Guaranties outstanding from time to time during the term of this
Agreement, plus all normal and customary fees and charges associated with the
issuance, amendment, extension, cancellation and administration thereof, for the
account of Agent, which all such fees and charges shall be deemed fully earned
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<PAGE>
upon issuance of each such Letter of Credit or LC Guaranty. The fee paid to
Agent for the ratable benefit of the Lenders shall be due and payable in full
upon the issuance of such Letter of Credit or execution of such LC Guaranty and,
all other fees and charges associated with such Letter of Credit or LC guaranty
shall be due and payable as required, first on the date of issuance or execution
and thereafter on the first Business Day of each month. The fees and charges
under this Section shall not be subject to rebate or proration upon the
termination of this Agreement for any reason.
2.5 Unused Line Fee. Borrower shall pay to Agent, for the ratable benefit
of Lenders, a fee equal to .375% per annum of the average daily difference
during any calendar month between (i) the Total Revolving Credit Facility and
(ii) the sum of the principal balance of all outstanding Revolving Credit Loans
and the LC Amount. The Unused Line Fee shall be payable quarterly in arrears on
the first (1st) day of each quarter.
2.6 Administrative Agent Fee. Borrower shall pay Agent the annual
Administrative Agent Fee provided for in the fee letter dated January 19, 2000
among Agent, the Company and OHS, which fee shall be earned and nonrefundable
and payable on the Closing Date and on each anniversary thereof.
2.7 Inspection, Audit, Examination and Appraisal Expenses. Borrower shall
pay to Agent, upon demand, in connection with all inspections, audits,
examinations and appraisals of Borrower's books and records and such other
matters as Agent shall deem reasonably appropriate (including matters set forth
under subsection 8.1.1), all fees, costs and expenses reasonably incurred by
Agent in connection with such inspections, audits, examinations and appraisals
based upon standard rates (as determined by Agent and disclosed to Borrower).
Absent the occurrence of an Event of Default, such fees shall not exceed $75,000
per annum.
2.8 Reimbursement of Expenses. If, at any time or times regardless of
whether or not an Event of Default then exists, Agent incurs legal expenses or
any other costs or out-of-pocket expenses in connection with (i) the negotiation
and preparation of this Agreement or any of the other Loan Documents, or any
amendment of or modification of this Agreement or any of the other Loan
Documents, (ii) the administration of this Agreement or any of the other Loan
Documents and the transactions contemplated hereby and thereby; (iii) any
litigation, contest, dispute, suit, proceeding or action (whether instituted by
Agent, Borrower or other Person) in any way relating to the Collateral, this
Agreement or any of the other Loan Documents or Borrower's affairs; (iv) any
attempt to enforce any rights of Agent and/or any Lender against any Obligor or
any other Person which may be obligated to Agent and/or any Lender by virtue of
this Agreement or any of the other Loan Documents, including, without
limitation, the Account Debtors; or (v) any attempt to inspect, verify, protect,
preserve, restore, collect, sell, liquidate or otherwise dispose of or realize
upon the Collateral; then all such reasonable legal expenses and other costs and
out of pocket expenses of Agent shall be charged to Borrower. All amounts
chargeable to Borrower under this Section 2.8 shall be Obligations secured by
all of the Collateral, shall be payable on demand to Agent and shall bear
interest from the date such demand is made until paid in full at the Revolving
Credit Base Rate from time to time. Borrower
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<PAGE>
shall also reimburse Agent for expenses incurred by Agent in its administration
of the Collateral to the extent and in the manner provided in Section 6 hereof.
2.9 Bank Charges. Borrower shall pay to Agent, on demand, any and all fees,
costs or expenses which Agent pays to a bank or other similar institution
arising out of or in connection with (i) the forwarding to Borrower or any other
Person on behalf of Borrower or by Agent of proceeds of Loans made by Agent
and/or any Lender to Borrower pursuant to this Agreement and (ii) the depositing
for collection, by Agent, of any check or item of payment received or delivered
to Agent and/or any Lender on account of the Obligations.
2.10 Indemnity re: LIBOR. Borrower hereby indemnifies Agent and each Lender
and holds Agent and each Lender harmless from and against any and all
out-of-pocket losses or expenses that Agent and/or any Lender may sustain or
incur as a consequence of any prepayment or any Default by Borrower in the
payment of the principal of or interest on any LIBOR Rate Loan or failure by
Borrower to complete a borrowing of, a prepayment of, or conversion of or to a
LIBOR Rate Loan after notice thereof has been given by Borrower or such rate
would otherwise be applicable pursuant to Section 2.1 hereof, including (but not
limited to) any interest payable by Agent and/or any Lender to lenders of funds
obtained by Agent and/or such Lenders in order to make or maintain the LIBOR
Rate Loans hereunder, and any other out-of-pocket loss or expense incurred by
Agent and/or any Lender by reason of the liquidation or reemployment of deposits
or other funds acquired by Agent and/or such Lenders to make, continue, convert
into or maintain, a LIBOR Rate Loan.
SECTION 3. LOAN ADMINISTRATION.
3.1 Manner of Borrowing Revolving Credit Loans. Borrowings under the credit
facility established pursuant to Section 1.1 hereof shall be as follows:
3.1.1 Loan Requests.
(a) A request for a Revolving Credit Loan shall be made, or shall be deemed
to be made, in the following manner: (i) Borrower, through any one or more of
them, may give Agent notice of its intention to borrow, in which notice Borrower
shall specify the amount of the proposed borrowing, the rate option and the
proposed borrowing date, no later than 12:00 noon, Eastern time, on the proposed
borrowing date for all Revolving Credit Base Rate Loans or, for a Revolving
Credit LIBOR Rate Loan, no later than 11:00 A.M. Eastern time on the second
(2nd) London Business Day prior to the requested borrowing date in accordance
with subsection 2.1.1(a)(ii)(A), 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 or any of the other Loan
Documents, whether as interest or for any other Obligation, shall be deemed
irrevocably to be a request for a Revolving Credit Loan on the due date in the
amount required to pay such interest or other Obligation. As an accommodation to
Borrower, Agent may permit telephonic requests for Revolving Credit Loans and
electronic transmittal of instructions, authorizations, agreements or reports to
Agent by Borrower. Unless Borrower specifically directs Agent in writing not to
accept or act upon telephonic or electronic
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communications from Borrower, Agent shall have no liability to Borrower for any
loss or damage suffered by Borrower as a result of Agent's honoring of any
requests, execution of any instructions, authorizations or agreements or
reliance on any reports communicated to it telephonically or electronically and
purporting to have been sent to Agent by Borrower and Agent shall have no duty
to verify the origin of any such communication or the authority of the person
sending it, except to confirm the name of the Specified Officer.
(b) Upon receiving a request for a Revolving Credit Loan in accordance with
subsection 3.1.1(a)(i) above or upon Borrower being deemed to have made a
request for a Revolving Credit Loan under subsection 3.1.1(a)(ii) above, by
12:00 noon, Eastern time, or as soon as is reasonably practicable thereafter,
Agent shall notify all Lenders of the request. Each Lender shall advance its
applicable Pro Rata Percentage of the requested Revolving Credit Loan to Agent
by remitting immediately available federal funds to Agent pursuant to Agent's
instructions prior to 2:00 P.M. Eastern time on the date of the applicable
Revolving Credit Loan regardless of any failure by any other Lender to do so.
Subject to the satisfaction of the terms and conditions hereof, and receipt by
Agent of required funds from the other Lenders, Agent shall make the requested
Revolving Credit Loan available to Borrower, in accordance with subsection 3.1.2
as soon as is reasonably practicable thereafter on the day the requested
Revolving Credit Loan is to be made. In lieu of the foregoing, Agent may, in its
discretion, fund the Pro Rata Percentage of such Revolving Credit Loan on behalf
of any one or more Lenders (unconditionally and absolutely obligating such
affected Lender to reimburse Agent in full on demand without deduction or
setoffs for its portion of such Revolving Credit Loan, so long as Agent
reasonably believed at the time such Revolving Credit Loan was made that it was
made, in all material respects, in compliance with this Agreement) with a
settlement of the Pro Rata Shares of Lenders on the following Business Day or
under such other settlement procedures as Agent may establish from time to time.
3.1.2 Disbursement. Borrower hereby irrevocably authorizes Agent to
disburse the proceeds of each Revolving Credit Loan requested, or deemed to be
requested, pursuant to this subsection 3.1.2 as follows: (i) the proceeds of
each Revolving Credit Loan requested under subsection 3.1.1(i) shall be
disbursed by Agent in lawful money of the United States of America in
immediately available funds, in the case of the initial borrowing, in accordance
with the terms of the written disbursement letter from Borrower, and in the case
of each subsequent borrowing, by wire transfer to such bank account as may be
agreed upon by Borrower and Agent from time to time or elsewhere if pursuant to
a written direction from Borrower; and (ii) the proceeds of each Revolving
Credit Loan requested under subsection 3.1.1(ii) shall be disbursed by Agent by
way of direct payment of the relevant interest or other Obligation.
3.1.3 Authorization. Borrower hereby irrevocably authorizes Agent, in
Agent's sole discretion, to advance to Borrower, and to charge to Borrower's
Loan Account hereunder as a Revolving Credit Loan, a sum sufficient to pay all
interest accrued on the Obligations during the immediately preceding month and
to pay all costs, fees and expenses at any time owed by Borrower to Agent and/or
any Lender hereunder.
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3.1.4 Specified Officer. All requests for a Revolving Credit Loan and
elections of interest rate shall be made by Borrower through a Specified
Officer, and Borrower agrees that any request so made by a Specified Officer
shall be deemed made by Borrower.
3.2 Payments. Except where evidenced by notes or other instruments issued
or made by Borrower to Lenders specifically containing payment provisions which
are in conflict with this Section 3.2 (in which event the conflicting provisions
of said notes or other instruments shall govern and control) the Obligations
shall be payable as follows:
3.2.1 Principal. Principal payable on account of Revolving Credit Loans may
be pre-paid at any time, subject to the requirements of Section 2.10, and shall
be payable by Borrower to Lenders immediately upon the earliest of (i) except as
otherwise provided in this Agreement, and provided that a Dominion Triggered
Period is in effect, the receipt by Agent, any Lender or Borrower of any
proceeds of any of the Collateral, to the extent of said proceeds, (ii) the
occurrence of an Event of Default in consequence of which Agent elects to
accelerate the maturity and payment of the Obligations, or (iii) termination of
this Agreement pursuant to Section 4 hereof; provided, however, that if an
Overadvance shall exist at any time, Borrower shall, on demand, repay the
Overadvance.
3.2.2 Interest. Interest accrued on the Revolving Credit Loans shall be due
and payable on the earliest of (i) the first calendar day of each month (for the
immediately preceding month), computed through the last calendar day of the
preceding month, (ii) the occurrence of an Event of Default in consequence of
which Agent elects to accelerate the maturity and payment of the Obligations or
(iii) termination of this Agreement pursuant to Section 4 hereof.
3.2.3 Costs, Fees and Charges. Costs, fees and charges payable pursuant to
this Agreement shall be payable by Borrower as and when provided in Section 2
hereof or in the Fee Letter dated January 19, 2000 among Agent the Company and
OHS, to Agent or to any other Person designated by Agent in writing.
3.2.4 Other Obligations. The balance of the Obligations requiring the
payment of money, if any, shall be payable by Borrower to Agent and/or Lenders
as and when provided in this Agreement, the Other Agreements or the Security
Documents, or on demand, whichever is later.
3.3 Mandatory Prepayments.
3.3.1 Proceeds of Loss, Destruction or Condemnation of Collateral. If any
of the Collateral is lost or destroyed or taken by condemnation, Borrower shall
pay to Agent, unless otherwise agreed by Agent, as and when received by Borrower
and as a mandatory prepayment of the Revolving Credit Loans in the sole
discretion of Agent, a sum equal to the Net Available Proceeds received by
Borrower from such loss, destruction or condemnation.
3.3.2 Intentionally Omitted.
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3.3.3 LIBOR Rate Loans. Notwithstanding any other provision contained
herein, no portion of the LIBOR Rate Loans may be repaid during a LIBOR Interest
Period unless Borrower first satisfies in full its obligations under Section
2.10 arising from such repayment.
3.4 Application of Payments and Collections. All items of payment received
by Agent by 12:00 noon, Eastern time, on any Business Day shall be deemed
received on that Business Day. All items of payment received after 12:00 noon,
Eastern time, on any Business Day shall be deemed received on the following
Business Day. All amounts paid in accordance with subsections 3.1.1(a)(ii) and
3.1.2(ii) shall be deemed received prior to 12:00 noon, Eastern time, on the
Business Day upon which such funds are disbursed by the Agent under subsection
3.1.2(ii). Borrower irrevocably waives the right to direct the application of
any and all payments and collections at any time or times hereafter received by
Agent from or on behalf of Borrower, and Borrower does hereby irrevocably agree
that Agent shall have the continuing exclusive right to apply and reapply any
and all such payments and collections received at any time or times hereafter by
Agent or its agent against the Obligations, in such manner as Agent may deem
advisable, notwithstanding any entry by Agent upon any of its books and records.
If as the result of collections of Accounts as authorized by subsection 6.2.6
hereof a credit balance exists in the Loan 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 Default or Event of Default exists. Agent
may, at its option, offset such credit balance against any of the Obligations
upon and after the occurrence of an Event of Default.
3.5 All Loans to Constitute One Obligation. The Loans shall constitute one
general Obligation of Borrower, and shall be secured by Agent's Lien, for the
ratable benefit of Lenders, upon all of the Collateral.
3.6 Loan Account. Agent shall enter all Loans as debits to the Loan Account
and shall also record in the Loan Account all payments made by Borrower on any
Obligations and all proceeds of Collateral which are finally paid to Lenders,
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.
3.7 Statements of Account. Agent will account to Borrower monthly with a
statement of Loans, charges and payments made pursuant to this Agreement, and
such account rendered by Agent shall be deemed final, binding and conclusive
upon Borrower unless Agent is notified by Borrower in writing to the contrary
within sixty (60) days of the date each accounting is mailed to Borrower. Such
notice shall only be deemed an objection to those items specifically objected to
therein.
SECTION 4. TERM AND TERMINATION
4.1 Term of Agreement. Subject to Lenders' right to cease making Loans to
Borrower upon or after the occurrence of any Default or Event of Default, this
Agreement shall
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be in effect for a period through and including March 10, 2004 (the "Original
Term"), unless terminated as provided in Section 4.2 hereof.
4.2 Termination.
4.2.1 Termination by Agent. This Agreement shall terminate as of the last
day of the Original Term and Agent may terminate this Agreement upon or after
the occurrence of an Event of Default according to the provisions of Section 10
hereof.
4.2.2 Termination by Borrower. Upon at least ten (10) days prior written
notice to Agent (which shall state a termination date), Borrower may, at its
option, terminate this Agreement; provided, however, no such termination shall
be effective until Borrower has paid all of the Obligations in immediately
available funds and all Letters of Credit and LC Guaranties have expired or have
been collateralized to Agent's reasonable satisfaction. Any notice of
termination given by Borrower shall be irrevocable unless all Lenders otherwise
agree in writing, and neither Agent nor Lenders shall have any obligation to
make any Loans or issue or procure any Letters of Credit or LC Guaranties on or
after the termination date stated in such notice. Borrower may elect to
terminate this Agreement in its entirety only. No section of this Agreement or
type of Loan available hereunder may be terminated singly.
4.2.3 Termination Charges. At the effective date of termination of this
Agreement for any reason, Borrower shall pay to Agent, for the ratable benefit
of Lenders, in addition to the then outstanding principal, accrued interest and
other charges owing under the terms of this Agreement and any of the other Loan
Documents as liquidated damages for the loss of the bargain and not as a
penalty, an amount equal to one percent (1%) of the Total Revolving Credit
Facility if termination occurs during the first twelve (12) month period of the
Original Term; and one half of one percent (1/2%) of the Total Revolving Credit
Facility if termination occurs during the second twelve (12) month period of the
Original Term. No amount shall be due under this subsection if the Total
Revolving Credit Facility is terminated for any reason after the second twelve
(12) month period of the Original Term.
4.2.4 Effect of Termination. All of the Obligations shall be immediately
due and payable upon the termination date stated in any notice of termination of
this Agreement. All undertakings, agreements, covenants, warranties and
representations of Borrower contained in the Loan Documents shall survive any
such termination and Agent shall retain its Liens, for the ratable benefit of
Lenders, upon the Collateral and Agent and Lenders shall retain all of their
rights and remedies under the Loan Documents notwithstanding such termination
until Borrower has paid the Obligations, in full, in immediately available
funds, together with the applicable liquidated damages pursuant to subsection
4.2.3, if any. Notwithstanding the payment in full of the Obligations, Agent
shall not be required to terminate its Liens upon the Collateral unless, with
respect to any loss or damage Agent may incur as a result of dishonored checks
or other items of payment received by Agent and/or any Lender from Borrower or
any Account Debtor and applied to the Obligations, Agent shall, at its option,
(i) have received a written agreement, executed by Borrower and by any Person
whose loans or other advances to Borrower are used in whole or in part to
satisfy the Obligations, indemnifying Agent and Lenders from any such loss
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or damage; or (ii) have retained such monetary reserves and Liens upon the
Collateral for such period of time as Agent, in its reasonable discretion, may
deem necessary to protect Agent and Lenders from any such loss or damage.
SECTION 5. SECURITY INTERESTS
5.1 Security Interest in Collateral. To secure the prompt payment and
performance to Lenders of the Obligations and satisfaction by Borrower of all
covenants and undertakings contained in the Loan Documents, Borrower hereby
grants to Agent, for the ratable benefit of Lenders, a continuing security
interest in and Lien upon all of Borrower's Property (other than Equipment and
fixtures and any General Intangibles or insurance proceeds to the extent related
to Equipment and fixtures), whether now owned or existing or hereafter created,
acquired or arising and wherever located, including:
(i) Accounts;
(ii) Inventory;
(iii) Chattel Paper;
(iv) Instruments;
(v) Documents;
(vi) General Intangibles;
(vii) Deposit Accounts;
(viii) Investment Property (provided that the pledge of and creation of a
security interest in and Lien upon any capital stock issued by a corporation
organized in a jurisdiction outside the United States shall be limited to
Sixty-Five Percent (65%) of such capital stock);
(ix) All monies and other Property (other than Equipment and fixtures and
any General Intangibles or insurance proceeds to the extent related to Equipment
and fixtures) of any kind now or at any time or times hereafter in the
possession or under the control of Agent or any Lender or a bailee or Affiliate
of Agent or any Lender;
(x) All Commercial Lockboxes, all Government Lockboxes, all Concentration
Account(s), all Dominion Accounts and other accounts into which any of the
Collections are deposited, all funds received thereby or deposited therein, and
any checks or instruments from time to time representing or evidencing the same;
(xi) All Real Estate;
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(xii) All accessions to, substitutions for and all replacements, products
and cash and non-cash proceeds of (i) through (xi) above, including, without
limitation, proceeds of and unearned premiums with respect to insurance policies
insuring any of the Collateral; and
(xiii) All books and records (including, without limitation, customer
lists, credit files, computer programs, print-outs, and other computer materials
and records) of Borrower pertaining to any of (i) through (xii) above.
The security interest in and Lien upon the Collateral granted to Agent, for
the ratable benefit of the Lenders under this Section, shall be prior to any
other Lien or security interest in the Collateral, except to the extent any such
Collateral is subject to a Purchase Money Lien, a Capitalized Lease Obligation
or a Lien as shown on Schedule 8.2.5 hereof, in which case, the security
interest and Lien granted to Agent, for the ratable benefit of the Lenders under
this Section, in any such Property shall be junior only to such Purchase Money
Lien, Lien in connection with a Capitalized Lease Obligation or existing
scheduled Lien (and any extension, renewal or replacement thereof) and shall be
senior to all other Liens on any such Property. Notwithstanding anything else in
this Agreement, the security interest and Lien granted to Agent, for the ratable
benefit of the Lenders under this Section, shall be limited to the extent that a
grant of a security interest in and Lien on any Property of the Borrower would
violate any applicable legal requirement, including any applicable patient
confidentiality restrictions.
5.2 Lien Perfection; Further Assurances. Borrower, at Agent's request,
shall execute such UCC-1 financing statements as are required by the Code and
such other instruments, assignments or documents as are necessary to perfect
Agent's Lien upon any of the Collateral and shall take such other action as may
be required to perfect or to continue the perfection of Agent's Lien upon the
Collateral. Notwithstanding the foregoing, (i) with respect to any Real Estate
in which Borrower has a fee interest, whether now owned or hereafter acquired,
Borrower, at Agent's request, shall execute any mortgages, instruments,
assignments and documents and shall take any other actions as Agent may request
in order to perfect Agent's Lien on any such Real Estate and (ii) with respect
to any leasehold interest of Borrower, whether now owned or hereafter acquired,
Borrower, at the reasonable request of the Majority Lenders, shall execute any
mortgages, instruments, assignments and documents and shall take any other
actions as Majority Lenders may request in order to perfect Agent's Lien on any
such leasehold interest. Borrower shall give Agent at least thirty (30) days
prior written notice before (i) acquiring any fee interest in any Real Estate or
(ii) acquiring any leasehold interest in any Real Estate with annual payments
due under the lease greater than Five Hundred Thousand Dollars ($500,000.00) and
a lease term longer than five (5) years. Agent acknowledges that Agent's Lien in
any Real Estate will not be perfected until such time as all mortgages,
instruments, assignments, documents and/or other actions as may be required in
the jurisdiction where the Real Estate is located are executed, recorded and/or
taken. Unless prohibited by applicable law, Borrower hereby authorizes Agent to
execute and file any such financing statement, instruments, assignments or
documents on Borrower's behalf. The parties agree that a carbon, photographic or
other reproduction of this Agreement shall be sufficient as a financing
statement and may be
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filed in any appropriate office in lieu thereof. At Agent's request, Borrower
shall also promptly execute or cause to be executed and shall deliver to Agent
any and all documents, instruments and agreements deemed necessary by Agent to
give effect to or carry out the terms or intent of the Loan Documents, including
landlord's waivers as reasonably requested by Agent.
SECTION 6. COLLATERAL ADMINISTRATION
6.1 General
6.1.1 Location of Inventory. All Inventory, other than Inventory in
transit: (i) will at all times be kept by Borrower at one or more of the
business locations set forth in Exhibit 6.1.1 hereto and at such new locations
which Borrower may hereafter establish, provided that, Borrower shall provide
Agent, not less than thirty (30) days prior to delivery of any Collateral to
such new location, with written notice thereof and, provided further, that prior
to delivery of any Collateral to such new location Borrower will take all
actions relative to such location as Agent may reasonably require under Section
5.2 hereof, and (ii) shall not, without at least thirty (30) days prior written
notice having been given to Agent, be otherwise moved from any such location set
forth on Exhibit 6.1.1 or new location except, prior to an Event of Default and
Agent's acceleration of the maturity of the Obligations in consequence thereof,
for (A) sales or rental of Inventory in the ordinary course of business, and (B)
removals in connection with returns thereof to vendors. Except as shown on
Exhibit 6.1.1, no Inventory is stored with a bailee, warehouseman or similar
party, nor is any Inventory consigned to any Person. Notwithstanding any of the
forgoing, Borrower may (x) keep inventory at business locations not listed on
Exhibits 6.1.1 and (y) store Inventory or maintain consignment Inventory with a
third person at a site not listed on Exhibit 6.1.1 provided that the aggregate
fair market value of the Inventory kept, stored or maintained at any such
individual business location or site may not exceed Fifty Thousand Dollars
($50,000.00).
6.1.2 Insurance of Collateral. Borrower shall maintain and pay for
insurance upon all Collateral wherever located and with respect to Borrower's
business, covering casualty, hazard, public liability and such other risks in
such amounts and with insurance companies and such deductibles as would be
maintained by a prudent operator in the same business as Borrower and as are
reasonably satisfactory to Agent. Borrower shall deliver certified copies of
such policies to Agent with satisfactory lender's loss payable endorsements,
naming Agent, for the ratable benefit of Lenders, as lender's loss payee, or
assignee and naming Agent and each of the Lenders as additional insured or
mortgagee, as appropriate. Each policy of insurance or endorsement shall contain
a clause requiring the insurer to give not less than thirty (30) days prior
written notice to Agent in the event of cancellation of the policy for any
reason whatsoever and a clause specifying that the interests of Agent and the
Lenders shall not be impaired or invalidated by any act or neglect of Borrower
or the owner of the Collateral or by the occupation of the premises for purposes
more hazardous than are permitted by said policy. If Borrower fails to provide
and pay for such insurance, Agent may, at its option, but shall not be required
to, procure the same and charge Borrower therefor. Borrower agrees to deliver to
Agent, promptly as rendered, true copies of all reports made in any reporting
forms to insurance companies.
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6.1.3 Protection of Inventory. All expenses of protecting, storing,
warehousing, insuring, handling, maintaining and shipping the Inventory, any and
all excise, property, sales, and use taxes imposed by any state, federal, or
local authority on any of the Inventory or in respect of the sale thereof shall
be borne and paid by Borrower. If Borrower fails to promptly pay any portion
thereof when due, Agent may, at its option, but shall not be required to, pay
the same and charge Borrower therefor. Neither Agent nor any Lender shall be
liable or responsible in any way for the safekeeping of any of the Inventory or
for any loss or damage thereto (except for reasonable care in the custody
thereof while any Inventory is in Agent's or any Lender's actual possession) or
for any diminution in the value thereof, or for any act or default of any
warehouseman, carrier, forwarding agency, or other person whomsoever, but the
same shall be at Borrower's sole risk.
6.2 Administration of Accounts.
6.2.1 Records, Schedules and Assignments of Accounts. Borrower shall keep
accurate and complete records of its Accounts and all payments and collections
thereon and shall submit to Agent on such periodic basis as Agent shall
reasonably request a sales and collections report for the preceding period, in
form satisfactory to Agent. On or before the thirtieth (30th) day of each month
from and after the date hereof, Borrower shall deliver to Agent, in form
reasonably acceptable to Agent, a detailed aged trial balance of all Accounts
existing as of the last day of the preceding month, specifying the names,
addresses and book value for each Account Debtor obligated on an Account so
listed ("Schedule of Accounts"), and, upon Agent's request therefor, copies of
proof of delivery of inventory and the original copy of all documents,
including, without limitation, repayment histories and present status reports
relating to the Accounts so scheduled and such other matters and information
relating to the status of then existing Accounts as Agent shall reasonably
request. In addition, if at any time any Account with a book value in excess of
Five Hundred Thousand Dollars ($500,000.00) that was represented as an Eligible
Account on the immediately preceding Borrowing Base Certificate becomes
ineligible because it falls within one of the specified categories of
ineligibility set forth in the definition of Eligible Accounts, Borrower shall
notify Agent of such occurrence no later than the third (3rd) Business Day
following such occurrence and the Borrowing Base shall thereupon be adjusted to
reflect such occurrence. If requested by Agent, Borrower shall execute and
deliver to Agent, for the ratable benefit of Lenders, 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
invoices or invoice registers related thereto.
6.2.2 Discounts, Allowances, Disputes. If Borrower grants any discounts,
allowances or credits that are not reflected in the book value for the Account
involved, Borrower shall report such discounts, allowances or credits, as the
case may be, to Agent as part of the next required Schedule of Accounts. If any
amounts due and owing in excess of Two Hundred and Fifty Thousand Dollars
($250,000.00) become disputed between Borrower and any Account Debtor (other
than refusals to pay based on technical discrepancies which are curable in the
ordinary course of business), and such Account was represented as an Eligible
Account on the immediately preceding Borrowing Base Certificate, Borrower shall
provide Agent with written notice thereof at the time of submission of the next
Schedule of Accounts, explaining in detail the reason for the dispute,
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all claims related thereto and the amount in controversy. Upon and after the
occurrence and during the continuance of an Event of Default, Agent shall have
the right to settle or adjust all disputes and claims, other than disputes or
claims arising solely on a technical basis in Borrower's ordinary course of
business, directly with the Account Debtor and to compromise the amount or
extend the time for payment of the Accounts upon such terms and conditions as
Agent may deem advisable, and to charge the deficiencies, costs and expenses
thereof, including attorney's fees, to Borrower.
6.2.3 Taxes. If an Account includes a charge for any tax payable to any
governmental taxing authority, Agent is authorized, in its sole discretion, to
pay the amount thereof to the proper taxing authority for the account of
Borrower and to charge Borrower therefor, provided, however, that Agent shall
not be liable for any taxes to any governmental taxing authority that may be due
by Borrower.
