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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K
(Mark One)
[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
[_]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED)
COMMISSION FILE NUMBER: 1-10989
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VENCOR, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 61-1055020
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
3300 PROVIDIAN CENTER 40202
400 WEST MARKET STREET (ZIP CODE)
LOUISVILLE, KY
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
(502) 596-7300
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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<S> <C>
Common Stock, par value $.25 per share New York Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
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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 periods that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No .
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Rule
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 of this Form 10-K. [X]
As of March 1, 1996, there were 69,915,086 shares of the Registrant's Common
Stock, $.25 par value, outstanding. The aggregate market value of the shares
of Registrant held by non-affiliates of the Registrant, based on the closing
price of such stock on the New York Stock Exchange on March 1, 1996, was
approximately $2,491,379,000. For purposes of the foregoing calculation only,
all directors and executive officers of the Registrant have been deemed
affiliates.
DOCUMENTS INCORPORATED BY REFERENCE
A portion of Part III is incorporated by reference from the Registrant's
Proxy Statement for the Annual Meeting of Shareholders to be held on May 15,
1996. A portion of Part II is incorporated by reference from the Registrant's
Annual Report to Shareholders for the year ended December 31, 1995.
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TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
PART I
Item 1. Business.................................................... 3
Item 2. Properties.................................................. 23
Item 3. Legal Proceedings........................................... 23
Item 4. Submission of Matters to a Vote of Security Holders......... 23
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters........................................ 25
Item 6. Selected Financial Data..................................... 26
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................. 27
Item 8. Financial Statements and Supplementary Data................. 30
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure................................... 30
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 30
Item 11. Executive Compensation...................................... 30
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................. 30
Item 13. Certain Relationships and Related Transactions.............. 30
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K........................................................ 31
</TABLE>
2
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PART I
ITEM 1. BUSINESS
GENERAL
On September 28, 1995, The Hillhaven Corporation ("Hillhaven") merged into
Vencor, Inc. (the "Company") (the "Hillhaven Merger"), creating one of the
nation's largest providers of healthcare services primarily focusing on the
needs of the elderly. At December 31, 1995, the Company's operations included
36 long-term intensive care hospitals containing 3,263 licensed beds, 311
nursing centers containing 39,480 licensed beds, 55 retail and institutional
pharmacy outlets and 23 retirement housing communities with 3,122 apartments.
Healthcare services provided through this network of facilities included long-
term intensive hospital care, long-term nursing care, contract respiratory
therapy services, acute cardiopulmonary care, subacute and post-operative
care, inpatient and outpatient rehabilitation therapy, specialized care for
Alzheimer's disease, hospice care, pharmacy services and retirement and
assisted living. At December 31, 1995, the Company was providing subacute,
rehabilitation and respiratory therapy services to 2,008 nursing and subacute
care centers through its contract services business ("Vencare"). Through its
subsidiary, Ventech Systems, Inc. ("Ventech"), the Company is developing and
maintaining ProTouch(TM), a comprehensive paperless clinical information
system designed to increase the operating efficiencies of the Company's
facilities.
The Company was incorporated in Kentucky in 1983 as Vencare, Inc. and
commenced operations in 1985. It was reorganized as a Delaware corporation in
1987. The Company changed its name to Vencor, Incorporated in 1989 and to
Vencor, Inc. in 1993. Initially following the Hillhaven Merger in September
1995, the Company conducted business through its hospital, nursing center and
contract services divisions. During the first quarter of 1996, the Company
reorganized on the basis of regional integrated service areas.
This Report contains a number of forward-looking statements. These
statements are qualified by reference to the cautionary statements set forth
under "Business--Additional Company Information--Cautionary Statements."
VENCOR STRATEGY
The healthcare system of the United States remains in a period of
significant change. Factors affecting the healthcare system include cost
containment, the expansion of managed care, improved medical technology and an
increased focus on measurable medical outcomes. The Company believes that
these factors will lead to more patient-focused care in lower cost alternate
sites by providers who are able to demonstrate high quality, cost-effective
care.
At the same time, the Company believes that the need for long-term care is
increasing. Improved medical care and advancements in medical technology
increase the survival rates for victims of disease and trauma of all ages.
Many of these patients never fully recover and require long-term care. The
incidence of chronic problems increases with age, particularly in connection
with certain degenerative conditions. As the average age of the United States
population increases, the Company believes there will be an increase in the
need for long-term care at all levels of the continuum of care.
Accordingly, the Company is developing full-service integrated networks to
meet the needs of patients requiring long-term care. The Company's full-
service capability should enable it to match the appropriate acuity of care
with each patient's needs. The Company is continuing to integrate and expand
the operations of its intensive care hospitals and nursing centers. The
Company is also continuing to investigate and develop related healthcare
services. The Company is exploring other ways in which it can transfer its
expertise in the efficient delivery of cardiopulmonary and other long-term
care to other healthcare businesses. Such efforts may include affiliating with
or acquiring other healthcare businesses.
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The Company's strategy for implementing full-service integrated networks for
long-term care is set forth below.
Focus on Long-Term Care Continuum. The Company intends to continue expanding
its long-term care network. The Company conducts market research prior to
entering new markets, which research may address (i) the need for placement of
long-term patients or residents, (ii) existing provider referral patterns,
(iii) the presence of competitors, (iv) payor mix and (v) the political and
regulatory environment. Although the Company is continually considering
opportunities for future growth and is actively negotiating to acquire
additional facilities and related healthcare businesses, as of March 21, 1996,
the Company had not entered into any agreements regarding future acquisitions.
From time to time, the Company may also sell all or a portion of its interest
in a facility or business where such disposition would be in the best interest
of the Company.
Expand Specialty Care Services. The Company intends to continue to expand
the specialty care programs and services at its nursing centers. These
services generally produce higher revenues than do routine nursing care
services and serve to differentiate the Company's facilities from others in a
given market. The Company is focusing on the expansion of its subacute,
medical and rehabilitation services, including physical, occupational and
speech therapies, wound care, oncology treatment, brain injury care, stroke
therapy and orthopedic therapy.
Expand Vencare Contract Services. In 1993, the Company initiated its Vencare
program of providing respiratory therapy and subacute care services in nursing
and hospital facilities owned by third parties. The Vencare program also
currently includes hospice care, management of cardiopulmonary hospital
departments and rehabilitation therapy services. Vencare services are provided
pursuant to contracts with nursing and subacute care centers and hospitals.
Vencare enables the Company to provide its services to lower acuity, subacute
patients in cost-efficient sites and facilitates patient referrals between its
hospitals and contract-affiliated nursing centers as medical conditions
warrant. The Company intends to continue to expand its Vencare program.
Implement Ventech Patient Information System. In 1993, the Company formed
Ventech Systems, Inc. ("Ventech") to develop the ProTouch(TM) electronic
patient medical record system. ProTouch(TM) is a software application which
allows nurses, physicians and other clinicians to access and manage clinical
information utilized in the delivery of patient care. The Company had
installed ProTouch(TM) in all of its hospitals as of the end of 1995 and plans
to complete the installation of ProTouch(TM) in its nursing centers by the end
of 1997.
HOSPITAL OPERATIONS
The Company's hospitals primarily provide long-term acute hospital care to
medically complex, chronically ill patients. The Company's hospitals have the
capability to treat patients who suffer from multiple systemic failures or
conditions such as neurological disorders, head injuries, brain stem and
spinal cord trauma, cerebral vascular accidents, chemical brain injuries,
central nervous system disorders, developmental anomalies and cardiopulmonary
disorders. Chronic patients are often dependent on technology for continued
life support, such as mechanical ventilators, total parenteral nutrition,
respiration or cardiac monitors and dialysis machines. Generally,
approximately 60% of the Company's chronic patients are ventilator-dependent
for some period of time during their hospitalization. The Company's patients
suffer from conditions which require a high level of monitoring and
specialized care, yet may not necessitate the continued services of an
intensive care unit. Due to their severe medical conditions, the Company's
hospital patients generally are not clinically appropriate for admission to a
skilled nursing facility or rehabilitation hospital. The medical condition of
most of the Company's hospital patients is periodically or chronically
unstable. By combining general acute care services with the ability to care
for chronic patients, the Company believes that its long-term hospitals
provide its patients with high quality, cost-effective care. During 1995, the
average length of stay for chronic patients in the Company's long-term
hospitals was approximately 55 days. Although the Company's patients range in
age from pediatric to geriatric, typically more than 70% of the Company's
chronic hospital patients are over 65 years of age.
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HOSPITAL FACILITIES
The following table lists by state the number of hospitals and related
licensed beds owned and leased by the Company as of December 31, 1995:
<TABLE>
<CAPTION>
NUMBER OF FACILITIES
LICENSED -----------------------
STATE BEDS OWNED LEASED TOTAL
----- -------- ------ ------- ------
<S> <C> <C> <C> <C>
Arizona.................................... 110 2 - 2
California................................. 544 6 - 6
Colorado................................... 68 1 - 1
Florida.................................... 278 3 1 4
Georgia.................................... 72 - 1 1
Illinois................................... 365 3 - 3
Indiana.................................... 121 2 - 2
Kentucky................................... 374 1 - 1
Massachusetts.............................. 40 1 - 1
Michigan................................... 160 1 - 1
Missouri................................... 227 2 - 2
North Carolina............................. 124 1 - 1
Oklahoma................................... 59 1 - 1
Pennsylvania............................... 101 2 - 2
Tennessee.................................. 49 1 - 1
Texas...................................... 365 5 1 6
Virginia................................... 206 1 - 1
----- ------ ------ ------
Total.................................... 3,263 33 3 36
===== ====== ====== ======
</TABLE>
SERVICES PROVIDED BY COMPANY HOSPITALS
Chronic. The Company has devised a comprehensive program of care for its
chronic patients that draws upon the talents of interdisciplinary teams,
including licensed pulmonary specialists. The teams evaluate chronic patients
upon admission to determine an appropriate treatment plan. Where appropriate,
the treatment programs may involve the services of several disciplines, such
as pulmonary and physical therapy. Individual attention to patients who have
the cognitive and physical abilities to respond to therapy is emphasized.
Patients who successfully complete treatment programs are discharged to
skilled nursing facilities, rehabilitation hospitals or home care settings.
General Acute Care. The Company operates two general acute care hospitals.
Certain of the Company's long-term hospitals also provide general acute care
and outpatient services in support of their long-term care services. Certain
of the Company's hospitals maintain subacute units. General acute care and
outpatient services may include inpatient services, diagnostic services,
emergency services, CT scanning, one-day surgery, hospice services,
laboratory, X-ray, respiratory therapy, cardiology and physical therapy. The
Company may expand its general acute care and outpatient services as its long-
term hospitals mature.
Major factors contributing to the growth in demand for the Company's
intensive care hospital services include the following:
Increased Patient Population. Improved medical care and advancements in
medical technology have increased the survival rates for infants born with
severe medical problems, as well as victims of disease and trauma of all ages.
Many of these patients never fully recover and require long-term hospital
care. The incidence of chronic respiratory problems increases with age,
particularly in connection with certain degenerative conditions. As the
average age of the United States population increases, the Company believes
there will be an increase in the need for long-term hospital care. Typically
more than 70% of the Company's hospital patients are over 65 years of age.
5
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Medically Displaced Patients. The Company's hospital patients require a high
level of monitoring and specialized care, yet may not require the continued
services of an intensive care unit. Due to their extended recovery period, the
Company's hospital patients generally would not receive specialized
multidisciplinary treatment focused on the unique aspects of a long-term
recovery program in a general acute care hospital and yet cannot qualify for
admission to a skilled nursing facility or rehabilitation hospital.
Economically Displaced Patients. Historically, reimbursement policies and
practices designed to control healthcare costs have made it difficult to place
medically complex, chronically ill patients in an appropriate healthcare
setting. Under the Medicare program, general acute care hospitals are
reimbursed under the prospective payment system ("PPS"), a fixed payment
system which provides an economic incentive to general acute care hospitals to
minimize the length of patient stay. As a result, these hospitals generally
receive less than full cost for providing care to patients with extended
lengths of stay. Furthermore, PPS does not provide for reimbursement more
frequently than once every 60 days, placing an additional economic burden on a
general acute care hospital providing long-term care. The Company's long-term
hospitals, however, are exempt from PPS and thus receive reimbursement on a
more favorable basis for providing long-term hospital care to Medicare
patients. Commercial reimbursement sources, such as insurance companies and
health maintenance organizations ("HMOs"), some of which pay based on
established hospital charges, typically seek the most economical source of
care available. The Company believes that its emphasis on long-term hospital
care allows it to provide high quality care to chronic patients on a cost-
effective basis.
HOSPITAL PATIENT ADMISSION
Substantially all of the chronic patients admitted to the Company's
hospitals are transferred from other healthcare providers. Patients are
referred from general acute care hospitals, rehabilitation hospitals, skilled
nursing facilities and home care settings. Referral sources include discharge
planners, case managers of managed care plans, social workers, physicians,
third-party administrators, HMOs and insurance companies.
The Company employs case managers who educate healthcare professionals from
other hospitals as to the unique nature of the services provided by the
Company's long-term hospitals. The case managers develop an annual admission
plan for each hospital, with assistance from the hospital's administrator. To
identify specific service opportunities, the admission plan for each hospital
is based on a variety of factors, including population characteristics,
physician characteristics and incidence of disability statistics. Admission
plans involve ongoing education of local physicians, utilization review and
case management personnel, HMOs, acute care hospitals and preferred provider
organizations ("PPOs"). The Company maintains a centralized pre-admission
certification system at its corporate headquarters to assess certain clinical
and other information in determining the appropriateness of each patient
referral to its hospitals.
PROFESSIONAL STAFF
Each of the Company's hospitals is staffed with a multidisciplinary team of
healthcare professionals, including nurses, therapists and physicians. A
professional nursing staff trained to care for the long-term acute patient is
on duty 24 hours each day in the Company's hospitals. Other professional staff
includes respiratory therapists, physical therapists, occupational therapists
and registered dietitians.
The physicians at the Company's hospitals generally are not employees of the
Company and may also be members of the medical staff of other hospitals. Each
of the Company's hospitals has a fully credentialled, multispecialty medical
staff to meet the needs of the patients. Each patient is visited at least once
a day by a staff physician. Typically, the Company does not enter into
exclusive contracts with physicians to provide services to
6
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its hospital patients. The Company's hospitals and physicians enter into
service contracts providing for pulmonary, radiology, pathology, infection
control and anesthesiology services, most of which are cancellable on no more
than 90 days' notice.
The Company believes that its future success will depend in large part upon
its continued ability to hire and retain qualified personnel. The Company
seeks the highest quality of professional staff within each market.
CENTRALIZED MANAGEMENT AND OPERATIONS
A hospital administrator supervises and is responsible for the day-to-day
operations at each of the Company's hospitals. Each hospital also employs a
controller who monitors the financial matters of each hospital, including the
measurement of actual operating results compared to goals established by the
Company. In addition, each hospital employs an assistant administrator to
oversee the clinical operations of the hospital and a quality assurance
manager to direct an integrated quality assurance program. The Company's
corporate headquarters provides services in the areas of system design and
development, training, human resource management, reimbursement expertise,
legal advice, technical accounting support, purchasing and facilities
management. Financial control is maintained through fiscal and accounting
policies that are established at the corporate level for use at each hospital.
The Company has standardized operating procedures and monitors its hospitals
to assure consistency of operations.
MANAGEMENT INFORMATION SYSTEM
The financial information for each Company hospital is centralized at the
corporate headquarters through its management information system. The Company
uses a customized hospital financial reporting system which enables it to
monitor, on a daily basis, certain key financial data at each hospital such as
payor mix, admissions and discharges, cash collections, revenues and staffing.
In addition, the financial reporting system provides monthly budget analysis,
financial comparisons to prior periods and comparisons among the Company's
hospitals.
The Company has installed an electronic patient medical record system in all
of its hospitals and intends to complete such installations in its nursing
centers by the end of 1997. See "Ventech Systems, Inc."
QUALITY ASSESSMENT AND IMPROVEMENT
The Company maintains a strategic outcomes program which includes a
centralized pre-admission evaluation program and concurrent review for all of
its patient population against utilization and quality screens, as well as
quality of life outcomes data collection and patient and family satisfaction
surveys. In addition, each hospital has an integrated quality assessment and
improvement program administered by a quality review manager which encompasses
utilization review, quality improvement, infection control and risk
management. The objective of these programs is to ensure that patients are
appropriately admitted to the Company's hospitals and that quality healthcare
is rendered to them in a cost-effective manner.
The Company has implemented a program whereby its hospitals will be reviewed
annually by internal quality auditors for compliance with standards of the
Joint Commission on Accreditation of Health Care Organizations ("JCAHO"). The
purposes of this internal review process are to (i) ensure ongoing compliance
with industry recognized standards for hospitals, (ii) assist management in
analyzing each hospital's operations and (iii) provide consulting and
educational opportunities for each hospital to identify opportunities to
improve patient care.
7
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SELECTED HOSPITAL OPERATING DATA
The following table sets forth certain operating data for the Company's
hospitals:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Hospitals in operation at end of period........... 36 33 26
Number of licensed beds at end of period.......... 3,263 2,511 2,198
Patient days...................................... 489,612 403,623 293,367
Average daily census.............................. 1,341 1,123 875
Occupancy percentage.............................. 47.6% 48.8% 44.1%
</TABLE>
As used in the above table, the term "licensed beds" refers to the maximum
number of beds permitted in the hospital under its license regardless of
whether the beds are actually available for patient care. "Patient days"
refers to the total number of days of patient care provided by the Company's
hospitals for the periods indicated. "Average daily census" is computed by
dividing each hospital's patient days by the number of calendar days the
respective hospital is in operation. "Occupancy percentage" is computed by
dividing average daily census by the number of licensed beds, adjusted for the
length of time each facility was in operation during each respective period.
SOURCES OF HOSPITAL REVENUES
The Company receives payment for hospital services from third-party payors,
including government reimbursement programs such as Medicare and Medicaid and
nongovernment sources such as commercial insurance companies, HMOs, PPOs and
contracted providers. Payments from government programs are generally based
upon cost and payments from nongovernment payors are generally based upon
charges. Patients covered by nongovernment payors are generally more
profitable to the Company than those covered by Medicare and Medicaid
programs. The following table sets forth the approximate percentages of the
Company's hospital revenues derived from the specified payor sources
indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Medicare....................................... 57% 56% 51%
Medicaid....................................... 12 11 9
Private and other.............................. 31 33 40
</TABLE>
For the year ended December 31, 1995, hospital revenues totaled
approximately $456 milion, or 19.6% of the Company's consolidated revenues.
HOSPITAL COMPETITION
As of December 31, 1995, the hospitals owned or leased by the Company were
located in 32 geographic markets in 17 states. In each geographic market,
there are general acute care hospitals which provide services comparable to
those offered by the Company's hospitals. In addition, as of February 6, 1996,
there were 180 hospitals in the United States certified by Medicare as general
long-term hospitals, some of which provide similar cardiopulmonary services to
those provided by the Company's hospitals. Many of these short-term and long-
term hospitals are larger and more established than the Company's hospitals.
Certain hospitals that compete with the Company's hospitals are operated by
not-for-profit, nontaxpaying or governmental agencies, which can finance
capital expenditures on a tax-exempt basis, and which receive funds and
charitable contributions unavailable to the Company's hospitals. Cost
containment efforts by federal and state governments and other third-party
payors designed to encourage more efficient utilization of hospital services
have generally resulted in lower hospital industry occupancy rates in recent
years. As a result of these efforts, a number of acute care hospitals have
converted to specialized care facilities. Some hospitals are developing step-
down units which attempt to serve the needs of patients who require care at a
level between that provided by an intensive care unit
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and a general medical/surgical unit. This trend is expected to continue due to
the current oversupply of acute care hospital beds and the increasing
consolidation and affiliation of free-standing hospitals into larger systems.
As a result, the Company may experience increased competition from existing
hospitals and converted facilities.
Competition for patients covered by nongovernment reimbursement sources is
intense. The primary competitive factors in the long-term intensive care
business include quality of services, charges for services and responsiveness
to the needs of patients, families, payors and physicians. Other companies
have entered the long-term intensive care market with licensed hospitals that
compete with the Company's hospitals.
Some skilled nursing facilities, while not licensed as hospitals, have
developed units which provide a greater intensity of care than that typically
provided by a skilled nursing facility. The condition of patients in these
skilled nursing facility units is less acute than the condition of patients
cared for in the Company's hospitals.
The competitive position of any hospital, including the Company's hospitals,
is also affected by the ability of its management to negotiate contracts with
purchasers of group healthcare services, including private employers, PPOs and
HMOs. Such organizations attempt to obtain discounts from established hospital
charges. The importance of obtaining contracts with PPOs, HMOs and other
organizations which finance healthcare, and its effect on a hospital's
competitive position, vary from market to market, depending on the number and
market strength of such organizations.
The Company also competes with other healthcare companies for hospital and
other healthcare acquisitions.
HOSPITAL REGULATION
The healthcare industry is subject to regulation by a number of government
and private agencies. Regulatory activities affect the Company's business
activities by controlling its growth, requiring licensure and certification
for its hospitals, regulating the use of its properties and controlling
reimbursement to the Company for services provided.
Certificates of Need and State Licensing. Certificate of Need ("CON")
regulations control the development and expansion of healthcare services and
facilities in certain states. CON laws generally provide that approval must be
obtained from the designated state health planning agency prior to the
expansion of existing facilities, construction of new facilities, addition of
beds, acquisition of major items of equipment or introduction of new services.
The stated objective of the CON process is to promote quality healthcare at
the lowest possible cost and avoid unnecessary duplication of services,
equipment and facilities. Recently, some states (including Florida,
Massachusetts and Tennessee) have amended their CON regulations to require CON
approval prior to the conversion of a hospital from a general short-term
facility to a general long-term facility. Of the seventeen states in which the
Company's hospitals were located as of December 31, 1995, Florida, Georgia,
Illinois, Kentucky, Massachusetts, Michigan, Missouri, North Carolina,
Pennsylvania, Tennessee and Virginia have CON programs. With one exception,
the Company was not required to obtain a CON in connection with its previous
acquisitions, due to relatively low renovation costs and the absence of
additional licensed beds or changes in services. CONs may be required in
connection with the Company's future hospital and contract services expansion.
There can be no assurance that the Company will be able to obtain the CONs
necessary for any or all such projects. If the Company is unable to obtain the
requisite CONs, its growth and business could be adversely affected.
State licensing of hospitals is a prerequisite to the operation of each
hospital and to participation in government programs. Once a hospital becomes
licensed and operational, it must continue to comply with federal, state and
local licensing requirements in addition to local building and life-safety
codes. All of the Company's hospitals in operation have obtained the necessary
licenses to conduct business.
9
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Medicare and Medicaid. Medicare is a federal program that provides certain
hospital and medical insurance benefits to persons age 65 and over and certain
disabled persons. Medicaid is a medical assistance program administered by
each state pursuant to which hospital benefits are available to certain
indigent patients. Within the Medicare and Medicaid statutory framework, there
are substantial areas subject to administrative rulings, interpretations and
discretion which may affect payments made under Medicare and Medicaid. A
substantial portion of the Company's hospital revenues is derived from
patients covered by Medicare and Medicaid. See "Hospital Operations--Sources
of Hospital Revenues."
In order to receive Medicare reimbursement, each hospital must meet the
applicable conditions of participation set forth by the Department of Health
and Human Services ("HHS") relating to the type of hospital, its equipment,
personnel and standard of medical care, as well as comply with state and local
laws and regulations. The Company has developed a management system to ensure
compliance with the various standards and requirements. Each of the Company's
hospitals employs a person who is responsible for an on-going quality
assessment and improvement program. Hospitals undergo periodic on-site
Medicare certification surveys, which are generally limited if the hospital is
accredited by JCAHO. As of December 31, 1995, all the Company's hospitals were
certified as Medicare providers, and thirty-three of its hospitals were also
certified by their respective state Medicaid programs. Applications are
pending for Medicaid certification with respect to the Company's other
hospitals. A loss of certification could adversely affect a hospital's ability
to receive payments under the Medicare and Medicaid programs.
Prior to 1983, Medicare reimbursed hospitals for the reasonable direct and
indirect cost of the services provided to beneficiaries. The Social Security
Amendments of 1983 implemented PPS as a means of controlling healthcare costs.
Under PPS, Medicare inpatient costs are reimbursed based upon a fixed payment
amount per discharge using diagnosis related groups ("DRGs"). The DRG payment
under PPS is based upon the national average cost of treating a Medicare
patient's condition. Although the average length of stay varies for each DRG,
the average stay for all Medicare patients subject to PPS is approximately six
days. An additional outlier payment is made for patients with unusually
extended lengths of stay or higher treatment costs. Outlier payments are only
designed to cover marginal costs. Additionally, PPS payments can only be made
once every 60 days. Thus, PPS creates an economic incentive for general short-
term hospitals to discharge chronic Medicare patients as soon as clinically
possible. Hospitals that are certified by Medicare as general long-term
hospitals are excluded from PPS. Management believes that the incentive for
short-term hospitals to discharge chronic medical patients as soon as
clinically possible creates a substantial referral source for the Company's
general long-term hospitals.
The Social Security Amendments of 1983 exempted psychiatric, rehabilitation,
cancer, children's and general long-term hospitals from PPS. A general long-
term hospital is defined as a hospital which has an average length of stay
greater than 25 days. Inpatient operating costs for general long-term
hospitals are reimbursed under the cost-based reimbursement system, subject to
a computed target rate (the "Target") per discharge for inpatient operating
costs established by the Tax Equity and Fiscal Responsibility Act of 1982
("TEFRA"). Until October 1991, Medicare operating costs per discharge in
excess of the Target were not reimbursed. Effective October 1, 1991, Medicare
operating costs in excess of the Target are reimbursed at the rate of 50% of
the excess up to 10% of the Target. Hospitals whose operating costs are lower
than the Target are reimbursed their actual costs plus an incentive. The
incentive is equal to 50% of the difference between their actual costs and the
Target and may not exceed 5% of the Target. New hospitals may apply for an
exemption from the TEFRA Target provisions. For hospitals certified prior to
October 1, 1992, the exemption was optional and, if granted, lasted for three
years. For certifications after October 1, 1992, the exemption is automatic
and is effective for two years. As of December 31, 1995, twenty-seven of the
Company's hospitals were subject to TEFRA Target provisions. The Company's
other hospitals were not subject to TEFRA because they had qualified for the
new hospital exemptions described above. During 1996, five more of the
Company's hospitals will become subject to TEFRA Target provisions. The TEFRA
limits have not had a material adverse effect on the Company's results of
operations, and the Company does not expect that the TEFRA limits will have a
material effect on the Company's results of operations in 1996.
10
<PAGE>
Medicare and Medicaid reimbursements are generally determined from annual
cost reports filed by the Company which are subject to audit by the respective
agency administering the programs. Management believes that adequate
provisions for loss have been recorded to reflect any adjustments which could
result from audits of these cost reports. Adjustments to the Company's cost
reports have not had a material adverse effect on the Company's hospital
operating results.
Federal regulations provide that admission to and utilization of hospitals
by Medicare and Medicaid patients must be reviewed by peer review
organizations ("PROs") in order to ensure efficient utilization of hospitals
and services. A PRO may conduct such review either prospectively or
retroactively and may, as appropriate, recommend denial of payments for
services provided to a patient. Such review is subject to administrative and
judicial appeal. Each of the Company's hospitals employs a clinical
professional to administer the hospital's integrated quality assurance and
improvement program, including its utilization review program. PRO denials
have not had a material adverse effect on the Company's hospital operating
results.
Medicare and Medicaid antifraud and abuse amendments codified under Section
1128B(b) of the Social Security Act (the "Antifraud Amendments") prohibit
certain business practices and relationships that might affect the provision
and cost of healthcare services reimbursable under Medicare and Medicaid.
Sanctions for violating the Antifraud Amendments include criminal and civil
penalties and exclusion from the Medicare and Medicaid programs. Pursuant to
the Medicare and Medicaid Patient and Program Protection Act of 1987, HHS and
the Office of the Inspector General ("OIG") specified certain "safe harbors"
which describe conduct and business relationships permissible under the
Antifraud Amendments. These "safe harbor" regulations may result in more
aggressive enforcement of the Antifraud Amendments by HHS and the OIG.
Section 1877 of the Social Security Act (commonly known as "Stark I") states
that a physician who has a financial relationship with a clinical laboratory
is generally prohibited from referring patients to that laboratory. The
Omnibus Budget Reconciliation Act of 1993 contains provisions ("Stark II")
amending Section 1877 to greatly expand the scope of Stark I. Effective
January 1995, Stark II broadened the referral limitations of Stark I to
include, among other designated health services, inpatient and outpatient
hospital services. Under Stark I and Stark II (collectively referred to as the
"Stark Provisions"), a "financial relationship" is defined as an ownership
interest or a compensation arrangement. If such a financial relationship
exists, the entity is generally prohibited from claiming payment for such
services under the Medicare or Medicaid programs. Compensation arrangements
are generally exempted from the Stark Provisions if, among other things, the
compensation to be paid is set in advance, does not exceed fair market value
and is not determined in a manner that takes into account the volume or value
of any referrals or other business generated between the parties. The Company
expects that business practices of providers and financial relationships
between providers will be subject to increased scrutiny as healthcare reform
efforts continue at federal and state levels.
Healthcare Reform. In recent years, an increasing number of legislative
proposals have been introduced or proposed in Congress and in some state
legislatures which could effect major changes in the healthcare system. In
October 1993, the Clinton Administration submitted comprehensive healthcare
reform legislation to Congress designed to provide, among other things, for
universal access to healthcare. Neither the Clinton Administration's plan nor
other healthcare reform legislation was enacted by Congress. More recently, a
significant effort has been initiated in Congress and the Clinton
Administration to balance the federal budget in seven years. This effort could
result in significant reductions in Medicare and Medicaid spending, which may
be achieved through restrictions on growth of healthcare costs, implementation
of various aggregate cost limits, or a restructuring of Medicaid through block
grants to the states. The Company believes that implementation of block grants
to the states could add incentives to provide an increased amount of
healthcare services through managed care health plans.
A number of legislative proposals have included a moratorium on the
designation of additional long-term hospitals for Medicare reimbursement
purposes. However, the Company cannot predict the form of any healthcare or
budget reform legislation which may be proposed in Congress or in state
legislatures in the future,
11
<PAGE>
and whether such legislation, if any, will be adopted. Accordingly, the
Company is unable to assess the effect of any such legislation on its
business. There can be no assurance that any such legislation will not have a
material adverse impact on the Company's future growth, revenues and earnings.
Gramm-Rudman. The Company's Medicare revenues may be adversely affected by
the Balanced Budget and Emergency Deficit Control Act of 1985, as amended
("Gramm-Rudman"). Under Gramm-Rudman, if the Office of Management and Budget
and the Congressional Budget Office determines that the federal deficit will
exceed certain specified levels for a federal fiscal year through 1998,
sufficient reductions in federal spending must be made to remove the excess
deficit. One-half of these reductions must be made in nondefense programs.
Although Medicaid funding is exempt from reductions under Gramm-Rudman, the
Medicare program is not. If reductions are made in the Medicare program, each
payment to providers that is paid on a reasonable cost basis may be reduced.
Payment reductions under Gramm-Rudman in federal fiscal years through 1998
could have an adverse effect on the Company's revenues and earnings. However,
because the actual amount of the reduction for any fiscal year may vary
according to the federal deficit, the financial impact of Gramm-Rudman on the
Company's results of operations cannot be predicted.
JCAHO Accreditation. Hospitals receive accreditation from JCAHO, a
nationwide commission which establishes standards relating to the physical
plant, administration, quality of patient care and operation of medical staffs
of hospitals. Generally, hospitals and certain other healthcare facilities are
required to have been in operation at least six months in order to be eligible
for accreditation by JCAHO. After conducting on-site surveys, JCAHO awards
accreditation for up to three years to hospitals found to be in substantial
compliance with JCAHO standards. Accredited hospitals are periodically
resurveyed, at the option of JCAHO, upon a major change in facilities or
organization and after merger or consolidation. As of December 31, 1995,
thirty-three of the Company's hospitals were accredited by JCAHO. The Company
intends to apply for JCAHO accreditation for its other hospitals within the
next year. The Company intends to seek and obtain JCAHO accreditation for any
additional facilities it may purchase or lease and convert into long-term
hospitals. The Company does not believe that the failure to obtain JCAHO
accreditation at any hospital would have a material adverse effect on its
results of operations.
State Regulatory Environment. The Company currently operates four hospitals
and manages a chronic unit in Florida, a state which regulates hospital rates.
These operations contribute a significant portion of the Company's revenues
and operating income from its hospitals. Accordingly, the Company's hospital
revenues and operating income could be materially adversely affected by
Florida rate setting laws or other cost containment efforts. The Company also
operates six hospitals in Texas and six hospitals in California which
contribute a significant portion of the Company's revenues and operating
income from its hospitals. Although Texas and California do not currently
regulate hospital rates, the adoption of such legislation or other cost
containment measures in these or other states could have a material adverse
effect on the Company's hospital revenues and operating income. The Company is
unable to predict whether and in what form any such legislation will be
adopted. The Company's revenues and operating income could be adversely
affected by other state rate setting laws. Certain other states in which the
Company operates hospitals require hospitals to disclose specified financial
information. In evaluating markets for expansion, the Company considers the
regulatory environment, including but not limited to, any mandated rate
setting.
VENCARE OPERATIONS
In 1993, the Company initiated its Vencare contract services business.
Through Vencare, the Company has expanded the scope of its cardiopulmonary
care by providing subacute care, rehabilitation therapy and respiratory care
services and supplies to nursing and subacute care centers. The Company also
manages cardiopulmonary departments for other hospitals. The Company provides
hospice services to nursing center patients, hospital patients and persons in
private residences. For the year ended December 31, 1995, revenues from
Vencare totaled approximately $110 million, or 4.7% of the Company's
consolidated revenues.
12
<PAGE>
RESPIRATORY CARE SERVICES
The Company provides respiratory care services and supplies to nursing and
subacute center patients pursuant to contracts between the Company and the
nursing center or subacute center. The services are provided by respiratory
therapists based at the Company's hospitals. These respiratory therapists
perform a wide variety of procedures, including oxygen therapy, bronchial
hygiene, nebulizer and aerosol treatments, tracheostomy care, ventilator
management and patient respiratory education. Pulse oximeters and arterial
blood gas machines are used to evaluate the patient's condition, as well as
the effectiveness of the treatment. The Company also provides respiratory
equipment and supplies to nursing and subacute centers.
The Company receives payments from the nursing centers and subacute centers
for services rendered and these facilities, in turn, receive payments from the
appropriate provider. Respiratory therapy and supplies are covered under the
Medicare program and reimbursed as an ancillary service when the service is
provided by hospital-based respiratory therapists. Many commercial insurers
and managed care providers are seeking hospital discharge options for lower
acuity respiratory patients. Management believes that the Company's pricing
and successful clinical outcomes make its respiratory care program attractive
to commercial insurers and managed care providers.
At December 31, 1995, the Company had entered into contracts to provide
contract respiratory therapy services and supplies to 1,590 nursing and
subacute care centers.
SUBACUTE SERVICES
At December 31, 1995, the Company had entered into contracts to provide
subacute care services to 13 nursing and subacute care centers. These
services, which are also an extension of the cardiopulmonary services provided
by the Company's hospitals, may include ventilator management, tracheostomy
care, continuation of airway restoration programs, enteral and parenteral
nutritional support, IV therapy for hydration and medication administration,
progressive wound care, chronic chest tube management, laboratory, radiology,
pharmacy and dialysis services and customized rehabilitation services.
Subacute patients generally require assisted ventilation through mechanical
devices.
REHABILITATION THERAPY SERVICES
The Company provides physical, occupational and speech therapies to nursing
and subacute care center patients. At December 31, 1995, the Company had
entered into contracts to provide rehabilitation therapy services to patients
at 405 facilities.
HOSPICE SERVICES
The Company provides hospice services to nursing center patients, hospital
patients and persons in private residences.
CONTRACT SERVICES COMPETITION
Although the respiratory therapy services, rehabilitation services, subacute
services and hospice care markets are fragmented, significant competition
exists for the Company's contract services. The primary competitive factors
for the contract services business are quality of services, charges for
services and responsiveness to the needs of patients, families and the
facilities in which the services are provided. Certain hospitals are
establishing and managing their own step-down and subacute facilities. Other
hospital companies have entered the contract services market through
affiliation agreements and management contracts.
13
<PAGE>
VENTECH SYSTEMS, INC.
In 1993, the Company formed Ventech to develop the ProTouch(TM) electronic
patient medical records system. ProTouch(TM) is a software application which
allows nurses, physicians and other clinicians to manage clinical information
utilized in the patient care delivery process.
Among the features of ProTouch(TM) are on-line access and update of an
electronic patient chart, on-line trend analysis using electronic flowsheets
and graphs, and remote access for authorized users. The system is designed to
decrease administrative time, reduce paper and support the delivery of quality
patient care.
The Company completed the installation of ProTouch(TM) in all of its
hospitals during 1995, and plans to install ProTouch(TM) in all of its nursing
centers by the end of 1997.
NURSING CENTER, PHARMACY AND RETIREMENT HOUSING COMMUNITY OPERATIONS
The Company's nursing center operations provide long-term care and subacute
medical and rehabilitation services in 311 nursing centers containing 39,480
licensed beds located in thirty-three states. At December 31, 1995, the
Company owned 216 nursing centers and leased 79 nursing centers. The Company
also managed 16 nursing centers, including 7 centers owned by Tenet Healthcare
Corporation ("Tenet"), which holds a greater than 10% interest in the Company.
The Company is a leading provider of rehabilitation services, including
physical, occupational and speech therapies. The majority of patients in
rehabilitation programs stay for eight weeks or less. Patients in
rehabilitation programs generally provide for higher revenues than other
nursing center patients because they require a higher level of ancillary
services. In addition, management believes that the Company is one of the
leading providers of care for patients with Alzheimer's disease. At December
31, 1995, the Company offered treatment in approximately 2,239 beds in 71
nursing centers for patients suffering from Alzheimer's disease. Most of these
patients reside in separate units within the nursing centers and are cared for
by teams of professionals specializing in the unique problems experienced by
Alzheimer's patients.
NURSING CENTER MARKETING
The factors which affect consumers' selection of a nursing center vary by
community and include a nursing center's competitive position and its
relationships with local referral sources. Competition creates the standards
against which nursing centers in a given market are judged by various referral
sources, which include physicians, hospital discharge planners, community
organizations and families. Therefore, the Company's nursing center sales
efforts are conducted at the local market level by the nursing center
administrators, admissions coordinators and others. Nursing center personnel
are assisted in carrying out their marketing strategies by regional marketing
staffs. The Company's sales efforts are directed toward improving the payor
mix at the nursing centers by increasing the census of private pay patients,
patients covered by managed care contracts and Medicare patients. Accordingly,
the Company's sales efforts focus on the value of its nursing centers as a
lower cost alternative for subacute medical and rehabilitation services
compared to similar care provided by acute care and rehabilitation hospitals.
NURSING CENTER OPERATIONS
Each nursing center is managed by a state-licensed administrator who is
supported by other professional personnel, including a director of nursing,
staff development professional (responsible for employee training), activities
director, social services director, licensed dietician, business office
manager and, in general, physical, occupational and speech therapists. The
directors of nursing are state-licensed nurses who supervise nursing staffs
which include registered nurses, licensed practical nurses and nursing
assistants. Staff size and composition
14
<PAGE>
vary depending on the size and occupancy of each nursing center and on the
level of care provided by the nursing center. The nursing centers contract
with physicians who serve as medical directors and serve on quality assurance
committees.
The nursing centers are supported by regional staff in the areas of nursing,
dietary and rehabilitation services, maintenance, sales and financial
services. In addition, corporate staff provide other services in the areas of
sales assistance, human resource management, state and federal reimbursement,
state licensing and certification, legal, finance and accounting support.
Financial control is maintained principally through fiscal and accounting
policies established at the corporate level for use at the nursing centers.
Quality of care is monitored and enhanced by quality assurance committees
and family satisfaction surveys. The quality assurance committees oversee
patient healthcare needs and resident and staff safety. Additionally,
physicians serve on the quality assurance committees as medical directors and
advise on healthcare policies and practices. Nursing professionals visit each
nursing center periodically to review practices and recommend improvements
where necessary in the level of care provided and to assure compliance with
requirements under applicable Medicare and Medicaid regulations. Surveys of
residents' families are conducted from time to time in which the families are
asked to rate various aspects of service and the physical condition of the
nursing centers. These surveys are reviewed by nursing center administrators
to help ensure quality care.
The Company provides training programs for nursing center administrators,
managers, nurses and nursing assistants. These programs are designed to
provide career opportunities for employees and to maintain high levels of
quality patient care.
Substantially all of the nursing centers are currently certified to provide
services under the Medicare and Medicaid programs. A nursing center's
qualification to participate in such programs depends upon such factors as
accommodations, equipment, services, safety, personnel, physical environment
and adequate policies and procedures.
SELECTED NURSING CENTER OPERATING DATA
The following table sets forth certain operating data for the Company's
owned and leased nursing centers:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Number of nursing centers in operation at
end of period............................ 295 294 308
Number of licensed beds at end of period.. 37,383 37,336 38,496
Patient days.............................. 12,770,435 12,654,016 12,569,600
Average daily census...................... 34,987 34,669 34,437
Occupancy percentage...................... 92.2% 92.9% 93.3%
</TABLE>
SOURCES OF NURSING CENTER REVENUES
Nursing center revenues are derived principally from Medicare and Medicaid
programs and from private pay patients. Consistent with the nursing home
industry generally, changes in the mix of the Company's patient population
among these three categories significantly affect the profitability of the
Company's operations. Although the level of cost reimbursement for Medicare
and other high acuity patients generally produces the most revenue per patient
day, profitability is reduced by the costs associated with the higher level of
nursing care and other services required by such patients. The Company
believes that private pay patients generally constitute the most profitable
and Medicaid patients generally constitute the least profitable category.
15
<PAGE>
The following table sets forth certain percentages related to the payor mix
of the Company's owned and leased nursing centers:
<TABLE>
<CAPTION>
MEDICARE MEDICAID PRIVATE AND OTHER
--------------------- --------------------- ---------------------
YEAR PATIENT DAYS REVENUES PATIENT DAYS REVENUES PATIENT DAYS REVENUES
- ---- ------------ -------- ------------ -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
1995......... 12% 27% 65% 45% 23% 28%
1994......... 11 25 65 46 24 29
1993......... 8 18 68 53 24 29
</TABLE>
The following table sets forth certain percentages related to the mix of
patient services of the Company's owned and leased nursing centers:
<TABLE>
<CAPTION>
SUBACUTE MEDICAL LONG-
AND REHABILITATION SERVICES TERM NURSING CARE
--------------------------------- ---------------------
YEAR PATIENT DAYS REVENUES PATIENT DAYS REVENUES
- ---- --------------- ------------- ------------ --------
<S> <C> <C> <C> <C>
1995............... 14% 31% 86% 69%
1994............... 12 27 88 73
1993............... 8 19 92 81
</TABLE>
For the year ended December 31, 1995, nursing center revenues totaled
approximately $1.5 billion, or 66.3% of the Company's consolidated revenues.
Both governmental and private third-party payors have employed cost
containment measures designed to limit payments made to healthcare providers.
Those measures include the adoption of initial and continuing recipient
eligibility criteria which may limit payment for services, the adoption of
coverage criteria which limit the services that will be reimbursed and the
establishment of payment ceilings which set the maximum reimbursement that a
provider may receive for services. Furthermore, government reimbursement
programs are subject to statutory and regulatory changes, retroactive rate
adjustments, administrative rulings and government funding restrictions, all
of which may materially increase or decrease the rate of program payments to
the Company for its services. There can be no assurance that payments under
governmental and private third-party payor programs will remain at levels
comparable to present levels or will be sufficient to cover the costs
allocable to patients eligible for reimbursement pursuant to such programs. In
addition, there can be no assurance that facilities owned, leased or managed
by the Company, or the provision of services and supplies by the Company, will
meet the requirements for participation in such programs. The Company could be
adversely affected by the continuing efforts of governmental and private
third-party payors to contain the amount of reimbursement for healthcare
services. In an attempt to limit the federal budget deficit, there have been,
and the Company expects that there will continue to be, a number of proposals
to limit Medicare and Medicaid reimbursement for healthcare services.
Medicare. The Medicare Part A program provides reimbursement for extended
care services furnished to Medicare beneficiaries who are admitted to skilled
nursing centers after at least a three-day stay in an acute care hospital.
Covered services include nursing care, room and board, social services,
physical and occupational therapies, pharmaceuticals, supplies and other
necessary services provided by skilled nursing centers.
Under the Medicare program, skilled nursing center reimbursement is based
upon reasonable direct and indirect costs of services provided to
beneficiaries. Routine costs are subject to a routine cost limit ("RCL"). The
RCL is a national average cost per patient day which is adjusted for
variations in local wages. Revenues under this program are subject to audit
and retroactive adjustment. Management believes that adequate provisions for
loss have been recorded to reflect any adjustments which could result from
such audits. Settlements of Medicare audits have not had a material adverse
effect on the Company's nursing center operating results.
Medicaid. Medicaid is a state-administered program financed by state funds
and matching federal funds. The program provides for medical assistance to the
indigent and certain other eligible persons. Although administered under broad
federal regulations, states are given flexibility to construct programs and
payment methods consistent with their individual goals. Accordingly, these
programs differ from state to state in many respects.
16
<PAGE>
Federal law requires Medicaid programs to pay rates that are reasonable and
adequate to meet the costs incurred by an efficiently and economically
operated nursing center providing quality care and services in conformity with
all applicable laws and regulations. However, despite these federal
requirements, disagreements frequently arise between nursing centers and
states regarding the adequacy of Medicaid payments. In addition, the Medicaid
programs are subject to statutory and regulatory changes, administrative
rulings, interpretations of policy by the state agencies and certain
government funding limitations, all of which may materially increase or
decrease the level of program payments to nursing centers operated by the
Company. Management believes that the payments under these programs are not
sufficient on an overall basis to cover the costs of serving residents
participating in these programs. Furthermore, OBRA mandates an increased
emphasis on ensuring quality patient care, which has resulted in additional
expenditures by nursing centers.
There can be no assurance that the payments under Medicaid programs will
remain at levels comparable to current levels or, in the future, will be
sufficient to cover the costs incurred in serving residents participating in
such programs. The Company provides to eligible individuals Medicaid-covered
services consisting of nursing care, room and board and social services. In
addition, states may at their option cover other services such as physical,
occupational and speech therapies and pharmaceuticals.
Private Pay and Managed Care. The Company's nursing centers seek to increase
the number of private pay patients and those covered under private insurance
and managed care health plans. Such patients typically have financial
resources to pay for their monthly services and do not rely generally on
government programs for support.
NURSING CENTER COMPETITION
The Company's nursing centers compete on a local and regional basis with
other nursing centers. The Company's competitive position varies within each
community served. The Company believes that the quality of care provided,
reputation, location and physical appearance of its nursing centers and, in
the case of private pay patients, the charges for services, are significant
competitive factors. Although there is limited, if any, price competition with
respect to Medicare and Medicaid patients (since revenues received for
services provided to such patients are based on fixed rates or cost
reimbursement regulations), there is significant competition for both private
pay and Medicare patients.
The long-term care industry is divided into a variety of competitive areas
which market similar services. These competitors include nursing centers,
hospitals, extended care centers, retirement housing facilities and
communities, home health agencies and similar institutions. The industry
includes government-owned, church-owned, secular not-for-profit and for-profit
institutions.
17
<PAGE>
NURSING CENTER FACILITIES
The following table lists by state the number of nursing centers and related
licensed beds operated by the Company as of December 31, 1995:
<TABLE>
<CAPTION>
NUMBER OF FACILITIES
LICENSED --------------------------
STATE BEDS OWNED LEASED MANAGED TOTAL
- ----- -------- ----- ------ ------- -----
<S> <C> <C> <C> <C> <C>
Alabama(1).................................. 447 3 - - 3
Arizona..................................... 970 5 2 - 7
Arkansas.................................... 174 1 - - 1
California.................................. 4,473 21 16 3 40
Colorado.................................... 935 4 3 - 7
Connecticut(1).............................. 716 6 - - 6
Florida(1).................................. 2,011 12 1 3 16
Georgia(1).................................. 370 3 - - 3
Hawaii...................................... 60 1 - - 1
Idaho....................................... 903 7 2 - 9
Indiana(1).................................. 4,071 15 13 - 28
Kentucky(1)................................. 2,014 13 3 - 16
Louisiana................................... 258 - - 2 2
Maine(1).................................... 882 11 - - 11
Massachusetts(1)............................ 4,246 33 3 2 38
Minnesota................................... 159 1 - - 1
Mississippi................................. 120 - 1 - 1
Montana(1).................................. 456 2 1 - 3
Nebraska.................................... 167 - 1 - 1
Nevada(1)................................... 314 3 - - 3
New Hampshire............................... 622 3 - 1 4
North Carolina(1)........................... 3,241 20 9 - 29
Ohio(1)..................................... 1,935 9 4 1 14
Oklahoma(1)................................. 226 1 - 1 2
Oregon(1)................................... 468 2 2 - 4
Tennessee(1)................................ 2,669 5 11 - 16
Texas....................................... 180 - - 1 1
Utah........................................ 740 5 - 1 6
Vermont(1).................................. 260 1 - 1 2
Virginia(1)................................. 764 4 1 - 5
Washington.................................. 1,521 10 3 - 13
Wisconsin(1)................................ 2,657 11 3 - 14
Wyoming(1).................................. 451 4 - - 4
------ --- --- --- ---
Total(2).................................... 39,480 216 79 16 311
====== === === === ===
</TABLE>
- --------
(1) These states have CON regulations. See "Governmental Regulation of Nursing
Centers, Retirement Centers and Pharmacies."
(2) Of the 39,480 nursing center licensed beds operated by the Company at
December 31, 1995, 26,933 were owned, 10,450 were leased and 2,097 were
managed by the Company.
PHARMACIES
Through its subsidiary, Medisave Pharmacies, Inc. ("Medisave"), the Company
provides institutional and retail pharmacy services. As of December 31, 1995,
Medisave operated 35 institutional pharmacies and 20 retail pharmacies in 18
states. For the year ended December 31, 1995, Medisave revenues totaled
approximately $178 million, or 7.7% of the Company's consolidated revenues.
The institutional pharmacy division focuses on providing a full array of
pharmacy services to approximately 735 nursing centers and specialized care
centers. Institutional pharmacy sales encompass a wide variety of
18
<PAGE>
products including prescription medication, prosthetics, respiratory and
infusion services and enteral therapies. In addition, Medisave provides a
variety of pharmaceutical consulting services designed to assist nursing
centers in program administration. Institutional pharmacy operations accounted
for substantially all of Medisave's pharmacy revenues and operating income in
1995.
Medisave's retail pharmacy operations consist of discount retail pharmacy
and optical stores in leased facilities. In 1993 and 1994, the Company
terminated leases of 36 retail outlets in Wal-Mart stores. The leases of the
remaining 14 Wal-Mart outlets were terminated in the first quarter of 1995.
The termination of these leases has not had a material effect on pharmacy
operating income.
The following table lists by state the number of pharmacies operated by
Medisave as of December 31, 1995:
<TABLE>
<CAPTION>
STATE INSTITUTIONAL RETAIL TOTAL
----- ------------- ------ -----
<S> <C> <C> <C>
Arizona......................................... 1 - 1
California...................................... 14 - 14
Florida......................................... 2 - 2
Idaho........................................... 1 - 1
Illinois........................................ - 3 3
Kansas.......................................... - 2 2
Louisiana....................................... - 3 3
Massachusetts................................... 1 - 1
Mississippi..................................... - 6 6
Missouri........................................ 1 - 1
Nevada.......................................... 2 - 2
North Carolina.................................. 4 - 4
Ohio............................................ 1 1 2
Tennessee....................................... 2 - 2
Texas........................................... - 5 5
Utah............................................ 1 - 1
Virginia........................................ 2 - 2
Wisconsin....................................... 3 - 3
--- --- ---
Total......................................... 35 20 55
=== === ===
</TABLE>
RETIREMENT HOUSING COMMUNITIES
As of December 31, 1995, the Company's retirement housing operations
consisted of 23 retirement housing communities. These centers included 3,122
apartment units and were located in 15 states. Of the total number of
retirement housing centers, 11 are owned by the Company, one is leased by the
Company, three are managed by the Company for a third party and eight are
owned by partnerships in which the Company has an equity interest. For the
year ended December 31, 1995, retirement housing community revenues totaled
approximately $46 million, or 2% of the Company's consolidated revenues.
Retirement housing communities serve more independent and self-sufficient
residents than do the nursing centers. A retirement housing community consists
of studio, one-bedroom and two-bedroom apartment units. Residents typically
receive weekly housekeeping and linen service, local transportation, 24-hour
emergency call service and daily food service.
Residents are responsible for monthly fees which typically are paid by the
resident or the resident's family members. Retirement housing operations do
not presently qualify for reimbursement under Medicare, Medicaid or Veterans
Administration healthcare programs because they do not offer the levels of
care required under such programs. Monthly fees paid by residents are based
upon the resident's apartment size, the number of meals the resident elects to
purchase and the level of personal care required by the resident.
19
<PAGE>
The following table lists by state the number of retirement housing
communities and related apartments operated by the Company as of December 31,
1995:
<TABLE>
<CAPTION>
NUMBER OF FACILITIES
NUMBER OF -----------------------------
STATE APARTMENTS OWNED(1) LEASED MANAGED TOTAL
----- ---------- -------- ------ ------- -----
<S> <C> <C> <C> <C> <C>
Arizona.......................... 522 4 - - 4
California....................... 212 1 - - 1
Colorado......................... 99 1 - - 1
Florida.......................... 660 3 - 1 4
Idaho............................ 115 1 - - 1
Indiana.......................... 136 1 - 1 2
Kansas........................... 155 1 - - 1
Massachusetts.................... 555 1 - 1 2
Missouri......................... 173 1 - - 1
New Hampshire.................... 28 1 - - 1
Ohio............................. 80 - 1 - 1
Oklahoma......................... 35 1 - - 1
Oregon........................... 33 1 - - 1
Utah............................. 120 1 - - 1
Washington....................... 199 1 - - 1
----- --- --- --- ---
Total.......................... 3,122 19 1 3 23
===== === === === ===
</TABLE>
- --------
(1) Includes retirement housing communities owned by partnerships in which the
Company has a limited and/or general partnership interest that are managed
by the Company for such partnerships.
GOVERNMENTAL REGULATION OF NURSING CENTERS, RETIREMENT CENTERS AND PHARMACIES
The federal government and all states in which the Company operates regulate
various aspects of the Company's nursing center business. In particular, the
development and operation of nursing centers and retirement communities and
the provision of healthcare services are subject to federal, state and local
laws relating to the adequacy of medical care, distribution of
pharmaceuticals, equipment, personnel, operating policies, fire prevention,
rate-setting and compliance with building codes and environmental laws.
Nursing centers are subject to periodic inspection by governmental and other
authorities to assure continued compliance with various standards, their
continued licensing under state law, certification under the Medicare and
Medicaid programs and continued participation in the Veterans Administration
program. Retirement communities and their owners are subject to periodic
inspection by governmental authorities to assure compliance with various
standards including standards relating to the financial condition of the
owners of such communities. The failure to obtain or renew any required
regulatory approvals or licenses could adversely affect the Company's
operations.
Effective October 1, 1990, the Omnibus Budget Reconciliation Act of 1987, as
amended ("OBRA"), increased the enforcement powers of state and federal
certification agencies. Additional sanctions were authorized to correct
noncompliance with regulatory requirements, including fines, temporary
suspension of admission of new patients to nursing centers and, in extreme
circumstances, decertification from participation in the Medicare or Medicaid
programs.
Nursing centers managed and operated by the Company are licensed either on
an annual or bi-annual basis and certified annually for participation in
Medicare and Medicaid programs through various regulatory agencies which
determine compliance with federal, state and local laws. These legal
requirements relate to the quality of the nursing care provided, the
qualifications of the administrative personnel and nursing staff, the adequacy
of the physical plant and equipment and continuing compliance with the laws
and regulations governing the operation of nursing centers. From time to time
the Company's nursing centers receive statements of deficiencies
20
<PAGE>
from regulatory agencies. In response, the Company implements plans of
correction with respect to these nursing centers to address the alleged
deficiencies. The Company believes that its nursing centers are in material
compliance with all applicable regulations or laws.
In certain circumstances, federal law mandates that conviction of certain
abusive or fraudulent behavior with respect to one nursing center may subject
other facilities under common control or ownership to disqualification for
participation in Medicare and Medicaid programs. In addition, some state
regulations provide that all nursing centers under common control or ownership
within a state are subject to delicensure if any one or more of such
facilities are delicensed.
Revised federal regulations under OBRA, which became effective in 1995,
affect the survey process for nursing centers and the authority of state
survey agencies and the Health Care Financing Administration to impose
sanctions on facilities based upon noncompliance with applicable requirements.
Available sanctions include imposition of civil monetary penalties, temporary
suspension of payment for new patient admissions, appointment of a temporary
manager, suspension of payment for eligible patients and suspension or
decertification from participation in the Medicare and/or Medicaid programs.
The process of implementing these regulatory changes has only recently been
addressed by the federal and state regulators. Each state will be allowed some
discretion in its implementation of the changes, but the scope of this
discretion is evolving through instructions issued by federal regulators and
is not yet finalized. The Company is unable to project how these regulatory
changes and their implementation will affect the Company.
In addition to license requirements, many states in which the Company
operates have statutes that require a CON to be obtained prior to the
construction of a new nursing center, the addition of new beds or services or
the incurring of certain capital expenditures. Certain states also require
regulatory approval prior to certain changes in ownership of a nursing center.
Certain states in which the Company operates have eliminated their CON
programs and other states are considering alternatives to their CON programs.
To the extent that CON or other similar approvals are required for expansion
of Company operations, either through facility acquisitions or expansion or
provision of new services or other changes, such expansion could be adversely
affected by the failure or inability to obtain the necessary approvals,
changes in the standards applicable to such approvals or possible delays and
expenses associated with obtaining such approvals.
Pharmaceutical operations are subject to regulation by the various states in
which the Company conducts its business as well as by the federal government.
The Company's pharmacies are regulated under the Food, Drug and Cosmetic Act
and the Prescription Drug Marketing Act, which are administered by the United
States Food and Drug Administration. Under the Comprehensive Drug Abuse
Prevention and Control Act of 1970, which is administered by the United States
Drug Enforcement Administration ("DEA"), dispensers of controlled substances
must register with the DEA, file reports of inventories and transactions and
provide adequate security measures. Failure to comply with such requirements
could result in civil or criminal penalties.
The Company's operations are also subject to federal and state laws which
govern financial and other arrangements between healthcare providers. These
laws often prohibit certain direct and indirect payments or fee-splitting
arrangements between healthcare providers that are designed to induce or
encourage the referral of patients to, or the recommendation of, a particular
provider for medical products and services. Such laws include the anti-
kickback provisions of the federal Medicare and Medicaid Patients and Program
Protection Act of 1987. These provisions prohibit, among other things, the
offer, payment, solicitation or receipt of any form of remuneration in return
for the referral of Medicare and Medicaid patients. In addition, some states
restrict certain business relationships between physicians and pharmacies, and
many states prohibit business corporations from providing, or holding
themselves out as a provider of, medical care. Possible sanctions for
violation of any of these restrictions or prohibitions include loss of
licensure or eligibility to participate in reimbursement programs as well as
civil and criminal penalties. These laws vary from state to state and have
seldom been interpreted by the courts or regulatory agencies.
21
<PAGE>
ADDITIONAL COMPANY INFORMATION
EMPLOYEES
As of December 31, 1995, the Company had approximately 43,643 full-time and
16,375 part-time and per diem employees. The Company was a party to 25
collective bargaining agreements covering approximately 3,700 employees as of
December 31, 1995.
LIABILITY INSURANCE
The Company maintains professional liability and general liability insurance
for substantially all its hospitals in amounts per hospital totaling up to $1
million per claim and $3 million in the aggregate. In addition, $25 million in
umbrella coverage is also maintained for hospital operations.
The nursing center, retirement housing community and pharmaceutical
operations are insured by the Company's wholly owned captive insurance company
for professional liability losses per facility up to $500,000 per claim and $8
million in the aggregate. Coverages for losses in excess of various limits are
maintained through unrelated commercial insurance carriers.
An additional $105 million of umbrella coverage is maintained for all
operations of the Company. The Company believes that its insurance is adequate
in amount and coverage. However, there can be no assurance that in the future
such insurance will be available to the Company at a reasonable cost or that
the Company will be able to maintain adequate levels of insurance coverages.
CAUTIONARY STATEMENTS
Information provided herein by the Company contains, and from time to time
the Company may disseminate materials and make statements which may contain
"forward-looking" information, as that term is defined by the Private
Securities Litigation Reform Act of 1995 (the "Act"). These cautionary
statements are being made pursuant to the provisions of the Act and with the
intention of obtaining the benefits of the "safe harbor" provisions of the
Act. The Company cautions investors that any forward-looking statements made
by the Company are not guarantees of future performance and that actual
results may differ materially from those in the forward-looking statements as
a result of various factors, including, but not limited to, the following:
(i) In recent years, an increasing number of legislative proposals have
been introduced or proposed by Congress and in some state legislatures
which would effect major changes in the healthcare system. However, the
Company cannot predict the form of healthcare reform legislation which may
be proposed or adopted by Congress or by state legislatures. Accordingly,
the Company is unable to assess the effect of any such legislation on its
business. There can be no assurance that any such legislation will not have
a material adverse impact on the future growth, revenues and net income of
the Company.
(ii) The Company derives substantial portions of its revenues from third-
party payors, including government reimbursement programs such as Medicare
and Medicaid, and nongovernment sources, such as commercial insurance
companies, HMOs, PPOs and contract services. Both government and
nongovernment payors have undertaken cost-containment measures designed to
limit payments to healthcare providers. There can be no assurance that
payments under governmental and nongovernmental payor programs will be
sufficient to cover the costs allocable to patients eligible for
reimbursement. The Company cannot predict whether or what proposals or
cost-containment measures will be adopted or, if adopted and implemented,
what effect, if any, such proposals might have on the operations of the
Company.
(iii) The Company is subject to extensive federal, state and local
regulations governing licensure, conduct of operations at existing
facilities, construction of new facilities, purchase or lease of existing
facilities, addition of new services, certain capital expenditures, cost-
containment and reimbursement for services rendered. The failure to obtain
or renew required regulatory approvals or licenses, the delicensing of
facilities owned, leased or operated by the Company or the disqualification
of the Company from
22
<PAGE>
participation in certain federal and state reimbursement programs could
have a material adverse effect upon the operations of the Company.
(iv) There can be no assurance that the Company will be able to continue
its substantial growth or be able to fully implement its strategy to
develop and expand its long-term care networks.
ITEM 2. PROPERTIES
Information related to the number, location and ownership of the Company's
hospitals, nursing centers, pharmacies and retirement housing communities is
included in "Hospital Operations" and "Nursing Center, Pharmacy and Retirement
Housing Community Operations." The Company believes that its facilities are
adequate for the Company's future needs in such locations.
ITEM 3. LEGAL PROCEEDINGS
On January 25, 1995, Horizon Healthcare Corporation ("Horizon") made a
proposal to acquire Hillhaven in a stock merger valued by Horizon at $28 per
share. On February 5, 1995, a Special Committee of Hillhaven's Board of
Directors (the "Special Committee") considered the proposal with its advisors
and concluded that the proposal was inadequate. On March 7, 1995, Horizon made
another offer to acquire Hillhaven in a stock merger valued by Horizon at $31
per share.
In light of the March 7, 1995 Horizon proposal and expressions of interest
received by Hillhaven from other parties desiring to explore an acquisition
transaction, on March 20, 1995, the Special Committee instructed Merrill
Lynch, Pierce, Fenner and Smith Incorporated to explore strategic
alternatives, including the possible sale of Hillhaven to a third party. The
Special Committee established a process to evaluate all alternatives available
to Hillhaven.
As part of this process, Hillhaven engaged in discussions with certain
parties interested in acquiring Hillhaven, and invited Horizon to participate
in this process. Horizon announced that its proposal expired on March 21,
1995. On April 24, 1995, Hillhaven announced that it had entered into a
definitive merger agreement with the Company.
A number of legal actions resulted from Horizon's January and March
proposals to acquire Hillhaven, all of which have been resolved except as set
forth below.
Hillhaven and its directors are named as defendants in a number of putative
class action complaints filed on behalf of Hillhaven's stockholders in Nevada
state court (the "Nevada State Court Actions") and California state court (the
"California State Court Actions"). These complaints raise allegations that
Hillhaven and its directors have breached their fiduciary duties to
Hillhaven's stockholders in connection with the consideration of Horizon's
acquisition proposal and certain corporate actions also cited in Horizon's
counterclaim. These actions seek declaratory and injunctive relief and, in
California, compensatory damages in unspecified amounts. The Hillhaven Merger
rendered moot the issues raised in the Nevada State Court Actions and
California State Court Actions, with the exception of the plaintiffs' request
for an award of attorneys' fees and costs, which has yet to be decided by the
court.
As is typical in the healthcare industry, the Company is subject to claims
and legal actions by patients and others in the ordinary course of business.
The Company believes that all such claims and actions currently pending
against it either are adequately covered by insurance or would not have a
material adverse effect on the Company if decided in a manner unfavorable to
the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
23
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below are the present executive officers of the Company, their
ages (as of January 1, 1996), their positions with the Company and the year in
which they first became an executive officer of the Company:
<TABLE>
<CAPTION>
FIRST ELECTED
NAME AGE POSITION EXECUTIVE OFFICER
---- --- -------- -----------------
<S> <C> <C> <C>
Michael R. Barr......... 46 Chief Operating Officer and 1985(1)
Executive Vice President
Jill L. Force........... 43 Vice President, General Counsel and 1995(2)
Corporate Secretary
James H. Gillenwater, 38 Vice President, Planning and 1995(3)
Jr. ................... Development
Thomas T. Ladt.......... 45 Executive Vice President, Operations 1993(4)
Richard A. Lechleiter... 37 Vice President, Finance and 1995(5)
Corporate Controller
W. Bruce Lunsford....... 48 Chairman of the Board, President and 1985(6)
Chief Executive Officer
Carl J. Napoli.......... 58 Chief Executive Officer, Chief 1995(7)
Operating Officer and President of
Medisave Pharmacies, Inc.
W. Earl Reed, III....... 44 Chief Financial Officer and 1987(8)
Executive Vice President
</TABLE>
- --------
(1) Mr. Barr, a founder of the Company, physical therapist and certified
respiratory therapist, has served as Chief Operating Officer and Executive
Vice President of the Company since February 1996. From November 1995 to
February 1996, he was Executive Vice President of the Company and Chief
Executive Officer of the Company's Hospital Division. Mr. Barr served as
Vice President of Operations for the Company from 1985 to November 1995.
(2) Ms. Force, a certified public accountant and attorney, has served as Vice
President, General Counsel and Corporate Secretary of the Company since
November 1995. From 1989 to 1995, she was General Counsel and Corporate
Secretary of the Company.
(3) Mr. Gillenwater has served as Vice President, Planning and Development of
the Company since November 1995. From 1989 to November 1995, he was
Director of Planning and Development of the Company.
(4) Mr. Ladt has served as Executive Vice President, Operations of the Company
since February 1996. From November 1995 to February 1996, he served as
President of the Company's Hospital Division. From 1993 to November 1995,
Mr. Ladt was Vice President of the Company's Hospital Division. From 1989
to December 1993, Mr. Ladt was a Regional Director of Operations for the
Company.
(5) Mr. Lechleiter, a certified public accountant, has served as Vice
President, Finance and Corporate Controller of the Company since November
1995. From June 1995 to November 1995, he was Director of Finance of the
Company. Prior thereto, Mr. Lechleiter served as Vice President and
Controller at each of (i) Columbia/HCA Healthcare Corporation (September
1993 to May 1995), (ii) Galen Health Care, Inc. (March 1993 to August
1993) and (iii) Humana Inc. (September 1990 to February 1993).
(6) Mr. Lunsford, a founder of the Company, certified public accountant and
attorney, has served in this position since the Company commenced
operations in 1985.
(7) Mr. Napoli has served as President, Chief Executive Officer and Chief
Operating Officer of Medisave Pharmacies, Inc., a subsidiary of the
Company, since July 1994. From May 1992 to July 1994, Mr. Napoli was
President and Chief Operating Officer of Medisave Pharmacies, Inc. He was
Executive Vice President of Operations of Medisave Pharmacies, Inc. from
September 1984 to May 1992.
(8) Mr. Reed, a certified public accountant, has served as Chief Financial
Officer and Executive Vice President of the Company since November 1995.
From 1987 to November 1995, Mr. Reed served as Vice President, Finance and
Development of the Company.
24
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by Item 5 of this Report appears on the inside back
cover of the 1995 Annual Report to Shareholders and is incorporated by
reference in this Report.
25
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
VENCOR, INC.
SELECTED FINANCIAL DATA
AS OF AND FOR THE YEARS ENDED DECEMBER 31
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND STATISTICS)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Revenues................ $2,323,956 $2,032,827 $1,727,436 $1,575,225 $1,425,629
---------- ---------- ---------- ---------- ----------
Salaries, wages and
benefits............... 1,360,018 1,167,181 985,163 921,508 847,261
Supplies................ 188,754 162,053 126,473 117,940 110,566
Rent.................... 79,476 79,371 74,323 85,942 112,196
Other operating
expenses............... 416,969 366,621 330,014 299,813 268,465
Depreciation and
amortization........... 89,478 79,519 69,126 56,408 39,179
Interest expense........ 60,918 62,828 73,559 62,532 48,364
Investment income....... (13,444) (13,126) (16,056) (12,820) (17,013)
Non-recurring
transactions........... 109,423 (4,540) 5,769 113,265 -
---------- ---------- ---------- ---------- ----------
2,291,592 1,899,907 1,648,371 1,644,588 1,409,018
---------- ---------- ---------- ---------- ----------
Income (loss) from
operations before
income taxes........... 32,364 132,920 79,065 (69,363) 16,611
Provision for income
taxes.................. 24,001 46,781 10,089 12,051 7,138
---------- ---------- ---------- ---------- ----------
Income (loss) from
operations............. 8,363 86,139 68,976 (81,414) 9,473
Reinstatement of
discontinued
operations............. - - - 24,743 4,379
Extraordinary gain
(loss) on
extinguishment of debt,
net of
income taxes .......... (23,252) (241) (2,217) 380 -
Cumulative effect on
prior years of a change
in accounting
for income taxes....... - - (1,103) - -
---------- ---------- ---------- ---------- ----------
Net income (loss).... $ (14,889) $ 85,898 $ 65,656 $ (56,291) $ 13,852
========== ========== ========== ========== ==========
Earnings (loss) per
common and common
equivalent share:
Primary:
Income (loss) from
operations............ $ .21 $ 1.37 $ 1.22 $ (1.57) $ .19
Reinstatement of
discontinued
operations............ - - - .47 .09
Extraordinary gain
(loss) on
extinguishment of
debt.................. (.37) - (.04) .01 -
Cumulative effect on
prior years of a
change in accounting
for income taxes...... - - (.02) - -
---------- ---------- ---------- ---------- ----------
Net income (loss).... $ (.16) $ 1.37 $ 1.16 $ (1.09) $ .28
========== ========== ========== ========== ==========
Fully diluted:
Income (loss) from
operations............ $ .29 $ 1.28 $ 1.22 $ (1.57) $ .19
Reinstatement of
discontinued
operations............ - - - .47 .09
Extraordinary gain
(loss) on
extinguishment of
debt.................. (.32) - (.04) .01 -
Cumulative effect on
prior years of a
change in accounting
for income taxes...... - - (.02) - -
---------- ---------- ---------- ---------- ----------
Net income (loss).... $ (.03) $ 1.28 $ 1.16 $ (1.09) $ .28
========== ========== ========== ========== ==========
Shares used in
computing earnings
(loss) per common and
common equivalent
share:
Primary................ 62,318 57,037 54,555 52,820 49,138
Fully diluted.......... 71,967 69,014 60,640 52,820 49,138
FINANCIAL POSITION:
Working capital......... $ 239,666 $ 129,079 $ 114,339 $ 114,695 $ 150,392
Assets.................. 1,912,454 1,656,205 1,563,350 1,515,812 1,004,093
Long-term debt.......... 778,100 746,212 784,801 988,998 481,080
Stockholders' equity.... 772,064 596,454 485,550 283,791 302,074
OPERATING DATA:
Number of hospitals..... 36 33 26 18 14
Number of hospital
licensed beds.......... 3,263 2,511 2,198 1,717 1,250
Number of hospital
patient days........... 489,612 403,623 293,367 223,483 150,564
Number of nursing
centers................ 311 310 325 369 380
Number of nursing center
licensed beds.......... 39,480 39,423 40,759 45,419 46,808
Number of nursing center
patient days........... 12,569,600 12,654,016 12,770,435 13,709,222 14,563,082
Number of Vencare
contracts.............. 2,008 948 128 - -
Number of pharmacy
outlets................ 55 60 88 131 118
Number of retirement
centers................ 23 22 24 29 29
Number of retirement
center apartments...... 3,122 3,049 3,254 3,565 3,514
</TABLE>
26
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Selected Financial Data in Item 6 and the consolidated financial
statements included in this Form 10-K set forth certain data with respect to
the financial position, results of operations and cash flows of Vencor, Inc.
("Vencor") which should be read in conjunction with the following discussion
and analysis.
HILLHAVEN AND NATIONWIDE MERGERS
The merger with The Hillhaven Corporation ("Hillhaven") (the "Hillhaven
Merger") was consummated on September 28, 1995. At the time of the Hillhaven
Merger, Hillhaven operated 311 nursing centers, 56 retail and institutional
pharmacies and 23 retirement communities with 3,122 apartments. Annualized
revenues approximated $1.7 billion.
Prior to its merger with Vencor, Hillhaven completed a merger with
Nationwide Care, Inc. ("Nationwide") (the "Nationwide Merger") on June 30,
1995. At the time of the Nationwide Merger, Nationwide operated 23 nursing
centers containing 3,257 licensed beds and four retirement communities with
442 apartments. Annualized revenues approximated $125 million.
As discussed in the Notes to Consolidated Financial Statements, the
Hillhaven and Nationwide Mergers have been accounted for by the pooling-of-
interests method. Accordingly, the accompanying consolidated financial
statements and financial and operating data included herein give retroactive
effect to these transactions and include the combined operations of Vencor,
Hillhaven and Nationwide for all periods presented.
ANTICIPATED MERGER SYNERGIES AND IMPLEMENTATION OF NETWORK STRATEGY
As a result of the Hillhaven Merger, Vencor has become one of the nation's
largest diversified healthcare providers, offering a broad continuum of
specialized respiratory, rehabilitation and pharmacy services through its
network of hospitals, nursing centers, Vencare contract services,
institutional and retail pharmacies, and retirement communities.
Management believes that Vencor will achieve significant operational
synergies in connection with the Hillhaven Merger through (i) growth in
revenues from increased patient referrals and expansion of ancillary services
within the integrated continuum of healthcare services and (ii) reductions in
operating costs from the elimination of duplicative services, improved
purchasing power of the combined entity, and refinancing of higher rate long-
term debt. The estimated effect of these synergies could increase pretax
income approximately $100 million per year by 1997.
There can be no assurances, however, that Vencor will successfully develop
and expand its long-term care networks. The Hillhaven Merger substantially
changed the nature, scope and size of Vencor's business, and significant
efforts required to integrate the operations and management of the combined
entity could have an adverse effect on Vencor's ability to realize the
operating synergies described above.
27
<PAGE>
RESULTS OF OPERATIONS
A summary of revenues follows (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994
-------------------- -------------------- 1993
AMOUNT % CHANGE AMOUNT % CHANGE AMOUNT
---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
Hospitals................. $ 456,486 26.4 $ 361,111 29.5 $ 278,826
---------- ---------- ----------
Nursing centers:
Long-term care........... 1,073,413 5.5 1,017,592 3.1 987,271
Subacute medical and
rehabilitation care..... 492,912 28.7 383,097 64.3 233,133
---------- ---------- ----------
1,566,325 11.8 1,400,689 14.8 1,220,404
Non-recurring
transactions............ (24,500) - -
---------- ---------- ----------
1,541,825 10.1 1,400,689 14.8 1,220,404
---------- ---------- ----------
Ancillary services:
Vencare.................. 110,350 183.6 38,907 1,041.3 3,409
Pharmacies............... 178,363 (7.6) 193,104 (0.9) 194,935
Retirement communities... 46,371 17.7 39,390 31.9 29,862
---------- ---------- ----------
335,084 23.5 271,401 18.9 228,206
---------- ---------- ----------
Elimination............... (9,439) (374) -
---------- ---------- ----------
$2,323,956 14.3 $2,032,827 17.7 $1,727,436
========== ========== ==========
</TABLE>
Hospital revenue increases in both 1995 and 1994 resulted from the
acquisition of facilities in each of the last two years and growth in same-
store patient days. Hospital patient days rose 21% to 489,612 in 1995 and 38%
to 403,623 in 1994.
Excluding the effect of non-recurring transactions, nursing center revenue
increases resulted primarily from significant growth in subacute medical and
rehabilitation therapy services. Patient days related to these services grew
16% to 1,699,500 in 1995 and 37% to 1,469,624 in 1994. Patient days related to
long-term and custodial care declined 3% to 10,870,100 in 1995 and 4% to
11,184,392 in 1994.
Growth in ancillary services revenues in both 1995 and 1994 was primarily
attributable to the expansion of the Vencare contract services business.
Vencare, which commenced operations in 1993, provides respiratory and
rehabilitation therapy services and subacute care primarily to nursing
centers. The number of Vencare contracts grew from 128 at the end of 1993 to
948 and 2,008 at December 31, 1994 and 1995, respectively.
In the third quarter of 1995, Vencor recorded pretax charges aggregating
$128.4 million ($89.9 million net of tax) primarily in connection with the
Hillhaven Merger. The charges included (i) $23.2 million of investment
advisory and professional fees, (ii) $53.8 million of employee benefit plan
and severance costs, (iii) $26.9 million of losses associated with the planned
disposition of certain nursing center properties and (iv) $24.5 million of
charges to reflect Vencor's change in estimates of accrued revenues recorded
in connection with certain prior-year nursing center third-party reimbursement
issues. Operating results for 1995 also include pretax charges of $5.5 million
($3.7 million net of tax) recorded in the second quarter related primarily to
the Nationwide Merger.
Non-recurring transactions related primarily to sales of assets and nursing
center restructuring activities increased pretax income by $4.5 million ($2.7
million net of tax) in 1994. Operating results in 1993 include a pretax charge
of $5.8 million ($3.7 million net of tax) related to the restructuring of
certain nursing centers held for sale. In addition, provision for income taxes
includes a credit of approximately $19 million related to deferred income
taxes.
Income from operations for 1995 totaled $8.3 million, compared to $86.1
million and $69 million for 1994 and 1993, respectively. Excluding the effect
of non-recurring transactions, 1995 income from operations increased 22% to
$101.9 million ($1.45 per share--fully diluted) and 55% to $83.4 million
($1.24 per share-- fully diluted) in 1994. The improvement in both periods
resulted primarily from growth in (i) hospital patient
28
<PAGE>
days, (ii) Vencare contracts and (iii) higher margin subacute and
rehabilitation therapy services in the nursing center business.
For more information concerning the provision for income taxes as well as
information regarding differences between effective income tax rates and
statutory rates, see Note 6 of the Notes to Consolidated Financial Statements.
LIQUIDITY
Cash provided by operations totaled $113.6 million for 1995 compared to $133
million for 1994 and $105.2 million for 1993. Cash payments in 1995 related to
non-recurring transactions reduced cash flows from operations by approximately
$32 million. In addition, certain non-recurring transaction costs for employee
benefits and consolidation activities related to the Hillhaven Merger are
expected to reduce cash flows from operations in 1996. Growth in cash flows in
1994 was primarily attributable to growth in net income.
During each of the past three years, cash flows from operations have been
adversely impacted by growth in the outstanding days of revenues in accounts
receivable. Growth in accounts receivable has been primarily related to the
integration of acquired hospital facilities and delays in payments from
certain state Medicaid programs and managed care plans. Management believes
that these factors will continue to have an adverse effect on cash flows from
operations in 1996.
Concurrent with the consummation of the Hillhaven Merger, Vencor established
a $1 billion credit facility (the "Credit Facility") to finance the redemption
of Hillhaven preferred stock, repay certain Hillhaven higher rate debt and
borrowings under prior revolving credit agreements, and provide sufficient
credit for future expansion. At December 31, 1995, available borrowings under
the Credit Facility approximated $300 million.
Working capital totaled $239.7 million at December 31, 1995 compared to
$129.1 million at December 31, 1994. Management believes that cash flows from
operations and amounts available under the Credit Facility are sufficient to
meet future expected liquidity needs.
CAPITAL RESOURCES
Excluding acquisitions, capital expenditures totaled $136.9 million for 1995
compared to $111.5 million for 1994 and $74.1 million for 1993. Planned
capital expenditures in 1996 (excluding acquisitions) are expected to
approximate $175 million and include significant expenditures related to the
expansion of Vencor's retirement community and assisted living operations.
Management believes that its capital expenditure program is adequate to
expand, improve and equip existing facilities.
Vencor also expended $59.3 million, $36.4 million and $44.1 million for
acquisitions of new facilities (and related healthcare businesses) and
previously leased nursing centers during 1995, 1994 and 1993, respectively, of
which $44.2 million, $32.4 million and $25.1 million related to additional
hospital and related ancillary facilities. Management intends to acquire
additional hospitals, nursing centers and related healthcare businesses in the
future.
Capital expenditures during the last three years were financed primarily
through internally generated funds and, in 1995, from the public offering of
2.2 million shares of common stock, the proceeds from which aggregated $66.5
million. Vencor intends to finance a substantial portion of its capital
expenditures with internally generated and borrowed funds. Sources of capital
include available borrowings under the Credit Facility, public or private debt
and equity.
As discussed in Note 8 of the Notes to Consolidated Financial Statements,
Vencor called for redemption all of its outstanding convertible debt
securities in the fourth quarter of 1995, resulting in the issuance of
approximately 7,259,000 shares of common stock. Approximately $34.4 million of
the convertible securities were redeemed in exchange for cash equal to 104.2%
of face value plus accrued interest. These transactions had
29
<PAGE>
no material effect on earnings per common and common equivalent share. Had
these transactions occurred on December 31, 1994, the ratio of debt to debt
plus stockholders' equity would have improved from approximately 57% to 46%.
As discussed in Note 8 of the Notes to Consolidated Financial Statements,
Vencor entered into certain interest rate swap agreements in the fourth quarter
of 1995 to eliminate the impact of changes in interest rates on $400 million of
floating rate debt outstanding under the Credit Facility. The agreements expire
in April 1997 ($100 million), October 1997 ($200 million) and April 1998 ($100
million) and provide for fixed rates at 5.7% plus 1/2% to 1 1/4%.
HEALTH CARE LEGISLATION
Congress is currently considering various proposals which could reduce
expenditures under certain government health and welfare programs, including
Medicare and Medicaid. Management cannot predict whether such proposals will be
adopted, or if adopted, what effect, if any, such proposals would have on its
business.
Medicare revenues as a percentage of consolidated revenues were 30%, 27% and
21% for 1995, 1994 and 1993, respectively, while Medicaid percentages of
revenues approximated 33%, 36% and 41% for the respective periods.
OTHER INFORMATION
Various lawsuits and claims arising in the ordinary course of business are
pending against Vencor. As discussed in Note 10 of the Notes to Consolidated
Financial Statements, Vencor is a party to certain litigation involving the
proposed acquisition of Hillhaven by Horizon Health Corporation in January
1995. Resolution of such litigation and other loss contingencies is not
expected to have a material adverse effect on Vencor's liquidity, financial
position or results of operations.
The Credit Facility contains covenants which require maintenance of certain
financial ratios and limit amounts of additional debt and purchases of common
stock. Vencor was in compliance with all such covenants at December 31, 1995.
The Financial Accounting Standards Board issued Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of," effective for fiscal years beginning after December 15,
1995. The provisions of this statement, which will be adopted in 1996, are not
expected to have a material impact on the consolidated financial statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item 8 is included in appendix pages F-1
through F-19 of this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEMS 10, 11, 12 AND 13. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT;
EXECUTIVE COMPENSATION; SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT; AND CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by these Items other than the information set forth
above under Part I, "Executive Officers of the Registrant," is omitted because
the Company is filing a definitive proxy statement pursuant to Regulation 14A
not later than 120 days after the end of the fiscal year covered by this
Report. The required information contained in the Company's proxy statement is
incorporated herein by reference.