6.2.4 Account Verification. Whether or not an Event of Default has
occurred, any of Agent's officers, employees or agents shall have the right in
the name of Agent, any designee of Agent or Borrower, to verify the validity,
amount or any other matter relating to any Accounts by mail, telephone,
telegraph or otherwise, during regular business hours and consistent with
Agent's customary practices. Borrower shall cooperate fully with Agent in an
effort to facilitate and promptly conclude any such verification process.
6.2.5 Maintenance of Dominion Account. Consistent with Medicare and
Medicaid regulations, Borrower shall maintain Dominion Account(s) pursuant to
arrangements reasonably acceptable to Agent with such bank(s) as may be selected
by Borrower and be acceptable to Agent. If at any time, there exists less than
Sixty Million Dollars ($60,000,000.00) in Availability and/or the principal
balance of the Loans exceeds Thirty Five Million Dollars ($35,000,000.00) (a
"Triggering Event"), Agent shall have the right, which right shall be exercised
in accordance with Medicare and Medicaid regulations, to give notice (a "Trigger
Effectiveness Notice") to any Concentration Bank(s) that the funds of the
Borrower in any Concentration Account(s) shall thereafter be swept daily from
such accounts into the Dominion Account(s). Borrower shall subject to and
consistent with Medicare and Medicaid regulations issue to any Concentration
Bank(s) an irrevocable letter of instruction directing such Concentration
Bank(s) to act in accordance with such notice from Agent, and Borrower shall
also issue to any bank at which the Dominion Account(s) is maintained an
irrevocable letter of instruction directing such bank to deposit all payments or
other remittances received by such bank to the Dominion Account(s) for
application on account of the Obligations. All funds deposited in the Dominion
Account shall automatically be applied to the Obligations as of the date good
funds are deposited in the Dominion Account, provided that such good funds are
deposited in the Dominion Account by 12:00 noon, Eastern time, or, if such good
funds are deposited in the Dominion Account after 12:00 noon, Eastern time, on
the following Business Day. Agent shall have this right upon both the initial
and any subsequent occurrence of a Triggering Event. Except with respect to
Government Accounts, all funds deposited in the Dominion Account shall
immediately become the property of Agent, for the ratable benefit of Lenders,
and Borrower shall obtain the agreement by such banks in favor of Agent to waive
any offset rights against the funds so deposited. Agent assumes no
responsibility for such arrangement, including, without limitation, any claim of
accord and satisfaction or
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release with respect to deposits accepted by any bank thereunder. If at any time
after the occurrence of a Triggering Event, Availability of more than Sixty
Million Dollars ($60,000,000.00) shall exist and the principal balance of the
Loans shall be less than Thirty-Five Million Dollars ($35,000,000.00), and
provided that no Event of Default has occurred and remains outstanding, Borrower
may request that Agent issue instructions (a "Trigger Rescission Notice") to any
Concentration Bank(s) to cease the daily sweep of Borrower's funds, and Agent
shall issue such instructions to such Concentration Bank(s). The time period
beginning on the date upon which Agent shall issue a Trigger Effectiveness
Notice and ending on the date upon which Agent shall issue a Trigger Rescission
Notice shall be known as a "Dominion Triggered Period."
6.2.6 Collection of Accounts, Proceeds of Collateral. To expedite
collection, Borrower shall use commercially reasonable efforts to make
collection of its Accounts. Borrower covenants that it shall direct all its
Account Debtors to remit all payments with respect to any and all Accounts to
the Commercial Lockboxes or the Government Lockboxes, as applicable, and that
any and all remittances received by Borrower with respect to any and all
Accounts shall be immediately deposited in kind in the Commercial Lockbox(es)
and the Government Lockbox(es), as applicable. Borrower covenants that it shall
cause all funds in all Lockbox Accounts to be transferred to Borrower's
Concentration Account(s) on a daily basis, provided that any funds which are
deposited into the Lockbox Accounts after the time of the daily transfer will be
transferred into the Concentration Account as of the next Business Day. Agent
shall have the right during any Dominion Triggered Period to issue notices
("Lockbox Trigger Notices") to the Lockbox Banks instructing such Lockbox Banks
that until instructions to the contrary are received by the Lockbox Banks from
Agent, all funds deposited in the Lockbox Accounts shall automatically be
transferred by the Lockbox Banks to the Concentration Account(s) and Borrower
shall have no direct access to the funds in such Lockbox Accounts subject to and
consistent with Medicare and Medicaid regulations. Borrower shall cooperate with
Agent in issuing such notices, which cooperation shall include, without
limitation providing to Agent (upon Agent's request) a complete and correct list
of all of Borrower's Lockbox Accounts and Lockbox Banks and executing or counter
signing any Lockbox Trigger Notices in form reasonably acceptable to Borrower as
Agent may request. Upon the ending of any Dominion Triggered Period, Borrower
may request that Agent issue instructions to the Lockbox Banks canceling the
instructions in the Lockbox Trigger Notices and Agent shall issue such
instructions to the Lockbox Banks. At all times during which a Dominion
Triggered Period is in effect, and to the extent consistent with Medicare and
Medicaid regulations, all remittances received by Borrower with respect to
Accounts, together with the proceeds of any other Collateral, shall be held as
Lender's property by Borrower as trustee of an express trust for Lenders'
ratable benefit and Borrower shall immediately deposit same in kind in the
Commercial Lockboxes and the Government Lockboxes, as applicable. To the extent
consistent with Medicare and Medicaid regulations, Agent retains the right at
all times after the occurrence and during the continuance of an Event of Default
to notify Account Debtors that Accounts have been assigned to Agent, for the
ratable benefit of Lenders, and to collect Accounts directly in its own name and
to charge the collection costs and expenses, including attorneys' fees, to
Borrower.
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6.3 Administration of Inventory.
6.31. Records and Reports of Inventory. Borrower shall keep accurate and
complete records of its Inventory. Borrower shall furnish Agent with Inventory
reports in form and detail reasonably satisfactory to Agent at such time as
Agent may require. Borrower shall conduct a physical inventory no less
frequently than annually and shall provide to Agent a report based on each such
physical inventory promptly thereafter, together with such supporting
information as Agent shall reasonably request.
6.3.2 Returns of Inventory. If at any time or times hereafter any Account
Debtor returns any Inventory to Borrower the shipment of which generated an
Account on which such Account Debtor is obligated in excess of One Hundred
Thousand Dollars ($100,000.00), Borrower shall immediately notify Agent of the
same, specifying the reason for such return and the location, condition and
intended disposition of the returned Inventory
6.4 Administration of Equipment.
6.4.1 Records and Schedules of Equipment. Borrower shall keep accurate
records itemizing and describing the kind, type, quantity and value of its
Equipment and shall furnish Agent with a current schedule containing the
foregoing information on an annual basis and, after the occurrence and during
the continuance Event of Default, more often if reasonably requested by Agent.
Immediately on request therefor by Agent, Borrower shall deliver to Agent
appropriate evidence of ownership, if any, of any of the Equipment.
6.4.2 Intentionally Omitted.
6.5 Payment of Charges. All amounts chargeable to Borrower under Section 6
hereof shall be Obligations secured by all of the Collateral, shall be payable
on demand and shall bear interest from the date such advance was made until paid
in full at the Revolving Credit Base Rate.
SECTION 7. REPRESENTATIONS AND WARRANTIES
7.1 General Representations and Warranties. To induce Agent and Lenders to
enter into this Agreement and to make Loans hereunder, Borrower warrants,
represents and covenants to Agent and Lenders that:
7.1.1 Organization and Qualification. Each of Borrower and each of its
Subsidiaries is a corporation duly organized, validly existing and, except as
noted on Exhibit 7.1.1, is in good standing under the laws of the jurisdiction
of its incorporation. Each of Borrower and each of its Subsidiaries is duly
qualified and is authorized to do business and, except as noted on Exhibit
7.1.1, is in good standing as a foreign corporation in each state or
jurisdiction listed on Exhibit 7.1.1 hereto and in all other states and
jurisdictions in which the failure of Borrower or any of its Subsidiaries to be
so qualified would have a Material Adverse Effect.
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7.1.2 Corporate Power and Authority. Each of Borrower and each of its
Subsidiaries is duly authorized and empowered to enter into, execute, deliver
and perform this Agreement and each of the other Loan Documents to which it is a
party. The execution, delivery and performance of this Agreement and each of the
other Loan Documents have been duly authorized by all necessary corporate action
and do not and will not (i) require any consent or approval of the shareholders
of Borrower or any of its Subsidiaries; (ii) contravene Borrower's or any of its
Subsidiaries' charter, articles or certificate of incorporation or by-laws;
(iii) violate, or cause Borrower or any of its Subsidiaries to be in default
under, any provision of any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award in effect having applicability to
Borrower or any of its Subsidiaries; (iv) result in a breach of or constitute a
default in any material respect under any indenture or loan or credit agreement
or any other material agreement, lease or instrument to which Borrower or any of
its Subsidiaries is a party or by which it or its Properties may be bound or
affected; or (v) result in, or require, the creation or imposition of any Lien
(other than Permitted Liens) upon or with respect to any of the Properties now
owned or hereafter acquired by Borrower or any of its Subsidiaries.
7.1.3 Legally Enforceable Agreement. This Agreement is, and each of the
other Loan Documents when delivered under this Agreement will be, a legal, valid
and binding obligation of Borrower and each of its Subsidiaries, enforceable
against Borrower and each of its Subsidiaries in accordance with its respective
terms.
7.1.4 Capital Structure. Exhibit 7.1.4 hereto states (i) the correct name
of each of the Subsidiaries of Borrower, its jurisdiction of incorporation and
the percentage of its Voting Stock owned by the Borrower, (ii) the name of
Borrower's corporate or joint venture Affiliates and the nature of the
affiliation, (iii) the number, nature and holder of all outstanding Securities
of Borrower and each Subsidiary and (iv) the number of authorized, issued and
treasury shares of Borrower and each Subsidiary. Borrower has good title to all
of the shares it purports to own of the stock of each of its Subsidiaries, free
and clear in each case of any Lien other than Permitted Liens. All such shares
have been duly issued and are fully paid and non-assessable. Except as set forth
in Exhibit 7.1.4, there are no outstanding options to purchase, or any rights or
warrants to subscribe for, or any commitments or agreements to issue or sell, or
any Securities or obligations convertible into, or any powers of attorney
relating to, shares of the capital stock of Borrower or any of its Subsidiaries.
Except as set forth in Exhibit 7.1.4, there are no outstanding agreements or
instruments binding upon any of Borrower's shareholders relating to the
ownership of its shares of capital stock.
7.1.5 Corporate Names. Neither Borrower nor any of its Subsidiaries has
been known as or used any corporate, fictitious or trade names since March 1,
1995, except those listed on Exhibit 7.1.5 hereto. Except as otherwise set forth
on Exhibit 7.1.5 since March 1, 1995, neither Borrower nor any of its
Subsidiaries has been the surviving corporation of a merger or consolidation or
acquired all or substantially all of the assets of any Person.
7.1.6 Business Locations; Agent for Process. Borrower and its Subsidiaries'
chief executive office and other places of business are as listed on Exhibit
7.1.6 hereto. During
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the preceding one-year period, neither Borrower nor any of its Subsidiaries has
had an office, place of business or agent for service of process other than as
listed on Exhibit 7.1.6.
7.1.7 Title to Properties; Priority of Liens. Borrower and its Subsidiaries
have good and marketable title to and fee simple ownership of, or valid and
subsisting leasehold interests in, all of its Real Estate, and good title to all
of the Collateral and all of its personal Property other than Collateral,
including good leasehold title with respect to Property leased from others, in
each case, free and clear of all Liens except Permitted Liens. Borrower has paid
or discharged all lawful claims which, if unpaid, might become a Lien against
Borrower's real and personal Property that is not a Permitted Lien. The Liens
granted to Agent under Section 5 hereof, if properly perfected, are first
priority Liens, subject only to Permitted Liens.
7.1.8 Accounts. Agent may rely, in determining which Accounts are Eligible
Accounts, on all statements and representations made by Borrower with respect to
any Account or Accounts. Unless otherwise indicated in writing to Agent, with
respect to all Accounts:
(i) the Accounts are genuine and in all respects what they purport to
be, and are not evidenced by a judgment;
(ii) the Accounts arise out of completed, bona fide sales and
deliveries of goods or rendition of services by Borrower in the ordinary
course of Borrower's business and in accordance with the terms and
conditions of all purchase orders, contracts or other documents relating
thereto and forming a part of the contract between Borrower and the
respective Account Debtor;
(iii) the Accounts are for liquidated amounts not in excess of any
amount Borrower has agreed to accept pursuant to any contractual agreement
with any Account Debtor or Obligor and maturing as stated in the respective
invoices covering such sales or renditions of services, copies of which
have been furnished or are available to Agent;
(iv) Such Accounts, and Agent's security interest therein, are not,
and will not (by voluntary act or omission of Borrower) be with the passage
of time, subject to any offset, Lien, deduction, defense, dispute,
counterclaim or any other adverse condition except for (a) disputes
resulting in returned goods where the amount in controversy is deemed by
Agent to be immaterial and (b) Permitted Liens, and the Accounts are
absolutely owing to Borrower and are not contingent in any respect or for
any reason;
(v) Borrower has not made any agreement with any Account Debtor or
Obligor thereunder for any extension, compromise, settlement or
modification of any such Account or any deduction therefrom, except (i)
discounts or allowances which are granted by Borrower in the ordinary
course of its business for prompt payment and (ii) payment arrangements
with respect to Accounts, provided that the aggregate amount of the
portions of such Accounts subject to such payment arrangements at any given
time do
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not exceed One Million Dollars ($1,000,000.00), and such arrangements are
reflected in the calculation of the net amount of each respective invoice
related thereto and are reflected in the Schedules of Accounts submitted to
Agent pursuant to subsection 6.2.1 hereof;
(vi) To Borrower's knowledge, there are no facts, events or
occurrences which in any way impair the validity or enforceability of any
Accounts or (other than with respect to discounts or allowances granted by
Borrower in the ordinary course of business) tend to reduce the amount
payable thereunder from the face amount of the invoice and statements
delivered to Agent with respect thereto;
(vii) To Borrower's knowledge, each Account Debtor thereunder (A) had
the capacity to contract at the time any contract or other document giving
rise to the Account was executed and (B) each such Account Debtor is
Solvent; and
(viii) Except as set forth on Schedule 7.1.8, to Borrower's knowledge,
there are no proceedings or actions which are threatened or pending against
any Account Debtor thereunder which could reasonably be expected to result
in any material adverse change in such Account Debtor's financial condition
or the collectibility of such Account.
7.1.9 Equipment. To Borrower's knowledge, the Equipment is in good
operating condition and repair in all material respects and all necessary
replacements of and repairs thereto shall be made so that the value and
operating efficiency of the Equipment shall be maintained and preserved,
reasonable wear and tear excepted, provided, however, that the foregoing will
not obligate Borrower or any of its Subsidiaries to repair any Equipment which
in Borrower's or such Subsidiary's reasonable business judgment is obsolete or
no longer used or useful by the Borrower in the ordinary course of its business.
7.1.10 Financial Statements; Fiscal Year.
(a) The Consolidated balance sheets of Borrower and such other Persons
described therein (including the accounts of all Subsidiaries of Borrower for
the respective periods during which a Subsidiary relationship existed) as of
January 3, 2000, and the related statements of income, changes in stockholder's
equity, and changes in financial position for the periods ended on such dates,
have been prepared in accordance with GAAP, and present fairly in all material
respects the financial position(s) of Borrower and such Persons at such dates
and the results of Borrower's operations for such periods. Since January 3,
2000, there has been no material adverse change in the condition, financial or
otherwise, of Borrower and such other Persons as shown on the Consolidated
balance sheet as of such date and no change in the aggregate value of Equipment
and Real Estate owned by Borrower or such other Persons, except changes in the
ordinary course of business, none of which individually or in the aggregate has
been materially adverse.
(b) The pro forma Consolidated opening balance sheet of the Borrower dated
as of the Closing Date provided by Borrower to Agent has been prepared in
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accordance with GAAP and fairly presents in all material respects the assets and
liabilities of the Borrower based on the assumptions accompanying such
projections which, while subject to changing conditions beyond Borrower's
control are believed by Borrower to be reasonable based on historical results
and in light of reasonably foreseeable business conditions. The fiscal year of
the Borrower ends on the Sunday nearest to December 31 of each year.
7.1.11 Full Disclosure. The financial statements referred to in subsection
7.1.10 hereof do not, nor does this Agreement or any other written statement of
Borrower to Agent and/or any Lender, contain any untrue statement of a material
fact or omit a material fact necessary to make the statements contained therein
or herein not misleading. There is no fact known to Borrower which Borrower has
failed to disclose to Agent in writing which materially affects adversely or, so
far as Borrower can now reasonably foresee, will materially affect adversely the
Properties, business, profits or condition (financial or otherwise) of the
Borrower or the ability of Borrower or its Subsidiaries to perform their
obligations as contained in this Agreement or the other Loan Documents.
7.1.12 Solvent Financial Condition. As of the Closing Date and the Funding
Date, Borrower and each of its Subsidiaries is and, after giving effect to the
Loans to be made and the Letters of Credit and LC Guaranties to be issued
hereunder, will be, Solvent. At all times after the Funding Date, each Borrower
is and will be Solvent. At all times after the Funding Date, Borrower and each
of its Subsidiaries are and will be Solvent on a Consolidated basis.
7.1.13 Surety Obligations. Neither the Borrower nor any of its Subsidiaries
is obligated as guarantor, surety or indemnitor under any surety or similar bond
or other contract issued or entered into any agreement to assure payment,
performance or completion of performance of any undertaking or obligation of any
Person other than the obligations of Borrower to Olsten Corporation under the
Separation Agreement dated September 17, 1999 among Olsten Corporation, Adecco
SA and Aaronco Corp., as amended, and except as would be permitted on the date
hereof under subsection 8.2.3.
7.1.14 Taxes. The federal tax identification number of Borrower and each of
its Subsidiaries is shown on Exhibit 7.1.14 hereto. Borrower and its
Subsidiaries has filed all federal, state and local tax returns and other
reports it is required by law to file and has paid, or made provision for the
payment of, all material taxes, assessments, fees, levies and other governmental
charges upon it, its income and Properties as and when such taxes, assessments,
fees, levies and charges that are due and payable, unless and to the extent any
thereof are being actively contested in good faith and by appropriate
proceedings and Borrower maintains reasonable reserves on its books therefor or
would not individually or in the aggregate have a Material Adverse Effect. The
provision for taxes on the books of Borrower and its Subsidiaries are adequate
for all years not closed by applicable statutes, and for its current fiscal
year.
7.1.15 Brokers. There are no claims against Borrower for brokerage
commissions, finder's fees or investment banking fees in connection with the
Divestiture or the establishment of the credit facility contemplated by this
Agreement.
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7.1.16 Patents, Trademarks, Copyrights and Licenses. Borrower and its
Subsidiaries own or possess all the patents, trademarks, service marks, trade
names, copyrights and licenses necessary for the present and planned future
conduct of its business without any known conflict with the rights of others.
All such patents, trademarks, service marks, tradenames, copyrights, licenses
and other similar rights are listed on Exhibit 7.1.16 hereto.
7.1.16 Governmental Consents. Each of Borrower and its Subsidiaries has,
and is in good standing with respect to, all governmental consents, approvals,
licenses, authorizations, permits, certificates, inspections and franchises
necessary to continue to conduct its business as heretofore or proposed to be
conducted by it and to own or lease and operate its Properties as now owned or
leased by it, except where the failure to have or be in good standing would not
have a Material Adverse Effect.
7.1.18 Compliance with Laws. Borrower and its Subsidiaries and their
respective Properties, business operations and leaseholds are in compliance with
the provisions of all federal, state and local laws, rules and regulations
applicable to it, its Properties or the conduct of its business except where the
failure to be in compliance would not have a Material Adverse Effect, and there
have been no citations, notices or orders of noncompliance issued to Borrower or
any of its Subsidiaries under any such law, rule or regulation which have not
been remedied except where noncompliance would not have a Material Adverse
Effect. Borrower and its Subsidiaries have established and maintain an adequate
monitoring system to insure that they remain in compliance with all federal,
state and local laws, rules and regulations applicable to it. No Inventory has
been produced by Borrower or any of its Subsidiaries in violation of the Fair
Labor Standards Act (29 U.S.C. ss. 201 et seq.), as amended, except for any
violation which would not have a Material Adverse Effect.
7.1.19 Restrictions. Neither the Borrower nor or any of its Subsidiaries is
a party or subject to any contract, agreement, or charter or other corporate
restriction, which materially and adversely affects its business or the use or
ownership of any of its respective Properties. Neither the Borrower nor any of
its Subsidiaries is a party or subject to any contract or agreement which
restricts its right or ability to incur Indebtedness, other than as set forth on
Exhibit 7.1.19 hereto, none of which prohibit the execution of or compliance
with this Agreement or the other Loan Documents by Borrower or any of its
Subsidiaries, as applicable.
7.1.20 Litigation. Except as set forth on Exhibit 7.1.20 hereto, there are
no actions, suits or proceedings pending, or, to the knowledge of Borrower,
threatened, nor, to the knowledge of Borrower, are there any investigations
pending, against Borrower or any of its Subsidiaries, or the business,
operations, Properties, prospects, profits or condition of Borrower or any of
its Subsidiaries which, either individually or in the aggregate could have a
Material Adverse Effect or could materially and adversely affect the rights of
Agent and/or Lenders hereunder. Notwithstanding the foregoing, Exhibit 7.1.20
lists all such actions, suits, proceedings or investigations which have been
instituted by any Government Authority in connection with healthcare-related
laws, rules or regulations. Neither the Borrower nor any of its
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Subsidiaries is in default with respect to any order, writ, injunction,
judgment, decree or rule of any court, governmental authority or arbitration
board or tribunal.
7.1.21 No Defaults. No event has occurred and no condition exists which
would, upon or after the execution and delivery of this Agreement or Borrower's
performance hereunder, constitute a Default or an Event of Default. Neither
Borrower nor any of its Subsidiaries is in default, and no event has occurred
and no condition exists which constitutes, or which with the passage of time or
the giving of notice or both would constitute, a default in the payment of any
Indebtedness to any Person for Money Borrowed.
7.1.22 Leases. Exhibit 7.1.22(a) hereto is a complete listing of all
Capitalized Lease Obligations of Borrower and its Subsidiaries and Exhibit
7.1.22(b) hereto is a complete listing of all Operating Leases (except for any
Operating Leases with annual payments due under the respective leases of less
than Ten Thousand Dollars ($10,000.00) of Borrower and its Subsidiaries. Each
Borrower and each Subsidiary is in full compliance in all material respects with
all of the terms of each of its respective Capitalized Lease Obligations and
Operating Leases listed in said exhibits.
7.1.23 Pension Plans. Except as disclosed on Exhibit 7.1.23 hereto, neither
the Borrower nor any of its Subsidiaries has any Plan. Borrower and its
Subsidiaries are in compliance with the requirements of ERISA and the
regulations promulgated thereunder with respect to each Plan, except where the
effect of such noncompliance would not have a Material Adverse Effect. No fact
or situation that could result in a material adverse change in the financial
condition of the Borrower exists in connection with any Plan. Neither Borrower
nor its Subsidiaries has any withdrawal liability in connection with a
Multiemployer Plan.
7.1.24 Trade Relations. There exists no actual or, to Borrower's knowledge,
threatened termination, cancellation or limitation of, or any modification or
adverse change in, the business relationship between Borrower or any of its
Subsidiaries and any customer or any group of customers whose purchases
individually or in the aggregate are material to the business of the Borrower,
or with any material supplier, and there exists no present condition or state of
facts or circumstances which would materially affect adversely the Borrower or
prevent Borrower or any of its Subsidiaries from conducting such business after
the consummation of the transaction contemplated by this Agreement in
substantially the same manner in which it has heretofore been conducted.
7.1.25 Labor Relations. Except as described on Exhibit 7.1.25 hereto,
neither the Borrower nor any of its Subsidiaries is a party to any collective
bargaining agreement. Except as described on Exhibit 7.1.25 hereto, there are no
material grievances, disputes or controversies with any union or any other
organization of Borrower's or any of its Subsidiaries' employees, or, to
Borrower's knowledge, threats of strikes, work stoppages or any asserted pending
demands for collective bargaining by any union or organization.
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7.1.26 Healthcare Representations and Warranties.
(a) Borrower owns or leases and operates facilities to provide health care
services and (i) maintains Medicare and Medicaid provider status and is the
holder of the provider identification numbers identified on Exhibit 7.1.26(a)
hereto, all of which are current and valid (except for any provider
identification numbers which may have inadvertently and temporarily cease to be
current or valid due to technical reasons (and not for cause) and which,
individually or in the aggregate, would not have a Material Adverse Effect or
materially and adversely affect any rights of Agent and/or Lenders hereunder,
provided that Borrower, promptly upon learning of any such situation with
respect to any provider identification number, shall correct all such technical
problems and have any such provider identification number or similar substitute
number reinstated or issued as current and valid) and, except as set forth on
Exhibit 7.1.26(a) hereto, Borrower has not allowed, permitted, authorized or
caused any other Person to use any such provider identification number; (ii) has
obtained all material licenses, accreditations and approvals of governmental
authorities and all other Persons necessary for Borrower to own its assets, to
carry on its business, to execute, deliver and perform the Loan Documents, and
to receive payments from the Obligors; and (iii) is in compliance except where
the effect of such noncompliance would not result in a Material Adverse Effect
with all laws, rules, regulations, orders, decrees and directions of any
Governmental Authority (including, without limitation, the Medicare Act, the
rules and regulations of HCFA under the Medicare Act, and the applicable
Medicaid laws) applicable to the Accounts or any contracts relating thereto, or
applicable to the Borrower's business and properties, a violation of which would
or could materially and adversely affect the Borrower's ability to carry out its
Obligations hereunder with respect to the Accounts. In addition, Borrower has
not been notified by any such Governmental Authority or other person during the
immediately preceding 24 month period that such party has rescinded or not
renewed, or intends to rescind or not renew, any such license or approval.
(b) The Medicaid and Medicare cost reports of each facility and of the home
office of Borrower for all cost reporting periods have been submitted when and
as required to (i) as to Medicaid, the state agency, or other HCFA-designated
agent or agent of such state agency, charged with such responsibility or (ii) as
to Medicare, the Medicare intermediary or other HCFA-designated agent charged
with such responsibility. Borrower's cost reports do not indicate and no audit
has resulted in any determination that Borrower was overpaid for Medicaid and
Medicare in an aggregate amount of Two Million Dollars ($2,000,000.00) or more
in any of the most recent three fiscal years covered by such audit. For the
purposes of this subsection, the amounts of any overpayment for any particular
matter which have been disclosed to Agent as of the Closing Date shall not be
included in the calculation of the aggregate amount of overpayments; however, if
a final determination is made at some time after the Closing Date that the total
amount of the overpayment for any particular matter disclosed to Agent as of the
Closing Date is greater than the amount which was disclosed as of the Closing
Date, the excess of the amount as of the final determination over the amount
disclosed to Agent as of the Closing Date shall be included in the calculation
of the aggregate amount of overpayments under this subsection.
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(c) With respect to all Accounts, as of the date each such Account is
created and included as an Eligible Account by Agent, on behalf of and for the
benefit of Lenders:
(i) All documents and agreements relating to the Accounts requested by
Agent have been delivered to Agent with respect to such Accounts and such
documents are true and correct in all material respects; Borrower has timely and
properly billed the applicable Obligors of the Accounts (except where supporting
claim documents must be forwarded to any Obligor before a bill may be submitted
in which case Borrower shall promptly complete documentation and billing of such
Obligors), and Borrower has delivered or caused to be delivered to such Obligors
all material Obligor requested supporting claim documents with respect to such
Accounts including all material documentation required by the applicable
Obligors for payment on the Accounts, and the statutory periods for issuing an
explanation of benefits ("EOB") in connection with such Accounts have not
expired; all information set forth in the bills and supporting claim documents
submitted to Obligors with respect to the Accounts is true, complete and correct
in all material respects, and, if additional information is requested by any
Obligor in connection therewith, Borrower will promptly provide the same and, if
necessary, will rebill or, if requested by the primary servicer (if other than
Borrower) cooperate with such servicer(s) to rebill any such Account;
(ii) The Accounts are exclusively owned by Borrower, and there is no
security interest in or lien against the Accounts in favor of any third party
other than Agent, except for Permitted Liens, nor is there any recording or
filing against Borrower, as debtor, covering or purporting to cover any interest
of any kind in the Accounts, except as has been or will be released or
terminated by each party holding such adverse interest in the Accounts prior to
or concurrently with the initial Loan made by Agent and Lenders to Borrower.
Borrower shall defend the first priority security interest of Agent, on behalf
of Lenders, in all Accounts against the claims of all persons claiming any
interest adverse to Agent and Lenders. With respect to any Government Accounts
the rights transferred to Agent in connection with this Agreement do not include
the right to claim payment in Agent's name from the applicable Obligor or the
right to direct such Obligor to remit payment directly to Agent except as
permitted by applicable laws and regulations governing such Accounts;
(iii) The Accounts (A) are payable in full by the Obligor identified by
Borrower as being obligated with respect to such Account, (B) are denominated
and payable only in lawful currency of the United States, and (C) are "accounts"
within the meaning of the Uniform Commercial Code of the state in which the
services or goods were provided or sold to the respective Patients or Obligors,
as applicable, by Borrower and in which Borrower has its chief executive office,
or are rights to payment under a policy of insurance or the proceeds thereof,
and are not evidenced by an instrument or chattel paper; and there are no
Obligors other than the applicable Obligors identified by Borrower as the
Obligors primarily liable, on the Accounts;
(iv) Borrower does not have any guaranty of, letter of credit providing
credit support for, or collateral security for, the Accounts, other than any
such
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guaranty, letter of creditor or collateral security as has been assigned to
Agent, and any such guaranty, letter of credit or collateral security is not
subject to any Lien in favor of any other person;
(v) To Borrower's knowledge and belief the goods or services provided and
creating the Accounts were received by the respective Patient or Obligor, as
applicable;
(vi) Where required by applicable law or contract, the fees charged for the
goods or services constituting the basis for the Accounts are (a) consistent
with the usual, customary and reasonable fees charged by other similar medical
service providers or providers of similar goods and services, as applicable, in
Borrower's community or the community in which the respective Patient or
Obligor, as applicable, resides or is located, whichever is less, of the same or
similar service by Borrower or (b) pursuant to negotiated fee contracts, or
imposed fee schedules, with or by the applicable Obligors;
(vii) No action by Borrower other than the execution and delivery of this
Agreement and the other Loan Documents, the issuance and delivery of any
required Obligor notices (in a form approved by Agent) and the filing of UCC
financing statements in the State(s) in which the Borrower's chief executive
office is located, is required to perfect the first priority security interest
of Agent in the Accounts, and all such actions have been or will be accomplished
no later than the date of the initial Loan advance by Agent, on behalf of and
for the ratable benefit of Lenders;
(viii) The Accounts comply, in all material respects which would affect the
timely collectibility of such Accounts, with all laws and regulations applicable
thereto;
(ix) Any insurance policy, contract or other instrument obligating any
respective Obligor to make payment with respect to the Accounts, except with
respect to Governmental Accounts, does not contain any provision prohibiting the
transfer of such payment obligation from a Patient to Borrower;
(x) Fees for services or goods which are subject to limitations imposed by
worker's compensation regulations or by contracts for reimbursement from the
related Obligor do not exceed the limitations imposed thereunder, and the
Accounts for which the fees are so restricted has been clearly identified to
Agent as being subject to such restriction;
(xi) There are no Obligors, other than as designated by Borrower, that are
primarily liable on the Accounts;
(xii) Except as set forth on Exhibit 7.1.26(c), there are no proceedings or
investigations in which Borrower is named as party or any other proceedings or
investigation ending or threatened before any Government Authority or any
arbitration or similar proceedings under any contract (a) asserting the
invalidity of any of the Accounts or any contracts related thereto, (b) seeking
the payment of any of the Accounts or any contract related thereto, or (c)
seeking any determination or ruling that might materially and adversely affect
the
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validity or enforceability of any of the Accounts or any contracts related
thereto which, either individually or in the aggregate could have a Material
Adverse Effect or could materially and adversely affect the rights of Agent
and/or Lenders hereunder. Notwithstanding the foregoing, Exhibit 7.1.26(c) lists
all such proceedings or investigations which have been instituted by any
Government Authority in connection with healthcare-related laws, rules or
regulations;
(xiii) None of the Accounts or contracts related thereto contravene in any
material respect any federal, state or local law, rule or regulation applicable
thereto (including, without limitation, the Medicare Act and the rules and
regulations of HCFA under the Medicare Act and laws, rules and regulations
relating to usury, consumer protection, truth in lending, fair credit billing,
fair credit reporting, equal credit opportunity, fair debt collection practices
and privacy), and no party to such related contract to Borrower's knowledge is
in violation of any such law, rule or regulation in any material respect; and
(xiv) All descriptions of the Accounts provided to Agent on behalf of
Borrower remain true and correct and do not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
descriptions of or statements made therein not misleading.
If a breach of any of the representations or warranties contained herein
relating to a Account may, in the reasonable opinion of Agent, have a material
adverse effect upon the validity, legality or collectibility of such Account
then, such Account shall no longer be deemed, an "Eligible Account", as defined
in Appendix A herein.
7.1.27 Y2K Compliance. All computer applications used by Borrower and its
Subsidiaries are able to effectively interpret, process and manipulate data and
recognize and perform properly date-sensitive functions involving dates prior
to, on and after December 31, 1999.
7.1.28 Operations and Accounts Receivable. Except for Gentiva Services
Limited Canada, no direct or indirect Subsidiary of the Company conducts any
business operations (except for the business of being a holding company) or owns
any Property (except for the capital stock of another corporation, or, in the
case of the Gentiva Trust, the convertible debentures of the Company) or
generates or owns any Accounts other than those Subsidiaries which are a party
to this Agreement as a Borrower or a Subsidiary Borrowing Corporation.
7.1.29 Cash Management. All funds and remittances received by Borrower with
respect to any Accounts are received into or immediately deposited by Borrower
into Borrower's Lockbox Accounts or Concentration Account(s), and all funds
deposited in Borrower's Lockbox Accounts are transferred to Borrower's
Concentration Account(s) on a daily basis, provided that any funds which are
deposited into the Lockbox Accounts after the time of the daily transfer are
transferred into the Concentration Account as of the next Business Day.
7.2 Continuous Nature of Representations and Warranties. Each
representation and warranty contained in this Agreement and the other Loan
Documents shall be continuous in nature and shall remain in all material
respects accurate, complete and not misleading at all times
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during the term of this Agreement, except for changes in the nature of
Borrower's or its Subsidiaries' business or operations that would render the
information in any exhibit attached hereto either inaccurate, incomplete or
misleading, so long as Agent has consented to such changes or such changes are
expressly permitted by this Agreement.
7.3 Survival of Representations and Warranties. All representations and
warranties of Borrower contained in this Agreement or any of the other Loan
Documents shall survive the execution, delivery and acceptance hereof and
thereof by Agent and the parties hereto and thereto and the closing of the
transactions described herein and therein, and related hereto and thereto.
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS
8.1 Affirmative Covenants. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lenders, Borrower
covenants that, unless otherwise consented to by the Majority Lenders, in
writing, which consent shall not be unreasonably withheld, it shall:
8.1.1 Visits and Inspections. Permit representatives of Agent, 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 each of its
Subsidiaries, inspect, audit and make extracts from its books and records at
Borrower's cost as provided in this Agreement, and discuss with its officers,
its employees and its independent accountants, Borrower's and each of its
Subsidiaries' businesses, assets, liabilities, financial condition, business
prospects and results of operations. After the occurrence and during the
continuance of an Event of Default, Agent shall give notice to the Lenders prior
to conducting any such visits, inspections or audits, and, any Lender may, upon
such Lender's request and at such Lender's expense, have a representative of
such Lender accompany Agent on and participate in any such visits, inspections
or audits.
8.1.2 Notices. Promptly notify Agent in writing of the occurrence of any
event or the existence of any fact which renders any representation or warranty
in this Agreement or any of the other Loan Documents inaccurate, incomplete or
misleading in any material respect.
8.1.3 Financial Statements. Keep, and cause each Subsidiary to keep,
adequate records and books of account with respect to its business activities in
which proper entries are made in accordance with GAAP reflecting all its
financial transactions, and cause to be prepared and furnished to Agent the
following (all to be prepared in accordance with GAAP applied on a consistent
basis, unless Borrower's certified public accountants concur in any change
therein and such change is disclosed to Agent and is consistent with GAAP):
(a) not later than ninety (90) days after the close of each fiscal
year of Borrower, unqualified audited financial statements of the Borrower
and its Subsidiaries as of the end of such year, on a Consolidated basis,
certified as to such Consolidated financial statements of the Borrower, by
a firm of independent certified public accountants of recognized standing
selected by Borrower but reasonably acceptable to
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Agent (except for a qualification for a change in accounting principles
with which the accountant concurs);
(b) not later than thirty (30) days after the end of each month
hereafter, (or, in the case of each March, June, September or December,
forty-five (45) days after the end of each such month), unaudited interim
financial statements as of the end of such month and of the portion of the
Borrower's fiscal year then elapsed, on a Consolidated basis, including a
balance sheet, profit and loss statement and a statement of cash flows,
certified by the principal financial officer of Borrower as prepared in
accordance with GAAP and fairly presenting the Consolidated financial
position and results of operations of the Borrower for such month and
period subject only to changes from audit and year-end adjustments and
except that such statements need not contain notes;
(c) promptly upon request, deliver such other information concerning
the Borrower as Agent may from time to time reasonably request, including
Medicare and Medicaid cost reports and audits, annual reports, security law
filings and reports to any security holders. To the extent Borrower
believes that any information reasonably requested by Agent would require
the disclosure of information subject to (i) any applicable privilege which
would prohibit such disclosure, or which privilege would be destroyed by
such disclosure or (ii) any applicable federal or state laws on patient
confidentiality, Borrower shall notify Agent of the general nature of the
information subject to the claimed privilege or applicable patient
confidentiality laws, and of Borrower's reasons for believing that such
disclosure would be prohibited, or would destroy the privilege, or would
violate any applicable patient confidentiality laws, and Agent, in its
reasonable discretion, will determine whether to require such information
under the circumstances;
(d) promptly after the sending or filing thereof, as the case may be,
copies of any proxy statements, financial statements or reports filed with
any public agency which Borrower has made available to its shareholders and
copies of any regular, periodic and special reports or registration
statements which Borrower files with the Securities and Exchange Commission
or any governmental authority which may be substituted therefor, or any
national securities exchange;
(e) promptly after the filing thereof, copies of any annual report to
be filed in accordance with ERISA in connection with each Plan; and
(f) such other data and information (financial and otherwise) as
Agent, from time to time, may reasonably request, bearing upon or related
to the Collateral or Borrower's and/or any Subsidiaries' financial
condition or results of operations. To the extent Borrower believes that
any information reasonably requested by Agent would require the disclosure
of information subject to (i) any applicable privilege which would prohibit
such disclosure, or which privilege would be destroyed by such disclosure
or (ii) any applicable federal or state laws on patient confidentiality,
Borrower shall notify Agent of the general nature of the information
subject to the claimed privilege or
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applicable patient confidentiality laws, and of Borrower's reasons for
believing that such disclosure would be prohibited, or would destroy the
privilege, or would violate any applicable patient confidentiality laws,
and Agent, in its reasonable discretion, will determine whether to require
such information under the circumstances.
Concurrently with the delivery of the financial statements described in
clause (a) of this subsection 8.1.3, Borrower shall forward to Agent a copy of
the accountants' letter to Borrower's management that is prepared in connection
with such financial statements and also shall cause to be prepared and shall
furnish to Agent a certificate of the aforesaid certified public accountants
certifying to Agent that, based upon their examination of the financial
statements of the Borrower performed in connection with their examination of
said financial statements, they are not aware of any Default or Event of
Default, or, if they are aware of such Default or Event of Default, specifying
the nature thereof. Concurrently with the delivery of (i) the financial
statements described in clauses (a) of this subsection 8.1.3 and (ii) the
financial statements described in clause (b) of the subsection 8.1.3 for each
month which is the last month in a fiscal quarter of Borrower (and not for any
other months), or more frequently if requested by Agent, Borrower shall cause to
be prepared and furnished to Agent a Compliance Certificate in the form of
Exhibit B hereto executed by the Chief Financial Officer of Borrower, together
with a work sheet reflecting all calculations made in completing the Compliance
Certificate. Upon reasonable request by Agent, Borrower shall provide the
financial statements described in clauses (a) or (b) on a Consolidated and
Consolidating basis.
8.1.4 Landlord and Storage Agreements. Provide Agent with copies of all
agreements between Borrower or any of its Subsidiaries and any landlord or
warehouseman which owns any premises at which any Inventory may, from time to
time, be kept, as Agent may reasonably request from time to time.
8.1.5 Year 2000 Compliance. Take all action necessary to assure that at all
times the computer-based systems utilized by Borrower and each of its
Subsidiaries are able to effectively interpret, process and manipulate data,
including dates before, on and after December 31, 1999. At Agent's request,
Borrower shall provide to Agent assurance reasonably satisfactory to Agent that
the computer-based systems utilized by Borrower and each of its Subsidiaries are
able to recognize and perform, without error, functions involving dates before,
on and after December 31, 1999.
8.1.6 Projections. Prior to the end of each fiscal year of Borrower,
deliver to Agent Projections of Borrower for the forthcoming fiscal year, month
by month.
8.1.7 Borrowing Base Certificate. No later than thirty (30) calendar days
after the last day of each calendar month, Borrower shall deliver to Agent a
Borrowing Base Certificate in the form of Exhibit C hereto executed by the Chief
Financial Officer of Borrower.
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8.1.8 Healthcare Covenants.
(a) Borrower will (i) not amend, waive or otherwise permit or agree to any
material deviation from the terms or conditions (other than adjustments in the
ordinary course of Borrower's business) of the Accounts without the express
written consent of Agent; (ii) upon the request of Agent, use all commercially
reasonable efforts to obtain all consents from patients which are required by
law in order for Agent, or any servicing entity retained by Agent, to secure
information needed to obtain payment from the respective Obligors on the
Accounts; and (iii) promptly bill for all Accounts on the same basis and using
the same policies and practices that it has used in the past unless Agent has
been advised in writing of a change prior to the making of any Loans.
(b) Agent or its designated agents and representatives from time to time
may verify the Accounts, inspect, check, take copies of or extracts from the
Borrower's books, records and files, consistent with the state and federal laws
regarding patient confidentiality and Borrower will make the same available to
Agent or such representatives at any reasonable time for such purposes,
including records relating to the collection of Accounts, the application of
collections (including misdirected payments) and other matters related thereto.
(c) If deemed necessary by Agent and upon reasonable notice, Borrower
agrees that Agent will be permitted to have at least one of its agents or
representatives physically present in the Borrower's administrative offices
during Borrower's normal business hours to monitor Borrower in performing its
obligations under this Agreement. Upon request made by Agent, subject to state
and federal laws, including without limitation laws regarding patient
confidentiality, Borrower shall furnish, or cause to be furnished, to Agent all
relevant records related to the Accounts in written and electronic form,
including any file cabinets, storage containers or computers within which such
records are kept. Borrower's grant to Agent, on behalf of and for the benefit of
Lenders, of a security interest in such records and goods as set forth herein is
subject to the confidentiality and other rights under applicable law and under
rights and rules of the JCAHO.
(d) Borrower shall promptly notify Agent in the event of any action(s),
suit(s), proceeding(s), dispute(s), offset(s), deduction(s), defense(s) or
counterclaim(s) that are or may be asserted by Obligor(s) with respect to any
Account(s), if the aggregate amount of the portion(s) of the Account(s) subject
to such actions, suits, etc. of which Borrower has gained knowledge since the
date of the last Borrowing Base Certificate shall exceed One Million Dollars
($1,000,000.00) (except for denials of Government Accounts which shall be
disclosed on a monthly basis by Borrower to Agent). This section does not
require Borrower to provide a notice of denial to Agent in those cases where
Borrower reasonably believes that an Obligor's notice of denial will be reversed
upon the submission of supplemental information to the Obligor.
(e) Borrower shall make all payments to the applicable Obligor necessary to
prevent such Obligor from offsetting any earlier overpayment to Borrower against
any amount the Obligor may owe on any Accounts if the aggregate amount of such
offsets shall at any time exceed One Million Dollars ($1,000,000.00).
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(f) Borrower shall comply in all material respects with all of the terms of
each settlement agreement and corporate integrity agreement entered into by
Borrower with the government.
8.2 Negative Covenants. During the term of this Agreement, and thereafter
for so long as there are any Obligations to Lenders, Borrower covenants that,
unless Majority Lenders have first consented thereto in writing, it will not:
8.2.1 Mergers; Consolidations; Acquisitions. Merge or consolidate, or
permit any Subsidiary to merge or consolidate, with any Person, nor acquire, nor
permit any of its Subsidiaries to acquire, all or any substantial part of the
Properties of any Person. Notwithstanding any of the foregoing:
(i) any Borrower may merge or consolidate with any other Borrower, and
any Subsidiary Guarantor may merge or consolidate with any other Subsidiary
Guarantor or any Borrower;
(ii) any Subsidiary Guarantor may be liquidated or dissolved if the
Borrower decides in the exercise of its reasonable business judgment that
such liquidation or dissolution is desirable provided that (a) such
dissolution shall not have a Material Adverse Effect and (b) upon such
dissolution, any and all of the assets and Property of such Subsidiary
Guarantor shall be distributed to the Borrower(s) or Subsidiary
Guarantor(s) which own(s) the capital stock of such Subsidiary Guarantor;
(iii) any Borrower may acquire a new Subsidiary, or merge or
consolidate with another Person, as a part of any Permitted Acquisition
transaction provided that (a) in the case of any Permitted Acquisition
transaction which involves the purchase of the capital stock or equity
interests of another Person but does not involve a merger or consolidation,
the Borrower shall pledge the capital stock or equity interests of such
acquired Person to the Agent for the ratable benefit of the Lenders
pursuant to the Pledge Agreement and the acquired Person shall become a
party to this Agreement as a Subsidiary Borrowing Corporation by executing
a Joinder Agreement in the form of Exhibit D attached hereto or (b) in the
case of any Permitted Acquisition transaction which involves a merger of
the acquired Person with the respective Borrower, the Borrower shall be the
surviving entity; and
(iv) any Borrower may create a new Subsidiary provided that the
Borrower shall pledge the capital stock or equity interests of such
newly-created Subsidiary to the Agent for the ratable benefit of the
Lenders pursuant to the Pledge Agreement and the newly-created Subsidiary
shall become a party to this Agreement as a Subsidiary Borrowing
Corporation by executing a Joinder Agreement.
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Any Person which executes a Joinder Agreement pursuant to this subsection shall
be deemed to be a "Borrower" under this Agreement, and every reference herein to
"Borrower" shall be deemed to include that Person.
8.2.2Loans. Make, or permit any Subsidiary of Borrower to make, any loans
or other advances of money (other than for salary, travel advances, advances
against commissions and other similar advances in the ordinary course of
business) to any Person, other than (a) loans to employees not to exceed Five
Hundred Thousand Dollars ($500,000.00) at any time outstanding in the aggregate
and (b) loans between or among a Borrower and any other Borrowers and/or any
Subsidiary Guarantors.
8.2.3 Total Indebtedness for Money Borrowed. Create, incur, assume, or
suffer to exist, or permit any Subsidiary of Borrower to create, incur or suffer
to exist, any Indebtedness for Money Borrowed, except:
(a) Obligations owing to Agent and/or Lenders under or in connection
with the Loan Documents;
(b) Indebtedness of a Borrower or any Subsidiary of Borrower to a
Borrower or its Subsidiary as permitted in subsection 8.2.4;
(c) the Subordinated Debt;
(d) Permitted Purchase Money Indebtedness;
(e) accounts payable to trade creditors and current operating expenses
(other than for Money Borrowed) which are not more than ninety (90) days
from the due date, and which are incurred in the ordinary course of
business and paid within such time period, unless the same are being
actively contested in good faith and by appropriate and lawful proceedings;
provided that Borrower or Subsidiary (as applicable) shall have set aside
such reserves, if any, with respect thereto as are required by GAAP and
deemed adequate by Borrower or Subsidiary (as applicable) and its
independent accountants;
(f) Obligations to pay Rentals permitted by subsection 8.2.13 and
Capitalized Lease Obligations permitted under subsection 8.2.8;
(g) contingent liabilities arising out of endorsements of checks and
other negotiable instruments for deposit or collection in the ordinary
course of business;
(h) guaranties of lease obligations or other similar obligations of
Subsidiaries to the extent that such lease obligations or similar
obligations are otherwise permitted by this Agreement;
(i) bid bonds, performance bonds, surety bonds, letters of credit or
similar obligations made in the ordinary course of business (including
bonds to secure
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payment of judgments) which do not, in the aggregate, exceed Twenty Million
Dollars ($20,000,000.00) at any one time; and
(j) other Indebtedness not to exceed an aggregate amount of Five
Million Dollars ($5,000,000.00) outstanding at any one time.
8.2.4 Affiliate Transactions. Except as set forth in Exhibit 8.2.4 hereto,
enter into, or be a party to, or permit any Subsidiary of Borrower to enter into
or be a party to, any transaction with any Affiliate of Borrower, except in the
ordinary course of and pursuant to the reasonable requirements of Borrower's or
Subsidiary's business and upon fair and reasonable terms which are fully
disclosed to Agent and are no less favorable to Borrower or Subsidiary than
would obtain in a comparable arm's length transaction with a Person not an
Affiliate of Borrower or its Subsidiary. Notwithstanding any of the foregoing,
the Company may issue up to Ten Million Dollars ($10,000,000.00) of additional
Convertible Debentures to the Gentiva Trust according to the terms of subsection
8.2.10.
8.2.5 Limitation on Liens. Create or suffer to exist, or permit any
Subsidiary of Borrower to create or suffer to exist, any Lien upon any of its
Property, income or profits, whether now owned or hereafter acquired, except:
(a) Liens at any time granted in favor of Agent, for the ratable
benefit of Lenders;
(b) Liens for taxes, assessments or charges imposed by any Government
Authority (excluding any Lien imposed pursuant to any of the provisions of
ERISA) not yet due, or being contested in the manner described in
subsection 7.1.14 hereto, but only if in Agent's reasonable judgment such
Lien does not materially adversely affect Agent's rights or the priority of
Agent's Lien, for the ratable benefit of Lenders, upon the Collateral;
(c) Liens arising in the ordinary course of Borrower's or such
Subsidiary's business by operation of law or regulation, such as carriers,
warehouseman's landlords' and mechanics liens, but only if payment in
respect of any such Liens are not at the time required and such Liens do
not, in the aggregate, materially detract from the value of the Property of
Borrower or any of its Subsidiaries or materially impair the use thereof in
the operation of Borrower's or any of its Subsidiaries' business;
(d) Purchase Money Liens securing Permitted Purchase Money
Indebtedness;
(e) such other Liens as appear on Exhibit 8.2.5 hereto;
(f) pledges or deposits to secure workers' compensation, unemployment
insurance and other social security legislation or the deposits securing
obligations to insurance companies insuring such liabilities;
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(g) pledges or deposits to secure the performance of bids, trade
contracts (other than for Borrowed Money), statutory obligations, surety
and appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business (including bonds to secure
payment of judgments), provided that such obligations do not, in the
aggregate, exceed Twenty Million Dollars ($20,000,000.00) at any one time;
(h) pledges or deposits to secure lease obligations of Borrower or any
Subsidiaries to the extent such lease obligations are permitted by this
Agreement;
(i) Liens consisting of judgment or judicial attachment Liens
(including prejudgment attachment) in existence less than forty-five (45)
days after the entry thereof or the enforcement of which is effectively
stayed or payment of which is covered in full (subject to a customary
deductible) by insurance or which do not otherwise result in any Event of
Default;
(j) Liens securing obligations in respect of Capitalized Lease
Obligations solely on property subject to such Capitalized Lease
Obligations;
(k) leases or subleases granted to third Persons not interfering in
any material respect with Agent's right to the Collateral or the business
of the Borrower or any Subsidiary;
(l) liens arising from UCC financing statements regarding leases
permitted by this Agreement;
(m) any interest or title of a lessor or sublessor under any lease
permitted by this Agreement;
(n) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods so long as such liens attached only to the imported
goods;
(o) Liens existing on the Property of any Person at the time such
Person becomes a Subsidiary of any Borrower or is merged or consolidated
into a Borrower pursuant to a Permitted Acquisition transaction, and, in
each case, not created in contemplation of or in connection with the
Permitted Acquisition transaction, provided however, that such Liens do not
extend to any of Property of any Borrower;
(p) other Liens in an amount not to exceed Five Hundred Thousand
Dollars ($500,000.00), provided that such Liens do not secure any
Indebtedness for Money Borrowed;
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(q) any extension, renewal or replacement of the foregoing; provided,
however, that the Liens permitted by this subsection 8.2.5 shall not cover
any additional Indebtedness or Property; and
(r) such other Liens as the Majority Lenders may hereafter approve in
writing.
8.2.6 Subordinated Debt. Either (i) make, or permit Borrower or any of its
Subsidiaries to make, any payment (including, without limitation, any
prepayment) of any part or all of any Subordinated Debt (other than in the
context of a refinancing transaction as permitted under clause (iii) of the
definition of Subordinated Debt), or otherwise repurchase, redeem or retire any
instrument evidencing any such Subordinated Debt, provided that if, after taking
any such payment into effect, no Event of Default shall have occurred and
Availability shall be at least Forty Million Dollars ($40,000,000.00 ), then
such a payment, repurchase, redemption or retirement with respect to the Quantum
Debentures may take place, or (ii) enter into any agreement (oral or written)
which could in any way be construed to amend, modify, alter or terminate any one
or more instruments or agreements evidencing or relating to any Subordinated
Debt except for amendments or modifications which are not adverse in any
material respect towards Agent and/or Lenders and as permitted by the terms of
the documents governing such Subordinated Debt. Notwithstanding any of the
foregoing, so long as no Default or Event of Default has occurred and remains
outstanding, Borrower may make regularly scheduled payments of interest in
respect of any of the Subordinated Debt.
8.2.7 Distributions. Declare or make, or permit any Subsidiary of Borrower
to declare or make, any Distributions. Notwithstanding the foregoing, (i) any
Borrower or any Subsidiary Guarantor may declare and/or make Distributions to
any Borrower and (ii) the Gentiva Trust may make regularly scheduled dividend
payments (either in cash or in-kind) to the holders of the Convertible Trust
Preferred Stock according to the terms of the documents governing the
Convertible Trust Preferred Stock.
8.2.8 Capital Expenditures. Make Capital Expenditures (including, without
limitation, by way of capitalized leases) which, in the aggregate, as to
Borrower and its Subsidiaries, exceed (i) Twenty-Six Million Dollars
($26,000,000.00) in fiscal year 2000, (ii) Twenty-Seven Million Dollars
($27,000,000.00) in fiscal year 2001, and (iii) Thirty Million Dollars
($30,000,000.00) in each fiscal year thereafter.
8.2.9 Disposition of Assets. Sell, lease or otherwise dispose of any of, or
permit any Subsidiary of Borrower to sell, lease or otherwise dispose any of,
its Properties, including any disposition of Property as part of a sale and
leaseback transaction, to or in favor of any Person, except: (i) sales of
Inventory in the ordinary course of business, (ii) a transfer of Property by any
Borrower or Subsidiary Guarantor to any Borrower, (iii) dispositions of Property
(including dispositions of used, worn-out or surplus Property) by Borrower or
any Subsidiary in the ordinary course of business with fair market value of less
than One Million Dollars ($1,000,000.00), in the aggregate, in any given fiscal
year (which disposition may include a disposition, whether or not in the
ordinary course of business of all or substantially all of the
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assets of a Borrower or a Subsidiary Guarantor, or all of the stock of any
Borrower or Subsidiary Guarantor, provided that such disposition is within the
$1,000,000.00 limitation) , (iv) leases or subleases of Property which shall not
have a Material Adverse Effect, and (v) dispositions expressly authorized by
this Agreement.