30
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Index to Consolidated Financial Statements and Financial Statement
Schedule:
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Report of Independent Auditors.................................. F-2
Consolidated Statement of Operations for the years ended
December 31, 1995, 1994 and 1993............................... F-3
Consolidated Balance Sheet, December 31, 1995 and 1994.......... F-4
Consolidated Statement of Stockholders' Equity for the years
ended
December 31, 1995, 1994 and 1993............................... F-5
Consolidated Statement of Cash Flows for the years ended
December 31, 1995, 1994 and 1993............................... F-6
Notes to Consolidated Financial Statements...................... F-7
Quarterly Consolidated Financial Information (Unaudited)........ F-18
Financial Statement Schedule (a):
Schedule II--Valuation and Qualifying Accounts for the years
ended December 31, 1995, 1994 and 1993....................... F-19
</TABLE>
- --------
(a) All other schedules have been omitted because the required information is
not present or not present in material amounts.
(a)(2) Index to Exhibits:
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
3.1 Certificate of Incorporation of the Company, as amended. Exhibit 3 to
the Company's Form 10-Q for the quarterly period ended September 30,
1995 (Comm. File No. 1-10989) is hereby incorporated by reference.
3.2 Second Amended and Restated Bylaws of the Company.
4.1 Specimen Common Stock Certificate.
4.2 Article IV of the Certificate of Incorporation of the Company is
included in Exhibit 3.1.
4.3 $1 Billion Credit Agreement dated September 11, 1995 (conformed to
include Amendment No. 1) among the Company, various banks and other
financial institutions, Morgan Guaranty Trust Company of New York (as
Documentation Agent), Nationsbank, N.A. (as Administrative Agent) and
J.P. Morgan Delaware (as Collateral Agent). Exhibit 4(b) to the
Company's Form 10-Q for the quarterly period ended September 30, 1995
(Comm. File No. 1-10989) is hereby incorporated by reference.
4.4 Amendment No. 2 to the $1 Billion Credit Agreement dated as of
September 11, 1995 among the Company, the other Borrowers referred to
therein and the Banks, Co-Agents, LC Issuing Banks and Agents referred
to therein. Exhibit 4(c) to the Company's Form 10-Q for the quarterly
period ended September 30, 1995 (Comm. File No. 1-10989) is hereby
incorporated by reference.
4.5 Amendment No. 3 to the $1 Billion Credit Agreement dated as of
November 27, 1995 among the Company, the other Borrowers referred to
therein and the Banks, Co-Agents, LC Issuing Banks and Agents referred
to therein.
4.6 Warrant and Registration Rights Agreement among Hillhaven, Tenet and
Manufacturers Hanover Trust Company of California, dated as of January
31, 1990.
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
4.7 Form of Indenture between Hillhaven and State Street Bank and Trust
Company, as Trustee with respect to the 10 1/8% Senior Subordinated
Notes due 2001.
4.8 Form of 10 1/8% Senior Subordinated Note due 2001.
4.9 First Supplemental Indenture dated September 27, 1995, among the
Company, Hillhaven and State Street Bank and Trust Company, as
Trustee, relating to 10 1/8% Senior Subordinated Notes due 2001.
Exhibit 4(a) to the Company's Form 10-Q for the quarterly period ended
September 30, 1995 (Comm. File No. 1-10989) is hereby incorporated by
reference.
10.1* Directors and Officers Insurance and Company Reimbursement Policies.
10.2* Vencor, Incorporated Retirement Savings Plan as amended and restated
as of January 1, 1989. Exhibit 10.13 to the Company's Registration
Statement on Form S-1 (Reg. No. 33-36703) is hereby incorporated by
reference.
10.3* Amendment No. 1 to the Vencor, Incorporated Retirement Savings Plan
dated December 7, 1990. Exhibit 4.4 to the Company's Registration
Statement on Form S-8 (Reg. No. 33-38188) is hereby incorporated by
reference.
10.4* Amendment No. 2 to the Vencor, Incorporated Retirement Savings Plan
dated May 15, 1991. Exhibit 10.16 to the Company's Registration
Statement on Form S-1 (Reg. No. 33-43097) is hereby incorporated by
reference.
10.5* Amendment No. 3 to the Vencor, Incorporated Retirement Savings Plan
dated November 26, 1991. Exhibit 10.10 to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1991 (Comm. File
No. 1-10989) is hereby incorporated by reference.
10.6* Amendment No. 4 to the Vencor, Incorporated Retirement Savings Plan
dated January 15, 1992. Exhibit 10.11 to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1991 (Comm. File
No. 1-10989) is hereby incorporated by reference.
10.7* Amendment No. 5 to the Vencor, Incorporated Retirement Savings Plan
dated January 15, 1992. Exhibit 10.6 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993 (Comm. File No.
1-10989) is hereby incorporated by reference.
10.8* Amendment No. 6 to the Vencor, Incorporated Retirement Savings Plan
dated December 22, 1992. Exhibit 10.7 to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1993 (Comm. File
No. 1-10989) is hereby incorporated by reference.
10.9* Amendment No. 7 to the Vencor, Incorporated Retirement Savings Plan,
dated May 20, 1994.
10.10* Amendment No. 8 to the Vencor, Incorporated Retirement Savings Plan,
dated August 13, 1995.
10.11* Vencor, Incorporated Retirement Savings Plan Trust Agreement dated
July 10, 1990 by and between the Company and First Kentucky Trust
Company, Trustee. Exhibit 10.14 to the Company's Registration
Statement on Form S-1 (Reg. No. 33-36703) is hereby incorporated by
reference.
10.12* 1987 Non-Employee Directors Stock Option Plan. Exhibit 10.10 to the
Company's Registration Statement on Form S-1 (Reg. No. 33-30212) is
hereby incorporated by reference.
10.13* 1987 Incentive Compensation Program. Exhibit 10.9 to the Company's
Registration Statement on Form S-1 (Reg. No. 33-30212) is hereby
incorporated by reference.
10.14* Amendment to the Vencor, Inc. 1987 Incentive Compensation Program
dated May 15, 1991. Exhibit 4.4 to the Company's Registration
Statement on Form S-8 (Reg. No. 33-40949) is hereby incorporated by
reference.
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
10.15* Amendments to the Vencor, Inc. 1987 Incentive Compensation Program
dated May 18, 1994. Exhibit 10.13 to the Company's Form 10-K for the
year ended December 31, 1994 (Comm. File No. 1-10989) is hereby
incorporated by reference.
10.16* Amendment to the Vencor, Inc. 1987 Incentive Compensation Program
dated February 15, 1995. Exhibit 10.14 to the Company's Form 10-K for
the year ended December 31, 1994 (Comm. File No. 1-10989) is hereby
incorporated by reference.
10.17* Amendment to the Vencor, Inc. 1987 Incentive Compensation Program
dated September 27, 1995.
10.18* Form of Vencor, Inc. Incentive Compensation Program Performance Share
Award, as amended.
10.19* Vencor, Incorporated Non-Employee Directors Deferred Compensation
Plan.
10.20* Amendment to Vencor, Incorporated Non-Employee Directors Deferred
Compensation Plan dated September 26, 1995.
10.21* Vencor, Inc. Employee Benefit Trust Agreement dated December 27, 1990
by and between the Company and First Kentucky Trust Company. Exhibit
10.20 to the Company's Registration Statement on Form S-1 (Reg. No.
33-39017) is hereby incorporated by reference.
10.22* Form of Severance Agreement between Hillhaven and certain of its
officers.
10.23* Form of Amendment to Severance Agreement between Hillhaven and certain
of its officers.
10.24* Form of Indemnification Agreement between Hillhaven and certain of its
executive officers.
10.25* The Amended Hillhaven Corporation Board of Directors Retirement Plan.
10.26* Deferred Savings Plan of The Hillhaven Corporation.
10.27* The Hillhaven Corporation Annual Incentive Plan, amended as of
December 6, 1994.
10.28* The Amended and Restated Hillhaven Corporation Deferred Compensation
Plan.
10.29* The Hillhaven Corporation Supplemental Executive Retirement Plan.
10.30* Hillhaven Individual Retirement Annuity Plan.
10.31* Form of Indemnification Agreement between Vencor, Inc. and certain of
its officers and employees.
10.32* Form of Vencor, Inc. Change-in-Control Severance Agreement.
10.33 Services Agreement between Hillhaven and Tenet, dated as of January
31, 1990.
10.34 Government Programs Agreement between Hillhaven and Tenet, dated
January 31, 1990.
10.35 Insurance Agreement between Hillhaven and Tenet, dated as of January
31, 1990.
10.36* Employee and Employee Benefits Agreement between Hillhaven and Tenet,
dated as of January 31, 1990.
10.37 Form of Assignment and Assumption of Lease Agreement between Hillhaven
and certain subsidiaries, on the one hand, and Tenet and certain
subsidiaries on the other hand, together with the related Guaranty by
Hillhaven, dated on or prior to January 31, 1990.
10.38 Form of Management Agreement between First Healthcare Corporation and
certain Tenet subsidiaries, dated as of January 31, 1990.
10.39 Reorganization and Distribution Agreement between Hillhaven and Tenet,
dated as of January 8, 1990, as amended on January 30, 1990.
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
10.40 Guarantee Reimbursement Agreement between Hillhaven and Tenet, dated
as of January 31, 1990.
10.41 First Amendment to Guarantee Reimbursement Agreement between Hillhaven
and Tenet, dated as of October 30, 1990.
10.42 First Amendment to Guarantee Reimbursement Agreement between Hillhaven
and Tenet, dated as of May 30, 1991.
10.43 Second Amendment to Guarantee Reimbursement Agreement between
Hillhaven and Tenet, dated as of October 2, 1991.
10.44 Third Amendment to Guarantee Reimbursement Agreement between Hillhaven
and Tenet, dated as of April 1, 1992.
10.45 Fourth Amendment to Guarantee Reimbursement Agreement between
Hillhaven and Tenet, dated as of November 12, 1992.
10.46 Fifth Amendment to Guarantee Reimbursement Agreement between Hillhaven
and Tenet, dated as of February 19, 1993.
10.47 Sixth Amendment to Guarantee Reimbursement Agreement between Hillhaven
and Tenet, dated as of May 28, 1993.
10.48 Seventh Amendment to Guarantee Reimbursement Agreement between
Hillhaven and Tenet, dated as of May 28, 1993.
10.49 Eighth Amendment to Guarantee Reimbursement Agreement between
Hillhaven and Tenet, dated as of September 2, 1993.
10.50 Facility Agreement among First Healthcare Corporation and Certain
Limited Partnerships, dated as of April 23, 1992 relating to the sale
of thirty-two nursing centers.
10.51 First Amendment to Facility Agreement among First Healthcare
Corporation and Certain Limited Partnerships, dated as of July 31,
1992 relating to the sale of thirty-two nursing centers.
10.52 Forebearance Agreement among First Healthcare Corporation, Medisave
Pharmacies, Inc. and Certain Limited Partnerships, dated as of August
25, 1995.
10.53 Letter of Intent dated June 22, 1993 between Hillhaven and Tenet.
10.54 Agreement and Waiver, dated as of September 2, 1993, by and among
Hillhaven, First Healthcare Corporation, Tenet and certain Tenet
subsidiaries.
10.55 Trust Agreement between The Hillhaven Corporation and Wachovia Bank of
North Carolina, N.A., as Trustee, dated as of January 16, 1995.
10.56 Amended and Restated Agreement and Plan of Share Exchange and
Agreements to Assign Partnership Interests dated as of February 27,
1995 by and among The Hillhaven Corporation, Nationwide Care, Inc.,
Phillippe Enterprises, Inc., Meadowvale Skilled Care Center, Inc. and
Specified Partners of Camelot Care Centers, Evergreen Woods, Ltd. and
Shangri-La Partnership.
10.57 Amended and Restated Agreement and Plan of Merger. Exhibit 2 to
Amendment No. 3 to Registration Statement on Form S-4 of Vencor, Inc.
(Reg. No. 33-59345) is hereby incorporated by reference.
10.58 Other Debt Instruments--Copies of debt instruments for which the
related debt is less than 10% of total assets will be furnished to the
Commission upon request.
11 Statement Regarding Computation of Earnings Per Share.
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
13.1 Annual Report to Shareholders--Market Prices and Dividend Information
(for the year ended December 31, 1995). No portion of this Annual
Report shall be deemed to be filed with the Commission except to the
extent that information is specifically incorporated herein by
reference.
21 Subsidiaries of the Company.
23 Consent of Ernst & Young LLP.
27 Financial Data Schedule (included only in filings under the Electronic
Data Gathering, Analysis, and Retrieval System).
</TABLE>
- --------
* Compensatory plan or arrangement required to be filed as an exhibit pursuant
to Item 14(c) of Form 10-K.
(b) Reports on Form 8-K.
During the fourth quarter of 1995, the Company filed a Report on Form 8-K
dated November 30, 1995 which disclosed the consolidated results of operations
of the Company for the period from October 1, 1995 through October 31, 1995.
(c) Exhibits.
The response to this portion of Item 14 is submitted as a separate section
of this report.
(d) Financial Statement Schedules.
The response to this portion of Item 14 is submitted as a separate section
of this report.
35
<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.
Date: March 29, 1996 Vencor, Inc.
By: /s/ W. BRUCE LUNSFORD
--------------------------------------
W. BRUCE LUNSFORD
CHAIRMAN OF THE BOARD, 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.
SIGNATURE TITLE DATE
/s/ MICHAEL R. BARR Executive Vice March 29, 1996
- ------------------------------------- President, Chief
MICHAEL R. BARR Operating Officer and
Director
/s/ WILLIAM C. BALLARD JR. Director March 29, 1996
- -------------------------------------
WILLIAM C. BALLARD JR.
/s/ WALTER F. BERAN Director March 29, 1996
- -------------------------------------
WALTER F. BERAN
/s/ DONNA R. ECTON Director March 29, 1996
- -------------------------------------
DONNA R. ECTON
/s/ GREG D. HUDSON Director March 29, 1996
- -------------------------------------
GREG D. HUDSON
/s/ RICHARD A. LECHLEITER Vice President, March 29, 1996
- ------------------------------------- Finance and Corporate
RICHARD A. LECHLEITER Controller (Principal
Accounting Officer)
/s/ WILLIAM H. LOMICK Director March 29, 1996
- -------------------------------------
WILLIAM H. LOMICKA
/s/ W. BRUCE LUNSFORD Chairman of the Board, March 29, 1996
- ------------------------------------- President, Chief
W. BRUCE LUNSFORD Executive Officer
(Principal Executive
Officer) and Director
36
<PAGE>
SIGNATURE TITLE DATE
/s/ W. EARL REED, III Executive Vice March 29, 1996
- ------------------------------------- President, Chief
W. Earl Reed, III Financial Officer
(Principal Financial
Officer) and Director
/s/ R. GENE SMITH Vice Chairman of the March 29, 1996
- ------------------------------------- Board and Director
R. Gene Smith
/s/ JACK O. VANCE Director March 29, 1996
- -------------------------------------
Jack O. Vance
37
<PAGE>
VENCOR, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Auditors........................................... F-2
Consolidated Financial Statements:
Consolidated Statement of Operations for the years ended December 31,
1995, 1994 and 1993.................................................... F-3
Consolidated Balance Sheet, December 31, 1995 and 1994.................. F-4
Consolidated Statement of Stockholders' Equity for the years ended
December 31, 1995, 1994
and 1993............................................................... F-5
Consolidated Statement of Cash Flows for the years ended December 31,
1995, 1994 and 1993.................................................... F-6
Notes to Consolidated Financial Statements.............................. F-7
Quarterly Consolidated Financial Information (Unaudited)................ F-18
Financial Statement Schedule (a):
Schedule II--Valuation and Qualifying Accounts for the years ended
December 31, 1995, 1994 and 1993....................................... F-19
</TABLE>
- --------
(a) All other schedules have been omitted because the required information is
not present or not present in material amounts.
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders
Vencor, Inc.
We have audited the accompanying consolidated balance sheet of Vencor, Inc.
as of December 31, 1995 and 1994, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1995. Our audits also included the financial
statement schedule listed in the index to Item 14(a). These financial
statements and schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Vencor, Inc. at December 31, 1995 and 1994, and the consolidated results of
its operations and cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
As discussed in Note 6 to the consolidated financial statements, effective
January 1, 1993, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes."
LOGO
Louisville, Kentucky
March 1, 1996
F-2
<PAGE>
VENCOR, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Revenues.................................. $2,323,956 $2,032,827 $1,727,436
---------- ---------- ----------
Salaries, wages and benefits.............. 1,360,018 1,167,181 985,163
Supplies.................................. 188,754 162,053 126,473
Rent...................................... 79,476 79,371 74,323
Other operating expenses.................. 416,969 366,621 330,014
Depreciation and amortization............. 89,478 79,519 69,126
Interest expense.......................... 60,918 62,828 73,559
Investment income......................... (13,444) (13,126) (16,056)
Non-recurring transactions................ 109,423 (4,540) 5,769
---------- ---------- ----------
2,291,592 1,899,907 1,648,371
---------- ---------- ----------
Income from operations before income
taxes.................................... 32,364 132,920 79,065
Provision for income taxes................ 24,001 46,781 10,089
---------- ---------- ----------
Income from operations.................... 8,363 86,139 68,976
Extraordinary loss on extinguishment of
debt, net of income tax
benefit of $14,839 in 1995, $125 in 1994
and $1,279 in 1993....................... (23,252) (241) (2,217)
Cumulative effect on prior years of a
change in accounting
for income taxes......................... - - (1,103)
---------- ---------- ----------
Net income (loss)..................... (14,889) 85,898 65,656
Preferred stock dividend requirements and
other items.............................. (5,280) (7,753) (2,344)
Gain on redemption of preferred stock..... 10,176 - -
---------- ---------- ----------
Income (loss) available to common
stockholders......................... $ (9,993) $ 78,145 $ 63,312
========== ========== ==========
Earnings (loss) per common and common
equivalent share:
Primary:
Income from operations.................. $ .21 $ 1.37 $ 1.22
Extraordinary loss on extinguishment of
debt................................... (.37) - (.04)
Cumulative effect on prior years of a
change in accounting
for income taxes....................... - - (.02)
---------- ---------- ----------
Net income (loss)..................... $ (.16) $ 1.37 $ 1.16
========== ========== ==========
Fully diluted:
Income from operations.................. $ .29 $ 1.28 $ 1.22
Extraordinary loss on extinguishment of
debt................................... (.32) - (.04)
Cumulative effect on prior years of a
change in accounting
for income taxes....................... - - (.02)
---------- ---------- ----------
Net income (loss)..................... $ (.03) $ 1.28 $ 1.16
========== ========== ==========
Shares used in computing earnings (loss)
per common and common equivalent share:
Primary............................... 62,318 57,037 54,555
Fully diluted......................... 71,967 69,014 60,640
</TABLE>
See accompanying notes.
F-3
<PAGE>
VENCOR, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1995 1994
---------- ----------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents............................. $ 35,182 $ 39,018
Accounts and notes receivable less allowance for loss
of $16,785--1995
and $12,856--1994.................................... 360,147 272,119
Inventories........................................... 24,862 23,387
Income taxes.......................................... 77,997 24,736
Other................................................. 26,491 27,018
---------- ----------
524,679 386,278
Property and equipment, at cost:
Land.................................................. 111,232 94,514
Buildings............................................. 992,992 913,266
Equipment............................................. 403,338 302,133
Construction in progress (estimated cost to complete
and equip after December 31, 1995--$32,000).......... 44,731 57,542
---------- ----------
1,552,293 1,367,455
Accumulated depreciation.............................. (362,199) (284,964)
---------- ----------
1,190,094 1,082,491
Notes receivable less allowance for loss of $15,305--
1995 and $15,409--1994................................ 78,090 84,133
Intangible assets less accumulated amortization of
$22,149--1995 and $32,439--1994....................... 42,580 51,492
Other.................................................. 77,011 51,811
---------- ----------
$1,912,454 $1,656,205
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...................................... $ 99,887 $ 76,575
Salaries, wages and other compensation................ 99,937 72,130
Other accrued liabilities............................. 75,617 57,393
Income taxes.......................................... - 7,612
Long-term debt due within one year.................... 9,572 43,489
---------- ----------
285,013 257,199
Long-term debt......................................... 778,100 746,212
Deferred credits and other liabilities................. 77,277 56,340
Contingencies
Stockholders' equity:
Preferred stock, $1.00 par value; authorized 1,000
shares; issued and outstanding 98 shares--1994....... - 15
Common stock, $.25 par value; authorized 180,000
shares;
issued 72,158 shares--1995 and 59,178 shares--1994... 18,040 14,794
Capital in excess of par value........................ 684,377 472,661
Retained earnings..................................... 102,865 136,614
---------- ----------
805,282 624,084
Common treasury stock; 2,025 shares--1995 and 2,174
shares--1994......................................... (33,218) (27,630)
---------- ----------
772,064 596,454
---------- ----------
$1,912,454 $1,656,205
========== ==========
</TABLE>
See accompanying notes.
F-4
<PAGE>
VENCOR, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SHARES PAR VALUE
--------------------------- -----------------
COMMON CAPITAL IN RETAINED COMMON
PREFERRED COMMON TREASURY PREFERRED COMMON EXCESS OF EARNINGS TREASURY
STOCK STOCK STOCK STOCK STOCK PAR VALUE (DEFICIT) STOCK TOTAL
--------- ------- -------- --------- ------- ---------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31,
1992................... 35 52,925 (621) $ 5 $13,231 $314,410 $(43,439) $ (416) $283,791
Adjustments to reflect
change in fiscal year
of
acquired entities:
Net income............ 41,862 41,862
Issuance of preferred
stock................ 122 18 119,982 120,000
Other................. 39 9 9,915 (2,070) 7,854
---- ------- ------ ---- ------- -------- -------- -------- --------
Balances, December 31,
1992, as adjusted...... 157 52,964 (621) 23 13,240 444,307 (3,647) (416) 453,507
Net income............. 65,656 65,656
Cash dividends on
preferred stock
($82.50 per share) and
provision for
redemption value...... (2,888) (47) (2,935)
Cash dividends paid by
acquired entities..... (3,613) (3,613)
Issuance of common
stock in connection
with employee benefit
plans................. 244 16 62 1,142 158 1,362
Issuance of stock by
acquired entities..... 5,024 909 5,933
Purchase of common
stock................. (2,388) (37,455) (37,455)
Other.................. 3,442 (347) 3,095
---- ------- ------ ---- ------- -------- -------- -------- --------
Balances, December 31,
1993................... 157 53,208 (2,993) 23 13,302 451,027 58,911 (37,713) 485,550
Net income............. 85,898 85,898
Cash dividends on
preferred stock
($82.50 per share) and
provision for
redemption value...... (3,066) (3,066)
In-kind dividend on
preferred stock....... 4 2 4,506 (4,508) -
Issuance of common
stock in connection
with employee benefit
plans................. 360 121 89 5,458 1,518 7,065
Issuance of common
stock in connection
with acquisitions..... 698 9,089 8,565 17,654
Exercise of common
stock purchase
warrants.............. 5,610 1,403 61,897 63,300
Tender of preferred
stock in connection
with
exercise of common
stock purchase
warrants.............. (63) (10) (63,290) (63,300)
Other.................. 3,974 (621) 3,353
---- ------- ------ ---- ------- -------- -------- -------- --------
Balances, December 31,
1994................... 98 59,178 (2,174) 15 14,794 472,661 136,614 (27,630) 596,454
Net loss............... (14,889) (14,889)
Cash dividends on
preferred stock
($67.98 per share) and
provision for
redemption value...... (2,380) (2,380)
In-kind dividend on
preferred stock....... 3 2,900 (2,900) -
Issuance of common
stock in connection
with employee benefit
plans................. 664 (150) 166 24,111 (11,098) 13,179
Issuance of common
stock in connection
with acquisitions..... 439 (3,227) 5,498 2,271
Increase in value of
common stock purchase
warrants of acquired
entities.............. 9,810 (9,810) -
Public offering of
common stock.......... 2,200 550 65,944 66,494
Conversion of long-term
debt.................. 7,260 1,815 149,645 151,460
Issuance of common
stock to grantor
trust................. 3,927 (3,927) 982 87,297 (88,279) -
Hillhaven merger:
Issuance of common
stock and related
income
tax benefits.......... 2,732 683 51,561 52,244
Termination of grantor
trust................. (3,786) 3,786 (946) (87,146) 88,279 187
Redemption of preferred
stock................. (101) (15) (91,253) (91,268)
Other.................. (17) 1 (4) 2,074 (3,770) 12 (1,688)
---- ------- ------ ---- ------- -------- -------- -------- --------
Balances, December 31,
1995................... - 72,158 (2,025) $ - $18,040 $684,377 $102,865 $(33,218) $772,064
==== ======= ====== ==== ======= ======== ======== ======== ========
</TABLE>
See accompanying notes.
F-5
<PAGE>
VENCOR, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994 1993
--------- -------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................. $ (14,889) $ 85,898 $ 65,656
Adjustments to reconcile net income (loss) to
net cash
provided by operating activities:
Depreciation and amortization................ 89,478 79,519 69,126
Deferred income taxes........................ (23,570) 5,526 (11,594)
Extraordinary loss on extinguishment of
debt........................................ 38,091 366 3,496
Change in accounting for income taxes........ - - 1,103
Non-recurring transactions................... 102,166 2,500 -
Other........................................ 14,809 (1,575) (4,979)
Change in operating assets and liabilities:
Accounts and notes receivable............... (107,761) (63,247) (25,203)
Inventories and other assets................ (3,478) 12,385 (5,296)
Accounts payable............................ 22,157 4,718 2,788
Other accrued liabilities................... (3,366) 6,946 10,142
--------- -------- ---------
Net cash provided by operating
activities............................... 113,637 133,036 105,239
--------- -------- ---------
Cash flows from investing activities:
Purchase of property and equipment............ (136,893) (111,486) (74,111)
Acquisition of healthcare businesses and
previously leased facilities................. (59,343) (36,391) (44,055)
Sale of assets................................ 899 6,530 22,341
Collection of notes receivable................ 4,715 8,965 22,590
Net change in investments..................... (12,779) 14,046 79,778
Other......................................... (8,241) 3,032 (12,926)
--------- -------- ---------
Net cash used in investing activities..... (211,642) (115,304) (6,383)
--------- -------- ---------
Cash flows from financing activities:
Net change in borrowings under revolving lines
of credit.................................... 161,600 21,000 (13,000)
Issuance of long-term debt.................... 438,052 18,599 137,149
Repayment of long-term debt................... (474,896) (75,124) (153,456)
Public offering of common stock............... 66,494 - -
Other issuances of common stock............... 6,520 1,289 430
Purchase of common stock...................... - - (37,455)
Redemption of preferred stock................. (91,268) - -
Payment of dividends.......................... (2,779) (3,070) (6,501)
Other......................................... (9,554) (2,338) (2,376)
--------- -------- ---------
Net cash provided by (used in) financing
activities............................... 94,169 (39,644) (75,209)
--------- -------- ---------
Change in cash and cash equivalents............ (3,836) (21,912) 23,647
Adjustment to reflect change in fiscal year of
acquired entities............................. - - (30,388)
Cash and cash equivalents at beginning of
period........................................ 39,018 60,930 67,671
--------- -------- ---------
Cash and cash equivalents at end of period..... $ 35,182 $ 39,018 $ 60,930
========= ======== =========
Supplemental information:
Interest payments............................. $ 69,916 $ 59,733 $ 66,285
Income tax payments........................... 42,218 37,332 19,072
</TABLE>
See accompanying notes.
F-6
<PAGE>
VENCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--ACCOUNTING POLICIES
REPORTING ENTITY
Vencor, Inc. ("Vencor") operates an integrated network of healthcare
services in forty-one states primarily focused on the needs of the elderly. At
December 31, 1995, Vencor operated 36 hospitals (3,263 licensed beds), 311
nursing centers (39,480 licensed beds), a contract services business
("Vencare") which provides respiratory therapy and subacute medical services
primarily to nursing centers, 55 retail and institutional pharmacy outlets and
23 retirement communities with 3,122 apartments.
On September 28, 1995, Vencor consummated a merger with The Hillhaven
Corporation ("Hillhaven") in a tax-free, stock-for-stock transaction (the
"Hillhaven Merger"). See Note 2.
Prior to its merger with Vencor, Hillhaven consummated a merger with
Nationwide Care, Inc. ("Nationwide") on June 30, 1995 in a tax-free, stock-
for-stock transaction (the "Nationwide Merger"). See Note 3.
BASIS OF PRESENTATION
The consolidated financial statements include all subsidiaries. Significant
intercompany transactions have been eliminated.
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles and include amounts
based upon the estimates and judgements of management. Actual amounts may
differ from these estimates.
The Hillhaven and Nationwide Mergers have been accounted for by the pooling-
of-interests method. Accordingly, the consolidated financial statements
included herein give retroactive effect to these transactions and include the
combined operations of Vencor, Hillhaven and Nationwide for all periods
presented.
For the years 1995 and 1994, the historical financial information of
Hillhaven and Nationwide (previously reported for fiscal years ending May 31
and September 30, respectively) have been recast to conform to Vencor's annual
reporting period ending December 31. For 1993, Hillhaven and Nationwide
financial data for the year ended May 31, 1993 and September 30, 1993,
respectively, have been combined with Vencor's calendar year information.
REVENUES
Revenues are recorded based upon estimated amounts due from patients and
third-party payors for healthcare services provided, including anticipated
settlements under reimbursement agreements with Medicare, Medicaid and other
third-party payors.
A summary of revenues by payor type follows (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Medicare..................................... $ 691,297 $ 554,443 $ 365,046
Medicaid..................................... 776,278 731,491 714,147
Private and other............................ 865,820 747,267 648,243
---------- ---------- ----------
2,333,395 2,033,201 1,727,436
Elimination.................................. (9,439) (374) -
---------- ---------- ----------
$2,323,956 $2,032,827 $1,727,436
========== ========== ==========
</TABLE>
F-7
<PAGE>
VENCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1--ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include highly liquid investments with an original
maturity of three months or less. Carrying values of cash and cash equivalents
approximate fair value due to the short-term nature of these instruments.
ACCOUNTS RECEIVABLE
Accounts receivable consist primarily of amounts due from the Medicare and
Medicaid programs, other government programs, managed care health plans,
commercial insurance companies and individual patients.
INVENTORIES
Inventories consist primarily of medical supplies and are stated at the
lower of cost (first-in, first-out) or market.
PROPERTY AND EQUIPMENT
Depreciation expense, computed by the straight-line method, was $79.7
million in 1995, $71.6 million in 1994 and $61.1 million in 1993. Depreciation
rates for buildings range generally from 20 to 45 years. Estimated useful
lives of equipment vary from 5 to 15 years.
The Financial Accounting Standards Board issued Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of", effective for fiscal years beginning after December 15,
1995. The provisions of this statement, which will be adopted in 1996, are not
expected to have a material impact on the consolidated financial statements.
INTANGIBLE ASSETS
Intangible assets consist primarily of costs in excess of the fair value of
identifiable net assets of acquired entities and are amortized using the
straight-line method over periods ranging from 10 to 15 years. Noncompete
agreement and debt issuance costs are amortized based upon the lives of the
respective contracts or loans.
PROFESSIONAL LIABILITY RISKS
Provisions for loss for professional liability risks are based upon
actuarially determined estimates. To the extent that subsequent claims
information varies from management's estimates, earnings are charged or
credited.
EARNINGS PER COMMON SHARE
Share and per share amounts have been retroactively restated to reflect a
three-for-two stock split distributed in October 1994.
The computation of earnings per common and common equivalent share gives
retroactive effect to the Hillhaven and Nationwide Mergers and is based upon
the weighted average number of common shares outstanding adjusted for the
dilutive effect of common stock equivalents (consisting primarily of stock
options) and convertible debt securities.
During 1995 all convertible debt securities were redeemed in exchange for
cash or converted into Vencor common stock. Accordingly, the computation of
fully diluted earnings per common share assumes that the equivalent number of
common shares underlying such debt securities were outstanding during the
entire year even though the result thereof is antidilutive.
F-8
<PAGE>
VENCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1--ACCOUNTING POLICIES (CONTINUED)
EARNINGS PER COMMON SHARE (CONTINUED)
In connection with the Hillhaven Merger, Vencor realized a gain of
approximately $10.2 million upon the cash redemption of Hillhaven preferred
stock. Although the gain had no effect on net income, fully diluted earnings
per common and common equivalent share were increased by $.14.
NOTE 2--HILLHAVEN MERGER
On September 27, 1995, the stockholders of both Vencor and Hillhaven
approved the Hillhaven Merger, effective September 28, 1995. In connection
with the Hillhaven Merger, each share of Hillhaven common stock was converted
on a tax-free basis into 0.935 of a share of Vencor common stock, resulting in
the issuance of approximately 31,651,000 Vencor common shares.
The Hillhaven Merger has been accounted for as a pooling of interests, and
accordingly, the consolidated financial statements give retroactive effect to
the Hillhaven Merger and include the combined operations of Vencor and
Hillhaven for all periods presented. The following is a summary of the results
of operations of the separate entities for periods prior to the Hillhaven
Merger (dollars in thousands):
<TABLE>
<CAPTION>
NON-RECURRING
VENCOR HILLHAVEN TRANSACTIONS ELIMINATION CONSOLIDATED
-------- ---------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Nine months ended Sep-
tember 30,
1995 (unaudited):
Revenues.............. $411,233 $1,322,873 $(24,500) $(3,775) $1,705,831
Income (loss) from op-
erations............. 31,566 41,367 (93,561) - (20,628)
Net income (loss)..... 30,711 20,235 (93,561) - (42,615)
1994:
Revenues.............. $400,018 $1,633,183 $ - $ (374) $2,032,827
Income from opera-
tions................ 31,416 51,976 2,747 - 86,139
Net income............ 31,416 51,735 2,747 - 85,898
1993:
Revenues.............. $282,235 $1,445,201 $ - $ - $1,727,436
Income from opera-
tions................ 22,924 30,718 15,334 - 68,976
Net income............ 22,924 27,398 15,334 - 65,656
</TABLE>
As discussed in Note 1, financial data for Hillhaven and Nationwide for the
year ended May 31, 1993 and September 30, 1993, respectively, have been
combined with Vencor's 1993 calendar year information. Summarized operating
results for Hillhaven and Nationwide for the respective periods not included
in the accompanying consolidated statement of operations follow (dollars in
thousands):
<TABLE>
<S> <C>
Hillhaven:
Seven months ended December 31, 1993 (unaudited):
Revenues............................................................ $859,603
Income from operations.............................................. 41,435
Net income.......................................................... 40,422
Nationwide:
Three months ended December 31, 1993 (unaudited):
Revenues............................................................ $ 29,272
Income from operations.............................................. 1,440
Net income.......................................................... 1,440
</TABLE>
F-9
<PAGE>
VENCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--NATIONWIDE MERGER
Prior to its merger with Vencor, Hillhaven completed the Nationwide Merger
on June 30, 1995. In connection therewith, 4,675,000 shares of common stock
(effected for the Hillhaven Merger exchange ratio) were issued in exchange for
all of the outstanding shares of Nationwide.
The Nationwide Merger has been accounted for as a pooling of interests, and
accordingly, the consolidated financial statements give retroactive effect to
the Nationwide Merger and include the combined operations of Hillhaven and
Nationwide for all periods presented. The following is a summary of the
results of operations of the separate entities for periods prior to the
Nationwide Merger (dollars in thousands):
<TABLE>
<CAPTION>
NON-RECURRING
HILLHAVEN NATIONWIDE TRANSACTIONS CONSOLIDATED
---------- ---------- ------------- ------------
<S> <C> <C> <C> <C>
Six months ended June 30,
1995 (unaudited):
Revenues................... $ 803,793 $ 66,800 $ - $ 870,593
Income from operations..... 23,837 2,147 (3,686) 22,298
Net income (loss).......... 23,459 (266) (3,686) 19,507
1994:
Revenues................... $1,509,729 $123,454 $ - $1,633,183
Income from operations..... 47,178 4,798 2,747 54,723
Net income................. 46,937 4,798 2,747 54,482
1993:
Revenues................... $1,378,466 $ 66,735 $ - $1,445,201
Income from operations..... 25,573 5,145 15,334 46,052
Net income................. 23,905 3,493 15,334 42,732
</TABLE>
NOTE 4--NON-RECURRING TRANSACTIONS
1995
In the third quarter of 1995, Vencor recorded pretax charges aggregating
$128.4 million primarily in connection with the Hillhaven Merger. The charges
included (i) $23.2 million of investment advisory and professional fees, (ii)
$53.8 million of employee benefit plan and severance costs, (iii) $26.9
million of losses associated with the planned disposition of certain nursing
center properties and (iv) $24.5 million of charges to reflect Vencor's change
in estimates of accrued revenues recorded in connection with certain prior-
year nursing center third-party reimbursement issues (recorded as a reduction
of revenues).
Pretax charges aggregating $5.5 million were recorded in the second quarter
primarily in connection with the Nationwide Merger.
1994
In the first quarter of 1994, Vencor recorded a pretax charge of $2.5
million in connection with the prior disposition of certain nursing centers.
Operating results in the fourth quarter of 1994 include a pretax gain of $7
million on the sale of assets.
1993
Operating results include a pretax charge of $5.8 million related to the
restructuring of certain nursing centers held for sale. As disclosed in Note
6, provision for income taxes includes a credit of approximately $19 million
related to deferred income taxes.
F-10
<PAGE>
VENCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--BUSINESS COMBINATIONS OTHER THAN HILLHAVEN AND NATIONWIDE
Vencor has acquired a number of healthcare facilities (including certain
previously leased facilities) and other related businesses, substantially all
of which have been accounted for by the purchase method. Accordingly, the
aggregate purchase price of these transactions has been allocated to tangible
and identifiable intangible assets acquired and liabilities assumed based upon
their respective fair values. The consolidated financial statements include
the operations of acquired entities since the respective acquisition dates.
The pro forma effect of these acquisitions on Vencor's results of operations
prior to consummation was not significant.
The following is a summary of acquisitions consummated during the last three
years under the purchase method of accounting (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Fair value of assets acquired..................... $ 78,893 $ 54,045 $ 72,687
Fair value of liabilities assumed................. (16,475) - (28,632)
-------- -------- --------
Net assets acquired............................. 62,418 54,045 44,055
Cash received from acquired entities.............. (804) - -
Issuance of common stock.......................... (2,271) (17,654) -
-------- -------- --------
Net cash paid for acquisitions.................. $ 59,343 $ 36,391 $ 44,055
======== ======== ========
</TABLE>
The purchase price paid in excess of the fair value of identifiable net
assets of acquired entities aggregated $9.7 million in 1995, $8.3 million in
1994 and $2.8 million in 1993.
NOTE 6--INCOME TAXES
Provision for income taxes consists of the following (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- --------
<S> <C> <C> <C>
Current:
Federal........................................ $ 40,008 $34,697 $ 17,281
State.......................................... 7,563 6,558 4,402
-------- ------- --------
47,571 41,255 21,683
Deferred......................................... (23,570) 5,526 (11,594)
-------- ------- --------
$ 24,001 $46,781 $ 10,089
======== ======= ========
Reconciliation of federal statutory rate to effective income tax rate
follows:
<CAPTION>
1995 1994 1993
-------- ------- --------
<S> <C> <C> <C>
Federal statutory rate........................... 35.0% 35.0% 35.0%
State income taxes, net of federal income tax
benefit......................................... 4.3 4.0 2.7
Merger costs..................................... 34.6 - -
Targeted jobs tax credits........................ - (4.5) -
Valuation allowance.............................. - - (24.0)
Other items, net................................. .3 .7 (.9)
-------- ------- --------
Effective income tax rate...................... 74.2% 35.2% 12.8%
======== ======= ========
</TABLE>
F-11
<PAGE>
VENCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--INCOME TAXES (CONTINUED)
Effective January 1, 1993, Vencor adopted the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes", which
requires, among other things, recognition of deferred income taxes using the
liability method rather than the deferred method. The cumulative effect of this
change reduced net income by $1.1 million.
A summary of deferred income taxes by source included in the consolidated
balance sheet at December 31 follows (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994
------------------- -------------------
ASSETS LIABILITIES ASSETS LIABILITIES
------- ----------- ------- -----------
<S> <C> <C> <C> <C>
Depreciation............................ $ - $40,912 $ - $35,982
Insurance............................... 10,269 - 10,429 -
Doubtful accounts....................... 26,723 - 12,003 -
Property................................ 10,148 - - -
Compensation............................ 19,133 - 11,424 -
Other................................... 16,127 8,584 16,631 4,395
------- ------- ------- -------
$82,400 $49,496 $50,487 $40,377
======= ======= ======= =======
</TABLE>
Management believes that the deferred tax assets in the table above will
ultimately be realized. Management's conclusion is based primarily on the
existence of sufficient taxable income within the allowable carryback periods
to realize the tax benefits of deductible temporary differences recorded at
December 31, 1995.
Deferred income taxes totaling $54.7 million and $24.7 million at December
31, 1995 and 1994, respectively, are included in other current assets.
Noncurrent deferred income taxes, included principally in deferred credits and
other liabilities, totaled $21.8 million and $14.6 million at December 31, 1995
and 1994, respectively.
NOTE 7--PROFESSIONAL LIABILITY RISKS
Vencor has insured a substantial portion of its nursing center professional
liability risks through a wholly owned insurance subsidiary since June 1, 1994.
Provisions for such risks underwritten by the subsidiary were $11.1 million for
1995 and $6.9 million for 1994.
Amounts funded for the payment of claims and expenses incident thereto,
included principally in cash and cash equivalents and other assets, aggregated
$17.5 million and $9.4 million at December 31, 1995 and 1994, respectively.
Allowances for professional liability risks, included principally in deferred
credits and other liabilities, were $15.9 million and $9.1 million at December
31, 1995 and 1994, respectively.
F-12
<PAGE>
VENCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8--LONG-TERM DEBT
CAPITALIZATION
A summary of long-term debt at December 31 follows (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Senior collateralized debt, 4.3% to 12.3% (rates generally
floating) payable
in periodic installments through 2025..................... $174,157 $194,654
Bank revolving credit agreements due 2001 (floating rates
averaging 6.9%)........................................... 205,600 44,000
Bank term loans (floating rates averaging 6.9%) payable in
periodic
installments through 2001................................. 400,000 173,100
10 1/8% Senior Subordinated Notes due 2001................. 3,289 174,453
12 1/2% Senior Subordinated Notes due 2000................. - 8,258
6% Convertible Subordinated Notes due 2002................. - 115,000
7 3/4% Convertible Subordinated Debentures due 2002........ - 74,750
Other...................................................... 4,626 5,486
-------- --------
Total debt, average life of seven years (rates averaging
6.4%).................................................... 787,672 789,701
Amounts due within one year................................ (9,572) (43,489)
-------- --------
Long-term debt............................................ $778,100 $746,212
======== ========
</TABLE>
CREDIT FACILITY
Concurrent with the consummation of the Hillhaven Merger, Vencor entered
into a five and one-half year $1 billion credit facility (the "Credit
Facility") comprising a $400 million term loan and a $600 million revolving
credit facility. The Credit Facility was established to finance the redemption
of Hillhaven preferred stock, repay certain higher rate debt and borrowings
under prior revolving credit agreements discussed below, and provide
sufficient credit for future expansion. Interest is payable at rates up to
either (i) the prime rate plus 1/4% or the daily federal funds rate plus 3/4%,
(ii) LIBOR plus 1 1/4% or (iii) the bank certificate of deposit rate plus 1
3/8%. Outstanding borrowings under the $400 million term loan are payable in
various installments beginning in 1997. The Credit Facility is collateralized
by the capital stock of certain subsidiaries and contains covenants which
require maintenance of certain financial ratios and limit amounts of
additional debt and purchases of common stock.
REFINANCING ACTIVITIES
During 1995 Vencor recorded $23.3 million of after-tax losses from
refinancing of long-term debt, substantially all of which was incurred in
connection with the Hillhaven Merger. Amounts refinanced in 1995 included $171
million of 10 1/8% Senior Subordinated Notes due 2001 (the "10 1/8% Notes"),
$112 million of outstanding borrowings under prior revolving credit
agreements, and $173 million of other senior debt.
In the fourth quarter of 1995, Vencor called for redemption its $115 million
of 6% Convertible Subordinated Notes due 2002 (the "6% Notes") and $75 million
of 7 3/4% Convertible Subordinated Debentures due 2002 (the "7 3/4%
Debentures") which were convertible into Vencor common stock at the rate of
$26.00 and $17.96 per share, respectively. Approximately $80.6 million
principal amount of the 6% Notes were converted into approximately 3,098,000
shares of common stock and the remainder were redeemed in exchange for cash
equal to 104.2% of face value plus accrued interest. All outstanding 7 3/4%
Debentures were converted into approximately 4,161,000 shares of common stock.
These transactions had no material effect on earnings per common and common
equivalent share.
F-13
<PAGE>
VENCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8--LONG-TERM DEBT (CONTINUED)
REFINANCING ACTIVITIES (CONTINUED)
In September 1993 Vencor substantially modified its relationship with a
significant stockholder, Tenet Healthcare Corporation ("Tenet"), through a
recapitalization plan in which Vencor (i) purchased from Tenet twenty-three
previously leased nursing centers for $111.8 million, (ii) repaid $147.2
million of debt owed to Tenet, (iii) released Tenet from guarantees related to
$400 million of debt and limited amounts payable to Tenet under remaining
guarantee commitments and (iv) eliminated Tenet's obligation to provide
additional financing to Vencor. The recapitalization was financed through (i)
issuance to Tenet of $120 million of Series D Preferred Stock, (ii) $175
million of borrowings under a secured bank term loan, (iii) issuance of $175
million of the 10 1/8% Notes, (iv) $30 million of borrowings under an accounts
receivable-backed credit facility and (v) payment of $39 million in cash.
OTHER INFORMATION
On October 30, 1995, Vencor entered into certain interest rate swap
agreements to eliminate the impact of changes in interest rates on $400
million of floating rate debt outstanding under the Credit Facility. The
agreements expire in April 1997 ($100 million), October 1997 ($200 million)
and April 1998 ($100 million) and provide for fixed rates at 5.7% plus 1/2% to
1 1/4%.
Maturities of long-term debt in years 1997 through 2000 are $54 million, $79
million, $103 million and $153 million, respectively.
The estimated fair value of Vencor's long-term debt was $777 million and
$819 million at December 31, 1995 and 1994, respectively, compared to carrying
amounts aggregating $788 million and $790 million. The estimate of fair value
includes the effect of the interest rate swap agreement and is based upon the
quoted market prices for the same or similar issues of long-term debt, or on
rates available to Vencor for debt of the same remaining maturities.
NOTE 9--LEASES
Vencor leases real estate and equipment under cancelable and non-cancelable
arrangements. Future minimum payments and related sublease income under non-
cancelable operating leases are as follows (dollars in thousands):
<TABLE>
<CAPTION>
MINIMUM SUBLEASE
PAYMENTS INCOME
-------- --------
<S> <C> <C>
1996.......................................................... $46,409 $7,548
1997.......................................................... 40,011 7,106
1998.......................................................... 32,708 6,077
1999.......................................................... 26,677 5,049
2000.......................................................... 23,998 4,888
Thereafter.................................................... 59,051 10,280
</TABLE>
Sublease income aggregated $13.7 million, $13.2 million and $10.4 million
for 1995, 1994 and 1993, respectively.
NOTE 10--CONTINGENCIES
Management continually evaluates contingencies based upon the best available
evidence. In addition, allowances for loss are provided currently for disputed
items that have continuing significance, such as certain third-party
reimbursements and deductions that continue to be claimed in current cost
reports and tax returns.
F-14
<PAGE>
VENCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10--CONTINGENCIES (CONTINUED)
Management believes that allowances for loss have been provided to the extent
necessary and that its assessment of contingencies is reasonable. Management
believes that resolution of contingencies will not materially affect Vencor's
liquidity, financial position or results of operations.
Principal contingencies are described below:
Revenues--Certain third-party payments are subject to examination by agencies
administering the programs. Vencor is contesting certain issues raised in
audits of prior year cost reports.
Professional liability risks--Vencor has provided for loss for professional
liability risks based upon actuarially determined estimates. Actual settlements
may differ from the provisions for loss.
Interest rate swap agreements--Vencor is a party to certain agreements which
reduce the impact of changes in interest rates on $400 million of its floating
rate long-term debt. In the event of nonperformance by other parties to these
agreements, Vencor may incur a loss to the extent that market rates exceed
contract rates.
Guarantees of indebtedness--Letters of credit and guarantees of indebtedness
aggregated $28 million at December 31, 1995.
Income taxes--Vencor is contesting adjustments proposed by the Internal
Revenue Service for 1991.
Litigation--Various suits and claims arising in the ordinary course of
business are pending against Vencor.
Vencor and certain former Hillhaven officers and directors are parties to
various legal actions brought by Horizon Health Corporation ("Horizon") and
certain Hillhaven stockholders in connection with Horizon's proposed
acquisition of Hillhaven initiated in January 1995.
F-15
<PAGE>
VENCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11--CAPITAL STOCK
In September 1995 Vencor common stockholders voted to increase the number of
authorized shares of common stock from 60 million to 180 million and increase
the number of common shares issuable under certain employee benefit plans from
approximately 3.2 million to 6.9 million. At December 31, 1995, approximately 6
million shares of common stock were reserved for issuance under Vencor's stock
compensation plans.
Vencor has plans under which options to purchase common stock may be granted
to officers, employees and certain directors. Options have been granted at not
less than market price on the date of grant. Exercise provisions vary, but most
options are exercisable in whole or in part beginning one to four years after
grant and ending ten years after grant. Activity in the plans is summarized
below:
<TABLE>
<CAPTION>
SHARES
UNDER OPTION PRICE
OPTION PER SHARE
--------- ----------------
<S> <C> <C>
Balances, December 31, 1992........................ 1,535,588 $ .53 to $24.13
Granted.......................................... 358,350 14.17 to 24.25
Exercised........................................ (211,066) .53 to 16.80
Canceled or expired.............................. (22,046) 4.97 to 22.09
---------
Balances, December 31, 1993........................ 1,660,826 .53 to 24.25
Granted.......................................... 536,239 11.53 to 22.75
Exercised........................................ (102,230) .53 to 22.09
Canceled or expired.............................. (48,185) 5.35 to 22.09
---------
Balances, December 31, 1994........................ 2,046,650 .53 to 24.25
Granted.......................................... 1,537,820 11.50 to 32.50
Exercised........................................ (593,918) .53 to 29.14
Canceled or expired.............................. (51,151) 5.35 to 28.50
---------
Balances, December 31, 1995........................ 2,939,401 $ .53 to $32.50
=========
</TABLE>
At December 31, 1995, options for 1,021,168 shares were exercisable. Shares
of common stock available for future grants were 2,470,066 at December 31, 1995
and 1,805,263 at December 31, 1994.
In 1993 Vencor adopted a Shareholder Rights Plan under which common
stockholders have the right to purchase Series A Preferred Stock in the event
of accumulation of or tender offer for 15% or more of Vencor's common stock.
The rights will expire in 2003 unless redeemed earlier by Vencor.
NOTE 12--EMPLOYEE BENEFIT PLANS
Vencor maintains defined contribution retirement plans covering employees who
meet certain minimum eligibility requirements. Benefits are determined as a
percentage of a participant's contributions and are generally vested based upon
length of service. Retirement plan expense was $9.7 million for 1995, $7
million for 1994 and $5.9 million for 1993. Amounts equal to retirement plan
expense are funded annually.
F-16
<PAGE>
VENCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13--ACCRUED LIABILITIES
A summary of other accrued liabilities at December 31 follows (dollars in
thousands):
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Interest.................................................... $ 3,582 $10,843
Taxes other than income..................................... 22,000 18,111
Patient accounts............................................ 13,319 10,101
Merger costs................................................ 19,071 -
Other....................................................... 17,645 18,338
------- -------
$75,617 $57,393
======= =======
</TABLE>
NOTE 14--SPIN-OFF AND RELATED TRANSACTIONS
Hillhaven became an independent public company in January 1990 as a result of
a spin-off transaction with Tenet (formerly National Medical Enterprises,
Inc.). The following is a summary of significant transactions with Tenet.
Financing--Certain long-term debt was financed by Tenet at the time of the
spin-off. As part of the recapitalization discussed in Note 8, Hillhaven repaid
all debt due Tenet in the aggregate amount of $147.2 million. In addition, debt
which had been guaranteed by Tenet totaling $266.7 million was also retired.
Interest expense paid to Tenet totaled $7.1 million in 1993.
Debt guarantees--Tenet and Hillhaven are parties to a guarantee agreement
under which Hillhaven pays a fee to Tenet in consideration for Tenet's
guarantee of certain Hillhaven obligations. Such fees totaled $3.8 million in
1995, $5 million in 1994 and $9.6 million in 1993.
Insurance--Prior to June 1, 1994, substantially all of the professional and
general liability risks of Hillhaven were insured by a subsidiary of Tenet.
Provisions for loss were $3.1 million in 1994 and $7.3 million in 1993.
Leases--At the time of the spin-off, 115 nursing centers were leased by
Hillhaven from Tenet. By the end of 1993, all such properties had been
purchased by Hillhaven. Interest expense related to these leases totaled $19.9
million in 1993. Vencor also leases certain nursing centers from a joint
venture in which Tenet has a minority interest. Lease payments to the joint
venture aggregated $9.9 million, $9.3 million and $9.7 million for 1995, 1994
and 1993, respectively.
Equity ownership--At December 31, 1995, Tenet owned 8,301,067 shares of
Vencor common stock. Prior to the Hillhaven Merger, Tenet also owned all of the
outstanding Series C and Series D Preferred Stock.
Management agreements--Fees paid by Tenet for management, consulting and
advisory services in connection with the operations of seven nursing centers
owned or leased by Tenet aggregated $2.7 million in 1995, $2.5 million in 1994
and $2.4 million in 1993.
NOTE 15--FAIR VALUE DATA
A summary of fair value data at December 31 follows (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994
----------------- -----------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Cash and cash equivalents.............. $ 35,182 $ 35,182 $ 39,018 $ 39,018
Notes receivable....................... 88,729 89,992 85,071 78,171
Long-term debt, including amounts due
within one year....................... 787,672 777,090 789,701 819,439
</TABLE>
F-17
<PAGE>
VENCOR, INC.
QUARTERLY CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1995
--------------------------------------------
FIRST SECOND THIRD FOURTH
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues....................... $552,178 $578,314 $575,339 $618,125
Net income (loss):
Income (loss) from operations
(a).......................... 21,172 21,087 (62,887) 28,991
Extraordinary loss on extin-
guishment of debt............ (66) (2,725) (19,196) (1,265)
Net income (loss)........... 21,106 18,362 (82,083) 27,726
Per common share:
Primary earnings (loss):
Income (loss) from opera-
tions....................... .33 .32 (.91) .43
Extraordinary loss on extin-
guishment of debt........... - (.05) (.32) (.02)
Net income (loss)........... .33 .27 (1.23) .41
Fully diluted earnings (loss):
Income (loss) from operations
(a)......................... .31 .30 (.91) .41
Extraordinary loss on extin-
guishment of debt........... - (.04) (.32) (.02)
Net income (loss)........... .31 .26 (1.23) .39
Market prices (b):
High......................... 37 38 36 1/8 33 3/4
Low.......................... 27 1/8 28 1/2 28 1/4 26
<CAPTION>
1994
--------------------------------------------
FIRST SECOND THIRD FOURTH
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues....................... $479,822 $502,582 $519,117 $531,306
Net income:
Income from operations (c).... 15,607 23,440 20,515 26,577
Extraordinary loss on extin-
guishment of debt............ (15) (156) (58) (12)
Net income.................. 15,592 23,284 20,457 26,565
Per common share:
Primary earnings:
Income from operations....... .24 .38 .32 .43
Extraordinary loss on extin-
guishment of debt........... - - - -
Net income.................. .24 .38 .32 .43
Fully diluted earnings:
Income from operations (c)... .24 .35 .31 .38
Extraordinary loss on extin-
guishment of debt........... - - - -
Net income.................. .24 .35 .31 .38
Market prices (b):
High......................... 24 7/8 24 30 3/8 30 5/8
Low.......................... 19 1/8 20 22 3/8 25 3/4
</TABLE>
- --------
(a) Second quarter results include $3.7 million ($.05 per share) of costs
related to the Nationwide Merger. Third quarter loss includes $89.9 million
($1.50 per share) of costs related to the Hillhaven Merger. See Note 4 of
the Notes to Consolidated Financial Statements.
(b) Vencor common stock is traded on the New York Stock Exchange (ticker
symbol--VC).
(c) First quarter results include $1.5 million ($.02 per share) of costs
incurred in connection with the prior disposition of certain nursing
centers. Fourth quarter results include a $4.2 million ($.06 per share)
gain on the sale of assets. See Note 4 of the Notes to Consolidated
Financial Statements.
F-18
<PAGE>
VENCOR, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
-----------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING COSTS AND OTHER DEDUCTIONS AT END
OF PERIOD EXPENSES ACCOUNTS OR PAYMENTS OF PERIOD
---------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Allowances for loss on
accounts and notes
receivable:
Year ended December
31, 1993............. $ 22,803 $ 4,735 $ - $ (6,222) $21,316
Year ended December
31, 1994............. 21,316 9,055 (344)(a) (1,762) 28,265
Year ended December
31, 1995............. 28,265 7,851 - (4,026) 32,090
Allowances for loss on
assets held for
disposition:
Year ended December
31, 1993............. $103,074 $ - $ - $(46,428) $56,646
Year ended December
31, 1994............. 56,646 - (56,646)(a)(b) - -
Year ended December
31, 1995............. - 26,900(c) - - 26,900
</TABLE>
- --------
(a) Adjustment to reflect change in fiscal year of acquired entities.
(b) Includes $54.6 million related to reinstatement of assets previously held
for disposition.
(c) Reflects provision for loss associated with the planned disposition of
certain nursing center properties recorded in connection with the
Hillhaven Merger.
F-19
<PAGE>
EXHIBIT 3.2
SECOND AMENDED AND RESTATED BY-LAWS
OF
VENCOR, INC.
ARTICLE I
OFFICES
-------
1.1. REGISTERED OFFICE. The registered office of the Corporation shall
-----------------
be in the City of Wilmington, County of New Castle, State of Delaware.
1.2. OTHER OFFICES. The Corporation may also have offices at such other
-------------
places both within and without the State of Delaware as the Board of Directors
may from time to time determine or the business of the Corporation may require.
1.3. FISCAL YEAR. The Board of Directors of the Corporation shall have
-----------
the power to fix, and from time to time change, the fiscal year of the
Corporation.
ARTICLE II
STOCKHOLDERS
------------
2.1. ANNUAL MEETING. The annual meeting of the stockholders of the
--------------
Corporation, for the election of directors, the consideration of financial
statements and other reports, and the transaction of such other business as may
properly be brought before such meeting, shall be held no later than six months
following the end of the Corporation's fiscal year. The meeting shall be held
at such time and on such date as may be designated by the Board of Directors of
the Corporation. In the event the annual meeting is not held or if directors
are not elected at the annual meeting, a special meeting may be called and held
for that purpose.
2.2. BUSINESS TO BE CONDUCTED. At an annual meeting of stockholders,
------------------------
only such business shall be conducted, and only such proposals shall be acted
upon, as shall have been properly brought before the annual meeting of
stockholders (a) by, or at the direction of, the Board of Directors or (b) by a
stockholder of the Corporation who complies with the procedures set forth in
Article II. For business or a proposal to be properly brought before an annual
meeting of stockholders by a stockholder, the stockholder must have given timely
notice thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation not less than 60 days nor more
than 90 days prior to the scheduled date of the annual meeting, regardless of
any postponement, deferral or adjournment of that meeting to a later date;
provided, however, that if less than 70 days' notice or prior public disclosure
of the date of the annual meeting is given or made to stockholders, notice by
the stockholder to be timely must be so delivered or received not later than the
close of business on the 10th day following the earlier of (i) the day on which
such notice of the date of the meeting was mailed or (ii) the day on which such
public disclosure was made.
<PAGE>
A stockholder's notice to the Secretary shall set forth as to each matter
the stockholder proposes to bring before an annual meeting of stockholders (i) a
description, in 500 words or less, of the business desired to be brought before
the annual meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and address, as they appear on the Corporation's books,
of the stockholder proposing such business and any other stockholders known by
such stockholder to be supporting such proposal, (iii) the class and number of
shares of the Corporation which are beneficially owned by such stockholder on
the date of such stockholder's notice and by any other stockholders known by
such stockholder to be supporting such proposal on the date of such
stockholder's notice, (iv) a description, in 500 words or less, of any interest
of the stockholder in such proposal, and (v) a representation that the
stockholder is a holder of record of stock of the Corporation and intends to
appear in person or by proxy at the meeting to present the proposal specified in
the notice. Notwithstanding anything in these By-Laws to the contrary, no
business shall be conducted at a meeting of stockholders except in accordance
with the procedures set forth in this Article II.
The chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that the business was not properly brought before the
meeting in accordance with the procedures prescribed by this Article II, and if
he should so determine, he shall so declare to the meeting and any such business
not properly brought before the meeting shall not be transacted.
Notwithstanding the foregoing, nothing in this Article II shall be interpreted
or construed to require the inclusion of information about any such proposal in
any proxy statement distributed by, at the direction of, or on behalf of, the
Board of Directors.
2.3. SPECIAL MEETINGS. Special meetings of stockholders, unless
----------------
otherwise prescribed by statute, may be called at any time only by the Board of
Directors or the Chairman of the Board of the Corporation.
2.4. PLACE OF MEETING. All meetings of the stockholders for the election
----------------
of directors shall be held at such place either within or without the State of
Delaware as shall be designated from time to time by the Board of Directors and
stated in the notice of the meeting. Meetings of stockholders for any other
purpose may be held at such time and place either within or without the State of
Delaware as shall be stated in the notice of such meeting.
2.5. NOTICE OF MEETINGS AND ADJOURNED MEETINGS. Written notice of the
-----------------------------------------
annual meeting or a special meeting stating the place, date and hour of the
meeting and, in the case of a special meeting, the purpose or purposes for which
the meeting is called, shall be given to each stockholder entitled to vote at
such meeting not less than ten (10) nor more than sixty (60) days before the
date of the meeting. When a meeting is adjourned to another time or place,
notice need not be given of the adjourned meeting if the time and place thereof
are announced at the meeting at which the adjournment is taken. At the
adjourned meeting, the Corporation may transact any business which might have
been transacted at the original meeting. If the adjournment is for more than
thirty (30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
2.6. STOCKHOLDERS LIST. The officer who has charge of the stock ledger
-----------------
of the Corporation shall prepare and make, at least ten (10) days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order and showing the address of each
stockholder and the number of shares registered in the name of
2
<PAGE>
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting, either at a place within
the city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
2.7. QUORUM AND ADJOURNMENT. At any meeting of stockholders, the holder
----------------------
of a majority of the issued and outstanding shares of stock entitled to vote
present in person or represented by proxy shall constitute a quorum. If,
however, such quorum shall not be present or represented at any meeting of the
stockholders, the chairman of the meeting or a majority of the stockholders
entitled to vote at the meeting, present in person or represented by proxy,
shall have power to adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be presented or
represented.
2.8. VOTING. When a quorum is present or represented at any meeting, the
------
vote of the holders of a majority of the shares of stock having voting power
present in person or represented by proxy shall decide any question brought
before such meeting, unless the question is one upon which by express provision
of the Delaware General Corporation Law or of the Certificate of Incorporation
or of these By-Laws a different vote is required, in which case such express
provision shall govern and control the decision of such question.
2.9. PROXIES. At each meeting of the stockholders, each stockholder
-------
shall, unless otherwise provided by the Certificate of Incorporation, be
entitled to one vote in person or by proxy for each share of stock held by him
which has voting power upon the matter in question, but no proxy shall be voted
after three years from its date, unless the proxy provides for a longer period.
2.10. ACTION OF STOCKHOLDERS WITHOUT A MEETING.
----------------------------------------
A. Whenever the vote of stockholders at a meeting thereof is
required or permitted to be taken for or in connection with any corporate
action, whether by any provision of the Delaware General Corporation Law or of
the Certificate of Incorporation or these By-Laws or otherwise, such corporate
action may be taken without a meeting, without prior notice and without a vote,
if a consent in writing, setting forth the action so taken, shall be signed by
the holders of eighty percent of outstanding stock. Prompt notice of the taking
of the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
B. In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten (10) days after the date
upon which the resolution fixing the record date is adopted by the Board of
Directors. Any stockholder of record seeking to have the stockholders authorize
or take corporate action by written consent shall, by written notice to the
Secretary, request the Board of Directors to fix a record date. The Board of
Directors shall promptly, but in all events within ten (10) days after the date
on which such a request is received, adopt a resolution fixing the record date.
If no record date has been fixed by the Board of Directors within ten (10) days
of the date on which such a request is received, the record date for determining
stockholders entitled to
3
<PAGE>
consent to corporate action in writing without a meeting, when no prior action
by the Board of Directors is required by applicable law, shall be the first date
on which a signed written consent setting forth the action taken or proposed to
be taken is delivered to the Corporation by delivery to its registered office in
the State of Delaware, its principal place of business, or any officer or agent
of the Corporation having custody of the book in which proceedings of
stockholders meetings are recorded, to the attention of the Secretary of the
Corporation. Delivery shall be by hand or by certified or registered mail,
return receipt requested. If no record date has been fixed by the Board of
Directors and prior action by the Board of Directors is required by applicable
law, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting shall be at the close of business
on the date on which the Board of Directors adopts the resolution taking such
prior action.
ARTICLE III
BOARD OF DIRECTORS
------------------
3.1. MANAGEMENT OF CORPORATION. The business affairs of the Corporation
-------------------------
shall be managed by its Board of Directors.
3.2. NUMBER OF DIRECTORS. The number of directors of the Corporation
-------------------
(exclusive of directors to be elected by the holders of one or more series of
the Preferred Stock of the Corporation which may be outstanding, voting
separately as a series or class) shall be fixed from time to time by action of
not less than a majority of the members of the Board of Directors then in
office, but in no event shall be less than three nor more than eleven.
3.3. ELECTION OF DIRECTORS. The directors shall be elected at the annual
---------------------
meeting of stockholders, or if not so elected, at a special meeting of
stockholders called for that purpose; provided, however, that if the Corporation
shall have no stockholders, directors may be appointed by the incorporators. At
any meeting of stockholders at which directors are to be elected, only persons
nominated as candidates shall be eligible for election, and the candidates
receiving the greatest number of votes shall be elected.
3.4. TERM. Each director shall hold office until the next annual meeting
----
of the stockholders and until his successor has been elected or until his
earlier resignation, removal from office, or death.
3.5. REMOVAL. Any director or the entire Board of Directors may be
-------
removed with or without cause, at any time, by the affirmative vote of the
holders of record of a majority of the outstanding shares of stock entitled to
vote in the election of directors, at a special meeting of the stockholders
called for the purpose.
3.6. VACANCIES. Any vacancy occurring on the Board of Directors for any
---------
reason, including, but not limited to, the resignation, removal, or death of a
director or an increase in the number of authorized directors, a majority of the
directors remaining in office, although less than a quorum, may elect a
successor for the unexpired term and until his successor is elected and
qualified.
3.7. ANNUAL MEETING. After each annual election of directors, on the
--------------
same day, the Board of Directors may meet for the purpose of organization, the
election of officers and the
4
<PAGE>
transaction of such other business at the place where the annual meeting of the
stockholders for the election of directors is held. Notice of such meeting need
not be given. Such meeting may be held at any other time or place which shall be
specified in a notice given as hereinafter provided for special meetings of the
Board of Directors or in a consent and waiver of notice thereof signed by all
the directors.
3.8. REGULAR MEETINGS. Regular meetings of the Board of Directors may be
----------------
held at such places either within or without the State of Delaware and at such
time as the Board shall by resolution determine. If any day fixed for a regular
meeting shall be a legal holiday at the place where the meeting is to be held,
then the meeting which would otherwise be held on that day shall be held at such
place at the same hour and on the next succeeding business day not a legal
holiday. Notice of regular meetings need not be given.
3.9. SPECIAL MEETINGS. Special meetings of the Board of Directors shall
----------------
be held whenever called by the Chairman of the Board, Chief Executive Officer, a
majority of the directors or stockholders owning a majority in amount of the
entire capital stock of the Corporation issued and outstanding and entitled to
vote. Notice of each such meeting shall be given to each director, at least 24
hours before the day on which the meeting is to be held, in accordance with
Article IV of these By-Laws. Each such notice shall state the time and place
either within or without the State of Delaware of the meeting but need not state
the purpose thereof, except as otherwise provided by the Delaware General
Corporation Law or by these By-Laws. Notice of any meeting of the Board need not
be given to any director who is present at such meeting; and any meeting of the
Board shall be a legal meeting without any notice thereof having been given if
all of the directors then in office are present at the meeting unless a director
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened.
3.10. QUORUM. Except as otherwise provided by the Delaware General
------
Corporation Law or by the Certificate of Incorporation, a majority of the total
number of directors shall be required to constitute a quorum for the transaction
of business at any meeting, and the affirmative vote of a majority of the
directors present at a meeting at which a quorum is present shall be necessary
for the adoption of any resolution or the taking of any other action.
3.11. TELEPHONE COMMUNICATIONS. Members of the Board of Directors or any
------------------------
committee thereof may participate in a meeting of such Board or committee by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this subsection shall constitute presence
in person at such meeting.
3.12. ACTION OF DIRECTORS WITHOUT A MEETING. Any action required or
-------------------------------------
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting if all members of the Board or
of such committee, as the case may be, consent thereto in writing and such
written consent is filed with the minutes of proceedings of the Board or such
committee.
3.13. COMPENSATION. By resolution of the Board of Directors, each
------------
director may be paid his expenses, if any, of attendance at each meeting of the
Board of Directors and may be paid a stated annual stipend as director or a
fixed sum for attendance at each meeting of the Board of Directors. No such
payment shall preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor.
5
<PAGE>
3.14. COMMITTEES. The Board of Directors may, by resolution passed by a
----------
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the Corporation. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. Any
such committee, to the extent provided in the resolution and not prohibited by
the Delaware General Corporation Law, shall have and may exercise the powers of
the Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it, and shall have the power and authority to declare a
dividend, to authorize the issuance of stock, and to adopt a certificate of
ownership and merger pursuant to Section 253 of the Delaware General Corporation
Law. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of Directors.
Each committee shall keep regular minutes of its meetings and report the same to
the Board of Directors when required.
3.15. GOVERNING BODIES. Each hospital owned or operated by the
----------------
Corporation shall have a governing body consisting of three persons (the
"Governing Board"). Unless the Board of Directors otherwise directs, the
Governing Board for each hospital operated or owned by the Corporation shall be
comprised of the Corporation's Vice President, Finance; Vice President,
Operations; and the local hospital administrator. To the extent not prohibited
by Delaware law or by resolution of the Board of Directors, the Governing Board
of each hospital shall have the authority, and shall be responsible for, the
day-to-day operations and conduct of the hospital as an institution.
Additionally, the Governing Board shall carry out, with respect to the hospital,
the functions specified in 42 C.F.R. Part 482, as may be amended from time to
time or any successor section thereto, as such section may pertain to the
governing bodies of the hospitals.
ARTICLE IV
NOTICES
-------
4.1. NOTICES. Whenever, under the provisions of the Delaware General
-------
Corporation Law or of the Certificate of Incorporation or of these By-Laws,
notice is required to be given to any director or stockholder, such notice shall
be in writing, and shall be hand-delivered or sent by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
Corporation, with postage thereon pre-paid, and such notice shall be deemed to
be given at the time when the same shall be deposited in the United States mail
or, in the case of notice mailed from the United States to an overseas address,
ten (10) days after the same is deposited in the United States mail. Notice to
directors may also be given orally, in person or by telephone, or by telegram or
telex, and such notice shall be deemed to be given upon transmission, in the
case of a notice by telegram, or upon receipt of the answer back of the telex
machine of the receiving party, in the case of a notice by telex.
4.2. WAIVER OF NOTICE. Whenever any notice is required to be given under
----------------
the provisions of the Delaware General Corporation Law or of the Certificate of
Incorporation or of these By-Laws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
6
<PAGE>
ARTICLE V
OFFICERS
--------
5.1. OFFICERS. The officers of the Corporation shall be a Chairman of
--------
the Board, Vice Chairman, Chief Executive Officer, President, one or more Vice
Presidents, a Secretary, a Treasurer, and, if the Board shall so determine, an
Assistant Secretary and an Assistant Treasurer. Any two or more offices may be
held by the same person.
5.2. ELECTION OF OFFICERS. The officers shall be elected by the Board of
--------------------
Directors and each shall hold office at the pleasure of the Board of Directors
until his successor shall have been duly elected and qualified, or until his
death, or until he shall resign or until he shall have been removed in the
manner hereinafter provided.
5.3. OTHER OFFICERS. In addition to the officers named in Article I, the
--------------
Corporation may have such other officers and agents as may be deemed necessary
by the Board of Directors. Such other officers and agents shall be appointed in
such manner, have such duties and hold their offices for such terms, as may be
determined by resolution of the Board of Directors.
5.4. RESIGNATION. Any officer may resign at any time by giving written
-----------
notice of his resignation to the Board of Directors or to the Chairman of the
Board of the Corporation. Any such resignation shall take effect at the time
specified therein; and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
5.5. REMOVAL. Any officer may be removed, either with or without cause,
-------
by action of the Board of Directors.
5.6. VACANCY. A vacancy in any office because of death, resignation,
-------
removal or any other cause shall be filled by the Board of Directors.
5.7. CHAIRMAN OF THE BOARD. The Chairman of the Board shall preside at
---------------------
all meetings of the stockholders and of the Board of Directors. Unless the Board
of Directors designates otherwise, the Chairman shall be the Chief Executive
Officer of the Corporation. He may sign certificates for shares of stock of the
Corporation, any deeds, mortgages, bonds, contracts, or other instruments which
the Board of Directors has authorized to be executed, except in cases where the
signing and execution thereof shall be expressly delegated by the Board of
Directors or by these By-Laws to some other officer or agent of the Corporation,
or shall be required by law to be otherwise signed or executed. The Chairman of
the Board shall, in general, perform all duties incident to the office of
chairman of the board and such other duties as may be set forth in the By-Laws
or may be prescribed by the Board of Directors from time to time.
5.8. PRESIDENT. In the absence of the Chairman of the Board, the
---------
President shall preside at meetings of the stockholders and of the Board of
Directors. If the Board of Directors does not appoint a Chairman of the Board,
the President shall have the authority given the Chairman of the Board in these
By-Laws and shall be considered the Chief Executive Officer of the Corporation
unless the Board of Directors otherwise designates. The President may sign, with
the Secretary or an Assistant Secretary, certificates for shares of stock of the
Corporation; and shall perform such other duties as from time to time may be
assigned to him by the Chairman of the Board or by the Board of Directors.
7
<PAGE>
5.9. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall have
-----------------------
direct charge of the business of the Corporation, subject to the general control
of the Board of Directors, and shall be the chief executive officer of the
Corporation unless otherwise determined by the Board of Directors. The Chief
Executive Officer shall have direct charge of the daily operational aspects of
the Corporation's business, unless otherwise determined by the Board of
Directors, and shall have such other duties as may be assigned to him from time
to time by the Board of Directors or its Chairman.
5.10. VICE PRESIDENT. In the absence of the President, or in the event of
--------------
his inability or refusal to act, the Vice President (or, in the event there be
more than one Vice President, the Vice Presidents in the order designated at the
time of their election, or in the absence of any designation, then in the order
of their election), shall perform all the duties of the President and such other
duties as from time to time may be assigned by the Board of Directors. The Vice
President may sign, with the Secretary or an Assistant Secretary, certificates
for shares of stock of the Corporation.
5.11. TREASURER. The Treasurer shall have charge and custody of and be
---------
responsible for all funds and securities of the Corporation; receive and give
receipts for monies due and payable to the Corporation from any source
whatsoever, and deposit all such monies in the name of the Corporation in such
banks, trust companies and other depositories as shall be selected in accordance
with the provisions of Section 6.3; and, in general, perform all the duties
incident to the office of Treasurer and such other duties as from time to time
may be assigned to him by the Chairman of the Board, the Chief Executive Officer
or the Board of Directors. If required by the Board of Directors, the Treasurer
shall give a bond for the faithful discharge of his duties in such sum and with
such surety or sureties as the Board of Directors shall determine.
5.12. SECRETARY. The Secretary shall (a) keep the minutes of the
---------
stockholders' meetings and of the Board of Directors' meetings in one or more
books provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these By-Laws or as required by law; (c) be
custodian of the corporate records and of the seal, if any, of the Corporation;
(d) keep a register of the mailing address of each stockholder; (e) sign with
the Chairman of the Board or Vice-Chairman or President or Vice President
certificates for shares of stock of the Corporation; (f) have general charge of
the stock transfer books of the Corporation; and, in general, perform all duties
as from time to time may be assigned to him by the Chairman of the Board, the
Chief Executive Officer or by the Board of Directors.
5.13. POWERS AND DUTIES. In the absence of any officer of the
-----------------
Corporation, or for any reason the Board of Directors may deem sufficient, the
Board of Directors may delegate for the time being, the powers or duties of such
officer, or any of them, to any other officer or to any director. The Board of
Directors may from time to time delegate to any officer authority to appoint and
remove subordinate officers and to prescribe their authority and duties.
5.14. COMPENSATION. The compensation of the officers shall be fixed from
------------
time to time by the Board of Directors. Nothing contained herein shall preclude
any officer from serving the Corporation in any other capacity, including that
of director, or from serving any of its stockholders, subsidiaries or affiliated
corporations in any capacity, and receiving proper compensation therefor.
8
<PAGE>
ARTICLE VI
LOANS, CHECKS, DEPOSITS, ETC.
-----------------------------
6.1. GENERAL. All checks, drafts, bills of exchange or other orders for
-------
the payment of money, issued in the name of the Corporation, shall be signed by
such person or persons and in such manner as may from time to time be designated
by the Board of Directors, which designation may be general or confined to
specific instances.
6.2. LOANS AND EVIDENCES OF INDEBTEDNESS. No loan shall be contracted on
-----------------------------------
behalf of the Corporation, and no evidence of indebtedness shall be issued in
its name, unless authorized by the Board of Directors. Such authorization may be
general or confined to specific instances. Loans so authorized by the Board of
Directors may be effected at any time for the Corporation from any bank, trust
company or other institution, or from any firm, corporation or individual. All
bonds, debentures, notes and other obligations or evidences of indebtedness of
the Corporation issued for such loans shall be made, executed and delivered as
the Board of Directors shall authorize. When so authorized by the Board of
Directors, any part of or all the properties, including contract rights, assets,
business or good will of the Corporation, whether then owned or thereafter
acquired, may be mortgaged, pledged, hypothecated or conveyed or assigned in
trust as security for the payment of such bonds, debentures, notes and other
obligation or evidences of indebtedness of the Corporation, and of the interest
thereon, by instruments executed and delivered in the name of the Corporation.
6.3. BANKING. All funds of the Corporation not otherwise employed shall
-------
be deposited from time to time to the credit of the Corporation in such banks,
trust companies or other depositories as the Board of Directors may authorize.
The Board of Directors may make such special rules and regulations with respect
to such bank accounts, not inconsistent with the provisions of these By-Laws, as
it may deem expedient. For the purpose of deposit and for the purpose of
collection for the account of the Corporation, checks, drafts and other orders
for the payment of money which are payable to the order of the Corporation shall
be endorsed, assigned and delivered by such person or persons and in such manner
as may from time to time be authorized by the Board of Directors.
6.4. SECURITIES HELD BY THE CORPORATION. Unless otherwise provided by
----------------------------------
resolution adopted by the Board of Directors, the Chairman of the Board may from
time to time appoint an attorney or attorneys, or an agent or agents, to
exercise in the name and on behalf of the Corporation the powers and rights
which the Corporation may have as the holder of stock or other securities in any
other corporation to vote or to consent in respect of such stock or other
securities; and the Chairman of the Board may instruct the person or persons so
appointed as to the manner of exercising such powers and rights and the Chairman
of the Board may execute or cause to be executed in the name and on behalf of
the Corporation and under its corporate seal, or otherwise, all such written
proxies, powers of attorney or other written instruments as he may deem
necessary in order that the Corporation may exercise such powers and rights.
9
<PAGE>
ARTICLE VII
STOCK CERTIFICATES
------------------
7.1. STOCK CERTIFICATES. Every stockholder shall be entitled to have a
------------------
certificate certifying the number of shares of stock of the Corporation owned by
him, signed by, or in the name of the Corporation by the Chairman of the Board,
or Vice-Chairman, President or a Vice President and by the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary of the
Corporation (except that when any such certificate is countersigned by a
transfer agent other than the Corporation or its employee or by a registrar
other than the Corporation or its employee the signature of any such officers
may be facsimiles). If the Corporation shall be authorized to issue more than
one class of stock or more than one series of any class, the designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, provided that, except in the
case of restrictions on transfer of securities which are required to be noted on
the certificate, in lieu of the foregoing requirements, there may be set forth
on the face or back of the certificate which the Corporation shall issue to
represent such class or series of stock, a statement that the Corporation will
furnish without charge to each stockholder who so requests the designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights.
7.2. LOST, STOLEN OR DESTROYED CERTIFICATES. The Board of Directors may
--------------------------------------
direct a new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate or certificates, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative, to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate alleged
to have been lost, stolen or destroyed.
7.3. RECORD DATES. In order that the Corporation may determine the
------------
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty (60) nor less than ten (10) days before the
date of such meeting, nor more than sixty (60) days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
7.4. PROTECTION OF CORPORATION. The Corporation shall be entitled to
-------------------------
recognize the exclusive right of a person registered on its books as the owner
of stock to receive dividends and shall not be bound to recognize any equitable
or other claim to or interest in such stock on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of the State of Delaware.
10
<PAGE>
ARTICLE VIII
CORPORATE SEAL
--------------
The Corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization and the words "Corporate Seal
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE IX
EMERGENCY REGULATIONS
---------------------
The Board of Directors may adopt, either before or during an emergency, as
that term is defined by the Delaware General Corporation Law, any emergency
regulations permitted by the Delaware General Corporation Law which shall be
operative only during an emergency. In the event the Board of Directors does not
adopt any such emergency regulations, the special rules provided in the Delaware
General Corporation Law shall be applicable during an emergency as therein
defined.
ARTICLE X
AMENDMENTS
----------
These By-Laws may be amended or repealed or new by-laws adopted (a) by the
affirmative vote of the holders of at least 66 2/3% of the voting power of all
shares of the Corporation entitled to vote generally in the election of
directors, voting together as a single class or (b) by action of the Board of
Directors at a regular or special meeting thereof. Any by-law made by the Board
of Directors may be amended or repealed by action of the stockholders at any
annual or special meeting of stockholders.
11
<PAGE>
EXHIBIT 4.1
COMMON STOCK
NUMBER INCORPORATED UNDER THE LAWS SHARES
CU OF THE STATE OF DELAWARE
THIS CERTIFICATE IS TRANSFERABLE CUSIP 922602 10 7
IN CLEVELAND, OHIO OR IN
NEW YORK, NEW YORK SEE REVERSE FOR CERTAIN
DEFINITIONS
VENCOR, INC.
This Certifies that
is the owner of
FULLY-PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF
CERTIFICATE OF STOCK
Vencor, Inc., transferable on the books of the Corporation
by the holder hereof in person or by duly authorized attorney
[SEAL] upon surrender of this certificate properly endorsed. This
certificate is not valid unless countersigned and registered
by the Transfer Agent and Registrar.
Witness the signatures of the duly authorized officers of
the Corporation.
Dated 9-14-95
Countersigned and Registered:
NATIONAL CITY BANK
(Cleveland, Ohio) Transfer Agent
By and Registrar, [ILLEGIBLE]
Secretary President
Authorized Signature.
<PAGE>
VENCOR, INC.
TERMS AND PROVISIONS OF AUTHORIZED STOCK
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF OF THE
CORPORATION AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH
PREFERENCES AND/OR RIGHTS. SUCH REQUEST MAY BE MADE TO THE OFFICE OF THE
SECRETARY OF THE CORPORATION OR TO THE TRANSFER AGENT.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - __________ Custodian __________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right under Uniform Gifts to Minors Act
of survivorship and not as _________________________________
tenants in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received, ____________________________________ hereby sell,
assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
________________________________________________________________________________
________________________________________________________________________________
Please print or typewrite name and address including postal zip code of assignee
________________________________________________________________________________
_________________________________________________________________________ Shares
of the capital stock represented by the within certificate,
and do hereby irrevocably constitute and appoint
-----------
_______________________________________________________________________ attorney
to transfer the said stock on the books of the within-named
Corporation with full power of substitution in the premises.
Dated: ____________________________
_________________________________________
NOTICE: The signature to this assignment
must correspond with the name as written
upon the face of the certificate in
every particular without alteration or
enlargement or any change whatever.
_________________________________________
The signature should be guaranteed by an
eligible guarantor institution pursuant
to S.E.C. Rule 17Ad-15.