8.2.10 Stock of Subsidiaries. Permit any of its Subsidiaries to issue any
additional shares of its capital stock except director's qualifying shares and
shares. Notwithstanding any of the foregoing, (i) the Company may issue
additional shares of its capital stock and (ii) the Gentiva Trust may issue
additional shares of preferred stock either (i) for the purpose of making
in-kind dividend payments as regularly scheduled to the holders of the
Convertible Trust Preferred Stock according to the terms of the documents
governing the Convertible Trust Preferred Stock or (ii) in connection with the
issuance of additional Convertible Debentures to the Gentiva Trust by the
Company after the Funding Date in an aggregate amount not to exceed Ten Million
Dollars ($10,000,000.00) on terms no less favorable to the Lenders than those of
the initial issuance of the Convertible Trust Preferred Stock at the time of the
Closing. Nothing in this subsection shall be construed to prohibit the creation
of new subsidiaries by any Borrower in accordance with the provisions of
subsection 8.2.1.
8.2.11 Bill-and-Hold Sales, Etc. Make a sale to any customer on a
bill-and-hold, guaranteed sale, sale and return, sale on approval or consignment
basis, or any sale on a repurchase or return basis except for consignment sales
which, in the aggregate, do not exceed One Million Dollars ($1,000,000.00).
8.2.12 Restricted Investment. Make or have, or permit any Subsidiary of
Borrower to make or have, any Restricted Investment.
8.2.13 Leases. Become, or permit any Subsidiary of Borrower to become, a
lessee under any Operating Lease (other than a lease under which Borrower or any
of its Subsidiaries is lessor, which lease is otherwise permitted by the terms
of this Agreement) of Property if the aggregate Rentals payable during any
current or future period of twelve (12) consecutive months under such lease and
all other leases under which Borrower or any of its Subsidiaries is then lessee
would exceed Thirty-Seven Million Dollars ($37,000,000.00). The term "Rentals"
means, as of the date of determination, all payments which the lessee is
required to make by the terms of any such lease.
8.2.14 Tax Consolidation. File or consent to the filing of any consolidated
income tax return with any Person other than a Subsidiary of Borrower.
8.2.15 Change of Corporate Name. Change or permit any Subsidiary of
Borrower to change the name of the respective corporate legal entity as
registered with the Secretary of State in the jurisdiction of its incorporation
unless 30 days prior written notice of such change is given to the Agent.
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8.3 Specific Financial Covenants. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lenders, Borrower
covenants that, Borrower shall, on a consolidated basis, maintain the financial
covenants set forth on Schedule 8.3 hereto.
SECTION 9. CONDITIONS PRECEDENT
9.1 Conditions Precedent to Effectiveness of Agreement. Notwithstanding any
other provision of this Agreement or any of the other Loan Documents, and
without affecting in any manner the rights of Agent and/or Lenders under the
other sections of this Agreement the effectiveness of this Agreement is subject
to satisfaction of each of the following conditions precedent:
9.1.1 Documentation. Agent shall have received, in form and substance
reasonably satisfactory to Agent and its counsel, a duly executed copy of this
Agreement, the Revolving Credit Notes and the other Loan Documents, together
with such additional documents, instruments and certificates as Agent and its
counsel shall require in connection therewith from time to time, all in form and
substance reasonably satisfactory to Agent and its counsel, including, without
limitation the following:
(a) Certified copies of Borrower's casualty insurance policies, together
with loss payable endorsements on Lender's standard form of lender's loss payee
endorsements naming Lender as lender loss payee and certified copies of
Borrower's liability insurance policies, together with endorsements naming
Lender as additional insured;
(b) Certified copies of (i) resolutions of Borrower's board of directors
authorizing the execution and delivery of this Agreement and the Loan Documents
and the performance of all transactions contemplated hereby and thereby, (ii)
Borrower's by-laws and any amendments thereto, and (iii) an incumbency
certificate of Borrower;
(c) A copy of the Articles or Certificate of Incorporation of Borrower, and
all amendments thereto, certified by the Secretary of State or other appropriate
official of its jurisdiction of incorporation;
(d) Good standing certificates for Borrower, issued by the Secretary of
State or other appropriate official of Borrower's jurisdiction of incorporation
and each jurisdiction where the conduct of Borrower's business activities or the
ownership of its Properties necessitates qualification;
(e) A closing certificate signed by the Chief Financial Officer of the
Company dated as of the date hereof, stating that (i) the representations and
warranties set forth in Section 7 hereof are true and correct in all material
respects on and as of such date, (ii) Borrower is on such date in compliance in
all material respects with all the terms and provisions set forth in this
Agreement and (iii) on such date no Default or Event of Default has occurred or
is continuing;
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(f) The Security Documents duly executed, accepted and acknowledged by or
on behalf of each of the signatories thereto;
(g) The favorable, written opinion of Borrower's counsel as to the
transactions contemplated by this Agreement and any of the other Loan Documents;
(h) the Subsidiary Guaranty duly executed and delivered by each Subsidiary
Guarantor;
(i) Duly executed agreement establishing a Dominion Account at a bank
selected by Borrower, but acceptable to Agent in its reasonable discretion for
the collection or servicing of the Accounts; and
(j) Such other documents, instruments and agreements as Lender shall
reasonably request in connection with the foregoing matters.
9.1.2 No Default. No Default or Event of Default shall exist.
9.2. Conditions Precedent to Funding. Notwithstanding the effectiveness of
this Agreement, any other provision of this Agreement or any of the other Loan
Documents, and without affecting in any manner the rights of Agent and/or
Lenders under the other sections of this Agreement, Agent and/or Lenders shall
have no obligations to make any Loans or to arrange for the issuance of any
Letters of Credit or LC Guaranties under the Revolving Credit Facility until the
following conditions precedent have been satisfied:
9.2.1 Other Loan Documents. Each of the conditions precedent set forth in
the other Loan Documents shall have been satisfied.
9.2.2 Availability. Agent shall have determined that immediately after
Lenders have made the initial Loans and issued the initial Letters of Credit and
LC Guaranties contemplated hereby, and paid all closing costs incurred in
connection with the transactions contemplated hereby, Aggregate Adjusted
Availability on the Funding Date shall not be less than One Hundred Million
Dollars ($100,000,000.00).
9.2.3 Borrowing Base Certificate and Disbursement Instructions. Borrower
shall have delivered to Agent an initial Borrowing Base Certificate dated as of
the Funding Date and written instructions from the Company on behalf of all
Borrowers directing the application of the initial Loans made pursuant to this
Agreement.
9.2.4 Delivery of Opinion of Special Healthcare Counsel. Borrower shall
have delivered to Agent the favorable, written opinion of Borrower's special
healthcare counsel as to certain matters relating to the creation and perfection
of Agent's security interest in certain Accounts of Borrower.
9.2.5 Payment of Fees. Borrower shall have paid all fees and expenses owing
hereunder.
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9.2.6 Convertible Debentures and Convertible Trust Preferred Stock. The
issuance of the Convertible Debentures and the Convertible Trust Preferred Stock
shall have been completed and closed and the proceeds thereof (which shall not
be less than Twenty Million Dollars ($20,000,000.00) shall have been received by
the Company and the Company shall have delivered to Agent copies of the
documents relating to the issuance of the Convertible Debentures and the
Convertible Trust Preferred Stock, certified as complete and correct by the
Company
9.2.7 No Litigation. No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or to
obtain damages in respect of, or which is related to or arises out of this
Agreement or the consummation of the transactions contemplated hereby.
9.2.8 Divestiture. The shareholders of Olsten Corporation shall have
approved the merger of Olsten Corporation with a wholly-owned subsidiary of
Adecco SA, which merger transactions shall include as an integral component the
Divestiture of Borrower, and such Divestiture of Borrower from Olsten
Corporation shall have been consummated according to the terms of the Merger
Agreement between Olsten Corporation and Adecco, SA dated August 17, 1999, as
amended, the Separation Agreement and all related agreements and documents. In
addition, Borrower shall have obtained any and all federal, state and local
regulatory approvals, and have completed any and all federal, state and local
regulatory notifications, which may be required in connection with the
Divestiture transactions, and have delivered to Agent copies of all of the
Divestiture Documents, certified as complete and correct by the Borrower.
9.2.9 No Default. No Default or Event of Default shall exist.
9.2.10 Funding Certificate. A certificate signed by the Chief Financial
Officer of the Company dated as of the Funding Date, stating that (i) the
representations and warranties set forth in Section 7 hereof are true and
correct in all material respects on and as of the Funding Date, (ii) Borrower is
on the Funding Date in compliance with all the terms and provisions set forth in
this Agreement, and (iii) on the Funding Date no Default or Event of Default has
occurred or is continuing.
9.3 Funding Date. If the Funding Date has not occurred by the end of the
day on March 24, 2000, this Agreement and all other Loan Documents shall become
null and void and of no further force and effect and all obligations, if any, of
Agent and/or Lenders to make Loans and/or arrange for the issuance of Letters of
Credit shall terminate.-
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
10.1 Events of Default. The occurrence of one or more of the following
events shall constitute an "Event of Default":
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10.1.1 Payment of Obligations. Borrower shall fail to pay any of the
Obligations on the due date thereof (whether at scheduled due date, at stated
maturity, on demand, upon acceleration, upon termination of this Agreement or
otherwise).
10.1.2 Misrepresentations. Any representation, warranty or other statement
made or furnished to Agent or any Lender by or on behalf of Borrower or any
Subsidiary of Borrower in this Agreement, any of the other Loan Documents or any
instrument, certificate or financial statement furnished in compliance with or
in reference thereto proves to have been false or misleading in any material
respect when made or furnished or when reaffirmed pursuant to Section 7.2
hereof.
10.1.3 Breach of Specific Covenants. Borrower shall fail or neglect to
perform, keep or observe any covenant contained in Sections 5.2, 6.1.1, 6.2,
8.1.1, 8.1.2, 8.1.8, 8.2 or 8.3 of this Agreement on the date that Borrower is
required to perform, keep or observe such covenant.
10.1.4 Breach of Other Covenants. Any Borrower shall fail or neglect to
perform, keep or observe any covenant contained in this Agreement (other than a
covenant which is dealt with specifically elsewhere in this Section 10.1) and
the breach of such other covenant is not cured to Agent's satisfaction within
twenty (20) days after the sooner to occur of the Borrower's receipt of notice
of such breach from Agent or the date on which such failure or neglect first
becomes known to any officer of Borrower except that, in the case of any such
failure or neglect with respect to subsection 8.1.3 hereof, such grace period
shall be ten (10) days..
10.1.5 Default Under Security Documents/Other Agreements. Any event of
default shall occur under, or Borrower shall default in any material respect in
the performance or observance of any material term, covenant, condition or
agreement contained in, any of the Security Documents or the Other Agreements
and such default shall continue beyond any applicable grace period.
10.1.6 Other Defaults. There shall occur any default or event of default on
the part of Borrower under any agreement, document or instrument to which
Borrower is a party or by which Borrower or any of its Property is bound,
creating or relating to any Indebtedness (other than the Obligations) which
singly or in the aggregate with any other such Indebtedness equals or exceeds
Two Million Dollars ($2,000,000.00) if the holder of such Indebtedness would be
entitled to accelerate such Indebtedness as a consequence of such default or
event of default.
10.1.7 Uninsured Losses. Any loss, theft, damage or destruction of any
material portion of the Collateral not fully covered (subject to such
deductibles as Agent shall have permitted) by insurance.
10.1.8 Adverse Changes. There shall occur any event or condition which
results in a material adverse change in the financial condition, or business
operations of the Borrower which impairs Borrower's ability to perform its
Obligations or brings into question the validity or enforceability of any of the
Loan Documents.
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10.1.9 Insolvency and Related Proceedings. Any Borrower shall cease to be
Solvent or shall suffer the appointment of a receiver, trustee, custodian or
similar fiduciary, or shall make an assignment for the benefit of creditors, or
any petition for an order for relief shall be filed by or against Borrower under
the Bankruptcy Code (if against Borrower, the continuation of such proceeding
for more than 60 days, provided that Lenders are not obligated to make Loans or
arrange for the issuance of Letters of Credit or LC Guaranties during any such
proceeding and may seek any relief that they or Agent deems appropriate in such
proceedings) or any Borrower shall make any offer of settlement, extension or
composition to their respective unsecured creditors generally.
10.1.10 Business Disruption; Condemnation. There shall occur a cessation of
a substantial part of the business of Borrower or any of its Subsidiaries for a
period which would have a Material Adverse Effect; Borrower or any of its
Subsidiaries shall suffer the loss or revocation of any license or permit now
held or hereafter acquired by Borrower or such Subsidiary which is necessary to
the continued or lawful operation of its business and which loss or revocation
has a Material Adverse Effect; or Borrower or any of its Subsidiaries shall be
enjoined, restrained or in any way prevented by court, governmental or
administrative order from conducting all or any material part of its business
affairs and such enjoining, restraint or prevention has a Material Adverse
Effect; or any material lease or agreement pursuant to which Borrower or any of
its Subsidiaries leases, uses or occupies any Property shall be canceled or
terminated prior to the expiration of its stated term and which loss or
termination has a Material Adverse Effect.
10.1.11 Change of Control. The occurrence of a Change of Control.
10.1.12 ERISA. A Reportable Event shall occur which Agent, in its sole
discretion, shall determine in good faith constitutes grounds for the
termination by the Pension Benefit Guaranty Corporation of any Plan or for the
appointment by the appropriate United States district court of a trustee for any
Plan, or if any Plan shall be terminated or any such trustee shall be requested
or appointed, or if Borrower or any of its Subsidiaries is in "default" (as
defined in Section 4219(c)(5) of ERISA) with respect to payments to a
Multiemployer Plan resulting from Borrower's or Subsidiary's complete or partial
withdrawal from such Plan.
10.1.13 Challenge to Agreement. Borrower or any of its Subsidiaries, or any
Affiliate of any of them, 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 enforceability of any of the Obligations or the
perfection or priority of any Lien granted to Agent, for the ratable benefit of
Lenders.
10.1.14 Repudiation of or Default Under Guaranty Agreement. Any Guarantor
shall revoke or attempt to revoke any guaranty and surety agreement signed by
such Guarantor, or shall repudiate such Guarantor's liability thereunder or
shall be in default under the terms thereof.
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10.1.15 Criminal Forfeiture. Borrower or any of its Subsidiaries shall be
criminally convicted or any judicial or administrative proceeding results in a
forfeiture of any material Property of Borrower or any of its Subsidiaries.
10.1.16 Judgments. Borrower or any of its Subsidiaries shall suffer any
final judgment or judgments for the payment of money (in excess of insurance
coverage) in excess of Two Million Dollars ($2,000,000.00) in the aggregate and
the same shall not be discharged, satisfied or stayed within a period of
forty-five (45) days. Notwithstanding the foregoing, for the purposes of this
subsection only, no judgment amount shall be included in the calculation of the
aggregate amount of judgments to the extent that such respective Borrower or
Subsidiary shall obtain a bond covering the liability.
10.2 Acceleration of the Obligations. Without in any way limiting the right
of Agent to demand payment of any portion of the Obligations payable on demand
in accordance with Section 3.2 hereof, upon or at any time after the occurrence
of an Event of Default, all or any portion of the Obligations shall, at the
option of Agent (or by Agent at the written direction of the Majority Lenders)
and without presentment, demand, protest or further notice by Agent, become at
once due and payable and Borrower shall forthwith pay to Lenders, the full
amount of such Obligations, provided that, upon the occurrence of an Event of
Default specified in subsection 10.1.9 hereof (other than an Event of Default
based solely on Borrower's ceasing to be Solvent), all of the Obligations shall
become automatically due and payable without declaration, notice or demand by
Agent.
10.3 Other Remedies. Upon the occurrence and during the continuance of an
Event of Default, Agent may (or, at the written direction of Majority Lenders,
shall) exercise from time to time the following rights and remedies to the
extent permitted by local law:
10.3.1 The right to cease making Loans.
10.3.2 Subject to all applicable laws and regulations governing payment of
Medicare and Medicaid receivables, the right to "take possession" of the
Collateral, and notify all Obligors of the Agent's security interest, on behalf
of and for the benefit of Lenders, in the Collateral and require payment under
the Accounts to be made directly to Agent, on behalf of Lenders, and Agent may,
in its own name or in the name of the Borrower, exercise all rights of a secured
party with respect to the Collateral and collect, sue for and receive payment on
all Accounts, and settle, compromise and adjust the same on any terms as may be
satisfactory to Agent and Lenders in their sole and absolute discretion for any
reason or without reason and Agent and Lenders may do all of the foregoing with
or without judicial process (including without limitation notifying the United
States postal authorities to redirect mail addressed to Borrower, or any of
them, to an address designated by Agent). With respect to any Government
Accounts, the rights transferred to Agent in connection with this Agreement do
not include the right to claim payment in Agent's name from the applicable
Obligor or the right to direct such Obligor to remit payment directly to Agent,
except as permitted by applicable laws and regulations governing such Accounts.
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10.3.3 All of the rights and remedies of a secured party under the Code or
under other applicable law, and all other legal and equitable rights to which
Agent or any Lender may be entitled, all of which rights and remedies shall be
cumulative and shall be in addition to any other rights or remedies contained in
this Agreement or any of the other Loan Documents, and none of which shall be
exclusive.
10.3.4 The right to take immediate possession of the Collateral, and to (i)
require Borrower to assemble the Collateral, at Borrower's expense, and make it
available to Agent at a place designated by Agent which is reasonably convenient
to both parties, and (ii) enter any premises where any of the Collateral shall
be located and to keep and store the Collateral on said premises until sold (and
if said premises be the Property of Borrower, Borrower agrees not to charge
Agent or any Lender for storage thereof).
10.3.5 The right to sell or otherwise dispose of all or any Collateral in
its then condition, or after any further manufacturing or processing thereof, at
public or private sale or sales, with such notice as may be required by law, in
lots or in bulk, for cash or on credit, all as Agent, in its sole discretion,
may deem advisable. Borrower agrees that ten (10) days written notice to
Borrower of any public or private sale or other disposition of Collateral shall
be reasonable notice thereof, and such sale shall be at such locations as Agent
may designate in said notice. Agent shall have the right to conduct such sales
on Borrower's premises, without charge therefor, and such sales may be adjourned
from time to time in accordance with applicable law. Agent shall have the right
to sell, lease or otherwise dispose of the Collateral, or any part thereof, for
cash, credit or any combination thereof, and Agent or any Lender may purchase
all or any part of the Collateral at public or, if permitted by law, private
sale and, in lieu of actual payment of such purchase price, may set off the
amount of such price against the Obligations. The proceeds realized from the
sale of any Collateral may be applied, first to the costs, expenses and
attorneys' fees incurred by Agent or any Lender in collecting the Obligations,
in enforcing the rights of Agent or any Lender under the Loan Documents and in
collecting, retaking, completing, protecting, removing, storing, advertising for
sale, selling and delivering any Collateral, second to the interest due upon any
of the Obligations; and third, to the principal of the Obligations. If any
deficiency shall arise, Borrower shall remain jointly and severally liable to
Agent and Lenders therefor.
10.3.6 Agent is hereby granted a license or other right to use, without
charge, Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, tradenames, trademarks and advertising matter, or any Property of a
similar nature, as it pertains to the Collateral, in advertising for sale and
selling any Collateral, and Borrower's rights under all licenses and all
franchise agreements shall inure to Agent's benefit to the extent permitted
under such agreements.
10.3.7 Agent may, at its option, require Borrower to deposit with Agent
funds equal to the LC Amount and, if Borrower fails to promptly make such
deposit, Agent may advance such amount as a Revolving Credit Loan (whether or
not an Overadvance is created thereby). Any such deposit or advance shall be
held by Agent, for the ratable benefit of Lenders, as a reserve to fund future
payments on such LC Guaranties and future drawings against such
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Letters of Credit. At such time as all LC Guaranties have been paid or
terminated and all Letters of Credit have been drawn upon or expired, any
amounts remaining in such reserve shall be applied against any outstanding
Obligations, or, if all Obligations have been indefeasibly paid in full,
returned to Borrower.
10.4 Remedies Cumulative; No Waiver. All covenants, conditions, provisions,
warranties, guaranties, indemnities, and other undertakings of Borrower
contained in this Agreement and the other Loan Documents, or in any document
referred to herein or contained in any agreement supplementary hereto or in any
schedule or in any guaranty and surety agreement given to Agent and/or any
Lender or contained in any other agreement among Agent, or any Lender and
Borrower, heretofore, concurrently, or hereafter entered into, shall be deemed
cumulative to and not in derogation or substitution of any of the terms,
covenants, conditions, or agreements of Borrower herein contained. The failure
or delay of Agent or any Lender to require strict performance by Borrower of any
provision of this Agreement or to exercise or enforce any rights, Liens, powers,
or remedies hereunder or under any of the aforesaid agreements or other
documents or security or Collateral shall not operate as a waiver of such
performance, Liens, rights, powers and remedies, but all such requirements,
Liens, rights, powers, and remedies shall continue in full force and effect
until all Loans and all other Obligations owing or to become owing from Borrower
to Agent and Lenders shall have been fully satisfied. None of the undertakings,
agreements, warranties, covenants and representations of Borrower contained in
this Agreement or any of the other Loan Documents and no Event of Default under
this Agreement or any other Loan Documents shall be deemed to have been
suspended or waived by Agent or any Lender, unless such suspension or waiver is
by an instrument in writing specifying such suspension or waiver and is signed
by a duly authorized representative of Agent and directed to Borrower.
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SECTION 11. AGENT
As between Agent and Lenders, Agent and each Lender, who are now or shall
become parties to this Agreement, agree as follows (and the Borrower hereby
consents to, and approves, such agreement):
11.1 Appointment and Authorization. Each Lender (and each subsequent holder
of any of the Notes by its acceptance thereof) hereby irrevocably appoints and
authorizes Agent to take such action on its behalf and to exercise such powers
under this Agreement as are delegated to Agent by the terms hereof, together
with such powers as are reasonably incidental thereto. Subject to the provisions
of this Agreement, Agent will handle all transactions relating to the Loans and
all other Obligations, including, without limitation, all transactions with
respect to Letters of Credit, LC Guaranties, this Agreement, the other Loan
Documents and all related documents in accordance with its usual practices. The
rights, privileges and remedies accorded to the Agent hereunder shall be
exercised by Agent on behalf of and for the ratable benefit of all Lenders.
11.2 General Immunity. In performing its duties as Agent hereunder, Agent
will take the same care as it takes in connection with loans in which it alone
is interested. However, neither Agent nor any of its directors, officers, agents
or employees shall be liable for any action taken or omitted to be taken by it
or them hereunder or in connection herewith except as such action or omission is
caused solely from its or their own gross negligence or willful misconduct
unless such action was taken or omitted by Agent at the direction of Majority
Lenders, so long as Agent acted or omitted to act in full compliance with such
directions.
11.3 Consultation with Counsel. Agent may consult with legal counsel and
any other professional advisors or consultants deemed necessary or appropriate
and selected by Agent and shall not be liable for any action taken or suffered
in good faith by it in accordance with the advice of such counsel or advisors.
11.4 Documents. Agent shall not be under a duty to examine into or pass
upon the effectiveness, genuineness or validity of this Agreement or any of the
Notes or any other Loan Document furnished pursuant hereto or in connection
herewith, and Agent shall be entitled to assume that the same are valid,
effective and genuine and what they purport to be. In addition, Agent shall not
be liable for failing to make any inquiry concerning the accuracy, performance
or observance of any of the terms, provisions or conditions of such instrument
or document.
11.5 Rights as a Lender. With respect to its applicable Pro Rata Shares in
each of the Loans, Agent shall have the same rights and powers hereunder as any
other Lender and may exercise the same as though it were not Agent, and the term
"Lender" or "Lenders" shall, unless the context otherwise indicates, include
Agent in its individual capacity. Subject to the provisions of this Agreement,
Agent may lend money to and generally engage in any kind of business with
Borrower and its Subsidiaries and Affiliates as if it were not Agent. Upon the
occurrence and during the continuation of an Event of Default, Agent shall, upon
the written
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request of any Lender, disclose to Lenders any business transactions or
arrangements then existing between Agent and Borrower (but only to the extent
that such disclosure would not violate the terms of any confidentiality
agreement between Agent and Borrower).
11.6 Responsibility of Agent. It is expressly understood and agreed that
the obligations of Agent hereunder are only those expressly set forth in this
Agreement and that Agent shall be entitled to assume that no Default or Event of
Default, has occurred and is continuing, unless Agent has actual knowledge of
such fact. Except to the extent Agent is required by Lenders pursuant to the
express terms hereof to take a specific action, Agent shall be entitled to use
its discretion with respect to exercising or refraining from exercising any
rights which may be vested in it by, or with respect to taking or refraining
from taking any action or actions that it may be able to take under or in
respect of, this Agreement and the Loan Documents. Agent shall incur no
liability under or in respect of this Agreement and the Loan Documents by acting
upon any notice, consent, certificate, warranty or other paper or instrument
believed by it to be genuine or authentic or to be signed by the proper party or
parties, or with respect to anything that it may do or refrain from doing in the
reasonable exercise of its judgment, or that may seem to it to be necessary or
desirable under the circumstances. Agent shall have no responsibility to carry
out audits or otherwise examine the books and records or properties of Borrower,
except as Agent in its reasonable discretion deems appropriate. The relationship
between Agent and each Lender is and shall be limited to that of agent and
principal and nothing herein shall be construed to constitute Agent a joint
venturer with any Lender, a trustee or fiduciary for any Lender or for the
holder of a participation, nor impose upon Agent duties and obligations other
than those set forth herein.
11.7 Collections and Disbursements.
11.7.1 Agent will have the right to collect and receive all payments of the
Obligations, and to collect and receive all reimbursements for draws or payments
made under the Letters of Credit or LC Guaranties respectively, together with
all fees, charges or other amounts due under this Agreement and the other Loan
Documents, and Agent will remit to each Lender, according to its applicable Pro
Rata Percentage, all such payments actually received by Agent (subject to any
required clearance procedures) in accordance with the settlement procedures
established from time to time. Settlements (including adjustments of the
proportionate shares among the Lenders) shall occur on such dates as Agent may
elect in its sole discretion but which shall be no less frequently than weekly.
Between settlement dates, all collections and payments shall be applied at
Agent's discretion.
11.7.2 If any such payment received by Agent or Issuer is rescinded or
otherwise required to be returned for any reason at any time, whether before or
after termination of this Agreement and the other Loan Documents (unless such
rescission or return occurs before the amount of such payment has been applied
to the Obligations or otherwise reflected in a settlement as provided for in
subsection 11.7.1 above), each Lender will, upon written notice from Agent,
promptly pay over to Agent its Pro Rata Percentage of the amount so rescinded or
returned (together with interest and other fees thereon if also required to be
rescinded or returned).
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11.7.3 All payments by Agent and Lenders to each other hereunder shall be
in immediately available funds. Agent will at all times maintain proper books of
account and records reflecting the interest of each Lender in the Loans, in a
manner customary to Agent's keeping of such records, which books and records
shall be available for inspection by each Lender at reasonable times during
normal business hours, at such Lender's sole expense. Agent may treat the payees
of any Note as the holder thereof until written notice of the transfer thereof
shall have been received by Agent in accordance with Section 11.16. In the event
that any Lender shall receive any payments in reduction of the Loans in an
amount greater than its applicable Pro Rata Percentage in respect of Obligations
to Lenders evidenced hereby (including, without limitation amounts obtained by
reason of setoffs), such Lender shall hold such excess in trust for Agent (on
behalf of all other Lenders) and shall promptly remit to Agent such excess
amount so that the amounts received by each Lender hereunder shall at all times
be in accordance with its applicable Pro Rata Percentage. To the extent
necessary for each Lender's actual percentage of all outstanding Loans to equal
its applicable Pro Rata Percentage, the Lender having a greater share of any
payment(s) than its applicable Pro Rata Percentage shall acquire a participation
in the applicable Pro Rata Share of the other Lenders as determined by Agent.
11.8 Indemnification. To the extent not indemnified by Borrower, Lenders
hereby each indemnify Agent and Issuer ratably according to the respective
amounts of each Lender's Pro Rata Percentage, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever that may be
imposed on, incurred by or asserted against Agent (or its Affiliate, as the case
may be) in any way relating to or arising out of this Agreement or any other
Loan Document or any action taken or omitted by Agent (or its Affiliate, as the
case may be) under or related to this Agreement or the Loans, provided that no
Lender shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting solely from Agent's (or its Affiliate's, as the case may be) gross
negligence or willful misconduct unless such action was taken or omitted by
Agent (or its Affiliate, as the case may be) at the direction of Majority
Lenders, so long as Agent acted or omitted to act in full compliance with such
directions. Agent shall have the right to deduct, from any amounts to be paid by
Agent to any Lender hereunder, any amounts owing to Agent (or its Affiliate, as
the case may be) by such Lender by virtue of this Section.
11.9 Expenses.
(a) All out-of-pocket costs and out-of-pocket expenses incurred by Agent
and not reimbursed on demand by Borrower, in connection with the analysis,
negotiation, preparation, consummation, creation, amendment, administration,
termination, work-out, forbearance and enforcement of the Loans (including,
without limitation, audit expenses, counsel, consultant and expert fees and
expenditures to protect, preserve and defend Agent's and each Lender's rights
and interest under this Agreement and under the other Loan Documents) shall be
shared and paid on demand by Lenders pro rata based on their applicable Pro Rata
Percentage.
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(b) Agent shall have the right to deduct, from amounts to be paid by Agent
to any Lender hereunder, any amount owing to Agent by such Lender by virtue of
this Section.
11.10 No Reliance. By execution of or joining in this Agreement, each
Lender acknowledges that it has entered into this Agreement and the other Loan
Documents solely upon its own independent investigation and is not relying upon
any information supplied by or any representations made by Agent. Each Lender
shall continue to make its own analysis and evaluation of Borrower. Agent makes
no representation or warranty and assumes no responsibility with respect to the
financial condition of Borrower, or any Account Debtor of Borrower; the
accuracy, sufficiency or currency of any information concerning the financial
condition, prospects or results of operations of Borrower; or the sufficiency,
authenticity, legal effect, validity or enforceability of this Agreement or the
other Loan Documents. Agent assumes no responsibility or liability with respect
to the collectability of the Obligations or the performance by Borrower of any
obligation under this Agreement or the Loan Documents.
11.11 Reporting. During the term of this Agreement, Agent will (to the
extent received by Agent) promptly furnish each Lender with (i) copies of all
notices, financial statements, borrowing base certificates and supporting
documentation of Borrower required to be delivered or obtained hereunder and
(ii) such other financial statements and reports and other information in
Agent's possession as any Lender may reasonably request; provided however, that
Agent will not be liable to any Lender for Agent's failure to do so unless such
failure constitutes gross negligence or willful misconduct or repeated failure
to comply with this provision after repeated requests by Lender. Agent will
immediately notify Lenders when it receives actual knowledge of any Event of
Default under the Loan Documents.
11.12 Removal of Agent. Agent may resign at any time upon giving thirty
(30) days prior written notice thereof to Lenders and Borrower. Agent may be
removed as Agent hereunder upon the written consent of all Lenders exclusive of
Agent upon the following: (i) willful misconduct in the performance of Agent's
duties or responsibilities under this Agreement as finally determined by a court
of competent jurisdiction; or (ii) if a receiver, trustee or conservator is
appointed for Agent or any state or federal regulatory authority assumes
management or control of Agent or if, under applicable law, the administrative
or discretionary duties and responsibilities of Agent hereunder become
controlled by or subject to the approval of any state or federal regulatory
authority. Upon any resignation or permitted removal of Agent, Lenders shall
have the right to appoint a successor Agent by majority vote of the Lenders
(based upon the Pro Rata Percentages of the Lenders). Upon the acceptance of the
appointment as a successor Agent hereunder by such successor Agent, such
successor Agent shall thereupon succeed to and become vested with all rights,
powers, obligations and duties of the retiring Agent and the retiring Agent
shall be discharged from its duties and obligations hereunder.
11.13 Action on Instructions of Lenders. With respect to any provision of
this Agreement, or any issue arising thereunder, concerning which Agent is
authorized to act or withhold action by direction of Lenders (or, if applicable,
Majority Lenders), Agent shall in all cases be fully protected in so acting, or
in so refraining from acting, hereunder in accordance
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with written instructions signed by Lenders (or, if applicable, Majority
Lenders). Such instructions and any action taken or failure to act pursuant
thereto shall be binding on all Lenders and on all holders of the Notes.
11.14 Several Obligations. The obligation of each Lender is several, and
neither Agent nor any other Lender shall be responsible for the obligation and
commitment of any other Lender.
11.15 Consent of Lenders.
(a) Except as expressly provided herein, Agent shall have the sole and
exclusive right to service, administer and monitor the Loans and the Loan
Documents, including, without limitation, the right to exercise all rights,
remedies, privileges and options under this Agreement and under the other Loan
Documents, including, without limitation, the credit judgment with respect to
the making of Loans and the determination as to the basis on which and extent to
which Loans may be made and, upon consultation with Issuer or its Affiliate (as
applicable), the determination as to whether draws should be honored for Letters
of Credit. To the extent reasonably practicable under the circumstances, without
impairing (in Agent's judgment) the Lenders' rights and interests concerning the
Borrower or the Collateral, Agent shall give notice to and shall consult with
Lenders prior to enforcing, or taking any action to collect, any and all of the
Obligations of Borrower or any other Person under the Loan Documents or
acquiring any or all of the Collateral (title to any such Collateral being held
for the benefit of the Lenders according to this Agreement). Agent may exercise
such rights directly or by employing others to operate, manage, preserve,
protect and dispose of such Collateral.
(b) Notwithstanding anything to the contrary contained in subsection
11.15(a) above, Agent shall not without the prior written consent of all
Lenders: (i) extend any payment date under the Notes or this Agreement or the
Revolving Credit Maturity Date, (ii) reduce any interest rate applicable to any
of the Loans, any fee payable to Lenders hereunder or any fee for any Letter of
Credit or LC Guaranty, (iii) increase the Total Revolving Credit Facility, (iv)
waive any Event of Default under subsection 10.1.1, (v) compromise or settle all
or a portion of the Obligations, (vi) release any Borrower or Subsidiary
Guarantor or any other Person liable in any way on account of the Obligations
except in connection with termination of the Revolving Credit Facility, and full
payment and satisfaction of all Obligations (including, without limitation,
obligations of Borrower under the Revolving Credit Note), except that, if all of
the stock of Borrower or Subsidiary Guarantor is sold in a transaction permitted
by subsection 8.2.9(iii), Agent shall release such Borrower or Subsidiary
Guarantor from its obligations hereunder and under any of the other Loan
Documents upon the request of Borrower, (vii) amend the definition of Borrowing
Base, Eligible Accounts, or Majority Lenders, (viii) amend this subsection
11.15(b), or (ix) modify the permitted use of proceeds, provided that, Agent
may, in its sole discretion and without the consent of any Lenders, release
insurance proceeds collected under subsection 6.1.2 to Borrower to permit the
repair, reconstruction or replacement of the loss or damage to Collateral. To
the extent applicable, upon receipt of written consent of all Lenders with
respect to any of the foregoing, Agent shall act in accordance therewith.
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(c) Notwithstanding anything to the contrary contained in subsection
11.15(a) above, and subject to any applicable limitation set forth in subsection
11.15(b) above, Agent shall not, without the prior written consent of Majority
Lenders: (i) waive any Event of Default (other than an Event of Default (A)
resulting from a breach of any covenant or agreement under Section 8.1 which may
be consented to by Agent within its discretion, or (B) under subsection 10.1.1
which is subject to clause (iv) of subsection 11.15(b) above); (ii) consent to
Borrower's taking any action which, if taken, would constitute an Event of
Default under this Agreement or under any of the other Loan Documents; (iii)
amend or modify or agree to an amendment or modification of any provision of
this Agreement; or (iv) release Collateral in excess of One Million Dollars
($1,000,000.00) in the aggregate in any fiscal year. To the extent applicable,
upon receipt of written consent of Majority Lenders with respect to any of the
foregoing, Agent shall act in accordance therewith.
(d) After an acceleration of the Obligations, Agent shall have the sole and
exclusive right, after consultation (to the extent reasonably practicable under
the circumstances) with all Lenders and, unless otherwise directed by Majority
Lenders, to exercise or refrain from exercising any and all right, remedies,
privileges and options under this Agreement or the other Loan Documents and
available at law or in equity to protect the rights of Agent and Lenders and
collect the Obligations, including, without limitation, instituting and pursuing
all legal actions against Borrower or to collect the Obligations, or defending
any and all actions brought by Borrower or other Person; or incurring expenses
or otherwise making expenditures to protect the Collateral, the Loans or Agent's
or any Lenders' rights or remedies.
(e) To the extent Agent is required to obtain or otherwise elects to seek
the consent of Lenders to an action Agent desires to take, if any Lender fails
to notify Agent, in writing, of its consent or dissent to any request of Agent
hereunder within ten (10) Business Days of such Lender's receipt of such
request, such Lender shall be deemed to have given its consent thereto.
(f) Notwithstanding any other provision of this Section 11.15 and without
impairing Agent's discretionary rights under Section 10, Agent shall have the
right (in its sole discretion) to permit to exist Overadvances to be outstanding
at any time up to an aggregate amount of Five Million Dollars ($5,000,000.00)
without right of disapproval by or consent of any Lenders, and be entitled in
its sole discretion to permit Borrower a period not to exceed ninety (90) days
to repay or remove such Overadvance. Notwithstanding the foregoing, Agent shall
not grant any request for an Overadvance to the extent that the aggregate amount
of all Revolving Credit Loans outstanding (after giving effect to such requested
Overadvance) would exceed the Total Revolving Credit Facility.
11.16 Participations and Assignments: Borrower hereby acknowledges and
agrees that any Lender may at any time subject to the prior written consent of
Majority Lenders: (a) grant participations in up to forty-nine percent (49%) of
its Pro Rata Share of the Loans and of its right, title and interest therein or
in or to this Agreement (collectively, "Participations") to any other lending
office of such Lender or to any Participating Lender; provided, however, that:
(i) all amounts payable by Borrower to each Lender hereunder shall be determined
as if such Lender
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had not granted such Participation; and (ii) any agreement pursuant to which any
Lender may grant a Participation: (A) shall provide that such Lender shall
retain the sole right and responsibility to enforce the obligations of Borrower
hereunder including, without limitation, the right to approve any amendment,
modification or waiver of any provisions of this Agreement; (B) such
participation agreement may provide that such Lender will not agree to any
modification, amendment or waiver of this Agreement without the consent of the
Participating Lender if such amendment, modification or waiver would reduce the
principal of or rate of interest on the Loans, increase the amount of the Total
Revolving Credit Facility, or postpone the date fixed for any scheduled payment
of principal of or interest on the Loans; and (C) shall not relieve such Lender
from its obligations, which shall remain absolute, to (subject to the terms and
conditions hereof) make Loans hereunder; and (b) assign, pursuant to a written
assignment and acceptance in form and substance satisfactory to Agent (the
"Assignment") all or any percent of its Pro Rata Share of the Loans, or any
right, title and interest therein or in and to this Agreement to any financial
institution so long as (i) after any such assignment occurs, the Pro Rata Share
of each Lender under this Agreement equals at least Five Million Dollars
($5,000,000.00), (ii) Agent and (if no Event of Default is outstanding) Borrower
consents to such assignment in writing, which consent shall not be unreasonably
withheld or delayed and (iii) Agent receives an assignment fee from the
assigning Lender (not reimbursable by or chargeable to the Borrower) of Five
Thousand Dollars ($5,000.00). Upon the execution by the assignor and assignee of
the Assignment, and delivery to Agent of the Assignment for acceptance, the
assigning Lender shall, to the extent provided in the Assignment, be released
from its obligations under this Agreement and the assignee thereunder shall be a
party hereto and, to the extent provided in such Assignment have the rights and
obligations of a Lender hereunder. All Participations and assignments hereunder
shall be of all of the Loans in the same proportion as is the Pro Rata
Percentage of all Loans of the Lender making the assignment or granting the
Participation. Borrower agrees that it will use its best efforts to assist and
cooperate with Agent in any manner reasonably requested by Agent to effect the
sale of participations in or assignments pursuant to this Section 11.16,
including, without limitation, assisting in the preparation of appropriate
disclosure documents. Borrower further agrees that Agent may disclose credit
information regarding Borrower to any potential participant or assignee.
11.17 Borrower's Consent. Any amendment to Section 11 (other than Section
11.16) of this Agreement shall not require Borrower's consent.
11.18 Security Interest of Lender. To the extent any Lender obtains a Lien
upon or security interest in any of the Collateral in support of any Obligation
of Borrower, or any of them, that does not arise under this Agreement or any of
the Loan Documents (other than a purchase money security interest or a
Capitalized Lease Obligation, the incurrence of and existence of which is
otherwise permitted by this Agreement), such Lien and security interest shall be
subordinate in priority to the Lien upon and security interest in the Collateral
of Agent, held for the ratable benefit of Lenders.
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SECTION 12. MISCELLANEOUS
12.1 Power of Attorney. Subject to and consistent with Medicare and
Medicaid regulations, Borrower hereby irrevocably designates, makes, constitutes
and appoints Agent (and all Persons designated by Agent) as Borrower's true and
lawful attorney (and agent-in-fact) and Agent, or Agent's agent, may, without
notice to Borrower, and in either Borrower's or Agent's name, but at the cost
and expense of Borrower:
12.1.1 Agent or said agent, in its sole discretion, may for the purpose of
deposit, endorse Borrower's name on any checks, notes, acceptances, drafts,
money orders or any other evidence of payment or proceeds of the Collateral
which come into the possession of Agent or any Lender or under Agent's or any
Lender's control.
12.1.2 At such time or times after the occurrence and during the
continuance of an Event of Default as Agent, or Agent's agent, in its sole
discretion, may determine: (i) demand payment of the Accounts from the Account
Debtors, enforce payment of the Accounts by legal proceedings or otherwise, and
generally exercise all of Borrower's rights and remedies with respect to the
collection of the Accounts; (ii) settle, adjust, compromise, discharge or
release of the Accounts or other Collateral or any legal proceedings brought to
collect any of the Accounts or other Collateral; (iii) sell or assign any of the
Accounts and other Collateral upon such terms, for such amounts and at such time
or times as Agent deems advisable; (iv) take control, in any manner, of any item
of payment or proceeds relating to any Collateral; (v) prepare, file and sign
Borrower's name to a proof of claim in bankruptcy or similar document against
any Account Debtor or to any notice of lien, assignment or satisfaction of lien
or similar document in connection with any of the Collateral; (vi) subject to
any applicable confidentiality restrictions receive, open and dispose of all
mail addressed to Borrower and to notify postal authorities to change the
address for delivery thereof to such address as Agent may designate; (vii)
endorse the name of Borrower upon any of the items of payment or proceeds
relating to any Collateral and deposit the same to the account of Agent on
account of the Obligations; (viii) endorse the name of Borrower upon any chattel
paper, document, instrument, invoice, freight bill, bill of lading or similar
document or agreement relating to the Accounts, Inventory and any other
Collateral; (ix) use Borrower's stationery and sign the name of Borrower to
verifications of the Accounts and notices thereof to Account Debtors; (x)
subject to any applicable confidentiality restrictions use the information
recorded on or contained in any data processing equipment and computer hardware
and software relating to the Accounts, Inventory, Equipment and any other
Collateral; (xi) make and adjust claims under policies of insurance; and (xii)
do all other acts and things necessary, in Agent's determination, to fulfill
Borrower's obligations under this Agreement.
12.2 Indemnity. Borrower hereby agrees to indemnify Agent and each Lender
and hold Agent and each Lender harmless from and against any liability, loss,
damage, suit, action or proceeding ever suffered or incurred by Agent and any
Lender (including reasonable attorneys fees and legal expenses) as the result of
Borrower's failure to observe, perform or discharge Borrower's duties hereunder
except to the extent resulting from or relating to Agent's gross negligence or
wilful misconduct. In addition, Borrower shall defend Agent and each Lender
against and hold Agent and each Lender harmless from all claims of any Person
with respect to the Collateral except to the extent resulting from or relating
to Agent's gross negligence or
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willful misconduct. Without limiting the generality of the foregoing, these
indemnities shall extend to any claims asserted against Agent and each Lender by
any Person under any Environmental Laws or similar laws by reason of Borrower's
or any other Person's failure to comply with laws applicable to solid or
hazardous waste materials or other toxic substances. Notwithstanding any
contrary provision in this Agreement, the obligation of Borrower under this
Section 12.2 shall survive the payment in full of the Obligations and the
termination of this Agreement.
12.3 Modification of Agreement; Sale of Interest. This Agreement may not be
modified, altered or amended, except by an agreement in writing signed by
Borrower, Agent and the Lenders required hereunder. Borrower may not sell,
assign or transfer any interest in this Agreement, any of the other Loan
Documents, or any of the Obligations, or any portion thereof, including, without
limitation, Borrower's rights, title, interests, remedies, powers, and duties
hereunder or thereunder.
12.4 Severability. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
12.5 Successors and Assigns. This Agreement, the Other Agreements and the
Security Documents shall be binding upon and inure to the benefit of the
successors and assigns of Borrower, Agent and each Lender permitted under
Section 11.16 hereof.
12.6 Cumulative Effect; Conflict of Terms. The provisions of the Other
Agreements and the Security Documents are hereby made cumulative with the
provisions of this Agreement. Except as otherwise provided in Section 3.2 hereof
and except as otherwise provided in any of the other Loan Documents by specific
reference to the applicable provision of this Agreement, if any provision
contained in this Agreement is in direct conflict with, or inconsistent with,
any provision in any of the other Loan Documents, the provision contained in
this Agreement shall govern and control.
12.7 Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which counterparts taken together shall constitute but one and the
same instrument.
12.8 Notice. Except as otherwise provided herein, all notices, requests and
demands to or upon a party hereto, to be effective, shall be in writing and
shall be sent by certified or registered mail, return receipt requested, by
personal delivery against receipt, by overnight courier or by facsimile and,
unless otherwise expressly provided herein, shall be deemed to have been validly
served, given or delivered immediately when delivered against receipt, three (3)
Business Days after deposit in the mail, postage prepaid, one (1) Business Day
after deposit with
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an overnight courier or, in the case of facsimile notice, when sent, provided
that a copy is sent either by mail or overnight courier immediately thereafter
addressed as follows:
If to Agent or any Lender: Fleet Capital Corporation
60 East 42nd Street
3rd Floor
New York, NY 10017
Attention: Loan Administration Manager
Facsimile No.: 212-885-8808
With a copy to: Blank Rome Comisky & McCauley LLP
One Logan Square
Philadelphia, PA 19103
Attention: Lawrence F. Flick, II, Esquire
Facsimile No.: 215-569-5522
If to Borrower: Gentiva Health Services, Inc.
Olsten Health Services Holding Corp.
175 Broad Hollow Road
Melville, NY 11747
Attention: John J. Collura
Facsimile No.: 631 - 844 - 7538
With a copy to: Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
Attention: John Schuster, Esquire
Facsimile No.: 212 - 269 - 5420
If to Lenders: To the address for each Lender set forth on
Annex I hereto.
or to such other address as each party may designate for itself by notice given
in accordance with this Section 12.8; provided, however, that any notice,
request or demand to or upon Agent pursuant to subsection 3.1.1 or 4.2.2 hereof
shall not be effective until received by Agent. Any notice provided hereunder to
Borrower shall be deemed to have been provided to, and shall bind and be
effective against, Borrower.
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12.9 Agent's and Lender's Consent. Whenever Agent's or any Lender's consent
is required to be obtained under this Agreement, any of the Other Agreements or
any of the Security Documents as a condition to any action, inaction, condition
or event, Agent or any Lender shall be authorized to give or withhold such
consent in its sole and absolute discretion (except to the extent expressly
provided otherwise in this Agreement) and to condition its consent upon the
giving of additional collateral security for the Obligations, the payment of
money or any other matter.
12.10 Credit Inquiries. Borrower hereby authorizes and permits Agent and
each Lender to respond to usual and customary credit inquiries from third
parties concerning Borrower or any of its Subsidiaries.
12.11 Time of Essence. Time is of the essence of this Agreement, the Other
Agreements and the Security Documents.
12.12 Entire Agreement. This Agreement and the other Loan Documents,
together with all other instruments, agreements and certificates executed by the
parties in connection therewith or with reference thereto, embody the entire
understanding and agreement between the parties hereto and thereto with respect
to the subject matter hereof and thereof and supersede all prior agreements,
understandings and inducements, whether express or implied, oral or written.
12.13 Interpretation. No provision of this Agreement or any of the other
Loan Documents shall be construed against or interpreted to the disadvantage of
any party hereto by any court or other governmental or judicial authority by
reason of such party having or being deemed to have structured or dictated such
provision.
12.14 GOVERNING LAW; CONSENT TO FORUM. THIS AGREEMENT HAS BEEN NEGOTIATED,
EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN NEW YORK.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK; PROVIDED, HOWEVER, THAT IF ANY OF THE COLLATERAL SHALL BE
LOCATED IN ANY JURISDICTION OTHER THAN NEW YORK, THE LAWS OF SUCH JURISDICTION
SHALL GOVERN THE METHOD, MANNER AND PROCEDURE FOR FORECLOSURE OF AGENT'S LIEN
UPON SUCH COLLATERAL AND THE ENFORCEMENT OF AGENT'S OR ANY LENDER'S OTHER
REMEDIES IN RESPECT OF SUCH COLLATERAL TO THE EXTENT THAT THE LAWS OF SUCH
JURISDICTION ARE DIFFERENT FROM OR INCONSISTENT WITH THE LAWS OF NEW YORK. AS
PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF ANY PRESENT
OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF BORROWER, AGENT OR ANY
LENDER, BORROWER HEREBY CONSENTS AND AGREES THAT THE SUPREME COURT OF NEW YORK,
SITTING IN NEW YORK COUNTY, OR, AT AGENT'S OPTION, THE UNITED STATES DISTRICT
COURT FOR THE DISTRICT OF NEW YORK, SHALL HAVE JURISDICTION TO HEAR AND
DETERMINE ANY CLAIMS OR DISPUTES BETWEEN BORROWER AND AGENT AND/OR ANY LENDER
PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING
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OUT OF OR RELATED TO THIS AGREEMENT. BORROWER EXPRESSLY SUBMITS AND CONSENTS IN
ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT,
AND BORROWER HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT. BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO BORROWER AT THE ADDRESS SET FORTH IN
THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON
BORROWER'S ACTUAL RECEIPT THEREOF. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR
OPERATE TO AFFECT THE RIGHT OF AGENT OR ANY LENDER TO SERVE LEGAL PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY AGENT OR ANY
LENDER OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY
ACTION TO ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.
12.15 WAIVERS BY BORROWER. BORROWER WAIVES (i) THE RIGHT TO TRIAL BY JURY
(WHICH EACH LENDER AND AGENT HEREBY ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING
OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN
DOCUMENTS, THE OBLIGATIONS OR THE COLLATERAL; (ii) PRESENTMENT, DEMAND AND
PROTEST AND NOTICE OF PRESENTMENT, PROTEST, DEFAULT, NON PAYMENT, MATURITY,
RELEASE, COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL COMMERCIAL
PAPER, ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS CHATTEL PAPER AND
GUARANTIES AT ANY TIME HELD BY AGENT AND/OR ANY LENDER ON WHICH BORROWER MAY IN
ANY WAY BE LIABLE AND HEREBY RATIFIES AND CONFIRMS WHATEVER AGENT AND/OR ANY
LENDER MAY DO IN THIS REGARD; (iii) NOTICE PRIOR TO TAKING POSSESSION OR CONTROL
OF THE COLLATERAL OR ANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT
PRIOR TO ALLOWING AGENT AND/OR ANY LENDER TO EXERCISE ANY OF AGENT'S AND/OR ANY
LENDER'S REMEDIES; (iv) THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND EXEMPTION
LAWS; AND (v) NOTICE OF ACCEPTANCE HEREOF. BORROWER ACKNOWLEDGES THAT THE
FOREGOING WAIVERS ARE A MATERIAL INDUCEMENT TO AGENT'S AND EACH LENDER'S
ENTERING INTO THIS AGREEMENT AND THAT AGENT AND EACH LENDER IS RELYING UPON THE
FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH BORROWER. BORROWER WARRANTS AND
REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVERS WITH ITS LEGAL COUNSEL AND
HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. IN THE
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EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL
BY THE COURT.
12.16 Joint and Several Liability. The liability of each of the entities
comprising the "Borrower" hereunder shall be joint and several.
12.17 Release Upon Termination. Upon the termination of this Agreement
pursuant to Section 4.2 hereof and the full, final and indefeasible payment in
cash of all of the Obligations hereunder, or any sale or transfer (but not
including any lease transfer) of Collateral by Borrower or any Subsidiary
permitted by the terms of this Agreement, the Agent shall, upon the request and
at the sole cost and expense of Borrower, forthwith assign, transfer and deliver
to Borrower, against receipt and without recourse or warranty by Agent, (i) all
of the Collateral (or in the case of a sale or transfer, such of the Collateral
as is subject to such sale or transfer) that may be in possession of the Agent
and shall not have been sold by Agent in accordance with or otherwise applied to
the Obligations pursuant to the terms hereof, and (ii) with respect to such
Collateral as is not in possession of the Agent, proper documents and
instruments (including UCC-3 termination statements or releases) acknowledging
the termination hereof or the release of such Collateral (or, in the case of a
sale or transfer such of the Collateral, as is subject to such sale or
transfer), as the case may be. Notwithstanding anything else herein, Agent shall
retain any Collateral provided to Agent under Section 1.3 for the purpose of
securing any Letter(s) of Credit or LC Guaranties with expiration dates beyond
the last day of the Original Term until such time as such Letter(s) of Credit
and/or LC Guarant(ies) shall have expired.
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<PAGE>
IN WITNESS WHEREOF, this Loan and Security Agreement has been duly executed
on the day and year specified at the beginning of this Agreement.
GENTIVA HEALTH SERVICES, INC.
By:
------------------------------------
Print name:
------------------------------------
Title:
------------------------------------
OLSTEN HEALTH SERVICES HOLDING CORP.
By:
------------------------------------
Print name:
------------------------------------
Title:
------------------------------------
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
S-1
<PAGE>
SUBSIDIARY BORROWING CORPORATIONS:
New York Healthcare Services, Inc.
OHS Service Corp.
Olsten Certified HealthCare Corp.
Olsten Flying Nurses Corp.
Olsten Health Services (Certified), Inc.
Olsten Health Services (Infusion), Inc.
Olsten Health Services (Quantum) Corp.
Olsten Health Services (Staffing), Inc.
Olsten Health Services (USA), Inc.
Olsten Network Management, Inc.
Olsten Network Management (Area One) Corp.
Olsten Network Management (Area Two) Corp.
Olsten Network Management (Area Three ) Corp.
Olsten Services of New York, Inc.
QC-Medi New York, Inc.
Quality Care - USA, Inc.
Quality Managed Care, Inc.
The I.V. Clinic, Inc.
The I.V. Clinic III, Inc.
By:
------------------------------------
Print name:
------------------------------------
Title:
------------------------------------
AGENT:
FLEET CAPITAL CORPORATION
By: /s/ Frank J. Galle
------------------------------------
Print name: Frank J. Galle
------------------------------------
Title: Senior Vice President
------------------------------------
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
S-2
<PAGE>
LENDERS:
FLEET CAPITAL CORPORATION
By: /s/ Frank J. Galle
------------------------------------
Print name: Frank J. Galle
------------------------------------
Title: Senior Vice President
------------------------------------
GMAC COMMERCIAL CREDIT LLC
By:
------------------------------------
Print name:
------------------------------------
Title:
------------------------------------
U.S. BANK NATIONAL ASSOCIATION
By: /s/ Robert W. Josephson
------------------------------------
Print name: Robert W. Josephson
------------------------------------
Title: Vice President
------------------------------------
debis FINANCIAL SERVICES, INC.
By: /s/ James M. Vandervalk
------------------------------------
Print name: James M. Vandervalk
------------------------------------
Title: President, ABL Division
------------------------------------
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
S-3
<PAGE>
DIME COMMERCIAL CORP.
By: /s/ James A. Fisher
------------------------------------
Print name: James A. Fisher
------------------------------------
Title: Senior Vice President
------------------------------------
IBJ WHITEHALL BUSINESS CREDIT
CORPORATION
By: /s/ Andrew Sepe
------------------------------------
Print name: Andrew Sepe
------------------------------------
Title: Assistant Vice President
------------------------------------
NATIONAL BANK OF CANADA
By: /s/ Michael F. McIntyre
------------------------------------
Print name: Michael F. McIntyre
------------------------------------
Title: Assistant Vice Presdient
------------------------------------
By: /s/ Vincent Lima
------------------------------------
Print name: Vincent Lima
------------------------------------
Title: Vice President
------------------------------------
SIEMENS CREDIT CORPORATION
By: /s/ Frank Amodio
------------------------------------
Print name: Frank Amodio
------------------------------------
Title: Vice President - Credit
------------------------------------
S-4
<PAGE>
APPENDIX A
GENERAL DEFINITIONS
When used in the Loan and Security Agreement dated as of March ___, 2000 by
and among Fleet Capital Corporation, as agent, the financial institutions
identified as "Lenders" on Annex I attached thereto, Gentiva Health Services,
Inc. Olsten Health Services Holding Corp., and each of the Subsidiary Borrowing
Corporations listed on the signature pages hereto (each a "Borrower," and
collectively "Borrower"), the following terms shall have the following meanings
(terms defined in the singular to have the same meaning when used in the plural
and vice versa):
Account Debtor - any Person who is or may become obligated under or on
account of an Account.