This certificate also evidences and entitles the holder hereof to certain rights
as set forth in a Rights Agreement between Vencor, Inc. and National City Bank,
as Rights Agent, dated as of July 20, 1993 (the "Rights Agreement"), the terms
of which are hereby incorporated herein by reference and a copy of which is on
file at the principal executive offices of Vencor, Inc. Under certain
circumstances, as set forth in the Rights Agreement, such Rights will be
evidenced by separate certificates and will no longer be evidenced by this
certificate. Vencor, Inc. will mail to the holder of this certificate a copy of
the Rights Agreement without charge after receipt of a written request therefor.
Under certain circumstances set forth in the Rights Agreement, Rights issued to,
or held by, any Person who is, was or becomes an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement) and certain
related persons, whether currently held by or on behalf of such Person or by any
subsequent holder, may become null and void.
<PAGE>
EXHIBIT 4.5
AMENDMENT NO. 3 TO CREDIT AGREEMENT
AMENDMENT NO. 3 dated as of November 27, 1995 to the Credit Agreement
dated as of September 11, 1995 among Vencor, Inc., the other Borrowers referred
to therein and the Banks, Co-Agents, LC Issuing Banks and Agents referred to
therein, as heretofore amended (the "Credit Agreement").
WHEREAS terms defined in the Credit Agreement have the same respective
meanings when used herein;
WHEREAS Vencor desires to (i) purchase shares of its own common stock
and/or (ii) purchase securities of Tenet Healthcare Corporation convertible into
or exchangeable for shares of Vencor's common stock; and
WHEREAS Vencor has asked the Banks to amend Section 5.11 of the Credit
Agreement to permit Vencor to make the foregoing purchases for an aggregate
purchase price up to $50,000,000 without restricting Vencor's ability to make
any other Restricted Payments;
NOW, THEREFORE, the undersigned parties hereto agree as follows:
SECTION 1. Restricted Payments. Section 5.11 of the Credit Agreement
-------------------
is amended as follows:
1. Clause (d) of Section 5.11 is redesignated as clause (e) and the
word "and" at the end of clause (c) is deleted.
2. The following new clause (d) is added to Section 5.11 immediately
after clause (c):
(d) payments after November 27, 1995 to (i) purchase common stock of
Vencor and/or (ii) purchase securities of Tenet Healthcare Corporation
convertible into or exchangeable for common stock of Vencor; provided that
--------
the aggregate purchase price for all such common stock and securities
purchased pursuant to this clause (d) shall not exceed $50,000,000; and
3. The reference in the proviso at the end of Section 5.11 to "clause
(c) or (d)" is changed to "clause (c), (d) or (e)".
4. The first page of the exhibit entitled "Calculation of Compliance
with Financial Covenants" included in Exhibit E to the Credit Agreement is
deleted and replaced by the first page of such exhibit attached hereto.
<PAGE>
SECTION 2. Transactions with Affiliates. The undersigned parties
----------------------------
hereby waive compliance with the provisions of Section 5.13 of the Credit
Agreement to the extent (and only to the extent) required to permit Vencor to
purchase directly from Tenet Healthcare Corporation any or all of the securities
convertible into or exchangeable for Vencor's common stock permitted to be
purchased pursuant to Section 5.11(d) of the Credit Agreement as amended hereby.
SECTION 3. Rights Otherwise Unaffected. This Amendment is limited
---------------------------
to the matters expressly set forth herein. Except to the extent specifically
amended or waived hereby, all terms of the Credit Agreement shall remain in full
force and effect.
SECTION 4. Governing Law. This Amendment shall be governed by and
-------------
construed in accordance with the laws of the State of New York.
SECTION 5. Counterparts. This Amendment may be signed in any number
------------
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
SECTION 6. Effectiveness. This Amendment shall become effective
-------------
when the Documentation Agent shall have received from each of the Required Banks
and each of the Borrowers either a counterpart hereof signed by such party or
telegraphic, telex or other written confirmation from such party that it has
signed a counterpart hereof.
IN WITNESS WHEREOF, the undersigned parties have caused this Amendment
to be duly executed as of the date first above written.
BORROWERS
---------
VENCOR, INC.
By: /s/ Robert K. Schneider
--------------------------------
Name: Robert K. Schneider
Title: Treasurer
FIRST HEALTHCARE CORPORATION
By: /s/ Robert K. Schneider
--------------------------------
Name: Robert K. Schneider
Title: Treasurer
2
<PAGE>
NORTHWEST HEALTH CARE, INC.
By: /s/ Robert K. Schneider
--------------------------------
Name: Robert K. Schneider
Title: Treasurer
MEDISAVE PHARMACIES, INC.
By: /s/ Robert K. Schneider
--------------------------------
Name: Robert K. Schneider
Title: Treasurer
HILLHAVEN PROPERTIES, LTD.
By: /s/ Robert K. Schneider
--------------------------------
Name: Robert K. Schneider
Title: Treasurer
HILLHAVEN OF CENTRAL FLORIDA, INC.
By: /s/ Robert K. Schneider
--------------------------------
Name: Robert K. Schneider
Title: Treasurer
NATIONWIDE CARE, INC.
By: /s/ Robert K. Schneider
--------------------------------
Name: Robert K. Schneider
Title: Treasurer
3
<PAGE>
BANKS
-----
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ Ruth Z. Edwards
--------------------------------
Name: Ruth Z. Edwards
Title: Vice President
THE BANK OF NEW YORK
By: /s/ Douglas Ober
--------------------------------
Name: Douglas Ober
Title: Vice President
CHEMICAL BANK
By: /s/ Peter C. Eckstein
--------------------------------
Name: Peter C. Eckstein
Title: Vice President
CREDIT SUISSE
By: /s/ Harry R. Olsen
--------------------------------
Name: Harry R. Olsen
Title: Member of Senior Management
By: /s/ Kristinn R. Kristinsson
--------------------------------
Name: Kristinn R. Kristinsson
Title: Associate
MELLON BANK, N.A.
By: /s/ Marsha Wicker
--------------------------------
Name: Marsha Wicker
Title: Vice President
4
<PAGE>
PNC BANK, KENTUCKY, INC.
By: /s/ Todd D. Munson
--------------------------------
Name: Todd D. Munson
Title: Vice President
TORONTO-DOMINION (TEXAS), INC.
By: /s/ Lisa Allison
--------------------------------
Name: Lisa Allison
Title: Vice President
WACHOVIA BANK OF NORTH CAROLINA,
N.A.
By: /s/ Robert G. Brookby
--------------------------------
Name: Robert G. Brookby
Title: Executive Vice President
BANK OF LOUISVILLE AND TRUST
COMPANY
By: /s/ Roy L. Johnson, Jr.
--------------------------------
Name: Roy L. Johnson, Jr.
Title: Senior Vice President
BANK ONE, COLUMBUS, NA
By: /s/ James Zook
--------------------------------
Name: James Zook
Title: Vice President
5
<PAGE>
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By: /s/ Joseph H. Towell
--------------------------------
Name: Joseph H. Towell
Title: Senior Vice President
FLEET BANK OF MASSACHUSETTS
By: /s/ Ginger Stolzenthaler
--------------------------------
Name: Ginger Stolzenthaler
Title: Vice President
LTCB TRUST COMPANY
By: /s/ Rene O. LeBlanc
--------------------------------
Name: Rene O. LeBlanc
Title: Senior Vice President
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ Diana H. Imhof
--------------------------------
Name: Diana H. Imhof
Title: Vice President
NATIONAL CITY BANK, KENTUCKY
By: /s/ Deroy Scott
--------------------------------
Name: Deroy Scott
Title: Vice President
6
<PAGE>
NATIONSBANK, N. A.
By: /s/ Ashley M. Crabtree
--------------------------------
Name: Ashley M. Crabtree
Title: Vice President
NBD BANK
By: /s/ Randall K. Stephens
--------------------------------
Name: Randall K. Stephens
Title: Vice President
U.S. BANK OF WASHINGTON NATIONAL
ASSOCIATION
By: /s/ Arnold J. Conrad
------------------------------
Name: Arnold J. Conrad
Title: Vice President
7
<PAGE>
CALCULATION OF COMPLIANCE WITH FINANCIAL COVENANTS
(Dollars in Thousands)
[Date]
RESTRICTED PAYMENTS [Section 5.11]
- ----------------------------------
Restricted Payments Made Pursuant to Section 5.11(d):
Cumulative amount in prior periods $___________
Current fiscal quarter $___________
Total cumulative amount $___________
Restricted Payments Allowed
Pursuant to Section 5.11(d): $50,000,000
Restricted Payments Made
Pursuant to Section 5.11(e):
Cumulative amount in prior periods $___________
Current fiscal quarter $___________
Total cumulative amount $___________
Restricted Payments Allowed
Pursuant to Section 5.11(e):
Base amount $20,000,000
10% of cumulative Consolidated
Net Income from October 1, 1995 $___________
Net cash proceeds of common stock
sold after Closing Date $___________
Total allowable amount $___________
8
<PAGE>
EXHIBIT 4.6
================================================================================
WARRANT AND REGISTRATION RIGHTS AGREEMENT
dated as of January 31, 1990
among
NATIONAL MEDICAL ENTERPRISES, INC.
and
THE HILLHAVEN CORPORATION
and
MANUFACTURERS HANOVER TRUST COMPANY OF CALIFORNIA, Warrant Agent
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
ARTICLE I - WARRANTS............................................ 2
Section 1. Issuance of Warrants; Registration of
New Hillhaven Common Stock; Form of
Warrant Certificates........................... 2
Section 2. Appointment of Warrant Agent................... 2
Section 3. Countersignature and Registration.............. 3
Section 4. Transfer, Split Up, Combination and
Exchange of Warrant Certificates;
Mutilated, Destroyed, Lost or Stolen
Warrant Certificates........................... 3
Section 5. Subsequent Issue of Warrant
Certificates................................... 4
Section 6. Exercise of Warrants; Purchase Price........... 4
Section 7. Cancellation and Destruction of
Warrant Certificates........................... 5
Section 8. Reservation and Availability of Shares
of New Hillhaven Common Stock;
Legending...................................... 6
Section 9. Common Stock Record Date....................... 7
Section 10. Adjustment of Purchase Price or
Number of Shares............................... 7
Section 11. Certification of Adjusted Purchase
Price and Number of Shares Issuable............ 12
Section 12. Consolidation, Merger or Sale of
Assets......................................... 12
Section 13. Fractional Shares.............................. 13
Section 14. Right Of Action................................ 13
Section 15. Agreement Of Warrant Certificate
Holders........................................ 13
Section 16. Concerning the Warrant Agent................... 14
Section 17. Merger or Consolidation Or Change of
Name of Warrant Agent.......................... 14
Section 18. Duties of Warrant Agent........................ 15
Section 19. Change of Warrant Agent........................ 17
Section 20. Issuance of New Warrant Certificates........... 18
Section 21. Notice of Proposed Actions..................... 19
ARTICLE II - REGISTRATION RIGHTS................................ 20
Section 1. Demand Registrations........................... 20
Section 2. Participation Registrations.................... 21
Section 3. Certain Covenants of New Hillhaven ............ 22
Section 4. Expenses....................................... 24
Section 5. Indemnification................................ 25
Section 6. Modification of Certain Registration
Rights......................................... 27
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE III - GENERAL........................................... 28
Section 1. Notices, etc................................... 28
Section 2. Supplements and Amendments..................... 29
Section 3. Successors and Assigns......................... 29
Section 4. Governing Law.................................. 29
Section 5. Assignment..................................... 29
Section 6. Titles and Headings............................ 29
Section 7. Entire Agreement............................... 29
Section 8. Counterparts................................... 30
Exhibit A Form of Warrant Certificate....................A-I
</TABLE>
ii
<PAGE>
WARRANT AND REGISTRATION RIGHTS AGREEMENT dated as of January 31, 1990
(this "Agreement") among NATIONAL MEDICAL ENTERPRISES, INC., a Nevada
corporation ("NME"), THE HILLHAVEN CORPORATION, a Nevada corporation ("New
Hillhaven"), and MANUFACTURERS HANOVER TRUST COMPANY OF CALIFORNIA, a California
corporation, as Warrant Agent (the "Warrant Agent")
__________________________
WHEREAS, NME and New Hillhaven have entered into a Reorganization and
Distribution Agreement (as amended to the date hereof, the "Distribution
Agreement") providing for a reorganization of certain of the businesses
heretofore conducted by NME's long term care group and a pro rata distribution
to the holders of NME's capital stock, as of the record date established by NME
in connection therewith, of approximately 85% of the outstanding shares of
common stock, par value $0.15 per share ("New Hillhaven Common Stock"), of New
Hillhaven (the "Distribution") on January 31, 1990 (the "Distribution Date")
and, in connection therewith, NME will retain approximately 14.4 million shares,
or approximately 15%, of such stock; and
WHEREAS, in connection with the Distribution, New Hillhaven will issue
to NME warrants (the "Warrants") to purchase shares of New Hillhaven Common
Stock upon the terms and subject to the conditions set forth in this Agreement;
and
WHEREAS, NME and New Hillhaven acknowledge that subsequent to the
Distribution NME may wish to dispose of all or part of the New Hillhaven Common
Stock retained by it or acquired by it pursuant to the exercise of all or part
of the Warrants (such New Hillhaven Common Stock so retained or acquired being
hereinafter referred to as the "Covered Common Stock"); and
WHEREAS, NME and New Hillhaven wish to set forth herein certain
agreements and understandings relating to the terms and conditions of the
issuance and exercise of the Warrants and the registration under the Securities
Act of 1933, as amended (the "Act"), of the Covered Common Stock.
NOW, THEREFORE, in consideration of the mutual covenants made herein
and of the mutual benefits to be derived here from, the parties hereby agree as
follows:
<PAGE>
ARTICLE I
WARRANTS
Section 1. Issuance of Warrants; Registration of New Hillhaven Common
----------------------------------------------------------
Stock; Form of Warrant Certificates. In partial consideration of the assets to
- -----------------------------------
be transferred to New Hillhaven pursuant to the Distribution Agreement between
NME and New Hillhaven, New Hillhaven hereby agrees to issue on the date of the
Distribution, to NME or its designees, Warrants to purchase an aggregate of 30
million shares of New Hillhaven Common Stock. New Hillhaven covenants and
agrees that, as long as the Warrants are outstanding, it will use its best
efforts to (i) maintain the listing of the New Hillhaven Common Stock on the
American Stock Exchange ("ASE") and (ii) make publicly available (within the
meaning of Rule 144 promulgated under the Act) the information referred to in
paragraph (c) of such Rule, as from time to time amended.
Certificates evidencing the Warrants (and the forms of election to
purchase shares and of assignment to be printed on the reverse thereof) shall be
substantially in the form set forth in Exhibit A hereto (the "Warrant
Certificates") and may have such letters, numbers or other marks of
identification or designation and such legends, summaries or endorsements
printed, lithographed or engraved thereon as New Hillhaven may deem appropriate
and as are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any law or with any rule or regulation made pursuant
thereto or with any rule or regulation Of any stock exchange on which the
Warrants may from time to time be listed, or to conform to usage; provided,
however, that no addition to the Warrant Certificates shall substantially change
the nature of or increase the duties, obligations or liabilities of the Warrant
Agent hereunder without the consent of the Warrant Agent. Subject to the
provisions of Section 20, the Warrant Certificates shall be dated as of the date
of issuance thereof by the Warrant Agent, either upon initial issuance or upon
transfer or exchange, and on their face shall entitle the holders thereof to
purchase one share each of New Hillhaven Common Stock at the price per share set
forth therein ("Purchase Price") for each Warrant represented thereby, but the
number of such shares and the Purchase Price per share shall be subject to
adjustments as provided herein.
Section 2. Appointment of Warrant Agent. New Hillhaven hereby
----------------------------
appoints the Warrant Agent to act as its agent in accordance with the terms and
conditions
2
<PAGE>
hereinafter set forth, and the Warrant Agent hereby accepts such appointment.
New Hillhaven may from time to time appoint such Co-Warrant Agents as it may
deem necessary or desirable.
Section 3. Countersignature and Registration. The Warrant
---------------------------------
Certificates shall be executed on behalf of New Hillhaven by its Chairman and
Chief Executive Officer, its Vice Chairman and Deputy Chief Executive Officer,
its President, any Executive Vice President or any Senior Vice President, by
manual or facsimile signature, and have affixed thereto a facsimile of New
Hillhaven's seal which shall be attested by the Secretary or any Assistant
Secretary of New Hillhaven by manual or facsimile signature. The Warrant
Certificates shall be manually countersigned by the Warrant Agent and shall not
be valid for any purpose unless so countersigned in case any officer of New
Hillhaven who shall have signed any of the Warrant Certificates shall cease to
be such officer of New Hillhaven before countersignature by the Warrant Agent
and issuance and delivery by New Hillhaven, such Warrant Certificates,
nevertheless, may be countersigned by the Warrant Agent and issued and delivered
with the same force and effect as though the person who signed such Warrant
Certificates had not ceased to be such officer of New Hillhaven; and any Warrant
Certificate may be signed on behalf of New Hillhaven by any person who, at the
actual date of the execution of such Warrant Certificate, shall be a proper
officer of New Hillhaven to sign such Warrant Certificate, although at the date
of the execution of this Warrant Agreement any such person was not such an
officer.
The Warrant Agent will keep or cause to be kept, at its principal
office in San Francisco, books for registration and transfer of the Warrant
Certificates issued hereunder. Such books shall show the names and addresses of
the respective holders of the Warrant Certificates, and the date of each of the
Warrant Certificates.
Section 4. Transfer, Split Up, Combination and Exchange of Warrant
-------------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Warrant Certificates.
- -----------------------------------------------------------------------
Subject to the provisions of Section 13, any Warrant Certificate, with or
without other Warrant Certificates, may be transferred, split up, combined or
exchanged for another Warrant Certificate or Warrant Certificates, entitling the
registered holder to purchase a like number of shares of New Hillhaven Common
Stock as the Warrant Certificate or Warrant Certificates surrendered then
entitled him to purchase. Any registered holder desiring to transfer, split up,
combine or exchange any Warrant Certificate shall make such request in writing
delivered to the Warrant Agent, and shall surrender the Warrant Certificate or
Warrant Certificates to be trans-
3
<PAGE>
ferred, split up, combine or exchanged at the office of the Warrant Agent
referred to in Section 3. Thereupon (subject to receipt of payment of any sum
referred to in the next sentence) the Warrant Agent shall countersign and
deliver to the person entitled thereto a Warrant Certificate or Warrant
Certificates, as the case may be, as so requested. New Hillhaven or the Warrant
Agent may require payment of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer, split up,
combination or exchange of Warrant Certificates.
Upon receipt by New Hillhaven and the Warrant Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Warrant Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and reimbursement to New Hillhaven
and the Warrant Agent of all reasonable expenses incidental thereto and upon
surrender and cancellation of the Warrant Certificate if mutilated, Hillhaven
will make and deliver a new Warrant Certificate of like tenor to the Warrant
Agent for delivery to the registered owner in lieu of the Warrant Certificate so
lost, stolen, destroyed or mutilated.
The Warrant Agent shall not be required to transfer any Warrant
Certificate(s) unless in connection therewith there shall have been furnished to
the Warrant Agent by the transferor an opinion of counsel, reasonably
satisfactory to the Warrant Agent, to the effect that no registration of the
Warrants represented by the Warrant Certificate(s) proposed to be transferred is
required under the Act.
Section 5. Subsequent Issue Of Warrant Certificates. Subsequent to
----------------------------------------
their original issuance, no Warrant Certificates shall be issued except (a)
Warrant Certificates issued upon any transfer, split up, combination or exchange
of Warrants pursuant to Section 4, (b) Warrant Certificates issued in
replacement of mutilated, destroyed, lost or stolen Warrant Certificates
pursuant to Section 4, (c) Warrant Certificates issued pursuant to Section 6
upon the partial exercise of any Warrant Certificate to evidence the unexercised
portion of such Warrant Certificate or (d) Warrant Certificates issued pursuant
to Section 20.
Section 6. Exercise of Warrants; Purchase Price. (a) The registered
------------------------------------
holder of any Warrant Certificate may exercise the Warrants evidenced thereby in
whole or in part at any time after the date hereof and prior to 5:00 p.m., San
Francisco time, on the tenth anniversary of the Distribution Date, upon
surrender of the Warrant Certificate, with the form of election to purchase on
the Warrant duly executed, to the Warrant Agent at the office of
4
<PAGE>
the Warrant Agent referred to in Section 3, together with payment of the
Purchase Price for each share of New Hillhaven Common Stock as to which the
Warrants are exercised and an amount equal to any applicable transfer tax.
(b) The Purchase Price for each share Of New Hillhaven Common Stock
pursuant to the exercise of a Warrant shall initially be 125% of the fair market
value of a share of New Hillhaven Common Stock on the Distribution Date. For the
purposes hereof such value shall be the fair market value on the Distribution
Date as determined by the Board of Directors of NME or a committee thereof for
purposes of adjusting the exercise price Of Outstanding NME Options or
convertible securities, as conclusively set forth in a certificate of the
Secretary or an Assistant Secretary of NME delivered to New Hillhaven and the
Warrant Agent as soon as practicable after the Distribution Date. The Purchase
Price shall be subject to adjustment as provided in Section 10 and shall be
payable in lawful money Of the United States of America.
(c) Upon receipt of a Warrant Certificate, with the form of election
to purchase duly executed, accompanied by payment, in cash or by certified or
official bank check payable to the order of New Hillhaven, of the Purchase Price
for the shares to be purchased and an amount equal to any applicable transfer
tax, the Warrant Agent shall thereupon promptly (i) requisition from any
transfer agent for the New Hillhaven Common Stock certificates for the number of
whole shares of New Hillhaven Common Stock to be purchased and New Hillhaven
hereby irrevocably authorizes its transfer agent to comply with all such
requests, (ii) when appropriate, requisition from New Hillhaven the amount of
cash to be paid in lieu of issuance of fractional shares and (iii) promptly
after receipt of such certificates cause the same to be delivered to or upon the
order of the registered holder of such Warrant Certificate, registered in such
name or names as may be designated by such holder, and, when appropriate, after
receipt promptly deliver such cash to or upon the order of the registered holder
of such Warrant Certificate.
(d) In case the registered holder of any Warrant Certificate shall
exercise less than all the Warrants evidenced thereby, a new Warrant Certificate
evidencing Warrants equivalent to the Warrants remaining unexercised shall be
issued by the Warrant Agent to the registered holder of such Warrant Certificate
or to his duly authorized assigns subject to the provisions of Sections 4 and
13.
Section 7. Cancellation and Destruction of Warrant Certificates. All
----------------------------------------------------
Warrant Certificates surrendered for the purpose of exercise, exchange,
substitution or
5
<PAGE>
transfer shall, if surrendered to New Hillhaven or to any of its agents, be
delivered to the Warrant Agent for cancellation or in cancelled form, or if
surrendered to the Warrant Agent shall be cancelled by it, and no Warrant
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. New Hillhaven shall deliver to the
Warrant Agent for cancellation and retirement, and the Warrant Agent shall so
cancel and retire, any other Warrant Certificate purchased or acquired by New
Hillhaven otherwise than upon the exercise thereof. The Warrant Agent shall
deliver all cancelled Warrant Certificates to New Hillhaven, or shall, at the
written request of New Hillhaven, destroy such cancelled Warrant Certificates,
and in such case shall deliver a certificate of destruction thereof to New
Hillhaven.
Section 8. Reservation and Availability of Shares of New Hillhaven
-------------------------------------------------------
Common Stock; Legending. New Hillhaven shall cause to be reserved and kept
- -----------------------
available out of its authorized and unissued shares of New Hillhaven Common
Stock or its authorized and issued shares of New Hillhaven Common Stock held in
its treasury, the number of shares of New Hillhaven Common Stock that will be
sufficient to permit the exercise in full of all outstanding Warrants.
So long as the New Hillhaven Common Stock issuable upon the exercise
of Warrants may be listed on any national securities exchange, New Hillhaven
shall use its best efforts to cause all shares reserved for such issuance to be
listed on such exchange upon official notice of issuance upon such exercise.
New Hillhaven shall also take all such action as may be necessary to
ensure that all shares of New Hillhaven Common Stock delivered upon exercise of
Warrants shall, at the time of delivery of the certificates for such shares
(subject to payment of the Purchase Price), be duly and validly authorized and
issued and fully paid and nonassessable shares.
In addition, New Hillhaven shall pay when due and payable any and all
federal and state transfer taxes and charges which may be payable in respect of
the issuance or delivery of the Warrant Certificates or of any shares of New
Hillhaven Common Stock upon the exercise of Warrants. New Hillhaven shall not,
however, be required to pay any transfer tax which may be payable in respect of
any transfer involved in the transfer or delivery of Warrant Certificates or the
issuance or delivery of certificates for New Hillhaven Common Stock in a name
other than that of the registered holder of the Warrant Certificate evidencing
Warrants surrendered for exercise or to issue or deliver any
6
<PAGE>
certificates for shares of New Hillhaven Common Stock upon the exercise of any
Warrants until any such tax shall have been paid (any such tax being payable by
the holder of such Warrant Certificate at the time of surrender) or until it has
been established to New Hillhaven's satisfaction that no such tax is due.
All shares of New Hillhaven Common Stock issuable upon exercise of the
Warrants shall contain a legend, substantially similar to the legend set forth
in the Warrant Certificates, with respect to the transferability of such shares,
until such time as New Hillhaven shall have been advised by its counsel that
such legend is no longer required by law.
Section 9. Common Stock Record Date. Each person in whose name any
------------------------
certificate for shares of New Hillhaven Common Stock is issued upon the exercise
of Warrants shall for all purposes be deemed to have become the holder of record
of the New Hillhaven Common Stock represented thereby on, and such certificate
shall be dated, the date upon which the Warrant Certificate evidencing such
Warrants was duly surrendered and payment of the Purchase Price (and any
applicable transfer taxes) was made; provided, however, that if the date of such
-------- -------
surrender and payment is a date upon which the New Hillhaven Common Stock
transfer books are closed, such person shall be deemed to have become the record
holder of such shares on, and such certificate shall be dated, the next
succeeding business day on which the New Hillhaven Common Stock transfer books
are open. Prior to the exercise of the Warrants evidenced thereby, the holder of
a Warrant Certificate shall not be entitled to any rights of a stockholder of
New Hillhaven as such with respect to shares for which the Warrants shall be
exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of New Hillhaven,
except as provided herein.
Section 10. Adjustment of Purchase Price or Number of Shares. The
------------------------------------------------
Purchase Price, the number of shares of New Hillhaven Common Stock covered by
each Warrant and the number of Warrants outstanding are subject to adjustment
from time to time upon the occurrence of the events enumerated in this Section
10.
(a) In case New Hillhaven shall at any time after the date of this
Agreement (i) declare a dividend on the Hillhaven Common Stock payable in shares
of New Hillhaven Common Stock, (ii) subdivide the outstanding New Hillhaven
Common Stock, (iii) combine the outstanding New Hillhaven Common Stock into a
smaller number of shares, or (iv) issue
7
<PAGE>
any shares of its capital stock in a reclassification of the New Hillhaven
Common Stock (including any such reclassification in connection with a
consolidation or merger in which New Hillhaven is the continuing corporation
other than a consolidation or merger in respect of which an adjustment is made
pursuant to Section 12), the Purchase Price in effect at the time of the record
date for such dividend or of the effective date of such subdivision, combination
or reclassification, and/or the number and kind of shares of capital stock
issuable on such dates, shall be proportionately adjusted so that the holder of
any Warrant exercised after such time shall be entitled to receive the aggregate
number and kind of shares of capital stock which, if such Warrant had been
exercised immediately prior to such date and at a time when the New Hillhaven
Common Stock transfer books of New Hillhaven were open, he would have owned upon
such exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification. Such adjustment shall be made
successively whenever any event listed above shall occur.
(b) In case New Hillhaven shall fix a record date for the issuance of
rights or warrants to all holders of New Hillhaven Common Stock entitling them
(for a period expiring within 45 calendar days after such record date) to
subscribe for or purchase New Hillhaven Common Stock (or securities convertible
into New Hillhaven Common Stock) at a price per share of New Hillhaven Common
Stock (or having a conversion price per share of New Hillhaven Common Stock, if
a security convertible into New Hillhaven Common Stock) less than the current
market price per share of New Hillhaven Common Stock (as defined in Section
10(d)) on such record date, the Purchase Price to be in effect after such record
date shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, of which the numerator shall be the
number of shares of New Hillhaven Common Stock outstanding on such record date
plus the number of shares of New Hillhaven Common Stock which the aggregate
offering price of the total number of shares of New Hillhaven Common Stock so to
be offered (or the aggregate initial conversion price of the convertible
securities so to be offered) would purchase at such current market price and of
which the denominator shall be the number of shares of New Hillhaven Common
Stock outstanding on such record date plus the number of additional shares of
New Hillhaven Common Stock to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially convertible). In
case such subscription price may be paid in a consideration part or all of which
shall be in a form other than cash the value of such consideration shall be as
determined by the Board of Directors of New Hillhaven, whose determination shall
be conclusive, and described in a statement filed with the
8
<PAGE>
Warrant Agent. Shares of New Hillhaven Common Stock owned by or held for the
account of New Hillhaven shall not be deemed outstanding for the purpose of any
such computation. Such adjustment shall be made successively whenever such a
record date is fixed; and in the event that such rights or warrants are not so
issued, the Purchase Price shall again be adjusted to be the Purchase Price
which would then be in effect if such record date had not been fixed.
(c) In case New Hillhaven shall fix a record date for the making of a
distribution to all holders of New Hillhaven Common Stock (including any such
distribution made in connection with a consolidation or merger in which New
Hillhaven is the continuing corporation other than a consolidation or merger in
respect of which an adjustment is made pursuant to Section 12) or evidences of
indebtedness or assets (other than cash dividends or cash distributions payable
out of consolidated earnings or earned surplus or dividends payable in New
Hillhaven Common Stock) or subscription rights or warrants (excluding those
referred to in Section 10(b) and any rights issued pursuant to the Rights
Agreement dated as of January 31, 1990 between New Hillhaven and Manufacturers
Hanover Trust Company of California, as Rights Agent (the "Rights Agreement")),
the Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, of which the numerator shall be the current market price per
share of New Hillhaven Common Stock (as defined in Section 10(d)) on such record
date, less the fair market value (as determined by the Board of Directors of
Hillhaven, whose determination shall be conclusive, and described in a statement
filed with the Warrant Agent) of the portion of the assets or evidences of
indebtedness so to be distributed or of such subscription rights or warrants
applicable to one share of New Hillhaven Common Stock and of which the
denominator shall be such current market price per share of New Hillhaven Common
Stock. Such adjustment shall be made successively whenever such a record date
is fixed; and in the event that such distribution is not so made, the Purchase
Price shall again be adjusted to be the Purchase Price which would then be in
effect if such record date had not been fixed.
(d) For the purpose of any computation under Section 10(b) or (c),
the current market price per share of New Hillhaven Common Stock on any date
shall be deemed to be the average of the daily closing prices per share of New
Hillhaven Common Stock for the 30 consecutive trading days as reported on the
ASE Composite Tape commencing 45 days before such date. The closing price for
each day shall be the last sale price regular way or, in case no such, sale
takes place on such day, the average of the closing bid and
9
<PAGE>
asked prices regular way, in either case as reported on the ASE, or if the New
Hillhaven Common Stock is not reported on the ASE, on the principal national
securities exchange on which the New Hillhaven Common Stock is listed or
admitted to trading, or if the New Hillhaven Common Stock is not listed or
admitted to trading on any national securities exchange, the average of the
highest reported bid and lowest reported asked prices as furnished by the
National Association of Securities Dealers, Inc. through NASDAQ or a similar
organization if NASDAQ is no longer reporting such information. If on any such
date the shares of New Hillhaven Common Stock are not quoted by any such
organization, the fair value of such shares on such date as determined by the
Board of Directors of New Hillhaven shall be used. The term "trading day" shall
mean a day on which the principal national securities exchange on which the
shares of New Hillhaven Common Stock are listed or admitted to trading is open
for the transaction of business or, if the shares of such stock are not listed
or admitted to trading on any national securities exchange, a Monday, Tuesday,
Wednesday, Thursday or Friday on which banking institutions in the State of
California are not authorized or obligated by law or executive order to close.
(e) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in such price;
provided, however, that any adjustments which by reason of this Section 10(e)
- -------- -------
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 10 shall be made
to the nearest cent or to the nearest one-hundredth of a share, as the case may
be.
(f) In the event that at any time, as a result of an adjustment made
pursuant to Section 10(a), the holder of any Warrant thereafter exercised shall
become entitled to receive any shares of capital stock of New Hillhaven other
than shares of New Hillhaven Common Stock, thereafter the number of such other
shares so receivable upon exercise of any Warrant shall be subject to adjustment
from time to time in a manner and on terms as nearly equivalent as practicable
to the provisions with respect to the shares of New Hillhaven Common Stock
contained in Section 10(a) through (c), inclusive, and the provisions of
Sections 6, 8, 9 and 13 with respect to the shares of New Hillhaven Common Stock
shall apply on like terms to any such other shares.
(g) All Warrants originally issued by New Hillhaven subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of shares of New Hillhaven
Common Stock purchasable from time to time
10
<PAGE>
hereunder upon exercise of Warrants, all subject to further adjustment as
provided herein.
(h) Upon each adjustment of the Purchase Price as a result of the
calculations made in Section 10(a), (b) or (c) each Warrant outstanding
immediately prior to the making of such adjustment shall thereafter evidence the
right to purchase, at the Adjusted Purchase Price, that number of shares
(calculated to the nearest hundredth) obtained by (i) multiplying the number of
shares covered by a Warrant immediately prior to this adjustment of the number
of shares by the Purchase Price in effect immediately prior Co such adjustment
of the Purchase Price and (ii) dividing the product so obtained by the Purchase
Price in effect immediately after such adjustment of the Purchase Price.
(i) Irrespective of any adjustment or change in the Purchase Price or
the number of shares of New Hillhaven Common Stock issuable upon the exercise of
the Warrants, the Warrant Certificates theretofore and thereafter issued may
continue to express the Purchase Price per share and the number of shares which
were expressed upon the initial Warrant Certificates issued hereunder.
(j) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then par value, if any, of the shares of New
Hillhaven Common Stock issuable upon exercise of the Warrants, New Hillhaven
shall take any corporate action which may, in the opinion of its counsel, be
necessary in order that New Hillhaven may validly and legally issue fully paid
and nonassessable shares of such New Hillhaven Common Stock at such adjusted
Purchase Price.
(k) In any case in which this Section 10 shall require that an
adjustment in the Purchase Price be made effective as of the record date for a
specified event, New Hillhaven may elect to defer until the occurrence of such
event the issuing to the holder of any Warrant exercised after such record date
the shares of New Hillhaven Common Stock and other capital stock of New
Hillhaven, if any, issuable upon such exercise over and above the shares of New
Hillhaven Common Stock, if any, issuable upon such exercise on the basis of the
Purchase Price in effect prior to such adjustment; provided, however, that New
-------- -------
Hillhaven shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional shares upon
the occurrence of the event requiring such adjustment.
(l) Anything in this Section 10 to the contrary notwithstanding, New
Hillhaven shall be entitled to make such reductions in the Purchase Price, in
addition to those
11
<PAGE>
adjustments required by this Section 10, as it in its sole discretion shall
determine to be advisable in order that any consolidation or subdivision of the
New Hillhaven Common Stock, issuance wholly for cash of any New Hillhaven Common
Stock at less than the current market price, issuance wholly for cash of New
Hillhaven Common Stock or securities which by their terms are convertible into
or exchangeable for New Hillhaven Common Stock, stock dividend, issuance of
rights, options or warrants referred to hereinabove in this Section 10,
hereinafter made by New Hillhaven to its common stockholders shall not be
taxable to them.
Section 11. Certification of Adjusted Purchase Price and Number of
------------------------------------------------------
Shares Issuable. Whenever the Purchase Price or the number of shares of New
- ---------------
Hillhaven Common Stock issuable upon the exercise of each Warrant are adjusted
as provided in Section 10, New Hillhaven shall (a) promptly obtain a certificate
of a firm of independent public accountants, which shall be an accounting firm
which is known as one of the "Big Six" accounting firms and which may be the
regular auditors of New Hillhaven, selected by the Board of Directors, setting
forth the Purchase Price as so adjusted, the number of shares of New Hillhaven
Common Stock issuable upon the exercise of each Warrant as so adjusted and a
brief statement of the facts accounting for such adjustment, (b) promptly file
with the Warrant Agent and with each transfer agent for the New Hillhaven Common
Stock a copy of such certificate and (c) mail a brief summary thereof to each
holder of a Warrant Certificate in accordance with Section 21.
Section 12. Consolidation, Merger or Sale of Assets. If New
---------------------------------------
Hillhaven shall at any time Consolidate with or merge into another corporation,
the holder of any Warrants will thereafter receive, upon the exercise thereof in
accordance with the terms of this Agreement, the securities or property to which
the holder of the number of shares of New Hillhaven Common Stock then
deliverable upon the exercise of such Warrants would have been entitled upon
such consolidation or merger and New Hillhaven shall take such steps in connect
ion with such consolidation or merger as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to any securities or property (including cash) thereafter
deliverable upon the exercise of the Warrants; provided, however, that if upon
-------- -------
any such consolidation or merger different holders of New Hillhaven Common Stock
shall be entitled to receive different forms of consideration, the form of such
consideration thereafter deliverable upon the exercise of the Warrants shall be
as determined by the Board of Directors of New Hillhaven as constituted
immediately prior to such consolidation or merger. New Hillhaven or the
successor corporation, as the
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case may be, shall execute and deliver to the Warrant Agent a supplemental
agreement so providing. A sale or transfer of all or substantially all the
assets of New Hillhaven for a consideration (apart from the assumption of
obligations) consisting primarily of securities shall be deemed a consolidation
or merger for the foregoing purposes. The provisions of this Section 12 shall
similarly apply to successive mergers or consolidations or sales or other
transfers.
Section 13. Fractional Shares.
-----------------
(a) Notwithstanding an adjustment pursuant to Section 10(h) in the
number of shares covered by a Warrant, New Hillhaven shall not be required to
issue fractional shares upon exercise of the Warrants or to distribute
certificates which evidence fractional shares. In lieu of fractional shares,
there shall be paid to the registered holders of Warrant Certificates at the
time such Warrant Certificates are exercised as herein provided an amount in
cash equal to the same fraction of the current market value of a share of New
Hillhaven Common Stock. For purposes of this Section 13(a), the current market
value of a share of New Hillhaven Common Stock shall be the closing price of a
share of New Hillhaven Common Stock (as determined pursuant to the second
sentence of Section 10(d)), for the trading day immediately prior to the date of
such exercise.
(b) The holder of a Warrant, by the acceptance of the Warrant,
expressly waives his right to receive any fractional Warrant or any fractional
share upon exercise of a Warrant.
Section 14. Right of Action. All rights of action in respect of this
---------------
Agreement (except for the rights of action of the Warrant Agent hereunder) are
vested in the respective registered holders of the Warrant Certificates; and any
registered holder of any Warrant Certificate, without the consent of the Warrant
Agent or of the holder of any other Warrant Certificate, may, in his own behalf
and for his own benefit, enforce, and may institute and maintain any suit,
action or proceeding against New Hillhaven to enforce, or otherwise act in
respect of, his right to exercise the Warrants evidenced by such Warrant
Certificate in the manner provided in such Warrant Certificate and in this
Agreement.
Section 15. Agreement of Warrant Certificate Holders. Every holder
----------------------------------------
of a Warrant Certificate by accepting the same consents and agrees with New
Hillhaven and the Warrant Agent and with every other holder of a Warrant
Certificate that:
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(a) the Warrant Certificates are transferable only on the registry
books of the Warrant Agent if surrendered at the office of the Warrant
Agent referred to in Section 3, duly endorsed or accompanied by a proper
instrument of transfer in accordance with the provisions hereof; and
(b) New Hillhaven and the Warrant Agent may deem and treat the person
in whose name the Warrant Certificate is registered as the absolute owner
thereof and of the Warrants evidenced thereby (notwithstanding any
notations of ownership or writing on the Warrant Certificates made by
anyone other than Hillhaven or the Warrant Agent) for all purposes
whatsoever, and neither New Hillhaven nor the Warrant Agent shall be
affected by any notice to the contrary.
Section 16. Concerning the Warrant Agent. New Hillhaven agrees to
----------------------------
pay to the Warrant Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Warrant Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of its duties
hereunder. New Hillhaven also agrees to indemnify the Warrant Agent for, and to
hold it harmless against, any loss, liability or expense, incurred without
negligence or bad faith on the part of the Warrant Agent, for any action taken,
suffered or omitted by the Warrant Agent in connection with the acceptance and
administration of this Agreement, including the costs and expenses of defending
against any claim of liability in the premises.
The Warrant Agent shall be protected and shall incur no liability for
or in respect of any action taken; suffered, or omitted by it in connection with
its administration of this Agreement in reliance upon any Warrant Certificate or
certificate for New Hillhaven Common Stock or for other securities of New
Hillhaven, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement or other
paper or document reasonably believed by it to be genuine and to be signed,
executed and, where necessary, verified or acknowledged, by the proper person or
persons.
Section 17. Merger or Consolidation or Change of Name of Warrant
----------------------------------------------------
Agent. Any corporation into which the Warrant Agent or any successor Warrant
- -----
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Warrant Agent or any
successor Warrant Agent shall be a party, or any corporation succeeding to the
corporate trust
14
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business of the Warrant Agent or any successor Warrant Agent, shall be the
successor to the Warrant Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
provided that such corporation would be eligible for appointment as a successor
Warrant Agent under the provisions of Section 19. In case at the time each
successor Warrant Agent shall succeed to the agency created by this Agreement,
any of the Warrant Certificates shall have been countersigned but not delivered,
any such successor Warrant Agent may adopt the countersignature of the
predecessor Warrant Agent and deliver such Warrant Certificates so
countersigned; and in case at that time any of the Warrant Certificates shall
not have been countersigned, any successor Warrant Agent may countersign such
Warrant Certificates either in the name of the Predecessor Warrant Agent or in
the name of the successor Warrant Agent; and in all such cases such Warrant
Certificates shall have the full force provided in the Warrant Certificates and
in this Agreement.
In case at any time the name of the Warrant Agent shall be changed and
at such time any of the Warrant Certificates shall have been countersigned but
not delivered, the Warrant Agent may adopt the countersignature under its prior
name and deliver Warrant Certificates so countersigned; and in case at that time
any of the Warrant Certificates shall not have been countersigned, the Warrant
Agent may countersign such Warrant Certificates either in its prior name or in
its changed name; and in all such cases such Warrant Certificates shall have the
full force Provided in the Warrant Certificates and in this Agreement.
Section 18. Duties of Warrant Agent. The Warrant Agent shall have
-----------------------
only the duties and obligations expressly set forth in this Agreement There
shall be no implied duties or obligations of the Warrant Agent. The Warrant
Agent undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which New Hillhaven and the holders of
Warrant Certificates, by their acceptance thereof, shall be bound:
(a) The Warrant Agent may consult with legal counsel (who may be
legal counsel for New Hillhaven), and the opinion of such counsel shall be
full and complete authorization and protection to the Warrant Agent as to
any action taken, suffered or omitted by it in good faith and in accordance
with such opinion.
(b) Whenever in the performance of its duties under this Agreement
the Warrant Agent shall deem it necessary or desirable that, any fact or
matter proved or established by New Hillhaven prior to taking
15
<PAGE>
or suffering any action hereunder, such fact or matter (unless other
evidence in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate signed by
the Chairman and Chief Executive Officer, the Vice Chairman and Deputy
Chief Executive Officer, the President, any Executive Vice President, any
Senior Vice President or the Secretary or any Assistant Secretary of New
Hillhaven and delivered to the Warrant Agent; and such certificate shall be
full authorization to the Warrant Agent for any action taken or suffered in
good faith by it under the provisions of this Agreement in reliance upon
such certificate.
(c) The Warrant Agent shall be liable hereunder only for its own
negligence or bad faith.
(d) The Warrant Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the
Warrant Certificates (except its countersignature thereof) or be required
to verify the same, but all such statements and recitals are and shall be
deemed to have been made by New Hillhaven only.
(e) The Warrant Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery
hereof (except the due execution hereof by the Warrant Agent) or in respect
of the validity or execution of any Warrant Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by
New Hillhaven of any covenant or condition contained in this Agreement or
in any Warrant Certificate; nor shall it be responsible for the adjustment
of the Purchase Price or the making of any change in the number of shares
of New Hillhaven Common Stock required under the provisions of Section 10
or responsible for the manner, method or amount of any such change or the
ascertaining of the existence of facts that would require any such
adjustment or change (except with respect to the exercise of Warrants
evidenced by Warrant Certificates after actual notice of any adjustment of
the Purchase Price); nor shall it by any act hereunder be deemed to make
any representation or warranty as to the authorization or reservation of
any shares of New Hillhaven Common Stock to be issued pursuant to this
Agreement or any Warrant Certificate or as to whether any shares of New
Hillhaven Common Stock will, when issued, be validly authorized and issued,
fully paid and nonassessable.
16
<PAGE>
(f) New Hillhaven shall perform, execute, acknowledge and deliver or
cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be
required by the Warrant Agent for the carrying out or performing by the
Warrant Agent of the provisions of this Agreement
(g) The Warrant Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from
the Chairman and Chief Executive Officer, the Vice Chairman and Deputy
Chief Executive Officer, the President, any Executive Vice President, any
Senior Vice President or the Secretary of New Hillhaven, and to apply to
such officers for advice or instructions in connection with its duties, and
it shall not be liable for any action taken or suffered to be taken by it
in good faith in accordance with the instructions of any such officer.
(h) The Warrant Agent and any Shareholder, director, officer or
employee of the Warrant Agent may buy, sell or deal in any of the Warrants
or other securities of New Hillhaven or become Pecuniarily interested in
any transaction in which New Hillhaven may be interested, or contract with
or lend money to New Hillhaven or otherwise act as fully and freely as
though it were not Warrant Agent under this Agreement. Nothing herein shall
preclude the Warrant Agent from acting in any other capacity for New
Hillhaven or for any other legal entity.
(i) The Warrant Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or
by or through its attorneys or agents, and the Warrant Agent shall not be
Answerable or accountable for any act, default, neglect or misconduct of
any such attorneys or agents or for any loss to New Hillhaven resulting
from such neglect or misconduct, provided reasonable care had been
exercised in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Warrant Agent 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 its
rights unless it shall have been first indemnified therefor to its
satisfaction.
Section 19. Change of Warrant Agent. The Warrant Agent may resign
-----------------------
and be discharged from its duties under this Agreement upon 30 days' notice in
writing mailed to New
17
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Hillhaven and to each transfer agent of the New Hillhaven Common Stock by
registered or certified mail, and to the holders of the Warrant Certificates by
first class mail. New Hillhaven may remove the Warrant Agent or any successor
Warrant Agent upon 30 days' notice in writing, mailed to the Warrant Agent or
successor Warrant Agent, as the case may be, and to each transfer agent of the
New Hillhaven Common Stock by registered or certified mail, and to the holders
of the Warrant Certificates by first-class mail. If the Warrant Agent shall
resign or be removed or shall otherwise become incapable of acting, New
Hillhaven shall appoint a successor to the Warrant Agent. If New Hillhaven shall
fail to make such appointment within a period of 30 days after such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Warrant Agent or by the holder of a Warrant
Certificate (who shall, with such notice, submit his Warrant Certificate for
inspection by New Hillhaven), then the registered holder of any Warrant
Certificate may apply to any court of competent jurisdiction for the appointment
of a new Warrant Agent. Any successor Warrant Agent, whether appointed by New
Hillhaven or by such a court, shall be a corporation organized and doing
business under the laws of the United States or of any state thereof, in good
standing, having its principal office in Boston, Massachusetts, Chicago,
Illinois, Los Angeles, California, New York, New York, San Francisco, California
or Seattle, Washington, which is authorized under such laws to exercise
corporate trust powers and is subject to supervision or examination by a federal
or state authority and which has at the time of its appointment as Warrant Agent
a combined capital and surplus of at least $250,000,000. After appointment, the
successor Warrant Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Warrant Agent without
further act or deed; but the predecessor Warrant Agent shall deliver and
transfer to the successor Warrant Agent any property at the time held by it
hereunder, and execute and deliver any further assurance, conveyance, act or
deed necessary for the purpose. Not later than the effective date of any such
appointment, New Hillhaven shall file notice thereof in writing with the
predecessor Warrant Agent and each transfer agent for New Hillhaven Common
Stock, and mail a notice thereof in writing to the registered holders of the
Warrant Certificates. Failure to give any notice provided for in this Section
19, however, or any defect therein, shall not affect the legality or validity of
the resignation or removal of the Warrant Agent or the appointment of the
successor Warrant Agent, as the case may be.
Section 20. Issuance of New Warrant Certificates. Notwithstanding any
------------------------------------
of the provisions of this Agreement or of the Warrants to the contrary, New
Hillhaven may, at its
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option, issue new Warrant Certificates evidencing Warrants in such form as may
be approved by its Board of Directors to reflect any adjustment or change in the
Purchase Price per share and the number or kind or class of shares of stock or
other securities or property purchasable under the several Warrant Certificates
made in accordance with the provisions of this Agreement.
Section 21. Notice of Proposed Actions. In case New Hillhaven shall
--------------------------
propose (a) to pay any dividend payable in stock of any class to the holders of
New Hillhaven Common Stock or to make any other distribution to the holders of
New Hillhaven Common Stock (other than a cash dividend), or (b) to offer to the
holders of New Hillhaven Common Stock rights or warrants to subscribe for or to
purchase any additional shares of New Hillhaven Common Stock or shares of stock
of any class of any other securities, rights or options (other than the rights
contemplated to be distributed to stockholders pursuant to the Rights
Agreement), or (c) to effect any reclassification of New Hillhaven Common Stock
(other than a reclassification involving only the subdivision or combination of
outstanding shares of New Hillhaven Common Stock), or (d) to effect any
consolidation, merger or sale, transfer or other disposition of all or
substantially all of the property, assets or business of New Hillhaven, or (e)
to effect the liquidation, dissolution or winding up of New Hillhaven, then in
each such case New Hillhaven shall give to each holder of a Warrant, in
accordance with Section 1 of Article III of this Agreement, a notice of such
proposed action, which shall specify the record date for the purposes of such
stock dividend, distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, disposition,
liquidation, dissolution or winding up is to take place and the date of
participation therein by the holders of New Hillhaven Common Stock, if any such
date is to be fixed. Such notice shall be so given in the case of any action
covered by clause (a) or (b) above at least ten days prior to the record date
for determining holders of New Hillhaven Common Stock for purposes of such
action, and in the case of any other such action, at least ten days prior to the
date of the proposed taking of such action or the date of participation therein
by the holders of New Hillhaven Common Stock, whichever shall be the earlier.
The failure to give notice required by this Section 21 or any defect therein
shall not affect the legality or validity of the action taken by New Hillhaven
or the vote upon any such action.
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ARTICLE II
REGISTRATION RIGHTS
Section 1. Demand Registrations. (a) At any time from the
--------------------
Distribution Date through the fifteenth anniversary thereof, upon the written
request of NME that New Hillhaven register all or part of the Covered Common
Stock then held by NME or any affiliate of NME (which request shall satisfy the
requirements of paragraph (c) of this Section 1) under the Act, New Hillhaven
shall, subject in all cases to the provisions of paragraph (b) of this Section
1, thereupon cause the Covered Common Stock specified in such request to be so
registered.
(b) New Hillhaven's obligation to register all or part of the Covered
Common Stock pursuant to paragraph (a) of this Section 1 shall in all cases be
subject to the following limitations and qualifications:
(i) New Hillhaven shall not be obligated to file more than one
registration statement during any six-month period, or to file a
registration statement with respect to less than 100,000 shares of Covered
Common Stock, or to file a registration statement at any time if a special
audit of New Hillhaven would be required by the rules and regulations of
the Securities and Exchange Commission (the "Commission") in connection
therewith (for purposes of the preceding sentence, "special audit" shall
mean an audit other than a fiscal year-end audit, requiring an opinion of
New Hillhaven's independent public accountants); and
(ii) New Hillhaven shall be entitled to postpone for a reasonable
period of time not to exceed 90 days the filing of any registration
statement otherwise required to be prepared and filed by it if, at the time
it receives a request for registration, New Hillhaven determines, in its
reasonable judgment, that such registration would materially interfere with
any financing, acquisition, corporate reorganization or other material
transaction then being contemplated by its Board of Directors, involving
New Hillhaven or any of its affiliates (other than NME), and promptly gives
NME written notice of such determination and the reasons therefor. In such
event, NME shall have the right to withdraw the request for registration by
giving written notice to New Hillhaven within 30 days after receipt of the
notice of postponement (and, in the event of such withdrawal, such request
shall be ignored for purposes of determining the number of
20
<PAGE>
registrations to which NME is entitled to have New Hillhaven pay all
out-of-pocket expenses pursuant to Section 4(a)).
(c) Any written request of NME made pursuant to paragraph (a) of this
Section 1 shall:
(i) specify the number of shares of Covered Common Stock which
NME or any affiliate of NME intends to offer and sell;
(ii) state the intention of NME or such affiliate to offer such
shares for sale;
(iii) describe the intended method of distribution of such shares;
and
(iv) contain an undertaking on the part of NME to provide all
such information and materials concerning NME or such affiliate and take
all such action as may be required on NME's part to permit New Hillhaven to
comply with all applicable requirements of the Commission and to obtain
acceleration of the effective date of the registration statement.
Section 2. Participation Registrations. (a) If, at any time from the
---------------------------
Distribution Date through the fifteenth anniversary thereof, New Hillhaven shall
propose to register under the Act an offering by New Hillhaven or any
stockholder(s) of New Hillhaven (other than NME) of any New Hillhaven
securities, it shall give written notice of such proposed registration to NME as
promptly as possible and shall, subject in all cases to paragraph (b) of this
Section 2, include in such registration (and offering if so requested by NME)
such number of shares of Covered Common Stock then owned by NME or any affiliate
of NME as NME shall request, within 10 days after the receipt of such notice.
(b) New Hillhaven's obligation to include Covered Common Stock owned by
NME or any affiliate of NME in any offering pursuant to paragraph (a) of this
Section 2 shall in all cases be subject to the following limitations and
qualifications:
(i) New Hillhaven shall not be required to give notice to NME or
include such shares in any such registration if the proposed registration
is (A) a registration of a stock option or compensation plan or of New
Hillhaven securities issued or issuable pursuant to any such plan or (B) a
registration of New Hillhaven securities proposed to be issued in exchange
for securities or assets of, or in connection with a merger or
consolidation with, another corporation;
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(ii) New Hillhaven may, in its sole discretion and without the
consent of NME, withdraw such registration statement and abandon the
proposed offering in which NME had requested to participate; and
(iii) If the proposed registration is to be underwritten (whether
on a "best efforts" or a "firm commitment" basis), the managing underwriter
shall have the right to exclude shares of Covered Common Stock from such
registration if such underwriter advises New Hillhaven in writing that such
exclusion is necessary to avoid interfering with the successful marketing
of the underwritten portion of the offering, provided that (A) such
-------- ----
exclusion applies on a proportional basis not only to the shares of Covered
Common Stock but also to all other shares of New Hillhaven Common Stock
proposed to be included other than those for which New Hillhaven initiated
the registration and which are being sold by New Hillhaven and (B) in no
event shall any shares of Covered Common Stock be excluded if, following
such exclusion, the number of shares of Covered Common Stock included in
the registration would be less than 10% of the total number of shares of
New Hillhaven Common Stock covered by the registration.
(c) There shall be no limit on the number of registrations in which NME or
any affiliates of NME may participate pursuant to Section 2.
Section 3. Certain Covenants of New Hillhaven. (a) In connection
----------------------------------
with any registration of Covered Common Stock undertaken by New Hillhaven
pursuant to Section l and, if and to the extent appropriate, Section 2, New
Hillhaven shall:
(i) prepare and file with the Commission a registration
statement with respect to such shares and use its best efforts to cause
such registration statement to become effective;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement current for such period not to exceed 90 days as NME shall
request and to comply with the provisions of the Act with respect to the
sale of all New Hillhaven Common Stock covered by such registration
statement during such period;
(iii) provide NME and its counsel a reasonable opportunity to
review and, in the case of registrations
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<PAGE>
effected pursuant to Section 1, approve prior to filing (A) any
registration statement filed by New Hillhaven in connection with a
registration effected pursuant to Section 1 or in which NME or any
affiliate is participating pursuant to Section 2 and (B) any amendment to
supplements to such registration statement and an prospectus used in
connection therewith;
(iv) furnish to NME and its counsel such of conformed copies of
such registration statement of each such amendment and supplement thereto
(in case including all exhibits), such number of copies the prospectus
included in such registration stat (including each preliminary prospectus
and prospectus supplement), in conformity with the requirements of the Act,
and such other documents as NME or its counsel may reasonably request in
order to facilitate the sale of the Covered Common Stock covered by such
registration statement;
(v) use its best efforts to register or qualify the Covered
Common Stock to which such registration statement relates under such other
securities or blue sky laws of such jurisdictions as NME or its counsel
shall reasonably request, and do any and all other acts and things which
may be reasonably necessary or advisable to enable NME to consummate the
sale in such jurisdictions of such shares; provided that New Hillhaven
--------
shall not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it would not
but for the requirements of this Paragraph (v) be obligated to be so
qualified, to subject itself to taxation in any such jurisdiction or to
consent to general service of process in any such jurisdiction;
(vi) notify NME, at any time when a prospectus relating to the
Covered Common Stock to which such registration statement relates is
required to be delivered under the Securities Act, of New Hillhaven's
becoming aware that the prospectus included in such registration statement,
as then in effect, includes an untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances
then existing, and at the request of NME promptly prepare and furnish to
NME a reasonable number of copies of a prospectus supplemented or amended
so that, as thereafter delivered to the purchasers of such shares, such
prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the
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statements therein not misleading in light of the circumstances then
existing;
(vii) use its best efforts to cause all the Covered Common Stock
to which such registration statement relates to be listed on each
securities exchange on which such stock is then listed or, if there shall
then be no such listing, to be accepted for quotation on NASDAQ;
(viii) provide a transfer agent and registrar for the Covered
Common Stock to which such registration statement relates not later than
the effective date of such registration statement; and
(ix) enter into such agreements (including an underwriting
agreement in customary form) and take such other actions as NME reasonably
requests in order to expedite or facilitate the disposition of such shares;
provided that (A) in respect of a registration effected pursuant to
--------
Section 1, New Hillhaven and NME shall each select one managing underwriter
(with NME determining which of such managing underwriters shall "run the
books") and (B) in respect of a registration in which NME or any affiliate
participates pursuant to Section 2, New Hillhaven shall select the managing
underwriter or underwriters.
(b) For as long as NME or any affiliate of NME shall continue to hold
any Covered Common Stock, New Hillhaven shall use reasonable efforts to file, on
a timely basis, all annual, quarterly and other reports required to be filed by
it under Sections 13 and 15(d) of the Securities Exchange Act of 1934 and the
rules and regulations of the Commission thereunder, as amended from time to
time. In the event of any proposed sale of Covered Common Stock by NME or any
affiliate of NME pursuant to Rule 144 (or any successor rule) promulgated under
the Act, New Hillhaven shall cooperate with NME or such affiliate so as to
enable such sales to be made in accordance with applicable laws, rules and
regulations, the requirements of New Hillhaven's transfer agents, and the
reasonable requirements of the broker through which the sales are proposed to be
executed.
Section 4. Expenses. (a) New Hillhaven shall pay all out-of-pocket
--------
expenses incurred by it in connection with any three registrations of Covered
Common Stock pursuant to Section 1 which are designated by NME as a registration
with respect to which New Hillhaven's obligations in this sentence shall apply.
As to any other registrations of Covered Common Stock pursuant to Section 1, NME
or any transferee of Warrants from NME shall reimburse New Hillhaven for all its
out-of-pocket expenses in
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connection therewith. For the purposes of this Section 4, out-of-pocket expenses
shall include, without limitation, all registration and filing fees, printing
expenses and expenses, fees and disbursements of New Hillhaven's legal counsel
and accountants, transfer agents' and registrars' fees, and expenses incidental
to any post-effective amendment to any such registration statement. For purposes
of this Section 4, "out-of-pocket expenses" shall not include salaries of New
Hillhaven employees or expenses attributable to New Hillhaven's corporate
overhead.
(b) In connection with any registration pursuant to Section 2, New
Hillhaven shall pay all registration and filing fees, underwriting discounts,
commissions and expenses (other than those attributable to Covered Common Stock
proposed to be sold by NME or any affiliate of NME), printing expenses, fees and
disbursements of New Hillhaven's legal counsel and accountants, transfer agents'
and registrars' fees and expenses incidental to any post-effective amendment to
any such registration statement. NME shall pay all other out-of-pocket expenses
attributable to the inclusion in the registration of the Covered Common Stock
being registered on its behalf, including, without limitation, registration and
filing fees and underwriting discounts, commissions and expenses attributable
thereto and fees and disbursements of NME's legal counsel and accountants.
Section 5. Indemnification. (a) In the case of each registration
---------------
effected by New Hillhaven pursuant to Section 1 or Section 2, New Hillhaven
agrees to indemnify and hold harmless NME, its affiliates, its officers and
directors, each underwriter of the Covered Common Stock so registered and each
person who controls any such underwriter within the meaning of Section 15 of the
Act, against any and all losses, claims, damages or liabilities to which they or
any of them may become subject under the Act or any other statute or common law,
including any amount paid in settlement of any litigation, commenced or
threatened, if such settlement is effected with the written consent of New
Hillhaven, which consent shall not be unreasonably withheld, and to reimburse
them for any legal or other expenses incurred by them in connection with
investigating any claims and defending any actions, insofar as any such losses,
claims, damages, liabilities or actions arise out of or are based upon (i) any
untrue statement or alleged untrue statement of a material fact contained in the
registration statement relating to the sale of Covered Common Stock, or any
post-effective amendment thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading or (ii) any untrue statement,or alleged untrue
statement of a material fact contained in any
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preliminary prospectus, if used prior to the effective date of such registration
statement, or contained in the final prospectus (as amended or supplemented if
Hillhaven shall have filed with the Commission any amendment thereof or
supplement thereto) if used within the period during which New Hillhaven is
required to keep the registration statement to which such prospectus relates
current pursuant to the terms of Section 3(a) (ii), or the omission or alleged
omission to state therein (if so used) a material fact necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the indemnification agreement
-------- -------
contained in this paragraph (a) shall not (x) apply to such losses, claims,
damages, liabilities or actions arising out of, or based upon, any such untrue
statement or alleged untrue statement, or any such omission or alleged omission,
if such statement or omission was made in reliance upon and in conformity with
information furnished in writing to New Hillhaven by NME or such underwriter for
use in connection with the preparation of the registration statement, any
preliminary prospectus or final prospectus contained in the registration
statement, or any amendment or supplement thereto, or (y) inure to the benefit
of any underwriter or any person controlling such underwriter, if such
underwriter failed to send or give a copy of the final prospectus to the person
asserting the claim at or prior to the written confirmation of the sale of
Covered Common Stock to such person and if the untrue statement or omission
concerned had been corrected in such final prospectus.
(b) In the case of each registration effected by New Hillhaven
pursuant to Section 1 or Section 2, NME, any affiliate of NME participating in
any such registration and each underwriter of the Covered Common Stock to be
registered (each such party and such underwriters being referred to~severally in
this paragraph (b) as the "indemnifying party") shall agree in the same manner
and to the same extent as set forth in paragraph (a) of this Section 5 to
indemnify and hold harmless New Hillhaven, each person who controls Hillhaven,
the directors of New Hillhaven and those of its officers who shall have signed
any such registration statement, with respect to any untrue statement or alleged
untrue statement in, or omission or alleged omission from, such registration
statement or any post-effective amendment thereto or any preliminary prospectus
or final prospectus (as amended or as supplemented, if amended or supplemented
as aforesaid) contained in such registration statement, if such statement or
omission was made in reliance upon and in conformity with information furnished
in writing to New Hillhaven by such indemnifying party for use in connection
with the preparation of such registration statement or any
26
<PAGE>
preliminary prospectus or final prospectus contained in such registration
statement Or any such amendment or supplement thereto.
(c) Each indemnified party shall, with reasonable promptness after
its receipt of written notice of the commencement of any action against such
indemnified party in respect of which indemnity may be sought from an
indemnifying party on account of an indemnity agreement contained in this
Section 5, notify the indemnifying party in writing of the commencement thereof.
In case any such action shall be brought against any indemnified party and it
shall so notify an Indemnifying party of the commencement thereof; the
indemnifying party shall be entitled to participate therein and, to the extent
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party; provided, however, if the defendants in any such action
-------- -------
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there are likely to be
substantial legal defenses available to it and/or the other indemnified parties
which are different from or additional to those available to the indemnifying
party, the indemnified party or parties shall have the right to select separate
counsel to assert such legal defenses and to otherwise participate in the
defense of such action on behalf of such indemnified party or parties. Upon
receipt of notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof and the approval of such counsel, the
indemnifying party shall (except as provided in the preceding sentence) not be
liable to such indemnified party under this Section 5 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation. The indemnity
agreements in this Section 5 shall be in addition to any liabilities which the
indemnifying parties may have pursuant to law.
Section 6. Modification of Certain Registration Rights. If NME shall
-------------------------------------------
transfer to any entity other than in a public offering all or any part of (i)
the Covered Common Stock or (ii) the Warrants, the transferee of such Covered
Common Stock and/or Warrants shall be entitled to the same registration rights
as NME is entitled to under this Agreement unless the number of shares of New
Hillhaven Common Stock held by such transferee, or the number of shares of New
Hillhaven Common Stock issuable upon the exercise of Warrants held by such
transferee, is less than 100,000 shares; provided, however that New Hillhaven
-------- -------
shall not be obligated to effect in the aggregate more than three registrations
pursuant to Section 1 without reimbursement for its out-of-pocket expenses.
27
<PAGE>
ARTICLE III
GENERAL
Section 1. Notices, etc. All notices, consents, requests,
------------
instructions, approvals and other communications hereunder shall be in writing
and shall be deemed to have been duly given, if delivered in person or by
courier, telegraphed, telexed or sent by facsimile transmission or mailed, by
certified or registered mail, postage prepaid at the following address (or at
such other address provided by one party to the other parties in writing):
If to NME:
National Medical Enterprises, Inc.
2700 Colorado Avenue
P.O. Box 4070
Santa Monica, California 90404
Attention: Treasurer
Telecopy No.: (213) 315-6507
with a copy to:
National Medical Enterprises, Inc.
2700 Colorado Avenue
P.O. Box 4070
Santa Monica, California 90404
Attention: General Counsel
Telecopy No.: (213) 315-6688
If to New Hillhaven:
The Hillhaven Corporation
1148 Broadway Plaza
Tacoma, Washington 98401-2264
Attention: President
Telecopy No.: (206) 756-4714
with a copy to:
The Hillhaven Corporation
1148 Broadway Plaza
Tacoma, Washington 98401-2264
Attention: General Counsel
Telecopy No.: (206) 756-4845
28
<PAGE>
If to the Warrant Agent,
Manufacturers Hanover Trust Company
of California
50 California Street, 10th Floor
San Francisco, California 94111
Attention: Corporate Trust Department
Section 2. Supplements and Amendments. New Hillhaven and the Warrant
--------------------------
Agent may from time to time supplement or amend Article I or Article III of this
Agreement without the approval of any holders of Warrant Certificates in order
to cure any ambiguity, to correct or supplement any provision contained therein
which may be defective or inconsistent with any provisions herein, or to make
any other provisions in regard to matters or questions arising thereunder which
New Hillhaven and the Warrant Agent may deem necessary or desirable and which
shall not adversely affect the interest of the holders of Warrant Certificates.
Article II of this Agreement may be supplemented or amended only by NME and New
Hillhaven.
Section 3. Successors and Assigns. This Agreement and all of the
----------------------
provisions hereof shall be binding upon and inure to the benefit of the parties
and their respective successors and permitted assigns.
Section 4. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of California.
Section 5. Assignment. This Agreement may not be assigned in whole
----------
or in part without the prior written consent of the parties hereto, provided
--------
that NME may assign its rights under Articles I and II of this Agreement.
Section 6. Titles and Headings. Titles and headings to sections
-------------------
herein are inserted for convenience of reference only and are not intended to be
part of or to affect the meaning or interpretation of this Agreement.
Section 7. Entire Agreement. This Agreement sets forth the entire
----------------
agreement and understanding of the parties with respect to the transactions
contemplated hereby and supersedes all prior agreements, arrangements and
understandings relating to the subject matter hereof. No representation,
promise, inducement or statement of intention has been made by any party hereto
which is not embodied in this Agreement or the Exhibit hereto, or the written
statements or other documents delivered pursuant hereto, and no party hereto
shall be bound by or liable for
29
<PAGE>
any alleged representation, promise, inducement or statement of intention not so
set forth.
Section 8. Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
NATIONAL MEDICAL ENTERPRISES,
INC.
By /s/ Marcus E. Powers
---------------------------
Name: MARCUS E. POWERS
Title: SENIOR VICE PRESIDENT
THE HILLHAVEN CORPORATION
By /s/ Christopher J. Marker
---------------------------
Name: CHRISTOPHER J. MARKER
Title: PRESIDENT
MANUFACTURERS HANOVER TRUST
COMPANY OF CALIFORNIA,
as Warrant Agent
By /s/ Carol Antos
---------------------------
Name CAROL ANTOS
Title: ASSISTANT VICE PRESIDENT
30
<PAGE>
Exhibit A
Form of Warrant Certificate
THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD OR
TRANSFERRED EXCEPT IN COMPLIANCE WITH
SAID ACT AND THE RULES AND REGULATIONS
PROMULGATED THEREUNDER AND APPLICABLE
STATE SECURITIES LAWS.
VOID AFTER JANUARY 31, 2000
This certificate represents __________ of an aggregate of 30,000,000 Warrants.
Warrant Certificate
THE HILLHAVEN CORPORATION
(a Nevada corporation)
THIS CERTIFIES THAT or registered assigns is the
registered owner of the number of Warrants set forth above, each of which
entitles the owner thereof to purchase at any time after January 31, 1990, and
prior to 5:00 P.M., Los Angeles time, January 31, 2000, at the principal office
of Manufacturers Hanover Trust Company of California, a California corporation
(the "Warrant Agent"), or its successor as Warrant Agent, in San Francisco,
California, one fully paid and nonassessable share of the Common Stock, par
value $0.15 ("New Hillhaven Common Stock"), of The Hillhaven Corporation, a
Nevada corporation ("New Hillhaven"), for each Warrant represented hereby at a
purchase price ("Purchase Price") of 125% of the fair market value of a share of
New Hillhaven Common Stock on the Distribution Date (as defined in the Agreement
hereinafter referred to), determined as provided in Section 6(b) of the
Agreement, upon presentation and surrender of this Warrant Certificate with the
Form of Election to Purchase duly executed, together with an amount equal to any
applicable transfer taxes. The number of Warrants evidenced by this Warrant
Certificate (and the number of shares of New Hillhaven Common Stock which may be
purchased upon exercise hereof) set forth above, and the Purchase Price per
share set forth above, are the number and Purchase Price as of the Distribution
Date, based on the shares of New Hillhaven Common Stock as constituted at such
date.
A-1
<PAGE>
As provided in the Agreement, the Purchase Price and the number of
shares of New Hillhaven Common Stock which may be purchased upon the exercise of
the Warrants evidenced by this Warrant Certificate are, upon the happening of
certain events, subject to modification and adjustment.
This Warrant Certificate is subject to all of the terms, provisions and
conditions of a Warrant and Registration Rights Agreement dated as of January
31, 1990 (the "Agreement") among National Medical Enterprises, Inc., New
Hillhaven and the Warrant Agent, which Agreement is hereby incorporated herein
by reference and made a part hereof and to which Agreement reference is hereby
made for a full description of the rights, limitations of rights, obligations,
duties and immunities hereunder of the Warrant Agent, New Hillhaven and the
holders of the Warrant Certificates. Copies of the Agreement are on file at the
above-mentioned office of the Warrant Agent.
This Warrant Certificate, with or without other Warrant Certificates,
upon surrender at the principal office of the Warrant Agent, may be exchanged
for another Warrant Certificate or Warrant Certificates of like tenor and date
evidencing Warrants entitling the holder to purchase a like aggregate number of
shares of New Hillhaven Common Stock as the Warrants evidenced by the Warrant
Certificate or Warrant Certificates surrendered shall have entitled such holder
to purchase. If this Warrant Certificate shall be exercised in part, the holder
shall be entitled to receive upon surrender hereof another Warrant Certificate
or Warrant Certificates for the number of whole Warrants not exercised.
No fractional shares of New Hillhaven Common Stock will be issued upon
the exercise of any Warrant or Warrants evidenced hereby, but in lieu thereof a
cash payment will be made, as provided in the Agreement.
No holder of this Warrant Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of New Hillhaven
Common Stock or of any other securities of New Hillhaven which may at any time
be issuable on the exercise or conversion hereof, nor shall anything contained
in the Agreement or herein be construed to confer upon the holder hereof, as
such, any of the rights of a stockholder of New Hillhaven, any right to vote
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action (whether upon any recapitalization,
issue of stock, reclassification of stock, change of par value, consolidation,
merger, conveyance, or otherwise) or, except as provided in the Agreement, to
receive notice of meetings, or to receive dividends or subscription rights or
otherwise, until the Warrant or Warrants evidenced by this Warrant
A-2
<PAGE>
Certificate shall have been exercised as provided in the Agreement.
This Warrant Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Warrant Agent.
IN WITNESS WHEREOF, a duly authorized officer of New Hillhaven has
executed this Warrant Certificate, and its Secretary or one of its Assistant
Secretaries has affixed its seal, this ___ day of ____ , 19___.
THE HILLHAVEN CORPORATION
By ______________________
Name:
Title:
ATTEST:
___________________________
Countersigned:
__________________________, as Warrant Agent
By _______________________
Authorized Signature
A-3
<PAGE>
FORM OF ASSIGNMENT
[To be executed by the registered holder if such
holder desires to transfer this Warrant Certificate.)
FOR VALUE RECEIVED ___________________________________________________
hereby sells, assigns and transfers unto _______________________________________
(Please insert social Security of other identifying number)
________________________________________________________________________________
(PLEASE PRINT NAME AND ADDRESS OF TRANSFEREE)
________________________________________________________________________________
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint
__________________________________ Attorney, to transfer the within Warrant
Certificate on the books of the within-named Company, with full power of
substitution.
Dated: _______________________ 19
Signature__________________________________
Signature Guaranteed:
_________________________________
NOTICE
The signature to the foregoing Assignment must correspond to the name
as written upon the face of this Warrant Certificate in every particular,
without alteration or enlargement or any change whatsoever.
A-4
<PAGE>
FORM OF ELECTION TO PURCHASE
(to be executed by the registered holder if such holder
desires to exercise this Warrant Certificate.)
THE HILLHAVEN CORPORATION:
The undersigned hereby irrevocably elects to exercise _____________________
Warrants represented by this Warrant Certificate to purchase the shares of New
Hillhaven Common Stock issuable upon the exercise of such Warrants and requests
that certificates for such shares be issued in the name of:
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
________________________________________________________________________________
(PLEASE PRINT NAME AN ADDRESS)
If such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, a new Warrant Certificate for the balance remaining of such
Warrants shall be registered in the name of and delivered to:
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
________________________________________________________________________________
(PLEASE PRINT NAME AND ADDRESS)
________________________________________________________________________________
Dated: ______________________________ 19
___________________________________
SIGNATURE
(THE SIGNATURE TO THE
FORGOING ELECTION MUST
CORRESPOND TO THE NAME AS
WRITTEN UPON THE FACE OF
THIS WARRANT CERTIFICATE
IN EVERY PARTICULAR
WHATSOEVER, WITHOUT
ALTERATION OR ENLARGEMENT
OR ANY CHANGE WHATSOEVER)
Signature Guaranteed:
___________________________________________________
A-5
<PAGE>
EXHIBIT 4.7
THE HILLHAVEN CORPORATION
and
STATE STREET BANK AND TRUST COMPANY
__________________
INDENTURE
Dated as of September ___, 1993
__________________
$175,000,000
_____% Senior Subordinated Notes due 2001
<PAGE>
Reconciliation and tie between Trust Indenture Act of 1939
and Indenture, dated as of September ___, 1993
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- --------------- ---------
<S> <C>
(S) 310(a)(1) ........................ 608
(a)(2) ........................ 608
(b) ........................ 607, 609
(S) 312(c) ........................ 702
(S) 314(a) ........................ 704
(a)(4) ........................ 1019
(c)(1) ........................ 103
(c)(2) ........................ 103
(e) ........................ 103
(S) 315(b) ........................ 601
(S) 316(a) (last
sentence) ........................ 101 ("Outstanding")
(a)(1)(A) ........................ 502, 512
(a)(1)(B) ........................ 513
(b) ........................ 508
(c) ........................ 105
(S) 317(a)(1) ........................ 503
(a)(2) ........................ 504
(S) 318(a) ........................ 108
</TABLE>
_____________________________________
Security: This reconciliation and tie shall not, for any purpose, be deemed to
be a part of this Indenture.
<PAGE>
Table of Contents
-----------------
<TABLE>
<CAPTION>
Page
----
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
<S> <C> <C>
Section 101. Definitions.......................................... 1
Accounts Receivable Financing........................ 2
Acquired Indebtedness................................ 2
Affiliate............................................ 2
Asset Sale........................................... 3
Attributable Debt.................................... 3
Average Life to Stated Maturity...................... 3
Bankruptcy Law....................................... 4
Board of Directors................................... 4
Board Resolution..................................... 4
Business Day......................................... 4
Capital Lease Obligation............................. 4
Capital Stock........................................ 4
Cash Equivalent...................................... 4
Change in Control.................................... 5
Code................................................. 5
Commission........................................... 6
Company.............................................. 6
Company Request...................................... 6
Consolidated Income Tax Expense...................... 6
Consolidated Interest Expense........................ 6
Consolidated Net Income (Loss)....................... 6
Consolidated Net Worth............................... 7
Consolidated Rental Payments......................... 7
Consolidation........................................ 8
Corporate Trust Office............................... 8
Default.............................................. 8
Designated Senior Indebtedness....................... 8
Event of Default..................................... 8
Exchange Act......................................... 8
Fair Market Value.................................... 8
Fiscal Year.......................................... 8
Fixed Charge Coverage Ratio.......................... 8
Generally Accepted Accounting
Principles...................................... 9
Guarantee............................................ 9
Guaranteed Debt...................................... 9
Guarantor............................................ 9
Holder............................................... 9
Indebtedness......................................... 9
Indenture............................................ 11
</TABLE>
i
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Table of Contents (con'd)
-------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Indenture Obligations................................ 11
Intercompany Agreement............................... 11
Interest Payment Date................................ 11
Interest Rate Contracts.............................. 11
Investment........................................... 11
Lien................................................. 11
Management Investors................................. 11
Maturity............................................. 12
Net Cash Proceeds.................................... 12
New Bank Credit Agreement............................ 12
NME.................................................. 12
Non-payment Default.................................. 12
Officers' Certificate................................ 13
Opinion of Counsel................................... 13
Outstanding.......................................... 13
Pari Passu Indebtedness.............................. 14
Paying Agent......................................... 14
Payment Default...................................... 14
Permitted Holders.................................... 14
Permitted Indebtedness............................... 14
Permitted Investment................................. 16
Permitted Junior Securities.......................... 16
Person............................................... 16
PIP Debentures....................................... 16
PIP options.......................................... 16
Predecessor Security................................. 16
Preferred stock...................................... 17
Public Equity Offering............................... 17
Qualified Capital Stock.............................. 17
Redeemable Capital Stock............................. 17
Redemption Date...................................... 17
Redemption Price..................................... 17
Regular Record Date.................................. 17
Responsible Officer.................................. 17
Restricted Payment................................... 18
Securities........................................... 18
Securities Act....................................... 18
Security Register.................................... 18
Senior Indebtedness.................................. 18
Senior Representative................................ 18
Series C Preferred Stock............................. 19
Series D Preferred Stock............................. 19
Significant Subsidiary............................... 19
Special Record Date.................................. 19
Stated Maturity...................................... 19
Subordinated Indebtedness............................ 19
</TABLE>
ii
<PAGE>
Table of Contents (con'd)
-------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Subsidiary........................................... 19
Temporary Cash Investment............................ 19
Trustee.............................................. 20
Trust Indenture Act.................................. 20
Voting Stock......................................... 20
Warrants............................................. 20
Wholly owned Subsidiary.............................. 20
Section 102. Other Definitions.................................... 21
Section 103. Compliance Certificates and Opinions................. 21
Section 104. Form of Documents Delivered to Trustee............... 22
Section 105. Acts of Holders...................................... 23
Section 106. Notices, etc., to Trustee, the Company
and any Guarantor.................................. 23
Section 107. Notice to Holders; Waiver............................ 24
Section 108. Conflict with Trust Indenture Act.................... 24
Section 109. Effect of Headings and Table of Contents............. 25
Section 110. Successors and Assigns............................... 25
Section 111. Separability Clause.................................. 25
Section 112. Benefits of Indenture................................ 25
Section 113. Governing Law........................................ 25
Section 114. Legal Holidays....................................... 26
ARTICLE TWO
SECURITY FORMS
Section 201. Forms Generally...................................... 26
Section 202. Form of Face of Security............................. 26
Section 203. Form of Reverse of Security.......................... 28
Section 204. Form of Trustee's Certificate of
Authentication..................................... 32
ARTICLE THREE
THE SECURITIES
Section 301. Title and Terms...................................... 32
Section 302. Denominations........................................ 33
Section 303. Execution, Authentication, Delivery
and Dating......................................... 33
Section 304. Temporary Securities................................. 34
Section 305. Registration, Registration of Transfer and
Exchange........................................... 35
Section 306. Mutilated, Destroyed, Lost and Stolen
Securities......................................... 36
Section 307. Payment of Interest; Interest Rights
</TABLE>
iii
<PAGE>
Table of Contents (cont'd)
-------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Preserved.......................................... 37
Section 308. Persons Deemed Owners................................ 38
Section 309. Cancellation......................................... 38
Section 310. Computation of Interest.............................. 39
ARTICLE FOUR
DEFEASANCE AND COVENANT DEFEASANCE
Section 401. Company's Option to Effect Defeasance or
Covenant Defeasance................................ 39
Section 402. Defeasance and Discharge............................. 39
Section 403. Covenant Defeasance.................................. 40
Section 404. Conditions to Defeasance or Covenant Defeasance...... 40
Section 405. Deposited Money and U.S. Government
Obligations to Be Held in Trust; Other
Miscellaneous Provisions........................... 43
Section 406. Reinstatement........................................ 43
ARTICLE FIVE
REMEDIES
Section 501. Events of Default.................................... 44
Section 502. Acceleration of Maturity: Rescission
and Annulment...................................... 46
Section 503. Collection of Indebtedness and Suits for
Enforcement by Trustee............................. 47
Section 504. Trustee May File Proofs of Claim..................... 48
Section 505. Trustee May Enforce Claims Without
Possession of Securities........................... 49
Section 506. Application of Money Collected....................... 50
Section 507. Limitation on Suits.................................. 50
Section 508. Unconditional Right of Holders to Receive
Principal, Premium and Interest.................... 51
Section 509. Restoration of Rights and Remedies................... 51
Section 510. Rights and Remedies Cumulative....................... 51
Section 511. Delay or Omission Not Waiver......................... 52
Section 512. Control by Holders................................... 52
section 513. Waiver of Past Defaults.............................. 52
Section 514. Undertaking for Costs................................ 53
Section 515. Waiver of Stay, Extension or Usury Laws.............. 53
</TABLE>
iv
<PAGE>
Table of Contents (con'd)
-------------------------
<TABLE>
<CAPTION>
Page
----
ARTICLE SIX
THE TRUSTEE
<S> <C> <C>
Section 601. Notice of Defaults................................... 54
Section 602. Certain Rights of Trustee............................ 54
Section 603. Trustee Not Responsible for Recitals,
Dispositions of Securities or Application
of Proceeds Thereof................................ 56
Section 604. Trustee and Agents May Hold Securities:
Collections; Etc................................... 56
Section 605. Money Held in Trust.................................. 56
Section 606. Compensation and Indemnification of Trustee
and Its Prior Claim................................ 57
Section 607. Conflicting Interests................................ 57
Section 608. Corporate Trustee Required; Eligibility.............. 57
Section 609. Resignation and Removal; Appointment of
Successor Trustee.................................. 58
Section 610. Acceptance of Appointment by Successor............... 59
Section 611. Merger, Conversion, Amalgamation,
Consolidation or Succession to Business............ 60
Section 612. Preferential Collection of Claims Against
Company............................................ 61
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 701. Company to Furnish Trustee Names and
Addresses of Holders............................... 61
Section 702. Disclosure of Names and Addresses of
Holders............................................ 62
Section 703. Reports by Trustee................................... 62
Section 704. Reports by Company................................... 62
ARTICLE EIGHT
CONSOLIDATION, MERGER, AMALGAMATION,
CONVEYANCE, TRANSFER OR LEASE
Section 801. Company or Guarantor May Consolidate,
Amalgamate, etc., Only on Certain Terms............. 63
Section 802. Successor Substitutes................................. 65
</TABLE>
v
<PAGE>
Table of Contents (con'd)
-------------------------
<TABLE>
<CAPTION>
Page
----
ARTICLE NINE
SUPPLEMENTAL INDENTURES
<S> <C> <C>
Section 901. Supplemental Indentures and Agreements
without Consent of Holders......................... 66
Section 902. Supplemental Indentures and Agreements
with Consent of Holders............................ 67
Section 903. Execution of Supplemental Indentures and
Agreements......................................... 68
Section 904. Effect of Supplemental Indentures.................... 68
Section 905. Conformity with Trust Indenture Act.................. 69
Section 906. Reference in Securities to Supplemental
Indentures......................................... 69
Section 907. Effect on Senior Indebtedness........................ 69
Section 908. Record Date.......................................... 69
ARTICLE TEN
COVENANTS
Section 1001. Payment of Principal, Premium and Interest.......... 70
Section 1002. Maintenance of Office or Agency..................... 70
Section 1003. Money for Security Payments to be Held
in Trust.......................................... 71
Section 1004. Corporate Existence................................. 72
Section 1005. Payment of Taxes and Other Claims................... 72
Section 1006. Maintenance of Properties........................... 73
Section 1007. Insurance........................................... 73
Section 1008. Limitation on Indebtedness.......................... 73
Section 1009. Limitation on Restricted Payments................... 74
Section 1010. Limitation on Preferred Stock of
Subsidiaries...................................... 77
Section 1011. Limitation on Dividend and Other Payment
Restrictions Affecting Subsidiaries............... 78
Section 1012. Limitation on Liens Securing Pari Passu
and Subordinated Indebtedness..................... 79
Section 1013. Provision of Financial Statements................... 79
Section 1014. Limitation on Transactions with Affiliates.......... 80
Section 1015. Disposition of Proceeds of Asset Sales.............. 80
Section 1016. Limitation on Issuance of Guarantees of
Pari Passu and Subordinated Indebtedness.......... 86
Section 1017. Limitation on Other Senior subordinated
Indebtedness...................................... 87
Section 1018. Purchase of Securities upon Change in
Control........................................... 87
</TABLE>
vi
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-------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 1019. Statement by Officers as to Default.................. 90
Section 1020. Waiver of Certain Covenants.......................... 91
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
Section 1101. Right of Redemption.................................. 91
Section 1102. Applicability of Article............................. 92
Section 1103. Election to Redeem; Notice to Trustee................ 92
Section 1104. Selection by Trustee of Securities to
Be Redeemed.......................................... 92
Section 1105. Notice of Redemption................................. 93
Section 1106. Deposit of Redemption Price.......................... 94
Section 1107. Securities Payable on Redemption Date................ 94
Section 1108. Securities Redeemed or Purchased in Part............. 94
ARTICLE TWELVE
SUBORDINATION OF SECURITIES
Section 1201. Securities Subordinate to Senior
Indebtedness....................................... 95
Section 1202. Payment Over of Proceeds Upon Dissolution,
Etc................................................ 95
Section 1203. Suspension of Payment When Senior
Indebtedness in Default............................ 97
Section 1204. Payment Permitted if No Default...................... 98
Section 1205. Subrogation to Rights of Holders of
Senior Indebtedness................................ 98
Section 1206. Provisions Solely to Define Relative
Rights............................................. 99
Section 1207. Trustee to Effectuate Subordination.................. 99
Section 1208. No Waiver of Subordination Provisions................ 100
Section 1209. Notice to Trustee.................................... 101
Section 1210. Reliance on Judicial Order or Certificate
of Liquidating Agent............................... 102
Section 1211. Rights of Trustee as a Holder of Senior
Indebtedness; Preservation of
Trustee's Rights................................... 102
Section 1212. Article Applicable to Paying Agents.................. 102
Section 1213. No Suspension of Remedies............................ 103
Section 1214. Trustee's Relation to Senior Indebtedness............ 103
Section 1215. Other Rights of Holders of Senior
Indebtedness....................................... 103
</TABLE>
vii
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Table of Contents (con'd)
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<TABLE>
<CAPTION>
Page
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ARTICLE THIRTEEN
SATISFACTION AND DISCHARGE
<S> <C> <C>
Section 1301. Satisfaction and Discharge of Indenture.............. 104
Section 1302. Application of Trust Money........................... 105
</TABLE>
viii
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INDENTURE, dated as of September ___, 1993, between THE HILLHAVEN
CORPORATION, a Nevada corporation (the "Company"), and STATE STREET BANK AND
TRUST COMPANY, a Massachusetts banking corporation, as trustee (the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of $175,000,000
aggregate principal amount of its _____ % Senior Subordinated Notes due 2001
(the "Securities"), of substantially the tenor and amount hereinafter set forth,
and to provide therefor the Company has duly authorized the execution and
delivery of this Indenture;
This Indenture is subject to, and shall be governed by, the provisions of
the Trust Indenture Act that are required to be part of and to govern indentures
qualified under the Trust Indenture Act;
All acts and things necessary have been done to make the Securities, when
executed by the Company and authenticated and delivered hereunder and duly
issued by the Company, the valid obligations of the Company and to make this
Indenture a valid agreement of the Company in accordance with the terms of this
Indenture.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Securities
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Securities, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 101. Definitions.
-----------
For all purposes of this Indenture, except as otherwise expressly provided
or unless the context otherwise requires:
(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;
<PAGE>
(b) 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;
(c) all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with GAAP;
(d) 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; and
(e) all references to $, US$, dollars or United States dollars shall refer
to the lawful currency of the United States of America.
Certain terms used principally in Article Four are defined in Article Four.
"Accounts Receivable Financing" means the Company's commercial paper
program established pursuant to the Company's Liquidity Agreement among
Hillhaven Funding Corporation, the banks named therein and Banque Indosuez, New
York Branch, as agent, dated as of July 1, 1990, and as amended to the date of
this Indenture and thereafter, pursuant to which the Company has issued short
term notes backed by certain of the Company's Medicaid accounts receivable.
"Acquired Indebtedness" means Indebtedness of a Person (i) existing at the
time such Person becomes a Subsidiary or (ii) assumed in connection with the
acquisition of assets from such Person, in each case, other than Indebtedness
incurred in connection with, or in contemplation of, such Person becoming a
Subsidiary or such acquisition. Acquired Indebtedness shall be deemed to be
incurred on the date of the related acquisition of assets from any Person or the
date the acquired Person becomes a Subsidiary.
"Affiliate" means with respect to any specified Person, (i) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person, (ii) any other Person that
owns, directly or indirectly, 10% or more of such specified Person's Capital
Stock, (iii) any officer or director of (A) any such specified Person, (B) any
Subsidiary of such specified Person or (C) any Person described in clause (i) or
(ii) above or (iv) the spouse of any natural Person described in clause (i),
(ii) or (iii) above or any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with such spouse. 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
2
<PAGE>
such Person directly or indirectly, whether through ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or other
disposition (including, without limitation, by way of merger, consolidation or
sale and leaseback transaction) (collectively, a "transfer"), directly or
indirectly, in one or a series of related transactions, of (i) any Capital Stock
of any Subsidiary; (ii) all or substantially all of the properties and assets of
any division or line of business of the Company or its Subsidiaries; or (iii)
any other properties or assets of the Company or any Subsidiary, other than in
the ordinary course of business, provided that for the purposes of this
definition only, the disposition of any nursing facilities shall not be
considered to be in the ordinary course of business. For the purposes of this
definition, the term "Asset Sale" shall not include (i) any transfer of
properties and assets that is governed by the provisions described under Article
Eight, or (ii) any transfer of properties or assets of the Company to any
Wholly Owned Subsidiary, or of any Subsidiary to the Company or any Wholly
Owned Subsidiary in accordance with the terms of this Indenture or (iii) the
transfer, directly or indirectly, in one transaction or a series of related
transactions, of property or assets with a Fair Market Value (as determined by
the Board of Directors of the Company, whose determination shall be evidenced by
a Board Resolution) not in excess of $1,000,000 in any 12-month period.
"Attributable Debt" in respect of a sale-leaseback transaction or an
operating lease in respect of a health care facility means, at the time of
determination, the present value (discounted at the interest rate implicit in
the lease, compounded semiannually) of the obligation of the lessee of the
property subject to such sale-leaseback transaction or operating lease in
respect of a health care facility for rental payments during the remaining term
of the lease included in such transaction including any period for which such
lease has been extended or may, at the option of the lessor, be extended or
until the earliest date on which the lessee may terminate such lease without
penalty or upon payment of penalty (in which case the rental payments shall
include such penalty), after excluding all amounts required to be paid on
account of maintenance and repairs, insurance, taxes, assessments, water,
utilities and similar charges.
"Average Life to Stated Maturity" means, as of the date of determination
with respect to any Indebtedness, the quotient obtained by dividing (i) the sum
of the products of (a) the number of years from the date of determination to the
date or dates of each successive scheduled principal payment of such
Indebtedness
3
<PAGE>
multiplied by (b) the amount of each such principal payment by (ii) the sum of
all such principal payments.
"Bankruptcy Law" means Title 11, United States Code, as amended, or any
similar United States federal or state law relating to bankruptcy, insolvency,
receivership, winding-up, liquidation, reorganization or relief of debtors or
any amendment to, succession to or change in any such law.
"Board of Directors" means the board of directors of the Company or any
Guarantor, as the case may be, or any Committee of the Board of Directors duly
authorized to act on behalf of the Board of Directors.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company or any Guarantor, as the case may be,
to have been duly adopted by the Board of Directors or any committee thereof and
to be in full force and effect on the date of such certification, and delivered
to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in The City of New York or the
City of Boston, Massachusetts, are authorized or obligated by law or executive
order to close.
"Capital Lease Obligation" of any Person means any obligation of such
Person and its Subsidiaries on a Consolidated basis under any capital lease of
real or personal property which, in accordance with GAAP, has been recorded on
the balance sheet of such Person as a capitalized lease obligation.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of such Person's
capital stock or equity interests.
"Cash Equivalent" means (A) any security, maturing not more than six months
after the date of acquisition, issued by the United States of America, or an
instrumentality or agency thereof and guaranteed fully as to principal, premium,
if any, and interest by the United States of America, (B) any certificate of
deposit, time deposit, money market account or bankers' acceptance, maturing not
more than six months after the date of acquisition, issued by any commercial
banking institution that is a member of the Federal Reserve System and that has
combined capital and surplus and undivided profits of not less than
$500,000,000, whose debt has a rating, at the time as of which any investment
therein is made, of "P-1" (or higher) according to Moody's Investors Service,
Inc. or any successor rating agency, or "A-1" (or higher) according to Standard
and Poor's Corporation or any successor rating agency, and
4
<PAGE>
(C) commercial paper, maturing not more than three months after the date of
acquisition, issued by any corporation (other than an Affiliate or Subsidiary of
the Company) organized and existing under the laws of the United States of
America with a rating, at the time as of which any investment therein is made,
of "P-1" (or higher) according to Moody's Investors Service, Inc. or any
successor rating agency, or "A-1" (or higher) according to Standard and Poor's
Corporation or any successor rating agency.
"Change in Control" occurs at any time that (i) any "person" or "group"
(as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other
than Permitted Holders, is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of more than 40% of the
total Voting Stock of the CoMpany; provided, that the Permitted Holders
"beneficially own" a lesser percentage of the Voting Stock than such other
person or group and do not have the right or ability by voting power, contract
or otherwise to elect or designate for election a majority of the Board of
Directors of the Company; (ii) the Company consolidates with, or merges into,
another Person or conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any Person consolidates or
merges with or into the Company, in any such event pursuant to a transaction in
which the outstanding Voting Stock of the Company is changed into or exchanged
for cash, securities or other property, other than any such transaction where
(A) the outstanding Voting Stock of the Company is changed into or exchanged for
(x) Voting Stock of the surviving corporation which is not Redeemable Capital
Stock or (y) cash, securities or other property in an amount which could be paid
by the Company in accordance with Section 1009 (and such amount shall be treated
as a Restricted Payment subject to the provisions in Section 1009), and (B) the
Holders of the Voting Stock of the Company immediately prior to such transaction
own, directly or indirectly, not less than 50% of the Voting Stock of the
surviving corporation immediately after such transaction; (iii) during any
period of two consecutive years, individuals who at the beginning of such period
constituted the Board of Directors of the Company (together with any new
directors whose election by such Board of Directors or whose nomination for
election by the stockholders of the Company was approved by a vote of at least
66 2/3% of the directors then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors of the Company then in office; or (iv) the Company is
liquidated or dissolved or adopts a plan of liquidation.
"Code" means the Internal Revenue Code of 1986, as amended.
5
<PAGE>
"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.
"Company" means The Hillhaven Corporation, a corporation incorporated under
the laws of Nevada, until a successor Person shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor Person. To the extent necessary to comply with the requirements
of the provisions of Trust Indenture Act Sections 310 through 317 as they are
applicable to the Company, the term "Company" shall include any other obligor
with respect to the Securities for purposes of complying with such provisions.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by any one of its Chairman of the Board, its
Vice-Chairman, its President or a Vice President (regardless of Vice
Presidential designation), and by any one of its Treasurer, an Assistant
Treasurer, its Secretary or an Assistant Secretary, and delivered to the
Trustee.
"Consolidated Income Tax Expense" means for any period, as applied to any
Person, the provision for federal, state, local and foreign income taxes of such
Person and its Consolidated Subsidiaries for such period as determined in
accordance with GAAP.
"Consolidated Interest Expense" of any Person means, without duplication,
for any period, as applied to any Person, the sum of (a) the interest expense of
such Person and its Consolidated Subsidiaries for such period, on a consolidated
basis, including, without limitation, (i) amortization of debt discount, (ii)
the net cost under interest rate contracts (including amortization of
discounts), (iii) any payment or fees with respect to guarantees, letters of
credit, or similar facilities, (iv) the interest portion of any deferred payment
obligation and (v) accrued interest, plus (b) the interest component of the
Capital Lease Obligations paid, accrued and,'or scheduled to be paid, or accrued
by such Person during such period, in each case as determined in accordance with
GAAP, plus (c) Preferred Stock dividends in respect of Preferred Stock of the
Company or any Subsidiary held by Persons other than the Company or a Wholly
Owned Subsidiary.
"Consolidated Net Income (Loss)" of any Person means, for any period, the
Consolidated net income (or loss) of the Company and its Consolidated
Subsidiaries for such period as determined in accordance with GAAP, adjusted, to
the extent included in calculating such net income (loss), by excluding (i) all
6
<PAGE>
extraordinary gains or losses (less all fees and expenses relating thereto),
(ii) the portion of net income (or loss) of the Company and its Consolidated
Subsidiaries allocable to minority interests in unconsolidated Persons to the
extent that cash dividends or distributions have not actually been received by
the Company or one of its Consolidated Subsidiaries, (iii) net income (or loss)
of any Person combined with the Company or any of its Subsidiaries in a "pooling
of interests" basis attributable to any period prior to the date of combination,
(iv) any gain or loss, net of taxes, realized upon the termination of any
employee pension benefit plan, (v) any gains or losses (less all fees and
expenses relating thereto) in respect of dispositions of assets other than in
the ordinary course of business, or (vi) the net income of any Subsidiary to the
extent that the declaration of dividends or similar distributions by that
Subsidiary of that income is not at the time permitted, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulations applicable to that
Subsidiary or its shareholders.
"Consolidated Net Worth" of any Person means the Consolidated stockholders'
equity (excluding Redeemable Capital Stock) of such Person and its Consolidated
Subsidiaries as set forth on the most recent consolidated balance sheet of such
Person and its Consolidated Subsidiaries determined in accordance with GAAP.
"Consolidated Rental Payments" of any Person means, for any period, the
aggregate rental obligations of such Person and its Consolidated Subsidiaries
(not including taxes, insurance, maintenance and similar expenses that the
lessee is obligated to pay under the terms of the relevant leases), determined
on a consolidated basis in conformity with GAAP, payable in respect of such
period under Attributable Debt or leases of real or personal property not
constituting Attributable Debt (net of income from subleases thereof, not
including taxes, insurance, maintenance and similar expenses that the sublessee
is obligated to pay under the terms of such sublease), whether or not such
obligations are reflected as liabilities or commitments on a consolidated
balance sheet of such Person and its Subsidiaries or in the notes thereto,
excluding, however, in any event, (i) that portion of Consolidated Interest
- --------- -------
Expense of such Person representing payments by such Person or any of its
Consolidated Subsidiaries in respect of Capital Lease Obligations (net of
payments to such Person or any of its Consolidated Subsidiaries under subleases
qualifying as capitalized lease subleases to the extent that such payments would
be deducted in determining Consolidated Interest Expense) and (ii) the aggregate
amount of amortization of obligations of such Person and its Consolidated
Subsidiaries in respect of such Capital Lease Obligations for such period (net
of payments to such Person or any of its Consolidated Subsidiaries and subleases
qualifying as
7
<PAGE>
capitalized lease subleases to the extent that such payments could be deducted
in determining such amortization amount).
"Consolidation" means, with respect to any Person, the consolidation of the
accounts of such Person and each of its subsidiaries if and to the extent the
accounts of such Person and each of its subsidiaries would normally be
consolidated with those of such Person, all in accordance with GAAP. The term
"Consolidated" shall have a similar meaning.
"Corporate Trust Office" means the office of the Trustee or an affiliate or
agent thereof at which at any particular time the corporate trust business for
the purposes of this Indenture shall be principally administered, which office
at the date of execution of this Indenture is located at 225 Franklin Street,
Boston, Massachusetts 02110.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) all Senior Indebtedness under
the New Bank Credit Agreement and (ii) any other Senior Indebtedness which is
$25,000,000 or more in aggregate principal amount outstanding and is
specifically designated in the instrument evidencing such Senior Indebtedness as
"Designated Senior Indebtedness".
"Event of Default" has the meaning specified in Article Five.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, with respect to any asset or property, the sale
value that would be obtained in an arm's-length transaction between an informed
and willing seller under no compulsion to sell and an informed and willing
buyer.
"Fiscal Year" with respect to the Company shall mean the fiscal year of the
Company.
"Fixed Charge Coverage Ratio" of any Person means, for any period, the
ratio of (a) the sum of Consolidated Net Income, Consolidated Interest Expense,
Consolidated Income Tax Expense, and one-third of Consolidated Rental Payments
plus, without duplication, all depreciation, amortization and all other non-cash
charges (excluding any such non-cash charge constituting an extraordinary item
or loss or any non-cash charge which requires an accrual of or a reserve for
cash charges for any future period), in each case, for such period, of the
Company and its Subsidiaries on a Consolidated basis, as determined in
accordance with GAAP to (b)
8
<PAGE>
the sum of (i) Consolidated Interest Expense for such period and (ii) one-third
of Consolidated Rental Payments for such period; provided that in making such
--------
computation, the Consolidated Interest Expense attributable to interest on any
Indebtedness computed on a pro forma basis and (A) bearing a floating interest
--- -----
rate shall be computed as if the rate in effect on the date of computation had
been the applicable rate for the entire period and (B) which was not outstanding
during the period for which the computation is being made but which bears, at
the option of the Company, a fixed or floating rate of interest, the Company
shall apply, at its option, either the fixed or floating rate for purposes of
calculating the Fixed Charge Coverage Ratio.
"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, consistently applied, which
are in effect from time to time.
"Guarantee" means the guarantee by any Guarantor which guarantees the
Indenture Obligations pursuant to a guarantee given in accordance with this
Indenture.
"Guaranteed Debt" of any Person means, without duplication, all
Indebtedness of any other Person guaranteed directly or indirectly in any manner
by such Person, or in effect guaranteed directly or indirectly by such Person
through an agreement (i) to pay or purchase such Indebtedness or to advance or
supply funds for the payment or purchase of such Indebtedness, (ii) to purchase,
sell or lease (as lessee or lessor) property, or to purchase or sell services,
primarily for the purpose of enabling the debtor to make payment of such
Indebtedness or to assure the Holder of such Indebtedness against loss, (iii) to
supply funds to, or in any other manner invest in, the debtor (including any
agreement to pay for property or services without requiring that such property
be received or such services be rendered), (iv) to maintain working capital or
equity capital of the debtor, or otherwise to maintain the net worth, solvency
or other financial condition of the debtor or (v) otherwise to assure a creditor
against loss; provided that the term "Guaranteed Debt" shall not include
--------
endorsements for collection or deposit, in either case in the ordinary course of
business.
"Guarantor" means any Person which guarantees the Indenture Obligations
pursuant to this Indenture.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indebtedness" means, with respect to any Person, without duplication, (i)
all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services,
9
<PAGE>
excluding any trade payables and other accrued current liabilities arising in
the ordinary course of business, but including, without limitation, all
obligations, contingent or otherwise, of such Person in connection with any
letters of credit or acceptances issued under letter of credit facilities,
acceptance facilities or other similar facilities and in connection with any
agreement to purchase, redeem, exchange, convert or otherwise acquire for value
any Capital Stock of such Person, or any warrants, rights or options to acquire
such Capital Stock, now or hereafter outstanding, (ii) all obligations of such
Person evidenced by bonds, notes, debentures, loan agreements, credit
agreements, lines of credit or other similar instruments, (iii) every obligation
of such Person issued or contracted for as payment in consideration of the
purchase by such Person or an Affiliate of such Person of the Capital Stock or
substantially all of the assets of another Person or in consideration for the
merger or consolidation with respect to which such Person or an Affiliate of
such Person was a party (other than any obligation of such Person to pay an
amount to another Person based on income in respect of Capital Stock or assets
which were purchased or in respect of such merger to which such Person or an
Affiliate was a party except for such obligations which are required in
accordance with GAAP to be classified as a liability on the balance sheet of
such Person), (iv) all indebtedness created or arising under any conditional
sale or other title retention agreement with respect to property acquired by
such Person (even if the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property), but excluding trade payables and other accrued current liabilities
arising in the ordinary course of business, (v) all obligations under Interest
Rate Contracts of such Person, (vi) all Capital Lease Obligations of such
Person, (vii) all indebtedness referred to in clauses (i) through (vi), (ix) and
(x) of other Persons and all dividends of other Persons, the payment of which is
secured by (or for which the holder of such indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien, upon any property
(including, without limitation, accounts and contract rights) owned by such
Person, even though such Person has not assumed or become liable for the payment
of such Indebtedness, (viii) all Guaranteed Debt of such Person, (ix) all
Redeemable Capital Stock valued at the greater of its voluntary or involuntary
maximum fixed repurchase price plus accrued and unpaid dividends and (x) all
Attributable Debt of such Person. For purposes hereof, the "maximum fixed
repurchase price" of any Redeemable Capital Stock which does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Redeemable Capital Stock as if such Redeemable Capita1 Stock were purchased on
any date on which Indebtedness shall be required to be determined pursuant to
this Indenture, and if such price is based upon, or measured by, the Fair Market
Value of such Redeemable Capital Stock, such Fair Market Value to be determined
10
<PAGE>
in good faith by the board of directors of the issuer of such Redeemable Capital
Stock.
"Indenture" means this instrument as originally executed (including all
exhibits and schedules thereto) and as it may from time to time be supplemented
or amended by one or more indentures supplemental hereto entered into pursuant
to the applicable provision hereof.
"Indenture Obligations" means the obligations of the Company and any other
obligor under this Indenture or under the Securities, including any Guarantor,
to pay principal of, premium, if any, and interest when due and payable, and all
other amounts due or to become due under or in connection with this Indenture,
the Securities and the performance of all other obligations to the Trustee and
the Holders under this Indenture and the Securities, according to the terms
thereof.
"Intercompany Agreement" means the Intercompany Agreement among the Company
and its Subsidiaries in the form of Exhibit A hereto.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Interest Rate Contracts" means interest rate swap agreements, interest
rate cap agreements, interest rate collar agreements, interest rate insurance,
and other agreements or arrangements designed to provide protection against
fluctuations in interest rates.
"Investment" means, with respect to any Person, directly or indirectly, any
advance, loan or other extension of credit or capital contribution to (by means
of any transfer of cash or other property (tangible or intangible) to others, or
any payment for property or services for the account or use of others or
otherwise), or any purchase, acquisition or ownership by such Person of any
Capital Stock, bonds, notes, debentures or other securities (including, without
limitation, any interests in any partnership or joint venture) issued or owned
by any other Person.
"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise),
privilege, security interest, hypothecation or other encumbrance upon or with
respect to any property of any kind, real or personal, movable or immovable, now
owned or hereafter acquired.
"Management Investors" means each (i) director of the Company and (ii) each
"officer" of the Company as such term is defined in Rule 16a-1 promulgated under
the Exchange Act.
11
<PAGE>
"Maturity" when used with respect to any Security means the date on which
the principal of such Security becomes due and payable as therein provided or as
provided in this Indenture, whether at Stated Maturity, or any Redemption Date
and whether by declaration of acceleration, Offer in respect of Excess Proceeds,
Change in Control Offer in respect of a Change in Control, call for redemption
or otherwise.
"Net Cash Proceeds" means, with respect to any Asset Sale by any Person,
the proceeds thereof in the form of cash or Cash Equivalents including payments
in respect of deferred payment obligations when received in the form of, or
stock or other assets when disposed for, cash or Cash Equivalents (except to the
extent that such obligations are financed or sold with recourse to the Company
or any Subsidiary) net of (i) brokerage commissions and other reasonable fees
and expenses (including fees and expenses of counsel and investment bankers)
related to such Asset Sale, (ii) provisions for all taxes payable as a result of
such Asset Sale, (iii) payments made to retire Indebtedness where payment of
such Indebtedness is secured by the assets or properties the subject of such
Asset Sale, (iv) amounts required to be paid to any Person (other than the
Company or any Subsidiary) owning a beneficial interest in the assets subject to
the Asset Sale and (v) appropriate amounts to be provided by the Company or any
Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against
any liabilities associated with such Asset Sale and retained by the Company or
any Subsidiary, as the case may be, after such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale, all as reflected in an officers'
certificate delivered to the Trustee.
"New Bank Credit Agreement" means the Credit Agreement, dated as of
_______, 1993, among First Healthcare Corporation, certain lenders named therein
and Morgan Guaranty Trust Company of New York, as agent, together with the
documents related thereto, including without limitation, any security
agreements, pledge agreements, mortgages and guarantees, in each case as such
agreements may be amended, extended, renewed, restated, supplemented, otherwise
modified, refinanced or replaced from time to time, whether or not involving the
same lenders.
"NME" means National Medical Enterprises, Inc.
"Non-payment Default" means any event (other than a Payment Default) the
occurrence of which entitles one or more Persons to accelerate the maturity of
any Designated Senior Indebtedness.
12
<PAGE>
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, Vice Chairman, the President or a Vice President (regardless of Vice
Presidential designation), and by the Treasurer, Secretary or an Assistant
Secretary, of the Company, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be counsel
for the Company or the Trustee unless an independent counsel is required
pursuant to the terms of this Indenture, and who shall be acceptable to the
Trustee.
"Outstanding" when used with respect to Securities means, as of the date of
determination, all Securities theretofore authenticated and delivered under this
Indenture, except:
(a) Securities theretofore cancelled by the Trustee or delivered to the
Trustee for cancellation;
(b) Securities, or portions thereof, for whose payment or redemption money
in the necessary amount has been theretofore deposited with the Trustee or any
Paying Agent (other than the Company) in trust or set aside and segregated in
trust by the Company (if the Company shall act as its own Paying Agent) for the
Holders of such Securities; provided that if such Securities are to be redeemed,
--------
notice of such redemption has been duly given pursuant to this Indenture or
provision there for reasonably satisfactory to the Trustee has been made; and
Securities, except to the extent provided in Sections 402 and 403, with respect
to which the Company has effected defeasance or covenant defeasance as provided
in Article Four; and
(c) Securities in exchange for or in lieu of which other Securities have
been authenticated and delivered pursuant to this Indenture, other than any such
Securities in respect of which there shall have been presented to the Trustee
proof reasonably satisfactory to it that such Securities are held by a bona fide
purchaser in whose hands the Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
- -------- -------
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company, any Guarantor, or any other obligor upon the Securities or any
Affiliate of the Company, any Guarantor, or such other obligor shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which the
Trustee knows to be so owned shall be so disregarded. Securities so owned which
have been
13
<PAGE>
pledged in good faith may be regarded as Outstanding if the pledgee certifies to
the Trustee that the pledgee has the right so to act with respect to such
Securities and that the pledgee is not the Company, any Guarantor or any other
obligor upon the Securities or any Affiliate of the Company, any Guarantor or
such other obligor.
"Pari Passu Indebtedness" means Indebtedness of the Company which ranks
pari passu in right of payment to the Securities.
- ---- -----
"Paying Agent" means any Person authorized by the Company to pay the
principal, premium, if any, or interest on any Securities on behalf of the
Company.
"Payment Default" means any default in the payment of principal, premium,
if any, interest, commitment fees, letter of credit fees, reimbursement
obligations in respect of amounts owing under letters of credit or payments in
respect of interest under Interest Rate Contracts on any Designated Senior
Indebtedness.
"Permitted Holders" means NME and the Management Investors.
"Permitted Indebtedness" means:
(a) Indebtedness of up to $360,000,000 aggregate principal amount under
the New Bank Credit Agreement;
(b) Indebtedness of up to $40,000,000 under the Accounts Receivable
Financing;
(c) any guarantee by the Company or any Subsidiary under the New Bank
Credit Agreement;
(d) Indebtedness in existence on the date of this Indenture and set forth
on Schedule I hereto;
(e) Indebtedness of the Company pursuant to the Securities;
(f) Indebtedness evidenced by letters of credit issued in the ordinary
course of business consistent with past practice to support the Company's or any
Subsidiary's insurance or self-insurance obligations (including to secure
workers' compensation and other similar insurance coverages);
(g) obligations pursuant to Interest Rate Contracts, to the extent that
the notional principal amount of such obligations does not exceed the amount of
Indebtedness outstanding or committed to be incurred on the date such Interest
Rate Contracts are entered into;
14
<PAGE>
(h) Indebtedness of the Company to a Subsidiary (provided that any
Indebtedness of the Company owing to a Wholly Owned Subsidiary is subject to the
Intercompany Agreement) and Indebtedness of a Subsidiary to the Company or
another Subsidiary;
(i) any guarantees of Indebtedness by a Subsidiary entered into in
accordance with Section 1016;
(j) obligations in respect of surety bonds or appeal bonds provided by the
Company or a subsidiary in the ordinary course of business;
(k) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently drawn against
insufficient funds in the ordinary course of business; provided that such
Indebtedness is extinguished within three Business Days of incurrence;
(l) Indebtedness of the Company consisting of guarantees, indemnities or
obligations in respect of purchase price adjustments in connection with the
acquisition or disposition of assets;
(m) Indebtedness of the Company or any Subsidiary, in addition to that
described in clauses (a) through (l) of this definition of "Permitted
Indebtedness," in an aggregate principal amount outstanding at any given time
not to exceed $25,000,000; and
(n) any renewals, extensions, substitutions, refundings, refinancings or
replacements of any Indebtedness described in clauses (a) through (e) of this
definition of "Permitted Indebtedness," including any successive extensions,
renewals, substitutions, refundings, refinancings or replacements, so long as
(i) any such new Indebtedness shall be in a principal amount that does not
exceed the principal amount (or, if such Indebtedness being refinanced provides
for any amount less than the principal amount thereof to be due and payable upon
a declaration of acceleration thereof, such lesser amount as of the date of
determination) so refinanced, plus the amount of any premium required to be paid
----
under the terms of the instrument governing such Indebtedness being refinanced
or the amount of any premium reasonably determined by the Company as necessary
to accomplish such refinancing through means of a tender offer or privately
negotiated transactions and, in each case, actually paid, plus the amount of
expenses of the Company incurred in connection with such refinancing, (ii) in
the case of any refinancing of Subordinated Indebtedness, such new Indebtedness
is made subordinate to the Securities at least to the same extent as the
Indebtedness being refinanced; (iii) in the case of any refinancing of Pari
Passu Indebtedness, such new Indebtedness shall rank not more than equally in
priority of payment with the Securities; (iv) any such
15
<PAGE>
new Subordinated Indebtedness has an Average Life to Stated Maturity longer than
the Average Life to Stated Maturity of the Securities and final Stated Maturity
later than the final Stated Maturity of the Securities; and (v) any such new
Pari Passu Indebtedness has an Average Life to Stated Maturity equal to or
longer than the Average Life to Stated Maturity of the Securities and a final
Stated Maturity equal to or later than the final Stated Maturity of the
Securities.
"Permitted Investment" means (i) Investments in any of the Securities or
any Guarantee; (ii) Temporary Cash Investments; (iii) Indebtedness of the
Company to a Subsidiary (provided that any Indebtedness of the Company to a
Wholly Owned Subsidiary is subject to the Intercompany Agreement); (iv)
Investments in existence on the date of this Indenture; provided, however, that
-------- -------
to the extent Indebtedness in existence on the date of this Indenture that
constitutes a Permitted Investment is repaid, the amount of such repayment may
be reinvested and shall constitute a Permitted Investment; (v) Investments in
any Wholly Owned Subsidiary by the Company or any Wholly Owned subsidiary or any
Investment in the. Company by any Wholly Owned Subsidiary; (vi) receivables
owing to the Company and it. Subsidiaries if created or acquired in the ordinary
course of business and payable or dischargeable in accordance with customary
trade terms; (vii) Investments acquired or retained from another Person in
connection with any sale, conveyance, transfer, lease or other disposition of
any properties or assets to such Person; and (viii) in addition to the Permitted
Investments described in the foregoing clauses (i) through (vii), Investments in
the aggregate amount of $10,000,000 at any one time outstanding.
"Permitted Junior Securities" shall have the meaning specified in Article
Twelve.
"Person" means any individual, corporation, limited or general partnership,
joint venture, association, joint stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"PIP Debentures" means the Company's convertible debentures due May 29,
1999 held by Hillhaven PIP Funding I, Inc., a Wholly Owned Subsidiary, issued in
connection with the Company's 1991 Performance Investment Plan.
"PIP Options" means options outstanding on the date of the Indenture
granted pursuant to the Company's 1991 Performance Investment Plan.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as
16
<PAGE>
that evidenced by such particular Security; and, for the purposes of this
definition, any Security authenticated and delivered under Section 306 in
exchange for a mutilated Security or in lieu of a lost, destroyed or stolen
Security shall be deemed to evidence the same debt as the mutilated, lost,
destroyed or stolen Security.
"Preferred Stock," as applied to any Person, means Capital Stock of any
class or classes (however designated) which is preferred as to the payment of
dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
"Public Equity Offering" means, with respect to any Person, a public
offering by such Person pursuant to a registration statement filed with the
Securities and Exchange Commission in accordance with the Securities Act of
shares of its Qualified Capital Stock.
"Qualified Capital Stock" of any Person means any and all Capital Stock of
such Person other than Redeemable Capital Stock.
"Redeemable Capital Stock" means any Capital Stock that, either by its
terms, by the terms of any security into which it is convertible or exchangeable
or otherwise, is, or upon the happening of an event or passage of time would be,
required to be redeemed prior to any Stated Maturity of the principal of the
Securities or is redeemable at the option of the holder thereof at any time
prior to any such Stated Maturity, or is convertible into or exchangeable for
debt securities at any time prior to any such Stated Maturity at the option of
the holder thereof.
"Redemption Date" when used with respect to any Security to be redeemed
pursuant to any provision in this Indenture means the date fixed for such
redemption by or pursuant to this Indenture.
"Redemption Price" when used with respect to any Security to be redeemed
pursuant to any provision in this Indenture 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 15th day (whether or not a Business Day) next preceding such
Interest Payment Date.
"Responsible Officer" when used with respect to the Trustee means any
officer assigned to the Corporate Trust Office or the agent of the Trustee
appointed hereunder, including any vice president, assistant vice president,
assistant secretary, or any other officer or assistant officer of the Trustee or
the agent of the Trustee appointed hereunder to whom any corporate trust matter
17
<PAGE>
is referred because of his or her knowledge of and familiarity with the
particular subject.
"Restricted Payment" has the meaning specified in Section 1009.
"Securities" has the meaning specified in the first recital of this
Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Register" and "Security Registrar" have the respective meanings
specified in Section 305.
"Senior Indebtedness" means the principal of, premium, if any, and interest
(including interest accruing after the filing of a petition by or against the
Company under any state or federal Bankruptcy Laws, whether or not such interest
is allowed as a claim after such filing in any proceeding under such law) on any
Indebtedness of the Company (other than as otherwise provided in this
definition), whether outstanding on the date of this Indenture or thereafter
created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Securities. Notwithstanding the
foregoing, "Senior Indebtedness" shall not include (a) Indebtedness evidenced by
the Securities, (b) Indebtedness that is by its terms subordinate or junior in
right of payment to any Indebtedness of the Company, including the Company's
outstanding Convertible Subordinated Debentures due 2002, (c) Indebtedness which
when incurred and without respect to any election under Section 1111(b) of the
Bankruptcy Law is without recourse to the Company, (d) Indebtedness which is
represented by Redeemable Capital Stock, (e) Indebtedness for goods, materials
or services purchased in the ordinary course of business or Indebtedness
consisting of trade payables or other current liabilities, (f) Indebtedness of
or amounts owed by the Company for compensation to employees or for services,
(g) to the extent it might constitute Indebtedness, any liability for federal,
state, local or other taxes owed or owing by the Company, (h) Indebtedness
(other than the then outstanding principal amount of the PIP Debentures) of the
Company to a Subsidiary of the Company or any other Affiliate of the Company or
any of such Affiliate's subsidiaries, (i) that portion of any Indebtedness which
at the time of issuance is issued in violation of this Indenture, and (j) to the
extent it might constitute Indebtedness, amounts owing under leases (other than
Capital Lease Obligations).
"Senior Representative" means a representative of one or more holders of
Designated Senior Indebtedness.
18
<PAGE>
"Series C Preferred Stock" means the shares of the Company's 8-1/4%
cumulative, non-voting Series C Preferred Stock outstanding on the date of this
Indenture, the rights, privileges and preferences with respect to which are
described in the certificate of designation in effect on the date of this
Indenture.
"Series D Preferred Stock" means the shares of the Company's Series D
Preferred Stock outstanding on the date of this Indenture, the rights,
privileges and preferences with respect to which are described in the
certificate of designation in effect on the date of this Indenture and any
additional Series D Preferred Stock that may be issued as payment-in-kind
dividends in accordance with such certificate of designation.
"Significant Subsidiary" shall include each Subsidiary that qualifies as a
"significant subsidiary" as that term is defined in Rule 1-02 of Regulation S-X
under the Securities Act, and in any event shall include the Subsidiary
Guarantors, if any.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 307.
"Stated Maturity" when used with respect to any Indebtedness or any
installment of interest thereon, means the dates specified in such Indebtedness
as the fixed date on which the principal of such Indebtedness or such
installment of interest is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company subordinated
in right of payment to the Securities.
"Subsidiary" means any corporation or other entity at least a majority of
the outstanding voting shares of which is at the time directly or indirectly
owned or controlled (either alone or through Subsidiaries or together with
Subsidiaries) by the Company or another Subsidiary.
"Temporary Cash Investment" means (A) any evidence of Indebtedness,
maturing not more than one year after the date of acquisition, issued by the
United States of America, or an instrumentality or agency thereof and guaranteed
fully as to principal, premium, if any, and interest by the United States of
19
<PAGE>
America, (B) any certificate of deposit, time deposit, money market account or
bankers' acceptance maturing not more than one year after the date of
acquisition, issued by, or time deposit of, a commercial banking institution
that is a member of the Federal Reserve System and that has combined capital and
surplus and undivided profits of not less than $500,000,000, whose debt has a
rating, at the time as of which any investment therein is made, of "P-1" (or
higher) according to Moody's Investors Service, Inc. or any successor rating
agency, or "A-1" (or higher) according to Standard and Poor's Corporation or any
successor rating agency, (C) commercial paper, maturing not more than one year
after the date of acquisition, issued by a corporation (other than an Affiliate
or Subsidiary of the Company) organized and existing under the laws of the
United States of America with a rating, at the time as of which any investment
therein is made, of "P-1" (or higher) according to Moody's Investors Service,
Inc. or any successor rating agency, or "A-1" (or higher) according to Standard
and Poor's Corporation or any successor rating agency, and (D) any money market
deposit accounts issued or offered by a domestic commercial bank having capital
and surplus in excess of $500,000,000.
"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
such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended, as
in force at the date as of which this instrument was executed, except as
provided in Section 905.
"Voting Stock" means stock of the class or classes pursuant to which the
holders thereof have the general voting power under ordinary circumstances to
elect at least a majority of the board of directors, managers or trustees of a
corporation (irrespective of whether or not at the time stock of any other class
or classes shall have or might have voting power by reason of the happening of
any contingency).
"Warrants" means the warrants outstanding on the date of this Indenture
held by NME to purchase up to 30,000,000 shares of the Company's common stock
pursuant to the terms of that certain Warrant and Registration Rights Agreement
dated January 31, 1990 between the Company and NME.
"Wholly Owned Subsidiary" means a Subsidiary all the Capital Stock of which
is owned by the Company or another Wholly Owned Subsidiary. For purposes of
this definition, directors qualifying shares shall be disregarded in determining
the ownership of a Subsidiary.
20
<PAGE>
Section 102. Other Definitions.
-----------------
<TABLE>
<CAPTION>
Defined in
Term Section
---- ----------
<S> <C>
"Act" 105
"Change in Control Offer" 1018
"Change in Control Purchase Date" 1018
"Change in Control Purchase Notice" 1018
"Change in Control Purchase Price" 1018
"covenant defeasance" 403
"Defaulted Interest" 307
"defeasance" 402
"Defeased Securities" 401
"Excess Proceeds" 1015
"Offer" 1015
"Offered Price" 1015
"Pari Passu Debt Amount" 1015
"Pari Passu Offer" 1015
"Payment Blockage Period" 1203
"Permitted Preferred Stock" 1010
"Purchase Date" 1015
"Securities Amount" 1015
"Surviving Entity" 801
"U.S. Government Obligations" 404
</TABLE>
Section 103. Compliance Certificates 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, any Guarantor and any
other obligor on the Securities shall furnish to the Trustee an Officers'
Certificate stating that all conditions precedent, if any, provided for in this
Indenture (including any covenants compliance with which constitutes a condition
precedent) relating to the proposed action have been complied with, an Opinion
of Counsel stating that in the opinion of such counsel all such conditions
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,
certificates and/or opinions 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 of Counsel with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(a) a statement that each individual signing such certificate or opinion
has read such covenant or condition and the definitions herein relating thereto;
21
<PAGE>
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of each such individual, he has made
such examination or investigation as necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(d) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
Section 104. Form of Documents Delivered to Trustee.
--------------------------------------
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company, any Guarantor or
other obligor of the Securities may be based, insofar as it relates to legal
matters, upon a certificate or opinion of, or representations by, counsel,
unless such officer knows, or in the exercise of reasonable care should know,
that the certificate or opinion or representations with respect to the matters
upon which his certificate or opinion is based are erroneous. Any such
certificate or opinion 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, any Guarantor or other obligor of the Securities stating that
the information with respect to such factual matters is in the possession of the
Company, any Guarantor or other obligor of the Securities, unless such counsel
knows that the certificate or opinion or representations with respect to such
matters are erroneous. Opinions of Counsel required to be delivered to the
Trustee may have qualifications customary for opinions of the type required and
counsel delivering such Opinions of Counsel may rely on certificates of the
Company or government or other officials customary for opinions of the type
required, including certificates certifying as to matters of fact, including
that various financial covenants have been complied with.
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.
22
<PAGE>
Section 105. Acts of Holders.
---------------
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given 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 duly appointed in writing;
and, except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the 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 shall be sufficient for any purpose of this Indenture
and conclusive in favor of the Trustee and the Company, if made in the manner
provided in this Section.
(b) The ownership of Securities shall be proved by the Security Register.
(c) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Security shall bind every future Holder of
the same Security or the Holder of every Security issued upon the transfer
thereof or in exchange therefor or in lieu thereof, in respect of anything done,
suffered or omitted to be done by the Trustee, any Paying Agent or the Company
or any Guarantor in reliance thereon, whether or not notation of such action is
made upon such Security.
Section 106. Notices, etc., to Trustee, the Company and any Guarantor.
--------------------------------------------------------
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:
(a) the Trustee by any Holder or by the Company or any Guarantor or any
other obligor of the Securities or a Senior Representative or holder of Senior
Indebtedness shall be sufficient for every purpose hereunder if made, given,
furnished or filed, in writing, to or with the Trustee at State Street Bank and
Trust Company, 225 Franklin Street, Boston, MA, 02110, or, if delivered by
recognized overnight carrier, to, State Street Bank and Trust Company, 5th
Floor, One Heritage Drive, North Quincy, MA, 02171-2128, in either case,
Attention: Mr. Brian Curtis, Corporate Trust Department or at any other address
previously furnished in writing to the Holders, the Company, any Guarantor, any
other obligor of
23
<PAGE>
the Securities or a Senior Representative or Holder of Senior Indebtedness by
the Trustee; or
(b) the Company or any Guarantor shall be sufficient for every purpose
(except as provided in Section 501(c)) hereunder if in writing and mailed,
first-class postage prepaid or delivered to the Company or such Guarantor
addressed to it at 1148 Broadway Plaza, Tacoma, Washington 98402, Attention:
Secretary, or at any other address previously furnished in writing to the
Trustee by the Company.
Section 107. 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 his address as it appears in the Security 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. Any notice when mailed to a Holder in the aforesaid
manner shall be conclusively deemed to have been received by such Holder whether
or not actually received by such Holder. 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.
In case by reason of the suspension of regular mail service or by reason of
any other cause, it shall be impracticable to mail notice of any event as
required by any provision of this Indenture, then any method of giving such
notice as shall be reasonably satisfactory to the Trustee shall be deemed to be
a sufficient giving of such notice.
Section 108. Conflict with Trust Indenture Act.
---------------------------------
If any provision hereof limits, qualifies or conflicts with any provision
of the Trust Indenture Act or another provision which is required or deemed to
be included in this Indenture by any of the provisions of the Trust Indenture
Act, the provision or requirement of the Trust Indenture Act shall control. If
any provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the
24
<PAGE>
latter provision shall be deemed to apply to this Indenture as so modified or to
be excluded, as the case may be.
Section 109. 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 110. Successors and Assigns.
----------------------
All covenants and agreements in this Indenture by the Company and any
Guarantors shall bind their successors and assigns, whether so expressed or not.
Section 111. Separability Clause.
-------------------
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 112. Benefits of Indenture.
---------------------
Nothing in this Indenture or in the Securities, express or implied, shall
give to any Person (other than the parties hereto and their successors
hereunder, any Paying Agent, the holders and the Holders of Senior Indebtedness)
any benefit or any legal or equitable right, remedy or claim under this
Indenture.
Section 113. 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 GIVING EFFECT TO THE
CONFLICTS OF LAWS PRINCIPLES THEREOF).
25
<PAGE>
Section 114. Legal Holidays.
--------------
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day, then (notwithstanding any
other provision of this Indenture or of the securities) payment of interest or
principal or premium, if any, need not be made on such date, but may be made on
the next succeeding Business Day with the same force and effect as if made on
the Interest Payment Date or Redemption Date, or at the Stated Maturity and no
interest shall accrue with respect to such payment for the period from and after
such Interest Payment Date, Redemption Date or Stated Maturity, as the case may
be, to the next succeeding Business Day.
ARTICLE TWO
SECURITY FORMS
Section 201. Forms Generally.
---------------
The Securities and the Trustee's certificate of authentication shall be in
substantially the forms set forth in this Article, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by the 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 the rules of any securities exchange, any organizational
document or governing instrument or applicable law or as may, consistently
herewith, be determined by the officers executing such securities, as evidenced
by their execution of the Securities. Any portion of the text of any Security
may be set forth on the reverse thereof, with an appropriate reference thereto
on the face of the Security.
The definitive Securities shall be printed, lithographed or engraved or
produced by any combination of these methods or may be produced in any other
manner permitted by the rules of any securities exchange on which the Securities
may be listed, all as determined by the officers executing such Securities, as
evidenced by their execution of such Securities.
Section 202. Form of Face of Security.
------------------------
The form of the face of the Securities shall be substantially as follows:
26
<PAGE>
THE HILLHAVEN CORPORATION
___________________
________% SENIOR SUBORDINATED NOTES due 2001
No. ________________ $______________
THE HILLHAVEN CORPORATION, a Nevada corporation (herein called the
"Company", which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
____________________ or registered assigns, the principal sum of
___________________ United States dollars on ___________________, 2001, at the
office or agency of the Company referred to below, and to pay interest thereon
from _______________, 1993 or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, semi-annually on
__________________ and _________________, in each year, commencing
_____________________, 1994 at the rate of ___________ % per annum, in United
States dollars, until the principal hereof is paid or duly provided for.
The interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in such Indenture, be paid to the Person
in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be ____________ or ___________ (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any such
interest not so punctually paid, or duly provided for, and interest on such
defaulted interest at the interest rate borne by the Securities, to the extent
lawful, shall forthwith cease to be payable to the Holder on such Regular Record
Date, and may be paid to the Person in whose name this Security (or one or more
Predecessor Securities) 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 Securities not less than 10
days prior to such Special Record Date, or may be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in said Indenture.
Payment of the principal of, premium, if any, and interest on this Security
will be made at the office or agency of the Company maintained for that purpose
in The City of New York, or at such other office or agency of the Company as may
be maintained for such purpose, 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
27
<PAGE>
private debts; provided, however, that payment of interest may be made at the
-------- -------
option of the Company by check mailed to the address of the Person entitled
thereto as such address shall appear on the Security Register. Interest shall be
computed on the basis of a 360-day year of twelve 30-day months.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly executed by
the Trustee referred to on the reverse hereof or by the authenticating agent
appointed as provided in the Indenture by manual signature, this Security shall
not be entitled to any benefit under the Indenture, or be valid or obligatory
for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the manual or facsimile signature of its authorized officers and its
corporate seal to be affixed or reproduced hereon.
Dated: __________________ THE HILLHAVEN CORPORATION
By:___________________________
Attest:
[SEAL]
- -------------------------
Secretary
Section 203. Form of Reverse of Security.
---------------------------
The form of the reverse of the Securities shall be substantially as
follows:
This Security is one of a duly authorized issue of Securities of the
Company designated as its _____________% Senior Subordinated Notes due 2001
(herein called the "Securities"), limited (except as otherwise provided in the
Indenture referred to below) in aggregate principal amount to $175,000,000,
which may be issued under an indenture (herein called the "Indenture") dated as
of ______________, 1993, among the Company and State Street Bank and Trust
Company, as trustee (herein called 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, obligations and immunities thereunder of
the Company, the Trustee
28
<PAGE>
and the Holders of the Securities, and of the terms upon which the Securities
are, and are to be, authenticated and delivered.
The Indenture contains provisions for defeasance at any time of (a) the
entire Indebtedness on this Security and (b) certain restrictive covenants and
related Defaults and Events of Default, in each case upon compliance with
certain conditions set forth therein.
The Indebtedness evidenced by the Securities is, to the extent and in the
manner provided in the Indenture, subordinate and subject in right of payment to
the prior payment in full of all Senior Indebtedness (as defined in the
Indenture), whether Outstanding on the date of the Indenture or thereafter, and
this Security is issued subject to such provisions. Each Holder of this
Security, 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
action as may be necessary or appropriate to effectuate the subordination as
provided in the Indenture and (c) appoints the Trustee his attorney-in-fact for
such purpose; provided, however, that the indebtedness evidenced by this
-------- -------
Security shall cease to be so subordinate and subject in right of payment upon
any defeasance of this Security referred to in clause (a) or (b) of the next
preceding paragraph.
The Securities are subject to redemption, as a whole or in part, at any
time on or after ____________, 1998 at the option of the Company, upon not less
than 30 nor more than 60 days' prior notice by first-class mail in amounts of
$1,000 or an integral multiple of $1,000 at the following redemption prices
(expressed as a percentage of the principal amount) if redeemed during the 12-
month period beginning _____________ of the years indicated below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
1998 ............................. ______%
1999 ............................. ______%
</TABLE>
and thereafter at 100% of the principal amount, in each case, together with
accrued and unpaid interest, if any, to the Redemption Date (subject to the
right of the Holders of record on the relevant record date to receive interest
due on an Interest Payment Date). If less than all of the Securities are to be
redeemed, such portion of the Securities shall be redeemed pro rata, by lot or
by any other method the Trustee shall deem fair and reasonable.
At any time on or prior to __________, 1996, the Company may redeem up to
an aggregate of $50,000,000 principal amount of
29
<PAGE>
Securities within 180 days of the conclusion of one or more Public Equity
Offerings of the Company or any of its Subsidiaries with the net proceeds of
such offerings at a redemption price equal to ___% of the aggregate principal
amount, together with accrued and unpaid interest, if any, to the Redemption
Date.
Upon the occurrence of a Change in Control, each Holder may require the
Company to repurchase all or a portion of such Holder's Securities at a purchase
price in cash equal to 101% of the principal amount thereof, together with
accrued and unpaid interest to the date of repurchase.
Under certain circumstances, in the event the Net Cash Proceeds received by
the Company from any Asset Sale, which is not used to prepay Senior Indebtedness
or invested in properties or assets used in the businesses of the Company,
exceeds $17,500,000, the Company will be required to apply such proceeds to the
repayment of the Securities and certain indebtedness ranking pari passu to the
---- -----
Securities.
In the case of any redemption of Securities, interest installments whose
Stated Maturity is on or prior to the Redemption Date will be payable to the
Holders of such Securities of record at the close of business on the relevant
Record Date referred to on the face hereof. Securities (or portions thereof)
for whose redemption and payment provision is made in accordance with the
Indenture shall cease to bear interest from and after the date of redemption.
In the event of redemption of this Security in part only, a new Security or
Securities for the unredeemed portion hereof shall be issued in the name of the
Holder hereof upon the cancellation hereof.
If an Event of Default shall occur and be continuing, the principal amount
of all the Securities may be declared due and payable in the manner and with the
effect provided in the Indenture.
The Indenture permits, with certain exceptions (including certain
amendments permitted without the consent of any Holders) as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders under the Indenture at any time by the
Company and the Trustee with the consent of the Holders of a specified
percentage in aggregate principal amount of the Securities at the time
Outstanding. The Indenture also contains provisions permitting the Holders of a
specified percentage in aggregate principal amount of the Securities at the time
Outstanding, on behalf of the Holders of all the Securities, to waive compliance
by the Company with certain
30
<PAGE>
provisions of the Indenture and certain past Defaults under the Indenture and
their consequences. Any such consent or waiver by or on behalf of the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security 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 Security.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company or any
Guarantor (in the event such Guarantor is obligated to make payments in respect
of the Securities), which is absolute and unconditional, to pay the principal
of, premium, if any, and interest on this Security at the times, place, and
rate, and in the coin or currency, herein prescribed, subject to the
subordination provisions of the Indenture.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable on the Security Register of
the Company, upon surrender of this Security for registration of transfer at the
office or agency of the Company maintained for such purpose in The City of New
York or at such other office or agency of the Company as may be maintained for
such purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Securities, of authorized denominations and for the
same aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, the Securities
are exchangeable for a like aggregate principal amount of Securities of a
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any registration of transfer or
exchange or redemption of Securities, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
The Company, the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name this Security is registered as the owner hereof
for all purposes, whether or not this Security is overdue, and neither the
Company, the Trustee nor any agent shall be affected by notice to the contrary.
31
<PAGE>
All terms used in this Security which are defined in the Indenture and not
otherwise defined herein shall have the meanings assigned to them in the
Indenture.
Section 204. Form of Trustee's Certificate of Authentication.
-----------------------------------------------
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the Securities referred to in the within-mentioned
Indenture.
STATE STREET BANK AND TRUST COMPANY
As Trustee
By:________________________________
Authorized Officer
ARTICLE THREE
THE SECURITIES
Section 301. Title and Terms.
---------------
The aggregate principal amount of Securities which may be authenticated and
delivered under this Indenture is limited to $175,000,000 in principal amount of
Securities, except for Securities authenticated and delivered upon registration
of transfer of, or in exchange for, or in lieu of, other Securities pursuant to
Section 303, 304, 305, 306, 906, 1015, 1018 or 1108.
The Securities shall be known and designated as the "__________% Senior
Subordinated Notes due 2001" of the Company. The Stated Maturity of the
Securities shall be ____________, 2001, and the Securities shall bear interest
at the rate of _________ % per annum from ___________, 1993 or from the most
recent Interest Payment Date to which interest has been paid or duly provided
for, as the case may be, payable on ___________, 1994 and semi-annually
thereafter on____________ and _____________, in each year, until the principal
thereof is paid or duly provided for. Subject to Article Twelve, interest on any
overdue principal, interest (to the extent lawful) or premium, if any, shall be
payable on demand.
The principal of, premium, if any, and interest on the Securities shall be
payable at the office or agency of the Company maintained for such purpose in
The City of New York, or at such other office or agency of the Company as may be
maintained for such purpose; provided, however, that at the option of the
-------- -------
Company interest may be paid by check mailed to addresses of the Persons
32
<PAGE>
entitled thereto as such addresses shall appear on the Security Register.
The Securities shall be redeemable at the option of the Company as provided
in Article Eleven.
At the election of the Company, the entire indebtedness on the Securities
or certain of the Company's obligations and covenants and certain Events of
Default thereunder may be defeased as provided in Article Four.
The Securities shall be subordinated in right of payment to Senior
Indebtedness as provided in Article Twelve.
Section 302. Denominations.
-------------
The Securities shall be issuable only in registered form without coupons
and only in denominations of $1,000 and any integral multiple thereof.
Section 303. Execution, Authentication, Delivery and Dating.
----------------------------------------------
The Securities shall be executed on behalf of the Company by one of its
Chairman of the Board, its President or one of its Vice Presidents under its
corporate seal reproduced thereon attested by its Secretary or one of its
Assistant Secretaries. The signature of any of these officers on the Securities
may be manual or facsimile.
Securities 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 Securities or did not
hold such offices on the date of such Securities.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Securities executed by the Company to the
Trustee for authentication, together with a Company Order for the authentication
and delivery of such Securities; and the Trustee in accordance with such Company
Order shall authenticate and deliver such Securities as provided in this
Indenture and not otherwise.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein duly
executed by the
33
<PAGE>
Trustee by manual signature of an authorized officer, and such certificate upon
any Security shall be conclusive evidence, and the only evidence, that such
Security has been duly authenticated and delivered hereunder.
In case the Company, pursuant to Article Eight or Section 1018, shall be
consolidated, amalgamated, merged with or into any other Person or shall convey,
transfer or lease substantially all of its properties and assets to any Person,
and the successor Person resulting from such consolidation or amalgamation, or
surviving such merger, or into which the Company shall have been merged or
amalgamated, or the Person which shall have received a conveyance, transfer or
lease as aforesaid, shall have executed an indenture supplemental hereto with
the Trustee pursuant to Article Eight, any of the Securities authenticated or
delivered prior to such consolidation, amalgamation, merger, conveyance,
transfer or lease may, from time to time, at the request of the successor
Person, be exchanged for other Securities executed in the name of the successor
Person with such changes in phraseology and form as may be appropriate, but
otherwise in substance of like tenor as the Securities surrendered for such
exchange and of like principal amount; and the Trustee, upon Company Request of
the successor Person, shall authenticate and deliver Securities as specified in
such request for the purpose of such exchange. If Securities shall at any time
be authenticated and delivered in any new name of a successor Person pursuant to
this Section in exchange or substitution for or upon registration of transfer of
any Securities, such successor Person, at the option of the Holders but without
expense to them, shall provide for the exchange of all Securities at the time
Outstanding for Securities authenticated and delivered in such new name.
Section 304. Temporary Securities.
--------------------
Pending the preparation of definitive Securities, the Company may execute,
and upon Company Order the Trustee shall authenticate and deliver, temporary
Securities which are printed, lithographed, typewritten or otherwise produced,
in any authorized denomination, substantially of the tenor of the definitive
Securities in lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other variations as the officers
executing such Securities may determine, as conclusively evidenced by their
execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the office
or agency of the Company designated for such purpose pursuant to Section 1002,
34
<PAGE>
without charge to the Holder. Upon surrender for cancellation of any one or
more temporary Securities the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a like principal amount of
definitive Securities of authorized denominations. Until so exchanged the
temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities.
Section 305. Registration, Registration of Transfer and Exchange.
---------------------------------------------------
The Company shall cause to be kept at the Corporate Trust Office of the
Trustee, or such other office as the Trustee may designate, a register (the
register maintained in such office and in any other office or agency designated
pursuant to Section 1002 being herein sometimes referred to as the "Security
Register") in which, subject to such reasonable regulations as the Security
Registrar may prescribe, the Company shall provide for the registration of
Securities and of transfers of Securities. The Trustee or an agent thereof or
of the Company shall initially be the "Security Registrar" for the purpose of
registering Securities and transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security at the office
or agency of the Company designated pursuant to Section 1002, the Company shall
execute, and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Securities of any
authorized denomination or denominations, of a like aggregate principal amount.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denomination or denominations, of a like aggregate
principal amount, upon surrender of the Securities to be exchanged at such
office or agency. Whenever any Securities are so surrendered for exchange, the
Company shall execute, and the Trustee shall authenticate and deliver, the
Securities which the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
Indebtedness, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer, or
for exchange or redemption shall (if so required by the Company or the Trustee)
be duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the
35
<PAGE>
Company and the Security 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 registration of
transfer or exchange or redemption of Securities, but the Company may require
payment of a sum sufficient to pay all documentary, stamp or similar issue or
transfer taxes or other governmental charges that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 303, 304, 305, 306, 906, 1015, 1018 or 1108 not
involving any transfer.
Neither the Company nor the Security Registrar shall be required (a) to
issue, register the transfer of or exchange any Security during a period
beginning at the opening of business (i) 15 days before the mailing of a notice
of redemption of the Securities selected for redemption under Section 1104 and
ending at the close of business on the day of such mailing or (ii) 15 days
before an Interest Payment Date and ending on the close of business on the
Interest Payment Date, or (b) to register the transfer of or exchange any
Security so selected for redemption in whole or in part, except the unredeemed
portion of Securities being redeemed in part.
Section 306. Mutilated, Destroyed, Lost and Stolen Securities.
------------------------------------------------
If (a) any mutilated Security is surrendered to the Trustee, or (b) the
Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Security, and there is delivered to the
Company, each Guarantor, if any, and the Trustee, such security or indemnity, in
each case, as may be required by them to save each of them harmless, then, in
the absence of notice to the Company, any Guarantor or the Trustee that such
Security has been acquired by a bona fide purchaser, the Company shall execute
and upon its written request the Trustee shall authenticate and deliver, in
exchange for any such mutilated Security or in lieu of any such destroyed, lost
or stolen Security, a replacement Security of like tenor and principal amount,
bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a replacement Security, pay such Security.
Upon the issuance of any replacement Securities under this Section, the
Company may require the payment of a sum sufficient to pay all documentary,
stamp or similar issue or transfer taxes or other governmental charge that may
be imposed in relation thereto
36
<PAGE>
and any other expenses (including the fees and expenses of the Trustee)
connected therewith.
Every replacement Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company and the Guarantors, whether or not the
destroyed, lost or stolen Security shall be at any time enforceable by anyone,
and shall be entitled to all benefits of this Indenture equally and
proportionately with any and all other Securities duly issued hereunder.
The provisions of this Section 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 Securities.
Section 307. Payment of Interest; Interest Rights Preserved.
----------------------------------------------
Interest on any Security 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 Security is registered at the close of business on the Regular Record
Date for such interest.
Any interest on any Security which is payable, but is not punctually paid
or duly provided for, on any Interest Payment Date and interest on such
defaulted interest at the then applicable interest rate borne by the Securities,
to the extent lawful (such defaulted interest and interest thereon herein
collectively called "Defaulted Interest") shall forthwith cease to be payable to
the Holder on the Regular Record Date; and such Defaulted Interest may be paid
by the Company, at its election in each case, as provided in Subsection (a) or
(b) below:
(a) The Company may elect to make payment of any Defaulted Interest to the
Persons in whose names the Securities 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 Security and the
date (not less than 35 days after such notice) 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 Persons entitled to such Defaulted Interest as
in this Subsection 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 10 days prior to the date of the proposed
37
<PAGE>
payment and not less than 10 days after the receipt by the Trustee of the notice
of the proposed payment. The Trustee shall promptly notify the Company in
writing of such Special Record Date. In the name and at the expense of the
Company, the Trustee 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 at his address as it appears in the
Security Register, not less than 10 days prior to such Special Record Date.
Notice of the proposed payment of such Defaulted Interest and the Special Record
Date therefor having been so mailed, such Defaulted Interest shall be paid to
the Persons in whose names the Securities are registered on such Special Record
Date and shall no longer be payable pursuant to the following Subsection (b).
(b) The Company may make payment to the Persons in whose name the
Securities are registered at the close of business on the Special Record Date of
any Defaulted Interest in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities may be listed,
and upon such notice as may be required by such exchange, if, after written
notice given by the Company to the Trustee of the proposed payment pursuant to
this Subsection, such payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
Section 308. Persons Deemed Owners.
---------------------
The Company, any Guarantor, the Trustee and any agent of the Company or the
Trustee may treat the Person in whose name any Security is registered as the
owner of such Security for the purpose of receiving payment of principal of,
premium, if any, and (subject to Section 307) interest on such Security and for
all other purposes whatsoever, whether or not such Security is overdue, and
neither the Company, any Guarantor, the Trustee nor any agent of the Company,
any Guarantor or the Trustee shall be affected by notice to the contrary.
Section 309. Cancellation.
------------
All Securities surrendered for payment, purchase, redemption, registration
of transfer or exchange shall be delivered to the Trustee and, if not already
cancel led, shall be promptly cancelled by it. The Company and any Guarantor may
at any time deliver to the Trustee for cancellation any Securities previously
38
<PAGE>
authenticated and delivered hereunder which the Company or such Guarantor may
have acquired in any manner whatsoever, and all Securities so delivered shall be
promptly cancelled by the Trustee. No Securities shall be authenticated in lieu
of or in exchange for any Securities cancelled as provided in this Section,
except as expressly permitted by this Indenture. All cancelled Securities shall
be held by the Trustee in accordance with the record retention requirements of
the Exchange Act. The Trustee shall provide the Company a list of all
Securities that have been cancelled from time to time as requested in writing by
the Company.
Section 310. Computation of Interest.
-----------------------
Interest on the Securities shall be computed on the basis of a 360-day year
of twelve 30-day months.
ARTICLE FOUR
DEFEASANCE AND COVENANT DEFEASANCE
Section 401. Company's Option to Effect Defeasance or Covenant Defeasance.
------------------------------------------------------------
The Company may, at its option by Board Resolution, at any time, with
respect to the Securities, elect to have either Section 402 or Section 403 be
applied to all of the Outstanding Securities (the "Defeased Securities"), upon
compliance with the conditions set forth below in this Article Four.
Section 402. Defeasance and Discharge.
------------------------
Upon the Company's exercise under Section 401 of the option applicable to
this Section 402, the Company and each Guarantor, if any, shall be deemed to
have been discharged from its obligations with respect to the Defeased
Securities on the date the conditions set forth below are satisfied
(hereinafter, "defeasance"). For this purpose, such defeasance means that the
Company shall be deemed to have paid and discharged the entire indebtedness
represented by the Defeased Securities, which shall thereafter be deemed to be
"Outstanding" only for the purposes of Section 405 and the other sections of
this Indenture referred to in (a) and (b) below, and to have satisfied all its
other obligations under such Securities and this Indenture insofar as such
Securities are concerned (and the Trustee, at the expense of the Company, and,
upon written request, shall execute proper instruments acknowledging the same),
except for the following which shall survive until otherwise terminated or
discharged hereunder: (a) the rights of Holders of Defeased Securities to
receive, solely from the trust fund described in Section 404 and as more fully
set
39
<PAGE>
forth in such Section, payments in respect of the principal of, premium, if
any, and interest on such Securities when such payments are due, (b) the
Company's obligations with respect to such Defeased Securities under Sections
304, 305, 306, 1002 and 1003, (c) the rights, powers, trusts, duties and
immunities of the Trustee hereunder, including, without limitation, the
Trustee's rights under Section 606, and (d) this Article Four. Subject to
compliance with this Article Four, the Company may exercise its option under
this Section 402 notwithstanding the prior exercise of its option under Section
403 with respect to the Securities.
Section 403. Covenant Defeasance.
-------------------
Upon the Company's exercise under Section 401 of the option applicable to
this Section 403, the Company and any Guarantor, if any, shall be released from
its obligations under each covenant or provision contained in Section 501(g) or
(h) and in Sections 1006 through 1019 and the provisions of Articles Eight and
Twelve, shall not apply, with respect to the Defeased Securities on and after
the date the conditions set forth below are satisfied (hereinafter, "covenant
defeasance"), and the Defeased Securities shall thereafter be deemed to be not
"Outstanding" for the purposes of any direction, waiver, consent or declaration
or Act of Holders (and the consequences of any thereof) in connection with such
covenants and the provisions of Article Twelve, but shall continue to be deemed
"Outstanding" for all other purposes hereunder. For this purpose, such covenant
defeasance means that, with respect to the Defeased Securities, the Company and
each Guarantor, if any, may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such Section or
Article, whether directly or indirectly, by reason of any reference elsewhere
herein to any such Section or Article or by reason of any reference in any such
Section or Article to any other provision herein or in any other document and
such omission to comply shall not constitute a Default or an Event of Default
under Section 501(c), (d) or (e), but, except as specified above, the remainder
of this Indenture and such Defeased Securities shall be unaffected thereby.
Section 404. Conditions to Defeasance or Covenant Defeasance.
-----------------------------------------------
The following shall be the conditions to application of either Section 402
or Section 403 to the Defeased Securities:
(1) The Company shall irrevocably have deposited or caused to be deposited
with the Trustee (or another trustee satisfying the requirements of Section 608
who shall agree to comply with the provisions of this Article Four applicable to
it) as trust funds in trust for the purpose of making the following payments,
specifically pledged as security for, and dedicated solely to, the
40
<PAGE>
benefit of the Holders of such Securities, (a) United States dollars in an
amount, or (b) U.S. Government Obligations which through the scheduled payment
of principal and interest in respect thereof in accordance with their terms will
provide, not later than one day before the due date of any payment, money in an
amount, or (c) a combination thereof, sufficient, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay and discharge and which
shall be applied by the Trustee (or other qualifying trustee) to pay and
discharge the principal of, premium, if any, and interest on the Defeased
Securities on the Stated Maturity (or Redemption Date, if applicable) of such
principal or installment of principal and interest; provided that the Trustee
--------
shall have been irrevocably instructed in writing to apply such United States
dollars or the proceeds of such U.S. Government Obligations to said payments
with respect to the Securities; and provided, further, that from and after the
-------- -------
91st day after the date of deposit, the United States dollars or U.S. Government
Obligations deposited shall not be subject to the rights of the Holders of
Senior Indebtedness pursuant to the provisions of Article Twelve. For this
purpose, "U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America, which, in either
case, are not callable or redeemable at the option of the issuer thereof prior
to the Stated Maturity of the Securities, and shall also include a depository
receipt issued by a bank (as defined in Section 3(a) (2) of the Securities Act),
as custodian with respect to any such U.S. Government Obligation or a specific
payment of principal of or interest on any such U.S. Government Obligation held
by such custodian for the account of the Holder of such depository receipt,
provided that (except as required by law) such custodian is not authorized to
- --------
make any deduction from the amount payable to the Holder of such depository
receipt from any amount received by the custodian in respect of the U.S.
Government Obligation or the specific payment of principal of or interest on the
U.S. Government Obligation evidenced by such depository receipt.
(2) In the case of an election under Section 402, the Company shall have
delivered to the Trustee an Opinion of Counsel of independent counsel in the
United States of nationally recognized standing to the effect that the Holders
of the then Outstanding Securities will not recognize income, gain or loss for
federal income tax purposes as a result of such defeasance and will be subject
to federal income tax on the same amounts, in the same
41
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manner and at the same times as would have been the case if such defeasance had
not occurred.
(3) In the case of an election under Section 403, the Company shall have
delivered to the Trustee an Opinion of Counsel of independent counsel in the
United States of nationally recognized standing to the effect that the Holders
of the outstanding Securities will not recognize income, gain or loss for
federal income tax purposes as a result of such covenant defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such covenant defeasance had not
occurred.
(4) No Default or Event of Default shall have occurred and be continuing
on the date of such deposit or insofar as subsections 501(g) and (h) are
concerned, at any time during the period ending on the 91st day after the date
of deposit.
(5) Such defeasance or covenant defeasance shall not result in a breach or
violation of, or constitute a Default under the Indenture, the New Bank Credit
Agreement or any other material agreement or instrument to which the Company or
any Guarantor is a party or by which it is bound.
(6) In the case of defeasance or covenant defeasance, the Company shall
have delivered to the Trustee an Opinion of Counsel of independent counsel to
the effect that (A) the trust funds will not be subject to any rights of Holders
of Senior Indebtedness, including, without limitation, those arising under this
Indenture, after the 91st day following the deposit and (B) after the 91st day
following the deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally.
(7) The Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders of the Securities or any Guarantee over the other
creditors of the Company or any Guarantor with the intent of defecting,
hindering, delaying or defrauding creditors of the Company or others.
(8) No event or condition shall exist that would prevent the Company from
making payments of the principal of, premium, if any, and interest on the
Securities on the date of such deposit or at any time ending on the 91st day
after the date of such deposit.
(9) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the defeasance under Section 402 or
the covenant defeasance under
42
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Section 403 (as the case may be) have been complied with as contemplated by this
Section 404.
Opinions of Counsel required to be delivered under this Section may have
qualifications customary for opinions of the type required and counsel
delivering such Opinions of Counsel may rely on certificates of the Company or
government or other officials customary for opinions of the type required,
including certificates certifying as to matters of fact, including that various
financial covenants have been complied with.
Section 405. Deposited Money and U.S. Government Obligations to Be Held in
-------------------------------------------------------------
Trust; Other Miscellaneous Provisions.
- -------------------------------------
Subject to the provisions of the last paragraph of Section 1003, all United
States dollars and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee (or other qualifying trustee--collectively for
purposes of this Section 405, the "Trustee") pursuant to Section 404 in respect
of the Defeased Securities shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Securities and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Holders of
such Securities of all sums due and to become due thereon in respect of
principal, premium, if any, and interest, but such money need not be segregated
from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 404 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of the Defeased Securities.
Anything in this Article Four to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon Company Request any
United States dollars or U.S. Government Obligations held by it as provided in
Section 404 which, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered to the
Trustee, are in excess of the amount thereof which would then be required to be
deposited to effect defeasance or covenant defeasance.
Section 406. Reinstatement.
-------------
If the Trustee or Paying Agent is unable to apply any United States dollars
or U.S. Government Obligations in accordance with Section 402 or 403, as the
case may be, by reason of any order or
43
<PAGE>
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, then the Company's obligations under
this Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to Section 402 or 403, as the case may be, until
such time as the Trustee or Paying Agent is permitted to apply all such United
States dollars or U.S. Government Obligations in accordance with Section 402 or
403, as the case may be; provided, however, that if the Company makes any
-------- -------
payment to the Trustee or Paying Agent of principal, premium, if any, or
interest on any Security following the reinstatement of its obligations, the
Trustee or Paying Agent shall promptly pay any such amount to the Holders of the
Securities and the Company shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the money held by the Trustee or
Paying Agent.
ARTICLE FIVE
REMEDIES
Section 501. 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
occasioned by the provisions of Article Twelve or 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) there shall be a default in the payment of any interest on any
Security when it becomes due and payable, and such default shall continue for a
period of 30 days;
(b) there shall be a default in the payment of the principal of (or
premium, if any, on) any Security at its Maturity;
(c) (i) there shall be a default in the performance, or breach, of any
covenant or agreement of the Company or of any Guarantor under this Indenture
(other than a default in the performance or breach of a covenant or agreement
which is specifically dealt with in clauses (a) or (b) or subclauses (ii), (iii)
or (iv) of this clause (c)) and such default or breach shall continue for a
period of 30 days after written notice has been given, by certified mail, (x) to
the Company by the Trustee or (y) to the Company and the Trustee by the Holders
of at least 25% in aggregate principal amount of the outstanding Securities;
(ii) there shall be a default in the performance or breach of the
44
<PAGE>
provisions of Article Eight; (iii) the Company shall have failed to make or
consummate an Offer in accordance with the provisions of Section 1015; or (iv)
the Company shall have failed to make or consummate a Change in Control Offer in
accordance with the provisions of Section 1018;
(d) (i) an event of default shall have occurred under any mortgage, bond,
indenture, loan agreement or other document evidencing any Indebtedness of the
Company or any Subsidiary, which Indebtedness is outstanding in an amount of
$15,000,000 or more in the aggregate, and such default shall result in such
Indebtedness becoming, whether by declaration or otherwise, due and payable
prior to the date on which it would otherwise become due and payable or (ii) a
default in any payment when due at final maturity of any such Indebtedness;
(e) any Holder of at least $15,000,000 in aggregate principal amount of
secured Indebtedness of the Company or any Subsidiary under the New Bank Credit
Agreement after a default under such secured Indebtedness under the New Bank
Credit Agreement shall commence proceedings, or take any action, to retain in
satisfaction of such secured Indebtedness under the New Bank Credit Agreement or
to collect, seize, dispose of or apply in satisfaction of such secured
Indebtedness under the New Bank Credit Agreement, assets of the Company or any
Subsidiary having a Fair Market Value in excess of $15,000,000 individually or
in the aggregate (including funds on deposit or held pursuant to lock-box and
other similar arrangements)
(f) one or more judgments, orders or decrees for the payment of money in
excess of $15,000,000, either individually or in the aggregate, shall be entered
against the Company or any Subsidiary or any of their respective properties
which is not fully covered by insurance, bond, surety or similar instrument and
shall not be discharged and either (a) any creditor shall have commenced an
enforcement proceeding upon such judgment, order or decree or (b) there shall
have been a period of 60 days during which a stay of enforcement of such
judgment or order, by reason of an appeal or otherwise, shall not be in effect;
(g) the entry of a decree or order by a court having jurisdiction in the
premises (i) for relief in respect of the Company or any Significant Subsidiary
in an involuntary case or proceeding under any applicable Bankruptcy Law or (ii)
adjudging the Company or any Significant Subsidiary bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment or composition of or in respect
of the Company or any Significant Subsidiary under applicable federal or state
law, or appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or any Significant
Subsidiary or of
45
<PAGE>
any substantial part of any of their respective properties, or ordering the
winding up or liquidation of any of their affairs, and the continuance of any
such decree or order unstayed and in effect, for a period of 60 consecutive
days; or
(h) (i) the institution by the Company or any Significant Subsidiary of a
voluntary case or proceeding under any applicable Bankruptcy Law or any other
case or proceedings to be adjudicated bankrupt or insolvent, (ii) the consent by
the Company or any Significant Subsidiary to the entry of a decree or order for
relief in respect of the Company or such Significant Subsidiary in an
involuntary case or proceeding under any Bankruptcy Law or to the institution of
any bankruptcy or insolvency proceedings against the Company or any Significant
Subsidiary, (iii) the filing by the Company or any Significant Subsidiary of a
petition or answer or consent seeking reorganization or relief under any
applicable federal or state law, (iv) the Company or any Significant Subsidiary
(x) consents to the filing of any such petition or to the appointment of or
taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of any of the Company or any Significant
Subsidiary or of any substantial part of their respective properties, (y) makes
an assignment for the benefit of creditors, or (z) admits in writing of its
inability to pay its debts generally as they become due or (v) the taking of
corporate action by the Company or any Significant Subsidiary authorizing any
such actions specified in this paragraph (h).
Within five business days after the occurrence of any Default or Event of
Default, the Company shall deliver to the Trustee written notice thereof, which
notice shall be in the form of an Officers' Certificate and shall include the
status of the Default or Event of Default and what action the Company is taking
or proposes to take with respect thereto.
Section 502. Acceleration of Maturity: Rescission and Annulment.
--------------------------------------------------
If an Event of Default (other than an Event of Default specified in
Sections 501(g) and (h)) occurs and is continuing, the Trustee or the Holders of
not less than 25% in aggregate principal amount of the Outstanding Securities
may, and the Trustee upon the request of the Holders of not less than 25% in
aggregate principal amount of the Outstanding Securities shall, declare all the
Securities to be due and payable immediately in an amount equal to the principal
amount of the Securities, together with accrued and unpaid interest to the date
the Securities become due and payable, by a notice in writing to the Company
(and to the Trustee, if given by the Holders), and upon any such declaration
such principal and interest shall become immediately due and payable. If an
Event of
46
<PAGE>
unpaid interest to the date the Securities become due and payable, by a
notice in writing to the Company (and to the Trustee, if given by the Holders),
and upon any such declaration such principal and interest shall become
immediately due and payable. If an Event of Default specified in Sections
501(g) and (h) occurs and is continuing, then the Securities shall ipso facto
---- -----
become and be immediately due and payable in an amount equal to the principal
amount of the Securities, together with accrued and unpaid interest, without any
declaration or other act on the part of the Trustee or any Holder.
After such declaration of acceleration has been made and before a judgment
or decree for payment of the money due has been obtained by the Trustee as
hereinafter in this Article provided, the Holders of a majority in aggregate
principal amount of the Outstanding Securities, by written notice to the Company
and the Trustee, may rescind and annul such declaration and its consequences if:
(a) the Company has paid or deposited with the Trustee a sum sufficient to
pay
(i) all sums paid or advanced by the Trustee under Section 606 and
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel,
(ii) all overdue interest on all Securities,
(iii) the principal of and premium, if any, on any Securities which
have become due otherwise than by such declaration of acceleration and
interest thereon at the rate borne by the Securities, and
(iv) to the extent that payment of such interest is lawful, interest
upon overdue interest at the rate borne by the Securities; and
(b) all Events of Default, other than the non-payment of principal of the
Securities which have become due solely by such declaration of acceleration,
have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon provided in Section 513.
Section 503. Collection of Indebtedness and Suits for Enforcement by
-------------------------------------------------------
Trustee.
- -------
The Company and each Guarantor, if any, covenant that if a
47
<PAGE>
(a) default is made in the payment of any interest on any Security when
such interest becomes due and payable and such default continues for a period of
30 days, or
(b) default is made in the payment of the principal of or premium, if any,
on any Security at the Stated Maturity thereof, the Company and any such
Guarantor will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, subject to Article Twelve, the whole amount then due
and payable on such Securities for principal and premium, if any, and interest,
with interest upon the overdue principal and premium, if any, and, to the extent
that payment of such interest shall be legally enforceable, upon overdue
installments of interest, in each case, from the date upon which such payments
become due and payable, at the rate borne by the Securities; and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
If the Company or any Guarantor, as the case may be, 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 sums so due and unpaid and may prosecute such proceeding to judgment or
final decree, and may enforce the same against the Company or any Guarantor or
any other obligor upon the Securities and collect the moneys adjudged or decreed
to be payable in the manner provided by law out of the property of the Company
or any Guarantor or any other obligor upon the Securities, 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 under this Indenture or the Guarantees by such appropriate private or
judicial proceedings as the Trustee shall deem most effectual to protect and
enforce such rights, including, seeking recourse against any Guarantor pursuant
to the terms of any Grarantee, 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 therein, or to enforce any other proper remedy, including,
without limitation, seeking recourse against any Guarantor pursuant to the terms
of a Guarantee, or to enforce any other proper remedy, subject however to
Section 512.
Section 504. 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
48
<PAGE>
any other obligor, including each Guarantor, if any, upon the Securities or the
property of the Company or of such other obligor or their creditors, the Trustee
(irrespective of whether the principal of the Securities shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective of
whether the Trustee shall have made any demand on the Company for the payment of
overdue principal or interest) shall be entitled and empowered, by intervention
in such proceeding or otherwise,
(a) to file and prove a claim for the whole amount of principal, and
premium, if any, and interest owing and unpaid in respect of the Securities and
to file such other papers or documents as may be necessary or advisable in order
to have the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel) and of the Holders allowed in such judicial proceeding, and
(b) subject to Article Twelve, to collect and receive any moneys or other
property payable or deliverable on any such claims and to distribute the same;
and any custodian, in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 606.
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 Securities
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.
Section 505. Trustee May Enforce Claims Without Possession of Securities.
-----------------------------------------------------------
All rights of action and claims under this Indenture or the Securities may
be prosecuted and enforced by the Trustee without the possession of any of the
Securities or the production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be brought in its own name and
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
49
<PAGE>
Section 506. Application of Money Collected.