Accounts - all of each Borrower's accounts, accounts receivable and rights
to payment for services performed or for goods and Inventory sold or leased by
such Borrower including, without limitation, (a) all "accounts" as defined in
the Code, (b) all health-care-insurance receivables, including the third party
reimbursable portion of accounts receivable owing to a Borrower arising out of
the delivery by Borrower of medical, surgical, diagnostic, treatment or other
professional or medical or other healthcare related services and/or the supply
of goods related to any of such services (whether such services are supplied by
Borrower or a third party), including all rights to reimbursement under any
agreements with an Obligor, (c) all accounts, general intangibles (other than
general intangibles to the extent related to any Borrower's Equipment or
fixtures), rights, remedies, guarantees, and security interests in respect of
the foregoing, all rights of enforcement and collection, all books and records
(other than medical records, unless patient consents with respect thereto have
been received) evidencing or related to the foregoing, and all rights under this
Agreement in respect of the foregoing, whether now owned or hereafter created or
acquired by Borrower or in which Borrower now has acquired or hereafter acquires
any interest, (d) all information and data compiled or derived by such Borrower
in respect of such accounts receivable (other than any such information and data
subject to legal restrictions of patient confidentiality), (e) Government
Accounts and (f) all proceeds of any of the foregoing.
Additional Convertible Debentures - see "Convertible Debentures."
Adjusted LIBOR Rate - for any LIBOR Interest Period, as applied to a
Revolving Credit LIBOR Rate Loan, the rate per annum (rounded upward if
necessary to the next 1/16 of 1%) determined pursuant to the following formula:
Adjusted LIBOR Rate = LIBOR Rate
(1.00 - Reserve Percentage)
For purposes hereof, "LIBOR Rate" shall mean the arithmetic average of the rates
of interest per annum (rounded upward, if necessary, to the next 1/16 of 1%) at
which Bank is offered deposits of the United States Dollar in the interbank euro
dollar loan market on
<PAGE>
or about 11:00 A.M London time two (2) London Business Days prior to the
commencement of such LIBOR Interest Period on amounts substantially equal to the
Revolving Credit LIBOR Rate Loan as to which Borrower may elect the Adjusted
LIBOR Rate to be applicable with a maturity of comparable duration to the LIBOR
Interest Period selected by Borrower for such Revolving Credit LIBOR Rate Loan
Adjusted Net Earnings From Operations - with respect to any fiscal period,
means the net earnings (or net loss) as reflected on the financial statements of
Borrower supplied to Lender pursuant to subsection 8.1.3 of the Agreement, but
excluding:
(i) any gain or loss arising from the sale of capital assets;
(ii) any gain arising from any write-up of assets;
(iii) earnings of any Subsidiary of any Borrower accrued prior to the
date it became a Subsidiary;
(iv) earnings of any corporation, substantially all the assets of
which have been acquired in any manner by any Borrower, realized by such
corporation prior to the date of such acquisition;
(v) net earnings of any business entity (other than a Subsidiary of
any Borrower) in which any Borrower has an ownership interest unless such
net earnings shall have actually been received by such Borrower in the form
of cash distributions;
(vi) any portion of the net earnings of any Subsidiary of any Borrower
which for any reason is unavailable for payment of dividends to any of the
Borrower;
(vii) the earnings of any Person to which any assets of any Borrower
shall have been sold, transferred of disposed of, or into which any
Borrower shall have merged, or been a party to any consolidation or other
form of reorganization, prior to the date of such transaction;
(viii) any gain arising from the acquisition of any Securities of any
Borrower; and
(ix) any gain arising from extraordinary or non-recurring items.
Affiliate - a Person (other than a Subsidiary): (i) which directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with, a Person; (ii) which beneficially owns or holds
25% (or, when used in the definition of Eligible Account, 5%) or more of any
class of the Voting Stock of a Person; or (iii) 25% (or, when used
ii
<PAGE>
in the definition of Eligible Account, 5%) or more of the Voting Stock (or in
the case of a Person which is not a corporation, 25% (or, when used in the
definition of Eligible Account, 5%) or more of the equity interest) of which is
beneficially owned or held by a Person or a Subsidiary of a Person.
Agreement - the Loan and Security Agreement referred to in the first
sentence of this Appendix A, all Exhibits thereto and this Appendix A, all as
amended, restated, replaced or supplemented from time to time.
Aggregate Adjusted Availability - an amount equal to the sum of (i) the
Borrowing Base plus (ii) Borrower's unrestricted cash on hand, less the sum of
(i) the amount of Revolving Credit Loans and the LC Amount as of the Funding
Date plus (ii) all sums due and owing to trade creditors which remain
outstanding beyond normal trade terms or special terms granted by trade
creditors, plus (iii) any reserves against the Borrowing Base permitted by
subsection 1.1.1 hereof, plus (iv) closing payments and expenses.
Applicable Margin - with respect to Revolving Credit LIBOR Rate Loans, 2.5%
and with respect to Revolving Credit Base Rate Loans, .25%.
Availability - the amount of money which Borrower is entitled to borrow
from time to time as Revolving Credit Loans, such amount being the difference
derived when the sum of (i) the principal amount of Revolving Credit Loans then
outstanding (including any amounts which Agent and/or any Lender may have paid
for the account of Borrower pursuant to any of the Loan Documents and which have
not been reimbursed by Borrower) and (ii) the LC Amount, is subtracted from the
Borrowing Base. If the amount outstanding is equal to or greater than the
Borrowing Base, Availability is zero.
Bank - Fleet National Bank, N.A., or its successor, or such other bank as
Agent may hereafter designate with the consent of Borrower, which consent shall
not be unreasonably withheld.
Base Rate - the rate of interest announced or quoted by Bank from time to
time as its prime rate for commercial loans, whether or not such rate is the
lowest rate charged by Bank to its most preferred borrowers; and, if such prime
rate for commercial loans is discontinued by Bank as a standard, a comparable
reference rate designated by Bank as a substitute therefor shall be the Base
Rate.
Borrowing Base - as at any date of determination thereof, an amount equal
to the lesser of:
(i) an amount equal to Total Revolving Credit Facility; or
(ii) an amount equal to 80% of the net amount of Eligible Accounts
outstanding at such date; provided, however, that loans against Government
Accounts shall at no time exceed in the aggregate the lesser of (a) Fifty
Million Dollars ($50,000,000) or (b) 33% of Availability.
For the purposes hereof, the net amount of Eligible Accounts at any time shall
be the face amount of such Eligible Accounts less any and all returns, rebates,
discounts (which may,
iii
<PAGE>
at Agent's option, be calculated on shortest terms), credits, allowances or
excise taxes of any nature at any time issued, owing, claimed by Account
Debtors, granted, outstanding or payable in connection with such Accounts at
such time.
Business Day - any day excluding Saturday, Sunday and any day which is a
legal holiday under the laws of the State of New York or is a day on which
banking institutions located in such state are closed.
Capital Expenditures - expenditures made or liabilities incurred for the
acquisition of any fixed assets or improvements, replacements, substitutions or
additions thereto which have a useful life of more than one year, including the
total principal portion of Capitalized Lease Obligations all as determined in
accordance with GAAP.
Capitalized Lease Obligation - any Indebtedness represented by obligations
under a lease that is required to be capitalized for financial reporting
purposes in accordance with GAAP.
Change of Control - if at any time (i) with respect to the Company, any
person (as such term is used in Section 13(d) and Section 14(d)(2) of the
Securities Exchange Act of 1934 as in effect at the date of the Closing) or
related persons constituting a group (as such term is used Rule 13d-5 under the
Securities Exchange Act of 1934 as in effect as of the date of the Closing)
become the "beneficial owners" (as such term is used in Rule 13(d)3 of the
Securities Exchange Act of 1934 as in effect on the date of the Closing),
directly or indirectly, of more than Fifty Percent (50.0%) of the total voting
power of the then outstanding Capital Stock of Borrower, or (ii) with respect to
any Borrower or Subsidiary Guarantor other than the Company, such Borrower or
Subsidiary Guarantor shall cease to be a wholly-owned direct or indirect
subsidiary of the Company (except in connection with a disposition of all of the
stock of any such Borrower or Subsidiary Guarantor in accordance with the terms
of subsection 8.2.9 (iii)). Notwithstanding the foregoing, the Gentiva Trust may
issue, and other Persons besides the Company may own, Convertible Trust
Preferred Stock which is issued in accordance with the terms of this Agreement.
Chattel Paper - as defined in the Code, whether now owned or hereafter
acquired by Borrower.
Closing Date - the date on which all of the conditions precedent to the
effectiveness of this Agreement in Section 9.1 of the Agreement are satisfied.
Code - the Uniform Commercial Code as adopted and in force in the State of
New York, as from time to time in effect; provided, however, that if by reason
of mandatory provisions of law, the perfection or the effect of perfection or
non-perfection of the security interest in any item or portion of the Collateral
is governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of New York, "Code" shall mean the Uniform Commercial Code as in
effect in such other jurisdiction as from time to time in effect, for purposes
of the provisions hereof relating to such perfection or effect of perfection or
non-perfection.
iv
<PAGE>
Collateral - all of the Property and interests in Property granted to
Agent, for the ratable benefit of Lenders, pursuant to Section 5 of the
Agreement, and all other Property and interests in Property that now or
hereafter is granted to Agent, for the ratable benefit of Lenders, to secure the
payment and performance of any of the Obligations.
Collections - means with respect to any Account, all cash collections on
such Account.
Commercial Lockbox - any lockbox and/or deposit account in the name of
Borrower maintained at Bank, or such other bank as is acceptable to Agent, to
which collections are sent, that is not a Government Lockbox.
Company - as defined in the Recitals to the Agreement.
Concentration Account(s) - Borrower's centralized cash management deposit
account(s) maintained at Bank, or such other bank as is acceptable to Agent,
which is subject to a tri-party agreement among Agent, Borrower and the
Concentration Bank and into which Borrower's funds are transferred and from
which, during any Dominion Triggered Period, Borrower's funds will be swept on a
daily basis according to the provisions of subsection 6.2.5. Concentration
Account(s) may also be Lockbox Account(s).
Concentration Bank - any depository bank at which a Concentration Account
is maintained.
Consolidated - the consolidation in accordance with GAAP of the accounts or
other items as to which such term applies.
Consolidated and Consolidating - the consolidation and consolidating in
accordance with GAAP of the accounts or other items as to which such term
applies.
Convertible Debentures - all of (i) those certain 10.0% Convertible
Subordinated Debentures of the Company issued in a minimum amount of Twenty
Million Dollars ($20,000,000.00) on or before the Funding Date and maturing on
March 15, 2005, on such terms and conditions as shall be reasonably satisfactory
to Agent ("Initial Convertible Debentures"), (ii) an additional amount of
Convertible Subordinated Debentures of the Company issued in an aggregate amount
not to exceed Ten Million Dollars ($10,000,000.00) at any time after the Funding
Date on terms no less favorable to the Lenders than those of the Initial
Convertible Debentures ("Additional Convertible Debenture"), and (iii) any
Convertible Subordinated Debentures of the Company issued as regularly scheduled
in-kind interest payments on either the Initial Convertible Debentures or the
Additional Convertible Debentures pursuant to the terms and conditions of the
respective documents governing the Initial Convertible Debentures and the
Additional Convertible Debentures ("Dividend Convertible Debentures").
Convertible Trust Preferred Stock - all of those certain shares of
preferred stock issued by the Gentiva Trust in conjunction with the issuance by
the Company and
v
<PAGE>
purchase by the Gentiva Trust of (i) the Initial Convertible Debentures, (ii)
any Additional Convertible Debentures and (iii) any Dividend Convertible
Debentures.
Default - an event or condition the occurrence of which would, with the
lapse of time or the giving of notice, or both, become an Event of Default.
Default Rate - as defined in subsection 2.1.2 of the Agreement.
Deposit Accounts - as defined in the Code, whether now owned or hereafter
created or acquired by Borrower or in which Borrower now has acquired or
hereafter acquires any interest.
Distribution - in respect of any corporation means and includes: (i) the
payment of any dividends or other distributions on capital stock of the
corporation (except distributions in such stock) and (ii) the redemption or
acquisition of Securities unless made contemporaneously from the net proceeds of
the sale of Securities.
Divestiture - the transfer to the Company of all healthcare related assets
of Olsten Corporation and the initial public offering and spin-off of the
Company from Olsten Corporation.
Divestiture Documents - means the Separation Agreement, evidence that the
Divestiture has been consummated and all other documents, instruments and
agreements entered into by borrowers in connections with the divestiture of
Borrower's from Olsten Corporation.
Dividend Convertible Debentures - see "Convertible Debentures."
Documents - as defined in the Code, whether now owned or hereafter acquired
by Borrower or in which Borrower now has acquired or hereafter acquires any
interest.
Dominion Account - a special account of Agent, for the benefit of Lenders,
established by Borrower pursuant to the Agreement at a bank selected by
Borrower, but acceptable to Agent in its reasonable discretion, and over which
Agent shall have sole and exclusive access and control for withdrawal purposes.
Dominion Triggered Period - as defined in subsection 6.2.5.
EBITDA - Adjusted Net Earnings from Operations plus the sum of
depreciation, amortization, income taxes and Interest Expense during the period
for which Adjusted Net Earnings from Operations were calculated, determined on a
Consolidated basis for the Borrower for the applicable Measurement Period.
Eligible Account - an Account arising in the ordinary course of Borrower's
business from the sale of goods or rendition of services, and for which an
invoice has been mailed or transmitted to the respective Account Debtor or
Obligor (or prepared for mailing or transmission to the respective Account
Debtor or Obligor, provided that such
vi
<PAGE>
invoice is actually mailed or transmitted within three (3) Business Days), which
Agent, in its sole credit judgment, deems to be an Eligible Account. Without
limiting the generality of the foregoing, no Account shall be an Eligible
Account if:
(i) it is outstanding (a) more than 180 days past the date the invoice
for the goods and/or services was issued or (b) more than 195 days past the
date the corresponding goods and/or services were provided;
(ii) it arises out of a sale made by Borrower to an Obligor who is an
Affiliate of Borrower or to an Obligor controlled by an Affiliate of
Borrower; or
(iii) 50% or more of the Accounts from the Account Debtor or Obligor
are not deemed Eligible Accounts hereunder; or
(iv) the total unpaid Accounts of the Account Debtor or Obligor to
Borrower exceed 20% of the net amount of all Eligible Accounts, to the
extent of such excess; or
(v) the Account is subject to any terms pursuant to which (i) payment
by the Obligor is conditional or (ii) the repayment of the Account by the
Obligor is subject to any payment arrangement entered into after payment
default by the Obligor;
(vi) any covenant, representation or warranty contained in the
Agreement with respect to such Account has been breached; or
(vii) the Account Debtor or Obligor is also Borrower's creditor or
supplier, but only to the extent of Borrower's liabilities or obligations
to such creditor or supplier, or the Account Debtor has disputed liability
with respect to such Account, or the Account Debtor has made any claim with
respect to any other Account due from such Account Debtor to Borrower, or
the Account otherwise is or may become subject to any right of setoff by
the Account Debtor, but only to the extent of any actual dispute or claim
or actual or potential right of setoff; or
(viii) the Account Debtor or Obligor has commenced a voluntary case
under the federal bankruptcy laws, as now constituted or hereafter amended,
or made an assignment for the benefit of creditors, or a decree or order
for relief has been entered by a court having jurisdiction in the premises
in respect of the Account Debtor in an involuntary case under the federal
bankruptcy laws, as now constituted or hereafter amended, or any other
petition or other application for relief under the federal bankruptcy laws
has been filed against the Account Debtor, or if the Account Debtor has
failed, suspended business, ceased to be Solvent, or consented to or
suffered a receiver, trustee, liquidator or custodian to be appointed for
it or for all or a significant portion of its assets or affairs; or
vii
<PAGE>
(ix) the Account Debtor or Obligor is not located in the United States
or Canada, unless the Account is supported by a letter of credit, guaranty
or acceptance terms, in each case acceptable to Agent in its sole
discretion; or
(x) it arises from a sale to the Account Debtor on a bill-and-hold,
guaranteed sale, sale-or-return, sale-on-approval, consignment or any other
repurchase or return basis, provided that, at such time as such sale
becomes final, such Account shall no longer be excluded from Eligible
Accounts under this clause; or
(xi) the Account is not at all times subject to Agent's duly
perfected, first priority Lien and security interest (for the ratable
benefit of Lenders) and no other Lien other than a Permitted Lien; or
(xii) the goods giving rise to such Account have not been delivered to
and accepted by the Account Debtor or the services giving rise to such
Account have not been performed by the Borrower and accepted by the Account
Debtor or the Account otherwise does not represent a final sale; or
(xiii) the Account is evidenced by chattel paper or an instrument of
any kind, or has been reduced to judgment; or
(xiv) the Borrower has made any agreement with the Account Debtor for
any deduction therefrom, except for discounts or allowances which are made
in the ordinary course of business for prompt payment and which discounts
or allowances are reflected in the calculation of the face value of each
invoice related to such Account; or
(xv) it represents finance charges, to such extent.
Environmental Laws - all federal, state and local laws, rules, regulations,
ordinances, programs, permits, guidelines, orders and consent decrees relating
to health, safety and environmental matters.
EOB - as defined in subsection 7.1.26(c)(i) of the Agreement.
Equipment - as defined in the Code, including, without limitation, all
machinery, apparatus, equipment, fittings, furniture, fixtures, motor vehicles
and other tangible personal Property (other than Inventory) of every kind and
description used in Borrower's operations or owned by Borrower or in which
Borrower has an interest, whether now owned or hereafter acquired by Borrower or
in which Borrower now has acquired or hereafter acquires any interest, and all
parts, accessories and special tools and all increases and accessions thereto
and substitutions and replacements therefor.
ERISA - the Employee Retirement Income Security Act of 1974, as amended,
and all rules and regulations from time to time promulgated thereunder.
viii
<PAGE>
Event of Default - as defined in Section 10.1 of the Agreement.
Fixtures - as defined in the Code, whether now owned or hereafter acquired
by Borrower or in which Borrower now has acquired or hereafter acquires any
interest.
Funding Date - the date on which all of the conditions precedent in
Sections 9.1 and 9.2 of the Agreement are satisfied and the initial Loans are
made and/or the initial Letters of Credit or LC Guaranties are issued under the
Agreement.
GAAP - generally accepted accounting principles in the United States of
America in effect from time to time.
General Intangibles - as defined in the Code, including, without
limitation, all personal property of Borrower (including, without limitation,
Intellectual Property, tax, insurance and other refunds, licenses, contract
rights, claims and choses in action) other than goods, Accounts, chattel paper,
documents, instruments and money, whether now owned or hereafter created or
acquired by Borrower or in which Borrower now has acquired or hereafter acquires
any interest, but not including any General Intangibles which to the extent
related to Equipment or fixtures of Borrower.
Gentiva Trust - the corporate trust of that name organized under the laws
of Delaware in connection with the issuance by the Company of the Convertible
Debentures.
Government Accounts - Accounts on which any federal or state governmental
unit or any intermediary for federal or state governmental unit is the Obligor.
Government Authority - any nation or government, government agency or
instrumentality, any state or other political subdivision thereof and any entity
exercising executive legislative, judicial, regulatory or administrative
functions of or pertaining to government.
Government Lockbox - a lockbox and/or deposit account in the name of
Borrower(s) maintained at Bank, or such other bank as is acceptable to the
Agent, to which Collections on all Government Accounts are sent.
Guarantor - any Person who may now or hereafter guarantee or become surety
for payment or performance of the whole or any part of the Obligations.
HCFA - the Health Care Financing Administration
Initial Convertible Debentures - see "Convertible Debentures."
Indebtedness - as applied to a Person means, without duplication
ix
<PAGE>
(i) all items which in accordance with GAAP would be included in
determining total liabilities as shown on the liability side of a balance
sheet of such Person as at the date as of which Indebtedness is to be
determined, including, without limitation, Capitalized Lease Obligations,
(ii) all obligations of other Persons which such Person has
guaranteed,
(iii) all reimbursement obligations in connection with letters of
credit or letter of credit guaranties issued for the account of such
Person, and
(iv) in the case of Borrower (without duplication), the Obligations.
Instruments - as defined in the Code, whether now owned or hereafter
created or acquired by Borrower or in which Borrower now has acquired or
hereafter acquires any interest.
Insurer - any Person which in the ordinary course of its business or
activities agrees to pay for healthcare goods and services received by
individuals, including a commercial insurance company, a non-profit insurance
(such as a Blue Cross/Blue Shield entity), an employer or union which self
insures for employees or member health insurance and a health maintenance
organization. "Insurer" includes, without limitation, insurance companies
issuing health, personal injury, worker's compensation or other types of
insurance, corporations, hospitals and thirty party intermediaries but does not
include any individual guarantors or employee benefit plans.
Intellectual Property - brand names, copyrights, copyrightable material,
data, designs, drawings, formulas, information, inventions, logos, labels, label
designs, license rights, licenses, manufacturing and processing rights, methods,
processes, software and computer programs, patents, patterns, plans and
blueprints, royalties, service marks, specifications and descriptions,
trademarks, trade names, trade secrets, and any registrations and applications
with respect to any of the foregoing, and all memoranda, notes and records with
respect to any research or development of any of the foregoing, and all proceeds
and products of the foregoing.
Interest Expense - for any period, all amounts which, in conformity with
GAAP, should be included as interest expense on a consolidated statement of
operations of the Borrower and its Subsidiaries for such period, including in
any event, without limitation, interest accrued on the Revolving Credit Loans,
interest accrued in respect of all Subordinated Debt, that portion of any
Capitalized Lease Obligations attributable to interest expense in accordance
with GAAP, debt issuance costs (excluding any original issue discount on the
Subordinated Notes and any debt issuance costs incurred on or prior to the date
hereof with respect to the Subordinated Notes and the Revolving Credit Loans)
and capitalized interest accrued during such period, all commissions, all
discounts and other fees and charges accrued with respect to letters of credit
and bankers' acceptance financing and net costs under interest rate protection
agreements (including amortization
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<PAGE>
of such costs), all as determined for the Borrower and its Subsidiaries on a
consolidated basis for such period in accordance with GAAP.
Inventory - all of Borrower's inventory, whether now owned or hereafter
acquired including, but not limited to, "inventory" as defined in the Code, all
goods intended for sale or lease by Borrower, or for display or demonstration;
all work in process; all raw materials and other materials and supplies of every
nature and description used or which might be used in connection with the
manufacture, printing, packing, shipping, advertising, selling, leasing or
furnishing of such goods or otherwise used or consumed in Borrower's business;
and all documents evidencing and General Intangibles relating to any of the
foregoing, whether now owned or hereafter acquired by Borrower or in which
Borrower now has acquired or hereafter acquires any interest; provided that
Inventory shall not include any of Borrower's Equipment.
Investment Property - as defined in the Code, whether now owned or
hereafter acquired by Borrower or in which Borrower now has acquired or
hereafter acquires any interest.
Issuer - Fleet National Bank, N.A., in its capacity as issuer of letters of
credit hereunder.
JCAHO - the Joint Commission for Accreditation of Healthcare Organizations,
a nationally recognized organization providing accreditations to hospitals and
other healthcare facilities, or any successor entity charged with performing its
functions.
LC Amount - at any time, the aggregate undrawn face amount of all Letters
of Credit and LC Guaranties then outstanding.
LC Guaranty - any guaranty pursuant to which Issuer shall guaranty the
payment or performance by Borrower of its reimbursement obligation under any
letter of credit.
Lenders - as defined in the Recitals hereto.
Letter of Credit - any letter of credit issued by Issuer for the account of
Borrower.
LIBOR Interest Period - a period of one, two, three or six months duration
during which the Revolving Credit LIBOR Rate is applicable.
LIBOR Rate Loans - collectively, all Revolving Credit LIBOR Rate Loans.
Lien - any interest in Property securing an obligation owed to, or a claim
by, a Person other than the owner of the Property, whether such interest is
based on common law, statute or contract. The term "Lien" shall also include
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting Property. For the purpose of the Agreement, Borrower shall be deemed
to be the owner of any Property which it has acquired or holds subject to a
conditional sale agreement or other arrangement pursuant
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<PAGE>
to which title to the Property has been retained by or vested in some other
Person for security purposes.
Loan Account - the loan account established on the books of Agent pursuant
to Section 3.6 of the Agreement.
Loan Documents - the Agreement, the Subsidiary Guaranty and the Security
Documents and any and all other instruments or documents executed and/or
delivered in connection therewith.
Loans - all loans and advances of any kind made by Agent or any Lender
pursuant to the Agreement.
Lockbox Accounts - all Commercial Lockboxes and Government Lockboxes.
Lockbox Bank - any bank at which Borrower maintains a Commercial Lockbox
and/or a Government Lockbox.
Lockbox Trigger Notices - as defined in subsection 6.2.6.
London Business Day - any Business Day on which banks in London, England
are open for business.
Majority Lenders - as of any date, Lenders holding Pro Rata Percentages
aggregating at least 66 and 2/3 %.
Material Adverse Effect - any specified event, condition or occurrence as
to Borrower or any of its Subsidiaries which individually or in the aggregate
with any other such event, condition or occurrence and whether through the
effect on Borrower's or Subsidiary's business, Property, profits or condition
(financial or otherwise) or otherwise, that could reasonably be expected to
materially and adversely effect the financial condition, business or Properties
of the Borrower and its Subsidiaries taken as a whole, or the perfection or
priority of Agent's security interest with respect to any material portion of
the Collateral.
Measurement Period - as of the end of any fiscal quarter, the four (4)
consecutive fiscal quarters then ended.
Medicare Act - Subchapter XVIII of the Social Security Act (42 USC Ch. 7).
Money Borrowed - means (i) Indebtedness arising from the lending of money
by any Person to Borrower; (ii) Indebtedness, whether or not in any such case
arising from the lending by any Person of money to Borrower, (A) which is
represented by notes payable or drafts accepted that evidence extensions of
credit, (B) which constitutes obligations evidenced by bonds, debentures, notes
or similar instruments, or (C) upon which interest charges are customarily paid
(other than accounts payable) or that was issued or assumed as full or partial
payment for Property; (iii) Indebtedness that consti-
xii
<PAGE>
tutes a Capitalized Lease Obligation; (iv) reimbursement obligations with
respect to letters of credit or guaranties of letters of credit and (v)
Indebtedness of Borrower under any guaranty of obligations that would constitute
Indebtedness for Money Borrowed under clauses (i) through (iii) hereof, if owed
directly by Borrower.
Multiemployer Plan - has the meaning set forth in Section 4001(a)(3) of
ERISA.
Net Available Proceeds - means the aggregate amount of proceeds of
insurance, condemnation awards and other compensation received by Borrower in
the event that any of the Collateral is lost or destroyed or taken by
condemnation net of (i) fees and expenses incurred by Borrower in connection
with recovery thereof, (ii) repayment of Indebtedness (other than Indebtedness
hereunder) to the extent secured by a Lien that is permitted hereunder and (iii)
any taxes (including income, transfer, stamp, duty, customs, withholding, and
any other taxes) paid or payable by Borrower in respect of amounts recovered
(after application of all creditors and other offsets).
Net Income - The net income of a Person as such would appear on such
Person's statement of income, prepared in accordance with GAAP.
Notes - any and all promissory notes executed by Borrower, as of the date
hereof and at any time hereafter, in connection with this Agreement or any of
the Loan Documents.
Obligations - all Loans and all other advances, debts, liabilities,
obligations, covenants and duties, including reimbursement obligations or
Letters of Credit and LC Guaranties, together with all interest, fees and other
charges thereon, owing, arising, due or payable from Borrower to Agent or any
Lender of any kind or nature, present or future, whether or not evidenced by any
note, guaranty or other instrument, whether arising under this Agreement or any
of the other Loan Documents or otherwise whether direct or indirect (including
those acquired by assignment), absolute or contingent, primary or secondary, due
or to become due, now existing or hereafter arising and however acquired.