------------------------------
Any money collected by the Trustee pursuant to this Article or otherwise on
behalf of the Holders or the Trustee pursuant to this Article or through any
proceeding or any arrangement or restructuring in anticipation or in lieu of
any proceeding contemplated by this Article shall be applied, subject to
applicable law, in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money on account of principal,
premium, if any, or interest, upon presentation of the Securities 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 under Section 606;
SECOND: Subject to Article Twelve, to the payment of the amounts then due
and unpaid upon the Securities for principal, premium, if any, and interest, 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 such Securities for principal, premium, if any, and interest;
and
THIRD: Subject to Article Twelve, the balance, if any, to the Person or
Persons entitled thereto, including the Company, provided that all sums due and
owing to the Holders and the Trustee have been paid in full as required by the
Indenture.
Section 507. Limitation on Suits.
-------------------
No Holder of any Securities shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(a) such Holder has previously given written notice to the Trustee of a
continuing Event of Default;
(b) the Holders of not less than 25% in principal amount of the
Outstanding Securities 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;
(c) such Holder or Holders have offered to the Trustee an indemnity
satisfactory to the Trustee against the costs, expenses (including the
reasonable fees and disbursements of its attorneys and agents) and liabilities
to be incurred in compliance with such request;
50
<PAGE>
(d) the Trustee for 60 days after its receipt of such notice, request and
offer of indemnity has failed to institute any such proceeding; and
(e) 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 Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture or any Guarantee 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 provided in this Indenture or any Guarantee and for the equal and ratable
benefit of all the Holders.
Section 508. Unconditional Right of Holders to Receive Principal, Premium
------------------------------------------------------------
and Interest.
- ------------
Notwithstanding any other provision in this Indenture, the Holder of any
Security shall have the right on the terms stated herein, which is absolute and
unconditional, to receive payment of the principal of, premium, if any, and
(subject to Section 307) interest on such Security on the respective Stated
Maturities expressed in such Security (or, in the case of redemption, on the
Redemption Date) and to institute suit for the enforcement of any such payment,
and such rights shall not be impaired without the consent of such Holder,
subject to Article Twelve.
Section 509. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce any
right or remedy under this Indenture or any Guarantee and such proceeding has
been discontinued or abandoned for any reason, or has been determined adversely
to the Trustee or to such Holder, then and in every such case the Company, each
Guarantor, if any, the Trustee and the Holders 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 and the Holders shall continue as though no such proceeding had been
instituted.
Section 510. Rights and Remedies Cumulative.
------------------------------
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
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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 511. Delay or Omission Not Waiver.
----------------------------
No delay or omission of the Trustee or of any Holder of any 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 or by law to
the Trustee or to the Holders may be exercised from time to time, and as often
as may be deemed expedient, by the Trustee or by the Holders, as the case may
be.
Section 512. Control by Holders.
------------------
The Holders of not less than a majority in aggregate principal amount of
the Outstanding Securities 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
--------
(a) such direction shall be in writing and shall not be in conflict with
any rule of law or with this Indenture or any Guarantee or, in the sole judgment
of the Trustee, expose the Trustee to personal liability; and
(b) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
Section 513. waiver of Past Defaults.
-----------------------
The Holders of not less than a majority in aggregate principal amount of
the Outstanding Securities may on behalf of the Holders of all the Securities
waive any past Default hereunder and its consequences, except a Default
(a) in the payment of the principal of, premium, if any, or interest on
any Security, or
(b) in respect of a covenant or provision hereof which under Article Nine
cannot be modified or amended without the consent of the Holder of each
Outstanding Security affected.
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising there from shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver
52
<PAGE>
shall extend to any subsequent or other default or impair any right consequent
thereon.
Section 514. Undertaking for Costs.
---------------------
All parties to this Indenture agree, and each Holder of any Security by his
acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 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 Securities,
or to any suit instituted by any Holder for the enforcement of the payment of
the principal of, premium, if any, or interest on any Security on or after the
respective Stated Maturities expressed in such Security (or, in the case of
redemption, on or after the Redemption Date).
Section 515. Waiver of Stay Extension or Usury Laws.
--------------------------------------
Each of the Company and each Guarantor, if any, covenants (to the extent
that it may lawfully do so) that it will not at any time insist upon, or plead,
or in any manner whatsoever claim or take the benefit or advantage of, any stay
or extension law or any usury or other law wherever enacted, now or at any time
hereafter in force, which would prohibit or forgive the Company or any Guarantor
from paying all or any portion of the principal of, premium, if any, or interest
on the Securities contemplated herein or in the Securities or which may affect
the covenants or the performance of this Indenture; and each of the Company and
each Guarantor, if any, (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.
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ARTICLE SIX
THE TRUSTEE
Section 601. Notice of Defaults.
------------------
Within 60 days after the occurrence of any Default, the Trustee shall
transmit by mail to all Holders, as their names and addresses appear in the
Security Register, notice of such Default hereunder known to the Trustee, 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 on any Security, the Trustee shall be protected in withholding such
notice if and so long as a trust committee of Responsible Officers of the
Trustee in good faith determines that the withholding of such notice is in the
interest of the Holders.
Section 602. Certain Rights of Trustee.
-------------------------
Subject to the provisions of Trust Indenture Act Sections 315(a) through
315(d):
(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, 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) 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) the Trustee may consult with counsel and any written advice of such
counsel or any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon in accordance with such advice or Opinion
of Counsel;
(d) 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 security or indemnity satisfactory to the Trustee against the
costs, expenses and liabilities which might be incurred therein or thereby in
compliance with such request or direction;
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(e) the Trustee shall not be liable for any action taken or omitted by it
in good faith and believed by it to be authorized or within the discretion,
rights or powers conferred upon it by this Indenture other than any liabilities
arising out of the negligence of the Trustee;
(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, approval,
appraisal, bond, debenture, note, coupon, security or other paper or document
unless requested in writing to do so by the Holders of not less than a majority
in aggregate principal amount of the Securities then Outstanding; provided that,
--------
if the payment within a reasonable time to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such investigation is,
in the opinion of the Trustee, not reasonably assured to the Trustee by the
security afforded to it by the terms of this Indenture, the Trustee may require
reasonable indemnity against such expenses or liabilities as a condition to
proceeding; the reasonable expenses of every such investigation shall be paid by
the Company or, if paid by the Trustee or any predecessor Trustee, shall be
repaid by the Company upon demand; provided, further, the Trustee in its
-------- -------
discretion may make such further inquiry or investigation into such facts
or matters as it may deem fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Company, personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder;
(h) 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;
(i) whenever the Trustee is given hereunder a permissive right or power to
act, such right or power shall not be construed as a requirement to act; and
(j) matters shall not be deemed known by the Trustee unless known by a
Responsible Officer of the Trustee.
55
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Section 603. Trustee Not Responsible for Recitals,
-------------------------------------
Dispositions of Securities or Application of Proceeds Thereof.
- -------------------------------------------------------------
The recitals contained herein and in the Securities, except the Trustee's
certificates of authentication, 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 Indenture or
of the Securities, except that the Trustee represents that it is duly authorized
to execute and deliver this Indenture, authenticate the Securities and perform
its obligations hereunder and that the statements made by it in a Statement of
Eligibility and Qualification on Form T-1 supplied to the Company are true and
accurate subject to the qualifications set forth therein. The Trustee shall not
be accountable for the use or application by the Company of the Securities or
the proceeds thereof.
Section 604. Trustee and Agents May Hold Securities: Collections; Etc.
--------------------------------------------------------
The Trustee, any Paying Agent, Security Registrar or any other agent of the
Company, in its individual or any other capacity, may become the owner or
pledgee of the Securities, with the same rights it would have if it were not the
Trustee, Paying Agent, Security Registrar or such other agent and, subject to
Trust Indenture Act Sections 310 and 311, may otherwise deal with the Company
and receive, collect, hold and retain collections from the Company with the same
rights it would have if it were not the Trustee, Paying Agent, Security
Registrar or such other agent.
Section 605. Money Held in Trust.
-------------------
All moneys received by the Trustee shall, until used or applied as herein
provided, be held in trust for the purposes for which they were received, but
need not be segregated from other funds except to the extent required by
mandatory provisions of law. Except for funds or securities deposited with the
Trustee pursuant to Article Four, the Trustee may invest all moneys received by
the Trustee, until used or applied as herein provided, in Temporary Cash
Investments in accordance with the written directions of the Company. Absent
written direction from the Company, the Trustee shall not be required to invest
any such monies. The Trustee shall not have liability for any losses on monies
invested in accordance with the directions of the Company.
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<PAGE>
Section 606. Compensation and Indemnification of Trustee and Its Prior
---------------------------------------------------------
Claim.
- -----
The Company covenants and agrees to pay to the Trustee from time to time,
and the Trustee shall be entitled to, reasonable compensation for all services
rendered by it hereunder (which shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust), and the company
covenants and agrees to pay or reimburse the Trustee and each predecessor
Trustee upon its request for all reasonable expenses, disbursements and advances
incurred or made by or on behalf of it in accordance with any of the provisions
of this Indenture (including the reasonable compensation and the expenses and
disbursements of its counsel and of all agents and other persons not regularly
in its employ) except any such expense, disbursement or advance as may arise
from its negligence or bad faith. The Company also covenants to indemnify the
Trustee and each predecessor Trustee for, and to hold it harmless against, any
loss, liability, tax, assessment or other governmental charge (other than taxes
applicable to the Trustee's compensation hereunder) or expense incurred without
negligence or bad faith on its part, arising out of or in connection with the
acceptance or administration of this Indenture or the trusts hereunder and its
duties hereunder, including enforcement of this Section 606 and also including
any liability which the Trustee may incur as a result of failure to withhold,
pay or report any tax, assessment or other governmental charge, and the costs
and expenses of defending itself against or investigating any claim of liability
in the premises. The obligations of the Company under this Section to compensate
and indemnify the Trustee and each predecessor Trustee and to pay or reimburse
the Trustee and each predecessor Trustee for expenses, disbursements and
advances shall constitute an additional obligation hereunder and shall survive
the satisfaction and discharge of this Indenture.
Section 607. Conflicting Interests.
---------------------
The Trustee shall comply with the provisions of Section 310(b) of the Trust
Indenture Act.
Section 608. Corporate Trustee Required: Eligibility.
---------------------------------------
There shall at all times be a Trustee hereunder which shall be eligible to
act as Trustee under Trust Indenture Act Section 310(a) (1) and which shall have
a combined capital and surplus of at least $100,000,000. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of federal, state, territorial or District of Columbia supervising
or examining authority, then for the purposes of this Section, the
57
<PAGE>
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, the Trustee shall resign
immediately in the manner and with the effect hereinafter specified in this
Article.
Section 609. Resignation and Removal; Appointment of Successor Trustee.
---------------------------------------------------------
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 610.
(b) The Trustee, or any trustee or trustees hereafter appointed, may at
any time resign by giving written notice thereof to the Company. Upon receiving
such notice of resignation, the Company shall promptly appoint a successor
Trustee by written instrument executed by authority of the Board of Directors of
the Company, a copy Of which shall be delivered to the resigning Trustee and a
copy to the successor Trustee. 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, or any Holder
who has been a bona fide Holder of a Security for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee. Such court
may thereupon, after such notice, if any, as it may deem proper, appoint a
successor Trustee.
(c) The Trustee may be removed at any time by an Act of the Holders of not
less than a majority in aggregate principal amount of the Outstanding
Securities, delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of Trust
Indenture Act Section 310(b) after written request therefor by the Company
or by any Holder who has been a bona fide Holder of a Security for at least
six months, or
(2) the Trustee shall cease to be eligible under Section 608 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
58
<PAGE>
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 case, (i) the Company by a Board Resolution may remove the Trustee,
or (ii) subject to Section 514, the Holder of any Security who has been a bona
fide Holder of a Security 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. Such
court may thereupon, after such notice, if any, as it may deem proper and
prescribe, remove the Trustee and appoint a successor Trustee.
(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 Securities 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 of the
Securities and accepted appointment in the manner hereinafter provided, the
Holder of any Security who has been a bona fide Holder for at least six months
may, subject to Section 514, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for 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
Securities as their names and addresses appear in the Security Register. Each
notice shall include the name of the successor Trustee and the address of its
Corporate Trust Office or agent hereunder.
Section 610. Acceptance of Appointment by Successor.
--------------------------------------
Every successor Trustee appointed hereunder 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 as if originally named as
59
<PAGE>
Trustee hereunder; but, nevertheless, on the written request of the Company or
the successor Trustee, upon payment of its charges then unpaid, such retiring
Trustee shall pay over to the successor Trustee all moneys at the time held by
it hereunder and shall execute and deliver an instrument transferring to such
successor Trustee all such rights, powers, duties and obligations. 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 such rights and powers. Any Trustee ceasing to act shall, nevertheless,
retain a prior claim upon all property or funds held or collected by such
Trustee or such successor Trustee to secure any amounts then due such Trustee
pursuant to the provisions of Section 606.
No successor Trustee with respect to the Securities shall accept
appointment as provided in this Section 610 unless at the time of such
acceptance such successor Trustee shall be eligible to act as Trustee under the
provisions of Trust Indenture Act Section 310(a) and this Article Sixth and
shall have a combined capital and surplus of at least $100,000,000 and have a
Corporate Trust Office or an agent selected in accordance with Section 608 in
the City of New York.
Upon acceptance of appointment by any successor Trustee as provided in this
Section 610, the Company shall give notice thereof to the Holders of the
Securities, by mailing such notice to such Holders at Their addresses as they
shall appear on the Security Register. If the acceptance of appointment is
substantially contemporaneous with the resignation, then the notice called for
by the preceding sentence may be combined with the notice called for by Section
609. If the Company fails to give such notice within 10 days after acceptance of
appointment by the successor Trustee, the successor Trustee shall cause such
notice to be given at the expense of the Company.
Section 611. Merger, Conversion, Amalgamation, Consolidation or Succession
-------------------------------------------------------------
to Business.
- -----------
Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated or amalgamated, or any corporation resulting from
any merger, conversion, amalgamation or 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 eligible under Trust Indenture Act
Section 310(a) and this Article Sixth and shall have a combined capital and
surplus of at least $100,000,000 and have a Corporate Trust Office or an agent
selected in accordance with Section 608 in the City of New York, without the
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<PAGE>
execution or filing of any paper or any further act on the part of any of the
parties hereto.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any of the Securities shall have been
authenticated but not delivered, any such successor to the Trustee may adopt the
certificate of authentication of any predecessor Trustee and deliver such
Securities so authenticated; and, in case at that time any of the Securities
shall not have been authenticated, any successor to the Trustee may authenticate
such Securities either in the name of any predecessor hereunder or in the name
of the successor Trustee; and in all such cases such certificate shall have the
full force which it is anywhere in the Securities or in this Indenture provided
that the certificate of the Trustee shall have; provided that the right to adopt
--------
the certificate of authentication of any predecessor Trustee or to authenticate
Securities in the name of any predecessor Trustee shall apply only to its
successor or successors by merger, amalgamation, conversion or consolidation.
Section 612. Preferential Collection of Claims Against Company.
-------------------------------------------------
If and when the Trustee shall be or become a creditor of the Company (or
other obligor under the Securities), 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).
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 701. Company to Furnish Trustee Names and Addresses of Holders.
---------------------------------------------------------
The Company will furnish or cause to be furnished to the Trustee
(a) semi-annually, not more than 15 days after each Regular Record Date, a
list, in such form as the Trustee may reasonably require, of the names and
addresses of the Holders as of such Regular Record Date; and
(b) at such other times as the Trustee may request in writing, within 30
days after receipt by the Company of any such request, a list of similar form
and content as of a date not more than 15 days prior to the time such list is
furnished;
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provided, however, that if and so long as the Trustee shall be the Security
- -------- -------
Registrar, no such list need be furnished.
Section 702. Disclosure of Names and Addresses of Holders.
--------------------------------------------
Every Holder of Securities, by receiving and holding the same, agrees with
the Company and the Trustee that neither the company nor the Trustee or any
agent of either of them shall be held accountable by reason of the disclosure of
any information as to the names and addresses of the Holders in accordance with
Trust Indenture Act Section 312, regardless of the source from which such
information was derived, and that the Trustee shall not be held accountable by
reason of mailing any material pursuant to a request made under Trust Indenture
Act Section 312.
Section 703. Reports by Trustee.
------------------
Within 60 days after May 15 of each year commencing with the first May 15
after the first issuance of Securities, the Trustee shall transmit by mail to
all Holders, as their names and addresses appear in the Security Register, as
provided in Trust Indenture Act Section 313(c), a brief report dated as of such
May 15 in accordance with and to the extent required by Trust Indenture Act
Section 313(a).
Section 704. Reports by Company.
------------------
The Company shall:
(a) file with the Trustee, within 15 days after the Company is required to
file the same with the Commission, copies of the annual reports and of the
information, documents and other reports (or copies of such portions of any of
the foregoing as the Commission may from time to time by rules and regulations
prescribe) which the Company may be required to file with the Commission
pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if the Company
is not required to file information, documents or reports pursuant to either of
said Sections, then it shall file with the Trustee and the Commission, in
accordance with rules and regulations prescribed from time to time by the
Commission, such of the supplementary and periodic information, documents and
reports which may be required pursuant to Section 13 of the Exchange Act in
respect of a security listed and registered on a national securities exchange as
may be prescribed from time to time in such rules and regulations;
(b) file with the Trustee and the Commission, in accordance with the rules
and regulations prescribed from time to time by the Commission, such additional
information, documents and reports with respect to compliance by the Company,
with the conditions and
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covenants of this Indenture as may be required from time to time by such rules
and regulations; and
(c) transmit by mail to all Holders, as their names and addresses appear
in the Security Register, within 15 days after the filing thereof with the
Trustee, in the manner and to the extent provided in Trust Indenture Act Section
313(c), such summaries of any information, documents and reports required to by
filed by the Company pursuant to Subsections (a) and (b) of this Section as may
be required by rules and regulations prescribed from time to time by the
Commission.
ARTICLE EIGHT
CONSOLIDATION, MERGER, AMALGAMATION,
CONVEYANCE, TRANSFER OR LEASE
Section 801. Company or Guarantor May Consolidate, Amalgamate, etc., Only
-------------------------------------------------------------
on Certain Terms.
- -----------------
(a) The Company shall not, in a single transaction or through a series of
related transactions, consolidate with or merge with or into any other Person or
sell, assign, convey, transfer or lease or otherwise dispose of all or
substantially all of its properties and assets to any Person or group of
affiliated Persons, or permit any of its Subsidiaries to enter into any such
transaction or transactions if such transaction or transactions, in the
aggregate, would result in a sale, assignment, transfer, lease or disposal of
all or substantially all of the properties and assets of the Company and its
Subsidiaries on a Consolidated basis to any other Person or group of affiliated
Persons, unless at the time and after giving effect thereto
(i) either (a) the Company shall be the continuing corporation, or
(b) the Person (if other than the Company) formed by such consolidation or
into which the Company is merged or the Person which acquires by
conveyance, transfer, lease or disposition the properties and assets of the
Company, substantially as an entirety (the "Surviving Entity") shall be a
corporation duly organized and validly existing under the laws of the
United States of America, any state thereof or the District of Columbia and
shall, in either case, expressly assume, by an indenture supplemental
hereto, executed and delivered to the Trustee, subject to 602(c), in form
satisfactory to the Trustee, all the obligations, including the performance
of all covenants contained herein, of the Company under the Securities and
this Indenture, and this Indenture shall remain in full force and effect;
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(ii) immediately before and immediately after giving effect to such
transaction on a pro forma basis (and treating any Indebtedness not
--- -----
previously an obligation of the Company or a Subsidiary which becomes the
obligation of the Company or any of its Subsidiaries in connection with or
as a result of such transaction as having been incurred at the time of such
transaction), no Default or Event of Default shall have occurred and be
continuing;
(iii) immediately after giving effect to such transaction on a pro
---
forma basis, the Consolidated Net Worth of the Company (or the Surviving
-----
Entity if the Company is not the continuing obligor under this Indenture)
is at least equal to the Consolidated Net Worth of the Company immediately
before such transaction;
(iv) immediately before and immediately after giving effect to such
transaction on a pro forma basis on the assumption that the transaction
--- -----
occurred on the first day of the four-quarter period immediately prior to
the consummation of such transaction with the appropriate adjustments with
respect to the transaction being included in such pro forma calculation,
the Company (or the Surviving Entity if the Company is not the continuing
obligor under this Indenture) could incur $1.00 of additional Indebtedness
under Section 1008 (other than Permitted Indebtedness);
(v) each Guarantor, if any, unless it is the other party to the
transactions described above, shall have by supplemental indenture
confirmed that its Guarantee of the Securities shall apply to such person's
obligations under this Indenture and the Securities; and
(vi) the Company or the Surviving Entity shall have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger, sale, assignment, conveyance, transfer,
lease or disposition and such supplemental indenture comply with this
Indenture.
(b) Each Guarantor, if any, (other than any Subsidiary whose Guarantee is
being released pursuant to Section 1016 as a result of such transaction), shall
not, and the Company will not permit a Guarantor to, in a single transaction or
through a series of related transactions, merge or consolidate with or into any
other corporation or other entity (other than the Company or any Guarantor), or
sell, assign, convey, transfer, lease or otherwise dispose of its properties and
assets on a Consolidated basis substantially as an entirety to any entity unless
64
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(i) either (1) such Guarantor shall be the continuing corporation
or partnership or (2) the entity (if other than such Guarantor) formed by
such consolidation or into which such Guarantor is merged or the entity
which acquires by sale, assignment, conveyance, transfer, lease or
disposition the properties and assets of such Guarantor substantially as an
entirety shall be a corporation or partnership organized and validly
existing under the laws of the United States, any state thereof 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, all the obligations of such Guarantor under
the Securities and this Indenture;
(ii) immediately before and immediately thereafter (and treating any
Indebtedness not previously an obligation of the Company or a Subsidiary
which becomes the obligation of the Company or any of its Subsidiaries in
connection with or as a result of such transaction as having been incurred
at the time of such transaction), no Default or Event of Default shall have
occurred and be continuing; and
(iii) such Guarantor shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, sale, assignment, conveyance, transfer, lease or
disposition and such supplemental indenture comply with this Indenture, and
thereafter all obligations of the predecessor shall terminate.
Section 802. Successor Substitutes.
----------------------
Upon any consolidation or merger, or any sale, assignment, conveyance,
transfer, lease or disposition of all or substantially all of the properties and
assets of the Company or any Guarantor in accordance with Section 801, the
successor Person formed by such consolidation or into which the Company or such
Guarantor, as the case may be, is merged or the successor Person to which such
sale, assignment, conveyance, transfer, lease or disposition is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company or such Guarantor, as the case may be, under this Indenture and/or
the Guarantees, if any, as the case may be, with the same effect as if such
successor had been named as the Company or such Guarantor, as the case may be,
herein and/or in the Guarantees, as the case may be. When a successor assumes
all the obligations of its predecessor under this Indenture, the Securities or a
Guarantee, as the case may be, the predecessor shall be released from those
obligations; provided that in the case of a transfer by lease, the predecessor
--------
shall not be released from the payment of principal and interest on the
Securities or a Guarantee, as the case may be.
65
<PAGE>
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 901. Supplemental Indentures and Agreements without Consent of
---------------------------------------------------------
Holders.
- -------
Without the consent of any Holders, the Company and the Guarantors, if any,
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 or
agreements or other instruments with respect to any Guarantee, in form and
substance satisfactory to the Trustee, for any of the following purposes:
(a) to evidence the succession of another Person to the Company or a
Guarantor, and the assumption by any such successor of the covenants of the
Company or such Guarantor herein and in the Securities and in any Guarantee;
(b) to add to the covenants of the Company or any Guarantor for the
benefit of the Holders, or to surrender any right or power herein conferred upon
the Company or any Guarantor, as applicable, herein, in the Securities or in any
Guarantee;
(c) to cure any ambiguity, to correct or supplement any provision herein
which may be defective or inconsistent with any other provision herein or in any
Guarantee, or to make any other provisions with respect to matters or questions
arising under this Indenture, the Securities or any Guarantee; provided that, in
--------
each case, such provisions shall not adversely affect the interests of the
Holders;
(d) to comply with the requirements of the Commission in order to effect
or maintain the qualification of this Indenture under the Trust Indenture Act,
as contemplated by Section 905 or otherwise;
(e) to add a Guarantor pursuant to the requirements of Section 1016;
(f) to evidence and provide the acceptance of the appointment of a
successor Trustee hereunder;
(g) to add Events of Default for the benefit of the Holders of all of the
Securities;
(h) to secure the Securities pursuant to the requirements of Section 1012
or otherwise; or
<PAGE>
(i) to mortgage, pledge, hypothecate or grant a security interest in favor
of the Trustee for the benefit of the Holders as additional security for the
payment and performance of the Indenture Obligations, in any property or assets,
including any which are required to be mortgaged, pledged or hypothecated, or in
which a security interest is required to be granted to the Trustee pursuant to
this Indenture or otherwise.
Section 902. Supplemental Indentures and Agreements with Consent of
------------------------------------------------------
Holders.
- -------
With the consent of the Holders of not less than a majority in aggregate
principal amount of the Outstanding Securities, by Act of said Holders delivered
to the Company, each Guarantor, if any, and the Trustee, the Company, and each
Guarantor (if a party thereto) when authorized by a Board Resolution, and the
Trustee may enter into an indenture or indentures supplemental hereto or
agreements or other instruments with respect to any Guarantee in form and
substance satisfactory to the Trustee 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, the Securities or any Guarantee; provided, however, that no such
-------- -------
supplemental indenture, agreement or instrument shall, without the consent of
the Holder of each Outstanding Security affected thereby:
(a) change the Stated Maturity of the principal of, or any installment of
interest on, any security, or reduce the principal amount thereof or the rate of
interest thereon or any premium payable upon the redemption or required purchase
thereof, or change the coin or currency in which the principal of any Security
or any premium or the interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment after the Stated Maturity
thereof (or, in the case of redemption, on or after the Redemption Date);
(b) amend, change or modify the obligation of the Company to make and
consummate a Change in Control Offer in accordance with Section 1018 or an Offer
in accordance with Section 1015, including amending, changing or modifying any
of the definitions related thereto for purposes of such provisions;
(c) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such supplemental
indenture, or the consent of whose Holders is required for any waiver of
compliance with certain provisions of this Indenture or certain Defaults
hereunder and their consequences provided for in this Indenture or with respect
to any Guarantee;
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(d) modify any of the provisions of this Section or Section 513 or 1020,
except to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the consent of
the Holder of each Security affected thereby;
(e) except as otherwise permitted under Article Eight, consent to the
assignment or transfer by the Company or any Guarantor of any of their rights
and obligations under this Indenture; or
(f) modify any of the provisions of this Indenture relating to the
subordination of the Securities or any Guarantee in a manner adverse to the
Holders thereof.
Upon the written request of the Company and each Guarantor, if any,
accompanied by a copy of a Board Resolution authorizing the execution of any
such supplemental indenture or guarantee, and upon the filing with the Trustee
of evidence of the consent of Holders as aforesaid, the Trustee shall join with
the Company and each Guarantor in the execution of such supplemental indenture
or Guarantee.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture or Guarantee
or agreement or instrument relating to any Guarantee, but it shall be sufficient
if such Act shall approve the substance thereof.
Section 903. Execution of Supplemental Indentures and Agreements.
---------------------------------------------------
In executing, or accepting the additional trusts created by, any
supplemental indenture, agreement or instrument permitted by this Article or the
modifications thereby of the trusts created by this Indenture, the Trustee shall
be entitled to receive, and (subject to Trust Indenture Act Section 315(a)
through 315(d) and Section 602 hereof) shall be fully protected in relying upon,
an Opinion of Counsel and an Officers' Certificate stating that the execution of
such supplemental indenture, agreement or instrument is authorized or permitted
by this Indenture. The Trustee may, but shall not be obligated to, enter into
any such supplemental indenture, agreement or instrument which affects the
Trustee's own rights, duties or immunities under this Indenture, any Guarantee
or otherwise.
Section 904. Effect of Supplemental Indentures.
---------------------------------
Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith,
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and such supplemental indenture shall form a part of this Indenture for all
Purposes; and every Holder of Securities theretofore or thereafter authenticated
and delivered hereunder shall be bound thereby.
Section 905. Conformity with Trust Indenture Act.
-----------------------------------
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
Section 906. Reference in Securities to Supplemental Indentures.
--------------------------------------------------
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Board of Directors, to any such supplemental indenture may be prepared and
executed by the Company and each Guarantor, if any, and authenticated and
delivered by the Trustee in exchange for Outstanding Securities.
Section 907. Effect on Senior Indebtedness.
-----------------------------
No supplemental indenture shall adversely affect the rights under Article
Twelve, or any definitions or provisions related thereto, or the Guarantees of
any Holder of Senior Indebtedness unless the requisite Holders of each issue of
Senior Indebtedness affected thereby shall have consented to such supplemental
indenture.
Section 908. Record Date.
-----------
If the Company shall solicit from the Holders any request, demand,
authorization, direction, notice, consent, waiver or other Act, the Company may,
but shall not be obligated to, fix a record date for the purpose of determining
the Holders entitled to consent to any supplemental indenture, agreement or
instrument or any waiver, and shall promptly notify the Trustee of any such
record date. If a record date is fixed those Persons who were Holders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to consent to such supplemental indenture, agreement or instrument or
waiver or to revoke any consent previously given, whether or not such Persons
continue to be Holders after such record date. The record date shall be a date
no more than 30 days prior to the first solicitation of Holders generally in
connection therewith and no later than the date such
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solicitation is completed. No such consent shall be valid or effective for more
than 90 days after such record date and no action shall be taken in respect of
such consent after such 90 day period.
ARTICLE TEN
COVENANTS
Section 1001. Payment of Principal, Premium and Interest.
------------------------------------------
The Company will duly and punctually pay the principal of, premium, if any,
and interest on the Securities in accordance with the terms of the Securities
and this Indenture.
Section 1002. Maintenance of Office or Agency.
-------------------------------
So long as any of the Securities remain outstanding, the Company will
maintain in the City of New York, an office or agency where Securities may be
presented or surrendered for payment, where Securities may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Company in respect of the Securities and this Indenture may be served. The
Company initially appoints State Street Bank and Trust Company, N.A., at its
office at 61 Broadway, New York, New York 10005, as its office or agency for
each of said purposes. The Company will 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 any such required 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 office of the agent
of the Trustee described above and the Company hereby appoints such agent as its
agent to receive all such presentations, surrenders, notices and demands.
The Company may from time to time designate one or more other offices or
agencies (in or outside of the City of New York) where the Securities may be
presented or surrendered for any or all such purposes, and may from time to time
rescind such designation; provided, however, that no such designation or
-------- -------
rescission shall in any manner relieve the Company of its obligation to maintain
an office or agency in the City of New York for such purposes. The Company will
give prompt written notice to the Trustee of any such designation or rescission
and any change in the location of any such office or agency.
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Section 1003. Money for Security Payments to be Held in Trust.
-----------------------------------------------
If the Company shall at any time act as its own Paying Agent, it will, on
or before each due date of the principal of, premium, if any, or interest on any
of the Securities, segregate and hold in trust for the benefit of the Holders
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 will promptly notify the Trustee
of its action or failure so to act.
If the Company is not acting as Paying Agent, the company will, on or
before each due date of the principal of, premium, if any, or interest on, any
Securities, deposit with a Paying Agent a sum in same day funds 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
or interest, and (unless such Paying Agent is the Trustee) the Company will
promptly notify the Trustee of such action or any failure so to act.
If the Company is not acting as Paying Agent, the Company will cause each
Paying Agent other than the Trustee to execute and deliver to the Trustee an
instrument in which such Paying Agent shall agree with the Trustee, subject to
the provisions of this Section, that such Paying Agent will:
(a) hold all sums held by it for the payment of the principal of, premium,
if any, or interest on Securities 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;
(b) give the Trustee notice of any Default by the Company or any Guarantor
(or any other obligor upon the Securities) in the making of any payment of
principal, premium, if any, or interest;
(c) 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
(d) acknowledge, accept and agree to comply in all aspects with the
provisions of this Indenture relating to the duties, rights and disabilities of
such 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
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Agent, such sums to be held by the Trustee upon the same trusts as those upon
which such sums were held by the Company or such Paying Agent; and, upon such
payment by any Paying Agent to the Trustee, such Paying Agent shall be released
from all further liability with respect to such money.
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 on any Security and remaining unclaimed for two years after such
principal and premium, if any, or interest has become due and payable shall
promptly be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Security
shall thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
-------- -------
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in the New York Times and The
Wall Street Journal (national edition), notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such notification or publication, any unclaimed balance of such
money then remaining will promptly be repaid to the Company.
Section 1004. Corporate Existence.
-------------------
Subject to Article Eight and Section 1018, the Company will do or cause to
be done all things necessary to preserve and keep in full force and effect its
corporate existence.
Section 1005. Payment of Taxes and Other Claims.
---------------------------------
The Company will pay or discharge or cause to be paid or discharged, before
the same shall become delinquent, all taxes, assessments and governmental
charges levied or imposed upon the Company or any Subsidiary or upon the income,
profits or property of the Company or any Subsidiary, the failure to pay or
discharge of which would have a material adverse effect on the condition
(financial or otherwise), earnings or business affairs of the Company and its
Subsidiaries taken as one enterprise; provided, however, that the Company shall
-------- -------
not be required to pay or cause to be paid or discharged any such tax,
assessment or governmental charge whose amount, applicability or validity is
being contested in good faith by appropriate proceedings properly instituted and
diligently conducted and in respect of which appropriate reserves (in the good
faith judgment of management of the Company) are being maintained in accordance
with GAAP consistently applied.
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Section 1006. Maintenance of Properties.
-------------------------
The Company will cause all properties owned or leased by the Company or any
Subsidiary or used or held for use in the conduct of its busineSs or the
business of any Subsidiary to be maintained and kept in good condition and
repair (ordinary wear and tear excepted) as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly conducted at all times; provided, however, that nothing in this Section
-------- -------
shall prevent the Company from (i) discontinuing the use, operation or
maintenance of any of such properties if such discontinuance is, in the judgment
of the Board of Directors of the Company or the Subsidiary concerned, or of any
officer (or other agent employed by the Company or any Subsidiary) having
managerial responsibility for any such property, desirable in the conduct of its
business or the business of any Subsidiary or (ii) selling any properties;
provided that the proceeds of such sale shall be applied in accordance with
Section 1015, if applicable.
Section 1007. Insurance.
---------
The Company shall provide or cause to be provided for itself and any
Subsidiaries insurance (including appropriate self-insurance), with insurers
believed by the Company to be responsible, against loss or damage of the kinds
customarily insured against by Persons similarly situated and owning like
properties in the same general areas in which the Company or such Subsidiaries
operate, unless such failure to provide or cause to be provided such insurance
could not reasonably be expected to have a material adverse effect on the
condition (financial or otherwise), earnings or business affairs of the Company
and its subsidiaries taken as one enterprise.
Section 1008. Limitation on Indebtedness.
--------------------------
The Company will not, and will not permit any of its Subsidiaries to,
crate, incur, assume, or directly or indirectly guarantee or in any other manner
become directly or indirectly liable for the payment of, any Indebtedness
(including any Acquired Indebtedness and the liquidation value of any
outstanding Permitted Preferred Stock but excluding Permitted Indebtedness)
unless the Company's Consolidated Fixed Charge Coverage Ratio for the four full
fiscal quarters immediately preceding such event, taken as one period, and after
given pro forma effect to (i) the incurrence of such Indebtedness and (if
--- -----
applicable) the application of the net proceeds therefrom, including to
refinance other Indebtedness, as if such Indebtedness was incurred at the
beginning of such four-quarter period; (ii) the incurrence, repayment or
retirement of any other Indebtedness by the Company and its Subsidiaries since
the first day of such four-quarter period as if such Indebtedness was
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<PAGE>
incurred, repaid or retired at the beginning of such four-quarter period (except
that, in making such computation, the amount of Indebtedness under any revolving
credit facility shall be computed based upon the average daily balance of such
Indebtedness during such four-quarter period); and (iii) any acquisition or
disposition by the Company or any Subsidiaries of any assets or any Person out
of the ordinary course of business, whether by merger, stock purchase or sale,
or asset purchase or sale, as if such acquisition or disposition occurred at the
beginning of such four-quarter period, including the Consolidated Net Income for
such period related to the Person or assets acquired or disposed by the Company
or such Subsidiary, is at least equal to the ratios set forth below during the
Fiscal Years indicated below:
<TABLE>
<CAPTION>
Fiscal Year Ratio
----------- -----
<S> <C>
1994.............................. 1.85:1.00
1995.............................. 2.00:1.00
1996 and thereafter............... 2.15:1.00
</TABLE>
Section 1009. Limitation on Restricted Payments.
---------------------------------
(a) The Company will not, and will not permit any Subsidiary to, directly
or indirectly:
(i) declare or pay any dividend on, or make any distribution to Holders
of, any Capital Stock of the Company (other than dividends or distributions
payable solely in shares of Qualified Capital Stock of the Company or in
options, warrants or other rights to acquire Qualified Capital Stock of the
Company);
(ii) purchase, redeem, defease or otherwise acquire or retire for value any
Capital Stock of the Company or any option, warrant or other right to acquire
such Capital Stock of the Company;
(iii) make any principal payment on, or redeem, repurchase, defease or
otherwise acquire or retire for value, prior to any scheduled repayment, or
maturity, any Subordinated Indebtedness or Pari Passu Indebtedness;
(iv) declare or pay any dividend or distribution on any Capital Stock
of any Subsidiary to any Person other than the Company or any of its Wholly
Owned Subsidiaries (other than dividends or distributions by any Subsidiary to
all Holders of Capital Stock or such Subsidiary on a pro rata basis) or
purchase, redeem, defease or otherwise acquire for value any Capital Stock of
any Subsidiary held by any Person (other than the Company or any of its Wholly
Owned Subsidiaries) or any warrants, rights or options to purchase or acquire
any such outstanding Capital Stock; or
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<PAGE>
(v) make any Investment in any Person (other than any Permitted
Investment) unless the Person will thereby become a Wholly Owned Subsidiary;
(any of the foregoing payments or other actions described in (i) through (v),
collectively, "Restricted Payments") unless at the time of and after giving
effect to the proposed Restricted Payment (the amount of any such Restricted
Payment, if other than cash, as determined by the Board of Directors, whose
determination shall be conclusive and evidenced by a Board Resolution), (1) no
Default or Event of Default shall have occurred and be continuing and such
Restricted Payment shall not be an event which is, or after notice or lapse of
time or both, would be, an "event of default" under the terms of any
Indebtedness of the Company or any Subsidiary; (2) immediately before and
immediately after giving effect to such transaction on a pro forma basis, the
Company could incur $1.00 of additional Indebtedness under the provisions of
Section 1008 (other than Permitted Indebtedness); and (3) the aggregate amount
of all Restricted Payments declared or made after the date of this Indenture
shall not exceed the sum of
(A) 50% of the Consolidated Net Income of the Company accrued on a
cumulative basis during the period beginning on the date of this Indenture and
ending on the last day of the Company's last fiscal quarter ending prior to the
date of such proposed Restricted Payment (or, if such aggregate cumulative
Consolidated Net Income shall be a loss, minus 100% of such loss);
(B) the aggregate Net Cash Proceeds received after the date of this
Indenture by the Company from the issuance or sale (other than to any of its
Subsidiaries) of shares of Qualified Capital Stock or any options or warrants to
purchase such shares of Qualified Capital Stock of the Company (except, in each
case, to the extent such proceeds are used for the purposes described in clause
(ii) of the following paragraph (b));
(C) the aggregate Net Cash Proceeds received after the date of this
Indenture by the Company as capital contributions to the Company;
(D) the aggregate Net Cash Proceeds received after the date of this
Indenture by the Company (other than from any of its Subsidiaries) upon the
exercise of any options or warrants to purchase shares of Qualified Capital
Stock of the Company; and
(E) the amount of which Indebtedness of the Company is reduced upon any
conversion or exchange of Indebtedness of the Company into Qualified Capital
Stock of the Company plus the aggregate cash received by the Company at the time
of such conversion or exchange.
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(b) None of the foregoing provisions shall be deemed to prohibit the
following Restricted Payments so long as in the case of clauses (ii), (iv) and
(vi) there is no Default or Event of Default continuing:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at the date of declaration, such payment would be
permitted by the provisions of the preceding paragraph (a) and such payment
shall be deemed to have been paid on such date of declaration for purposes of
the calculation required by the provisions of the foregoing paragraph;
(ii) the redemption, repurchase or other acquisition or retirement of any
shares of any class of Capital Stock of the Company, Subordinated Indebtedness
or Pari Passu Indebtedness in exchange for, or out of the net proceeds of, a
substantially concurrent issue and sale (other than to a Subsidiary) of shares
of Qualified Capital Stock of the Company; provided that any net proceeds from
--------
the issue and sale of such Qualified Capital Stock are excluded from clause 3(B)
of paragraph (a) above;
(iii) the repurchase of the PIP Options in accordance with the terms of the
PIP Options in an aggregate amount not to exceed $5,000,000, upon the death,
disability or involuntary or voluntary termination of employment of employees of
the Company;
(iv) the payment of dividends on the Series C Preferred Stock and the
Series D Preferred Stock, each in accordance with the terms of the certificates
of designation for such Preferred Stock;
(v) the exchange by NME of up to $63,300,000 in liquidation value of
Series D Preferred Stock in connection with the exercise of the Warrants held by
NME; and
(vi) the redemption, repurchase, or other acquisition or retirement of Pari
Passu Indebtedness or Subordinated Indebtedness of the Company (other than
Redeemable Capital Stock) made by exchange for, or out of the proceeds of the
substantially concurrent sale of, new Pari Passu Indebtedness or Subordinated
Indebtedness of the Company so long as (A) the principal amount of such new Pari
Passu Indebtedness or Subordinated Indebtedness does not exceed the principal
amount of the Pari Passu Indebtedness or Subordinated Indebtedness being so
redeemed, repurchased, acquired or retired for value (plus the amount of any
premium required to be paid under the terms of the instrument governing the Pari
Passu Indebtedness or Subordinated Indebtedness being so redeemed, repurchased,
acquired or retired or the amount of any premium reasonably determined by the
Company as necessary to accomplish such refinancing by means of a tender offer
or privately negotiated transactions and, in each case, actually paid, plus the
amount of
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expenses of the Company incurred in connection with such refinancing), (B) in
the case of the redemption, repurchase, or other acquisition or retirement of
Subordinated Indebtedness, such new Indebtedness is subordinated to Senior
Indebtedness and the Securities at least to the same extent as such Subordinated
Indebtedness so purchased, exchanged, redeemed, repurchased, acquired or retired
for value, (C) in the case of the redemption, repurchase or other acquisition or
retirement of Pari Passu Indebtedness, such new Indebtedness shall be pari passu
---- -----
in right of payment with the Securities or shall be Subordinated Indebtedness,
(D) any such Subordinated Indebtedness has a Stated Maturity for its final
scheduled principal payment later than the Stated Maturity for the final
scheduled principal payment of the Securities and an Average Life to Stated
Maturity greater than the remaining Average Life to Stated Maturity of the
Securities and (E) any such Pari Passu Indebtedness has a Stated Maturity for
its final scheduled principal payment later than or equal to the Stated Maturity
for the final scheduled principal payment of the Notes and an Average Life to
Stated Maturity greater than or equal to the remaining Average Life to Stated
Maturity of the Notes.
The actions described in clauses (i), (ii), (iii), (iv) and (v) of this
paragraph (b) shall be Restricted Payments that shall be permitted to be taken
in accordance with this paragraph (b) but shall reduce the amount that would
otherwise be available for Restricted Payments under clause (3) of paragraph (a)
and the actions described in clause (vi) of this paragraph (b) shall be
Restricted Payments that shall be permitted to be taken in accordance with this
paragraph (b) and shall not reduce the amount that would otherwise be available
for Restricted Payments under clause (3) of paragraph (a).
Section 1010. Limitation on Preferred Stock of Subsidiaries.
---------------------------------------------
The Company will not permit any Subsidiary to issue any Preferred Stock
other than Preferred Stock (collectively, "Permitted Preferred Stock") to be
issued (i) to the Company or a Wholly Owned Subsidiary, or (ii) to any Person
(other than the Company or a Wholly Owned Subsidiary) provided that at the time
of such issuance a Subsidiary would be entitled to create, incur or assume
Indebtedness pursuant to Section 1008 in the aggregate principal amount equal to
the aggregate liquidation value, plus any accrued dividends, of the Preferred
Stock to be issued. The Company will not sell, transfer or otherwise dispose of
Preferred Stock issued by a Subsidiary or permit a Wholly Owned Subsidiary to
sell, transfer or otherwise dispose of Preferred Stock issued by a Subsidiary,
other than (i) to the Company or a Wholly Owned Subsidiary, as the case may be,
or (ii) to any Person (other than the Company or a Wholly Owned Subsidiary),
provided that at the time of such sale, transfer or disposition a Subsidiary
would be
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entitled to create, incur or assume Indebtedness pursuant to Section 1008 hereof
in the aggregate amount equal to the aggregate liquidation value, plus any
accrued dividends, of the Preferred Stock to be sold, transferred or otherwise
disposed of. Notwithstanding the foregoing, nothing set forth in this covenant
will prohibit the ownership of Preferred Stock issued by a Person prior to the
time (A) such Person becomes a Subsidiary of the Company, (B) such Person merges
with or into a Subsidiary of the Company or (C) a Subsidiary of the Company
merges with or into such Person; provided, further, that such Preferred
-------- -------
Stock was not issued or incurred by such Person in anticipation of a transaction
contemplated by subclause (A), (B), or (C) above.
Section 1011. Limitation on Dividend and Other Payment Restrictions
-----------------------------------------------------
Affecting Subsidiaries.
- ----------------------
The Company will not, and will not permit any Subsidiary to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective any
encumbrance or restriction of any kind, on the ability of any Subsidiary to (i)
pay dividends or make any other distribution on its Capital Stock to the Company
or any other Subsidiary, (ii) pay any Indebtedness owed to the Company or any
other Subsidiary, (iii) make any Investment in the Company or any other
Subsidiary or (iv) transfer any of its property or assets to the Company or any
other Subsidiary, except (a) any encumbrance or restriction existing under or by
reason of applicable law; (b) any encumbrance or restriction existing under or
by reason of customary non-assignment provisions of any lease governing a
leasehold interest of the Company or any Subsidiary; (c) any encumbrance or
restriction pursuant to an agreement in effect at or entered into on the date of
this Indenture as set forth in an Officers' Certificate dated the date hereof
delivered to the Trustee; (d) any encumbrance or restriction, with respect to a
Subsidiary that is not a Subsidiary on the date of this Indenture, in existence
at the time such Person becomes a Subsidiary or created on the date it becomes a
Subsidiary and not incurred in connection with, or in contemplation of, such
Person becoming a Subsidiary; and (e) any encumbrance or restriction existing
under any agreement that extends, renews, refinances or replaces the agreements
containing the encumbrances or restrictions in the foregoing clauses (c) and
(d), provided that the terms and conditions of any such encumbrances or
--------
restrictions are not materially less favorable to the Holders of the Securities
than those under or pursuant to the agreement evidencing the Indebtedness so
extended, renewed, refinanced or replaced (in the opinion of the Board of
Directors of the Company whose determination shall be evidenced by a Board
Resolution).
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Section 1012. Limitation on Liens Securing Pari Passu and Subordinated
--------------------------------------------------------
Indebtedness.
- ------------
The Company will not, and will not permit any Subsidiary to, create, incur,
assume or suffer to exist any Liens of any kind upon any of their respective
assets or properties now owned or acquired after the date of this Indenture or
any income or profits therefrom securing (i) any Indebtedness of the Company
which is expressly by its terms subordinate or junior in right of payment to any
other Indebtedness of the Company, unless the Securities are equally and ratably
secured; provided that, if such Indebtedness which is expressly by its terms
--------
subordinate or junior in right of payment to any other Indebtedness of the
Company is Subordinated Indebtedness, the Lien securing such subordinated or
junior Indebtedness shall be subordinate and junior to the Lien securing the
Securities with the same relative priority as such subordinated or junior
Indebtedness shall have with respect to the Securities, or (ii) any assumption,
guarantee or other liability of any Subsidiary in respect of any Indebtedness of
the Company which is expressly by its terms subordinate or junior in right of
payment to any other Indebtedness of the Company, unless the substantially
similar assumption, guarantee or other liability of such Subsidiary in respect
of the Securities is equally and ratably secured; provided that, if such
--------
subordinated Indebtedness is expressly by its terms subordinate or junior to the
Securities, then the Lien securing the assumption, guarantee or other liability
of such Subsidiary in respect of such subordinated or junior Indebtedness shall
be subordinate and junior to the Lien securing the Securities or securing the
assumption, guarantee or other liability of such Subsidiary in respect of the
Securities, with the same relative priority as such subordinated or junior
Indebtedness shall have with respect to the Securities; provided, further, that
-------- -------
clauses (i) and (ii) shall not be applicable to any Lien securing Acquired
Indebtedness, which Lien is in existence at the time of such transaction or
incurrence of such Acquired Indebtedness (and was not created in connection
with, or in contemplation of, the incurrence of such Indebtedness by the Company
or any Subsidiary), which Indebtedness is permitted under the provisions of
Section 1008, and so long as such Liens do not extend to or cover any property
or assets of the Company or any Subsidiary other than the property or assets
acquired in such transaction or securing such Acquired Indebtedness.
Section 1013. Provision of Financial Statements.
---------------------------------
Whether or not the Company is subject to Section 13(a) or 15(d) of the
Exchange Act, the Company will, to the extent permitted under the Exchange Act,
file with the Commission the annual reports, quarterly reports and other
documents which the Company would have been required to file with the Commission
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pursuant to such Sections 13(a) of 15(d) if the Company were so subject, such
documents to be filed with the Commission on or prior to the respective dates
(the "Required Filing Dates") by which the Company would have been required to
file such documents if the Company were so subject. The Company will also in
any event within 15 days of each Required Filing Date file with the Trustee and
provide to the Holders of the Securities copies of the annual reports, quarterly
reports and other documents which the Company is required or permitted to file
with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act.
Section 1014. Limitation on Transactions with Affiliates.
------------------------------------------
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, enter into or suffer to exist any transaction or series
of related transactions (including, without limitation, the sale, purchase,
exchange or lease of assets, property or services) with any Affiliate of the
Company (other than the Company or a Wholly Owned Subsidiary) unless (i) such
transaction or series of related transactions is on terms that are no less
favorable to the Company or such Subsidiary, as the case may be, than would be
available in a comparable transaction in arm's-length dealings with an unrelated
third party, (ii) with respect to a transaction or series of related
transactions involving payments in excess of $1,000,000 in the aggregate, the
Company delivers an Officers' Certificate to the Trustee certifying that (x)
such transaction or series of related transactions complies with claus. (i)
above and (y) such transaction or series of related transactions shall have been
approved by a majority of the Board of Directors of the Company and (iii) with
respect to any transaction or series of transactions involving aggregate
payments in excess of $10,000,000, such transaction or series of related
transactions shall have been approved by a Majority of the independent directors
of the Board of Directors of the Company; provided, however, that the foregoing
-------- -------
restriction shall not apply to (a) any transaction resulting from any agreement
entered into prior to the date of this Indenture, (b) the payment of reasonable
and customary regular fees to directors of the Company or any of its
Subsidiaries who are not employees of the Company or any Affiliate or (c)
payments or distributions in accordance with the Company's employee compensation
and other benefit arrangements.
Section 1015. Disposition of Proceeds of Asset Sales.
--------------------------------------
(a) The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, make any Asset Sale unless the Company or such
Subsidiary receives consideration at the time of such Asset Sale at least equal
to the Fair Market Value of the shares or assets subject to such Asset Sale (as
determined by the
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Board of Directors of the Company and evidenced in a Board Resolution).
(b) If all or a portion of the Net Cash Proceeds of any Asset Sale are not
required to be applied to permanently repay any outstanding Senior Indebtedness,
or the Company determines not to apply such Net Cash Proceeds to the permanent
prepayment of such Senior Indebtedness, or if no such Senior Indebtedness is
outstanding, then the Company may within one year of the Asset Sale invest (or
enter into a legally binding agreement to invest) the Net Cash Proceeds in
properties and assets that (as determined by the Board of Directors, whose
determination shall be conclusive and evidenced by a Board Resolution) replace
the properties and assets that were the subject of the Asset Sale or in
properties and assets that will be used in the businesses of the Company or its
Wholly Owned Subsidiaries existing on the date of this Indenture or in a
business reasonably related thereto; provided that, in the case of any such
--------
legally binding agreement to invest, the Company makes such investment pursuant
to such legally binding agreement within 18 months of the Asset Sale. The
amount of such Net Cash Proceeds neither used to permanently repay or prepay
Senior Indebtedness nor used or invested as set forth in this paragraph
constitutes "Excess Proceeds."
(c) Subject to paragraph (f) below, when the aggregate amount of Excess
Proceeds equals $17,500,000 or more, the Company shall apply the Excess Proceeds
to the repayment of the Securities and any Pari Passu Indebtedness required to
be repurchased under the instrument governing such Pari Passu Indebtedness as
follows: (a) the Company shall make an offer to purchase (an "Offer") from all
Holders of the Securities in accordance with the procedures set forth in this
Indenture in the maximum principal amount (expressed as a multiple of $1,000) of
Securities that may be purchased out of an amount (the "Securities Amount")
equal to the product of such Excess Proceeds multiplied by a fraction, the
numerator of which is the outstanding principal amount of the Securities, and
the denominator of which is the sum of the outstanding principal amount of the
Securities and such Pari Passu Indebtedness (subject to proration in the event
such amount is less than the aggregate Offered Price (as defined herein) of all
Securities tendered) and (b) to the extent required by such Pari Passu
Indebtedness to permanently reduce the principal amount of such Pari Passu
Indebtedness, the Company shall make an offer to purchase Pari Passu
Indebtedness (a "Pari Passu Offer") in an amount (the "Pari Passu Debt Amount")
equal to the excess of the Excess Proceeds over the Securities Amount, provided
--------
that in no event shall the Pari Passu Debt Amount exceed the principal amount of
such Pari Passu Indebtedness plus the amount of any premium required to be paid
to repurchase such Pari Passu Indebtedness. The offer price shall be payable in
cash in an amount equal to 100% of the principal amount
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of the Securities plus accrued and unpaid interest, if any, to the date such
Offer is consummated (the "Offered Price") in accordance with the procedures set
forth in this Indenture. To the extent that the aggregate amount of the
Securities tendered and Pari Passu Indebtedness repurchased pursuant to an Offer
and Pari Passu Offer, respectively, is less than the amount of Excess Proceeds,
the Company may use such deficiency in the business of the company or its Wholly
Owned Subsidiaries or in a business reasonably related thereto. Upon completion
of the purchase of all the Securities tendered pursuant to an Offer or
repurchase of the Pari Passu Indebtedness pursuant to a Pari Passu Offer, the
amount of Excess Proceeds shall be reset at zero.
(d) Whenever the Excess Proceeds received by the Company or its
Subsidiaries exceed $5,000,000, such Excess Proceeds shall be set aside by the
Company in a separate account pending (i) deposit with the Trustee or a Paying
Agent of the amount required to purchase the Securities tendered in an Offer or
a Pari Passu Offer, (ii) delivery by the Company of the Offered Price to the
Holders of the Securities tendered in an Offer or a Pari Passu Offer and (iii)
application, as set forth above, of Excess Proceeds for the purposes specified
in paragraph (b) above. Such Excess Proceeds may be invested at the written
direction of the Company in Temporary Cash Investments, provided that the
--------
maturity date of any investment made after the amount of Excess Proceeds exceeds
$17,500,000 shall not be later than the Offer Date. The Company shall be
entitled to any interest or dividends accrued, earned or paid on such Temporary
Cash Investments, provided that the Company shall not be entitled to such
--------
interest if a Default or Event of Default has occurred and is continuing.
(e) If the Company becomes obligated to make an Offer pursuant to clause
(c) above, the Securities shall be purchased by the Company, at the option of
the Holder thereof, in whole or in part in integral multiples of $1,000, on a
date (the "Purchase Date") that is not earlier than 30 days and not later than
60 days from the date the notice is given to Holders, or such later date as may
be necessary for the Company to comply with the requirements under the Exchange
Act, subject to proration in the event the Securities Amount is less than the
aggregate Offered Price of all Securities tendered.
(f) In the event that the Company shall be unable to purchase Securities
from Holders thereof in an Offer because of the provisions (i) of applicable law
or (ii) of the Company's loan agreements, indentures or other contracts in
existence on the date of this Indenture, the Company need not make an Offer. The
Company shall then be obligated to (i) invest the Excess Proceeds in properties
and assets to replace the properties and assets that were the subject of the
Asset Sale or in properties and assets that
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(as determined by the Board of Directors, whose determination shall be
conclusive and evidenced by a Board Resolution) will be used in the business of
the Company or its Wholly Owned Subsidiaries existing on the date of this
Indenture or in any business reasonably related thereto or (ii) apply the Excess
Proceeds to repay Senior Indebtedness.
(g) The Company shall comply with the applicable tender offer rules,
including Rule 14e-1 under the Exchange Act, in connection with an Offer.
(h) The Company will not, and will not permit any Subsidiary to, create or
permit to exist or become effective any restriction (other than restrictions
existing under (i) Indebtedness as in effect on the date of this Indenture or
(ii) any Senior Indebtedness existing on the date of this Indenture or
thereafter, provided that, in each case, such restrictions are no less favorable
--------
to the Holders of Securities than those existing on the date of this Indenture)
that would materially impair the ability of the Company to Make an Offer to
purchase the Securities upon an Asset Sale or, if such Offer is made, to pay for
the Securities tendered for purchase.
(i) Within 30 days after the date on which the amount of Excess Proceeds
equals or exceeds $17,500,000, the Company shall send by first-class mail,
postage prepaid, to the Trustee and to each Holder of the Securities, at his
address appearing in the Security Register, a notice stating or including:
(1) that the Holder has the right to require the Company to
repurchase, subject to proration, such Holder's Securities at the Offered
Price;
(2) the Purchase Date;
(3) the instructions a Holder must follow in order to have its
Securities purchased in accordance with paragraph (c) of this Section; and
(4) (i) the most recently filed Annual Report on Form 10-K (including
audited consolidated financial statements) of the Company, the most recent
subsequently filed Quarterly Report on Form 10-Q and any Current Report on
Form 8-K of the Company filed subsequent to such Quarterly Report, other
than Current Reports describing Asset Sales otherwise described in the
offering materials (or corresponding successor reports) (or in the event
the Company is not required to prepare any of the foregoing Forms, the
comparable information required pursuant to Section 1013), (ii) a
description of material developments in the Company's business subsequent
to the date of the latest
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of such Reports, (iii) if material, appropriate pro forma financial
information, and (iv) such other information, if any, concerning the
business of the Company which the Company in good faith believes will
enable such Holders to make an informed investment decision.
(j) Holders electing to have Securities purchased will be required to
surrender such Securities to the Company at the address specified in the notice
at least two Business Days prior to the Purchase Date. An election may be
withdrawn before or after delivery by the Holder to the Paying Agent at the
office of the Paying Agent of the Security to which such an election relates, by
means of a written notice of withdrawal delivered by the Holder to the Paying
Agent at the office of the Paying Agent or to the office or agency referred to
in Section 1002 to which the related notice was delivered at any time prior to
the close of business on the Purchase Date specifying, as applicable:
(1) the certificate number of the Security in respect of which such
notice of withdrawal is being submitted;
(2) the principal amount of the Security (which shall be $1,000 or an
integral multiple thereof) with respect to which such notice of withdrawal
is being submitted; and
(3) the principal amount, if any, of such Security (which shall be
$1,000 or an integral multiple thereof) that remains subject to the
original notice of the Offer and that has been or will be delivered for
purchase by the Company.
Holders will be entitled to withdraw their election if the Company receives, not
later than three Business Days prior to the Purchase Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Securities delivered for purchase by the Holder as to
which his election is to be withdrawn and a statement that such Holder is
withdrawing his election to have such Securities purchased.
(k) Not later than the Purchase Date, the Company shall (i) accept for
payment Securities or portions thereof tendered pursuant to the Offer, (ii)
deposit with the Trustee or with a Paying Agent (or, if the Company is acting as
its own Paying Agent, segregate and hold in trust as provided in Section 1003)
an amount of money in same day funds (or New York Clearing House funds if such
deposit is made prior to the Purchase Date) sufficient to pay the aggregate
Offered Price of all the Securities or portions thereof which are to be
purchased on that date and (iii) deliver to the Paying Agent Officers'
Certificate stating the securities or portions thereof accepted for payment by
the Company.
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As provided in the Securities, the Trustee and the Paying Agent shall
return to the company any cash that remains unclaimed, together with interest or
dividends, if any, thereon, held by them for the payment of the Offered Price;
provided, however, that, to the extent that the aggregate amount of cash
- -------- -------
deposited by the Company with the Trustee in respect of an Offer exceeds the
aggregate Offered Price of the Securities or portions thereof to be purchased,
then the Trustee shall hold such excess for the Company and promptly after the
Business Day following the Purchase Date the Trustee shall upon demand return
any such excess to the Company.
(l) Securities to be purchased shall, on the Purchase Date, become due and
payable at the Offered Price and from and after such date (unless the Company
shall default in the payment of the Offered Price) such Securities shall cease
to bear interest. Such Offered Price shall be paid to such Holder promptly
following the later of the Business Day following the Purchase Date and the time
of delivery of such Security to the relevant Paying Agent at the office of such
Paying Agent by the Holder thereof in the manner required. Upon surrender of
any such Security for purchase in accordance with the foregoing provisions, such
Security shall be paid by the Company at the Offered Price; provided, however,
-------- -------
that installments of interest whose Stated Maturity is on or prior to the
Purchase Date shall be payable to the Holders of such Securities, or one or more
Predecessor Securities, registered as such on the relevant Regular Record Dates
according to the terms and the provisions of Section 307; provided, further,
-------- -------
that Securities to be purchased are subject to proration in the event the
Securities Amount is less than the aggregate Offered Price of all Securities
tendered for purchase, with such adjustments as may be appropriate by the
Trustee so that only Securities in denominations of $1,000 or integral multiples
thereof, shall be purchased. If any Security tendered for purchase shall not be
so paid upon surrender thereof, the principal thereof (and premium, if any,
thereon) shall, until paid, bear interest from the Purchase Date at the rate
borne by such Security. Any Security that is to be purchased only in part shall
be surrendered to a Paying Agent at the office of such Paying Agent (with, if
the Company or the Trustee so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to the Company and the Trustee duly
executed by, the Holder thereof or such Holder's attorney duly authorized in
writing), and the Company shall execute and the Trustee shall authenticate and
deliver to the Holder of such Security, without service charge, one or more new
Securities of any authorized denomination as requested by such Holder in an
aggregate principal amount equal to, and in exchange for, the portion of the
principal amount of the Security so surrendered that is not purchased.
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Section 1016. Limitation on Issuance of Guarantees of Pari Passu and
------------------------------------------------------
Subordinated Indebtedness.
- -------------------------
(a) The Company will not permit any Subsidiary, directly or indirectly, to
assume, guarantee or in any other manner become liable with respect to any
Indebtedness of the Company that is expressly by its terms subordinate or junior
in right of payment to any other Indebtedness of the Company unless (i) such
Subsidiary simultaneously executes and delivers a supplemental indenture to this
Indenture providing for a guarantee of payment of the Securities by such
Subsidiary and (A) if any such assumption, guarantee or other liability is
subordinated, the guarantee under the supplemental indenture shall be
subordinated to no more than the extent that the Securities are subordinated to
Senior Indebtedness of the Company under this Indenture and (B) if such
subordinated or junior Indebtedness is expressly subordinated or junior to the
Securities, any such assumption, guarantee or other liability of such Subsidiary
with respect to such subordinated or junior Indebtedness shall be subordinated
to such Subsidiary's assumption, guarantee or other liability with respect to
the Securities to at least the same extent as such subordinated or junior
Indebtedness is subordinated or junior to the Securities under this Indenture;
and (ii) such Subsidiary waives and will not in any manner whatsoever claim or
take the benefit or advantage of, any rights of reimbursement, indemnity or
subrogation or any other rights against the Company or any other Subsidiary as a
result of any payment by such Subsidiary under its Guarantee (as defined below).
(b) Each guarantee created pursuant to the provisions described in the
foregoing paragraph is referred to as a "Guarantee" and the issuer of each such
Guarantee is referred to as a "Guarantor." Notwithstanding the foregoing, any
Guarantee by a Subsidiary of the Securities shall provide by its terms that it
(together with any Liens arising from such Guarantee) shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer,
to any Person not an Affiliate of the Company, of all of the Company's Capital
Stock in, or all or substantially all the assets of, such Subsidiary, which is
in compliance with this Indenture, and (ii) in the case of any Guarantee created
pursuant to the provisions described in the foregoing paragraph, the release or
discharge of the assumption, guarantee or other liability which resulted in the
creation of such Guarantee, except a discharge or release by or as a result of
payment under such assumption, guarantee or other liability.
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Section 1017. Limitation on Other Senior Subordinated Indebtedness.
----------------------------------------------------
The Company will not create, incur, assume, guarantee or in any other
manner become liable with respect to any Indebtedness, other than the
Securities, that is subordinate in right of payment to any Senior Indebtedness,
unless such Indebtedness is also pari passu with, or subordinate in right of
---- -----
payment to, the Securities pursuant to subordination provisions substantially
similar to those contained in this Indenture.
Section 1018. Purchase of Securities upon Change in Control.
---------------------------------------------
(a) If a Change in Control occurs at any time, each Holder shall have the
right to require that the Company repurchase such Holder's Securities pursuant
to an offer described in subsection (c) of this Section (a "Change in Control
Offer") in whole or in part in integral multiples of $1,000, at a purchase price
(the "Change in Control Purchase Price") in cash in an amount equal to 101% of
the principal amount thereof, plus accrued and unpaid interest, if any, to the
date of purchase, in accordance with the procedures set forth in Subsections
(b), (c), (d) and (e) of this Section.
(b) Within 30 days following a Change in Control and prior to the mailing
of the Change in Control Purchase Notice to Holders provided for in paragraph
(c) below, the Company covenants to either (1) repay in full all Indebtedness
under the New Bank Credit Agreement and permanently reduce the commitments of
the lenders thereunder or offer to repay in full all such Indebtedness and
permanently reduce the commitment of each lender who has accepted such offer or
(2) obtain the requisite consent under the New Bank Credit Agreement to permit
the repurchase of the Securities as provided for in this Section 1018. The
Company shall first comply with this subsection (b) before it shall be required
to repurchase the Securities pursuant to this Section 1018, but any failure to
comply with this subsection (b) shall constitute a default of this covenant for
purposes of Section 501(c) (iv).
(c) Within 30 days following any Change in Control, the Company shall send
by first-class mail, postage prepaid, to the Trustee and to each Holder of the
Securities, at his address appearing in the Security Register, a notice (a
"Change in Control Purchase Notice") stating or including:
(1) that a Change in Control has occurred, the date of such event,
and that such Holder has the right to require the Company to repurchase
such Holder's Securities at the Change in Control Purchase Price;
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(2) the circumstances and relevant facts regarding such Change in
Control (including but not limited to information with respect to pro forma
--- -----
historical income, cash flow and capitalization after giving effect to such
Change in Control, if any);
(3)(i) the most recently filed Annual Report on Form 10-K including
audited consolidated financial statements) of the Company, the most recent
subsequently filed Quarterly Report on Form 10-Q, as applicable, and any
Current Report on Form 8-K of the Company filed subsequent to such
Quarterly Report (or in the event the Company is not required to prepare
any of the foregoing Forms, the comparable information required to be
prepared by the Company and any Guarantor pursuant to Section 1013), (ii) a
description of material developments in the Company's business subsequent
to the date of the latest of such reports and (iii) such other information,
if any, concerning the business of the Company which the Company in good
faith believes will enable such Holders to make an informed investment
decision;
(4) that the Change in Control Offer is being made pursuant to this
Section 1018(a) and that all Securities properly tendered pursuant to the
Required Offer will be accepted for payment at the Required Offer Purchase
Price;
(5) the purchase date (the "Change in Control Purchase Date") which
shall be a Business Day no earlier than 30 days nor later than 60 days from
the date such notice is mailed;
(6) the Change in Control Purchase Price;
(7) the names and addresses of the Paying Agent and the offices or
agencies referred to in Section 1002;
(8) that Securities must be surrendered on or prior to the Change in
Control Purchase Date to the Paying Agent at the office of the Paying Agent
or to an office or agency referred to in Section 1002 to collect payment;
(9) that the Change in Control Purchase Price for any Security which
has been properly tendered and not withdrawn will be paid promptly
following the Required Offer Purchase Date; and
(10) the procedures for withdrawing a tender.
(d) Upon receipt by the Company of the proper tender of Securities, the
Holder of the Security in respect of which such proper tender was made shall
(unless the tender of such Security is
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properly withdrawn) thereafter be entitled to receive solely the Change in
Control Purchase Price with respect to such Security. Upon surrender of any such
Security for purchase in accordance with the foregoing provisions, such Security
shall be paid by the Company at the Change in Control Purchase Price; provided,
--------
however, that installments of interest whose Stated Maturity is on or prior to
- -------
the Change in Control Purchase Date shall be payable to the Holders of such
Securities, or one or more Predecessor Securities, registered as such on the
relevant Regular Record Dates according to the terms and the provisions of
Section 307. If any Security tendered for purchase shall not be so paid upon
surrender thereof, the principal thereof (and premium, if any, thereon) shall,
until paid, bear interest from the Change in Control Purchase Date at the rate
borne by such Security. Holders electing to have Securities purchased will be
required to surrender such Securities to the Paying Agent at the address
specified in the notice at least two Business Days prior to the Change in
Control Purchase Date. Any Security that is to be purchased only in part shall
be surrendered to a Paying Agent at the office of such Paying Agent (with, if
the Company or the Trustee so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to the Company and the Trustee duly
executed by, the Holder thereof or such Holder's attorney duly authorized in
writing), and the Company shall execute and the Trustee shall authenticate and
deliver to the Holder of such Security, without service charge, one or more new
Securities of any authorized denomination as requested by such Holder in an
aggregate principal amount equal to, and in exchange for, the portion of the
principal amount of the Security so surrendered that is not purchased.
(e) Not later than the Change in Control Purchase Date, the Company shall
(i) accept for payment Securities or portions thereof tendered pursuant to the
Change in Control Offer, (ii) no later than 11:00 a.m. (New York time) on the
Business Day following the Change in Control Purchase Date, deposit with the
Paying Agent an amount of cash sufficient to pay the aggregate Change in Control
Purchase Price of all the Securities or portions thereof that are to be
purchased as of the Change in Control Purchase Date and (iii) deliver to the
Paying Agent an Officers' Certificate stating the Securities or portions thereof
accepted for payment by the Company. The Paying Agent shall promptly mail or
deliver to Holders of Securities so accepted payment in an amount equal to the
Change in Control Purchase Price of the Securities purchased from each such
Holder, and the Company shall execute and the Trustee shall promptly
authenticate and mail or deliver to such Holders a new Security equal in
principal amount to any unpurchased portion of the Security surrendered. Any
Securities not so accepted shall be promptly mailed or delivered by the Paying
Agent at the Company's expense to the Holder thereof. The Company will publicly
announce the results of the Change in Control Offer on the Change in Control
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Purchase Date. For purposes of this section 1018, the Company shall choose a
Paying Agent which shall not be the Company.
(f) A Change in Control Purchase Notice may be withdrawn before or after
delivery by the Holder to the Paying Agent at the office of the Paying Agent of
the Security to which such Change in Control Purchase Notice relates, by means
of a written notice of withdrawal delivered by the Holder to the Paying Agent at
the office of the Paying Agent or to the office or agency referred to in Section
1002 to which the related Change in Control Purchase Notice was delivered at any
time prior to the close of business on the Change in Control Purchase Date
specifying, as applicable:
(1) the certificate number of the Security in respect of which such
notice of withdrawal is being submitted,
(2) the principal amount of the Security (which shall be $1,000 or an
integral multiple thereof) with respect to which such notice of withdrawal
is being submitted, and
(3) the principal amount, if any, of such Security (which shall be
$1,000 or an integral multiple thereof) that remains subject to the
original Change in Control Purchase Notice and that has been or will be
delivered for purchase by the Company.
(g) As provided in the Securities, the Trustee and the Paying Agent shall
return to the Company any cash that remains unclaimed, together with interest or
dividends, if any, thereon, held by them for the payment of the Change in
Control Purchase Price; provided, however, that, to the extent that the
-------- -------
aggregate amount of cash deposited by the Company pursuant to clause (e) (ii)
exceeds the aggregate Change in Control Purchase Price of the Securities or
portions thereof to be purchased, then the Trustee shall hold such excess for
the Company and promptly after the Business Day following the Change in Control
Purchase Date the Trustee shall upon demand return any such excess to the
Company together with interest or dividends, if any, thereon.
(h) The Company shall comply with the applicable tender offer rules,
including Rule 14e-1 under the Exchange Act, in connection with a Change in
Control Offer.
Section 1019. Statement by Officers as to Default.
-----------------------------------
(a) The Company will deliver to the Trustee, on or before a date not more
than 60 days after the end of each fiscal quarter and not more than 120 days
after the end of each Fiscal Year of the Company ending after the date hereof, a
written statement signed by the principal executive officer, principal financial
officer or
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principal accounting officer of the Company, stating whether or not, after a
review of the activities of the Company during such year or such quarter and of
the Company's performance under this Indenture, to the best knowledge, based on
such review, of the signers thereof, the Company has fulfilled all its
obligations and is in compliance with all conditions and covenants under this
Indenture throughout such year or quarter, as the case may be, and, if there has
been a Default, specifying each Default and the nature and status thereof.
(b) When any Default or Event of Default has occurred and is continuing,
or if the Trustee or any Holder or the trustee for or the holder of any other
evidence of Indebtedness of the Company or any Subsidiary gives any notice to
the Company or takes any other action of which the Company has knowledge with
respect to a claimed default (other than with respect to Indebtedness in the
principal amount of less than $1,000,000), the Company shall deliver to the
Trustee by registered or certified mail or by telegram, telex or facsimile
transmission followed by hard copy an Officers' Certificate specifying such
Default, Event of Default, notice or other action within five Business Days of
its occurrence.
Section 1020. Waiver of Certain Covenants.
---------------------------
The Company may omit in any particular instance to comply with any covenant
or condition set forth in Sections 1005 through 1014, 1016, 1017 and 1019, if,
before or after the time for such compliance, the Holders of not less than a
majority in aggregate principal amount of the Securities at the time Outstanding
waive such compliance in such instance 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 waiver shall become effective, the
obligations of the Company and the duties of the Trustee in respect of any such
covenant or condition shall remain in full force and effect.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
Section 1101. Right of Redemption.
-------------------
(a) The Securities may be redeemed at the election of the Company, as a
whole or from time to time in whole or in part, at any time on or after
___________, 1998, at the option of the Company subject to the conditions and at
the Redemption Prices specified in the form of Security, together with accrued
interest to the Redemption Date.
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(b) Up to $50,000,000 principal amount of Securities may also be redeemed
at any time on or prior to __________, 1996, within 180 days of one or more
Public Equity Offerings of the Company or any of its Subsidiaries with the net
proceeds of such Public Equity Offerings at ____________% of the aggregate
principal amount, together with accrued and unpaid interest, if any, to the
redemption date.
Section 1102. Applicability of Article.
------------------------
Redemption of Securities at the election of the Company or otherwise, as
permitted or required by any provision of this Indenture, shall be made in
accordance with such provision and this Article.
Section 1103. Election to Redeem; Notice to Trustee.
-------------------------------------
The election of the Company to redeem any Securities pursuant to Section
1101 shall be evidenced by a Company Order and an Officers' Certificate. In case
of any redemption at the election of the Company, the Company shall, not less
than 45 nor more than 60 days prior to the Redemption Date fixed by the Company
(unless a shorter notice period shall be satisfactory to the Trustee), notify
the Trustee in writing of such Redemption Date and of the principal amount of
Securities to be redeemed.
Section 1104. Selection by Trustee of Securities to Be Redeemed.
-------------------------------------------------
If less than all the Securities are to be redeemed, the particular
Securities or portions thereof to be redeemed shall be selected not more than 30
days prior to the Redemption Date by the Trustee, from the Outstanding
Securities not previously called for redemption, by lot or such other method as
the Trustee shall deem fair and appropriate, and the amounts to be redeemed may
be equal to $1,000 or any integral multiple thereof.
The Trustee shall promptly notify the Company and each Security Registrar
in writing of the Securities selected for redemption and, in the case of any
Securities selected for partial redemption, the principal amount thereof to be
redeemed.
For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to redemption of Securities shall relate, in the case of
any Security redeemed or to be redeemed only in part, to the portion of the
principal amount of such Security which has been or is to be redeemed.
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Section 1105. Notice of Redemption.
--------------------
Notice of redemption shall be given by first-class mail, postage prepaid,
mailed not less than 30 nor more than 60 days prior to the Redemption Date, to
each Holder of Securities to be redeemed, at his address appearing in the
Security Register.
All notices of redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) if less than all Outstanding Securities are to be redeemed, the
identification of the particular Securities to be redeemed;
(d) in the case of a Security to be redeemed in part, the principal amount
of such Security to be redeemed and that after the Redemption Date upon
surrender of such Security, new Security or Securities in the aggregate
principal amount equal to the unredeemed portion thereof will be issued;
(e) that Securities called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price;
(f) that on the Redemption Date the Redemption Price will become due and
payable upon each such Security or portion thereof, and that (unless the Company
shall default in payment of the Redemption Price) interest thereon shall cease
to accrue on and after said date;
(g) the place or places where such Securities are to be surrendered for
payment of the Redemption Price; and
(h) the CUSIP number, if any, relating to such Securities.
Notice of redemption of Securities to be redeemed at the election of the
Company shall be given by the Company or, at the Company's written request, by
the Trustee in the name and at the expense of the Company.
The notice if mailed in the manner herein provided shall be conclusively
presumed to have been given, whether or not the Holder receives such notice. In
any case, failure to give such notice by mail or any defect in the notice to the
Holder of any Security designated for redemption as a whole or in part shall not
affect the validity of the proceedings for the redemption of any other Security.
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Section 1106. Deposit of Redemption Price.
---------------------------
No later than 10:00 a.m. (New York time) on Redemption Date, the Company
shall deposit with the Trustee or with a Paying Agent (or, if the Company is
acting as its own Paying Agent, segregate and hold in trust as provided in
Section 1003) an amount of money in same day funds sufficient to pay the
Redemption Price of, and (except if the Redemption Date shall be an Interest
Payment Date) accrued interest on, all the Securities or portions thereof which
are to be redeemed on that date. All money earned on funds held in trust by the
Trustee or any Paying Agent shall be remitted to the Company.
Section 1107. Securities Payable on Redemption Date.
-------------------------------------
Notice of redemption having been given as aforesaid, the Securities so to
be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security shall
be paid by the Company at the Redemption Price together with accrued 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 Securities, or one or more Predecessor Securities, registered as
such on the relevant Regular Record Dates according to the terms and the
provisions of Section 307.
If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal and premium, if any, shall, until paid,
bear interest from the Redemption Date at the rate borne by such Security.
Section 1108. Securities Redeemed or Purchased in Part.
----------------------------------------
Any Security which is to be redeemed or purchased only in part shall be
surrendered to the Paying Agent at the office or agency maintained for such
purpose pursuant to Section 1002 (with, if the Company, the Security Registrar
or the Trustee so requires, due endorsement by, or a written instrument of
transfer in form satisfactory to the Company, the Security Registrar or the
Trustee duly executed by, the Holder thereof or such Holder's attorney duly
authorized in writing), and the Company shall execute, and the Trustee shall
authenticate and deliver to the Holder of such Security without service charge,
a new Security or Securities, of any authorized denomination as requested by
such Holder in aggregate principal amount equal to, and in exchange for, the
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unredeemed portion of the principal of the Security so surrendered that is not
redeemed or purchased.
ARTICLE TWELVE
SUBORDINATION OF SECURITIES
Section 1201. Securities Subordinate to Senior Indebtedness.
---------------------------------------------
The Company covenants and agrees, and each Holder of a Security, by his
acceptance thereof, likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this Article, the Indebtedness represented
by the Securities and the payment of the principal of, premium, if any, and
interest on each and all of the Securities are hereby expressly made subordinate
and subject in right of payment as provided in this Article to the prior payment
in full of all Senior Indebtedness.
This Article Twelve shall constitute a continuing offer to all Persons who,
in reliance upon such provisions, become holders of, or continue to hold Senior
Indebtedness; and such provisions are made for the benefit of the holders of
Senior Indebtedness; and such holders are made obligees hereunder and they or
each of them may enforce such provisions.
Section 1202. Payment Over of Proceeds Upon Dissolution, Etc.
----------------------------------------------
In the event of (a) any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding in
connection therewith, relative to the Company or to its creditors, as such, or
to its assets, or (b) any liquidation, dissolution or other winding up of the
Company, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or
any other marshaling of assets or liabilities of the Company, then and in any
such event:
(1) the holders of Senior Indebtedness shall be entitled to receive
payment in full or provision made for such payment of all amounts due on or in
respect of all Senior Indebtedness, before the Holders of the Securities are
entitled to receive any payment or distribution of any kind or character
(excluding securities of the Company or any other corporation that are equity
securities or are subordinated in right of payment to all Senior Indebtedness,
that may at the time be outstanding, to substantially the same
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extent as, or to a greater extent than, the Securities are so subordinated as
provided in this Article; such securities are hereinafter collectively referred
to as "Permitted Junior Securities") on account of principal of, premium, if
any, or interest on the Securities (including any payment or other distribution
which may be received from the holders of Subordinated Indebtedness as a result
of any payment on such Subordinated Indebtedness); and
(2) any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities (excluding Permitted Junior
Securities), by set-off or otherwise, to which the Holders or the Trustee would
be entitled but for the provisions of this Article (including any payment or
other distribution which may be received from the holders of Subordinated
Indebtedness as a result of any payment on such Subordinated Indebtedness) shall
be paid by the liquidating trustee or agent or other Person making such payment
or distribution, whether a trustee in bankruptcy, a receiver or liquidating
trustee or otherwise, directly to the holders of Senior Indebtedness or their
representative or representatives or to the trustee or trustees under any
indenture under which any instruments evidencing any of such Senior Indebtedness
may have been issued, ratably according to the aggregate amounts remaining
unpaid on account of the Senior Indebtedness held or represented by each, to the
extent necessary to make payment in full in cash or in any other form acceptable
to each, of all Senior Indebtedness remaining unpaid, after giving effect to any
concurrent payment or distribution to the holders of such Senior Indebtedness;
and
(3) in the event that, notwithstanding the foregoing provisions of this
Section, the Trustee or the Holder of any Security shall have received any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, in respect of principal, premium, if
any, and interest on the Securities before all Senior Indebtedness is paid in
full, then and in such event such payment or distribution (excluding Permitted
Junior Securities but including any payment or other distribution which may be
received from the holders of Subordinated Indebtedness as a result of any
payment on such Subordinated Indebtedness) 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 Senior Indebtedness
remaining unpaid, to the extent necessary to pay all Senior Indebtedness in full
in cash or, as acceptable to each holder of Senior Indebtedness, any other
manner, after giving effect to any concurrent payment or distribution to or for
the holders of Senior Indebtedness.
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The consolidation of the Company with, or the merger of the Company with or
into, another Person or the liquidation or dissolution of the Company following
the conveyance, transfer or lease of its properties and assets substantially as
an entirety to another Person upon the terms and conditions set forth in Article
Eight shall not be deemed a dissolution, winding up, liquidation,
reorganization, assignment for the benefit of creditors or marshaling of assets
and liabilities of the Company for the purposes of this Section if the Person
formed by such consolidation or the surviving entity of such merger or the
Person which acquires by conveyance, transfer or lease such properties and
assets substantially as an entirety, as the case may be, shall, as a part of
such consolidation, merger, conveyance, transfer or lease, comply with the
conditions set forth in Article Eight.
Section 1203. Suspension of Payment When Senior Indebtedness in Default.
---------------------------------------------------------
(a) Unless Section 1202 shall be applicable, upon (1) the occurrence of a
Payment Default and (2) receipt by the Trustee and the Company from a Senior
Representative of written notice of such occurrence, then no payment (other than
any payments made pursuant to Article Four which have been deposited with the
Trustee for at least 91 days) or distribution of any assets of the Company of
any kind or character (excluding Permitted Junior Securities) shall be made by
the Company on account of principal of, premium, if any, or interest on, the
Securities or on account of the purchase, redemption or other acquisition of or
in respect of the Securities unless and until such Payment Default shall have
been cured or waived or shall have ceased to exist or the Designated Senior
Indebtedness shall have been discharged or paid in full, after which the Company
shall resume making any and all required payments in respect of the Securities,
including any missed payments.
(b) Unless Section 1202 shall be applicable, upon (1) the occurrence of a
Non-payment D.fault and (2) receipt by the Trustee and the Company from a Senior
Representative of written notice of such occurrence, then no payment or
distribution of any assets of the Company of any kind or character (excluding
Permitted Junior Securities) shall be made by the Company on account of any
principal of, premium, if any, or interest on, the Securities or on account of
the purchase, redemption or other acquisition of or in respect of Securities for
a period ("Payment Blockage Period") commencing on the date of receipt by the
Trustee and the Company of such notice unless and until the earliest of (x) 179
days after receipt of such written notice by the Trustee, (y) the date such Non-
payment Default shall have been cured or waived or shall have ceased to exist or
the Senior Indebtedness
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related thereto shall have been discharged or paid in full or (z) the date such
Payment Blockage Period shall have been terminated by written notice to the
Company or the Trustee from the Senior Representative of the holders of the
Designated Senior Indebtedness that have given notice of a Non-payment Default
at or after the initiation of such Payment Blockage Period, after which, in the
case of clause (x), (y) or (z), the Company shall resume making any and all
required payments in respect of the Securities, including any missed payments.
Notwithstanding any other provision of this Indenture, in no event shall a
Payment Blockage Period extend beyond 179 days. Not more than one Payment
Blockage with respect to the Securities may be commenced during any one period
of 365 consecutive days. No Non-payment Default with respect to the Designated
Senior Indebtedness which existed or was continuing on the date of the
commencement of any Payment Blockage Period will be, or can be, made the basis
for the commencement of a second Payment Blockage Period, whether or not within
a period of 365 consecutive days, unless such default shall have been cured or
waived for a period of not less than 90 consecutive days.
(c) In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section, then and in such event such payment shall
be paid over and delivered forthwith to a Senior Representative of the holders
of the Designated Senior Indebtedness or as a court of competent jurisdiction
shall direct.
Section 1204. Payment Permitted if No Default.
-------------------------------
Nothing contained in this Article, elsewhere in this Indenture or in any of
the Securities shall prevent the Company, at any time except during the pendency
of any case, proceeding, dissolution, liquidation or other winding up,
assignment for the benefit of creditors or other marshaling of assets and
liabilities of the Company referred to in Section 1202 or under the conditions
described in Section 1203, from making payments at any time of principal of,
premium, if any, or interest on the Securities.
Section 1205. Subrogation to Rights of Holders of Senior Indebtedness.
-------------------------------------------------------
Subject to the payment in full of all Senior Indebtedness, the Holders
of the Securities shall be subrogated 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 Securities shall be paid in full. For
purposes of such subrogation, no payments or distributions to the holders of
Senior Indebtedness of any cash,
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property or securities to which the Holders of the Securities or the Trustee
would be entitled except for the provisions of this Article, and no payments
over pursuant to the provisions of this Article to the holders of Senior
Indebtedness by Holders of the Securities or the Trustee, shall, as among the
Company, its creditors other than holders of Senior Indebtedness, and the
Holders of the Securities, be deemed to be a payment or distribution by the
Company to or on account of the Senior Indebtedness.
Section 1206. Provisions Solely to Define Relative Rights.
-------------------------------------------
The provisions of this Article are intended solely for the purpose of
defining the relative rights of the Holders of the Securities on the one hand
and the holders of Senior Indebtedness on the other hand. Nothing contained in
this Article or elsewhere in this Indenture or in the Securities is intended to
or shall (a) impair, as among the Company, its creditors other than Holders of
Senior Indebtedness and the holders of the Securities, the obligation of the
Company, which is absolute and unconditional, to pay to the Holders of the
Securities the principal of, premium, if any, and interest on the Securities as
and when the same shall become due and payable in accordance with their terms;
or (b) affect the relative rights against the Company of the Holders of the
Securities and creditors of the Company other than the holders of Senior
Indebtedness; or (c) prevent the Trustee or the Holder of any Security from
exercising all remedies otherwise permitted by applicable law upon default under
this Indenture, subject to the rights, if any, under this Article of the holders
of Senior Indebtedness (1) in any case, proceeding, dissolution, liquidation or
other winding up, assignment for the benefit of creditors or other marshaling of
assets and liabilities of the Company referred to in Section 1202, to receive,
pursuant to and in accordance with such Section, cash, property and securities
otherwise payable or deliverable to the Trustee or such Holder, or (2) under the
conditions specified in Section 1203, to prevent any payment prohibited by such
Section or enforce their rights pursuant to Section 1203(c).
Section 1207. Trustee to Effectuate Subordination.
-----------------------------------
Each Holder of a Security by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes,
including, in the event of any dissolution, winding-up, liquidation or
reorganization of the Company whether in bankruptcy, insolvency, receivership
proceedings, or otherwise, the timely filing of a claim for the unpaid balance
of the indebtedness of Company owing
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to such Holder in the form required in such proceedings and the causing of such
claim to be approved. If the Trustee does not file a proper claim at least 30
days before the expiration of the time to file such claim, then the holders of
Senior Indebtedness, and their agents, trustees or other representatives are
authorized to do so for and on behalf of the Holders of the Securities.
Section 1208. No Waiver of Subordination Provisions.
-------------------------------------
(a) 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
non-compliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
(b) Without limiting the generality of Subsection (a) of this Section, the
holders of Senior Indebtedness may, any time and from time to time, without the
consent of or notice to the Trustee or the Holders of the Securities, without
incurring responsibility to the Holders of the Securities and without impairing
or releasing the subordination provided in this Article or the obligations
hereunder of the Holders of the Securities to the holders of Senior
Indebtedness, do any one or more of the following: (1) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, Senior
Indebtedness or any instrument evidencing the same or any agreement under which
Senior Indebtedness is outstanding; (2) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (3) release any Person liable in any manner for the collection or
payment of Senior Indebtedness; and (4) exercise or refrain from exercising any
rights against the Company and any other Person; provided, however, that in no
-------- -------
event shall any such actions limit the right of the Holders of the Securities to
take any action to accelerate the maturity of the Securities pursuant to Article
5 of this Indenture or to pursue any rights or remedies hereunder or under
applicable laws if the taking of such action does not otherwise violate the
terms of this Article, subject to the rights, if any, under this Article, of the
holders, from time to time, of Senior Indebtedness to receive the cash, property
or securities receivable upon the exercise of such rights or remedies.
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Section 1209. Notice to Trustee.
-----------------
(a) 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 Securities. Notwithstanding the provisions of
this Article 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 Securities, unless
and until the Trustee shall have received written notice thereof from the
Company or a holder of Senior Indebtedness or from a Senior Representative or
any trustee, fiduciary or agent therefor; and, prior to the receipt of any such
written notice, the Trustee shall be entitled in all respects to assume that no
such facts exist; provided, however, that if the Trustee shall not have received
-------- -------
the notice provided for in this Section at least three Business Days prior to
the date upon which by the terms hereof any money may become payable for any
purpose (including, without limitation, the payment of the principal of,
premium, if any, or interest on any Security), then, anything herein contained
to the contrary notwithstanding but without limiting the rights and remedies of
the holders of Senior Indebtedness or any trustee, fiduciary or agent thereof,
the Trustee shall have full power and authority to receive such money and to
apply the same to the purpose for which such money was received and shall not be
affected by any notice to the contrary which may be received by it within three
Business Days prior to such date; nor shall the Trustee be charged with
knowledge of the curing of any such default or the elimination of the act or
condition preventing any such payment unless and until the Trustee shall have
received an Officers' Certificate to such effect.
(b) The Trustee shall be entitled to rely on the delivery to it of a
written notice to the Trustee and the Company by a Person representing himself
to be a Senior Representative or a holder of Senior Indebtedness (or a trustee,
fiduciary or agent therefor) to establish that such notice has been given by a
Senior Representative or a holder of Senior Indebtedness (or a trustee,
fiduciary or agent therefor); provided, however, that failure to give such
-------- -------
notice to the Company shall not affect in any way the ability of the Trustee to
rely on such notice. 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, 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, and if such evidence
is
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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 1210. Reliance on Judicial Order or Certificate of Liquidating
--------------------------------------------------------
Agent.
- -----
Upon any payment or distribution of assets of the Company referred to in
this Article, the Trustee and the Holders of the Securities shall be entitled to
rely upon any order or decree entered by any court of competent jurisdiction in
which such insolvency, bankruptcy, receivership, liquidation, reorganization,
dissolution, winding up or similar case or 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 of
Securities, for the purpose of ascertaining the Persons entitled to participate
in such payment or distribution, the holders of 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, provided that the foregoing shall apply only if such court has
--------
been fully apprised of the provisions of this Article.
Section 1211. Rights of Trustee as a Holder of Senior Indebtedness:
-----------------------------------------------------
Preservation of Trustee's Rights.
- --------------------------------
The Trustee in its individual capacity shall be entitled to all the rights
set forth in this Article 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 shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 606.
Section 1212. Article Applicable to Paying Agents.
-----------------------------------
In case at any time any Paying Agent other than the Trustee shall have been
appointed by the Company and be then acting under this Indenture, the term
"Trustee" as used in this Article 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 in addition to or in place of the Trustee; provided,
--------
however, that Section 1211 shall not apply to the Company or any Affiliate of
- -------
the Company if it or such Affiliate acts as Paying Agent.
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Section 1213. No Suspension of Remedies.
-------------------------
Nothing contained in this Article shall limit the right of the Trustee or
the Holders of Securities to take any action to accelerate the maturity of the
Securities pursuant to Article Five of this Indenture or to pursue any rights or
remedies hereunder or under applicable law, subject to the rights, if any, under
this Article of the holders, from time to time, of Senior Indebtedness to
receive the cash, property or securities receivable upon the exercise of such
rights or remedies.
Section 1214. Trustee's Relation to Senior Indebtedness.
-----------------------------------------
With respect to the holders of Senior Indebtedness, the Trustee undertakes
to perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article, and no implied covenants or obligations
with respect to the holders of Senior Indebtedness shall be read into this
Article against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Indebtedness and the Trustee shall not
be liable to any holder of Senior Indebtedness if it shall mistakenly pay over
or deliver to Holders, the Company or any other Person moneys or assets to which
any holder of Senior Indebtedness shall be entitled by virtue of this Article or
otherwise.
Section 1215. Other Rights of Holders of Senior Indebtedness.
----------------------------------------------
All rights and interests under this Indenture of the holders of Senior
Indebtedness, and all agreements and obligations of the Trustee, the Holders of
the Securities and the Company under this Article shall remain in full force and
effect irrespective of (a) any lack of validity or enforceability of the New
Bank Credit Agreement, and promissory notes evidencing the New Bank Credit
Agreement or any other agreement or instrument relating thereto or to any other
Senior Indebtedness or (b) any other circumstance that might constitute a
defense available to, or a discharge of, a guarantor or surety (other than as a
result of any payments made on the New bank Credit Agreement or any other Senior
Indebtedness).
The holders of Senior Indebtedness are hereby authorized to demand specific
performance of this Article, whether or not the Company shall have complied with
any provisions of this Article applicable to it, at any time when the Trustee or
any Holder of the Securities shall have failed to comply with any of these
provisions.
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The provisions of this Article shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any of the Senior
Indebtedness is rescinded or must otherwise be returned by any holder of Senior
Indebtedness upon the insolvency, bankruptcy or reorganization of the Company or
otherwise, all as though such payment had not been made.
ARTICLE THIRTEEN
SATISFACTION AND DISCHARGE
Section 1301. Satisfaction and Discharge of Indenture.
---------------------------------------
This Indenture shall cease to be of further effect (except as to surviving
rights of registration of transfer or exchange of Securities herein expressly
provided for) 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
(a) either
(1) all Securities theretofore authenticated and delivered (other
than (i) Securities which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 306 and (ii) Securities
for whose payment United States dollars have 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 1003)
have been delivered to the Trustee for cancellation; or
(2) all such Securities not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company or any Guarantor
has irrevocably deposited or caused to be deposited with the Trustee in
trust for the purpose an amount in United States dollars sufficient to pay
and discharge the entire Indebtedness on such Securities not theretofore
delivered to the Trustee for cancellation, for the principal of, premium,
if any, and interest to the date of such deposit;
(b) the Company or any Guarantor has paid or caused to be paid all other
sums payable hereunder by the Company and any Guarantor; and
(c) the Company and each Guarantor, if any, have delivered to the Trustee
an Officers' Certificate and an Opinion of Counsel
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each stating that all conditions precedent herein provided for relating to the
satisfaction and discharge of this Indenture have been complied.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 606 and, if United
States dollars shall have been deposited with the Trustee pursuant to subclause
(2) of Subsection (a) of this Section, the obligations of the Trustee under
Section 1302 and the last paragraph of Section 1003 shall survive.
Section 1302. Application of Trust Money.
--------------------------
Subject to the provisions of the last paragraph of Section 1003, all
United States dollars deposited with the Trustee pursuant to Section 1301 shall
be held in trust and applied by it, in accordance with the provisions of the
Securities and this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting as its own Paying Agent) as the
Trustee may determine, to the Persons entitled thereto, of the principal of,
premium, if any, and interest on the Securities for whose payment such United
States dollars have been deposited with the Trustee.
If an officer whose signature is on this Indenture no longer holds that
office at the time the Trustee authenticates a Security on which a Guarantee is
endorsed, such Guarantee shall be valid nevertheless.
* * * * *
If an officer whose signature is on this Indenture no longer holds that
office at the time the Trustee authenticates a Security on which a Guarantee is
endorsed, such Guarantee shall be valid nevertheless.
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This Indenture may be signed in any number of counterparts with the same
effect as if the signatures to each counterpart were upon a single instrument,
and all such counterparts together shall be deemed an original of this
Indenture.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
THE HILLHAVEN CORPORATION
By: ______________________________
Name:
Title:
Attest: ______________________
Name:
Title:
STATE STREET BANK AND TRUST COMPANY
as Trustee
By:______________________________
Name:
Title:
Attest: _______________________
Name:
Title:
106
<PAGE>
STATE OF WASHINGTON )
) ss.:
COUNTY OF )
On the ________ day of September, 1993, before more personally came
___________, to me known, who, being by me duly sworn, did depose and say that
he resides at __________________________________; that he is a of The Hillhaven
Corporation one of the corporations described in and which executed the
foregoing instrument; that he knows the corporate seal of such corporation; that
the seal affixed to said instrument is such corporate seal; that it was so
affixed pursuant to authority of the Board of Directors of such corporation; and
that he signed his name thereto pursuant to like authority.
(NOTARIAL
SEAL)
<PAGE>
STATE OF )
) ss.:
COUNTY OF )
On the ____________ day of September, 1993, before me personally came
__________________, to me known, who, being by me duly sworn, did depose and say
that he resides at ______________; that he is __________________ of State Street
Bank and Trust Company one of the corporations described in and which executed
the above instrument; that he knows the corporate seal of such corporation; that
the seal affixed to said instrument is such corporate seal; that it was so
affixed pursuant to authority of the Board of Directors of such corporation; and
that he signed his name thereto pursuant to like authority.
(NOTARIAL
SEAL)
<PAGE>
EXHIBIT A
---------
FORM OF INTERCOMPANY AGREEMENT
------------------------------
THIS AGREEMENT, made and entered into this ______________ day of
_____________, 1993, by and among The Hillhaven Corporation, a Nevada
corporation (the "Company"), and the Subsidiaries listed on Annex A hereto (all
of the above corporations or partnerships other than the Company are referred to
individually as a Subsidiary, as such term is defined in the Indenture between
the Company and State Street Bank and Trust Company, as Trustee, dated as of
___________, 1993 (the "Indenture"), and referred to collectively as the
"Subsidiaries").
All capitalized terms used herein that are defined in, or by reference in,
the Indenture, have the meanings assigned to such terms therein, or by reference
therein, unless otherwise defined.
ARTICLE I
TERMS OF THE INTERCOMPANY LOANS
Section 1.01 The Loans. Each of the parties to this Agreement agrees that
---------
all loans and other advances (individually, a "Loan" and collectively, the
"Loans") by a party hereto (a "Lender") to another party hereto (a "Borrower")
made after the date hereof shall be made on the terms and subject to the
conditions set forth in this Agreement. For the purposes hereof, "Loans" shall
also include all intercompany loans and advances owing by the Company to any
Subsidiary outstanding on the date hereof and all Loans made after the date
hereof.
Section 1.02 Payment Terms. Each Loan subject to the terms of this
-------------
Agreement shall be payable on such terms as may be agreed upon from time to time
by the parties thereto.
Section 1.03 Interest Prepayment. (a) The interest rate ("Interest
-------------------
Rate"), if any, on a Loan shall be determined by the parties and shall be
recorded in the Ledgers (as defined below) of the Borrower and the Lender.
(b) The interest, if any, payable on each Loan shall accrue from the date
such Loan is made.
A-1
<PAGE>
(c) The Loans may provide that if the principal or accrued interest, if
any, on a Loan is not paid on the date, when due, interest on the unpaid
principal and interest will accrue at a rate equal to the Interest Rate, if any,
plus a specified amount of basis points per annum from maturity until the
principal and interest on such Loan are fully paid.
(d) The Loans may provide for prepayment at the option of the Borrower.
Section 1.04 Subordination. Subject to Section 3.01, all Loans made to
-------------
the Company or any Guarantor, in either case, by a Wholly Owned Subsidiary shall
be subordinated in right of payment to the payment and performance of the
obligations of the Company and any Guarantor under the Indenture, the
Securities, the Guarantees or any other Indebtedness ranking senior to or pari
----
passu with the Securities.
- -----
ARTICLE II
COVENANTS
Section 2.01 Maintenance of Ledger. Each Borrower and Lender shall
---------------------
maintain, in accordance with generally accepted accounting principles
consistently applied, a loan account in their general ledgers or other financial
records (the "Ledgers") and each Loan (including the Interest Rate, if any) when
made shall be promptly evidenced by a book-entry in such Ledgers. The Ledgers
shall also indicate the date on which any repayment or prepayment of principal
or accrued interest, if any, on a Loan is made and the amount of such repayment
or prepayment.
Section 2.02 Additional Subsidiaries. The Company agrees to cause any
-----------------------
entity which becomes a Subsidiary after the date hereof to become a party to
this Agreement on the date that the Company or a Subsidiary creates or acquires
such Subsidiary by executing an amendment to this Agreement pursuant to which
such Subsidiary agrees to be bound by the terms hereof as if an original party
hereto.
Section 2.03 Separate Evidence of Intercompany Debt Obligations. Any
--------------------------------------------------
intercompany debt obligation may be evidenced by a promissory note, agreement or
other instrument, provided that any such promissory note, agreement or other
--------
instrument entered into after the date hereof if it evidences a Loan to the
Company from a Wholly Owned Subsidiary incorporates by reference all of the
terms of this Agreement and is not inconsistent with the terms hereof.
A-2
<PAGE>
ARTICLE III
REPAYMENT PROVISIONS
Section 3.01 Repayment Provisions. If after the date of issuance of a
--------------------
Loan (i) a Default or Event of Default has occurred and is continuing under the
Indenture or (ii) a Default or Event of Default under the New Bank Credit
Agreement (as defined) shall have occurred and be continuing, then any Loans
made to the Company by any Wholly Owned Subsidiary shall not be payable;
provided, however, that if any such Default or Event of Default under the
- -------- -------
Indenture or the New Bank Credit Agreement has been waived, cured or rescinded,
such Loans may be paid. Any Lender that is a Wholly Owned Subsidiary hereby
agrees that if it receives from the Company any payments or distributions on any
Loan in violation of the prior sentence after any Default or Event of Default
under the Indenture or the New Bank Credit Agreement has occurred, is continuing
and has not been waived, cured or rescinded, it will pay over and deliver
forthwith to the Company, all such payments and distributions.
ARTICLE IV
MISCELLANEOUS
Section 4.01 Amendments, Etc. No amendment or waiver of any provision of
---------------
this Agreement, or consent to depart therefrom, which in any such case could
adversely affect the Holders of the Securities, is permitted at any time for any
reason, except for (i) an amendment required under Section 2.02 or (ii) with the
consent of the Holders of at least a majority in aggregate principal amount of
the Outstanding Securities.
Section 4.02 Termination; Release. This Agreement shall expire upon (i)
--------------------
the discharge of the Company's and each of the Guarantor's obligations under the
Indenture or (ii) the Company's election to defuse its obligations under the
Indenture with respect to all Outstanding Securities in accordance with Section
402 or 403 of the Indenture. A Subsidiary shall be released from its
obligations under this Agreement upon (x) its merger into another Subsidiary or
the Company or (y) the sale, exchange or transfer by consolidation, merger or
otherwise, to any Person not an Affiliate of the Company of all the Company's
stock in, or all or substantially all of the assets of, such Subsidiary which is
in compliance with the Indenture.
A-3
<PAGE>
Section 4.03 Assignment. No party to this Agreement may assign, in whole
----------
or in part, any of its rights and obligations under this Agreement, except to
its legal successor in interest.
Section 4.04 Third Party Beneficiaries. The Holders of the Securities,
-------------------------
shall be third party beneficiaries of this Agreement; provided that only the
--------
Trustee (on behalf of the Holders of the Securities) shall have the right to
enforce this Agreement against the Company and the Subsidiaries.
Section 4.05 Headings. Article and Section headings in this Agreement are
--------
included for convenience of reference only and shall not constitute a part of
this Agreement for any other purpose.
Section 4.06 Execution of 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 shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Section 4.07 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF.
Section 4.08 Waivers. The maker of any loan hereunder hereby waives
-------
presentment, demand for payment, notice of protest and all other demands and
notices in connection with the delivery, acceptance, performance or enforcement
thereof.
A-4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
THE HILLHAVEN CORPORATION
By_________________________________
Name:
Title:
FIRST HEALTHCARE CORPORATION
By_________________________________
Name:
Title:
MEDISAVE PHARMACIES INC.
By_________________________________
Name:
Title:
Each of the Corporations listed on
Schedule A
By_________________________________
Name:
Title:
A-5
<PAGE>
SCHEDULE I
INDEBTEDNESS OF THE COMPANY AND ITS SUBSIDIARY
(Excluding Attributable Debt)
AS OF ____________, 1993
<PAGE>
EXHIBIT 4.8
THE HILLHAVEN CORPORATION
_____________________
________% SENIOR SUBORDINATED NOTES due 2001
No. ________________ $______________
THE HILLHAVEN CORPORATION, a Nevada corporation (herein called the
"Company", which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
____________________ or registered assigns, the principal sum of
___________________ United States dollars on ___________________, 2001, at the
office or agency of the Company referred to below, and to pay interest thereon
from _______________, 1993 or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, semi-annually on
__________________ and _________________, in each year, commencing ___________,
1994 at the rate of ___________ % per annum, in United States dollars, until the
principal hereof is paid or duly provided for.
The interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in such Indenture, be paid to the Person
in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be ____________ or ___________ (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any such
interest not so punctually paid, or duly provided for, and interest on such
defaulted interest at the interest rate borne by the Securities, to the extent
lawful, shall forthwith cease to be payable to the Holder on such Regular Record
Date, and may be paid to the Person in whose name this Security (or one or more
Predecessor Securities) 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 Securities not less than 10
days prior to such Special Record Date, or may be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in said Indenture.
Payment of the principal of, premium, if any, and interest on this Security
will be made at the office or agency of the Company maintained for that purpose
in The City of New York, or at such other office or agency of the Company as may
be maintained for such purpose, 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
<PAGE>
private debts; provided, however, that payment of interest may be made at the
-------- -------
option of the Company by check mailed to the address of the Person entitled
thereto as such address shall appear on the Security Register. Interest shall be
computed on the basis of a 360-day year of twelve 30-day months.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly executed by
the Trustee referred to on the reverse hereof or by the authenticating agent
appointed as provided in the Indenture by manual signature, this Security shall
not be entitled to any benefit under the Indenture, or be valid or obligatory
for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the manual or facsimile signature of its authorized officers and its
corporate seal to be affixed or reproduced hereon.
Dated: _______________ THE HILLHAVEN CORPORATION
By:_______________________
Attest:
[SEAL]
_________________________
Secretary
Form of Reverse of Security.
----------------------------
The form of the reverse of the Securities shall be substantially as
follows:
This Security is one of a duly authorized issue of Securities of the
Company designated as its _____________% Senior Subordinated Notes due 2001
(herein called the "Securities"), limited (except as otherwise provided in the
Indenture referred to below) in aggregate principal amount to $175,000,000,
which may be issued under an indenture (herein called the "Indenture") dated as
of ______________, 1993, among the Company and State Street Bank and Trust
Company, as trustee (herein called 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, obligations and immunities thereunder of
the Company, the Trustee
<PAGE>
and the Holders of the Securities, and of the terms upon which the Securities
are, and are to be, authenticated and delivered.
The Indenture contains provisions for defeasance at any time of (a) the
entire Indebtedness on this Security and (b) certain restrictive covenants and
related Defaults and Events of Default, in each case upon compliance with
certain conditions set forth therein.
The Indebtedness evidenced by the Securities is, to the extent and in the
manner provided in the Indenture, subordinate and subject in right of payment to
the prior payment in full of all Senior Indebtedness (as defined in the
Indenture), whether Outstanding on the date of the Indenture or thereafter, and
this Security is issued subject to such provisions. Each Holder of this
Security, 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
action as may be necessary or appropriate to effectuate the subordination as
provided in the Indenture and (c) appoints the Trustee his attorney-in-fact for
such purpose; provided, however, that the indebtedness evidenced by this
-------- -------
Security shall cease to be so subordinate and subject in right of payment upon
any defeasance of this Security referred to in clause (a) or (b) of the next
preceding paragraph.
The Securities are subject to redemption, as a whole or in part, at any
time on or after __________, 1998 at the option of the Company, upon not less
than 30 nor more than 60 days' prior notice by first-class mail in amounts of
$1,000 or an integral multiple of $1,000 at the following redemption prices
(expressed as a percentage of the principal amount) if redeemed during the
12-month period beginning ___________ of the years indicated below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
1998 .......................... ______%
1999 .......................... ______%
</TABLE>
and thereafter at 100% of the principal amount, in each case, together with
accrued and unpaid interest, if any, to the Redemption Date (subject to the
right of the Holders of record on the relevant record date to receive interest
due on an Interest Payment Date). If less than all of the Securities are to be
redeemed, such portion of the Securities shall be redeemed pro rata, by lot or
by any other method the Trustee shall deem fair and reasonable.
At any time on or prior to __________, 1996, the Company may redeem up to
an aggregate of $50,000,000 principal amount of
<PAGE>
Securities within 180 days of the conclusion of one or more Public Equity
Offerings of the Company or any of its Subsidiaries with the net proceeds of
such offerings at a redemption price equal to of the aggregate principal amount,
together with accrued and unpaid interest, if any, to the Redemption Date.
Upon the occurrence of a Change in Control, each Holder may require the
Company to repurchase all or a portion of such Holder's Securities at a purchase
price in cash equal to 101% of the principal amount thereof, together with
accrued and unpaid interest to the date of repurchase.
Under certain circumstances, in the event the Net Cash Proceeds received by
the Company from any Asset Sale, which is not used to prepay Senior Indebtedness
or invested in properties or assets used in the businesses of the Company,
exceeds $17,500,000, the Company will be required to apply such proceeds to the
repayment of the Securities and certain indebtedness ranking pari passu to the
---- -----
Securities.
In the case of any redemption of Securities, interest installments whose
Stated Maturity is on or prior to the Redemption Date will be payable to the
Holders of such Securities of record at the close of business on the relevant
Record Date referred to on the face hereof. Securities (or portions thereof)
for whose redemption and payment provision is made in accordance with the
Indenture shall cease to bear interest from and after the date of redemption.
In the event of redemption of this Security in part only, a new Security or
Securities for the unredeemed portion hereof shall be issued in the name of the
Holder hereof upon the cancellation hereof.
If an Event of Default shall occur and be continuing, the principal amount
of all the Securities may be declared due and payable in the manner and with the
effect provided in the Indenture.
The Indenture permits, with certain exceptions (including certain
amendments permitted without the consent of any Holders) as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders under the Indenture at any time by the
Company and the Trustee with the consent of the Holders of a specified
percentage in aggregate principal amount of the Securities at the time
Outstanding. The Indenture also contains provisions permitting the Holders of a
specified percentage in aggregate principal amount of the Securities at the time
Outstanding, on behalf of the Holders of all the Securities, to waive compliance
by the Company with certain
<PAGE>
provisions of the Indenture and certain past Defaults under the Indenture and
their consequences. Any such consent or waiver by or on behalf of the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the registration
of transfer hereof or in exchange here for or in lieu hereof whether or not
notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company or any
Guarantor (in the event such Guarantor is obligated to make payments in respect
of the Securities), which is absolute and unconditional, to pay the principal
of, premium, if any, and interest on this Security at the times, place, and
rate, and in the coin or currency, herein prescribed, subject to the
subordination provisions of the Indenture.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable on the Security Register of
the Company, upon surrender of this Security for registration of transfer at the
office or agency of the Company maintained for such purpose in The City of New
York or at such other office or agency of the Company as may be maintained for
such purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Securities, of authorized denominations and for the
same aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, the Securities
are exchangeable for a like aggregate principal amount of Securities of a
different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any registration of transfer or
exchange or redemption of Securities, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
The Company, the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name this Security is registered as the owner hereof
for all purposes, whether or not this Security is overdue, and neither the
Company, the Trustee nor any agent shall be affected by notice to the contrary.
<PAGE>
All terms used in this Security which are defined in the Indenture and not
otherwise defined herein shall have the meanings assigned to them in the
Indenture.
Form of Trustee's Certificate of Authentication.
-----------------------------------------------
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the Securities referred to in the within-mentioned
Indenture.
STATE STREET BANK AND TRUST COMPANY
As Trustee
By:_________________________
Authorized Officer
<PAGE>
EXHIBIT 10.1
- --------------------------------------------------------------------------------
POLICY NUMBER:
445-86-62
[LOGO OF AMERICAN INTERNATIONAL COMPANIES]
DIRECTORS, OFFICERS AND CORPORATE LIABILITY INSURANCE POLICY
<TABLE>
<S> <C>
[_]AIU Insurance Company [_]Illinois National Insurance Company
[_]American Global Insurance Company [X]National Union Fire Insurance Company of Pittsburgh, Pa
[_]Granite State Insurance Company [_]National Union Fire Insurance Company of Louisiana
[_]New Hampshire Insurance Company [_]Birmingham Fire Insurance Company of Pennsylvania
</TABLE>
(each of the above being a capital stock company)
__________________________________________________________________
NOTICE: EXCEPT TO SUCH EXTENT AS MAY OTHERWISE BE PROVIDED HEREIN, THE
COVERAGE OF THIS POLICY IS GENERALLY LIMITED TO LIABILITY FOR ONLY THOSE CLAIMS
THAT ARE FIRST MADE AGAINST THE INSUREDS DURING THE POLICY PERIOD AND REPORTED
IN WRITING TO THE INSURER PURSUANT TO THE TERMS HEREIN. PLEASE READ THE POLICY
CAREFULLY AND DISCUSS THE COVERAGE THEREUNDER WITH YOUR INSURANCE AGENT OR
BROKER.
NOTICE: THE LIMIT OF LIABILITY AVAILABLE TO PAY JUDGMENTS OR SETTLEMENTS SHALL
BE REDUCED BY AMOUNTS INCURRED FOR LEGAL DEFENSE. AMOUNTS INCURRED FOR LEGAL
DEFENSE SHALL BE APPLIED AGAINST THE RETENTION AMOUNT.
NOTICE: THE INSURER DOES NOT ASSUME ANY DUTY TO DEFEND; HOWEVER, THE INSURER
MUST ADVANCE DEFENSE COSTS PAYMENTS PURSUANT TO THE TERMS HEREIN PRIOR TO THE
FINAL DISPOSITION OF A CLAIM.
DECLARATIONS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
ITEM 1. NAMED CORPORATION: VENCOR INC
MAILING ADDRESS: 3300 PROIVIDIAN CENTER
LOUISVILLE, KY 40202
STATE OF INCORPORATION OF THE NAMED CORPORATION: Delaware
ITEM 2. SUBSIDIARY COVERAGE: any past, present or future Subsidiary of the Named Corporation
ITEM 3. POLICY PERIOD: From: September 28, 1995 To: September 28, 1996
(12:01 AM standard time at the address stated in Item 1.)
ITEM 4. LIMIT OF LIABILITY: $20,000,000 aggregate for Coverages A and B combined
(including Defense Costs)
ITEM 5. RETENTION:
SECURITIES CLAIMS
-----------------
Judgments & Settlements (all coverages) None
</TABLE>
62334 (5/95) 1
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Defense Costs (non-Indemnifiable Loss) None
Defense Costs (Coverage B(i) and
Indemnifiable Loss) $ 200,000 for Loss arising from Claims alleging the
same Wrongful Act or related Wrongful Acts
(waivable under Clause 6 in certain
circumstances)
OTHER CLAIMS:
-------------
Judgments, Settlements and Defense
Costs (non-Indemnifiable Loss) None
Judgments, Settlements and Defense
Costs (Indemnifiable Loss) $200,000 for Loss arising from Claims alleging the
same Wrongful Act or related Wrongful Acts
ITEM 6. CONTINUITY DATES:
A. Coverages A and B(ii): September 01, 1989
B. Coverage B(i): September 28, 1995
C. Outside Entity Coverage: Per Outside Entity, see endorsement # 15, 16, 17 & 18
ITEM 7. PREMIUM: $335,000 + $ 5,025 KY Surcharge
ITEM 8. NAME AND ADDRESS OF INSURER ("Insurer"):
(This policy is issued only by the insurance company indicated below.)
National Union Fire Insurance Company of Pittsburgh, Pa.
70 Pine Street
New York, NY 10270
</TABLE>
IN WITNESS WHEREOF, the Insurer has caused this policy to be signed by its
President and Secretary and signed on the Declarations Page by a duly authorized
representative of the Insurer.
/s/ Elizabeth M. Tuck [SIGNATURE ILLEGIBLE]
SECRETARY PRESIDENT
ALEXANDER & ALEXANDER
TWO PRUDENTIAL PLAZA
CHICAGO, IL 60601-6714
[SIGNATURE ILLEGIBLE]
--------------------------
AUTHORIZED REPRESENTATIVE
11-27-95 LOUISVILLE, KY
--------------------- ----------------
COUNTERSIGNATURE DATE COUNTERSIGNED AT
2
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
DIRECTORS, OFFICERS AND CORPORATE LIABILITY INSURANCE POLICY
In consideration of the payment of the premium, and in reliance upon the
statements made to the Insurer by application forming a part hereof and its
attachments and the material incorporated therein, the insurance company
designated in Item 8 of the Declarations, herein called the "Insurer", agrees as
follows:
1. INSURING AGREEMENTS
COVERAGE A: DIRECTORS AND OFFICERS INSURANCE
This policy shall pay the Loss of each and every Director or Officer of the
Company arising from a Claim first made against the Directors or Officers
during the Policy Period or the Discovery Period (if applicable) and
reported to the Insurer pursuant to the terms of this policy for any actual
or alleged Wrongful Act in their respective capacities as Directors or
Officers of the Company, except when and to the extent that the Company has
indemnified the Directors or Officers. The Insurer shall, in accordance
with and subject to Clause 8, advance Defense Costs of such Claim prior to
its final disposition.
COVERAGE B: CORPORATE LIABILITY INSURANCE
This policy shall pay the Loss of the Company arising from a:
(i) Securities Claim first made against the Company, or
(ii) Claim first made against the Directors or Officers,
during the Policy Period or the Discovery Period (if applicable) and
reported to the Insurer pursuant to the terms of this policy for any actual
or alleged Wrongful Act, but, in the case of (ii) above, only when and to
the extent that the Company has indemnified the Directors or Officers for
such Loss pursuant to law, common or statutory, or contract, or the Charter
or By-laws of the Company duly effective under such law which determines
and defines such rights of indemnity. The Insurer shall, in accordance with
and subject to Clause 8, advance Defense Costs of such Claim prior to its
final disposition.
2. DEFINITIONS
(a) "Claim" means:
(1) a written demand for monetary or non-monetary relief, or
(2) a civil, criminal, or administrative proceeding for monetary or
non-monetary relief which is commenced by:
(i) service of a complaint or similar pleading; or
(ii) return of an indictment (in the case of a criminal
proceeding); or
(iii) receipt or filing of a notice of charges.
The term "Claim" shall include a Securities Claim; provided, however,
that with respect to Coverage B(i) only, Claim or Securities Claim
shall not mean a criminal or administrative proceeding against the
Company.
(b) The "Company" means the Named Corporation designated in Item I of the
Declarations and any Subsidiary thereof.
1
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
(c) "Continuity Date" means the date set forth in:
(1) Item 6A of the Declarations with respect to Coverages A and
B(ii); or
(2) Item 6B of the Declarations with respect to Coverage B(i); or
(3) Item 6C of the Declarations with respect to Coverages A or B for
a Claim against an Insured arising out of such Insured serving as
a director, officer, trustee or governor of an Outside Entity.
(d) "Defense Costs" means reasonable and necessary fees, costs and
expenses consented to by the Insurer (including premiums for any
appeal bond, attachment bond or similar bond, but without any
obligation to apply for or furnish any such bond) resulting solely
from the investigation, adjustment, defense and appeal of a Claim
against the Insureds, but excluding salaries of Officers or employees
of the Company.
(e) "Director(s) or Officer(s)" or "Insured(s)" means:
(1) with respect to Coverages A and B(ii), any past, present or
future duly elected or appointed directors or officers of the
Company. In the event the Named Corporation or a Subsidiary
thereof operates outside the United States, then the term
"Director(s) or Officer(s)" or "Insured(s)" also means those
titles, positions or capacities in such foreign Named Corporation
or Subsidiary which is equivalent to the position of Director or
Officer in a corporation incorporated within the United States.
Coverage will automatically apply to all new Directors and
Officers after the inception date of this policy;
(2) with respect to Coverage B(i) only, the Company.
(f) "Listed Event" means any of the following events:
(1) any event for which the Company has reported or is required to
report on Form 8-K filed with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934; or
(2) any restatement or correction of a Company financial statement
contained in any document filed with the Securities and Exchange
Commission; or
(3) any statement or disclosure made by or on the behalf of the
Company relating to a prior forecast, estimate or projection of
the Company's earnings or sales made by or on the behalf of the
Company, which statement or disclosure represents a greater than
15% change from such prior forecast, estimate or projection.
(g) "Loss" means damages, judgments, settlements and Defense Costs;
however, Loss shall not include civil or criminal fines or penalties
imposed by law, punitive or exemplary damages, the multiplied portion
of multiplied damages, taxes, any amount for which the Insureds are
not financially liable or which are without legal recourse to the
Insureds, or matters which may be deemed uninsurable under the law
pursuant to which this policy shall be construed.
2
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Further, with respect to Coverage B only, Loss shall not include
damages, judgments or settlements arising out of a Claim alleging that
the Company paid an inadequate or unfair price or consideration for
the purchase of its own securities or the securities of a subsidiary.
Notwithstanding the foregoing, with respect to Coverage B(i) only and
subject to the other terms, conditions and exclusions of the policy,
Loss shall include punitive damages (if insurable by law) imposed upon
the Company.
(h) "No Liability" means with respect to a Securities Claim made against
the Insured(s): (1) a final judgment of no liability obtained prior to
trial, in favor of all Insureds, by reason of a motion to dismiss or a
motion for summary judgment, after the exhaustion of all appeals; or
(2) a final judgment of no liability obtained after trial, in favor of
all Insureds, after the exhaustion of all appeals. In no event shall
the term "No Liability" apply to a Securities Claim made against an
Insured for which a settlement has occurred.
(i) "Outside Entity" means:
(1) a not-for-profit organization under section 501(c)(3) of the
Internal Revenue Code of 1986 (as amended); or
(2) any other corporation, partnership, joint venture or other
organization listed by endorsement to this policy.
(J) "Policy Period" means the period of time from the inception date shown
in Item 3 of the Declarations to the earlier of the expiration date
shown in Item 3 of the Declarations or the effective date of
cancellation of this policy; however, to the extent that coverage
under this policy replaces coverage in other policies terminating at
noon standard time on the inception date of such coverage hereunder,
then such coverage as is provided by this policy shall not become
effective until such other coverage has terminated.
(k) "Securities Claim" means a Claim made against an Insured which alleges
a violation of the Securities Act of 1933 or the Securities Exchange
Act of 1934, rules or regulations promulgated thereunder, the
securities laws of any state, or any foreign jurisdiction, and which
alleges a Wrongful Act in connection with the claimant's purchase or
sale of; or the offer to purchase or sell to the claimant, any
securities of the Company, whether on the open market or arising from
a public or private offering of securities by the Company.
(l) "Subsidiary" means:
(1) a corporation of which the Named Corporation owns on or before
the inception of the Policy Period more than 50% of the issued
and outstanding voting stock either directly, or indirectly
through one or more of its Subsidiaries;
(2) automatically a corporation whose assets total less than 10% of
the total consolidated assets of the Company as of the inception
date of this policy, which corporation becomes a Subsidiary
during the Policy Period. The Named Corporation shall provide the
Insurer with full particulars of the new Subsidiary before the
end of the Policy Period;
3
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(3) a corporation which becomes a Subsidiary during the Policy Period
(other than a corporation described in paragraph (2) above) but
only upon the condition that within 90 days of its becoming a
Subsidiary, the Named Corporation shall have provided the Insurer
with full particulars of the new Subsidiary and agreed to any
additional premium and/or amendment of the provisions of this
policy required by the Insurer relating to such new Subsidiary.
Further, coverage as shall be afforded to the new Subsidiary is
conditioned upon the Named Corporation paying when due any
additional premium required by the Insurer relating to such new
Subsidiary.
A corporation becomes a Subsidiary when the Named Corporation owns
more than 50% of the issued and outstanding voting stock, either
directly, or indirectly through one or more of its Subsidiaries. A
corporation ceases to be a Subsidiary when the Named Corporation
ceases to own more than 50% of the issued and outstanding voting
stock, either directly, or indirectly through one or more of its
Subsidiaries.
In all events, coverage as is afforded with respect to a Claim made
against a Subsidiary or any Director or Officer thereof shall only
apply for Wrongful Acts committed or allegedly committed after the
effective time that such Subsidiary became a Subsidiary and prior to
the time that such Subsidiary ceased to be a Subsidiary.
(m) "Wrongful Act" means:
(1) with respect to individual Directors or Officers, any breach of
duty, neglect, error, misstatement, misleading statement,
omission or act by the Directors or Officers of the Company in
their respective capacities as such, or any matter claimed
against them solely by reason of their status as Directors or
Officers of the Company, or any matter claimed against them
arising out of their serving as a director, officer, trustee or
governor of an Outside Entity in such capacities, but only if
such service is at the specific written request or direction of
the Company,
(2) with respect to the Company, any breach of duty, neglect, error,
misstatement, misleading statement, omission or act by the
Company, but solely as respects a Securities Claim.
3 EXTENSIONS
Subject otherwise to the terms hereof, this policy shall cover Loss arising
from a Claim made against the estates, heirs, or legal representatives of
deceased Directors or Officers, and the legal representatives of Directors
or Officers in the event of incompetency, insolvency or bankruptcy, who
were Directors or Officers at the time the Wrongful Acts upon which such
Claims are based were committed.
Subject otherwise to the terms hereof, this policy shall cover Loss
arising from a Claim made against the lawful spouse (whether such status is
derived by reason of statutory law, common law or otherwise of any
applicable jurisdiction in the world) of an individual Director or Officer
for a Claim arising solely out of his or her status as the spouse of an
individual Director or Officer, including a Claim that seeks damages
recoverable from marital community property, property jointly held by the
individual Director or Officer and the spouse, or property transferred from
the individual Director or Officer to the spouse; provided, however, that
this extension shall not afford coverage for any Claim for any actual or
alleged Wrongful Act of the spouse, but shall apply only to Claims arising
out of any actual or alleged Wrongful Acts of an individual Director or
Officer, subject to the policy's terms, conditions and exclusions.
62335 (5/95) 4
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4. EXCLUSIONS
The Insurer shall not be liable to make any payment for Loss in connection
with a Claim made against an Insured:
(a) arising out of, based upon or attributable to the gaining in fact of
any profit or advantage to which an Insured was not legally entitled;
(b) arising out of, based upon or attributable to: (1) profits in fact
made from the purchase or sale by an Insured of securities of the
Company within the meaning of Section 16(b) of the Securities Exchange
Act of 1934 and amendments thereto or similar provisions of any state
statutory law; or (2) payments to an Insured of any remuneration
without the previous approval of the stockholders of the Company,
which payment without such previous approval shall be held to have
been illegal;
(c) arising out of, based upon or attributable to the committing in fact
of any criminal or deliberate fraudulent act;
[The Wrongful Act of a Director or Officer shall not be imputed to any
other Director or Officer for the purpose of determining the applicability
of the foregoing exclusions 4(a) through 4(c)]
(d) alleging, arising out of, based upon or attributable to the facts
alleged, or to the same or related Wrongful Acts alleged or contained,
in any claim which has been reported, or in any circumstances of which
notice has been given, under any policy of which this policy is a
renewal or replacement or which it may succeed in time;
(e) alleging, arising out of, based upon or attributable to any pending or
prior litigation as of the Continuity Date, or alleging or derived
from the same or essentially the same facts as alleged in such pending
or prior litigation;
(f) alleging, arising out of, based upon or attributable to a Listed Event
that occurs no later than 90 days subsequent to the Continuity Date;
provided, however, that this exclusion shall only apply with respect
to coverage which would have otherwise been afforded under Coverage
B(i) of the policy;
(g) with respect to serving as a director, officer, trustee or governor of
an Outside Entity, for any Wrongful Act occurring prior to the
Continuity Date if the Insured knew or could have reasonably foreseen
that such Wrongful Act could lead to a Claim under this policy;
(h) alleging, arising out of, based upon or attributable to any actual or
alleged act or omission of the Directors or Officers serving in their
capacities as directors, officers, trustees or governors of any other
entity other than the Company or an Outside Entity, or by reason of
their status as directors, officers, trustees or governors of such
other entity;
(i) which is brought by any Insured or by the Company; or which is brought
by any security holder of the Company, whether directly or
derivatively, unless such security holder's Claim is instigated and
continued totally independent of, and totally without the solicitation
of, or assistance of, or active participation of, or intervention of,
any Insured or the Company; provided, however, this
5
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exclusion shall not apply to a wrongfUl termination of employment
Claim brought by a former employee other than a former employee who is
or was a Director of the Company;
(j) for any Wrongful Act arising out of the Insured serving as a director,
officer, trustee or governor of an Outside Entity if such Claim is
brought by the Outside Entity or by any director or officer thereof;
or which is brought by any security holder of the Outside Entity,
whether directly or derivatively, unless such security holder's Claim
is instigated and continued totally independent of; and totally
without the solicitation of; or assistance of; or active participation
of; or intervention of; the Outside Entity, any director or officer
thereof, the Company or an Insured.
(k) for bodily injury, sickness, disease, death or emotional distress of
any person, or damage to or destruction of any tangible property,
including the loss of use thereof, or for injury from libel or slander
or defamation or disparagement, or for injury from a violation of a
person's right of privacy;
(l) alleging, arising out of, based upon, attributable to, or in any way
involving, directly or indirectly:
(1) the actual, alleged or threatened discharge, dispersal, release or
escape of pollutants; or
(2) any direction or request to test for, monitor, clean up, remove,
contain, treat, detoxify or neutralize pollutants,
Including but not limited to a Claim alleging damage to the Company
or its securities holders.
Pollutants include (but is not limited to) any solid, liquid, gaseous
or thermal irritant or contaminant, including smoke, vapor, soot,
fumes, acids, alkalis, chemicals and waste. Waste includes (but is not
limited to) materials to be recycled, reconditioned or reclaimed;
(m) for violation(s) of any of the responsibilities, obligations or duties
imposed upon fiduciaries by the Employee Retirement Income Security
Act of 1974, or amendments thereto or any similar provisions of state
statutory law or common law.
5. LIMIT OF LIABILITY (FOR ALL LOSS - INCLUDING DEFENSE COSTS)
The Limit of Liability stated in Item 4 of the Declarations is the limit of
the Insurer's liability for all Loss, under Coverage A and Coverage B
combined, arising out of any Claim first made against the Insureds during
the Policy Period and the Discovery Period (if applicable); however, the
Limit of Liability for the Discovery Period shall be part of, and not in
addition to, the Limit of Liability for the Policy Period. Further, a Claim
which is made subsequent to the Policy Period or Discovery Period (if
applicable) which pursuant to Clause 7(b) or 7(c) is considered made during
the Policy Period or Discovery Period shall also be subject to the
aggregate Limit of Liability stated in Item 4 of the Declarations.
DEFENSE COSTS ARE NOT PAYABLE BY THE INSURER IN ADDITION TO THE LIMIT OF
LIABILITY. DEFENSE COSTS ARE PART OF LOSS AND AS SUCH ARE SUBJECT TO THE
LIMIT OF LIABILITY FOR LOSS.
6
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6. RETENTION CLAUSE
The Insurer shall only be liable for the amount of Loss arising from a
Claim which is in excess of the Retention amount stated in Item 5 of the
Declarations, such Retention amount to be borne by the Company and/or the
Insureds and shall remain uninsured, with regard to all Loss under: (i)
Coverage A or B(ii) for which the Company has indemnified or is permitted
or required to indemnify the Director(s) or Officer(s) ("Indemnifiable
Loss"); or (ii) Coverage B(i). A single Retention amount shall apply to
Loss arising from all Claims alleging the same Wrongful Act or related
Wrongful Acts.
Notwithstanding the foregoing, solely with respect to a Securities Claim
under this policy, the Retention shall only apply to Defense Costs;
provided, however, no Retention shall apply for a Securities Claim even as
respects Defense Costs in the event of a determination of No Liability of
all Insureds, and the Insurer shall thereupon reimburse such Defense Costs
paid by the Insured.
7. NOTICE/CLAIM REPORTING PROVISIONS
NOTICE HEREUNDER SHALL BE GIVEN IN WRITING TO THE INSURER NAMED IN ITEM 8
OF THE DECLARATIONS AT THE ADDRESS INDICATED IN ITEM 8 OF THE DECLARATIONS.
IF MAILED, THE DATE OF MAILING SHALL CONSTITUTE THE DATE THAT SUCH NOTICE
WAS GIVEN AND PROOF OF MAILING SHALL BE SUFFICIENT PROOF OF NOTICE.
(a) The Company or the Insureds shall, as a condition precedent to the
obligations of the Insurer under this policy, give written notice to
the Insurer of a Claim made against an Insured as soon as practicable
and either:
(1) anytime during the Policy Period or during the Discovery Period
(if applicable); or
(2) within 30 days after the end of the Policy Period or the
Discovery Period (if applicable), as long as such Claim(s) is
reported no later than 30 days after the date such Claim was
first made against an Insured.
(b) If written notice of a Claim has been given to the Insurer pursuant to
Clause 7(a) above, then a Claim which is subsequently made against the
Insureds and reported to the Insurer alleging, arising out of, based
upon or attributable to the facts alleged in the Claim for which such
notice has been given, or alleging any Wrongful Act which is the same
as or related to any Wrongful Act alleged in the Claim of which such
notice has been given, shall be considered made at the time such
notice was given.
(c) If during the Policy Period or during the Discovery Period (if
applicable) the Company or the Insureds shall become aware of any
circumstances which may reasonably be expected to give rise to a Claim
being made against the Insureds and shall give written notice to the
Insurer of the circumstances and the reasons for anticipating such a
Claim, with full particulars as to dates, persons and entities
involved, then a Claim which is subsequently made against the Insureds
and reported to the Insurer alleging, arising out of, based upon or
attributable to such circumstances or alleging any Wrongful Act which
is the same as or related to any Wrongful Act alleged or contained in
such circumstances, shall be considered made at the time such notice
of such circumstances was given.
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8. DEFENSE COSTS, SETTLEMENTS, JUDGMENTS (INCLUDING THE ADVANCEMENT OF DEFENSE
COSTS)
Under both Coverage A and Coverage B of this policy, except as hereinafter
stated, the Insurer shall advance, at the written request of the Insured,
Defense Costs prior to the final disposition of a Claim. Such advance
payments by the Insurer shall be repaid to the Insurer by the Insureds or
the Company, severally according to their respective interests, in the
event and to the extent that the Insureds or the Company shall not be
entitled under the terms and conditions of this policy to payment of such
Loss.
THE INSURER DOES NOT, HOWEVER, UNDER THIS POLICY, ASSUME ANY DUTY TO
DEFEND. THE INSUREDS SHALL DEFEND AND CONTEST ANY CLAIM MADE AGAINST THEM.
THE INSUREDS SHALL NOT ADMIT OR ASSUME ANY LIABILITY, ENTER INTO ANY
SETTLEMENT AGREEMENT, STIPULATE TO ANY JUDGMENT, OR INCUR ANY DEFENSE COSTS
WITHOUT THE PRIOR WRITTEN CONSENT OF THE INSURER. ONLY THOSE SETTLEMENTS,
STIPULATED JUDGMENTS AND DEFENSE COSTS WHICH HAVE BEEN CONSENTED TO BY THE
INSURER SHALL BE RECOVERABLE AS LOSS UNDER THE TERMS OF THIS POLICY. THE
INSURER'S CONSENT SHALL NOT BE UNREASONABLY WITHHELD, PROVIDED THAT THE
INSURER SHALL BE ENTITLED TO EFFECTIVELY ASSOCIATE IN THE DEFENSE AND THE
NEGOTIATION OF ANY SETTLEMENT OF ANY CLAIM.
The Insurer shall have the right to effectively associate with the Company
and the Insureds in the defense of any Claim that appears reasonably likely
to involve the Insurer, including but not limited to negotiating a
settlement. The Company and the Insureds shall give the Insurer full
cooperation and such information as it may reasonably require.
The Insurer may make any settlement of any Claim it deems expedient with
respect to any Insured subject to such Insured's written consent. If any
Insured withholds consent to such settlement, the Insurer's liability for
all Loss on account of such Claim shall not exceed the amount for which the
Insurer could have settled such Claim plus Defense Costs incurred as of the
date such settlement was proposed in writing by the Insurer.
The Company is not covered in any respect under Coverage A; the Company is
covered, subject to the policy's terms and conditions, only with respect to
its indemnification of its Directors or Officers under Coverage B(ii) as
respects a Claim against such Directors and Officers, and subject to the
policy's terms and conditions, under Coverage B(i) for a Securities Claim
made against the Company. Accordingly, the Insurer has no obligation under
this policy for Defense Costs incurred by, judgments against or settlements
by the Company arising out of a Claim made against the Company other than a
covered Securities Claim, or any obligation to pay Loss arising out of any
legal liability that the Company has to a claimant except as respects a
covered Securities Claims against the Company.
With respect to (i) Defense Costs jointly incurred by, (ii) any joint
settlement made by, and/or (iii) any adjudicated judgment of joint and
several liability against the Company and any Director or Officer, in
connection with any Claim other than a Securities Claim, the Company and
the Director(s) or Officer(s) and the Insurer agree to use their best
efforts to determine a fair and proper allocation of the amounts as between
the Company and the Director(s) or Officer(s) and the Insurer, taking into
account the relative legal and financial exposures of and the relative
benefits obtained by the Directors and Officers and the Company. In the
event that a determination as to the amount of Defense Costs to be advanced
under the policy cannot be agreed to, then the Insurer shall advance such
Defense Costs which the Insurer states to be fair and proper until a
different amount shall be agreed upon or determined pursuant to the
provisions of this policy and applicable law.
62335 (5/95) 8
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9. PRE-AUTHORIZED SECURITIES DEFENSE ATTORNEYS
Only with respect to a Securities Claim:
Affixed as Appendix A hereto and made a part of this policy is a list of
Panel Counsel law firms ("Panel Counsel Firms"). The list provides the
Insured a choice of law firms from which a selection of legal counsel shall
be made to conduct the defense of any Securities Claim made against them.
The Insureds shall select a Panel Counsel Firm to defend a Securities Claim
made against the Insureds in the jurisdiction in which the Securities Claim
is brought. In the event a Securities Claim is brought in a jurisdiction
not included on the list, the Insureds shall select a Panel Counsel Firm in
the listed jurisdiction which is the nearest geographic jurisdiction to
either where the Securities Claim is brought or where the corporate
headquarters of the Named Corporation is located. In such instance the
Insureds also may, with the consent of the Insure, which consent shall not
be unreasonably withheld, select a non-Panel Counsel Firm in the
jurisdiction in which the Securities Claim is brought to function as "local
counsel" on the Securities Claim to assist the Panel Counsel Firm which
will function as "lead counsel" in conducting the defense of the Securities
Claim.
With the express prior written consent of the Insurer, an Insured may
select a Panel Counsel Firm different from that selected by other Insured
defendants if such selection is required due to an actual conflict of
interest or is otherwise reasonably justifiable.
The list of Panel Counsel Firms may be amended from time to time by the
Insurer. However, no change shall be made to the specific list attached to
this policy during the Policy Period without the consent of the Named
Corporation. At the request of the Insured, the Insurer may in its
discretion add to the attached list of Panel Counsel Firms for the purposes
of defending a Securities Claim made against the Insured in any specified
jurisdiction (including a jurisdiction not originally included in the Panel
Counsel list) a Panel Counsel Firm not originally listed for such
jurisdiction. The Insurer may in its discretion waive, in part or in whole,
the provisions of this clause as respects a particular Claim.
10. DISCOVERY CLAUSE
Except as indicated below, if the Insurer or the Named Corporation shall
cancel or refUse to renew this policy, the Named Corporation shall have the
right, upon payment of an additional premium of 75% of the "full annual
premium", to a period of one year following the effective date of such
cancellation or nonrenewal (herein referred to as the Discovery Period) in
which to give to the Insurer written notice of Claims first made against
the Insureds during said one yew period for any Wrongful Act occurring
prior to the end of the Policy Period and otherwise covered by this policy.
As used herein, "full annual premium" means the premium level in effect
immediately prior to the end of the Policy Period. The rights contained in
this paragraph shall terminate, however, unless written notice of such
election together with the additional premium due is received by the
Insurer within 30 days of the effective date of cancellation or nonrenewal.
In the event of a Transaction, as defined in Clause 12, the Named
Corporation shall have the right, within 30 days before the end of the
Policy Period, to request an offer from the Insurer of a Discovery Period
(with respect to Wrongful Acts occurring prior to the effective time of the
Transaction) for a period of no less than three years or for such longer or
shorter period as the Named Corporation may request.
62335 (5/95) 9
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The Insurer shall offer such Discovery Period pursuant to such terms,
conditions and premium as the Insurer may reasonably decide. In the event
of a Transaction, the right to a Discovery Period shall not otherwise exist
except as indicated in this paragraph.
The additional premium for the Discovery Period shall be fully earned at
the inception of the Discovery Period. The Discovery Period is not
cancelable. This clause and the rights contained herein shall not apply to
any cancellation resulting from non-payment of premium.
11. CANCELLATION CLAUSE
This policy may be canceled by the Named Corporation at any time only by
mailing written prior notice to the Insurer or by surrender of this policy
to the Insurer or its authorized agent. This policy may also be canceled by
or on behalf of the Insurer by delivering to the Named Corporation or by
mailing to the Named Corporation, by registered, certified, or other first
class mail, at the Named Corporation's address as shown in Item 1 of the
Declarations, written notice stating when, not less than 60 days
thereafter, the cancellation shall be effective. The mailing of such notice
as aforesaid shall be sufficient proof of notice. The Policy Period
terminates at the date and hour specified in such notice, or at the date
and time of surrender.
If this policy shall be canceled by the Named Corporation, the Insurer
shall retain the customary short rate proportion of the premium herein.
If this policy shall be canceled by the Insurer, the Insurer shall retain
the pro rata proportion of the premium herein.
Payment or tender of any unearned premium by the Insurer shall not be a
condition precedent to the effectiveness of cancellation, but such payment
shall be made as soon as practicable.
If the period of limitation relating to the giving of notice is prohibited
or made void by any law controlling the construction thereof, such period
shall be deemed to be amended so as to be equal to the minimum period of
limitation permitted by such law.
12. CHANGE IN CONTROL OF NAMED CORPORATION
If during the Policy Period:
a. the Named Corporation shall consolidate with or merge into, or sell
all or substantially all of its assets to any other person or entity
or group of persons and/or entities acting in concert; or
b. any person or entity or group of persons and/or entities acting in
concert shall acquire an amount of the outstanding securities
representing more than 50% of the voting power for the election of
Directors of the Named Corporation, or acquires the voting rights of
such an amount of such securities;
(either of the above events herein referred to as the "Transaction")
62335 (5/95) 10
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then, this policy shall continue in full force and effect as to Wrongful
Acts occurring prior to the effective time of the Transaction, but there
shall be no coverage afforded by any provision of this policy for any
actual or alleged Wrongful Act occurring after the effective time of the
Transaction. This policy may not be canceled after the effective time of
the Transaction and the entire premium for this policy shall be deemed
earned as of such time. The Named Corporation shall also have the right to
an offer by the Insurer of a Discovery Period described in Clause 10 of the
policy.
The Named Corporation shall give the Insurer written notice of the
Transaction as soon as practicable, but not later than 30 days after the
effective date of the Transaction.
13. SUBROGATION
In the event of any payment under this policy, the Insurer shall be
subrogated to the extent of such payment to all the Company's and the
Insureds' rights of recovery thereof, and the Company and the Insureds
shall execute all papers required and shall do everything that may be
necessary to secure such rights including the execution of such documents
necessary to enable the Insurer effectively to bring suit in the name of
the Company and/or the Insureds. In no event, however, shall the Insurer
exercise its rights of subrogation against an Insured under this policy
unless such Insured has been convicted of a criminal act, or been
judicially determined to have committed a deliberate fraudulent act, or
obtained any profit or advantage to which such Insured was not legally
entitled.
14. OTHER INSURANCE AND INDEMNIFICATION
Such insurance as is provided by this policy shall apply only as excess
over any other valid and collectible insurance.
In the event of a Claim against a Director or Officer arising out of his or
her serving as a director, officer, trustee or governor of an Outside
Entity, coverage as is afforded by this policy shall be specifically excess
of indemnification provided by such Outside Entity and any insurance
provided to such Outside Entity with respect to its directors or officers.
Further, in the event such other Outside Entity insurance is provided by
the Insurer or any member company of American International Group, Inc.
(AIG) (or would be provided but for the application of the retention
amount, exhaustion of the limit of liability or failure to submit a notice
of a Claim) then the maximum aggregate Limit of Liability for all Losses
combined covered by virtue of this policy as respects any such Claim shall
be reduced by the limit of liability (as set forth on the Declarations
Page) of the other AIG insurance provided to such Outside Entity.
15. NOTICE AND AUTHORITY
It is agreed that the Named Corporation shall act on behalf of its
Subsidiaries and all Insureds with respect to the giving of notice of Claim
or giving and receiving notice of cancellation, the payment of premiums and
the receiving of any return premiums that may become due under this policy,
the receipt and acceptance of any endorsements issued to form a part of
this policy and the exercising or declining to exercise any right to a
Discovery Period.
16. ASSIGNMENT
This policy and any and all rights hereunder are not assignable without the
written consent of the Insurer.
62335 (5/95) 11
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17. ARBITRATION
It is hereby understood and agreed that all disputes or differences which
may arise under or in connection with this policy, whether arising before
or after termination of this policy, including any determination of the
amount of Loss, shall be submitted to the American Arbitration Association
under and in accordance with its then prevailing commercial arbitration
rules. The arbitrators shall be chosen in the manner and within the time
frames provided by such rules. If permitted under such rules, the
arbitrators shall be three disinterested individuals having knowledge of
the legal, corporate management, or insurance issues relevant to the
matters in dispute.
Any party may commence such arbitration proceeding in either New York, NY;
Atlanta, Georgia; Chicago, Illinois; or Denver, Colorado. The arbitrators
shall give due consideration to the general principles of Delaware law in
the construction and interpretation of the provisions of this policy;
provided, however, that the terms, conditions, provisions and exclusions of
this policy are to be construed in an evenhanded fashion as between the
parties, including without limitation, where the language of this policy is
alleged to be ambiguous or otherwise unclear, the issue shall be resolved
in the manner most consistent with the relevant terms, conditions,
provisions or exclusions of the policy (without regard to the authorship of
the language, the doctrine of reasonable expectation of the parties and
without any presumption or arbitrary interpretation or construction in
favor of either party or parties, and in accordance with the intent of the
parties.)
The written decision of the arbitrators shall be provided to both parties
and shall be binding on them. The arbitrators' award shall not include
attorney fees or other costs.
Each party shall bear equally the expenses of the arbitration.
18. ACTION AGAINST INSURER
Except as provided in Clause 17 of the policy, no action shall lie against
the Insurer unless, as a condition precedent thereto, there shall have been
full compliance with all of the terms of this policy, nor until the amount
of the Insureds' obligation to pay shall have been finally determined
either by judgment against the Insureds after actual trial or by written
agreement of the Insureds, the claimant and the Insurer.
Any person or organization or the legal representative thereof who has
secured such judgment or written agreement shall thereafter be entitled to
recover under this policy to the extent of the insurance afforded by this
policy. No person or organization shall have any fight under this policy to
join the Insurer as a party to any action against the Insureds or the
Company to determine the Insureds' liability, nor shall the Insurer be
impleaded by the Insureds or the Company or their legal representatives.
Bankruptcy or insolvency of the Company or the Insureds or of their estates
shall not relieve the Insurer of any of its obligations hereunder.
19. HEADINGS
The descriptions in the headings of this policy are solely for convenience,
and form no part of the terms and conditions of coverage.
62335 (5/95) 12
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<PAGE>
APPENDIX A
----------
PANEL COUNSEL
<TABLE>
<CAPTION>
Palo Alto
CALIFORNIA
Los Angeles
<S> <C>
Wilson Sonsini Goodrich & Rosati
Gibson Dunn & Crutcher 650 Page Mill Road
333 South Grand Avenue Palo Alto, California 94304-1050
Los Angeles, California 90071-3197 Contact Person: Bruce Vanyo or
Contact Person: Robert Warren or Steven Sethatz (415) 493-9300
Robert S. Warren (213) 229-7326
Wayne W. Smith (213) 229-7464 Heller, Ellman, White & McAuliffe
John H. Sharer (213) 229-7476 525 University Avenue
Palo Alto, California 94301
Irell & Manella Contact Person: Norman J. Blears
1800 Avenue Of The Stars (415) 324-7000
Suite 900
Los Angeles, California 90067-4276
Contact Person: Richard Borow San Francisco
(310) 277-1010
Brobeck, Phleger & Harrison
Kirkland & Ellis Spear Street Tower
300 South Grand Avenue One Market
Los Angeles, California 90071 San Francisco, California 94104
Contact Person: Jeffrey S. Davidson or Contact Person:
Stephen C. Neal Tower C. Snow, Jr. (415) 442-0900
(213) 680-8400
Heller, Ehrman, White & McAuliffe
Latham & Watkins 333 Bush Street
633 West Fifth Avenue San Francisco, California 94104-2878
Los Angeles, CA 90071 Contact Person: Douglas Schwab or
Contact: M. Laurence Popofsky (415) 772-6000
Hugh Steven Wilson (213) 485-1234
McCutchen, Doyle, Brown & Enersen
Munger, Tolles & Olson 3 Embarcadero Center - 18th floor
355 South Grand Avenue - 35th floor San Francisco. California 94111-4034
Los Angeles, California 90071-1560 Contact Person: David Balabanian or
Contact Person: Dennis Kinnaird Phillip Rotner (415) 393-2000
(213) 683-9264
or John W. Spiegel (213) 683-9152 Morrison & Foerster
345 California Street
O'Melveny & Myers San Francisco, California 94104-2675
400 South Hope Street Contact Person:
Los Angeles, California 90071-2899 Melvin R. Goldman (415) 677-7311
Contact Person: Seth Aronson or Paul T. Friedman (415) 677-7444
Robert Vanderet (213) 669-6000
Orrick Herrington & Sutcliffe
Skadden, Arps, Slate, Meagher & Flom Old Federal Reserve Bank Bldg.
300 South Grand Avenue 400 Sansome Street
Suite 3400 San Francisco, California 94111
Los Angeles, California 90071 Contact Person: James A. Hughes
Contact Person: James E. Lyons or (415) 392-1122
Frank Rothman (213) 687-5000 or W. Reece Bader (415) 392-1122
Pillsbury, Madison & Sutro
P.O. Box 7880
235 Montgomery Street
San Francisco, California 94104
Contact Person: Gary H. Anderson
(415) 983-1341
</TABLE>
<PAGE>
PANEL COUNSEL
<TABLE>
<CAPTION>
DISTRICT OF COLUMBIA GEORGIA
Washington Atlanta
<S> <C>
Arnold & Porter Alston & Bird
555 Twelfth St. N.W. One Atlantic Center
Washington, DC 20004 1201 West Peachtree Street
Contact Person: Scott Schreiber Atlanta. Georgia 30309-3424
(202) 942-5672 Contact Person: Peter Q. Bassett (404) 881-7343
Mary C. Gill (404) 881-7276
Davis Polk & Wardwell
1300 I Street, NW King & Spalding
Suite 1100 191 Peachtree Street N.W.
Washington, D.C. 20005 Atlanta, Georgia 30303
Contact Person: Scott W. Muller Contact Person: Michael R. Smith or
Michael P. Carroll (202) 962-7000 Griffin Bell (404) 572-4600
Gibson, Dunn & Crutcher Long, Aldridge & Norman
1050 Connecticut Avenue, NW One Peachtree Center
Suite 900 303 Peachtree Street - Suite 5300
Washington, D.C. 20036-5306 Atlanta, Georgia 30308
Contact Person: F. Joseph Warin Contact Person: Clay C. Long (404) 527-4050
(202) 887-3609 J. Allen Maines (404) 527-8340
Mudge Rose Guthrie Alexander & Ferdon Smith, Gambrell & Russel
212 K Street, NW Suite 1800
Washington, D.C. 20037-5303 3343 Peachtree Road N.E.
Contact Person: Leonard Garment or Atlanta. Georgia 30326
I. Lewis Libby (202) 429-9355 Contact Person: David Handley (404) 264-2671
Robert C. Schwartz (404) 264-2658
Patton Boggs, LLP
2550 M Street N.W.
Suite 900 ILLINOIS
Washington, D.C. 20037 Chicago
Contact Person:
C. Allen Foster (202) 457 6320 Jenner & Block
or Charles H. Camp (202) 457-5265 One IBM Plaza
Chicago, Illinois 60611
Shearman & Sterling Contact Person: Jerold Solovy
801 Pennsylvania Avenue N.W. (312) 222-9350
Washington, D.C. 20004-2604
Contact Person: Thomas S. Martin or Kirkland & Ellis
Jonathan L Greenblatt (202) 508-8000 200 East Randolph Drive
Chicago, Illinois 60601
Willkie Farr & Gallagher Contact Person: Garrett B. Johnson
Three Lafayette Centre Robert J. Kopecky (312) 861-2000
1155 21st Street N.W.
Washington, D.C. 20036-3384
Contact Person:
Kevin B. Clark (202) 328-8000
</TABLE>
<PAGE>
PANEL COUNSEL
<TABLE>
<S> <C>
Sidley & Austin NEW YORK
One First National Plaza New York
Chicago, Illinois 60603-2003
Contact Person: Robert Downing (312) 853-7434 Cahill Gordon & Reindel
Eugene Schoon (312) 853-7279 80 Pine Street
Walter C. Carlson (312) 853-7734 New York, New York 10005
Contact Person: Charles A. Gilman
Skadden, Arps, Slate, Meagher & Flom or Thomas J. Kavaler (212) 701-3000
333 West Wacker Drive or Immanuel Kohn
Suite 2100
Chicago, Illinois 60606 Davis, Polk & Wardwell
Contact Person: Timothy Nelsen or 450 Lexington Avenue
Susan Getzendanner (312) 407-0700 New York, New York 10017
Contact Person: Henry King,
Sonnenschein Nath & Rosenthal or Dan Kolb (212) 450-4000
8000 Sears Tower
Chicago, Illinois 60606-6404
Contact Person: Harold D. Shapiro Fried Frank Harris Shriver & Jacobson
(312) 876-8035 1 New York Plaza - 27th Floor
New York, New York 10004
Contact Person: Sheldon Raab
MASSACHUSETTS (212) 820-8090
Boston
Kirkland & Ellis
Goodwin, Proctor & Hoar Citicorp Center
Exchange Place Boston, 153 East 53rd Street
Massachusetts 02109-2881 New York, New York 10022-4675
Contact Person: Don M. Kennedy Contact Person: Yosef J. Riemer or
(617) 570-1000 Frank M, Holozubiec (212) 446-4800
Hale & Dorr Milbank, Tweed, Hadley & McCloy
60 State St. 1 Chase Manhattan Plaza
Boston, Massachusetts 02109 New York, New York 10005
Jeffery Rudman (617) 742-9100 Contact Person: Russell E. Brooks
(212) 530-5554
Ropes & Gray
One International Plaza Mudge Rose Guthrie Alexander & Ferdon
Boston, Massachusetts 02110-2624 180 Maiden Lane
Contact Person: John Donovan, Jr. New York, New York 10038
(617) 951-7566 Contact Person: Kenneth Con boy,
John J. Kirby, Jr., or
Skadden, Arps, Slate, Meagher & Flom Laurence V. Senn, Jr. (212) 510-7000
1 Beacon Street
Boston, Massachusetts 02108 Shearman & Sterling
Contact Person: Thomas A. Dougherty or Citicorp Center
George J. Skelley 153 E 53rd Street
(617) 573-4800 New York, New York 10022-4676
Contact Person:
Palmer & Dodge Dennis Orr (212) 848-8000
1 Beacon Street
Boston, Massachusetts 02108
Contact Person: Peter Terris or
Peter Saparoff
(617) 573-0100
</TABLE>
<PAGE>
PANEL COUNSEL
<TABLE>
<S> <C>
Simpson Thacher & Bartlett TEXAS
425 Lexington Avenue Dallas
New York, New York 10017-3909
Contact Person: Roy L. Reardon, Akin, Gump, Strauss, Hauer & Feld, LLP.
James Hagan, or 4100 Suite
Michael J. Chepiga (212) 455-2000 1700 Pacific Avenue
Dallas, Texas 75201-4618
Contact Person: Michael Lowenberg P.C.
Skadden, Arps, Slate, Meagher & Flom or Louis P. Bickel (214) 969-2800
919 Third Avenue
New York, New York 10022 Fulbright & Jaworski
Contact Person: Barry H. Garfinkel or 2200 Ross Avenue
Jonathan Lerner (212) 735-3000 Suite 2800
Dallas, Texas 75201
Stroock & Stroock & Lavan Contact Person: Karl G. Dial
Seven Hanover Square (214) 855-8000
New York, NY 10004-2696
Contact: Locke Purnell Rain Harrell
Melvin A. Brosterman (212) 806-5400 2200 Ross Avenue
Laurence Greenwald (212) 806-5400 Suite 2200
Alvin K. Hellerstein (212) 806-5400 Dallas, TX 75201-6776
Contact Person:
Sullivan & Cromwell John McElhaney (214) 740-8458
125 Broad Street Peter Flynn (214) 740-8654
New York, New York 10004 Morris Harrell (214) 740-8404
Contact Person: John L Warden
(212) 558-4000 Thompson & Knight, P.C.
1700 Pacific Avenue
Wachtell, Lipton, Rosen & Katz Suite 3300
51 West 57th Street Dallas, TX 75201
New York, New York 10019 Contact Person:
Contact Person: Norman Redlich. Schuyler B. Marshall (214) 969-1246
(212) 371-9200
Baker & Botts, LLP.
Willkie Farr & Gallagher 2001 Ross Avenue
One Citicorp Center Dallas, Texas 75201-2916
153 East 53rd Street Contact Person:
New York, New York 10022-4677 Ronald L Palmer (214) 953-6500
Contact Person:
Michael R. Young (212) 821-8000 Haynes & Boone, LLP.
David L Foster (212) 821-8000 3100 NationsBank Plaza
Richard L Posen (212) 821-8000 901 Main Street
Dallas, Texas 75202-3789
Weil, Gotshal & Manges Contact Person: Michael Boone,
767 Fifth Avenue George Bramblett, or
New York, New York 10153 Noel Hensley (214) 651-5000
Contact Person: Dennis J. Block
(212) 310-8000
Kaye, Scholer, Fierman, Hays & Handler
425 Park Avenue
New York, New York 10022
Contact Person: Frederic W. Yerman
(212) 836-8663
</TABLE>
<PAGE>
PANEL COUNSEL
<TABLE>
<CAPTION>
Houston
<S> <C>
Vinson & Elkins
Akin, Gump, Strauss, Hauer & Feld, L.L.P. 2500 First City Tower
Pennzoil Place - South Tower 1001 Fannin
711 Louisiana Street Houston, Texas 77002-6760
Suite 1900 Contact Person: David T. Hedges Jr.
Houston, Texas 77002 (713) 758-2676
Contact Person: Charles Moore or
Paula Hinton (713) 220-5800 Baker & Botts
910 Louisiana Street
Fulbright & Jaworski, L.LP. One Shell Plaza
1301 McKinney Houston, Texas 77002-4995
Suite 5100 Contact Person:
Houston, Texas 77010-3095l William C. Slugger (713) 229-1234
Contact Person: Richard Carrell or Harold Metts (713) 229-1234
Frank Jones (713) 651-5151
</TABLE>
<PAGE>
NOTICE
STATE OF KENTUCKY
WARNING: "ANY PERSON WHO KNOWINGLY AND WITH INTENT TO DEFRAUD ANY INSURANCE
COMPANY OR OTHER PERSON FILES AN APPLICATION FOR INSURANCE CONTAINING ANY
MATERIALLY FALSE INFORMATION OR CONCERNS, FOR THE PURPOSE OF MISLEADING,
INFORMATION CONCERNING ANY FACT MATERIAL THERETO COMMITS A FRAUDULENT INSURANCE
ACT, WHICH IS A CRIME."
<PAGE>
ENDORSEMENT# 1
-------------
This endorsement, effective 12:01 AM, September 28, 1995 forms a part of
policy number 445-86-62
issued to VENCOR INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
NUCLEAR ENERGY LIABILITY EXCLUSIONS ENDORSEMENT
(BROAD FORM)
In consideration of the premium charged, it is hereby understood
and agreed that the Insurer shall not be liable to make any
payment for Loss in connection with any claim or claims made
against any Insured(s):
A. alleging, arising out of, based upon, attributable to, or in
any way involving, directly or indirectly the hazardous
properties of nuclear material, including but not limited
to:
(1) nuclear material located at any nuclear facility owned
by, or operated by or on behalf of, the Company, or
discharged or dispersed there from; or
(2) nuclear material contained in spent fuel or waste which
was or is at any time possessed, handled, used,
processed, stored, transported or disposed of by or on
behalf of the Company; or
(3) the furnishing by an Insured or the Company of
services, materials, parts or equipment in connection
with the planning, construction, maintenance, operation
or use of any nuclear facility; or
(4) claims for damages to the Company or its shareholders
which alleges, arises from, is based upon, is
attributed to or in any way involves, directly or
indirectly, the hazardous properties of nuclear
material.
B. (1) which is insured under a nuclear energy liability
policy issued by Nuclear Energy Liability Insurance
Association, Mutual Atomic Energy Liability
underwriters, or Nuclear Insurance Association of
Canada, or would be insured under any such policy but
for its termination or exhaustion of its limit of
liability; or,
<PAGE>
ENDORSEMENT# 1 (CONTINUED)
------------
This endorsement, effective 12:01 AM, September 28, 1995 forms a part of
policy number 445-86-62
issued to VENCOR INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
(2) with respect to which (a) any person or organization is
required to maintain financial protection pursuant to
the Atomic Energy Act of 1954, or any law amendatory
thereof, or (b) the Insured is, or had this policy not
been issued would be entitled to indemnity from the
United States of America, or any agency thereof, under
any agreement entered into the United States of
America, or any agency thereof, with any person or
organization.
As used in this endorsement:
"hazardous properties" include radioactive, toxic or explosive
properties;
"nuclear material" means source material, special nuclear
material or byproduct material;
"source material", "special nuclear material", and "byproduct
material" have the meanings given them in the Atomic Energy Act
of 1954 or in law amendatory thereof;
"spent fuel" means any fuel element or fuel component, solid or
liquid, which has been used or exposed to radiation in a nuclear
reactor;
"waste" means any waste material (1) containing byproduct
material and (2) resulting from the operation by any person or
organization of any nuclear facility included within the
definition of nuclear facility under paragraph (a) or (b)
thereof;
"nuclear facility" means
(a) any nuclear reactor,
(b) any equipment or device designed or used for
(1) separating the isotopes of uranium or plutonium,
(2) processing or utilizing spent fuel, or
(3) handling, processing or packaging waste,
<PAGE>
ENDORSEMENT# 1 (CONTINUED)
------------
This endorsement, effective 12:01 AM, September 28, 1995 forms a part of
policy number 445-86-62
issued to VENCOR INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
(c) any equipment or device used for the processing, fabricating
or alloying of special nuclear material if at any time the
total amount of such material in the custody of the Insured
at the premises where such equipment or device is located
consists of or contains more than 25 grams of plutonium or
uranium 233 or any combination thereof, or more than 250
grams of uranium 235,
(d) any structure, basin, excavation, premises or place prepared
or used for the storage or disposal of waste, and includes
the site on which any of the foregoing is located, all
operations conducted on such site and all premises used for
such operations;
"nuclear reactor" means any apparatus designed or used to sustain
nuclear fission in a self-supporting chain reaction or to contain
a critical mass of fissionable material.
All other terms, conditions and exclusions remain unchanged.
[SIGNATURE ILLEGIBLE]
------------------------------
AUTHORIZED REPRESENTATIVE
<PAGE>
ENDORSEMENT# 2
------------
This endorsement, effective 12:01 AM, September 28, 1995 forms a part of
policy number 445-86-62
issued to VENCOR INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
COMMISSIONS EXCLUSION
In consideration of the premium charged, it is hereby understood
and agreed that the Insurer shall not be liable to make any
payment for Loss in connection with any claim made against any
Insured(s) alleging, arising out of, based upon, attributable to:
(i) Payments, commissions, gratuities, benefits or any other
favors to or for the benefit of any full or part-time
domestic or foreign government or armed services officials,
agents, representatives, employees or any members of their
family or any entity with which they are affiliated; or
(ii) Payments, commissions, gratuities, benefits or any other
favors to or for the benefit of any full or part-time
officials, directors, agents, partners, representatives,
principal shareholders, or owners or employees, or
affiliates (as that term is defined in The Securities
Exchange Act of 1934, including any of their officers,
directors, agents, owners, partners, representatives,
principal shareholders or employees) of any customers of
the company or any members of their family or any entity
with which they are affiliated; or
(iii) Political contributions, whether domestic or foreign.
All other terms, conditions and exclusions remain unchanged.
[SIGNATURE ILLEGIBLE]
------------------------------
AUTHORIZED REPRESENTATIVE
<PAGE>
ENDORSEMENT# 3 (REVISED)
------------
This endorsement, effective 12.01 AM, September 28, 1995 forms a part of
policy number 445-86-62
issued to VENCOR INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
In consideration of the premium charged, it is hereby understood
and agreed that the term "Director or Officer" as stated in
Policy Form 62335 (5/95) is amended in part to include the
position of
- Administrators (all locations)
- All Corporate Directors including:
- Director of Acquisition and Development
- Director of Corporate Accounting
- Director of Finance
- Directors of Hospital Accounting
- Director of Reimbursement
- Director of Tax and Insurance
- Director of Vencare Accounting
- Assistant Administrator of Clinical Operations
(all locations)
- Assistant Administrator of Finance (Corporate)
- Assistant Administrator of Outpatient Services
(all locations)
- Medical Directors (all locations)
- Peer Review Committee (all locations)
- Regional Directors of Operations
- Manager of Investment Relations
- Director of Total Compensation
- Senior Director of Finance
- Senior Director Financial Planning
- Senior Director Management Information Services
- Senior Director Reimbursement
- Senior Director of Taxation
- Senior Director & Treasurer
- Senior Director Human Resources & Support Services
- Senior Director of Risk Management
- Senior Director Purchasing
- Senior Director Internal Audit
- Senior Director Investor Relations/Public Relations.
<PAGE>
ENDORSEMENT# 4
--------------
This endorsement, effective 12.01 AM, September 28, 1995 forms a part of
policy number 445-86-62
issued to VENCOR INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
DIRECTORS AND OFFICERS INSURANCE AND COMPANY REIMBURSEMENT POLICY
DEFINITION OF COMPANY
In consideration of the premium charged, it is hereby understood and agreed that
the term "Company" is amended, in part, to include the following entities:
The Hillhaven Foundation
It is further understood and agreed that this policy provides coverage only for
claim or claims against the Directors or Officers of each of the above listed
entities for alleged Wrongful Acts occurring on or after the date of creation or
acquisition of such entity, and otherwise covered by this policy,
All other terms and conditions of the policy remain unchanged.