Obligor - means the party primarily obligated to pay on Account, including
without limitation, any Insurer and any Government Authority that is responsible
for payment for all or any portion of any Account.
OHS - as defined in the Recitals to the Agreement.
Operating Lease - any lease of real or personal Property (other than leases
the lessee's obligations under which are Capitalized Lease Obligations).
Original Term - as defined in Section 4.1.
Other Agreements - any and all agreements, instruments and documents (other
than the Agreement and the Security Documents), heretofore, now or hereafter
executed
xiii
<PAGE>
by Borrower, any Subsidiary of Borrower or any other third party and delivered
to Agent or any Lender in respect of the transactions contemplated by the
Agreement.
Overadvance - the amount, if any, by which the sum of the outstanding
principal amount of Revolving Credit Loans plus the LC Amount exceeds the
Borrowing Base.
Participations - shall have the meaning set forth in Section 11.16 herein.
Participating Lender - each Person who shall be granted the right by any
Lender, pursuant to the terms of this Agreement, to participate in any of the
Loans described in the Agreement and who shall have entered into a participation
agreement in form and substance satisfactory to Agent
Patient - when used in connection with any Account on which the primary
Obligor is not the party who received the medical or healthcare related goods
and services from Borrower which resulted in the creation of an Account, the
actual party who received such goods and services.
Permitted Acquisition - any acquisition transaction whereby any Borrower
shall acquire all or substantially all of the assets of another Person or shall
acquire all of the capital stock or other equity interests of another Person
and/or merge or consolidate with another Person, provided that (i) the value of
each such acquisition shall not exceed One Million Dollars ($1,000,000.00) and
(ii) the aggregate value of all such acquisition transactions which have
occurred since the Closing Date do not exceed Five Million Dollars
($5,000,000.00). For the purposes of this definition, the value of an
acquisition shall be deemed to be an amount equal to the sum of all cash and the
fair market value of all non-cash consideration paid by the respective Borrower
in connection with the acquisition, including cash paid, indebtedness assumed
and the value of any stock of the Company issued in connection with the
acquisition based on the market value of such stock as of the date of the
acquisition. Furthermore, in the case of any acquisition transaction which
involves the acquisition of all of the capital stock or other equity interests
of another Person and/or the merger or consolidation with another Person, such
acquisition transaction will only be deemed to be a "Permitted Acquisition" if
(i) such other Person shall engage solely in line(s) or type(s) of business that
are substantially similar to the lines and types of business engaged in by
Borrower on the Closing Date, (ii) in the case of any transaction involving a
merger or consolidation, the Borrower shall be the surviving entity, and (ii) in
the case of any transaction not involving a merger or consolidation, the
acquired Person shall become a party to this Agreement as a Subsidiary Borrowing
Corporation by executing a Joinder Agreement in the form of Exhibit D attached
hereto.
Permitted Liens - any Lien of a kind specified in subsection 8.2.5 of the
Agreement.
Permitted Purchase Money Indebtedness - Purchase Money Indebtedness of
Borrower incurred after the date hereof which is secured by a Purchase Money
Lien.
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<PAGE>
Person - an individual, partnership, corporation, limited liability
company, joint stock company, land trust, business trust, or unincorporated
organization, or a government or agency or political subdivision thereof.
Plan - an employee benefit plan now or hereafter maintained for employees
of Borrower that is covered by Title IV of ERISA.
Pledge Agreement(s) - those certain Pledge Agreement(s) of even date
herewith executed and delivered by each Borrower which is the owner of the
capital stock or equity interests of any other Person, pledging such capital
stock or equity interests to Agent, for the ratable benefit of the Lenders, to
secure the Obligations hereunder.
Projections - Borrower's forecasted Consolidated (a) balance sheets, (b)
profit and loss statements, (c) cash flow statements, and (d) capitalization
statements, all prepared on a consistent basis with Borrower's historical
financial statements, together with appropriate supporting details and a
statement of underlying assumptions.
Property - any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible.
Pro Rata Percentage - With respect to a Lender, the percentage set forth
next to such Lender's name on Annex I to the Agreement.
Pro Rata Share - With respect to a Lender, the share of the Total Revolving
Credit Facility set forth next to such Lender's name on Annex I to the
Agreement.
Purchase Money Indebtedness - means and includes (i) Indebtedness (other
than the Obligations) for the payment of all or any part of the purchase price
of any fixed assets, (ii) any Indebtedness (other than the Obligations) incurred
at the time of or within ten (10) days prior to or after the acquisition of any
fixed assets for the purpose of financing all or any part of the purchase price
thereof, and (iii) any renewals, extensions or refinancing thereof, but not any
increases in the principal amounts thereof outstanding at the time.
Purchase Money Lien - a Lien upon fixed assets which secures Purchase Money
Indebtedness, but only if such Lien shall at all times be confined solely to the
fixed assets the purchase price of which was financed through the incurrence of
the Purchase Money Indebtedness secured by such Lien.
Quantum Debentures - those certain Quantum Health Resources, Inc. 4 3/4 %
Convertible Subordinated Debentures due October 1, 2000.
Real Estate - all right, title and interest of any Borrower (including,
without limitation, any leasehold estate) in and to a parcel of real property
owned or operated by any Borrower together with, in each case, all improvements
and appurtenant personal property, easements and other property and rights
incidental to the ownership, lease or operation; provided, however, that this
shall not include any Fixtures or Equipment attached to or located at such real
property.
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<PAGE>
Regulation D - Regulation D of the Board of Governors of the Federal
Reserve System, comprising Part 204 of Title 12, Code of Federal Regulations, as
amended, and any successor thereto.
Rentals - as defined in subsection 8.2.13 of the Agreement.
Reportable Event - any of the events set forth in Section 4043(b) of ERISA.
Reserve Percentage - for any day, that reserve (expressed as a decimal)
which is in effect (whether or not actually incurred) with respect to Bank on
such day, as prescribed by the Board of Governors of the Federal Reserve System
(or any successor or any other banking authority to which Bank is subject
including any board or governmental or administrative agency of the United
States or any other jurisdiction to which Bank is subject), for determining the
maximum reserve requirement (including without limitation any basic,
supplemental, marginal or emergency reserves) for Eurocurrency liabilities as
defined in Regulation D.
Restricted Investment - any investment made in cash or by delivery of
Property to any Person, whether by acquisition of stock, Indebtedness or other
obligation or Security, or by loan, advance or capital contribution, or
otherwise, or in any Property except the following:
(i) investments in one or more Subsidiaries of Borrower to the extent
existing on the Closing Date;
(ii) Property to be used in the ordinary course of business;
(iii) Current Assets arising from the sale of goods and services in
the ordinary course of business of Borrower and its Subsidiaries;
(iv) investments in direct obligations of the United States of
America, or any agency thereof or obligations guaranteed by the United
States of America, provided that such obligations mature within one year
from the date of acquisition thereof;
(v) investments in certificates of deposit maturing within one year
from the date of acquisition issued by a bank or trust company organized
under the laws of the United States or any state thereof having capital
surplus and undivided profits aggregating at least One Hundred Million
Dollars ($100,000,000.00);
(vi) investments in commercial paper given the highest rating by a
national credit rating agency and maturing not more than 270 days from the
date of creation thereof; and
(vii) investments made in connection with any Permitted Acquisition.
xvi
<PAGE>
Revolving Credit Base Rate - a per annum rate equal to the sum of the Base
Rate plus the Applicable Margin.
Revolving Credit Base Rate Loan - that portion of the Revolving Credit
Loans that bears interest at the Revolving Credit Base Rate.
Revolving Credit Facility - the credit facility established pursuant to
Section 1.1 of the Agreement.
Revolving Credit LIBOR Rate - a per annum rate equal to the sum of the
Adjusted LIBOR Rate plus the Applicable Margin.
Revolving Credit LIBOR Rate Loan - that portion of the Revolving Credit
Loans on which interest accrues at the Revolving Credit LIBOR Rate.
Revolving Credit Loan - a Loan made by Lenders to Borrower as provided in
Section 1.1 of the Agreement.
Revolving Credit Maturity Date - the last day of the Original Term.
Revolving Credit Notes - the secured promissory notes to be executed by
Borrower on or about the Closing Date in favor of each Lender, each in the
amount of such Lender's Pro Rata Share of the Total Revolving Credit Facility,
to evidence the Revolving Credit Loans, which shall be in form of Exhibit A to
the Agreement, as amended, restated, supplemented or replaced from time to time.
Schedule of Accounts - as defined in subsection 6.2.1 of the Agreement.
Security - shall have the same meaning as in Section 2(1) of the Securities
Act of 1933, as amended.
Security Documents - the Trademark Security Agreement(s), the Pledge
Agreement(s), the Subsidiary Guarantor Pledge Agreement(s) and all instruments
and agreements now or at any time hereafter securing the whole or any part of
the Obligations.
Separation Agreement - that Separation Agreement dated August 17, 1999, as
amended, among Olsten Corporation, Adecco SA and Gentiva Health Services, Inc.
and all other related agreements, including the Employee Benefits Agreement
among the same parties of even date therewith and the Tax Sharing Agreement
among the same parties of even date therewith.
Solvent - as to any Person, such Person (i) owns Property whose fair
saleable value is greater than the amount required to pay all of such Person's
Indebtedness (including contingent debts), (ii) is able to pay all of its
Indebtedness as such Indebtedness matures and (iii) has capital sufficient to
carry on its business and transactions and all business and transactions in
which it is about to engage.
xvii
<PAGE>
Special Charges - unusual or non-recurring expenses which are reflected in
the Consolidated statements of operations and which are required to be
separately disclosed under GAAP in notes to the Consolidated financial
statements of Borrower.
Specified Officer - John J. Collura, who is presently Executive Vice
President, Chief Financial Officer and Treasurer of Borrower, or John R.
Potapchuk, who is presently Vice President of Finance and Controller of
Borrower, or such other officer of Borrower as Borrower may hereafter specify in
writing to Agent.
Subordinated Debt - Indebtedness of Borrower with respect to (i) the
Quantum Debentures and (ii) the Convertible Debentures, and (iii) any other
Indebtedness incurred by Borrower prior to the maturity of the Quantum
Debentures and the Convertible Debentures to refinance either or both of the
Quantum Debentures and the Convertible Debentures in an amount not to exceed the
then outstanding principal balance of the Quantum Debentures and the Convertible
Debentures provided such refinanced Subordinated Debt is fully subordinated to
Lenders and is on terms no less favorable to Borrower and Lenders than the
existing Quantum Debentures and/or Convertible Debentures except for changes
which are reasonably acceptable to Agent and except with respect to the rate of
interest which may be a market created interest.
Subsidiary - any corporation of which a Person owns, directly or indirectly
through one or more intermediaries, more than 50% of the Voting Stock at the
time of determination.
Subsidiary Borrowing Corporation - any Subsidiary of Olsten Health Services
Holding Corp. or Gentiva Health Services, Inc. which is a party to this
Agreement as a Borrower.
Subsidiary Guarantor Pledge Agreement(s) - those certain Subsidiary
Guarantor Pledge Agreement(s) of even date herewith executed and delivered by
each Subsidiary Guarantor which is the owner of the capital stock or equity
interests of any other Person, pledging such capital stock or equity interests
to Agent, for the ratable benefit of the Lenders, to secure the obligations of
each such Subsidiary Guarantor under the Subsidiary Guaranty.
Subsidiary Guarantors - all of the direct and indirect Subsidiaries of the
company (except the Gentiva Trust and Gentiva Services Limited Canada), but not
including any Subsidiary which is a party to this Agreement as a Borrower.
Subsidiary Guaranty - that certain Subsidiary Guaranty of even date
herewith executed and delivered by each Subsidiary Guarantor guaranteeing the
Obligations of Borrower under this Agreement.
Tangible Net Worth - at any time, the amount by which the total assets of
Borrower as determined on a Consolidated basis and as would be shown on a
xviii
<PAGE>
Consolidated balance sheet for Borrower, prepared in accordance with GAAP
(excluding trademarks, copyrights, goodwill, covenants not to compete, deferred
closing costs, leasehold improvements and all other assets which would be
determined to be intangible assets under GAAP) exceed all of Borrower's
liabilities as determined on a Consolidated basis as would be shown on a
Consolidated balance sheet for Borrower, prepared in accordance with GAAP.
Total Revolving Credit Facility - means One Hundred Fifty Million Dollars
($150,000,000.00).
Trademark Security Agreement(s) - those certain Trademark Security
Agreement(s) of even date herewith executed and delivered by each Borrower which
is the owner of any trademark Collateral granting a security interest in such
trademark Collateral to Agent, for the ratable benefit of the Lenders, to secure
the Obligations hereunder.
Trigger Effectiveness Notice - as defined in subsection 6.2.5 of this
Agreement.
Trigger Rescission Notice - as defined in subsection 6.2.5 of this
Agreement.
Triggering Event - as defined in subsection 6.2.5 of this Agreement.
Unused Line Fee - as defined in Section 2.5 of this Agreement.
Voting Stock - Securities of any class or classes of a corporation the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors (or Persons performing similar
functions).
Other Terms. All other terms contained in the Agreement shall have, when
the context so indicates, the meanings provided for by the Code to the extent
the same are used or defined therein.
Certain Matters of Construction. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to the Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. The section titles, table of contents and
list of exhibits appear as a matter of convenience only and shall not affect the
interpretation of the Agreement. All references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations. All references to any of the Loan Documents shall include any and
all modifications thereto and any and all extensions or renewals thereof.
xix
<PAGE>
<TABLE>
<CAPTION>
ANNEX I
SCHEDULE OF LENDERS
Lender Pro Rate Share Pro Rate Percentage
- ------ -------------- -------------------
<S> <C> <C>
Fleet Capital Corporation $32,500,000.00 21.67%
60 East 42nd Street
3rd Floor
New York, NY 10017
Attention: Frank Galle
GMAC Commercial Credit LLC $32,500,000.00 21.67%
1290 Avenue of the Americas
3rd Floor
New York, NY 10104
Attention: Sam Cirelli
U.S. Bank National Association $23,000,000.00 15.33%
U.S. Bank Business Finance
MPFP P0512
601 Second Avenue South
Minneapolis, MN 55402
Attention: Robert Josephson
debis Financial Services, Inc. $14,000,000.00 9.33%
89 Headquarters Plaza North
Suite 1444
Morristown, NJ 07960
Attention: Alexander Cole
Dime Commercial Corp. $14,000,000.00 9.33%
1180 Avenue of the Americas
Suite 510
New York, NY 10036
Attention: James Fisher
IBJ Whitehall Business Credit Corporation $14,000,000.00 9.33%
One State Street
New York, NY 10004
Attention: Andrew C. Sepe
cc: Craig Thaler
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<PAGE>
National Bank of Canada $10,000,000.00 6.67%
125 West 55th Street
23rd Floor
New York, NY 10019
Attention: Michael McIntyre
Siemens Credit Corporation $10,000,000.00 6.67%
991 U.S. Highway 22
Bridgewater, NJ 08807
Attention: Frank Amodio
</TABLE>
xxi
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. CREDIT FACILITY...........................................2
1.1 Revolving Credit Loans.....................................2
1.2 Use of Proceeds............................................3
1.3 Letters of Credit; LC Guaranties...........................3
SECTION 2. INTEREST, FEES AND CHARGES................................4
2.1 Interest...................................................4
2.2 Computation of Interest and Fees...........................6
2.3 Commitment Fee.............................................6
2.4 Letter of Credit and LC Guaranty Fees......................6
2.5 Unused Line Fee............................................7
2.6 Administrative Agent Fee...................................7
2.7 Inspection, Audit, Examination and Appraisal Expenses......7
2.8 Reimbursement of Expenses..................................7
2.9 Bank Charges...............................................8
2.10 Indemnity re: LIBOR........................................8
SECTION 3. LOAN ADMINISTRATION......................................8
3.1 Manner of Borrowing Revolving Credit Loans.................8
3.2 Payments...................................................10
3.3 Mandatory Prepayments......................................10
3.4 Application of Payments and Collections....................11
3.5 All Loans to Constitute One Obligation.....................11
3.6 Loan Account...............................................11
3.7 Statements of Account......................................11
SECTION 4. TERM AND TERMINATION....................................11
4.1 Term of Agreement..........................................12
4.2 Termination................................................12
SECTION 5. SECURITY INTERESTS........................................13
5.1 Security Interest in Collateral............................13
5.2 Lien Perfection; Further Assurances........................14
SECTION 6. COLLATERAL ADMINISTRATION................................15
6.1 General....................................................15
6.2 Administration of Accounts.................................16
6.3 Administration of Inventory................................19
6.4 Administration of Equipment................................19
6.5 Payment of Charges.........................................19
SECTION 7. REPRESENTATIONS AND WARRANTIES............................19
7.1 General Representations and Warranties.....................19
7.2 Continuous Nature of Representations and Warranties........30
7.3 Survival of Representations and Warranties.................31
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS....................31
8.1 Affirmative Covenants......................................31
8.2 Negative Covenants.........................................35
8.3 Specific Financial Covenants...............................41
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<PAGE>
SECTION 9. CONDITIONS PRECEDENT......................................41
9.1 Conditions Precedent to Effectiveness of Agreement.........41
9.2 Conditions Precedent to Funding............................42
Other Loan Documents................................................42
Availability........................................................42
No Litigation.......................................................43
9.3 Funding Date...............................................43
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT..........44
10.1 Events of Default..........................................44
10.2 Acceleration of the Obligations............................46
10.3 Other Remedies.............................................46
10.4 Remedies Cumulative; No Waiver.............................48
SECTION 11. AGENT......................................................49
11.1 Appointment and Authorization..............................49
11.2 General Immunity...........................................49
11.3 Consultation with Counsel..................................49
11.4 Documents..................................................49
11.5 Rights as a Lender.........................................49
11.6 Responsibility of Agent....................................50
11.7 Collections and Disbursements..............................50
11.8 Indemnification............................................51
11.9 Expenses...................................................51
11.10 No Reliance................................................52
11.11 Reporting..................................................52
11.12 Removal of Agent...........................................52
11.13 Action on Instructions of Lenders..........................53
11.14 Several Obligations........................................53
11.15 Consent of Lenders.........................................53
11.16 Participations and Assignments.............................55
11.17 Borrower's Consent.........................................55
11.18 Security Interest of Lender................................55
SECTION 12. MISCELLANEOUS..............................................56
12.1 Power of Attorney..........................................56
12.2 Indemnity..................................................56
12.3 Modification of Agreement; Sale of Interest................57
12.4 Severability...............................................57
12.5 Successors and Assigns.....................................57
12.6 Cumulative Effect; Conflict of Terms.......................57
12.7 Execution in Counterparts..................................57
12.8 Notice.....................................................58
12.9 Agent's and Lender's Consent...............................59
12.10 Credit Inquiries...........................................59
12.11 Time of Essence............................................59
12.12 Entire Agreement...........................................59
12.13 Interpretation.............................................59
12.14 GOVERNING LAW; CONSENT TO FORUM............................59
12.15 WAIVERS BY BORROWER........................................60
12.16 Joint and Several Liability................................61
xxiii
<PAGE>
LIST OF EXHIBITS
Exhibit A Revolving Credit Notes
Exhibit B Compliance Certificate
Exhibit C Borrowing Base Certificate
Exhibit D Joinder Agreement
Exhibit E Notice to Obligors - Commercial
Exhibit F Notice to Obligors - Government
Exhibit 6.1.1 Inventory Locations
Exhibit 7.1.1 Jurisdictions in which Authorized to Do Business
Exhibit 7.1.4 Capital Structure of Borrower
Exhibit 7.1.5 Corporate Names
Exhibit 7.1.6 Borrower's and each Subsidiary's Business Locations
Exhibit 7.1.14 Tax Identification Numbers of Borrower and Subsidiaries
Exhibit 7.1.16 Patents, Trademarks, Copyrights and Licenses
Exhibit 7.1.19 Contracts Restricting Borrower's Right to Incur Debts
Exhibit 7.1.20 Litigation
Exhibit 7.1.22(a) Capitalized Leases
Exhibit 7.1.22(b) Operating Leases
Exhibit 7.1.23 Pension Plans
Exhibit 7.1.25 Labor Contracts
Exhibit 7.1.26(a) Medicare and Medicaid Provider Numbers
Exhibit 7.1.26(c) Litigation Relating to Accounts
Exhibit 8.2.4 Affiliate Transactions Exhibit 8.2.5 Permitted Liens
Exhibit 8.3 Financial Covenants
LIST OF ANNEXES
Annex I Lenders' Pro Rata Shares/Percentages
xxiv
CHANGE IN CONTROL AGREEMENT
Agreement, made this ___ day of _________, 2000, by and between Gentiva
Health Services, Inc., a Delaware corporation (the "Company"), and
_________________ (the "Executive").
WHEREAS, the Executive is a key employee of the Company; and
WHEREAS, the Board of Directors of the Company (the "Board") considers the
maintenance of a sound management to be essential to protecting and enhancing
the best interests of the Company and its stockholders and recognizes that the
possibility of a change in control raises uncertainty and questions among key
employees and may result in the departure or distraction of such key employees
to the detriment of the Company and its stockholders; and
WHEREAS, the Board wishes to assure that it will have the continued
dedication of the Executive and the availability of his or her advice and
counsel, notwithstanding the possibility, threat or occurrence of a bid to take
over control of the Company, and to induce the Executive to remain in the employ
of the Company; and
WHEREAS, the Executive is willing to continue to serve the Company taking
into account the provisions of this Agreement;
NOW, THEREFORE, in consideration of the foregoinq, and the respective
covenants and agreements of the parties herein contained, the parties agree as
follows:
1. Operation and Term of Agreement. This Agreement shall commence at the
Effective Time of the Merger as contemplated in the Merger Agreement (defined
below) and shall continue through the third anniversary of such date; provided,
however, that after a Change in Control of the Company during the term of this
Agreement, this Agreement shall remain in effect until all of the obligations of
the parties hereunder are satisfied and the Protection Period has expired. Prior
to a Change in Control this Agreement shall immediately terminate upon
termination of the Executive's employment, except in the case of such
termination under circumstances set forth in the last paragraph of Section 4
below.
<PAGE>
-2-
2. Change in Control; Protection Period. A "Change of Control" shall be
deemed to occur on the date that any of the following events occur:
(a) any person or persons acting together which would constitute a "group"
for purposes of Section 13(d) of the Exchange Act (other than the Company or any
subsidiary and other than Permitted Holders) shall beneficially own (as defined
in Rule 13d-3 of the Exchange Act), directly or indirectly, at least 25% of the
total voting power of all classes of capital stock of the Company entitled to
vote generally in the election of the Board;
(b) either (i) Current Directors (as herein defined) shall cease for any
reason to constitute at least a majority of the members of the Board (for these
purposes, a "Current Director" shall mean any member of the Board as of the date
hereof, and any successor of a Current Director whose election, or nomination
for election by the Company's shareholders, was approved by at least two-thirds
of the Current Directors then on the Board) or (ii) at any meeting of the
shareholders of the Company called for the purpose of electing directors, a
majority of the persons nominated by the Board for election as directors shall
fail to be elected;
(c) consummation of (i) a plan of complete liquidation of the Company, or
(ii) a merger or consolidation of the Company (A) in which the Company is not
the continuing or surviving corporation (other than a consolidation or merger
with a wholly owned subsidiary of the Company in which all shares of Common
Stock outstanding immediately prior to the effectiveness thereof are changed
into common stock of the subsidiary) or (B) pursuant to which the Common Stock
is converted into cash, securities or other property, except a consolidation or
merger of the Company in which the holders of the Common Stock immediately prior
to the consolidation or merger have, directly or indirectly, at least a majority
of the common stock of the continuing or surviving corporation immediately after
such consolidation or merger or in which the Board immediately prior to the
merger or consolidation would, immediately after the merger or consolidation,
constitute a majority of the board of directors of the continuing or surviving
corporation; or
<PAGE>
-3-
(d) consummation of a sale or other disposition (in one transaction or a
series of transactions) of all or substantially all of the assets of the
Company.
For purposes of this Section 2 under this Agreement, "Permitted Holders"
shall mean Miriam Olsten, Stuart Olsten, and Cheryl Olsten, and each of their
spouses, their lineal descendants and their estates and their Affiliates or
Associates (as defined in Rule 12b-2 of the Exchange Act) (collectively the
"Olsten Stockholders"), so long as the Olsten Stockholders beneficially own 20%
or less of the voting power of all classes of capital stock of the Company
entitled to vote generally in the election of the Board; provided, however, such
percentage shall be increased on a percentage basis (rounded to the nearest
whole percent) to the extent the Olsten Stockholders acquire any such capital
stock on conversion of the convertible trust preferred securities which they
hold on March 15, 2000.
Notwithstanding the foregoing, the transactions provided for in the
Agreement and Plan of Merger By and Among Adecco SA, Staffing Acquisition
Corporation and Olsten Corporation dated as of August 17, 1999, as amended (the
"Merger Agreement"), shall not constitute a Change in Control for purposes
hereof.
A "Protection Period" shall be the period beginning on the date of a Change
in Control and ending on the third anniversary of the date on which the Change
in Control occurs.
3. Termination Following Change in Control. The Executive shall be entitled
to the benefits provided in Section 4 hereof upon any termination of his or her
employment with the Company within a Protection Period, except a termination of
employment (a) because of his or her death, (b) because of a "Disability," (c)
by the Company for "Cause," or (d) by the Executive other than for "Good
Reason."
(i) Disability. The Executive's employment shall be deemed to have
terminated because of a "Disability" if the Executive applies for and is
determined to be eligible to receive disability benefits under the
Company's Long-Term Disability Plan.
(ii) Cause. Termination by the Company of the Executive's employment
for "Cause" shall mean termination upon: (A) the willful and continued
failure by the Execu-
<PAGE>
-4-
tive to substantially perform his or her duties with the Company, after a
written demand for substantial performance is delivered to the Executive by
the Board which specifically identifies the manner in which the Board
believes that the Executive has not substantially performed his or her
duties; or (B) the willful engaging by the Executive in conduct which is
demonstrably and materially injurious to the Company, monetarily or
otherwise. For purposes hereof, no act, or failure to act, on the
Executive's part shall be considered "willful" unless done, or omitted to
be done, by the Executive not in good faith and without reasonable belief
that his or her action or omission was in the best interest of the Company.
Notwithstanding the foregoing, the Executive shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered
to the Executive a copy of a resolution duly adopted by the affirmative
vote of not less than a majority of the entire membership of the Board at a
meeting of the Board called and held for that purpose (after reasonable
notice to the Executive and an opportunity for the Executive, together with
his or her counsel, to be heard before the Board), finding that in the good
faith opinion of the Board the Executive engaged in the prohibited conduct
set forth above in clauses (A) or (B) of the first sentence of this
subsection and specifying the particulars thereof in detail.
(iii) Without Cause. The Company may terminate the employment of the
Executive without Cause during a Protection Period only by giving the
Executive written notice of termination to that effect. In that event, the
Executive's employment shall terminate on the last day of the month in
which such notice is given (or such later date as may be specified in such
notice), and the benefits set forth in Section 4 hereof shall be provided
to the Executive.
(iv) Good Reason. Termination of employment by the Executive for "Good
Reason" shall mean termination:
(A) if there has occurred a reduction by the Company in the
Executive's base salary in effect on the date hereof, as increased
from time to time thereafter, other than a reduction in the
Executive's base salary of not more than ten percent which is part of
a general salary reduction for a majority of
<PAGE>
-5-
the salaried employees of the Company and its subsidiaries;
(B) if without the Executive's written consent, the Company has
required the Executive to be relocated anywhere in excess of fifty
(50) miles from the Executive's office location on the date hereof,
except for required travel on the business of the Company;
(C) if there has occurred a failure by the Company to maintain
plans providing benefits not materially less favorable than those
provided by any benefit or compensation plan (including, without
limitation, any incentive compensation plan, bonus plan or program,
retirement, pension or savings plan, stock option plan, restricted
stock plan, life insurance plan, health and dental plan and disability
plan) in which the Executive is participating immediately before the
beginning of the Protection Period, or if the Company has taken any
action which would adversely affect the Executive's participation in
or reduce the Executive's benefits (other than stock option or
restricted stock grants) under any of such plans or deprive the
Executive of any material fringe benefit enjoyed by the Executive
immediately before the beginning of the Protection Period, or if the
Company has failed to provide the Executive with the number of paid
vacation days to which he or she would be entitled in accordance with
the normal vacations policy of the Company as in effect immediately
before the beginning of the Protection Period; provided, however, that
a reduction in benefits under the Company's tax-qualified retirement,
pension or savings plans or its life insurance plan, health and dental
plan, disability plans or other insurance plans which reduction
applies equally to all participants in the plans and has a de minimis
effect on the Executive shall not constitute "Good Reason" for
termination by the Executive;
(D) the assignment to the Executive of any material duties
inconsistent with his or her status as a senior executive officer of
the Company or a substantial adverse alteration in the nature or
status
<PAGE>
-6-
of the Executive's responsibilities from those in effect immediately
prior to the Change in Control;
(E) if the Company has failed to obtain the assumption of the
obligations contained in this Agreement by any successor as
contemplated in Section 8(c) hereof; or
(F) if there occurs any purported termination of the Executive's
employment by the Company which is not effected pursuant to a written
notice of termination as described in subsection (ii) or (iii) above.