[SIGNATURE ILLEGIBLE]
------------------------------
AUTHORIZED REPRESENTATIVE
ED0365
<PAGE>
ENDORSEMENT# 5
-------------
This endorsement, effective 12:01 AM, September 28, 1995 forms a part of
policy number 445-86-62
issued to VENCOR INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
In consideration of the premium charged, it is hereby understood
and agreed that Appendix A (PANEL COUNSEL FIRMS), is amended to
include the following two firms:
Heller, Ehrman, White & McAuliffe
6100 Columbia Center
701 Fifth Avenue
Seattle, Washington 98104
Contact Person: George E. Greer
Phone: (206) 447-0900
Lane, Powell, Spears & Lubersky
1420 Fifth Avenue, Suite 4100
Seattle, WA 98101
Contact Person: James L. Robert
Phone (206) 223-7000
[SIGNATURE ILLEGIBLE]
------------------------------
AUTHORIZED REPRESENTATIVE
<PAGE>
ENDORSEMENT# 6
-------------
This endorsement, effective 12.01 AM, September 28, 1995 forms a part of
policy number 445-86-62
issued to VENCOR INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
MEDICAL MALPRACTICE EXCLUSION
In consideration of the premium charged, it is hereby understood
and agreed that the Insurer shall not be liable to make any
payment for Loss in connection with any claim or claims made
against the Directors or Officers alleging, arising out of, based
upon or attributable to medical or professional malpractice,
including but not limited to the rendering or failure to render
medical or professional service or treatment.
Provided, however, that the foregoing exclusion shall not be
applicable to any derivative or shareholder class action claims
against Directors or Officers alleging a failure to supervise
those who performed or failed to perform such professional
services.
All other terms and conditions and exclusions remain unchanged.
[SIGNATURE ILLEGIBLE]
------------------------------
AUTHORIZED REPRESENTATIVE
<PAGE>
ENDORSEMENT# 7
------------
This endorsement, effective 12.01 AM, September 28, 1995 forms a part of
policy number 445-86-62
issued to VENCOR INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
GENERAL E&O EXCLUSION
In consideration of the premium charged, it is hereby understood
and agreed that the Insurer shall not be liable to make any
payment for Loss in connection with any claim or claims made
against the Directors or Officers alleging, arising out of, based
upon or attributable to the Company's or an Insured's performance
of or failure to perform professional services for others for a
fee, or any act, error, or omission relating thereto.
Provided, however, that the foregoing exclusion shall not be
applicable to any derivative or shareholder class action claims
against Directors or Officers alleging a failure to supervise
those who performed or failed to perform such professional
services.
All other terms and conditions remain unchanged.
[SIGNATURE ILLEGIBLE]
------------------------------
AUTHORIZED REPRESENTATIVE
<PAGE>
ENDORSEMENT# 8
------------
This endorsement, effective 12:01 AM, September 28, 1995 forms a part of
policy number 445-86-62
issued to VENCOR INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
PROFESSIONAL E&O EXCLUSION
In consideration of the premium charged, it is hereby understood
and agreed that the Insurer shall not be liable to make any
payment for Loss in connection with any claim or claims made
against any Insured(s) alleging, arising out of, based upon or
attributable to the Company's or an Insured's performance of or
failure to perform professional services, or any act, error or
omission relating there to.
However, notwithstanding the foregoing, it is further understood
and agreed that this exclusion shall not apply to shareholder
actions against an Insured for failure to supervise those who
performed or failed to perform such professional services
provided that such shareholder action is instigated and continued
totally independent of, and totally without the solicitation of,
or assistance of, or active participation of, or intervention of,
any Insured or the Company.
ALL TERMS, CONDITIONS, AND EXCLUSIONS REMAIN UNCHANGED.
[SIGNATURE ILLEGIBLE]
------------------------------
AUTHORIZED REPRESENTATIVE
<PAGE>
ENDORSEMENT# 9
------------
This endorsement, effective 12:01 AM, September 28, 1995 forms a part of
policy number 445-86-62
issued to VENCOR INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
REGULATORY EXCLUSION
(INSURANCE)
In consideration of the premium charged, it is hereby understood and agreed that
the Insurer shall not be liable to make any payment for Loss in connection with
any claim or claims made against the Directors or Officers brought directly or
indirectly by or on behalf of, or based upon, attributable to or alleging any
claim brought by or on the behalf of, any insurance regulatory agency or
supervisory authority, including but not limited to any state or local insurance
department or commission, or any state or local insurance guaranty or insolvency
fund (any of the foregoing organizations are hereinafter referred to as an
"Agency"), including any type of legal or equitable action which such Agency has
the legal right to bring as receiver, conservator, liquidator or assignee of the
Company, its security holders or its creditors, or otherwise; whether such
action or proceeding is brought in the name of such Agency, or by or on behalf
of such Agency in the name of any other entity, or solely in the name of any
third party.
All other terms and conditions remain unchanged.
[SIGNATURE ILLEGIBLE]
----------------------------
AUTHORIZED REPRESENTATIVE
<PAGE>
ENDORSEMENT# 10
-------------
This endorsement, effective 12:01 AM, September 28, 1995 forms a part of
policy number 445-86-62
issued to VENCOR INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
In consideration for the premium charged, it is hereby understood
and agreed that Clause 11, CANCELLATION CLAUSE, is amended to
increase the Insurers required notice of cancellation to ninety
(90) days from sixty (60) days, except for non-payment of premium
in which case ten (10) days notice must be given.
[SIGNATURE ILLEGIBLE]
---------------------------
AUTHORIZED REPRESENTATIVE
<PAGE>
ENDORSEMENT# 11
-------------
This endorsement, effective 12:01 AM, September 28, 1995 forms a part of
policy number 445-86-62
issued to VENCOR INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
PRIOR ACTS EXCLUSION
(for listed Entity(ies)
In consideration of the premium charged, it is hereby understood
and agreed that the Insurer shall not be liable to make any
payment for Loss in connection with any claim or claims made
against the Insured(s) of any entity listed below for any
Wrongful Act(s) which occurred on or before such entity s
respective retroactive date listed below, and prior to the end of
the Policy Period, and otherwise covered by this policy. Loss(es)
arising out of the same related Wrongful Act(s) shall be deemed
to arise from the first such same or related Wrongful Act(s).
<TABLE>
<CAPTION>
ENTITY RETROACTIVE DATE
<S> <C>
Ventech Systems, Inc. December 22, 1993
Candle Subacute Services, Inc. February 4, 1994
Hillhaven Corporation September 28, 1995
</TABLE>
All other terms, conditions and exclusions remain unchanged.
[SIGNATURE ILLEGIBLE]
----------------------------
AUTHORIZED REPRESENTATIVE
<PAGE>
ENDORSEMENT# 12
-------------
This endorsement, effective 12:01 AM, September 28, 1995 forms a part of
policy number 445-86-62
issued to VENCOR INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
In consideration of the premium charged, it is hereby understood
and agreed that the Insurer shall not be liable to make payment
for loss in connection with any claim or claims including, but
not limited to, any derivative or representative class actions)
brought by or on behalf of East Ascension Parish Hospital Service
District and/or Lanoux or any of their subsidiaries, affiliates,
agents, employees or related parties against the directors and
officers alleging, arising out of, based upon or attributable to:
1. anti-trust actions;
2. medicare/medicaid fraud;
3. the Federal False Claims Act;
4. mismanagement and/or failure to manage a hospital in a
prudent matter;
5. seeking Rule 11 sanctions;
[SIGNATURE ILLEGIBLE]
---------------------------
AUTHORIZED REPRESENTATIVE
<PAGE>
ENDORSEMENT# 13
-------------
This endorsement, effective 12:01 AM, September 28, 1995 forms a part of
policy number 445-86-62
issued to VENCOR INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
In consideration of the premium charged, it is hereby
understood and agreed that:
I. Upon expiration of the policy period, the Insurer shall
renew this policy unless:
(1) during the Policy Period: (a) the Named Corporation
shall consolidate with or merge into, or sell all or
substantially all of its assets to, any person or
entity or group of persons and/or entities acting in
concert; or (b) any person or entity or group of
persons and/or entities acting in concert shall acquire
an amount of the outstanding securities representing
more than 50% of the voting power for the election of
Directors of the Named Corporation, or acquires the
voting rights of such an amount of such securities; or
(c) the Name Corporation has been adjudicated bankrupt
or insolvent or made an assignment for the benefit of
creditors, or a bankruptcy petition has been filed to
have the Named Corporation adjudicated bankrupt and the
matter is still pending at the expiration of the Policy
Period; or
(2) the Insurer has not been provided on a timely basis
with a properly completed renewal application and other
information for renewal underwriting; or
(3) this policy has been cancelled by the Named Corporation
or the Insurer as permitted or required by law and the
cancellation clause of this policy; or
(4) there has occurred a change in the law (including
insurance regulations) or insurance regulatory action
which prevents the Insurer from issuing a renewal
policy at the same terms and conditions as this policy.
II. A renewal of this policy pursuant to Section I shall be at
the same terms and conditions as this policy (except for the
inception and expiration dates of the policy period, and
with an endorsement like this one but
<PAGE>
ENDORSEMENT# 13 (Continued)
-------------
This endorsement, effective 12:01 AM, September 28, 1995 forms a part of
policy number 445-86-62
issued to VENCOR INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
having no requirement of adding a like endorsement to
any renewal) for one year. The premium for such
renewal shall be in accordance with Section III below.
III. The premium for a renewal of this policy pursuant to Section
I shall not exceed 110% of the greater of (i) the Pull
Annual Premium for this policy, or (ii] the Full Annual
Premium for the policy renewed by this policy; unless,
during the Policy Period, a notice of claim or notice of
circumstances which may reasonably be expected to give rise
to a claim has been given to the Insurer, in which case the
110% premium cap shall not apply. In this case, however, the
Insurer may, in its absolute discretion, agree in writing to
apply the cap notwithstanding the notice of claim or notice
of circumstances. If there has occurred a change in the law
(including insurance regulations) or insurance regulatory
action which prevents the Insurer from issuing a renewal
policy at any premium permitted by this Section III, then
all rights and obligations of all parties under this
endorsement shall terminate.
IV. Nothing in this endorsement shall be construed to affect any
rights the Insurer has to require an additional premium
and/or amendment of the provisions of this policy during the
Policy Period because of the addition of a new Subsidiary in
accordance with Section 2(1) of the policy.
V. The "Full Annual Premium" shall mean the premium level in
effect immediately prior to the end of the expiring policy
period, annualized to a full one year.
VI. The Named Corporation shall have the right, prior to
expiration of the Policy Period, to decline to have a
renewal of this policy issued by the Insurer.
[SIGNATURE ILLEGIBLE]
-------------------------------
AUTHORIZED REPRESENTATIVE
<PAGE>
ENDORSEMENT# 14
-------------
This endorsement, effective 12:01 AM, September 28, 1995 forms a part of
policy number 445-86-62
issued to VENCOR INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
EMPLOYMENT PRACTICES ENDORSEMENT
COVERAGE
In consideration of the premium charged, it is hereby understood
and agreed that the coverage as is afforded by this policy is
extended to Employment Practice Claims against an individual
"Insured" (whether such Claims are brought by (i) a past, present
or prospective employee or employees, whether directly or by
class action; or (ii) by the Employee Equal Opportunity
Commission (EEOC) or any other state or federal governmental
authority regulating employment practices; or (iii) by any other
person or entity), subject to both the terms, conditions and
exclusions of this endorsement and the policy.
DEFINITIONS
It is further understood and agreed that for the purposes of this
endorsement only, the following definitions shall apply:
(1) "Employment Practice Claims" shall mean any Claim relating
to a past, present or prospective employee of the Company
for, or arising out of the following: (i) any actual or
alleged wrongful dismissal, discharge or termination (either
actual or constructive), of employment; (ii) employment-
related misrepresentation; (iii) wrongful failure to employ
or promote; (iv) wrongful deprivation of career opportunity;
(v) wrongful discipline; (vi) failure to grant tenure or
negligent employee evaluation; (vii) failure to provide
adequate employee policies and procedure; or (viii) sexual
or workplace harassment of any kind, (including the alleged
creation of a harassing workplace environment); or (ix)
unlawful discrimination, (including sexual or workplace
harassment or creation of a harassing workplace environment)
whether direct, indirect, or unintentional.
Employment Practices Claims shall include Claims brought
under state, local or federal law (whether common or
statutory) and shall include, but not be
<PAGE>
ENDORSEMENT# 14 (Continued)
-------------
This endorsement, effective 12:01 AM, September 28, 1995 forms a part of
policy number 445-86-62
issued to VENCOR INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
limited to, allegations of violations of the following federal
laws (as amended), including regulations promulgated thereunder:
1. Family and Medical Leave Act of 1993
2. Americans with Disabilities Act of 1992 (ADA),
3. Civil Rights Act of 1991,
4. Age Discrimination in Employment Act of 1967 (ADEA),
including the Older Workers Benefit Protection Act of 1990.
5. Title VII of the Civil Rights Law of 1964, as amended,
including the Pregnancy Discrimination Act of 1978.
6. Civil Rights Act of 1866, Section 1981, and
7. Fifth and Fourteenth Amendments of the U.S. Constitution.
(2) The term "Insured" shall include, for the purposes of Employment
Practices Claims only, any past, present or future duly elected
individual Director or Officer.
EXCLUSIONS
It is further understood and agreed that solely for the additional
coverage hereby granted for Employment Practices Claims exclusions (i)
and (k) are amended as follows:
(1) Exclusion (i) is amended by deleting the phrase, "wrongful
termination of employment claims", and substituting the phrase,
"Employment Practice Claims" (as defined in this endorsement) and
by deleting the word "former employee" and substituting the word
"employee" to read as follows:
(i) which are brought by any Insured or the Company; or which
are brought by any security holder of the Company, whether
directly or derivatively, unless such security holder's
Claim(s) is instigated and
<PAGE>
ENDORSEMENT# 14 (Continued)
-------------
This endorsement, effective 12:01 AM, September 28, 1995 forms a part of
policy number 445-86-62
issued to VENCOR INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
continued totally independent of, and totally without
the solicitation of, or assistance of, or active
participation of, or intervention of, any Insured or
the Company; provided, however, this exclusion shall
not apply to Employment Practice Claims brought by an
employee other than an employee who is or was a
Director of the Company.
(2) Exclusion (k) is amended by deleting the phrase, "emotional
distress", and by deleting the phrase, "or for injury from
libel or slander or defamation or disparagement or for
injury from a violation of a person's right of privacy", to
read as follows:
(k) for bodily injury, sickness, disease or death of any
person, or damage to or destruction of any tangible
property, including the loss of use thereof;
It is further understood and agreed that only as respects any
additional coverage granted by virtue of this endorsement, the
following exclusions shall apply:
(1) The Insurer shall not be liable for any Loss in connection
with any Claim or Claims made against an Insured alleging,
arising out of, based upon or attributable to any pending or
prior litigation as of September 28, 1995, or alleging or
derived from the same or essentially the same facts as
alleged in such pending or prior litigation.
(2) The Insurer shall not be liable for any Loss in connection
with any Claim or Claims made against an Insured for any
alleged Wrongful Act committed prior to
September 28, 1995 if any Insured(s), as of such date, knew
or could have reasonably foreseen that such Wrongful Act
could lead to a Claim.
ALL OTHER TERMS, CONDITIONS, AND EXCLUSIONS OF THE POLICY REMAIN
UNCHANGED.
[SIGNATURE ILLEGIBLE]
-----------------------------
AUTHORIZED REPRESENTATIVE
<PAGE>
ENDORSEMENT# 15
-------------
This endorsement, effective 12:01 AM, September 28, 1995 forms a part
of policy number 445-86-62
issued to VENCOR INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
OUTSIDE ENTITY ENDORSEMENT
(2x)
In consideration of the premium charged, it is hereby
understood and agreed that the following entities shall be
deemed an "Outside Entity", but only as respects the Outside
Entity's respective Continuity Date below:
OUTSIDE ENTITY CONTINUITY DATE
1) a not-for-profit organization September 1, 1989
under section 501(c)(3) of the
Internal Revenue Code of 1986
(as amended))
2) a not-for-profit organization September 1, 1989
other than a not-for-profit
organization listed in (1) above
(2/90) [SIGNATURE ILLEGIBLE]
------------------------------
AUTHORIZED REPRESENTATIVE
<PAGE>
ENDORSEMENT# 16
-------------
This endorsement, effective 12:01 AM, September 28, 1995 forms a part of
policy number 445-86-62
issued to VENCOR INC
by National Union Fire Insurance Company of Pittsburgh. Pa.
In consideration of the premium charged, it is hereby understood
and agreed that the coverage as is afforded under this policy is
extended to Directors and Officers who were or now are at the
specific written request of Vencor, Inc a member of the
Partnership Management Committee of the Partnerships listed below
for any alleged Wrongful Acts in their respective capacities as a
member of this Partnership Management Committee.
Further, coverage as is afforded by virtue of this endorsement
shall be specifically excess of any insurance in force as
respects to the Partnership and any indemnification provided to
the Directors and Officers by the Partnership. Further, if said
other insurance in force as respects to any such Partnership is
provided by the Insurer or any member company of American
International Group, (or would be provided but for the
application of the retention amount or the exhaustion of the
Limit of Liability) then the Limit of Liability for all Loss
covered by virtue of this endorsement shall be reduced by the
Limit of Liability (as set forth on the Declarations Page) of
such other AIG insurance provided to such Partnership.
Furthermore, it is understood and agreed that coverage as is
afforded by virtue of this endorsement shall not apply to any
claim or claims for any alleged Wrongful Act, if as of the
effective date of the first Directors and Officers Liability and
Corporation Reimbursement Policy/Directors and Officers Insurance
and Company Reimbursement Policy/Directors, Officers and
Corporate Liability Insurance Policy for which coverage as is
afforded by this endorsement was granted issued by the Insurer to
the Company first named in Item 1 of the Declarations, as of such
date, knew or could have reasonably foreseen that such Wrongful
Act could lead to a claim.
It is further understood and agreed, as respects this
endorsement, that the Insurer shall not be liable for any Loss in
connection with any claim or claims made against the Directors or
Officers which are brought by or on behalf of any of the
Partnerships listed below; or which are brought by any member of
the Partnership Management Committee of any of the Partnerships
listed below; or which are brought by
<PAGE>
ENDORSEMENT# 16 (Continued)
-------------
This endorsement, effective 12:01 AM, September 28, 1995 forms a part of
policy number 445-86-62
issued to VENCOR INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
any security holder of the Partnerships listed below, whether
directly or derivatively, unless such claim(s) is instigated and
continued totally independent of, and totally without the
solicitation of, or assistance of, or active participation of, or
intervention of any member of the Partnership Management
Committee of any of the Partnerships listed below.
The Partnerships to which this endorsement applies is as follows:
PARTNERSHIPS
1. Pharmaceutical Infusion Therapy, a California General
Partnership, Advanced Infusion Systems has a 50.99%
interest.
2. CPS-Sacramento, a California General Partnership,
Advanced Infusion Systems has a 60% interest.
Further provided that for the purposes of the applicability of
this endorsement, the for-profit organizations listed above will
be conclusively deemed to have indemnified the Partnership
Management Committee members to the extent that the Partnerships
are permitted or required to grant such indemnification pursuant
to law, common or statutory, or contract or the Charter or the
By-laws of the Partnerships (which are deemed to adopt the
broadest provisions of the law which determines or defines such
rights of indemnity). The Partnerships hereby agree to indemnify
such persons to the fullest extent permitted by law and to no
less extent as indemnification is permitted for the Partnership's
management committee members.
[SIGNATURE ILLEGIBLE]
-----------------------------
AUTHORIZED REPRESENTATIVE
<PAGE>
ENDORSEMENT# 17
-------------
This endorsement, effective 12:01 AM, September 28, 1995 forms a part of
policy number 445-86-62
issued to VENCOR INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
DIRECTORS AND OFFICERS INSURANCE AND COMPANY REIMBURSEMENT
POLICY
OUTSIDE DIRECTORSHIP EXTENSION: FOR-PROFIT
(DOUBLE EXCESS, SCHEDULED ORGANIZATIONS)
In consideration of the premium charged, it is hereby understood
and agreed that the coverage as is afforded under this policy is
extended to Directors or Officers who were, now are or hereafter
become at the specific written request of the Company a director
of the for-profit organization(s) listed below for any alleged
Wrongful Acts in their respective capacities as directors of such
for-profit organization.
Further, coverage as is afforded by virtue of this endorsement
shall be specifically excess of any insurance in force as
respects to these for-profit organizations and any
indemnification provided by these for-profit organizations.
Further, if said other insurance in force as respects to any such
for-profit organization is provided by the Insurer or any member
company of American International Group, Inc. (or would be
provided but for the application of the retention amount, the
exhaustion of the Limit of Liability or the failure to submit the
claim), then the Limit of Liability for all Loss by virtue of
this endorsement with respect of any such for-profit organization
shall be reduced by the Limit of Liability (as set forth on the
Declarations Page) of such other American International Group,
Inc. member company insurance provided to such for-profit
organization.
Furthermore, it is understood and agreed that coverage as is
afforded by virtue of this endorsement shall not apply to any
claim or claims for any alleged Wrongful Act: (i) occurring at
any time when the Insured was not sitting as a director of the
for-profit organization at the specific written request of the
Company, or (ii) for any Wrongful Act if as of the effective date
of the first Directors and Officers Liability and Corporation
Reimbursement Policy/Directors and Officers Insurance and Company
Reimbursement Policy for which coverage as is afforded by this
endorsement was granted issued by the Insurer to the Company
first named in Item 1 of the date of this policy,
<PAGE>
ENDORSEMENT# 17 (Continued)
-------------
This endorsement, effective 12:01 AM, September 28, 1995 forms a part of
policy number 445-86-62
issued to VENCOR INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
(or in the case of a newly appointed or elected director as of
the appointment or election date for such Insured) the
Insured(s), as of such date, knew or could have reasonably
foreseen that such Wrongful Act could lead to a claim.
The list of for-profit organization to which this endorsement
applies is as follows:
FOR-PROFIT ORGANIZATION
American X-Rays, Inc.
Evergreen Pharmaceutical, Inc.
All other terms and conditions of the policy remain unchanged.
[SIGNATURE ILLEGIBLE]
----------------------------
AUTHORIZED REPRESENTATIVE
<PAGE>
ENDORSEMENT# 18
-------------
This endorsement, effective 12:01 AM, September 28, 1995 forms a part of
policy number 445-86-62
issued to VENCOR INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
In consideration of the premium charged, it is hereby understood
and agreed that the coverage as is afforded under this policy is
extended to Directors and Officers who were or now are at the
specific written request of Vencor Inc a member of the
Partnership Management Committee of the Partnerships listed below
for any alleged Wrongful Acts in their respective capacities as a
member of this Partnership Management Committee.
Further, coverage as is afforded by virtue of this endorsement
shall be specifically excess of any insurance in force as
respects to the Partnership and any indemnification provided to
the Directors and Officers by the Partnership, Further, if said
other insurance in force as respects to any such Partnership is
provided by the Insurer or any member company of American
International Group, (or would be provided but for the
application of the retention amount or the exhaustion of the
Limit of Liability) then the Limit of Liability for all Loss
covered by virtue of this endorsement shall be reduced by the
Limit of Liability (as set forth on the Declarations Page) of
such other AIG insurance provided to such Partnership.
Furthermore, it is understood and agreed that coverage as is
afforded by virtue of this endorsement shall not apply to any
claim or claims for any alleged Wrongful Act, if as of the
effective date of the first Directors and Officers Liability and
Corporation Reimbursement Policy/Directors and Officers Insurance
and Company Reimbursement Policy/Director, Officers and
Corporate Liability Insurance Policy for which coverage as is
afforded by this endorsement was granted issued by the Insurer to
the Company first named in Item 1 of the Declarations, as of such
date, knew or could have reasonably foreseen that such Wrongful
Act could lead to a claim.
It is further understood and agreed, as respects this
endorsement, that the Insurer shall not be liable for any Loss in
connection with any claim or claims made against the Directors or
Officers which are brought by or on behalf of any of the
Partnerships listed below; or which are brought by any member of
the Partnership Management Committee of any of the Partnerships
listed below; or which are brought by
<PAGE>
ENDORSEMENT# 18 (Continued)
-------------
This endorsement, effective 12:01 AM, September 28, 1995 forms a part of
policy number 445-86-62
issued to VENCOR INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
any security holder of the Partnerships listed below, whether
directly or derivatively, unless such claim(s) is instigated and
continued totally independent of, and totally without the
solicitation of, or assistance of, or active participation of, or
intervention of any member of the Partnership Management
Committee of any of the Partnerships listed below.
The Partnerships to which this endorsement applies is as
follows:
PARTNERSHIPS
1. Hillhaven Community Health Partnership, a Florida General
Partnership, First Healthcare Corporation, General Partner.
First Healthcare Corporation 50% interest.
2. Windsor Woods Nursing Home Partnership, a Washington General
Partnership, First Healthcare Corporation, General Partner,
First Healthcare Corporation 50% interest.
3. St. George Nursing Home Limited Partnership, an Oregon
Limited Partnership, Hillhaven Properties, Ltd., General
Partner, First Healthcare Corporation, a Limited Partner.
Hillhaven Properties, Ltd. owns 96% of the general partners'
interest, and First Healthcare Corporation owns 7.5% of the
limited partners' interest.
4. Bartlesville Nursing Home Partnership, an Oregon General
Partnership, First Healthcare Corporation, General Partner.
First Healthcare Corporation has 50% interest.
5. Carrollwood Care Center, a Florida General Partnership,
First Healthcare Corporation, General Partner. First
Healthcare Corporation has 50% interest.
6. Foothill Nursing Company Partnership, a California General
Partnership, First Healthcare Corporation, General Partner.
First Healthcare Corporation has 50% interest.
<PAGE>
ENDORSEMENT# 18 (Continued)
-------------
This endorsement, effective 12:01 AM, September 28, 1995 forms a part of
policy number 445-86-62
issued to VENCOR INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
7. San Marcos Nursing Home Partnership, a California General
Partnership, First Healthcare Corporation General Partner.
First Healthcare Corporation has 50% interest.
8. Fox Hill Village Partnership, a Massachusetts General
Partnership, Brim of Massachusetts, Inc. General Partner.
Brim of Massachusetts, Inc. has 50% interest.
9. Starr Farm Partnership, a Vermont General Partnership, First
Healthcare Corporation, General Partner. First Healthcare
Corporation has a 50% interest.
10. New Pond Village Associates, a Massachusetts General
Partnership, First Healthcare Corporation, General Partner.
First Healthcare Corporation purchase its partners interest
and now has 100% interest. The Partnership may be dissolved
in the future unless marketing reasons dictate otherwise.
11. Tuscon Retirement Center Limited, an Oregon Limited
Partnership, Hillhaven Properties, Ltd., General and Limited
Partner.
12. San Marcos Retirement Village, a California General Partner,
Hillhaven Properties, Ltd. General Partner. Hillhaven
Properties, Ltd. has a 35% interest.
13. Castle Gardens Retirement Center Limited Partnership, an
Oregon Limited Partnership, Hillhaven Properties, sole
General Partner, First Healthcare Corporation, sole Limited
Partner.
14. Lantana Partners, Ltd. a Florida Limited Partnership,
Hillhaven Properties, Ltd. and Twenty-Nine Hundred
Associates, Ltd. are sole General Partners.
15. Woodhaven Partners, Ltd. a Florida Limited Partnership,
Hillhaven Properties, Ltd. the General Partner and sole
Limited Partner. Hillhaven Properties, Ltd. has 50% interest
in the general partnership.
16. Hillcrest Retirement Center, Ltd., an Oregon Limited
Partnerships, Fairview Living Centers, Inc. sole General
<PAGE>
ENDORSEMENT# 18 (Continued)
-------------
This endorsement, effective 12:01 AM, September 28, 1995 forms a part of
policy number 445-86-62
issued to VENCOR INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
Partner, and has acquired eight limited partnership
interests out of 41.
17. Topeka Retirement Center, Ltd., a Kansas Limited
Partnerships, Hillhaven Properties, Ltd. the General
Partner. Hillhaven Properties, Ltd., has 90% interest.
18. Meridian Manor, a Louisiana General Partnerships, Hillhaven
Properties, Ltd. and First Healthcare Corporation are equal
General Partners.
19. Sandy Retirement Center Limited Partnerships, an Oregon
Limited Partnership, Hillhaven Properties, Ltd., sole
General Partner, first Healthcare Corporation, sole Limited
Partner.
20. Mayfair Retirement Center Limited Partnership, an Oregon
Limited Partnerships, Hillhaven Properties, Ltd. sole
General Partner, appears to own 1% interest.
21. Hillhaven-MSC Partnerships, a California General
Partnerships, First Healthcare Corporation, General Partner.
first Healthcare Corporation has 50% interest.
22. Stockton Health Care Center Limited Partnerships, an Oregon
Limited Partnerships, First Healthcare Corporation, is sole
General Partner and owns 1%.
23. Twenty-Nine Hundred Associates, Ltd., a Florida Limited
Partnerships, Twenty-Nine Hundred Corporation, is the sole
General Partner and Hillhaven Properties, Ltd., is the sole
Limited Partner.
24. Medisave Pharmacies Partnerships, d.b.a. HealthCare Network,
a California General Partnership, Medisave Pharmacies, Inc.
has 74% interest.
25. Medisave - CSSI Partnerships, a Florida General
Partnerships, Medisave of Florida, Inc. has a 51% interest.
26. VNA/CPS Pharmaceutical Services, a California General
Partnerships, Advanced Infusion Systems has a 46.2875%
interest.
[SIGNATURE ILLEGIBLE]
---------------------------
AUTHORIZED REPRESENTATIVE
<PAGE>
ENDORSEMENT# 19
-------------
This endorsement, effective 12:01 AM, September 28, 1995 forms a part of
policy number 445-86-62
issued to VENCOR INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
In consideration of the premium charged, it is hereby understood
and agreed that the coverage as is afforded under this policy is
extended to Directors and Officers who were or now are at the
specific written request of Vencor, Inc. a member of the
Partnership Management Committee of the Partnership listed below
for any alleged Wrongful Acts in their respective capacities as a
member of this Partnership Management Committee.
Further, coverage as is afforded by virtue of this endorsement
shall be specifically excess of any insurance in force as
respects to the Partnership and any indemnification provided to
the Directors and Officers by the Partnership. Further, if said
other insurance in force as respects to any such Partnerships is
provided by the Insurer or any member company of American
International Group, (or would be provided but for the
application of the retention amount or the exhaustion of the
Limit of Liability) then the Limit of Liability for all Loss
covered by virtue of this endorsement shall be reduced by the
Limit of Liability (as set forth on the Declarations Page) of
such other AIG insurance provided to such Partnership.
Furthermore, it is understood and agreed that coverage as is
afforded by virtue of this endorsement shall not apply to any
claim or claims for any alleged Wrongful Act if, as of the
effective date of the first Directors and Officers Liability and
Corporation Reimbursement Policy/Directors and Officers Insurance
and Company Reimbursement Policy/Directors, Officers and
Corporate Liability Insurance Policy for which coverage as is
afforded by this endorsement was granted issued by the Insurer to
the Company first named in Item 1 of the Declarations, the
Insured(s), as of such date, knew or could have reasonably
foreseen that such Wrongful Act could lead to a claim.
It is further understood and agreed, as respects this
endorsement, that the Insurer shall not be liable for any Loss in
connection with any claim or claims made against the Directors or
Officers which are brought by or on behalf of any of the
Partnerships listed below; or which are brought by any member of
the Partnership Management Committee of any
<PAGE>
ENDORSEMENT# 19 (Continued)
-------------
This endorsement, effective 12:01 AM, September 28, 1995 forms a part of
policy number 445-86-62
issued to VENCOR INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
of the Partnerships listed below; or which are brought by any
security holder of the Partnerships listed below, whether
directly or derivatively, unless such claim(s) is instigated and
continued totally independent of, and totally without the
solicitation of, or assistance of, or active participation of, or
intervention of any member of the Partnership Management
Committee of any of the Partnerships listed below.
The Partnerships to which this endorsement applies are as
follows:
1. California Respiratory Care Partnership, a California
General Partnership, Advanced Infusion Systems has a 51%
interest.
2. Visiting Nurse Advanced Infusion Systems - Colton, a
California General Partnerships, Advanced Infusion Systems
has a 51% interest.
3. Evergreen Woods, Ltd. Nationwide Care, Inc. has a 99%
interest and First Healthcare Corporation has a 1%
interest.
Furthermore, it is understood and agreed that coverage as is
afforded by virtue of this endorsement shall not apply to any
claim or claims for any alleged Wrongful Act alleging, arising
out of, based upon or attributable to any pending or prior
litigation, as of the effective date of the first Directors and
Officers Liability and Corporation Reimbursement Policy/Directors
and Officers Insurance and Company Reimbursement
Policy/Directors, Officers and Corporate Liability Insurance
Policy for which coverage as is afforded by this endorsement was
granted issued by the Insurer to the Company first named in Item
1 of the Declarations, or alleging or derived from the same or
essentially the same facts as alleged in such pending or prior
litigation.
<PAGE>
ENDORSEMENT# 19 (Continued)
-------------
This endorsement, effective 12:01 AM, September 28, 1995 forms a part of
policy number 445-86-62
issued to VENCOR INC
by National Union Fire Insurance Company of Pittsburgh, Pa.
Further, provided that for the purposes of the applicability of
this endorsement, the for-profit organizations listed above will
be conclusively deemed to have indemnified the Partnership
Management Committee members to the extent that the Partnerships
are permitted or required to grant such indemnification pursuant
to law, common or statutory, or contract or the Charter or By-
laws of the Partnerships (which are deemed to adopt the broadest
provisions of the law which determines or defines such rights of
indemnity), the Partnerships hereby agree to indemnify such
persons to the fullest extent permitted by law and to no less
extent as indemnification is permitted for the Partnership's
management committee members.
[SIGNATURE ILLEGIBLE]
-----------------------------
AUTHORIZED REPRESENTATIVE
<PAGE>
ENDORSEMENT #20
THIS ENDORSEMENT, EFFECTIVE 12:01 AM SEPTEMBER 28, 1995 FORMS A PART OF
POLICY NUMBER 445-86-62
ISSUED TO VENCOR, INC.
BY NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA
In consideration of the return premium of $5,025, it is hereby understood and
agreed that Item 7, of the DECLARATIONS page, PREMIUM, is amended to read:
7. PREMIUM: $329,975 + $5,025 KY Surcharge
ALL OTHER TERMS, CONDITIONS AND EXCLUSIONS REMAIN UNCHANGED.
[SIGNATURE ILLEGIBLE]
-----------------------------
Authorized Representative
<PAGE>
ENDORSEMENT #21
This endorsement, effective 12:01 AM September 29, 1995 forms a part of
policy number 445-86-62
issued to VENCOR, INC,
by National Union Fire Insurance Company of Pittsburgh, PA
In consideration of the premium charged, it is hereby understood and
agreed That Endorsement #9 is deleted in its entirety.
All other terms, conditions and exclusions remain unchanged.
[SIGNATURE ILLEGIBLE]
---------------------------
AUTHORIZED REPRESENTATIVE
<PAGE>
IMPORTANT NOTE: THIS IS CLAIMS MADE COVERAGE PLEASE READ THIS POLICY
CAREFULLY
THIS POLICY, SUBJECT TO THE DECLARATIONS, INSURING AGREEMENTS, TERMS,
CONDITIONS LIMITATIONS AND AMENDMENTS, APPLIES ONLY TO CLAIM OR CLAIMS
THAT ARE FIRST MADE AGAINST THE INSURED(S) AND REPORTED TO THE INSURER
DURING THE POLICY PERIOD OR DISCOVERY PERIOD (IF APPLICABLE).
THE LIMIT OF LIABILITY AVAILABLE TO PAY JUDGMENTS OR SETTLEMENTS SHALL
BE REDUCED AND MAY BE EXHAUSTED BY AMOUNTS INCURRED FOR DEFENSE COSTS
CHARGES AND EXPENSES (THE RETENTIONS) APPLYIES TO DEFENSIVE COSTS
CHARGES AND EXPENSES
-------------------------------------ST. PAUL MERCURY------------------
INSURANCE COMPANY
EXCESS DIRECTORS AND OFFICERS LIABILITY AND CORPORATE INDEMNIFICATION
POLICY
DECLARATIONS St. Paul, Minnesota 55102
A Capital Stock Company
Herein Called the Insurer
-----------------------------------------------------------------------
<TABLE>
<S> <C>
ITEM 1. NAMED INSURED: The Directors and Officers of
VENCOR, INC.
ITEM 2. ADDRESS (No., Street, City, State and Zip Code)
3300 Capital Holding Center
400 West Market Street, Suite 3300
Louisville, KY 40202
ITEM 3. POLICY PERIOD
From To
9-28-95 9-28-96 (12:01 A.M. Standard Time at the address stated in Item 2.)
---------------------------------------------------
ITEM 4. LIMIT OF LIABILITY $ 10,000,000 each POLICY PERIOD in excess of Item 7(E). The limit of liability available
------------------
to pay judgments or settlements shall be reduced and may be exhausted by amounts incurred for legal defense costs,
charges and expense.
ITEM 5. RETENTIONS (Applicable to Section 2(B)(2))
$ 200,000 Corporate Indemnification Each Loss
-----------------
$ -0- Each Insured Each Loss
-----------------
$ -0- Aggregate All Insureds Each Loss
-----------------
ITEM 6. PREMIUM $70,000. (inclusive of Municipal Tax: $3,784. and State Surcharge: $978.)
-----------------------
ITEM 7. SCHEDULE OF UNDERLYING INSURER(S)
(A) 1. Underlying Insurer: National Union Fire Insurance Company of Pittsburgh, Pa.
2. Policy Number: 445 86 62
3. Policy Period: From: 9-28-95 To 9-28-96
4. Limit of Liability: $20,000,000.
5. Retentions:
$200,000. Corporate Indemnification Each Loss
-------------------------
$ -0- Each Insured Each Loss
-------------------------
$ -0- Aggregate All Insureds Each Loss
-------------------------
(B) 1. Underlying Insurer: Not Applicable
2. Policy Number:
3. Policy Period: From: To:
4. Limit of Liability: $
(C) 1. Underlying Insurer: Not Applicable
2. Policy Number:
3. Policy Period: From: To:
4. Limit of Liability: $
(D) 1. Underlying Insurer: Not Applicable
2. Policy Number:
3. Policy Period: From: To:
4. Limit of Liability: $
(E) Total amount of Underlying Limit of Liability $ 20,000,000. and any retentions or deductibles as
---------------------
applicable under the policy(ies) as stated in this Item 7.
ITEM 8. SUBJECT TO THE TERMS, CONDITIONS AND LIMITATIONS OF THIS POLICY AS HEREINAFTER PROVIDED, THIS POLICY FOLLOWS THE
FORM OF:
Insurer's Name: National Union Fire Insurance Company of Pittsburgh, Pa.
Policy Number: 445 86 62
ITEM 9. FORMS ATTACHED (a) St. Paul Mercury Excess Insurance Company Policy, Form #50408.
(b) Endorsements one through three.
SIGNATURE ILLEGIBLE
---------------------------------------- --------------------------------- --------------------------------
Authorized representative Countersignature Date Countersigned At
[LOGO OF THE ST PAUL APPEARS HERE]
</TABLE>
<PAGE>
INSURING CLAUSE
consideration of the payment of the premium, in reliance upon the statements
made to the Insurer by application including its attachments, a copy of which is
attached to and forms a part of this policy, and any material submitted
therewith (which shall be retained on file by the Insurer and be deemed attached
hereto), and except as hereinafter otherwise provided or amended, this policy is
subject to the same Insuring Agreement(s), Terms, Conditions and Limitations as
provided by the policy stated in Item 8 of the Declarations and any amendments
thereto, provided:
A. 1. the Insurer has received prior written notice from the Insured(s) of
any amendments to the policy stated in Item 8 of the Declarations, and
2. the Insurer has given to the Insured(s) its written consent to any
amendments to the policy stated in Item 8 of the Declarations, and
3. the Insured has paid any required additional premium.
B. This policy is not subject to the same premium or the amount and Limit of
Liability of the policy stated in Item 8 of the Declarations.
TERMS, CONDITIONS AND LIMITATIONS
SECTION 1. UNDERLYING INSURANCE
A. It is a condition precedent to the Insured(s) rights under this policy that
the Insured(s) notify the Insurer, as soon as practicable in writing, of a
failure to maintain in full force and effect, except as provided for under
Section 2(B), and without alteration of any Terms, Conditions, Limit of
Liability or Retentions, any of the underlying insurance policies as stated
in Item 7 of the Declarations.
Failure to maintain, as set forth above, any of the underlying insurance
policies as stated in Item 7 of the Declarations, except as provided for
under Section 2(B), shall not invalidate this policy, but the liability of
the Insurer for loss under this policy shall apply only to the same extent
it would have been liable had the underlying insurance policies been
maintained as set forth above. In no event shall the Insurer be liable to
pay loss under this policy until the total amount of the Underlying Limit
of Liability, as stated in Item 7(E) of the Declarations, has been paid
solely by reason of the payment of loss.
SECTION 2. LIMIT OF LIABILITY
A. The Insurer shall only be liable to make payment under this policy after
the total amount of the Underlying Limit of Liability as stated in Item
7(E) of the Declarations has been paid solely by reason of the payment of
loss.
B. In the event of the reduction or exhaustion of the total amount of the
Underlying Limit of Liability as stated in Item 7(E) of the Declarations
solely by reason of the payment of loss, this policy shall:
1. in the event of such reduction pay excess of the reduced amount of the
Underlying Limit of Liability but not to exceed the amount stated in
Item 4 of the Declarations, or
2. in the event of exhaustion continue in force provided always that this
policy shall only pay the excess over the Retention amount stated in
Item 5 of the Declarations as respects each and every loss hereunder,
but not to exceed the amount stated in Item 4 of the Declarations.
C. The Insurers' liability for loss subject to paragraphs (A) and (B) above
shall be the amount stated in Item 4 of the Declarations which shall be the
maximum liability of the Insurer in the Policy Period stated in Item 3 of
the Declarations. The Limit of Liability of the Insurer for the Discovery
Period, if elected, shall be part of, and not in addition to, the Limit of
Liability as stated in Item 4 of the Declarations.
3
<PAGE>
SECTION 3. LOSS PROVISIONS
The Insured(s) shall as a condition precedent to the right to be indemnified
under this policy give to the Insurer notice in writing, as soon as practicable
and during the Policy Period or during the Discovery Period, if effective, of a
claim made against the Insured(s).
SECTION 4. NOTICE
Notice hereunder shall be given to St. Paul Mercury Insurance Company, 385
Washington Street, St. Paul. MN 55102.
SECTION 5. CANCELLATION
This policy may be cancelled by the Corporation at any time by mailing written
notice to the Insurer at the address shown in Section 4 stating when thereafter
such cancellation shall be effective or by surrender of this policy to the
Insurer or its authorized agent. This policy may also be cancelled by or on
behalf of the Insurer by delivering to the Corporation or by mailing to the
Corporation by registered, certified, or other first class mail, at the
Corporation's address as shown in Item 2 of the Declarations, written notice
stating when, not less than sixty (60) days thereafter, the cancellation shall
be effective. The mailing of such notice as aforesaid shall be sufficient proof
of notice. The Policy Period terminates at the date and hour specified in such
notice, or at the date and time of surrender.
If the period of limitation relating to the giving of notice is prohibited or
made void by any law controlling the construction thereof, such period shall be
deemed to be amended so as to be equal to the minimum period of limitation
permitted by such law.
SECTION 6. DISCOVERY PERIOD
If the Insurer shall cancel or refuse to renew (refusal to renew is hereafter
referred to as non-renewal) this policy, the Corporation or the Insureds shall
have the right, upon payment of the additional premium of 75% of the premium
hereunder, to an extension of the cover granted by this policy to report any
claim or claims in accordance with Section 3, which claim or claims are made
against the Insureds during the period of twelve (12) months after the effective
date of cancellation or non-renewal, herein called the Discovery Period, but
only for any Wrongful Act committed before the effective date of such
cancellation or non-renewal and otherwise covered by this policy.
This right shall terminate, however, unless the Corporation or the Insureds
provide written notice of such election together with the payment of the
additional premium due and this is received by the Insurer at the address shown
in Section 4 within ten (10) days after the effective date of cancellation or
non-renewal.
Discovery Period wherever used in this policy shall also mean optional extension
period or extended reporting period as defined by the policy stated in Item 8 of
the Declarations.
The offer by the Insurer of renewal terms, conditions, limits of liability
and/or premiums different from those of the expiring policy shall not constitute
non-renewal.
The provisions of this Section 6 and the rights granted herein to the
Corporation or the Insureds shall not apply to any cancellation resulting from
non-payment of premium.
SECTION 7. NUCLEAR ENERGY LIABILITY EXCLUSION
It is agreed that:
A. This policy does not apply:
1. Under any Liability Coverage, to bodily injury or property damage
4
<PAGE>
a. with respect to which an Insured under this policy is also an
Insured under a nuclear energy liability policy issued by Nuclear
Energy Liability Insurance Association, Mutual Atomic Energy
Liability Underwriters or Nuclear Insurance Association of Canada,
or would be an Insured under any such policy but for its
termination upon exhaustion of its limit of liability; or
b. resulting from the hazardous properties of nuclear material and
with respect to which (1) any person or organization is required to
maintain financial protection pursuant to the Atomic Energy Act of
1954, or any law amendatory thereof, or (2) the Insured is, or had
this policy not been issued would be, entitled to indemnity from
the United States of America, or an agency thereof, under any
agreement entered into by the United States of America, or any
agency thereof with any person or organization.
2. Under any Medical Payments coverage, or under any Supplementary
Payments provision relating to first aid, to expenses incurred with
respects to bodily injury resulting from the hazardous properties of
nuclear material and arising out of the operation of a nuclear facility
by any person or organization.
3. Under any Liability Coverage, to bodily injury or property damage
resulting from the hazardous properties of nuclear material, if
a. the nuclear material (l) is at any nuclear facility owned by, or
operated by or on behalf of an Insured or (2) has been discharged
or dispersed therefrom;
b. the nuclear material is contained in spent fuel or waste at any
time possessed, handled, used, processed, stored, transported or
disposed of by or on behalf of an Insured, or
c. the bodily injury or property damage arises out of the furnishing
by an Insured of services, materials, parts or equipment in
connection with the planning, construction, maintenance, operation
or use of any nuclear facility, but if such facility is located
within the United States of America, its territories or possessions
or Canada, this exclusion (c) applies only to property damage to
such nuclear facility and any property thereat.
As used in this exclusion:
"hazardous properties" include radioactive, toxic or explosive properties;
"nuclear material" means source material, special nuclear material or
by-product material;
"source material," "special nuclear material," and by-product material have
the meanings given them in the Atomic Energy Act of 1954 or in any law
amendatory thereof;
"spent fuel" means any fuel element or fuel component, solid or liquid,
which has been used or exposed to radiation in a nuclear reactor;
"waste" means any waste material (l) containing by-product material and (2)
resulting from the operation by any person or organization of any nuclear
facility included within the definition of nuclear facility under paragraph
(l) or (2) thereof;
"nuclear facility" means
(1) any nuclear reactor,
(2) any equipment or device designed or used for (1) separating the
isotopes of uranium or plutonium, (2) processing or utilizing spent fuel,
or (3) handling, processing or packaging waste,
(3) any equipment or device used for the processing, fabricating or
alloying of special nuclear material if at any time the total amount of
such material in the custody of the Insured and the premises where such
equipment or device is located consists of or contains more than 25 grams
of plutonium or uranium 233 or any combination thereof, or more than 250
grams of uranium 235,
(4) any structure, basin, excavation, premises or place prepared or used
for the storage or disposal of waste, and includes the site on which any of
the foregoing is located, and operations conducted on such site and all
premises used for such operations;
5
<PAGE>
"nuclear reactor" means any apparatus designed or used to sustain nuclear
fission in a self-supporting chain reaction or to contain critical mass of
fissionable material, "property damage" includes all forms of radioactive
contamination of property.
SECTION 8. ACTION AGAINST THE INSURER
No action shall lie against the Insurer unless, as a condition precedent
thereto, there shall have been full compliance with all of the terms of this
policy, nor until the amount of the Corporation's obligation to pay and/or the
Insureds' obligation to pay have been finally determined either by judgment
against the Insureds after actual trial or by written agreement of the
Corporation and/or the Insureds, the claimant and the Insurer.
Any person or organization or the legal representative thereof who has secured
such judgment or written agreement shall thereafter be entitled to recover under
this policy to the extent of the insurance afforded by this policy. No person or
organization shall have any right under this policy to join the Insurer as a
party to any action against the Corporation and/or Insureds to determine the
Insureds' liability, nor shall the Insurer be impleaded by the Corporation
and/or Insureds or their legal representatives. Bankruptcy or insolvency of the
Corporation or the Corporation's estate, or bankruptcy or insolvency of the
Insureds or the Insureds' estate shall not relieve the Insurer of any of its
obligations hereunder.
IN WITNESS WHEREOF, the Insurer designated on the Declarations page has caused
this policy to be signed by its President and Secretary and countersigned on the
Declarations page by a duly authorized representative of the Insurer.
SIGNATURE ILLEGIBLE SIGNATURE ILLEGIBLE
Secretary President
6
<PAGE>
[LOGO OF THE ST PAUL APPEARS HERE]
ENDORSEMENT #3
The following spaces preceded by an asterisk (*) need not be completed if this
endorsement and the policy have the same inception date.
- --------------------------------------------------------------------------------
ATTACHED TO AND FORMING *EFFECTIVE DATE OF *ISSUED TO
PART OF POLICY NO. ENDORSEMENT
900DX0158
- --------------------------------------------------------------------------------
SCHEDULED ATTACHMENTS TO POLICY ENDORSEMENT
In consideration of the premium charged, it is hereby understood and agreed that
the Insurer has relied upon the material listed in the following schedule. It is
further understood and agreed that the material listed below is attached to and
forms a part of the policy.
-SCHEDULE-
1) Warranty Letter signed by W. Bruce Lunsford, President and Chief Executive
Officer, dated September 28, 1995.
2) Copy of the Joint Proxy Statement dated August 11, 1995.
3) 1994 Vencor, Inc. Annual Report.
4) 1994 Vencor, Inc. form 10-k.
5) 1995 Vencor, Inc. form 10-Q.
6) List of Subsidiaries.
and that this aforementioned material shall be retained on file by the Insurer
and be deemed attached hereto and made a part of this application and policy by
reference.
Nothing herein contained shall be held to vary, alter, waive or extend any of
the terms, conditions, provisions, agreements or limitations of the above
mentioned policy, other than as above stated.
In Witness Whereof, the Company has caused this
*Agency Name and Address endorsement to be signed by a duly authorized
representative of the Company.
-----------------------------------------------
Authorized Representative
<PAGE>
[LOGO OF THE ST PAUL APPEARS HERE]
ENDORSEMENT #2
The following spaces preceded by an asterisk (*) need not be completed if this
endorsement and the policy have the same inception date.
- --------------------------------------------------------------------------------
ATTACHED TO AND FORMING *EFFECTIVE DATE OF *ISSUED TO
PART OF POLICY NO. ENDORSEMENT
900DX0158
- --------------------------------------------------------------------------------
In consideration of the premium charged, it is hereby understood and
agreed that this policy does not follow form with Endorsement #13 of the
policy referenced in Item 8 of the Declarations and that this endorsement
is deleted in its entirety.
Nothing herein contained shall be held to vary, alter, waive or extend any of
the terms, conditions, provisions, agreements or limitations of the above
mentioned policy, other than as above stated.
In Witness Whereof, the Company has caused this
*Agency Name and Address endorsement to be signed by a duly authorized
representative of the Company.
-----------------------------------------------
Authorized Representative
<PAGE>
[LOGO OF THE ST PAUL APPEARS HERE]
ENDORSEMENT #1
The following spaces preceded by an asterisk (*) need not be completed if this
endorsement and the policy have the same inception date.
- --------------------------------------------------------------------------------
ATTACHED TO AND FORMING *EFFECTIVE DATE OF *ISSUED TO
PART OF POLICY NO. ENDORSEMENT
900DX0158
- --------------------------------------------------------------------------------
PRIOR AND PENDING LITIGATION EXCLUSION
M1150 Ed. 3-90
In consideration of the premium charged, it is hereby understood and agreed that
the Insurer shall not be liable to make any payment for loss in connection with
any claim or claims made against the Insured(s) arising from any prior or
pending litigation as of 9-28-95, as well as all future claims or litigation
based upon the pending or prior litigation or derived from the same or
essentially the same facts (actual or alleged) that gave rise to the prior or
pending litigation.
Nothing herein contained shall be held to vary, alter, waive or extend any of
the terms, conditions, provisions, agreements or limitations of the above
mentioned policy, other than as above stated.
In Witness Whereof, the Company has caused this
*Agency Name and Address endorsement to be signed by a duly authorized
representative of the Company.
-----------------------------------------------
Authorized Representative
<PAGE>
EXHIBIT 10.9
AMENDMENT NUMBER 7
VENCOR, INCORPORATED
RETIREMENT SAVINGS PLAN
WHEREAS Vencor, Incorporated ("Sponsoring Employer") adopted the Retirement
Savings Plan ("Plan") effective as of January 1, 1989; and
WHEREAS the Sponsoring Employer reserved the right to amend the Plan by
action of its Board of Directors; and
WHEREAS the Sponsoring Employer now desires to amend said Plan to comply
with changes in the Internal Revenue Code of 1986;
NOW, THEREFORE, the Plan is amended, effective as provided herein, in the
following respects:
(1) Section 1.12 is amended effective January 1, 1994, to read as follows:
Section 1.12 COMPENSATION means, for any Plan Year, total cash compensation
paid to an Employee by the Employer as reportable on Internal
Revenue Service form W-2 , excluding reimbursements or other
expense allowances, fringe benefits (cash and noncash), moving
expenses, deferred compensation and welfare benefits and increased
by amounts deferred pursuant to Code Sections 125 (flexible
benefit plans), 402(a)(8) (salary redirection), and 402(h)(1)(B)
(simplified employee plans). In the Plan Year during which an
Employee becomes a Participant, only remuneration paid in the
portion of the Plan Year in which he was a participant shall be
considered Compensation. Effective for Plan Years beginning on or
after January 1, 1989, Compensation shall be limited to such
amount as determined pursuant to Code Section 401(a)(17).
(2) Subsection 3.5(d) is amended effective January 1, 1994, to read as follows:
(d) The term "compensation" for purposes of this Section, shall
include all amounts paid by the Employer to the Employee which are
currently includible in the Employee's gross income. For Plan
Years beginning prior to January 1, 1992, or such later date as
permitted by regulations or notices, said compensation shall only
include amounts paid by the Employer to the Employee during the
period he is eligible to make Salary Redirection contributions and
which amounts are currently includible in the Employee's gross
income. For all Plan Years, the Employer shall have the right to
increase the Employee's compensation, for purposes of this Section
by the amount of any Employee salary redirection elections under
Section 125 (flexible benefit plans), 402(a)(8) (salary
redirection) and 402(h)(1)(B)
-1-
<PAGE>
(simplified employee plans) of the Code, or to use such alternate
definition of compensation as may be provided under Section 414(s)
of the Code. Compensation for purposes of this Section shall be
limited pursuant to Code Section 401(a)(17).
(3) Subsection 3.6(d) is amended effective January 1, 1994, to read as follows:
(d) The term "compensation" for purposes of this Section, shall
include all amounts paid by the Employer to the Employee which are
currently includible in the Employee's gross income. For Plan
Years beginning prior to January 1, 1992, or such later date as
permitted by regulations or notices, said compensation shall only
include amounts paid by the Employer to the Employee during the
period he is eligible to receive Matching Contributions and which
amounts are currently includible in the Employee's gross income.
For all Plan Years, the Employer shall have the right to increase
the Employee's compensation, for purposes of this Section by the
amount of any Employee salary redirection elections under Section
125 (flexible benefit plans), 402(a)(8) (salary redirection) and
402(h)(1)(B) (simplified employee plans) of the Code, or to use
such alternate definition of compensation as may be provided under
Section 414(s) of the Code. Compensation for purposes of this
Section shall be limited pursuant to Code Section 401(a)(17).
(4) Section 5.11 is amended effective January 1, 1993, to read as follows:
Section 5.11 PARTICIPANT DIRECTED ROLLOVERS
(a) This Section applies to distributions made on or after January 1,
1993. Notwithstanding any provision of the plan to the contrary
that would otherwise limit a distributee's election under this
Section, a distributee may elect, at the time and in the manner
prescribed by the Committee, to have any portion of an eligible
rollover distribution paid directly to an eligible retirement plan
specified by the distributee in a direct rollover.
(b) For purposes of this Section, an eligible rollover distribution is
any distribution of all or any portion of the balance to the
credit of the distributee, except that an eligible rollover
distribution does not include: any distribution that is one of a
series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy)
of the distributee or the joint lives (or joint life expectancies)
of the distributee and the distributee's designated beneficiary,
or for a specified period of ten (10) years or more; any
distribution to the extent such distribution is required under
Section 401(a)(9) of the Code; and the portion of any distribution
that is not includible in gross income (determined without regard
to the exclusion for net unrealized appreciation with respect to
employer securities).
-2-
<PAGE>
(c) For purposes of this Section, an eligible retirement plan is an
individual retirement account described in Section 408(a) of the
Code, an individual retirement annuity described in Section 408(b)
of the Code, an annuity plan described in Section 403(a) of the
Code, or a qualified trust described in Section 401(a) of the
Code, that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover
distribution to the surviving spouse, an eligible retirement plan
is an individual retirement account or individual retirement
annuity.
For purposes of this Section, a distributee includes an Employee
or former Employee. In addition, the Employee's or former
Employee's surviving spouse and the Employee's or former
Employee's spouse or former spouse who is the alternate payee
under a qualified domestic relations order, as defined in Section
414(p) of the Code, are distributees with regard to the interest
of the spouse or former spouse.
(d) A direct rollover is a payment by the plan to the eligible
retirement plan specified by the distributee.
(5) Section 11.5 is amended effective January 1, 1994, to read as follows:
Section 11.5 COMPENSATION
For purposes of this Article, compensation shall have the same
meaning as assigned to it by Code Section 415 and shall be limited
to such amount as required by Code 401(a)(17).
* * * * * * * * * * *
SIGNATURES
----------
IN WITNESS WHEREOF, the Sponsoring Employer has caused this Amendment
Number 7 to be executed this the 20th day of May , 1994, but effective
------- --------
as provided herein.
Attest: Vencor, Incorporated
[SIGNATURE IS ILLEGIBLE] By [SIGNATURE IS ILLEGIBLE]
- --------------------------- -----------------------------
Secretary
Title V.P
--------------------------
-3-
<PAGE>
EXHIBIT 10.10
AMENDMENT NUMBER 8
VENCOR, INCORPORATED RETIREMENT SAVINGS PLAN
WHEREAS Vencor, Inc. ("Sponsoring Employer") adopted the Vencor,
Incorporated Retirement Savings Plan ("Plan") effective as of January 1, 1986;
and
WHEREAS the Sponsoring Employer reserved the right to amend the Plan by
action of its Board of Directors; and
WHEREAS the Sponsoring Employer now desires to amend said Plan to reflect
changes in the Plan;
NOW, THEREFORE, the Plan is amended, effective August 1, 1995, except as
otherwise indicated herein, in the following respects:
(1) Section 1.10 is amended to read as follows:
Section 1.10 COMPANY means Vencor, Inc. and all of the legal entities which
are part of the controlled group or affiliated service group with
Vencor, Inc. pursuant to the provisions of Code Sections 414(b),
(c), (m) or (o).
(2) Section 1.18 is amended to read as follows:
Section 1.18 EMPLOYER means Vencor, Inc. and each of the legal entities,
or any successor thereto which is a part of the Company and
which has adopted the Plan for its eligible Employees with
consent of the Sponsoring Employer. The Sponsoring Employer
shall be Vencor, Inc.
(3) Section 1.37 is amended to read as follows:
Section 1.37 Plan means the Vencor, Inc. Retirement Savings Plan.
(4) Subsection 6.1(e) is amended to read as follows:
(e) The withdrawals under this Section shall in no way affect said
Participant's continued participation in this Plan except by the
reduction in account balances caused by such.
<PAGE>
(5) Subsection 6.1(f) is amended to read as follows:
(f) A Participant shall present evidence to the Committee that the
requested withdrawal is not in excess of the amount necessary to
relieve the financial need of the Participant and that the need can
not be satisfied from other resources that are reasonably available to
the Participant. The determination by the Committee that the
distribution will be necessary to satisfy an immediate and heavy
financial need will be made on the basis of all relevant facts and
circumstances. A distribution generally will be treated as necessary
to satisfy a financial need if the Committee relies, without actual
knowledge to the contrary, on the Participant's representation that
the need cannot be relieved:
1. through reimbursement or compensation by insurance or otherwise;
2. by reasonable liquidation of the Participant's assets, to the
extent such liquidation would not itself cause an immediate and
heavy financial need;
3. by cessation of Salary Redirection under the Plan; or
4. by other distributions or non-taxable loans from the plans
maintained by the Employer or by any other employer, or by
borrowing from commercial sources on reasonable commercial terms.
For purposes of this Subsection, the Participant's resources shall be
deemed to include those of his spouse and minor children that are
reasonably available to the Participant.
(6) Appendix A is deleted.
* * * * * * * * * *
-2-
<PAGE>
SIGNATURES
----------
IN WITNESS WHEREOF, the Sponsoring Employer has caused this Amendment
Number 8 to be executed this the 13th day of August, 1995, but effective August
1, 1995, except as otherwise indicated herein.
Attest: Vencor, Inc.
SIGNATURE NOT LEGIBLE By SIGNATURE NOT LEGIBLE
- ---------------------------- ----------------------------
Secretary Vice President
Title Finance and Development
-------------------------
-3-
<PAGE>
EXHIBIT 10.17
AMENDMENTS TO THE VENCOR, INC.
1987 INCENTIVE COMPENSATION PROGRAM
SEPTEMBER 27, 1995
The undersigned, JUNE N. KING, the duly elected and acting Assistant
Secretary of VENCOR, INC., a Delaware corporation (the "Company"), hereby
certifies that set forth below are Amendments to the Vencor, Inc. 1987 Incentive
Compensation Program (the "Program"), which Amendments became effective as of
September 27, 1995:
Section 5.1 of the Program is hereby amended in its entirety to read as
follows:
"5.1. Number of Shares Subject to adjustment as provided in
----------------
Section 11.6, the number of shares of Common Stock which may be issued
under the Program shall not exceed 6,900,000 shares of Common Stock."
WITNESS the signature of the undersigned Assistant Secretary of the Company
as of September 27, 1995.
/s/ June N. King
---------------------------------------
June N. King
Assistant Secretary
<PAGE>
EXHIBIT 10.18
VENCOR, INC.
INCENTIVE COMPENSATION PROGRAM
PERFORMANCE SHARE AWARD
This Agreement is made as of ________________, 19___ (the "Grant Date"), by
and between VENCOR, INC., a Delaware corporation (the "Company"), having its
offices at 3300 Providian Center, Louisville, Kentucky 40202, and
______________________________ ("Employee"), who is serving as
____________________________________ of the Company (the "Position").
RECITALS:
--------
A. The Company's 1987 Incentive Compensation Program (the "Plan") was
adopted by the Board of Directors of the Company on May 27, 1987 and was
approved by the shareholders on June 18, 1987.
B. Pursuant to the Plan, shares of the Company's $.25 par value Common
Stock (the "Common Stock") may be issued to officers and valued employees of the
Company upon whose judgment, initiative and efforts the continued success and
growth of the business of the Company largely depend.
C. Shares of Common Stock may be issued under the Plan under such terms as
the Executive Compensation Committee of the Board of Directors (the "Committee")
shall determine.
AGREEMENT:
---------
NOW, THEREFORE, in consideration of Employee serving in the Position, the
parties hereto agree as follows:
1. GRANT. Subject to the terms and conditions of this Agreement and the
-----
Plan, which is hereby incorporated herein by reference, the Company hereby
agrees to issue to Employee up to ____________ shares of Common Stock (the
"Performance Shares"), in consideration of services to be performed by Employee
in the Position with the Company or any of its subsidiaries after the date
hereof and until completion of the final Performance Period.
2. VESTING AND ISSUANCE. Except as otherwise provided in this Agreement,
--------------------
the Performance Shares shall not be issued to Employee unless Employee is
serving in the Position, or in a comparable or higher position, as determined by
the Committee, with the Company or a subsidiary thereof, throughout the
applicable performance period (the "Performance Period") set forth below:
<PAGE>
Number of Shares
of Common Stock Performance Period
In addition, as conditions to Employee receiving any Performance Shares with
respect to a Performance Period, (a) Employee must have met the applicable
performance standards established by the Committee for a given Performance
Period for the Position; and (b) Employee must have retained at least one-half
of the Performance Shares which have previously been awarded to him or her
pursuant to this Agreement. Subject to the foregoing, the number of Performance
Shares to be issued upon completion of a Performance Period shall be determined
by the Committee in its sole discretion, with the maximum number of Performance
Shares that may be so issued to equal the sum of (i) the aggregate of the number
of shares set forth in the foregoing table for such Performance Period and for
all prior Performance Periods minus (ii) the number of shares for any prior
-----
Performance Period that have previously been issued. Within three months after
the end of each Performance Period, the Company shall determine whether the
applicable performance standards have been met and shall make its determination
in accordance with the foregoing as to the number of Performance Shares to be
issued. Such Performance Shares shall be delivered within 30 days after such
determination. All Performance Shares that are not issued in accordance with
the foregoing in respect of any Performance Period through and including the
final Performance Period (ending December 31, 19__) shall be forfeited by
Employee and shall be of no further force or effect.
3. COMPLIANCE WITH SECURITIES LAWS. If Employee is an "officer" of the
-------------------------------
Company as defined in Rule 16a-1 promulgated under the Securities Exchange Act
of 1934 ("1934 Act"), then Employee will comply with the provisions of Section
16 of the 1934 Act in connection with any sale, transfer or other disposition of
the Performance Shares.
4. NO SHAREHOLDER RIGHTS. Until the Performance Shares are issued to
---------------------
Employee (or, upon Employee's death, to Employee's estate, pursuant to the terms
of this Agreement), Employee shall have no rights with respect to the
Performance Shares, including the right to vote or to receive any cash dividends
with respect to, or the right to transfer, assign, alienate, pledge, hypothecate
or otherwise dispose of, such Performance Shares.
5. EMPLOYMENT. The grant of the Performance Shares to Employee neither
----------
confers on Employee the right to continued service in the Position and/or
employment by the Company or any of its subsidiaries nor affects the right of
the Company or any of its subsidiaries to remove Employee from the Position, or
to terminate Employee's employment with the Company or a subsidiary thereof, for
any reason with or without cause.
6. WITHHOLDING TAXES. Employee agrees to pay promptly to the Company the
-----------------
amount of any federal and state withholding taxes which become due as a result
of the award of any Performance Shares.
2
<PAGE>
7. REMOVAL AND REASSIGNMENT, TERMINATION, DEATH AND DISABILITY.
-----------------------------------------------------------
(a) If Employee is removed from the Position and is reassigned to
another position with the Company or any subsidiary thereof which is not a
comparable or higher position, as determined by the Committee, with the Company
or a subsidiary thereof, or if Employee's employment with the Company or a
subsidiary thereof is terminated either by the Company or such subsidiary or by
Employee for any reason prior to the completion of any applicable Performance
Period, then, on the effective date of such removal and reassignment or of such
termination, Employee shall forfeit his or her eligibility to receive any
Performance Shares which have not yet been issued under this Agreement.
(b) If prior to the completion of the applicable Performance Period
and while serving in the Position or in a comparable or higher position, as
determined by the Committee, with the Company or a subsidiary thereof, Employee
retires from active full employment, then, on the effective date of such
retirement, Employee shall forfeit his or her eligibility to receive any
Performance Shares which have not yet been issued under this Agreement.
(c) If prior to the completion of the applicable Performance Period
and while serving in the Position or in a comparable or higher position, as
determined by the Committee, with the Company or a subsidiary thereof, Employee
dies or becomes permanently and totally disabled, as determined by the
Committee, then all Performance Shares which have not yet been issued under this
Agreement shall be fully vested in and issued to Employee or, in the case of
Employee's death, shall be vested in and issued to Employee's estate, as of the
date of Employee's disability or death.
8. ADJUSTMENTS.
-----------
(a) Subject to Section 8(b) hereof, if the outstanding shares of
Common Stock of the Company are increased, decreased or exchanged for a
different number or kind of shares or other securities, or if additional shares
or new or different shares or other securities are distributed with respect to
such shares of Common Stock or other securities, through merger, consolidation,
sale of all or substantially all the property of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other distribution with respect to such shares of Common Stock or other
securities, an appropriate and proportionate adjustment shall be made in the
number and kind of shares or other securities subject to this Agreement without
change in the applicable Performance Period.
(b) Despite the provisions of Section 8(a) hereof, upon dissolution
or liquidation of the Company or upon a reorganization, merger or consolidation
of the Company with one or more corporations, as a result of which the Company
is not the surviving corporation, or upon the sale of all or substantially all
the property of the Company, all applicable Performance Periods under Section 2
hereof shall lapse and all Performance Shares shall be fully vested in and
issued to Employee.
(c) Upon a Change in Control of the Company, all applicable
Performance Periods under Section 2 hereof shall lapse, and all Performance
Shares shall be fully vested in and issued to Employee. As used herein, "Change
in Control" shall have the meaning set forth in Section 6.7 of the Plan.
3
<PAGE>
9. CONFIDENTIALITY. Employee acknowledges that this Agreement and the
---------------
award of Performance Shares to Employee is confidential, and Employee agrees not
to disclose any of the terms of this Agreement except to duly authorized
representatives of the Company acting in the course of their employment and as
may otherwise be required by law.
10. BINDING EFFECT AND BENEFIT. This Agreement shall be binding upon the
--------------------------
Company, its successors and assigns, and, subject to the conditions hereof,
shall inure to the benefit of the legatees and personal representatives of
Employee.
11. ENTIRE UNDERSTANDING AND WAIVER. This Agreement embodies the entire
-------------------------------
understanding and agreement of the parties in relation to the subject matter
hereof, and no promise, condition, representation or warranty, expressed or
implied, not herein stated, shall bind either party hereto. None of the terms
and conditions of this Agreement may be changed, modified, waived or cancelled
except by a writing, signed by the parties hereto specifying such change,
modification, waiver or cancellation. A waiver by either party, at any time, of
compliance with any of the terms and conditions of this Agreement shall not be
considered a modification, cancellation or consent to a future waiver of such
terms and conditions or of any preceding or succeeding breach thereof, unless
expressly so stated.
12. APPLICABLE LAW. This Agreement shall be construed and enforced in
--------------
accordance with the laws of the Commonwealth of Kentucky.
IN WITNESS WHEREOF, the Company has executed this Agreement by its proper
officer thereunto authorized and Employee has executed this Agreement, each as
of the date first above written.
VENCOR, INC.
By: _______________________________
Title: ____________________________
("Company")
____________________________________
("Employee")
4
<PAGE>
EXHIBIT 10.18
VENCOR, INC.
INCENTIVE COMPENSATION PROGRAM
AMENDMENT TO
PERFORMANCE SHARE AWARD
This Amendment is made as of March 29, 1996, to the Performance Share Award
dated as of December 1, 1995 by and between VENCOR, INC., a Delaware corporation
(the "Company"), having its offices at 3300 Providian Center, Louisville,
Kentucky 40202, and _________________________________ ("Employee"), who is
serving as ______________________________ of the Company (the "Position").
RECITALS:
A. The Company and the Employee previously entered into a Performance
Share Award Agreement (the "Performance Agreement") relating to the issuance of
shares of the Company's common stock to Employee upon the attainment of certain
performance goals and other conditions set forth therein ("Performance Shares").
B. The Company and the Employee believe that it is in their best
interests that the grant of Performance Shares satisfy the requirements for an
exemption from the deduction limitation set forth in the Omnibus Budget
Reconciliation Act of 1993 ("OBRA").
AGREEMENT:
----------
NOW, THEREFORE, in consideration of the premises, the parties hereto agree
as follows:
1. AMENDMENT OF PERFORMANCE AGREEMENT. For the purpose of satisfying
-----------------------------------
the requirements for an exemption from the deduction limitation set forth in
OBRA, the last paragraph of Section 2 of the Performance Agreement is hereby
amended to read in its entirety as follows:
In addition, as conditions to Employee receiving any Performance Shares
with respect to a Performance Period, (a) Employee must have met the applicable
performance standards established by the Committee for a given Performance
Period for the Position; and (b) as of the Determination Date (as defined
below), Employee must have retained at least one-half of the Performance Shares
which have previously been awarded to Employee pursuant to this Agreement. If
the Committee so elects, it may establish different levels of performance
standards, which if met would result in the issuance of less than the maximum
number of Performance Shares provided for above. Within three months after the
end of each Performance Period, the Committee shall determine (the
"Determination Date") whether the applicable performance standards for such
Performance Period have been met and the number of Performance Shares to be
issued as
<PAGE>
a result thereof. Such Performance Shares shall be delivered within 30 days
after the Determination Date (the "Scheduled Time"). All Performance Shares that
are not issued in accordance with the foregoing in respect of any Performance
Period shall be forfeited by Employee and shall be of no further force or
effect.
2. APPLICABLE LAW. This Amendment shall be construed and enforced in
---------------
accordance with the laws of the Commonwealth of Kentucky.
3. BINDING EFFECT AND BENEFIT. This Amendment shall be binding upon the
---------------------------
Company, its successors and assigns, and, subject to the conditions hereof,
shall inure to the benefit of the legatees and personal representatives of
Employee.
IN WITNESS WHEREOF, the Company has executed this Amendment by its proper
officer thereunto authorized and Employee has executed this Agreement, each as
of the date first above written.
VENCOR, INC.
By: _________________________
Title: _________________________
("Company")
________________________________
("Employee")
<PAGE>
EXHIBIT 10.19
VENCOR, INCORPORATED
NON-EMPLOYEE DIRECTORS DEFERRED
COMPENSATION PLAN
ARTICLE 1
PURPOSES
1.1 PURPOSES. The purposes of this Non-Employee Directors Deferred
--------
Compensation Plan ("Plan") of Vencor, Incorporated, a Delaware corporation
("Company"), are to encourage the Company's non-employee directors to invest in
the future of the Company through ownership of an interest in the Company and to
provide flexibility to the Company in attracting and retaining directors.
ARTICLE 2
ELIGIBILITY AND PARTICIPATION
2.1 ELIGIBILITY. Any director of the Company who is not an employee of the
-----------
Company or a subsidiary of the Company ("Director") is eligible to participate
in the Plan.
2.2 PARTICIPATION. A Director shall become a participant in the Plan
-------------
("Participant") by filing an Election Form in accordance with the provisions of
Section 5.1.a. A Participant shall remain a Participant until such time as the
Participant has received all payments to which the Participant is entitled under
the terms of the Plan.
ARTICLE 3
SHARES SUBJECT TO PLAN
3.1 NUMBER OF SHARES. Subject to adjustment as provided in Section 3.2,
----------------
the number of shares of the Company's common stock, par value $0.25 per share
("Common Stock"), reserved for issuance under the Plan is 30,000 shares. Any
Common Stock issued under the Plan may consist, in whole or in part, of
authorized and unissued shares or treasury shares.
3.2 ADJUSTMENTS. In the event of a merger, reorganization, consolidation,
-----------
recapitalization, reclassification, split-up, spin-off, separation, liquidation,
stock dividend, stock split, reverse stock split, share combination, share
exchange or other change in the corporate structure of the Company affecting the
Common Stock, the Committee (as hereinafter defined) shall substitute or adjust
the total number and class of stock or securities which may be issued under the
Plan and which are credited to a Participant's
<PAGE>
Deferred Stock Account as it determines to be appropriate and equitable to
prevent dilution or enlargement of the rights of Participants.
ARTICLE 4
ADMINISTRATION
4.1 THE COMMITTEE. The Plan shall be administered by the Executive
-------------
Compensation Committee of the Board of Directors of the Company ("Board"), or by
any other committee ("Committee") appointed by the Board consisting of two or
more directors of the Company who are "disinterested persons" within the meaning
of Rule 16b-3 (or any successor provision) promulgated under the Securities
Exchange Act of 1934, as amended ("Exchange Act").
4.2 AUTHORITY OF THE COMMITTEE. The Committee shall have sole discretion
--------------------------
to make all determinations which may be necessary or advisable for the
administration of the Plan. To the extent permitted by law and Rule 16b-3
promulgated under the Exchange Act, the Committee may delegate its authority as
identified hereunder. All determinations and decisions made by the Committee
pursuant to the provisions of the Plan, and all related orders or resolutions of
the Board, shall be final, conclusive and binding upon all persons, including
the Company, Participants and their estates and beneficiaries.
4.3 SECTION 16 COMPLIANCE. It is the intention of the Company that the
---------------------
Plan and the administration of the Plan comply in all respects with Section
16(b) of the Exchange Act and the rules and regulations promulgated thereunder.
If any Plan provision, or any aspect of the administration of the Plan, is found
not to be in compliance with Section 16(b) of the Exchange Act, the provision or
administration shall be deemed null and void, and in all events the Plan shall
be construed in favor of its meeting the requirements of Rule 16b-3 promulgated
under the Exchange Act.
ARTICLE 5
DEFERRAL ELECTION
5.1 MAKING OF ELECTION.
------------------
a. Each Director may elect in writing, in the manner and on the form
("Election Form") prescribed by the Committee, to defer payment of all, but not
less than all, of the fees which would otherwise be paid to such Director by the
Company for services on the Board and committees thereof. An election shall be
effective with respect to amounts which would otherwise be paid to the
Participant beginning on or after the first day of the calendar quarter
following the making of the election; provided, however, that in the case of
those persons who are Directors on the date hereof, the initial election shall
become
-2-
<PAGE>
effective as of July 1, 1993. Once an election has been made, it shall remain in
effect with respect to all future amounts which would otherwise be paid to the
Participant as a Director until changed by the filing of a new election in the
manner provided in Section 5.1.b.
b. In the case of those persons who are Directors on the date hereof,
the initial election, if any, to participate in the Plan shall be made by April
30, 1993. In the case of Directors elected or reelected at an annual meeting of
the Company, an election or change in an existing election may only be made
within 30 days following the annual meeting. In the case of a Director elected
At other than an annual meeting, the initial election to participate in the Plan
may only be made within 30 days following the Director's election to the Board.
At the time of making any such election or change in an existing election, the
Participant shall further elect, in accordance with procedures adopted by the
Committee, (i) to have either 100% or 50% of the amount of such deferred fees be
deemed invested in Common Stock ("Share Election"), or (ii) to have either 100%
or 50% of such deferred fees deemed invested with interest ("Cash Election");
provided, however, that in no event shall a Share Election be effective until
six months after the date of the Share Election, with the result that during
such six-month period, the Participant shall be deemed to have made a Cash
Election .
5.2 PARTICIPANT ACCOUNT. A Participant Account shall be established for
-------------------
each Participant. Deferred compensation will be credited to the Participant's
Participant Account as of the date such compensation would otherwise be payable
to the Participant. A Participant Account shall include a Deferred Cash
Account, if a Cash Election has been made, and/or a Deferred Stock Account, if a
Share Election has been made.
5.3 DEFERRED CASH ACCOUNT. Each Deferred Cash Account shall be credited
---------------------
with the amounts deferred on behalf of a Participant plus annual interest
thereon as provided in Section 7.1.
5.4 DEFERRED STOCK ACCOUNT. Each Deferred Stock Account shall be credited
----------------------
with 110% of the amounts deferred to the Deferred Stock Account on behalf of a
Participant. Deferred Stock Accounts shall also be credited as of the payment
date for dividends on Common Stock in an amount equal to the dividends
attributable to the number of shares of Common Stock credited to the
Participant's Deferred Stock Account as of the record date set by the Board for
the payment of dividends (the amounts referred to in the first two sentences of
this Section 5.4 are hereinafter referred to as the "Cash Credits"). As of the
last day of March, June, September and December of each year, there shall be
credited to a Participant's Deferred Stock Account a number of shares of Common
Stock equal to that whole number obtained by dividing (i) the amount of Cash
Credits in the Deferred Stock Account as of such date, by (ii) the fair market
value of the Common Stock (determined as provided in Section 6.1) on such date.
Any amount of the Deferred Stock Account in excess of the number of shares of
Common Stock credited to the Deferred Stock Account shall be treated as a Cash
Credit and held in the Deferred Stock Account until the end of the following
quarterly crediting date.
-3-
<PAGE>
ARTICLE 6
FAIR MARKET VALUE
6.1 FAIR MARKET VALUE. For purposes of this Plan, the fair market value
-----------------
of the Common Stock on any date shall be (i) if the Common Stock is listed on a
national or regional exchange, or on the NASDAQ National Market System or a
comparable market, the closing price of the Common Stock on such date, or (ii)
if (i) above does not apply, the value determined by the Committee .
ARTICLE 7
INTEREST
7.1 INTEREST ON DEFERRED CASH ACCOUNT. Interest will be credited to each
---------------------------------
Deferred Cash Account at the announced prime rate of First National Bank of
Louisville as the same shall exist from time to time, changing with each change
in such announced prime rate. This assumed interest shall be compounded annually
and treated as earned from the date deferred compensation is credited to the
Deferred Cash Account to the date of withdrawal.
ARTICLE 8
PAYMENT OF DEFERRED AMOUNTS
8.1 LIMITATION ON PAYMENT OF DEFERRED AMOUNTS. No payment may be made from
-----------------------------------------
any Participant Account except as provided in this Article 8.
8.2 TIME FOR PAYMENT OF DEFERRED AMOUNTS.
------------------------------------
a. Payment of the amount in a Participant Account shall be made upon
the earlier to occur of (i) 60 days following the date the Participant ceases
to be a Director, (ii) the date selected by the Participant at the time of
making a Cash Election or Share Election (which date may be different for the
Cash Election and the Stock Election) or (iii) 60 days following a Change in
Control (as defined in Section 8.2.b). Payment shall be made in the form of a
lump sum, with payment from a Deferred Cash Account made in cash, and payment
from a Deferred Stock Account made in Common Stock (except for any Cash Credits
remaining in the Participant's Deferred Stock Account, which shall be paid in
cash).
b. For purposes of the Plan, a Change in Control shall occur upon (i)
the acquisition by any person after the date hereof of beneficial ownership of
50% or more of the voting power of the Company's outstanding voting stock, (ii)
five or more of the current members of the Board ceasing to be members of the
Board unless any replacement director was elected by a vote of either at least
75% of the remaining directors, or of at least 75 %
-4-
<PAGE>
of the shares entitled to vote on such replacement, or (iii) approval by the
stockholders of the Company of (a) a merger or consolidation of the Company with
another corporation if the stockholders of the Company immediately before such
vote will not, as a result of such merger or consolidation, own more than 50% of
the voting stock of the corporation resulting from such merger or consolidation,
or (b) a complete liquidation of the Company or sale of all, or substantially
all, of the assets of the Company. Notwithstanding the foregoing, a Change in
Control shall not occur solely because 50% or more of the voting stock of the
Company is acquired by (i) a trust which is part of an employee benefit plan
maintained by the Company or its subsidiaries, or (ii) a corporation which,
immediately following such acquisition, is owned directly or indirectly by the
stockholders of the Company in the same proportion as their ownership of stock
in the Company immediately prior to such acquisition.
ARTICLE 9
MISCELLANEOUS
9.1 ASSIGNABILITY. No right to receive payments hereunder shall be
-------------
transferable or assignable by a Participant except by will or by the laws of
descent and distribution.
9.2 AMENDMENT OR TERMINATION. The Plan may be amended, modified or
------------------------
terminated by the Board at any time or from time to time. Notwithstanding the
foregoing, without the approval of stockholders of the Company (as may be
required by Section 16 of the Exchange Act and the rules promulgated thereunder,
any national securities exchange or system on which the Common Stock is then
listed or reported or a regulatory body having jurisdiction with respect
hereto), no such amendment, modification or termination may (i) materially
increase the benefits accruing to Participants under the Plan, (ii) materially
increase the total number of shares of Common Stock which may be issued under
the Plan, except as provided in Section 3.2 or (iii) materially modify the
eligibility requirements for participation in the Plan. No amendment,
modification or termination shall, without the consent of a Participant,
adversely affect such Participant's existing rights under the Plan.
9.3 FUTURE DIRECTOR TERMS. Nothing in the Plan, nor any action taken under
---------------------
the Plan, shall be construed as giving any Participant a right to continue as a
Director or require the Company to nominate or cause the nomination of a
Participant for a future term as a Director .
9.4 PARTICIPANT'S RIGHTS UNSECURED. The right of any Participant to
------------------------------
receive payment of deferred amounts under the provisions of the Plan shall be an
unsecured claim against the general assets of the Company. The maintenance of
individual Participant Accounts is for bookkeeping purposes only. The Company is
not obligated to acquire or set aside any particular assets for the discharge of
its obligations, nor shall any Participant have any property rights in any
particular assets held by the Company, whether or not held for the purpose of
funding the Company's obligations hereunder.
-5-
<PAGE>
9.5 GOVERNING LAW. To the extent not preempted by Federal law, this Plan
-------------
shall be governed by, and construed in accordance with, the laws of the State of
Delaware without regard to its conflict of laws rules.