The Executive shall exercise his or her right to terminate employment for
Good Reason by giving the Company a written notice of termination specifying in
reasonable detail the circumstances constituting such Good Reason. In that
event, the Executive's employment shall terminate on the last day of the month
in which such notice is given.
A termination of employment by the Executive within a Protection Period
shall be for Good Reason if one of the occurrences specified in this subsection
(iv) shall have occurred, notwithstanding that the Executive may have other
reasons for terminating employment, including employment by another employer
which the Executive desires to accept.
4. Benefits Upon Termination Within Protection Period. If, within a
Protection Period, the Executive's employment by the Company shall be terminated
(a) by the Company other than for Cause or because of the Executive's death or
Disability, or (b) by the Executive for Good Reason, the Executive shall be
entitled to the benefits provided for below (and the Executive shall not be
entitled to severance benefits otherwise payable under the Executive's separate
severance letter agreement with the Company):
(i) The Company shall pay to the Executive through the date of the
Executive's termination of employment salary at the rate then in effect,
together with salary in lieu of vacation accrued to the date on which his
employment terminates, in accordance with the standard payroll practices of
the Company;
(ii) The Company shall pay to the Executive an amount in cash equal to
two times the sum of (A) the Ex-
<PAGE>
-7-
ecutive's annual base salary in effect immediately prior to the date of the
Executive's termination of employment or the date of the Change in Control
(whichever is higher), and (B) the higher of (x) the Executive's target
annual bonus for the year that includes the date of the Executive's
termination of employment or (y) the Executive's target annual bonus for
the year that includes the date of the Change in Control; and such payment
shall be made in a lump sum within 10 business days after the date of such
termination of employment;
(iii) The Company shall continue to cover the Executive and his or her
dependents under, or provide the Executive and his or her dependents with
insurance coverage no less favorable than, the Company's life, disability,
health, dental or other emp1oyee welfare benefit plans or programs (as in
effect on the day immediately preceding the Protection Period or, at the
option of the Executive, on the date of termination of his or her
employment) for a period equal to the lesser of (x) two years following the
date of termination or (y) until the Executive is provided by another
employer with benefits substantially comparable to the benefits provided by
such plans or programs;
(iv) All options to purchase Company stock granted under the Company's
1999 Stock Incentive Plan (or other Company plan) held by the Executive
shall become immediately vested and exercisable in full upon such
termination of employment, and all such stock options shall remain
exercisable for one year following such termination of employment (but not
beyond the original full term of the stock option); and
(v) All of the Executive's benefits accrued under the pension,
retirement, savings and deferred compensation plans of the Company shall
become vested in full; provided, however, that to the extent such
accelerated vesting of benefits cannot be provided under one or more of
such plans consistent with applicable provisions of the Internal Revenue
Code of 1986, as amended, such benefits shall be paid to the Executive in a
lump sum within 10 days after termination of employment outside the
applicable plan.
Anything in this Agreement to the contrary notwithstanding, the Executive
shall be entitled to the benefits de-
<PAGE>
-8-
scribed in this Section 4, if the Executive's employment with the Company is
terminated by the Company (other than for Cause) within one year prior to the
date on which a Change in Control occurs, and it is reasonably demonstrated that
such termination (i) was at the request of a third party who has taken steps
reasonably calculated or intended to effect a Change in Control or (ii)
otherwise arose in connection with or anticipation of a Change in Control.
5. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plans, practices, policies or programs provided by the
Company or any of its subsidiaries and for which the Executive may qualify, nor
shall anything herein limit or otherwise affect such rights as the Executive may
have under any stock option or other agreements with the Company or any of its
subsidiaries. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any plan, practice, policy or program of the
Company or any of its subsidiaries at or subsequent to the date of termination
of the Executive's employment shall be payable in accordance with such plan,
practice, policy or program.
6. Full-Settlement; Legal Expenses. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement. The Company
agrees to pay, upon written demand therefor by the Executive, all legal fees and
expenses which the Executive may reasonably incur as a result of any dispute or
contest by or with the Company or others regarding the validity or
enforceability of, or liability under, any provision of this Agreement
(including as a result of any contest by the Executive about the amount of any
payment hereunder) if the Executive substantially prevails in the dispute or
contest, plus in each case interest at the applicable Federal rate provided for
in Section 7872(f)(2) of the Internal Revenue Code of 1986, as amended (the
"Code"). In any such action brought by the Executive for damages or to enforce
any provisions of this Agreement, the Executive shall be entitled to seek both
legal and equitable relief and remedies, in-
<PAGE>
-9-
cluding, without limitation, specific performance of the Company's obligations
hereunder, in his or her sole discretion.
7. Excise Tax Cut Back.
(a) Anything in this Agreement to the contrary notwithstanding, if it shall
be determined that any payment, distribution or benefit provided (including,
without limitation, the acceleration of any payment, distribution or benefit and
the acceleration of exercisability of any stock option) to the Executive or for
his or her benefit (whether paid or payable or distributed or distributable)
pursuant to the terms of this Agreement or otherwise would be subject, in whole
or in part, to the excise tax imposed by Section 4999 of the Internal Revenue
Code of 1986, as amended (the "Excise Tax"), then the amounts payable to the
Executive under this Agreement shall be reduced (by the minimum possible amount)
until no amount payable to the Executive is subject to the Excise Tax; provided
however, that no such reduction shall be made if the net after-tax benefit
(after taking into account Federal, state, local or other income, employment,
self-employment and excise taxes) to which the Executive would otherwise be
entitled without such reduction would be greater than the net after-tax benefit
(after taking into account Federal, state, local or other income, employment,
self-employment and excise taxes) to the Executive resulting from the receipt of
such payments with such reduction. If, as a result of subsequent events or
conditions, it is determined that payments have been reduced by more than the
minimum amount required under this Section 7, then an additional payment shall
be promptly made to the Executive in an amount equal to the excess reduction.
(b) All determinations required to be made under this Section 7, including
whether a payment would result in an Excise Tax shall be made by
PricewaterhouseCoopers LLP (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive as requested by
the Company or the Executive. All fees and expenses of the Accounting Firm shall
be borne solely by the Company and shall be paid by the Company. Except as set
forth in the last sentence of Section 7(a) hereof, all determinations made by
the Accounting Firm under this Section 7 shall be final and binding upon the
Company and the Executive.
8. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all
<PAGE>
-10-
secret or confidential information, knowledge or data relating to the Company or
any of its subsidiaries, and their respective businesses, which shall have been
obtained by the Executive during the Executive's employment by the Company or
any of its subsidiaries and which shall not be or become public knowledge (other
than by acts of the Executive or his or her representatives in violation of this
Agreement). After the date of termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company, communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it. In no event shall an
asserted violation of the provisions of this Section 8 constitute a basis for
deferring or withholding any amounts otherwise payable to the Executive under
this Agreement.
9. Successors.
(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives or successor(s) in interest.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to a11 or substantially all of the
business and/or assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law or otherwise.
10. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without reference to principles of conflict
of laws therof. The captions of this Agreement are not part of the provisions
<PAGE>
-11-
hereof and shall have no force or effect. This Agreement may not be amended or
modified otherwise than by a written agreement executed by the parties hereto or
their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
If to the Company:
Gentiva Health Services, Inc.
175 Broad Hollow Road
Melville, NY 11747
Attention:
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
(d) The Company may withhold from any amounts payable under this Agreement
such Federal, state or local taxes as shall be required to be withheld pursuant
to any applicable law or regulation.
(e) The Executive's failure to insist upon strict compliance with any
provision hereof shall not be deemed to be a waiver of such provision or any
other provision thereof.
(f) This Agreement contains the entire understanding of the Company and the
Executive with respect to the subject
<PAGE>
-12-
matter hereof but, except as specifically provided in Section 4 hereof, does not
supersede or override the provisions of any stock option, severance letter
agreement, employee benefit or other plan, program, policy or practice in which
Executive is a participant or under which the Executive is a beneficiary;
provided, however, that this Agreement does supersede the Change in Control
Agreement between Olsten Corporation and the Executive dated ______________.
<PAGE>
-13-
IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant
to the authorization from its Board of Directors, the Company has caused these
presents to be executed as of the day and year first above written.
---------------------------
Name:
GENTIVA HEALTH SERVICES, INC.
By:
------------------------
Name:
Title:
CHANGE IN CONTROL AGREEMENT
Agreement, made this ___ day of January, 2000, by and between Gentiva
Health Services, Inc., a Delaware corporation (the "Company"), and Edward A.
Blechschmidt (the "Executive").
WHEREAS, the Executive is a key employee of the Company; and
WHEREAS, the Board of Directors of the Company (the "Board") considers the
maintenance of a sound management to be essential to protecting and enhancing
the best interests of the Company and its stockholders and recognizes that the
possibility of a change in control raises uncertainty and questions among key
employees and may result in the departure or distraction of such key employees
to the detriment of the Company and its stockholders; and
WHEREAS, the Board wishes to assure that it will have the continued
dedication of the Executive and the availability of his or her advice and
counsel, notwithstanding the possibility, threat or occurrence of a bid to take
over control of the Company, and to induce the Executive to remain in the employ
of the Company; and
WHEREAS, the Executive is willing to continue to serve the Company taking
into account the provisions of this Agreement;
NOW, THEREFORE, in consideration of the foregoinq, and the respective
covenants and agreements of the parties herein contained, the parties agree as
follows:
1. Operation and Term of Agreement. This Agreement shall commence at the
Effective Time of the Merger as contemplated in the Merger Agreement (defined
below) and shall continue through the third anniversary of such date; provided,
however, that after a Change in Control of the Company during the term of this
Agreement, this Agreement shall remain in effect until all of the obligations of
the parties hereunder are satisfied and the Protection Period has expired. Prior
to a Change in Control this Agreement shall immediately terminate upon
termination of the Executive's employment, except in the case of such
termination under circumstances set forth in the last paragraph of Section 4
below.
<PAGE>
-2-
2. Change in Control; Protection Period. A "Change of Control" shall be
deemed to occur on the date that any of the following events occur:
(a) any person or persons acting together which would constitute a "group"
for purposes of Section 13(d) of the Exchange Act (other than the Company or any
subsidiary and other than Permitted Holders) shall beneficially own (as defined
in Rule 13d-3 of the Exchange Act), directly or indirectly, at least 25% of the
total voting power of all classes of capital stock of the Company entitled to
vote generally in the election of the Board;
(b) either (i) Current Directors (as herein defined) shall cease for any
reason to constitute at least a majority of the members of the Board (for these
purposes, a "Current Director" shall mean any member of the Board as of the date
hereof, and any successor of a Current Director whose election, or nomination
for election by the Company's shareholders, was approved by at least two-thirds
of the Current Directors then on the Board) or (ii) at any meeting of the
shareholders of the Company called for the purpose of electing directors, a
majority of the persons nominated by the Board for election as directors shall
fail to be elected;
(c) consummation of (i) a plan of complete liquidation of the Company, or
(ii) a merger or consolidation of the Company (A) in which the Company is not
the continuing or surviving corporation (other than a consolidation or merger
with a wholly owned subsidiary of the Company in which all shares of Common
Stock outstanding immediately prior to the effectiveness thereof are changed
into common stock of the subsidiary) or (B) pursuant to which the Common Stock
is converted into cash, securities or other property, except a consolidation or
merger of the Company in which the holders of the Common Stock immediately prior
to the consolidation or merger have, directly or indirectly, at least a majority
of the common stock of the continuing or surviving corporation immediately after
such consolidation or merger or in which the Board immediately prior to the
merger or consolidation would, immediately after the merger or consolidation,
constitute a majority of the board of directors of the continuing or surviving
corporation; or
<PAGE>
-3-
(d) consummation of a sale or other disposition (in one transaction or a
series of transactions) of all or substantially all of the assets of the
Company.
For purposes of this Section 2 under this Agreement, "Permitted Holders"
shall mean Miriam Olsten, Stuart Olsten, and Cheryl Olsten, and each of their
spouses, their lineal descendants and their estates and their Affiliates or
Associates (as defined in Rule 12b-2 of the Exchange Act) (collectively the
"Olsten Stockholders"), so long as the Olsten Stockholders beneficially own 20%
or less of the voting power of all classes of capital stock of the Company
entitled to vote generally in the election of the Board; provided, however, such
percentage shall be increased on a percentage basis (rounded to the nearest
whole percent) to the extent the Olsten Stockholders acquire any such capital
stock on conversion of the convertible trust preferred securities which they
hold on March 15, 2000.
Notwithstanding the foregoing, the transactions provided for in the
Agreement and Plan of Merger By and Among Adecco SA, Staffing Acquisition
Corporation and Olsten Corporation dated as of August 17, 1999, as amended (the
"Merger Agreement"), shall not constitute a Change in Control for purposes
hereof.
A "Protection Period" shall be the period beginning on the date of a Change
in Control and ending on the third anniversary of the date on which the Change
in Control occurs.
3. Termination Following Change in Control. The Executive shall be entitled
to the benefits provided in Section 4 hereof upon any termination of his or her
employment with the Company within a Protection Period, except a termination of
employment (a) because of his or her death, (b) because of a "Disability," (c)
by the Company for "Cause," or (d) by the Executive other than for "Good
Reason."
(i) Disability. The Executive's employment shall be deemed to have
terminated because of a "Disability" if the Executive applies for and is
determined to be eligible to receive disability benefits under the
Company's Long-Term Disability Plan.
(ii) Cause. Termination by the Company of the Executive's employment
for "Cause" shall mean termination upon: (A) the willful and continued
failure by the Execu-
<PAGE>
-4-
tive to substantially perform his or her duties with the Company, after a
written demand for substantial performance is delivered to the Executive by
the Board which specifically identifies the manner in which the Board
believes that the Executive has not substantially performed his or her
duties; or (B) the willful engaging by the Executive in conduct which is
demonstrably and materially injurious to the Company, monetarily or
otherwise. For purposes hereof, no act, or failure to act, on the
Executive's part shall be considered "willful" unless done, or omitted to
be done, by the Executive not in good faith and without reasonable belief
that his or her action or omission was in the best interest of the Company.
Notwithstanding the foregoing, the Executive shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered
to the Executive a copy of a resolution duly adopted by the affirmative
vote of not less than a majority of the entire membership of the Board at a
meeting of the Board called and held for that purpose (after reasonable
notice to the Executive and an opportunity for the Executive, together with
his or her counsel, to be heard before the Board), finding that in the good
faith opinion of the Board the Executive engaged in the prohibited conduct
set forth above in clauses (A) or (B) of the first sentence of this
subsection and specifying the particulars thereof in detail.
(iii) Without Cause. The Company may terminate the employment of the
Executive without Cause during a Protection Period only by giving the
Executive written notice of termination to that effect. In that event, the
Executive's employment shall terminate on the last day of the month in
which such notice is given (or such later date as may be specified in such
notice), and the benefits set forth in Section 4 hereof shall be provided
to the Executive.
(iv) Good Reason. Termination of employment by the Executive for "Good
Reason" shall mean termination:
(A) if there has occurred a reduction by the Company in the
Executive's base salary in effect on the date hereof, as increased
from time to time thereafter, other than a reduction in the
Executive's base salary of not more than ten percent which is part of
a general salary reduction for a majority of
<PAGE>
-5-
the salaried employees of the Company and its subsidiaries;
(B) if without the Executive's written consent, the Company has
required the Executive to be relocated anywhere in excess of fifty
(50) miles from the Executive's office location on the date hereof,
except for required travel on the business of the Company;
(C) if there has occurred a failure by the Company to maintain
plans providing benefits not materially less favorable than those
provided by any benefit or compensation plan (including, without
limitation, any incentive compensation plan, bonus plan or program,
retirement, pension or savings plan, stock option plan, restricted
stock plan, life insurance plan, health and dental plan and disability
plan) in which the Executive is participating immediately before the
beginning of the Protection Period, or if the Company has taken any
action which would adversely affect the Executive's participation in
or reduce the Executive's benefits (other than stock option or
restricted stock grants) under any of such plans or deprive the
Executive of any material fringe benefit enjoyed by the Executive
immediately before the beginning of the Protection Period, or if the
Company has failed to provide the Executive with the number of paid
vacation days to which he or she would be entitled in accordance with
the normal vacations policy of the Company as in effect immediately
before the beginning of the Protection Period; provided, however, that
a reduction in benefits under the Company's tax-qualified retirement,
pension or savings plans or its life insurance plan, health and dental
plan, disability plans or other insurance plans which reduction
applies equally to all participants in the plans and has a de minimis
effect on the Executive shall not constitute "Good Reason" for
termination by the Executive;
(D) the assignment to the Executive of any material duties
inconsistent with his or her status as a senior executive officer of
the Company or a substantial adverse alteration in the nature or
status
<PAGE>
-6-
of the Executive's responsibilities from those in effect immediately
prior to the Change in Control;
(E) if the Company has failed to obtain the assumption of the
obligations contained in this Agreement by any successor as
contemplated in Section 8(c) hereof; or
(F) if there occurs any purported termination of the Executive's
employment by the Company which is not effected pursuant to a written
notice of termination as described in subsection (ii) or (iii) above.
The Executive shall exercise his or her right to terminate employment for
Good Reason by giving the Company a written notice of termination specifying in
reasonable detail the circumstances constituting such Good Reason. In that
event, the Executive's employment shall terminate on the last day of the month
in which such notice is given.
A termination of employment by the Executive within a Protection Period
shall be for Good Reason if one of the occurrences specified in this subsection
(iv) shall have occurred, notwithstanding that the Executive may have other
reasons for terminating employment, including employment by another employer
which the Executive desires to accept.
4. Benefits Upon Termination Within Protection Period. If, within a
Protection Period, the Executive's employment by the Company shall be terminated
(a) by the Company other than for Cause or because of the Executive's death or
Disability, or (b) by the Executive for Good Reason, the Executive shall be
entitled to the benefits provided for below (and the Executive shall not be
entitled to severance benefits otherwise payable under the Executive's separate
Employment Agreement with the Company):
(i) The Company shall pay to the Executive through the date of the
Executive's termination of employment salary at the rate then in effect,
together with salary in lieu of vacation accrued to the date on which his
employment terminates, in accordance with the standard payroll practices of
the Company;
(ii) (a) If such termination of employment occurs prior to the first
anniversary of the date hereof, the
<PAGE>
-7-
Company shall pay to the Executive an amount in cash equal to the sum of
(A) the Executive's annual base salary in effect immediately prior to the
date of the Executive's termination of employment or the date of the Change
in Control (whichever is higher), and (B) the higher of (x) the Executive's
target annual bonus for the year that includes the date of the Executive's
termination of employment or (y) the Executive's target annual bonus for
the year that includes the date of the Change in Control; and such payment
shall be made in a lump sum within 10 business days after the date of such
termination of employment;
(b) If such termination of employment occurs on or after the first
anniversary of the date hereof, the Company shall pay to the Executive an
amount in cash equal to two times the sum of (A) the Executive's annual
base salary in effect immediately prior to the date of the Executive's
termination of employment or the date of the Change in Control (whichever
is higher), and (B) the higher of (x) the Executive's target annual bonus
for the year that includes the date of the Executive's termination of
employment or (y) the Executive's target annual bonus for the year that
includes the date of the Change in Control; and such payment shall be made
in a lump sum within 10 business days after the date of such termination of
employment;
(iii) The Company shall continue to cover the Executive and his or her
dependents under, or provide the Executive and his or her dependents with
insurance coverage no less favorable than, the Company's life, disability,
health, dental or other emp1oyee welfare benefit plans or programs (as in
effect on the day immediately preceding the Protection Period or, at the
option of the Executive, on the date of termination of his or her
employment) for a period equal to the lesser of (x) two years following the
date of termination or (y) until the Executive is provided by another
employer with benefits substantially comparable to the benefits provided by
such plans or programs;
(iv) All options to purchase Company stock granted under the Company's
1999 Stock Incentive Plan (or other Company plan) held by the Executive
shall become immediately vested and exercisable in full upon such
termination of employment, and all such stock options shall remain
ex-
<PAGE>
-8-
ercisable for one year following such termination of employment (but not
beyond the original full term of the stock option); and
(v) All of the Executive's benefits accrued under the pension,
retirement, savings and deferred compensation plans of the Company shall
become vested in full; provided, however, that to the extent such
accelerated vesting of benefits cannot be provided under one or more of
such plans consistent with applicable provisions of the Internal Revenue
Code of 1986, as amended, such benefits shall be paid to the Executive in a
lump sum within 10 days after termination of employment outside the
applicable plan.
Anything in this Agreement to the contrary notwithstanding, the Executive
shall be entitled to the benefits described in this Section 4, if the
Executive's employment with the Company is terminated by the Company (other than
for Cause) within one year prior to the date on which a Change in Control
occurs, and it is reasonably demonstrated that such termination (i) was at the
request of a third party who has taken steps reasonably calculated or intended
to effect a Change in Control or (ii) otherwise arose in connection with or
anticipation of a Change in Control.
5. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plans, practices, policies or programs provided by the
Company or any of its subsidiaries and for which the Executive may qualify, nor
shall anything herein limit or otherwise affect such rights as the Executive may
have under any stock option or other agreements with the Company or any of its
subsidiaries. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any plan, practice, policy or program of the
Company or any of its subsidiaries at or subsequent to the date of termination
of the Executive's employment shall be payable in accordance with such plan,
practice, policy or program.
6. Full-Settlement; Legal Expenses. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against
<PAGE>
-9-
the Executive or others. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this Agreement. The
Company agrees to pay, upon written demand therefor by the Executive, all legal
fees and expenses which the Executive may reasonably incur as a result of any
dispute or contest by or with the Company or others regarding the validity or
enforceability of, or liability under, any provision of this Agreement
(including as a result of any contest by the Executive about the amount of any
payment hereunder) if the Executive substantially prevails in the dispute or
contest, plus in each case interest at the applicable Federal rate provided for
in Section 7872(f)(2) of the Internal Revenue Code of 1986, as amended (the
"Code"). In any such action brought by the Executive for damages or to enforce
any provisions of this Agreement, the Executive shall be entitled to seek both
legal and equitable relief and remedies, including, without limitation, specific
performance of the Company's obligations hereunder, in his or her sole
discretion.
7. Excise Tax Cut Back.
(a) Anything in this Agreement to the contrary notwithstanding, if it shall
be determined that any payment, distribution or benefit provided (including,
without limitation, the acceleration of any payment, distribution or benefit and
the acceleration of exercisability of any stock option) to the Executive or for
his or her benefit (whether paid or payable or distributed or distributable)
pursuant to the terms of this Agreement or otherwise would be subject, in whole
or in part, to the excise tax imposed by Section 4999 of the Internal Revenue
Code of 1986, as amended (the "Excise Tax"), then the amounts payable to the
Executive under this Agreement shall be reduced (by the minimum possible amount)
until no amount payable to the Executive is subject to the Excise Tax; provided
however, that no such reduction shall be made if the net after-tax benefit
(after taking into account Federal, state, local or other income, employment,
self-employment and excise taxes) to which the Executive would otherwise be
entitled without such reduction would be greater than the net after-tax benefit
(after taking into account Federal, state, local or other income, employment,
self-employment and excise taxes) to the Executive resulting from the receipt of
such payments with such reduction. If, as a result of subsequent events or
conditions, it is determined that payments have been reduced by more than the
minimum amount required under this Section 7, then an addi-
<PAGE>
-10-
tional payment shall be promptly made to the Executive in an amount equal to the
excess reduction.
(b) All determinations required to be made under this Section 7, including
whether a payment would result in an Excise Tax shall be made by
PricewaterhouseCoopers LLP (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive as requested by
the Company or the Executive. All fees and expenses of the Accounting Firm shall
be borne solely by the Company and shall be paid by the Company. Except as set
forth in the last sentence of Section 7(a) hereof, all determinations made by
the Accounting Firm under this Section 7 shall be final and binding upon the
Company and the Executive.
8. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its subsidiaries, and their
respective businesses, which shall have been obtained by the Executive during
the Executive's employment by the Company or any of its subsidiaries and which
shall not be or become public knowledge (other than by acts of the Executive or
his or her representatives in violation of this Agreement). After the date of
termination of the Executive's employment with the Company, the Executive shall
not, without the prior written consent of the Company, communicate or divulge
any such information, knowledge or data to anyone other than the Company and
those designated by it. In no event shall an asserted violation of the
provisions of this Section 8 constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement.
9. Successors.
(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives or successor(s) in interest.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
<PAGE>
-11-
(c) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to a11 or substantially all of the
business and/or assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law or otherwise.
10. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without reference to principles of conflict
of laws therof. The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect. This Agreement may not be amended or
modified otherwise than by a written agreement executed by the parties hereto or
their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
Edward A. Blechschmidt
c/o Gentiva Health Services, Inc.
175 Broad Hollow Road
Melville, NY 11747
If to the Company:
Gentiva Health Services, Inc.
175 Broad Hollow Road
Melville, NY 11747
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and
<PAGE>
-12-
communications shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
(d) The Company may withhold from any amounts payable under this Agreement
such Federal, state or local taxes as shall be required to be withheld pursuant
to any applicable law or regulation.
(e) The Executive's failure to insist upon strict compliance with any
provision hereof shall not be deemed to be a waiver of such provision or any
other provision thereof.
(f) This Agreement contains the entire understanding of the Company and the
Executive with respect to the subject matter hereof but, except as specifically
provided in Section 4 hereof, does not supersede or override the provisions of
any stock option, severance letter agreement, employee benefit or other plan,
program, policy or practice in which Executive is a participant or under which
the Executive is a beneficiary.
<PAGE>
-13-
IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant
to the authorization from its Board of Directors, the Company has caused these
presents to be executed as of the day and year first above written.
----------------------------
Edward A. Blechschmidt
GENTIVA HEALTH SERIVCES, INC.
By:
------------------------
Josh S. Weston, Chairman,
Human Resources and
Compensation Committee
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Post-Effective
Amendment No. 1 on Form S-8 (No. 333-88663) to the Registration Statement on
Form S-4 of Gentiva Health Services, Inc. of our report dated March 15, 2000
relating to the financial statements and financial statement schedule, which
appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
- ----------------------------------
PricewaterhouseCoopers LLP
New York, New York
March 31, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial imformation extracted from Gentiva
Health Services, Inc. and Subsidiaries Consolidated Balance Sheet at January 2,
2000 and Gentiva Health Services, Inc. and Subsidiaries Consolidated Statement
of Income for the year ended January 2, 2000 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-02-2000
<PERIOD-END> JAN-02-2000
<CASH> 2,942
<SECURITIES> 0
<RECEIVABLES> 612,219
<ALLOWANCES> 36,759
<INVENTORY> 95,218
<CURRENT-ASSETS> 759,231
<PP&E> 131,681
<DEPRECIATION> 79,872
<TOTAL-ASSETS> 1,063,015
<CURRENT-LIABILITIES> 320,695
<BONDS> 0
0
0
<COMMON> 2,035
<OTHER-SE> 703,256
<TOTAL-LIABILITY-AND-EQUITY> 1,063,015
<SALES> 1,489,822
<TOTAL-REVENUES> 1,489,822
<CGS> 984,396
<TOTAL-COSTS> 984,396
<OTHER-EXPENSES> 470,971
<LOSS-PROVISION> 38,687
<INTEREST-EXPENSE> 16,975
<INCOME-PRETAX> (21,207)
<INCOME-TAX> (6,121)
<INCOME-CONTINUING> (15,086)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,086)
<EPS-BASIC> (.74)
<EPS-DILUTED> (.74)
</TABLE>