IN WITNESS WHEREOF, the Company has caused the Plan to be executed by the
Board this 16th day of March, 1993.
VENCOR, INCORPORATED
/s/ W. Bruce Lunsford
By ------------------------------------
W. Bruce Lunsford, Chairman of the
Board
-6-
<PAGE>
EXHIBIT 10.20
VENCOR, INC.
------------
AMENDMENT TO
------------
NON-EMPLOYEE DIRECTORS DEFERRED
-------------------------------
COMPENSATION PLAN
-----------------
SEPTEMBER 26, 1995
------------------
Section 8.2(b) of the Plan is hereby amended to read, in its entirety, as
follows:
b. For purposes of the Plan, a Change in Control shall occur upon (i) the
acquisition by any person after the date hereof of beneficial ownership of
50% or more of the voting power of the Company's outstanding voting stock,
(ii) five or more of the current members of the Board ceasing to be members
of the Board unless the replacement director was elected by a vote of
either at least 75% of the remaining directors, or at least 75% of the
shares entitled to vote on such replacement, or (iii) approval by
stockholders of the Company of (a) a merger or consolidation of the Company
with another corporation if the stockholders of the Company immediately
before such vote will not, as a result of such merger or consolidation, own
more than 50% of the voting stock of the corporation resulting from such
merger or consolidation, or (b) a complete liquidation of the Company or
sale of all, or substantially all, of the assets of the Company.
Notwithstanding the foregoing, a Change in Control shall not occur as a
result of the approval or consummation of the merger of The Hillhaven
Corporation into the Company or solely because 50% or more of the voting
stock of the Company is acquired by (i) a trust which is part of an
employee benefit plan maintained by the Company or its subsidiaries, or
(ii) a corporation which, immediately following such acquisition, is owned
directly or indirectly by the stockholders of the Company in the same
proportion as their ownership of stock of the Company immediately prior to
such acquisition.
VENCOR, INC.
By: /s/ W. Bruce Lunsford
--------------------------------------
W. Bruce Lunsford, Chairman of the
Board, President and Chief Executive
Officer
<PAGE>
Exhibit 10.22
AGREEMENT
This Agreement dated as of ________________, 199____ (this
"Agreement"), between The Hillhaven Corporation, a Nevada
corporation (the "Company"), and ____________________________
(the "Executive").
WITNESSETH:
WHEREAS, the Executive is currently employed by the Company
or one of its subsidiaries as its ______________________________
(the "Position"); and
WHEREAS, the Executive has extensive management experience
in long term care and the operation of the Company, and such
experience is very important to the continued success of the
Company, as well as to the orderly transition of the Company
should a change in corporate control and ownership occur; and
WHEREAS, changes in corporate control and ownership are
common occurrences in the current business environment, which can
be disruptive to a company's business and operations and
detrimental to the best interests of its shareholders; and
WHEREAS, the Company believes that it is in the best
interests of the Company and its shareholders to enter into
agreements with certain key officers, including the Executive, in
order to ensure their retention and to promote their objectivity
in reviewing proposed changes in control which may occur in the
future.
NOW, THEREFORE, the parties agree as follows:
1. Definitions. For purposes of this Agreement, the terms
set forth in this Section shall have the following meanings:
(a) a "Change in Control" of the Company shall be
deemed to have occurred if: (i) any Person, alone or
together with its Affiliates and Associates, is or becomes
the beneficial owner directly or indirectly of securities of
the Company representing 30% or more of the general voting
power of the Company; (ii) during any period of two
consecutive years during the term of this Agreement,
individuals who at the beginning of such period constitute
the Board of Directors of the Company cease for any reason
other than death or disability to constitute at least a
majority thereof; or (iii) any Person makes any filing under
Section 13(d) or 14(d) of the Securities Exchange Act of
1934, as amended, with respect to the Company.
(b) "Person" shall mean an individual, firm,
corporation or other entity or any successor to such entity,
together with all Affiliates and Associates of such Person,
but "Person" shall not include the Company, National Medical
Enterprises, Inc. ("NME"), any subsidiary of the Company or
NME, any Affiliate or Associate of NME, any employee benefit
<PAGE>
plan or employee stock plan of the Company, any subsidiary
of the Company, NME or any subsidiary of NME, or any Person
organized, appointed, established or holding Voting Stock
by, for or pursuant to the terms of such a plan or any
Person who acquires 20% or more of the general voting power
of the Company in a transaction or series of transactions
approved prior to such transaction or series of transactions
by the Board of Directors of the Company.
(c) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of
the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended.
(d) "Voting Stock" means shares of the Company's
capital stock having general voting power, with "voting
power" meaning the power under ordinary circumstances (and
not merely upon the happening of a contingency) to vote in
the election of directors.
(e) "Cause" shall mean: the willful, substantial,
continued and unjustified refusal of the Executive to
perform the duties of his or her office to the extent of his
or her ability to do so; any conduct on the part of the
Executive which constitutes a breach of any statutory or
common law duty of loyalty to the Company; any illegal or
publicly immoral act by the Executive which materially and
adversely affects the business of the Company; the physical
or mental disability of the Executive as determined by the
Board of Directors of the Company and resulting in his or
her inability to perform his or her duties hereunder; or the
death of the Executive.
2. Payments Upon Change in Control.
(a) If a Change in Control of the Company occurs at
any time and if at any time during the [one/two]-year period
thereafter, the Company (i) terminates the Executive without
Cause from the Position or from a comparable or higher position
with the Company, (ii) assigns to the Executive responsibilities
or title materially less than his or her responsibilities and
title as of the date hereof, (iii) reduces his or her salary,
(iv) reduces his or her fringe benefits other than in accordance
with a reduction in fringe benefits applicable to substantially
all employees of the Company, or (v) requires the Executive to
relocate to any location beyond a 30-mile radius of his or her
current principal place of employment, then in any such event,
the Company shall pay the Executive a severance benefit in cash
within 30 days after the occurrence of any such event in an
amount equal to two years' base salary.
(b) Whether or not any payment is made pursuant to
Section 2(a), if a Change in Control of the Company occurs at any
time and the Executive reasonably determines that any payment or
distribution by the Company or any of its Affiliates or
Associates to or for the benefit of the Executive, whether paid
or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise pursuant to or by reason of any
other agreement, policy, plan, program or arrangement, including
<PAGE>
without limitation any restricted stock, stock option, stock
appreciation right or similar right, or the lapse or termination
of any restriction on or the vesting or exerciseability of any of
the foregoing (individually and collectively, a "Payment"), would
be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code") (or any
successor provision thereto) by reason of being considered
"contingent on a change in ownership or control" of the Company,
within the meaning of Section 280G of the Code (or any successor
provision thereto), or any interest or penalties with respect to
such excise tax (such excise tax, together with any such interest
and penalties, being hereinafter collectively referred to as the
"Excise Tax"), then the Company shall pay to the Executive an
additional payment or payments (individually and collectively, a
"Gross-Up Payment"). The Gross-Up Payment shall be in an amount
such that, after payment by the Executive of all taxes required
to be paid by the Executive with respect to the receipt thereof
under the terms of any Federal, state or local government or
taxing authority (including any interest or penalties imposed
with respect to such taxes), including any Excise Tax imposed
with respect to the Gross-Up Payment, the Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed
upon the Payment. The Company shall pay the Gross-Up Payment to
the Executive within 30 days of its receipt of written notice
from the Executive that such Excise Tax has been paid or will be
payable at any time in the future.
3. Assignment; Binding Effect. Neither this Agreement nor
any rights or obligations hereunder may be assigned or pledged by
the Executive. This Agreement and the rights and obligations of
the parties hereunder shall be binding upon, and inure to the
benefit of, the parties hereto, the heirs and legal
representatives of the Executive and the successors and assigns
of the Company.
4. No Right to Employment. Nothing herein shall confer
upon the Executive any right to continue in the employ of the
Company or a subsidiary thereof or shall interfere in any way
with the right of the Company or any subsidiary to terminate such
employment at any time.
5. Severability. Should any provision of this Agreement
be declared illegal or unenforceable by any court of competent
jurisdiction in any action or proceeding, and such provision
cannot be modified to be enforceable, such provision shall
immediately become null and void and the parties shall
renegotiate such provision in good faith, leaving the remainder
of this Agreement in full force and effect.
6. Notices. Any notice to be given hereunder shall be
effective upon receipt, shall be in writing and shall be
personally delivered or sent by registered or certified mail,
postage prepaid to the following address or such other places as
either party shall designate in writing:
If to the Company: The Hillhaven Corporation
1148 Broadway Plaza
Tacoma, Washington 98402
Attention: Chief Executive Officer
<PAGE>
with a copy to: The Hillhaven Corporation
1148 Broadway Plaza
Tacoma, Washington 98402
Attention: General Counsel
If to the Executive: _______________________________
_______________________________
_______________________________
7. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Washington.
8. Attorneys' Fees; Etc. In the event that the Executive
brings any suit, action or other legal proceeding to enforce any
of the terms of this Agreement, and the Executive prevails in any
such suit, action or proceeding, the Company shall reimburse the
Executive for all costs and expenses, including reasonable
attorneys' fees, incurred by or for the account of the Executive
in connection with such suit, action or proceeding. The Company
shall pay such amount within ten days after receipt of the
Executive's demand therefor.
9. Headings. The headings and captions used in this
Agreement are for convenience of reference only, and shall not in
any way limit or affect the construction or interpretation of any
provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement as of the date first above written.
THE HILLHAVEN CORPORATION
By: __________________________
Its: _________________________
______________________________
(Type Executive's name here)
<PAGE>
EXHIBIT 10.23
AMENDMENT NO. 1 TO AGREEMENT
This Amendment No. 1 to Agreement dated as of December 6,
1994 (this "Amendment"), between The Hillhaven Corporation, a
Nevada corporation (the "Company"), and _____________ (the
"Executive").
WITNESSETH:
WHEREAS, the Company and the Executive are parties to that
certain Agreement dated as of May 24, 1994 (the "Agreement"); and
WHEREAS, the Agreement provides for certain payments by the
Company to the Executive in the event that a Change of Control,
as defined in the Agreement, occurs; and
WHEREAS, the Board of Directors of the Company has
authorized the Company to amend all compensation, incentive and
benefit plans and other employment arrangements which contain a
"Change of Control" provision in the manner set forth below; and
WHEREAS, the Employee also desires to amend the Agreement in
the manner set forth below.
NOW, THEREFORE, for and in consideration of the premises,
and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. Amendment. The Agreement is hereby amended by deleting
Section 1 in its entirety and substituting the following in lieu
thereof:
"1. Definitions. For purposes of this Agreement, the
terms set forth in this Section shall have the
following meanings:
A. A "Change of Control" shall be deemed to
occur if any of the following events has
occurred:
i. A Person, alone or together with its
Affiliates and Associates, or "group",
within the meaning of Section 13(d)(3)
of the Securities Exchange Act of 1934,
becomes, after the date hereof, the
beneficial owner of 20% or more of the
general voting power of the Company.
Notwithstanding the preceding sentence,
<PAGE>
a Change of Control shall not be deemed
to occur if the "Person" described in
the preceding sentence has acquired 20%
or more of the general voting power of
the Company as consideration in a
transaction or series of related
transactions involving the Company's
acquisition (by stock acquisition,
merger, asset purchase or otherwise) of
one or more businesses approved prior to
such transactions or series of
transactions by the Incumbent Board (as
defined in (ii) below), and, provided
that, if such transaction or series of
transactions results in the merger,
consolidation or reorganization of the
Company and such Person, the Company is
the surviving entity following such
merger, consolidation or reorganization.
ii. Individuals who, as of the date hereof,
constitute the Board (the "Incumbent
Board"), cease for any reason to
constitute at least a majority of the
Board, provided that any person becoming
a director subsequent to the date hereof
whose election, or nomination for
election by the Company's stockholders,
was approved by a vote of at least a
majority of the directors then
comprising the Incumbent Board (other
than an election or nomination of an
individual whose initial assumption of
office is in connection with an actual
or threatened election contest relating
to the election of the directors of the
Company, as such terms are used in Rule
14a-11 of Regulation 14A promulgated
under the Securities Exchange Act of
1934) shall be considered as though such
person were a member of the Incumbent
Board.
iii. Consummation or effectiveness of:
a. a merger, consolidation or reorganization
involving the Company (a "Business
Combination"), unless
1. the stockholders of the Company,
immediately before the Business
Combination, own, directly or indirectly
immediately following the Business
Combination, at least fifty-one percent
(51%) of the combined voting power of
the outstanding voting securities of the
<PAGE>
corporation resulting from the Business
Combination (the "Surviving
Corporation") in substantially the same
proportion as their ownership of the
voting securities immediately before the
Business Combination, and
2. the individuals who were members of
the Incumbent Board immediately prior to
the execution of the agreement providing
for the Business Combination constitute
at least a majority of the members of
the Board of Directors of the Surviving
Corporation, and
3. no Person (other than any Person
who, immediately prior to the Business
Combination, had beneficial ownership of
twenty percent (20%) or more of the then
outstanding Voting Securities) has
Beneficial Ownership of twenty percent
(20%) or more of the combined voting
power of the Surviving Corporation's
then outstanding voting securities;
b. a complete liquidation or dissolution of
the Company; or
c. the sale or other disposition of all or
substantially all of the assets of the
Company to any Person.
B. "Affiliate or Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of
the General Rules and Regulations under the
Securities Exchange Act of 1934.
C. "Person," for the purpose of this Section, means
an individual, firm, corporation or other entity
or any successor to such entity, but "Person"
shall not include the Company, any subsidiary of
the Company, any employee benefit plan or employee
stock plan (including a trust relating thereto) of
the Company or any subsidiary of the Company, or
any Person organized, appointed, established or
holding Voting Stock by, for or pursuant to the
terms of such a plan. "Person" shall also not
include National Medical Enterprises, Inc.
("NME"), any subsidiary of NME, any Affiliate or
Associate of NME, any employee benefit plan or
employee stock plan of NME or any subsidiary of
NME to the extent that such entities, individually
or collectively, own any or all of (x) the
8,878,147 shares of the Company's common stock
(approximately 31% of the general voting power of
the Company as of the date hereof) registered in
<PAGE>
the name of NME or any subsidiary of NME as of the
date of this Agreement, or (y) such additional
number of shares of the Company's common stock
issued to NME or any subsidiary of NME in exchange
for shares of the Company's Series C Preferred
Stock or Series D Preferred Stock so long as such
exchange has been approved in advance by the
Incumbent Board.
D. "Voting Stock" means shares of the Company's capital
stock having general voting power, with "voting power"
meaning the power under ordinary circumstances (and not
merely upon the happening of a contingency) to vote in
the election of directors.
E. "Cause" shall mean: the willful, substantial,
continued and unjustified refusal of the Executive to
perform the duties of his or her office to the extent
of his or her ability to do so; any conduct on the part
of the Executive which constitutes a breach of any
statutory or common law duty of loyalty to the Company;
any illegal or publicly immoral act by the Executive
which materially and adversely affects the business of
the Company; the physical or mental disability of the
Executive as determined by the Board of Directors of
the Company and resulting in his or her inability to
perform his or her duties hereunder; or the death of
the Executive."
2. Effect on Agreement. Except as expressly amended by
this Amendment, all of the terms and conditions of the Agreement
shall remain in full force and effect.
3. Captions. The captions and headings used herein are
for convenience of reference only and shall not be construed in
any manner to limit or modify any of the terms hereof.
4. Counterparts. This Amendment may be executed in
counterparts, each of which shall be an original, but all of
which together shall constitute but one and the same instrument.
5. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of Washington.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Amendment as of the date first set forth above.
THE HILLHAVEN CORPORATION
By:____________________________________
Its:___________________________________
______________________________________
Executive
<PAGE>
EXHIBIT 10.24
INDEMNIFICATION AGREEMENT
This Agreement, made and entered into this 31st day of January, 1990
("Agreement"), by and between The Hillhaven Corporation, a Nevada corporation
("Corporation"), and ("Indemnitee"):
WHEREAS, highly competent persons have recently become more reluctant
to serve or to continue to serve publicly-held corporations as directors or
officers or in other capacities, unless they are provided with better protection
from the risk of claims and actions against them arising out of their service to
and activities on behalf of such corporations; and
WHEREAS, the current difficulty of obtaining adequate insurance and
the uncertainties related to indemnification have been increasing the difficulty
of retaining or attracting and retaining such Persons; and
WHEREAS, the Board of Directors of the Corporation (the "Board") has
determined that in order to retain, or attract to the Corporation and retain,
highly competent persons it would be in the best interests of the Corporation
and its stockholder or stockholders for such persons to be assured that they
will have the indemnity protection described herein; and
WHEREAS, it is reasonable, prudent and necessary for the Corporation
to obligate itself contractually to indemnify such persons to the fullest extent
permitted by applicable law, so that such persons will serve or continue to
serve the Corporation free from undue concern that they will not be adequately
indemnified; and
WHEREAS, this Agreement is a supplement and an addition to any rights
granted under Article IX of the By-Laws of the Corporation in effect as of the
date hereof or as from time to time amended, under the Amended and Restated
Articles of Incorporation of the Corporation in effect as of the date hereof or
as from time to time amended (the "Articles of Incorporation") and under any
resolutions adopted pursuant thereto and shall not be deemed to diminish or
abrogate any rights of Indemnitee thereunder; and
WHEREAS, Indemnitee is willing to serve or to continue to serve and to
take on additional service for or
<PAGE>
on behalf of the Corporation on the condition that he or she be indemnified
according to the terms of this Agreement;
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Corporation and Indemnitee do hereby covenant and agree as
follows:
Section 1. Definitions. For purposes of this Agreement:
-----------
(a) "Change in Control" means a change in control of the Corporation
occurring after the date hereof of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in
response to any similar item on any similar schedule or form) promulgated under
the Securities Exchange Act of 1934, as amended (the "Act"), whether or not the
Corporation is then subject to such reporting requirement; provided, however,
-------- -------
that, without limitation, such a Change in Control shall be deemed to have
occurred if after the date hereof (i) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Act) (with the exception of National Medical
Enterprises, Inc., a Nevada corporation ("NME") or any Affiliate or Associate
(as such terms are used in Rule 12b-2 of the General Rules and Regulations under
the Act) of NME is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Act), directly or indirectly, of securities of the Corporation
representing 30% or more of the combined voting power of the Corporation's then
outstanding securities without the prior approval of at least two-thirds of the
members of the Board in office immediately prior to such person attaining such
percentage interest; (ii) the Corporation is a party to a merger, consolidation,
sale of assets or other reorganization or a proxy contest, as a consequence of
which members of the Board in office immediately prior to such transaction or
event constitute less than a majority of the Board thereafter; or (iii) during
any period of two consecutive years, individuals who at the beginning of such
period constituted the Board (including for this purpose any new director whose
election or nomination for election by the Corporation's stockholders was
approved by a vote of at least two-thirds of the directors then still in office
who were directors at the beginning of such period) cease for any reason to
constitute at least a majority of the Board.
(b) "Corporate Status" means the status of a person who is or was a
director, officer, employee, agent or fiduciary of the Corporation or of any
other corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise which such person is or was serving at the request of the
Corporation.
2
<PAGE>
(c) "Disinterested Director" means a director of the Corporation who
is not and was not a party to the Proceeding in respect of which indemnification
is sought by Indemnitee.
(d) "Expenses" means all reasonable attorneys' fees, retainers, court
costs, transcript costs, fees of experts, witness fees, travel expenses,
duplicating costs, printing and binding costs, telephone charges, postage,
delivery service fees, and all other disbursements or expenses of the types
customarily incurred in connection with prosecuting, defending, preparing to
prosecute or defend, investigating, or being or preparing to be a witness in a
Proceeding.
(e) "Independent Counsel" means a law firm, or a member of a law firm,
that is experienced in matters of corporation law and neither at the time it is
making a determination nor rendering advice pursuant hereto is, nor in the five
years prior thereto has been, retained to represent: (i) the Corporation or
Indemnitee in any other matter material to either such party, or (ii) any other
party to the Proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Counsel" shall not include
any person who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either the
Corporation or Indemnitee in an action to determine Indemnitee's rights under
this Agreement.
(f) "Proceeding" means any action, suit, arbitration, alternate
dispute resolution mechanism, investigation, administrative hearing or any other
proceeding, whether civil, criminal, administrative or investigative, except one
initiated by an Indemnitee pursuant to Section II of this Agreement to enforce
his rights under this Agreement.
Section 2. Services by indemnitee. Indemnitee agrees to serve or to
----------------------
continue to serve as a director, officer, employee, agent or fiduciary of the
Corporation, and, at its request, as director, officer, employee, agent or
fiduciary of certain other corporations and entities. Indemnitee may at any time
and for any reason resign from any such position (subject to any other
contractual obligation or any obligation imposed by operation of law).
Section 3. Indemnification - General. The Corporation shall
-------------------------
indemnify, and advance Expenses to, Indemnitee as provided in this Agreement to
the fullest extent permitted by applicable law in effect on the date hereof and
to such greater extent as applicable law may
3
<PAGE>
thereafter from time to time permit. The rights of Indemnitee provided under the
preceding sentence shall include, but shall not be limited to, the rights set
forth in the other Sections of this Agreement. This Agreement shall not apply to
any claims brought against the Indemnitee based on matters which antedate the
date hereof, unless Indemnitee shall have been serving in a Corporate Status
with respect to such claims, in which case this Agreement shall also apply to
such claims.
Section 4. Proceedings Other Than Proceedings by or in the Right of
--------------------------------------------------------
the Corporation. Indemnitee shall be entitled to the rights of indemnification
- ---------------
provided in this Section if, by reason of Indemnitee's Corporate Status,
Indemnitee is, or is threatened to be made, a party to any threatened, pending,
or completed Proceeding, other than a Proceeding by or in the right of the
Corporation. Pursuant to this Section, Indemnitee shall be indemnified against
Expenses, judgments, penalties, fines and amounts paid in settlement actually
and reasonably incurred by or on behalf of Indemnitee in connection with any
such Proceeding or any claim, issue or matter therein, if Indemnitee acted in
good faith and in a manner Indemnitee reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal Proceeding, had no reasonable cause to believe Indemnitee's conduct was
unlawful.
Section 5. Proceedings by or in the Right of the Corporation.
-------------------------------------------------
Indemnitee shall be entitled to the rights of indemnification provided in this
Section if, by reason of Indemnitee's Corporate Status, Indemnitee is, or is
threatened to be made, a party to any threatened, pending or completed
Proceeding brought by or in the right of the Corporation to procure a judgment
in its favor. Pursuant to this Section, Indemnitee shall be indemnified against
Expenses actually and reasonably incurred by or on behalf of Indemnitee and
against judgments, penalties, fines and amounts paid in settlement in connection
with any such Proceeding if Indemnitee acted in good faith and in a manner
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Corporation.
Notwithstanding the foregoing, no indemnification against such Expenses and
against judgments, penalties, fines and amounts paid in settlement shall be made
in respect of any claim, issue or matter in any such Proceeding as to which
Indemnitee shall have been adjudged to be liable to the Corporation if
applicable law prohibits such indemnification; provided, however, that if
-------- -------
applicable law so permits, indemnification against Expenses and against
judgments, penalties, fines and amounts paid in settlement shall nevertheless be
made by the Corporation in such event
4
<PAGE>
if, and only to the extent that, the Second Judicial District Court of the
County of Washoe of the State of Nevada, or the court in which such Proceeding
shall have been brought or is pending, shall determine.
Section 6. Indemnification for Expenses of a Party Who is Wholly or
--------------------------------------------------------
Partly Successful. Notwithstanding any other provision of this Agreement, to the
- -----------------
extent that Indemnitee is, by reason of his Corporate Status, a party to and is
successful, on the merits or otherwise, in any Proceeding, Indemnitee shall be
indemnified against all Expenses actually and reasonably incurred by or on
behalf of Indemnitee in connection therewith. If Indemnitee is not wholly
successful in such Proceeding but is successful, on the merits or otherwise, as
to one or more but less than all claims, issues or matters in such Proceeding,
the Corporation shall indemnify Indemnitee against all Expenses actually and
reasonably incurred by or on behalf of Indemnitee in connection with each
successfully resolved claim, issue or matter. For the purposes of this Section
and without limiting the foregoing, the termination of any claim, issue or
matter in any such Proceeding by dismissal, with or without prejudice, shall be
deemed to be a successful result as to such claim, issue or matter.
Section 7. Indemnification for Expenses of a Witness. Notwithstanding
-----------------------------------------
any other provision of this Agreement, to the extent that Indemnitee is, by
reason of his Corporate Status, a witness in any Proceeding, Indemnitee shall be
indemnified against all Expenses actually and reasonably incurred by or on
behalf of Indemnitee in connection therewith.
Section 8. Advancement of Expenses. The Corporation shall advance all
-----------------------
Expenses incurred by or on behalf of Indemnitee in connection with any
Proceeding within twenty days after the receipt by the Corporation of a
statement or statements from Indemnitee requesting such advance or advances from
time to time, whether prior to or after final disposition of such Proceeding.
Such statement or statements shall reasonably evidence the Expenses incurred by
Indemnitee and shall include or be preceded or accompanied by an undertaking by
or on behalf of Indemnitee to repay any Expanses advanced if it shall ultimately
be determined that Indemnitee is not entitled to be indemnified against such
Expenses.
Section 9. Procedure for Determination of Entitlement to
---------------------------------------------
Indemnification.
- ---------------
(a) To obtain indemnification under this Agreement in connection with
any Proceeding, and for the duration thereof, Indemnitee shall submit to the
Corporation
5
<PAGE>
a written request, including therein or therewith such documentation
and information as is reasonably available to Indemnitee and is reasonably
necessary to determine whether and to what extent Indemnitee is entitled to
indemnification. The Secretary of the Corporation shall, promptly upon receipt
of any such request for indemnification, advise the Board in writing that
Indemnitee has requested indemnification.
(b) Upon written request by Indemnitee for indemnification pursuant to
Section 9(a) hereof, a determination, if required by applicable law, with
respect to Indemnitee's entitlement thereto shall be made in such case: (i) if a
Change in Control shall have occurred, by Independent Counsel (unless Indemnitee
shall request that such determination be made by the Board or the stockholders,
in which case in the manner provided for in clauses (ii) or (iii) of this
Section 9(b)) in a written opinion to the Board, a copy of which shall be
delivered to Indemnitee; (ii) if a Change in Control shall not have occurred,
(A) by the Board by a majority vote of a quorum consisting of Disinterested
Directors, or (B) if a quorum of the Board consisting of Disinterested Directors
is not obtainable, or even if such quorum is obtainable, if such quorum of
Disinterested Directors so directs, either (x) by Independent Counsel in a
written opinion to the Board, a copy of which shall be delivered to Indemnitee,
or (y) by the stockholders of the Corporation, as determined by such quorum of
Disinterested Directors, or a quorum of the Board, as the case may be; or (iii)
as provided in Section 10(b) of this Agreement. If it is so determined that
Indemnitee is entitled to Indemnification, payment to Indemnitee shall be made
within 10 days after such determination. Indemnitee shall cooperate with the
person, persons or entity making such determination with respect to Indemnitee's
entitlement to indemnification, including providing to such person, persons or
entity upon reasonable advance request any documentation or information which is
not privileged or otherwise protected from disclosure and which is reasonably
available to Indemnitee and reasonably necessary to such determination. Any
costs or expenses (including attorneys' fees and disbursements) incurred by
Indemnitee in so cooperating with the person, persons or entity making such
determination shall be borne by the Corporation (irrespective of the
determination as to Indemnitee's entitlement to indemnification) and the
Corporation hereby indemnifies and agrees to hold Indemnitee harmless therefrom.
(c) If required, Independent Counsel shall be selected as follows: (i)
if a Change in Control shall not have occurred, Independent Counsel shall be
selected by the Board, and the Corporation shall give written notice to
6
<PAGE>
Indemnitee advising Indemnitee of the identity of Independent Counsel so
selected; or (ii) if a Change in Control shall have occurred, Independent
Counsel shall be selected by Indemnitee (unless Indemnitee shall request that
such selection be made by the Board, in which event (i) shall apply), and
Indemnitee shall give written notice to the Corporation advising the Corporation
of the identity of Independent counsel so selected. In either event, Indemnitee
or the Corporation, as the case may be, may, with in 7 days after such written
notice of selection shall have been given, deliver to the Corporation or to
Indemnitee, as the case may be, a written objection to such selection. Such
objection may be asserted only on the ground that Independent Counsel so
selected does not meet the requirements of "Independent Counsel" as defined in
Section 1 of this Agreement, and the objection shall set forth with
particularity the factual basis of such assertion. If such written objection is
made, Independent Counsel so selected may not serve as Independent Counsel
unless and until a court has determined that such objection is without merit.
If, within 20 day after submission by Indemnitee of a written request for
indemnification pursuant to Section 9(a) hereof, no Independent Counsel shall
have been selected and not objected to, either the Corporation or Indemnitee may
petition the Second Judicial District Court of the State of Nevada, or other
court of competent jurisdiction, for resolution of any objection which shall
have been made by the Corporation or Indemnitee to the other's selection of
Independent Counsel and/or for the appointment as Independent Counsel of a
person selected by such court or by such other person as such court shall
designate, and the person with respect to whom an objection is so resolved or
the person so appointed shall act as Independent Counsel under Section 9(b)
hereof. The Corporation shall pay any and all reasonable fees and expenses of
Independent Counsel incurred by such Independent Counsel in connection with its
actions pursuant to this Agreement, and the Corporation shall pay all reasonable
fees and expenses incident to the procedures of this Section 9(c), regardless of
the manner in which such Independent Counsel was selected or appointed. Upon the
due commencement date of any judicial proceeding or arbitration pursuant to
Section 11(a) (iii) of this Agreement, Independent Counsel shall be discharged
and relieved of any further responsibility in such capacity (subject to the
applicable standards of professional conduct then prevailing).
Section 10. Presumptions and Effects of Certain Proceedings.
-----------------------------------------------
(a) If a Change in Control shall have occurred, in making a
determination with respect to entitlement to
7
<PAGE>
indemnification hereunder, the person or persons or entity making such
determination shall presume that Indemnitee is entitled to indemnification under
this Agreement if Indemnitee has submitted a request for indemnification in
accordance with Section 9(a) of this Agreement, and the Corporation shall have
the burden of proof to overcome that presumption in connection with the making
by any person, persons or entity of any determination contrary to that
presumption.
(b) If the person, persons or entity empowered or selected under
Section 9 of this Agreement to determine whether Indemnitee is entitled to
indemnification shall not have made a determination within 60 days after receipt
by the Corporation of the request therefor, the requisite determination of
entitlement to indemnification shall be deemed to have been made and Indemnitee
shall be entitled to such indemnification, absent (i) a misstatement by
Indemnitee of a material fact, or an omission of a material fact necessary to
make Indemnitee's statement not materially misleading, in connection with the
request for indemnification, or (ii) Prohibition of such indemnification under
applicable law; provided, however, that such 60-day period may be extended for a
-------- -------
reasonable time, not to exceed an additional 30 days, if the person, persons or
entity making the determination with respect to entitlement to indemnification
in good faith require(s) such additional time for the obtaining or evaluating of
documentation and/or information relating thereto; and provided, further, that
-------- -------
the foregoing provisions of this Section 10(b) shall not apply (i) if the
determination of entitlement to indemnification is to be made by the
stockholders pursuant to Section 9(b) of this Agreement and if (A) within 15
days after receipt by the Corporation of the request for such determination the
Board has resolved to submit such determination to the stockholders for their
consideration at an annual meeting thereof to be held within 75 days after such
receipt and such determination is made thereat, or (B) a special meeting of
stockholders is called within 15 days after such receipt for the purpose of
making such determination, such meeting is held for such purpose within 60 days
after having been so called and such determination is made thereat, or (ii) if
the determination of entitlement to indemnification is to be made by Independent
Counsel pursuant to Section 9(b) of this Agreement.
(c) The termination of any Proceeding or of any claim, issue or matter
therein, by judgment, order, settlement or conviction, or upon a plea of nolo
----
contendere or its equivalent, shall not (except as otherwise expressly provided
- ----------
in this Agreement) of itself adversely affect the right of Indemnitee to
indemnification or create a presumption that Indemnitee did not act in good
faith and in
8
<PAGE>
a manner which Indemnitee reasonably believed to be in or not opposed to the
best interests of the Corporation or, with respect to any criminal Proceeding,
that Indemnitee had reasonable cause to believe that Indemnitee's conduct was
unlawful.
Section 11. Remedies of Indemnitee.
----------------------
(a) In the event that (i) a determination is made pursuant to Section
9 of this Agreement that Indemnitee is not entitled to indemnification under
this Agreement, (ii) advancement of Expenses is not timely made pursuant to
Section 8 of this Agreement, (iii) the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to Section 9(b) of
this Agreement and such determination shall not have been made and delivered in
a written opinion within 90 days after receipt by the Corporation of the request
for indemnification, (iv) payment of indemnification is not made pursuant to
Section 7 of this Agreement within 10 days after receipt by the Corporation of a
written request there for, or (v) payment of indemnification is not made within
10 days after a determination is deemed to have been made that Indemnitee is
entitled to indemnification or such determination is deemed to have been made
pursuant to Section 9 or 10 of this Agreement, Indemnitee shall be entitled to
an adjudication in an appropriate court of the State of Nevada, or in any other
court of competent jurisdiction, of Indemnitee's entitlement to such
indemnification or advancement of Expenses. Alternatively, Indemnitee, at
Indemnitee's option, may seek an award in arbitration to be conducted by a
single arbitrator pursuant to the rules of the American Arbitration Association.
Indemnitee shall commence such proceeding seeking an adjudication or an award in
arbitration within 180 days following the date on which Indemnitee first has the
right to commence such proceeding pursuant to this Section 11(a). The
Corporation shall not oppose Indemnitee's rights to seek any such adjudication
or award in arbitration.
(b) In the event that a determination shall have been made pursuant to
Section 9 of this Agreement that Indemnitee is not entitled to indemnification,
any judicial proceeding or arbitration commenced pursuant to this Section shall
be conducted in all respects as a de novo trial or arbitration on the merits and
-- ----
Indemnitee shall not be prejudiced by reason of that adverse determination. If
a Change in Control shall have occurred, in any judicial proceeding or
arbitration commenced pursuant to this Section the Corporation shall have the
burden of proving that Indemnitee is not entitled to indemnification or
advancement of Expenses, as the case may be.
9
<PAGE>
(c) If a determination shall have been made or deemed to have been
made pursuant to Section 9 or 10 of this Agreement that Indemnitee is entitled
to indemnification, the Corporation shall be bound by such determination in any
judicial proceeding or arbitration commenced pursuant to this Section, absent
(i) a misstatement by Indemnitee of a material fact, or an omission of a
material fact necessary to make Indemnitee's statement not materially
misleading, in connection with the request for indemnification, or (ii)
prohibition of such indemnification under applicable law.
(d) The Corporation shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section that the procedures
and presumptions of this Agreement are not valid, binding and enforceable and
shall stipulate in any such court or before any such arbitrator that the
Corporation is bound by all the provisions of this Agreement.
(e) In the event that Indemnitee, pursuant to this Section, seeks a
judicial adjudication of, or an award in arbitration to enforce, Indemnitee's
rights under, or to recover damages for breach of, this Agreement, Indemnitee
shall be entitled to recover from the Corporation, and shall be indemnified by
the Corporation against, any and all expenses (of the kinds described in the
definition of Expenses) actually and reasonably incurred by Indemnitee in such
judicial adjudication or arbitration, but only if Indemnitee prevails therein.
If it shall be determined in such judicial adjudication or arbitration that
Indemnitee is entitled to receive part but not all of the indemnification or
advancement of expenses sought, the expenses incurred by Indemnitee in
connection with such judicial adjudication or arbitration shall be appropriately
prorated.
Section 12. Non-Exclusivity; Survival of Rights; Insurance;
-----------------------------------------------
Subrogation.
- -----------
(a) The rights of indemnification and to receive advancement of
Expenses as provided by this Agreement shall not be deemed exclusive of any
other rights to which Indemnitee may at any time be entitled under applicable
law, the Articles of Incorporation or By-Laws of the Corporation, any agreement,
a vote of stockholders or a resolution of directors, or otherwise. No amendment,
alteration or repeal of this Agreement or any provision hereof shall be
effective as to any Indemnitee with respect to any action taken or omitted by
such Indemnitee in Indemnitee's Corporate Status prior to such amendment,
alteration or appeal.
(b) To the extent that the Corporation maintains an insurance policy
or policies providing liability insurance for directors, officers, employees,
agents or fiduciaries of the Corporation or of any other corporation,
10
<PAGE>
partnership, joint venture, trust, employee benefit plan or other enterprise
which such person serves at the request of the Corporation, Indemnitee shall be
covered by such policy or policies in accordance with its or their terms to the
maximum extent of the coverage available for any such director, officer,
employee, agent or fiduciary under such policy or policies.
(c) In the event of any payment under this Agreement, the Corporation
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and take all
action necessary to secure such rights, including execution of such documents as
are necessary to enable the Corporation to bring suit to enforce such rights.
(d) The Corporation shall not be liable under this Agreement to make
any payment of amounts otherwise indemnifiable hereunder if and to the extent
that Indemnitee has otherwise actually received such payment under any insurance
policy, contract, agreement or otherwise.
Section 13. Duration of Agreement. This Agreement shall continue
---------------------
until and terminate upon the later of: (a) 10 years after the date that
Indemnitee shall have ceased to serve as a director, officer, employee, agent or
fiduciary of the Corporation or of any other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise which Indemnitee
served at the request of the Corporation; or (b) the final termination of all
pending Proceedings in respect of which Indemnitee is granted rights of
indemnification or advancement of Expenses hereunder and of any proceeding
commenced by Indemnitee pursuant to Section 11 of this Agreement. This Agreement
shall be binding upon the Corporation and its successor: and assigns and shall
inure to the benefit of Indemnitee and Indemnitee's heirs, executors and
administrators.
Section 14. Severability. If any provision or provisions of this
------------
Agreement shall be held to be invalid, illegal or unenforceable for any reason
whatsoever: (a) the validity, legality and enforceability of the remaining
provisions of this Agreement (including, without limitation, each portion of any
Section of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that is not itself invalid, illegal or unenforceable)
shall not in any way be affected or impaired thereby; and (b) to the fullest
extent possible, the provisions of this Agreement (including, without
limitation, each portion of any Section of this Agreement containing any such
provision held to be invalid, illegal or unenforceable, that is not itself
invalid, illegal or unenforceable) shall be construed
11
<PAGE>
so as to give effect to the intent manifested by the provision held invalid,
illegal or unenforceable.
Section 15. Exception to Right of Indemnification or Advancement of
-------------------------------------------------------
Expenses. Except as provided in Section 11(e), Indemnitee shall not be entitled
- --------
to indemnification or advancement of Expenses under this Agreement with respect
to any Proceeding, or any claim therein, brought or made by Indemnitee against
the Corporation.
Section 16. Identical Counterparts. This Agreement may be executed in
----------------------
one or more counterparts, each of which shall for all purposes be deemed to be
an original but all of which together shall constitute one and the same
Agreement. Only one such counterpart signed by the party against whom
enforceability is sought needs to be produced to evidence the existence of this
Agreement.
Section 17. Headings. The headings of the paragraphs of this
--------
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction thereof.
Section 18. Modification and Waiver. No supplement, modification or
-----------------------
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.
Section 19. Notice by Indemnitee. Indemnitee agrees promptly to
--------------------
notify the Corporation in writing upon being served with any summons, citation,
subpoena, complaint, indictment, information or other document relating to any
Proceeding or matter which may be subject to indemnification or advancement of
Expenses covered hereunder.
Section 20. Notices. All notices, requests, demands and other
-------
communications hereunder shall be in writing and shall be deemed to have been
duly given if (i) delivered by hand and receipted for by the party to whom such
notice or other communication shall have been directed, or (ii) mailed by
certified or registered mail with postage prepaid, on the third business day
after the date on which it is so mailed:
(a) If to Indemnitee, to the home address according to the records of
the Corporation on the day of the notice.
(b) If to the Corporation to:
12
<PAGE>
The Hillhaven Corporation
1148 Broadway Plaza
Tacoma, WA 98401
Attention: Secretary
or to such other address as may have been furnished to Indemnitee by the
Corporation or to the Corporation by Indemnitee, as the case may be.
Section 21. Governing Law. The parties agree that this Agreement
-------------
shall be governed by, and construed and enforced in accordance with, the laws of
the State of Nevada.
13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
THE HILLHAVEN CORPORATION
By_________________________________
Name:
Title:
_________________________________
Indemnitee
14
<PAGE>
EXHIBIT 10.25
THE AMENDED
HILLHAVEN CORPORATION
BOARD OF DIRECTORS RETIREMENT PLAN
Effective January 1, 1995
SECTION 1
STATEMENT OF PURPOSE
This Amended Board of Directors Retirement Plan (the "Plan") of The
Hillhaven Corporation has been adopted to attract, retain, motivate and provide
financial security to members of the Board of Directors who are not employees
of the Company (the "Participants"). This Amended Plan applies to Directors
whose Termination of Service occurs after December 31, 1994.
SECTION 2
DEFINITIONS
2.1 AGREEMENT. "Agreement" means a written agreement
substantially in the form of Exhibit A between The Hillhaven Corporation and a
Participant.
2.2 ANNUAL BOARD RETAINER. "Annual Board Retainer" means the
total annual retainer paid to a Director by The Hillhaven Corporation for
Service on The Hillhaven Corporation's Board of Directors, excluding any
separate fees paid for meeting attendance or service of any committees of the
Board of Directors.
2.3 COMMITTEE. "Committee" means the members of the Executive
Committee of the Board of Directors of The Hillhaven Corporation who are
employees of the Company.
2.4 COMPANY. "Company" means The Hillhaven Corporation and its
Subsidiaries.
2.5 CHANGE OF CONTROL EVENT. A "Change of Control Event" shall be
deemed to occur if any of the following events has occurred:
(i) A Person, alone or together with its
Affiliates and Associates, or "group", within the meaning of
Section 13(d)(3) of the Securities
<PAGE>
Exchange Act of 1934, becomes, after the date hereof, the
beneficial owner of 20% or more of the general voting power of
the Company. Notwithstanding the preceding sentence, a Change
of Control Event shall not be deemed to occur if the "Person"
described in the preceding sentence has acquired 20% or more
of the general voting power of the Company as consideration in
a transaction or series of related transactions involving the
Company's acquisition (by stock acquisition, merger, asset
purchase or otherwise) of one or more businesses approved
prior to such transactions or series of transactions by the
Incumbent Board (as defined in (ii) below), and provided that,
if such transaction or series of transactions results in the
merger, consolidation or reorganization of the Company and
such Person, the Company is the surviving entity following
such merger, consolidation or reorganization.
(ii) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board"), cease for any
reason to constitute at least a majority of the Board,
provided that any person becoming a director subsequent to the
date hereof whose election, or nomination for election by the
Company's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
(other than an election or nomination of an individual whose
initial assumption of office is in connection with an actual
or threatened election contest relating to the election of the
directors of the Company, as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Securities
Exchange Act of 1934) shall be considered as though such
person were a member of the Incumbent Board.
(iii) Consummation or effectiveness of:
a. a merger, consolidation or
reorganization involving the Company (a "Business
Combination"), unless
1. the stockholders of the
Company, immediately before the Business
Combination, own, directly or indirectly
immediately following the Business
Combination, at least fifty-one percent (51%)
of the combined voting power of the
outstanding voting securities of the
corporation resulting from the Business
Combination (the "Surviving Corporation") in
substantially the same proportion as their
ownership of the voting securities
immediately and before the Business
Combination, and
2. the individuals who were
members of the Incumbent Board immediately
prior to the execution of the agreement
providing for the Business Combination
constitute at
2
<PAGE>
least a majority of the members of the Board
of Directors of the Surviving Corporation, and
3. no Person (other than any
Person who, immediately prior to the Business
Combination, had beneficial ownership of
twenty percent (20%) or more of the then
outstanding Voting Securities) has Beneficial
Ownership of twenty percent (20%) or more of
the combined voting power of the Surviving
Corporation's then outstanding voting
securities;
b. a complete liquidation or
dissolution of the Company; or
c. the sale or other disposition of all
or substantially all of the assets of the Company to
any Person.
For purposes of determining whether a Change of Control Event
has occurred, the following additional definitions apply:
"Affiliate or Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934.
"Person," shall mean an individual, firm, corporation or other
entity or any successor to such entity, but "Person" shall not
include the Company, any subsidiary of the Company, any
employee benefit plan or employee stock plan (including a
trust relating thereto) of the Company or any subsidiary of
the Company, or any Person organized, appointed, established
or holding Voting Stock by, for or pursuant to the terms of
such a plan. "Person" shall also not include National Medical
Enterprises, Inc. ("NME"), any subsidiary of NME, any
Affiliate or Associate of NME, any employee benefit plan or
employee stock plan of NME or any subsidiary of NME to the
extent that such entities, individually or collectively, own
any or all of (x) 8,878,147 shares of the Company's common
stock (approximately 31% of the general voting power of the
Company as of December 6, 1994) registered in the name of NME
or any subsidiary of NME as of the date of this Agreement, or
(y) such additional number of shares of the Company's common
stock issued to NME or any subsidiary of NME in exchange for
shares of the Company's Series C Preferred Stock or Series D
Preferred Stock so long as such exchange has been approved in
advance by the Incumbent Board.
"Voting Stock" shall mean shares of the Company's capital
stock having general voting power, with "voting power" meaning
the power under ordinary circumstances (and not merely upon
the happening of a contingency) to vote in the election of
directors.
3
<PAGE>
2.6 DIRECTOR. A "Director" is any member of the Board of
Directors of The Hillhaven Corporation who is not an employee of the Company.
2.7 ELIGIBLE CHILDREN. "Eligible Children" means all natural or
adopted children of a Participant under the age of 21, including any child
conceived prior to the death of a Participant.
2.8 FINAL ANNUAL BOARD RETAINER. "Final Annual Board Retainer"
means the Annual Board Retainer being paid to a Director at the time of his or
her Termination of Service on the Board of Directors of The Hillhaven
Corporation.
2.9 NORMAL RETIREMENT AGE. "Normal Retirement Age" under this
Plan is age 65.
2.10 PARTICIPANT. "Participant" shall include any Director who is
not an employee of The Hillhaven Corporation who enters into an agreement to
participate in the Plan.
2.11 SERVICE. "Service" refers to service as a Director of The
Hillhaven Corporation.
2.12 SUBSIDIARY. A "Subsidiary" of the Company is any corporation,
partnership, venture or other entity in which the Company owns 50% of the
capital stock or otherwise has a controlling interest as determined by the
Committee, in its sole and absolute discretion.
2.13 SURVIVING SPOUSE. "Surviving Spouse" means the person legally
married to the Participant for at least a one year period prior to the
Commencement Date of Benefits hereunder.
2.14 TERMINATION OF SERVICE. "Termination of Service" means the
cessation of a Participant's service as a Director of The Hillhaven Corporation
for any reason whatsoever, whether voluntarily or involuntarily.
2.15 YEAR. A "Year" is a period of twelve consecutive calendar
months.
2.16 YEARS OF SERVICE. "Year of Service" means each complete Year
of Service as a Director of The Hillhaven Corporation. Years of Service shall
be deemed to have begun as of the first day of the calendar month of service
and to have ceased on the last day of the calendar month of service.
4
<PAGE>
SECTION 3
RETIREMENT BENEFITS
3.1 RETIREMENT BENEFIT.
(a) Upon the later of a Participant's Termination of
Service or attainment of Normal Retirement Age, The
Hillhaven Corporation agrees to pay to the
Participant an annual Retirement Benefit for ten
years in an amount equal to 100% of his or her Final
Annual Board Retainer, subject to the limitation of
Section 3.1(b) and the vesting of Section 3.2.
(b) The Retirement Benefit shall not exceed $24,000 (100%
of the Annual Board Retainer in 1993) increased by a
compounded rate of six percent per year from 1994 to
the year of the Participant's Termination of Service.
3.2 VESTING OF RETIREMENT BENEFIT. A Participant's interest in
his Retirement Benefit shall vest in accordance with the following schedule:
<TABLE>
<CAPTION>
YEARS OF SERVICE VESTED BENEFIT
<S> <C>
Less than 5 0%
5 50%
6 60%
7 70%
8 80%
9 90%
10 100%
</TABLE>
All Years of Service as a Director shall count towards vesting credit. Vested
Retirement Benefits are subject to offset pursuant to Section 5.6 and
forfeiture pursuant to Section 5.7.
3.3 SURVIVOR BENEFIT.
(a) If a Participant who is receiving a Retirement
Benefit dies, his or her Surviving Spouse or Eligible
Children shall be entitled to receive (in accordance
with Sections 3.4 and 3.5) the installments of the
5
<PAGE>
Participant's Retirement Benefit for the remainder of
the ten year period.
(b) If a Participant, who has a vested interest under
Section 3.2, dies while serving as a Director of The
Hillhaven Corporation, his or her Surviving Spouse or
Eligible Children shall be entitled at the
Participant's death to receive (in accordance with
Sections 3.4 and 3.5) the installments of the
Retirement Benefit which would have been payable to
the Participant in accordance with Section 3.1 for a
period of ten years. The limitation set forth in
Section 3.1(b) will be based upon the date of the
Participant's death.
(c) If a Participant, who has a vested interest under
Section 3.2, dies after Termination of Service but at
death is not receiving any Retirement Benefits under
this Plan, his or her Surviving Spouse or Eligible
Children shall be entitled at the Participant's death
to receive (in accordance with Sections 3.4 and 3.5)
the installments of the Retirement Benefit which
would have been payable to the Participant in
accordance with Section 3.1 for a period of ten
years.
3.4 FORM AND DURATION OF BENEFIT PAYMENT. Retirement Benefits
shall be paid in equal monthly installments over a period of ten years.
Surviving Spouse payments shall be paid in equal monthly installments
over the remainder of the ten year period.
Eligible Children benefit payments shall be paid monthly over the
remainder of the ten year period, but not beyond the date when the youngest of
the Eligible Children reaches age 21.
3.5 RECIPIENTS OF BENEFIT PAYMENTS. If a Participant dies without
a Surviving Spouse but is survived by any Eligible Children, then benefits will
be paid to the Eligible Children or their legal guardian, if applicable. The
total monthly benefit payment will be equal to the monthly benefit that a
Surviving Spouse would have received, which will be paid in equal shares to
each of the Eligible Children for the remainder of the ten year period or until
the youngest of the Eligible Children attains age 21, whichever comes first.
When any of the Eligible Children reaches age 21, his or her share will be
reallocated equally to the remaining Eligible Children.
If the Surviving Spouse dies after the death of the Participant but is
survived by Eligible Children, the total monthly benefit previously paid to the
Surviving Spouse will be paid in equal shares to each of the Eligible Children
for the remainder of the ten year period or until the youngest of the Eligible
Children attains age 21, whichever comes first.
6
<PAGE>
When any of the Eligible Children reaches age 21, his or her share will be
reallocated equally to the remaining Eligible Children.
3.6 CHANGE OF CONTROL. In the event of a Change of Control Event
of The Hillhaven Corporation while this Plan remains in effect which results in
a Participant's Termination of Service as a Director of The Hillhaven
Corporation or a Participant's failure to be reelected as a Director of The
Hillhaven Corporation when his or her term of office expires, (i) the
Participant's Retirement Benefit hereunder will be fully vested in the
Participant without regard to his or her Years of Service with The Hillhaven
Corporation, and (ii) notwithstanding any other provisions of this Plan, the
Participant will be entitled to receive the full Normal Retirement Benefit
commencing at age 65. Notwithstanding the foregoing, Vested Retirement
Benefits are subject to offset pursuant to Section 5.6 and forfeiture pursuant
to the provisions of Section 5.7.
SECTION 4
PAYMENT
4.1 COMMENCEMENT OF PAYMENTS. Payments under this Plan shall
begin not later than the first day of the calendar month following the
occurrence of an event which entitles a Participant (or his or her Surviving
Spouse or Eligible Children) to payments under this Plan.
4.2 WITHHOLDING; EMPLOYMENT TAXES. To the extent required by the
law in effect at the time payments are made, The Hillhaven Corporation shall
report all payments hereunder and shall withhold therefrom any taxes required
to be withheld by the Federal or any state or local government.
4.3 RECIPIENTS OF PAYMENTS. All payments to be made by The
Hillhaven Corporation under this Plan shall be made to the Participant during
his or her lifetime. All subsequent payments under the Plan shall be made by
The Hillhaven Corporation to the Participant's Surviving Spouse, Eligible
Children or their guardian, if applicable.
SECTION 5
CONDITIONS RELATED TO BENEFITS
5.1 ADMINISTRATION OF PLAN. The Committee has been authorized to
administer the Plan and to interpret, construe and apply its provisions in
accordance with its terms. The Committee shall administer the Plan and shall
establish, adopt or revise such rules and regulations as it may deem necessary
or advisable for the administration of the Plan. All decisions of the
Committee shall be by vote or written consent of the majority of its members
and shall be final and binding.
7
<PAGE>
5.2 NO RIGHTS TO ASSETS. Neither a Participant nor any other
person shall acquire by reason of the plan any right in or title to any assets,
fund or property of The Hillhaven Corporation and its subsidiaries whatsoever
including, without limiting the generality of the foregoing, any specific funds
or assets which The Hillhaven Corporation, in its sole discretion, may set
aside in anticipation of a liability hereunder. No trust shall be created in
accordance with or by the execution or adoption of this Plan or any Agreement
with a Participant, and any benefits which become payable hereunder shall be
paid from the general assets of The Hillhaven Corporation. A Participant shall
have only an unsecured contractual right to the amounts, if any, payable
hereunder.
5.3 NO TENURE RIGHTS. Nothing herein shall constitute a contract
of continuing service or in any manner obligate The Hillhaven Corporation to
continue the Service of a Director, or obligate a Director to continue in the
Service of The Hillhaven Corporation, and nothing herein shall be construed as
fixing or regulating the compensation paid to a Director.
5.4 RIGHT TO TERMINATE OR AMEND. Except during any two year
period after any Change of Control Event of The Hillhaven Corporation, The
Hillhaven Corporation reserves the sole right to terminate the Plan at any time
and to terminate an Agreement with any Participant at any time. In the event
of termination of the Plan or of a Participant's Agreement, a Participant shall
be entitled only to the vested portion of his or her accrued benefits under
Section 3 of the Plan as of the time of the termination of the Plan or his or
her Agreement.
Benefits will be paid in the amounts specified and will commence at
the time specified in Section 3 as appropriate. The Hillhaven Corporation
further reserves the right in its sole discretion to amend the Plan in any
respect except that Plan benefits cannot be reduced during any two year period
after any Change of Control Event of The Hillhaven Corporation. No amendment
of the Plan (whether there has or has not been a Change of Control Event of The
Hillhaven Corporation) that reduced the value of the benefit theretofore
accrued and vested by the Participant shall be effective.
5.5 ELIGIBILITY. Eligibility to participate in the Plan is
expressly conditional upon a Director's furnishing The Hillhaven Corporation
certain information and taking physical examinations and such other relevant
action as may be reasonably requested by The Hillhaven Corporation. Any
Participant who refuses to provide such information or to take such action
shall not be enrolled as or shall thereupon cease to be a Participant under the
Plan. Any Participant who commits suicide during the two year period beginning
on the date of his or her Agreement, or who makes any material misstatement of
information or non-disclosure of medical history, will not receive any benefits
hereunder unless, in the sole discretion of the Committee, benefits in a
reduced amount are awarded.
8
<PAGE>
5.6 OFFSET. If at the time payments or installments are to be
made hereunder, any Participant or his or her Surviving Spouse or both are
indebted to The Hillhaven Corporation or its Subsidiaries, then the payments
remaining to be made to the Participant or his or her Surviving Spouse or both
may, at the discretion of the Committee, be reduced by the amount of such
indebtedness; provided, however, that an election by the Committee not to
reduce any such payment or payments shall not constitute a waiver of any claim
for such indebtedness.
5.7 CONDITIONS PRECEDENT. No Retirement Benefits will be payable
hereunder to any Participant (i) whose Service with The Hillhaven Corporation
is terminated because of willful misconduct or gross negligence in the
performance of his or her duties or (ii) who within three years after
Termination of Service becomes an employee, director or consultant to any third
party engaged in any line of business in competition with the Company that
accounts for more than ten percent of the gross revenues of the Company taken
as a whole.
SECTION 6
MISCELLANEOUS
6.1 NONASSIGNABILITY. Neither a Participant nor any other person
shall have any right to commute, sell, assign, transfer, pledge, anticipate,
mortgage or otherwise encumber, transfer, hypothecate or convey in advance of
actual receipt the amounts, if any, payable hereunder, or any part thereof,
which are, and all rights to which are, expressly declared to be unassignable
and non-transferrable. No part of the amounts payable shall, prior to actual
payment, be subject to seizure, or sequestration for the payment of any debts,
judgments, alimony or separate maintenance owed by a Participant or any other
person, nor be transferrable by operation of law in the event of a
Participant's or any person's bankruptcy or insolvency.
6.2 GENDER AND NUMBER. Wherever appropriate herein, the
masculine may mean the feminine and the singular may mean the plural or vise
versa.
6.3 NOTICE. Any notice required or permitted to be given to the
Committee under the Plan shall be sufficient if in writing and hand delivered,
or sent by registered or certified mail, to the principal office of The
Hillhaven Corporation, directed to the attention of the Secretary of the
Committee. Such notice shall be deemed given as of the date of delivery or, if
it is made by mail, as of the date shown on the postmark or on the receipt for
registration or certification.
6.4 VALIDITY. In the event any provision of this Plan is held
invalid, void or unenforceable, the same shall not affect, in any respect
whatsoever, the validity of any other provision of this Plan.
9
<PAGE>
6.5 APPLICABLE LAW. This Plan shall be governed and construed in
accordance with the laws of the State of Washington.
6.6 SUCCESSORS IN INTEREST. This Plan shall inure to the benefit
of, and be binding upon, and be enforceable by, any corporate successor to The
Hillhaven Corporation or successor to substantially all of the assets of The
Hillhaven Corporation.
6.7 NO REPRESENTATION ON TAX MATTERS. The Hillhaven Corporation
makes no representation to Participants regarding current or future income tax
ramifications of the Plan.
DATED this _____ day of February, 1995.
THE HILLHAVEN CORPORATION
By ________________________________
Its ____________________________
10
<PAGE>
EXHIBIT A
THE HILLHAVEN CORPORATION
BOARD OF DIRECTORS RETIREMENT PLAN AGREEMENT
THIS AGREEMENT is made and entered into at Tacoma, Washington, as of
______________, 199___, by and between The Hillhaven Corporation (the
"Company") and _____________________________________________("Director").
WHEREAS, THE HILLHAVEN CORPORATION has adopted a Board of Directors
Retirement Plan (as amended or restated from time to time, the "Plan");
and
WHEREAS, since the Director presently serves as a member of the Board
of Directors of the Company and is not an employee of the Company, the
Director is eligible to participate in the Plan; and
WHEREAS, the Plan requires that an agreement be entered into between
the Company and Director setting out certain terms and benefits of the
Plan as they apply to the Director;
NOW, THEREFORE, the Company and the Director hereby agree as follows:
1. The Plan, a copy of which is attached, is hereby incorporated
into and made a part of this Agreement as though set forth in
full herein. The parties shall be bound by, and have the
benefit of, each and every provision of the Plan, including but
not limited to the non-assignability provisions of Section 6.1
of the Plan.
2. The Director was born on ______________, 19___, and his or her
present service as a member of the Board of Directors of the
Company began on _______________, 19___.
3. This Agreement shall inure to the benefit of, and be binding
upon, the Company, its successors and assigns, and the Director
and his or her surviving Spouse and Eligible Children.
IT WITNESS WHEREOF, the parties hereto have signed and entered into
this Agreement as of he date first above written.
THE HILLHAVEN CORPORATION
By: _________________________________
Its: ________________________________
_____________________________________
Director
<PAGE>
EXHIBIT 10.26
DEFERRED SAVINGS PLAN
OF
THE HILLHAVEN CORPORATION
Application will be made to the Internal Revenue Service for an advance
determination that the Deferred Savings Plan of The Hillhaven Corporation (the
"Plan") satisfies the requirements of Sections 401(a), 401(k) and other
applicable provisions of the Internal Revenue Code.
<PAGE>
DEFERRED SAVINGS PLAN
OF
THE HILLHAVEN CORPORATION
<TABLE>
<CAPTION>
ARTICLE SECTION CONTENTS PAGE
- ------- ------- -------- ----
<S> <C> <C> <C>
I DEFINITIONS 1
II COMMITTEE AND OTHER FIDUCIARIES 16
2.1 Duties and Relationship of Fiduciaries 16
2.2 Appointment of Committee 17
2.3 Powers and Duties of Committee 17
2.4 Funding Policy 20
2.5 Investment Manager 20
2.6 Organization of Committee - Allocation
and Delegation of Duties 20
2.7 Compensation and Expenses of
Committee 21
2.8 Records of the Committee 21
2.9 Resignation and Removal of Members 21
2.10 Appointment of Successors 22
III PARTICIPATION OF EMPLOYEES 23
3.1 Eligibility to Participate 23
3.2 Application for Participation 23
3.3 Committee to Determine
Eligibility 24
3.4 Termination and Recommencement
of Active Participation 24
3.5 Termination of Participation 25
3.6 Military Service 25
3.7 Leaves of Absence 25
IV COMPENSATION DEFERRAL CONTRIBUTIONS 27
4.1 Compensation Deferral Contributions
by Participants 26
4.2 Elections to Change Compensation
Deferral Contributions 28
4.3 Maximum Amount Subject to Deferral 29
4.4 Non-Applicability of Limitation on
Compensation Deferrals by Highly
Compensated Employees 29
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
ARTICLE SECTION CONTENTS PAGE
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<S> <C> <C> <C>
4.5 Provisions for Return of Annual
Compensation Deferral
Contributions in Excess of
Deferral Limitation 29
4.6 Employer's Contribution 31
4.7 Non-Applicability of Limitations
on Matching Contributions for
Highly Compensated Employees 32
4.8 Separate Accounts 32
4.9 Conditional Contributions 32
V DETERMINATION AND VESTING OF
PARTICIPANTS' INTERESTS 34
5.1 Determination of Participants'
Interests 34
5.2 Vesting of Participants' Interests 36
5.3 Forfeiture For Cause 38
5.4 Election of Former Vesting
Schedule 38
5.5 Changes in Vesting Schedule 39
VI PAYMENT OF BENEFITS OTHER THAN
DEATH BENEFITS 40
6.1 Termination of Employment 40
6.2 Commencement of Benefits 40
6.3 Normal Form of Benefits 41
6.4 Automatic Cashouts 41
6.5 Forfeitures; Restoration 42
6.6 Facility of Payment 43
6.7 Special Distribution Rules 43
6.8 Withdrawal of Compensation Deferrals
by Participants 44
VII DISTRIBUTIONS UPON DEATH;
DESIGNATIONS OF BENEFICIARIES 46
7.1 Form of Death Benefits Provided 46
7.2 Designation of Beneficiary 46
7.3 Additional Requirements for
Distribution 47
VIII CONTINUANCE AND AMENDMENT OF PLAN 49
8.1 Continuance of the Plan Not a
Contractual Obligation of
the Company 49
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
ARTICLE SECTION CONTENTS PAGE
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<S> <C> <C> <C>
8.2 Plan Merger or Consolidation 49
8.3 Distribution of Trust Fund on
Termination or Partial Termination
of Plan 50
8.4 Amendments 50
IX ADMINISTRATION OF THE TRUST FUND 51
9.1 The Trust Agreement 51
X MISCELLANEOUS 52
10.1 Right of Company and Affiliates
to Dismiss Employees 52
10.2 Benefits Provided Solely From the
Trust Fund 52
10.3 Notice of Participants to be Filed
with Committee 52
10.4 Plan Intended to Conform to
Provisions of Federal Internal
Revenue Code Relative to
Employee's Trusts 52
10.5 Amendment and Successor Code or
Act or Sections Thereof 53
10.6 Claims Procedure 53
10.7 Context to Control 55
10.8 Gender and Number 56
10.9 More Than One Capacity 56
10.10 Service of Process 56
10.11 Indemnification 56
10.12 Missing Participants 57
10.13 Administrative Mistake 57
10.14 Information to be Furnished
to Committee 57
10.15 Spendthrift Trust Provisions 58
10.16 Withholding 59
10.17 Severability 60
XI TOP HEAVY PLAN RULES 61
11.1 Applicability 61
11.2 Definitions 61
11.3 Top-Heavy Status 62
11.4 Minimum Contributions 65
11.5 Maximum Annual Addition 66
11.6 Vesting Rules 67
11.7 Non-Eligible Employees 67
</TABLE>
(iii)
<PAGE>
DEFERRED SAVINGS PLAN
OF
THE HILLHAVEN CORPORATION
The undersigned, THE HILLHAVEN CORPORATION, a corporation organized
and doing business under the laws of the State of Nevada, does hereby constitute
and adopt the following Deferred Savings Plan, to be effective as of the
Effective Date (as defined below), to wit:
ARTICLE I
DEFINITIONS
When used herein, the following words shall have the following
meanings unless the context clearly indicates otherwise:
1.1 "Act" shall mean the Employee Retirement Income Security Act of
1974 (Public Law 93-406), all amendments thereto and all regulations issued
thereunder.
1.2 "Active Participant" shall mean a Participant who is employed by
the Employer and who is currently making Employee Mandatory Compensation
Deferral Contributions to the Plan.
1.3 "Administrator" - see "Committee," Paragraph 1.10.
1.4 "Affiliate" shall mean
(a) Any corporation which is included in a controlled group of
corporations, within the meaning of Section 414(b) of the Code, of which group
the Company is also a member,
(b) Any trade or business which is under common control with the
Company within the meaning of Section 414(c) of the Code,
(c) Any member of an affiliated service group, within the meaning
of Section 414(m) of the Code, that includes the Company, and
(d) Any other entity required to be aggregated with the Company
pursuant to regulations under Section 414(o) of the Code.
<PAGE>
Notwithstanding the foregoing, an entity shall be deemed to be an
Affiliate only with respect to periods during which the test under Code Section
414(b), (c), (m), or (o), as applicable, is met.
1.5 "Age" for any specified year shall be deemed to have been
attained at the arrival of the birthday during the latest of the number of years
in question.
1.6 "Beneficiary" shall mean a person who under this Plan becomes
entitled to receive a Participant's interest upon his death, unless otherwise
indicated by the context.
1.7 "Board of Directors" shall mean the Board of Directors of THE
HILLHAVEN CORPORATION.
1.8 "Claims Coordinator' shall mean the Claims Coordinator
hereinafter provided for in Paragraph 10.6.
1.9 "Code" shall mean the Internal Revenue Code of 1986, all
amendments thereto and all regulations issued thereunder.
1.10 "Committee" shall mean the Administration Committee hereinafter
provided for in Article II. Each member of the Committee shall be a "Named
Fiduciary" as defined by Section 402(a) of the Act. The Administration Committee
shall also be the "Administrator" provided for in Section 3(16)(A) of said Act.
1.11 "Company" shall mean THE HILLHAVEN CORPORATION.
1.12 "Compensation," for any calendar year, means the entire amount of
salary, wages and other remuneration reported by the Employer on Internal
Revenue Service Form W-2 for such calendar year, subject, however, to the
following adjustments:
(a) There shall be excluded from "Compensation" all of the
following amounts:
(i) "Holiday" and de minimis gifts.
--------------
(ii) Insurance premiums and any other imputed income not
paid in cash to the Employee.
(iii) Payments to an Employee designated as reimbursement for
voluntary contributions of the Employee to an individual retirement
arrangement.
2
<PAGE>
(iv) Except as provided in Subparagraph (b) below, payments
to or pursuant to any employee benefit plan, including, but not limited to
pensions, retirement benefits, stock bonuses, stock options, stock
appreciation rights and payments in lieu of dividends on shares of
restricted stock.
(v) In the case of an Employee working outside of the
United States, amounts in excess of the Employee's base pay intended to
reimburse the Employee for the higher cost of living outside of the United
States, such as foreign service premiums or hardship allowances.
(vi) Automobile, parking or other transportation-related
allowances, if any.
(vii) Club memberships or dues.
(viii) Relocation allowances and distributions from a Deferred
Compensation Master Plan of the Company or an Affiliate.
(ix) Professional association dues.
(x) Education or tuition allowances or reimbursements.
(xi) Uniforms or uniform allowances.
(xii) Any amount paid to a Covered Employee by the Employer
on account of a period of time during which no duties are performed by the
Covered Employee.
(xiii) Any payments made or due under a plan maintained solely
for the purpose of complying with workers compensation or unemployment
compensation or disability insurance laws.
(xiv) Any payment which solely reimburses the Employee for
expenses incurred by the Employee.
(xv) Any payments made to the Employee as severance pay.
(b) "Compensation" for a Plan Year shall also include amounts
which otherwise would be included in "Compensation" under the preceding
provisions of this Paragraph 1.12 but which are deferred by a Participant
3
<PAGE>
under this Plan in accordance with Section 401(k) of the Code or which are not
includible in income by reason of a salary reduction arrangement recognized
under Section 125 of the Code.
(c) Notwithstanding the foregoing, no amount payable to an
Employee by an Employer shall be deemed to be Compensation unless the
Compensation (i) is payable to the Employee with respect to a period of time (A)
during which the Employee is a Covered Employee and (B) following the date as of
which such Covered Employee becomes an Active Participant, as provided in
Paragraph 3.1, and (ii) does not exceed $200,000 in any Plan Year, as that
amount may be adjusted by the Secretary of the Treasury.
1.13 "Compensation Committee" shall mean the Compensation Committee of
the Board of Directors of the Company.
1.14 "Compensation Deferral Contribution" shall mean the amount paid
into the Trust Fund by the Employer at the election of the Employee pursuant to
Paragraphs 4.1.1, 4.1.2 and 4.1.3.
1.15 "Computation Period" shall mean each Plan Year (calendar year)
that includes or commences after an Employee's Employment Commencement Date.
1.16 "Contribution" shall mean any amount paid into the Trust Fund by
the Employer in accordance with Article IV.
1.17 "Covered Employee" shall mean an Employee who is employed by an
Employer in Category I, as that category is established and determined by the
Employer, or such other categories as are designated by an Employer in
resolutions adopted by the Employer, and from whose salary or wages income tax
or social security tax is required by law to be and is being withheld by the
Employer, provided, however, that no person shall be a Covered Employee
hereunder (i) while a member of a collective bargaining unit covered by a
collective bargaining agreement with respect to which retirement benefits were
the subject of good faith bargaining between employee representatives and the
Company or an Affiliate, which agreement does not specifically provide for
coverage of such EmploYee under this Plan, (ii) while a nonresident alien and
while receiving no earned income from the Company or an Affiliate which
constitutes income from sources within the United States, (iii) while in
Employment as a self-employed person, within the meaning of
4
<PAGE>
Section 401(c)(1) of the Code, (iv) while a "leased employee" within the meaning
of Code Section 414(n), or (v) while a Highly Compensated Employee.
1.18 "Effective Date" shall mean the earliest date following the date
the Company ceases to be an Affiliate of National Medical Enterprises, Inc. (the
"Spin-off Date") that it is administratively practicable to implement the Plan,
such date to be determined by the Committee; provided, however, in no event
shall the "Effective Date" be later than the sixtieth (60th) day following the
Spin-off Date.
1.19 "Employee" shall mean a person who is employed by the Company or
an Affiliate, and a person required to be treated as a "leased employee"
pursuant to Code Section 414(n); provided, however, that an independent
contractor shall not be deemed to be an Employee.
1.20 "Employee Mandatory Compensation Deferral Contributions" shall
mean Employee Compensation Deferral Contributions made pursuant to Paragraphs
4.1.1 and 4.1.3.
1.21 "Employee Voluntary Compensation Deferral Contributions" shall
mean Employee Compensation Deferral Contributions made pursuant to Paragraphs
4.1.2 and 4.1.3.
1.22 "Employer" means THE HILLHAVEN CORPORATION (or any covered
division, operating unit, facility or part thereof designated by the Board of
Directors in the event the Plan has not been extended to all such parts), and
any Affiliate thereof which has adopted this Plan with the approval of THE
HILLHAVEN CORPORATION (or any covered division, operating unit, facility or part
of such Affiliate designated by the Board of Directors of such Affiliate with
the approval of ThE HILLHAVEN CORPORATION in the event the Plan has not been
extended to all such parts). "Employer" shall also mean any successor in
interest to ThE HILLHAVEN CORPORATION, or any Affiliate thereof, resulting from
merger, consolidation, or transfer of assets substantially as a whole, which may
expressly agree in writing to continue this Plan as hereinafter provided,
provided that in the case of such a successor in interest to an Affiliate,
continuation of this Plan with respect to such successor shall be subject to
approval of the Compensation Committee.
1.23 "Employment" - see "Service," Paragraph 1.38.
1.24 "Employment Commencement Date" shall mean each of the following:
5
<PAGE>
(a) In the case of an Employee who is an Employee on the day
prior to the date the Company ceases to be an Affiliate of National Medical
Enterprises, Inc. (the "Spin-off Date'), the Employee's most recent date of hire
by the Company or an Affiliate.
(b) In the case of an Employee who is not an Employee on the day
prior to the Spin-off Date, the date on or after the Spin-off Date on which an
Employee first performs an Hour of Service in any capacity for the Company or an
Affiliate with respect to which the Employee is compensated or is entitled to
compensation by the Company or the Affiliate.
(c) In the case of an Employee whose Employment terminates on or
after the Spin-off Date and who is reemployed by the Company or an Affiliate,
the term "Employment Commencement Date" shall mean either (i) his "Employment
Commencement Date" prior to the Spin-off Date, as defined in (a) above, or his
"Employment Commencement Date' coinciding with or following the "Spin-off Date,
as defined in (b) above, or (ii) if the Participant incurs a One Year Break in
service, "Employment Commencement Date" shall also mean the first day following
the termination of Employment on which the Employee performs an Hour of Service
for the Company or an Affiliate with respect to which he is compensated or
entitled to compensation by the Company or Affiliate.
1.25 "Entry Date" shall mean the Effective Date, and each January 1
thereafter, except as otherwise provided in Paragraph 3.1(b).
1.26 "Fiduciary" shall include all of the following, to the extent
they are deemed to be such under the Act:
(a) Any administrator, officer, trustee, or custodian of the
Plan;
(b) Any person exercising any discretionary authority or
discretionary control respecting management of the Plan;
(c) Any person exercising authority or control respecting
management or disposition of Plan assets;
(d) Any person rendering investment advice for a fee or other
compensation with respect to Plan property, or with the authority or
responsibility to do so, except as provided otherwise in the Act;
6
<PAGE>
(e) Any person who possesses any discretionary authority or
responsibility in the administration of the Plan; and
(f) Any person designated under or to whom fiduciary duties are
delegated pursuant to Section 405(c)(1)(B) of the Act.
1.27 "Highly Compensated Employee" shall mean any Employee who is
described below.
(a) "Highly Compensated Employee" shall include any Employee who
(i) was a Five Percent Owner during the Determination Year
or the Look Back Year;
(ii) received Compensation from an Employer in excess of
$75,000 during the Look Back Year;
(iii) received Compensation from an Employer in excess of
$50,000 during the Look Back Year and was in the "top-paid group" of
Employees for such Look Back Year;
(iv) was at any time an officer during the Look Back Year
and received Compensation greater than fifty percent (50%) of the amount in
effect under Section 415(b)(1)(A) of the Code in such Look Back Year; or
(v) was an Employee described in Subparagraph (ii), (iii),
or (iv) above during the Determination Year and was a member of the group
consisting of the 100 Employees paid the greatest Compensation during the
Determination Year.
(b) Determination of a Highly Compensated Employee shall be in
accordance with the following definitions and special rules:
(i) "Determination Year" means the Plan Year for which the
determination of Highly Compensated Employee is being made.
(ii) "Look Back Year" is the twelve (12) month period
preceding the Determination Year.
(iii) An Employee shall be treated as a Five Percent Owner
for any Determination Year or Look Back Year if at any time during such
Year such
7
<PAGE>
Employee was a Five Percent Owner (as defined in Paragraph 11.2(b)).
(iv) An Employee is in the "top-paid group" of Employees for
any Determination Year or Look Back Year if such Employee is in the group
consisting of the top twenty percent (20%) of the Employees when ranked on
the basis of Compensation paid during such Year.
(v) For purposes of this Paragraph, no more than fifty (50)
Employees (or, if lesser, the greater of three (3) Employees or ten percent
(10%) of the Employees) shall be treated as officers. To the extent
required by Code Section 414(q), if for any Determination Year or Look Back
Year no officer of the Employer is described in this Section, the highest
paid officer of the Employer for such year shall be treated as described in
this section.
(vi) If any individual is a "family member" with respect to
a Five Percent Owner or of a Highly Compensated Employee in the group
consisting of the ten (10) Highly Compensated Employees paid the greatest
Compensation during the Determination Year or Look Back Year, then
(A) such individual shall not be considered a separate
Employee, and
(B) any Compensation paid to such individual (and any
applicable contribution or benefit on behalf of such individual) shall
be treated as if it were paid to (or on behalf of) the Five Percent
Owner or Highly Compensated Employee.
For purposes of this Subparagraph (vi), the term "family member" means, with
respect to any Employee, such Employee's Spouse and lineal ascendants or
descendants and the spouses of such lineal ascendants or descendants.
(c) For purposes of this Paragraph, the term "Compensation"
means Limitation Earnings as defined in Paragraph 1.30; provided, however, the
determination under this Subparagraph (c) shall be made without regard to Code
Sections 125, 402(a)(8), and 401(h)(1)(B), and in the case of Employer
contributions made pursuant to a salary reduction agreement, without regard to
Code Section 403(b).
8
<PAGE>
(d) For purposes of determining the number of Employees in the
"top-paid" group under this Paragraph, the following Employees shall be
excluded:
(i) Employees who have not completed six (6) months of
Service,
(ii) Employees who normally work less than 17-l/2 hours per
week,
(iii) Employees who normally work not more than six (6) months
during any Plan Year, and
(iv) Employees who have not attained age 21,
(v) Except to the extent provided in Treasury Regulations,
Employees who are included in a unit of employees covered by an agreement
which the Secretary of Labor finds to be a collective bargaining agreement
between Employee representatives and Employer, and
(vi) Employees who are nonresident aliens and who receive no
earned income (within the meaning of Section 911(d)(2) from the Employer
which constitutes income from sources within the United States (within the
meaning of Section 861(a)(3)).
An Employer may elect to apply Subparagraphs (i) through (vi) above by
substituting a shorter period of Service, smaller number of hours or months, or
lower age for the period of service, number of hours or months, or (as the case
may be) than as specified in such Subparagraphs.
(e) A former Employee shall be treated as a Highly Compensated
Employee if
(i) such Employee was a Highly Compensated Employee when
such Employee incurred a Severance, or
(ii) such Employee was a Highly Compensated Employee at any
time after attaining age fifty-five (55).
(f) Code Sections 414(b), (c), (m), and (o) shall be applied
before the application of this Section. Also, the term "Employee" shall include
"leased employees," within the meaning of Code Section 414(n), unless such
leased Employee is covered under a "safe
9
<PAGE>
harbor" plan of the leasing organization and not covered under a qualified plan
of the Employer.
(g) Notwithstanding the foregoing, for purposes of determining
Covered Employee status only, the Committee may in its sole discretion establish
rules and procedures for purposes of identifying Highly Compensated Employees,
which rules and procedures may result in an Employee being deemed to be a
Highly Compensated Employee, whether or not such Employee is an individual
described in Code Section 414(q).
1.28 "Hour of Service" shall include:
(a) Each hour for which an Employee is directly or indirectly
paid, or entitled to payment, by the Company or an Affiliate for the performance
of duties during the applicable computation period. Such hours shall be credited
to the Employee for the applicable computation period or periods as required by
Labor Reg. Subsection 2530.200b-2.
(b) Each hour for which back pay is awarded to the Employee or
agreed to by the Company or an Affiliate. Such hours shall be credited to the
Employee for the computation period or periods to which the award or agreement
pertains and shall be calculated irrespective of mitigation of damages, but no
Hour of Service shall be counted both under this paragraph and under the first
paragraph of this Paragraph 1.28.
(c) Any Hour of Service required to be credited to the Employee
under any law of the United States or any rule or regulation issued thereunder;
provided, however, that no hour shall be credited to the Employee both under
this paragraph and under any of the other paragraphs of this Paragraph 1.28.
(d) Each hour (i) for which the Employee is directly or
indirectly paid, or entitled to payment, by reasons (such as vacation, sickness
or disability) other than the performance of duties during the applicable
computation period as required by Paragraphs (b) and (c) of Labor Reg.
Subsection 2530.200b-2, and (ii) during a temporary layoff (even if of
indefinite duration) or a Company or an Affiliate-approved leave of absence.
Notwithstanding the foregoing, for purposes of crediting an Employee with Hours
of Service under this Plan, an Employee shall be credited with 45 Hours of
Service for each week for which the Employee is required to be credited with at
least one Hour of Service under the above
10
<PAGE>
provisions, subject to the limitations of Subparagraph (d) above.
Except as determined by the Chief Executive Officer of the
Company or his designee, or as required under Section 414 (a) of the Code, any
service or employment completed by an individual as an employee of a corporation
or trade or business prior to the date on which the corporation or trade or
business becomes an Affiliate shall not be taken into account for purposes of
determining Hours of Service or for any other purposes under this Plan.
1.29 "Investment Manager" means any fiduciary (other than (i) a
trustee or a fiduciary named in this Plan instrument, or (ii) who is identified
as a fiduciary pursuant to the procedure set forth in this instrument), (l) who
has the power to manage, acquire or dispose of any asset of the Plan, (2) who
has acknowledged in writing that he is a fiduciary with respect to the Plan, and
(3) who is (i) registered as an investment adviser under the Investment Advisers
Act of 1940; or (ii) is a bank, as defined in that Act; or (iii) is an insurance
company qualified to manage, acquire or dispose of the assets of retirement
plans under the laws of more than one State.
1.30 "Limitation Earnings" shall mean, for purposes of applying the
limitations in Paragraphs 5.1(e) and (f) of this Plan, the entire amount paid to
an Employee by the Company or an Affiliate which is included in the Employee's
income for federal income tax purposes during a Plan Year including, but not
limited to, commissions paid to salesmen, compensation for services on the basis
of percentage of profits, commissions on insurance premiums, tips and bonuses,
imputed income and excluding the following:
(a) Company or Affiliate contributions to a plan of deferred
compensation (whether funded or unfunded or qualified or non-qualified) which
are not included in an Employees gross income for the taxable year in which
contributed, salary reduction contributions which qualify for treatment under
Section 401(k) or Section 125 of the Code which are made to any plan maintained
by the Company or an Affiliate, Company or Affiliate contributions under a
simplified employee pension plan to the extent such contributions are deductible
by the Employee, or any distributions from a plan of deferred compensation,
except that any amount received by an Employee pursuant to an unfunded non-
qualified plan may be considered to be "Compensation" for purposes of this
Paragraph 5.1(h) in the Plan Year such amount is includible in the gross income
of the Employee;
11
<PAGE>
(b) Amounts realized from exercise of a non-qualified stock
option, or when restricted stock (or property) held by the Employee becomes
freely transferable, or no longer subject to a substantial risk of forfeiture;
(c) Amounts realized in the sale, exchange or other disposition
of stockacquired under a qualified stock option;
(d) Other amounts which received special tax benefits, or
contributions made by the Company or an Affiliate (whether or not under a salary
reduction agreement) towards the purchase of an annuity described in Section
403(b) of the Code (whether or not the amounts are actually excludable from the
gross income of the Employee).
1.31 "Named Fiduciary"(ies)" - see "Committee," Paragraph 1.10.
1.32 "Normal Retirement Date' shall be the Participant'S sixtieth (60)
birthday.
1.33 "One Year Break in Service" means a Computation Period at the end
of which the Employee's Employment is terminated and during which the Employee
has not completed more than five hundred (500) Hours of Service. Such One Year
Break in Service shall be deemed to occur on the last day of such Computation
Period. Solely for purposes of determining whether an Employee has sustained a
One Year Break in Service, an Employee's Hours of Service shall include the
following:
(a) Any period of absence by reason of the pregnancy of the
Employee, by reason of the birth of a child of the Employee, by reason of the
placement of a child with the Employee in connection with the adoption of the
child by the Employee, or for purposes of caring for the child for a period
beginning immediately following the birth or placement.
(b) The number of Hours of Service with which an Employee
described in Subparagraph (a) above shall be credited shall be --
(i) The number which otherwise normally would have been
credited to the Employee but for the absence, or
12
<PAGE>
(ii) If the number described in Subparagraph (i) above is not
capable of being determined, eight (8) Hours of Service per day of such
absence,
provided that the total number of hours treated as Hours of Service under this
Subparagraph (b) shall not exceed five hundred one (501) and that these Hours of
Service shall be taken into account solely for purposes of determining whether
or not the Employee has incurred a One Year Break in Service.
(c) The Hours described in Subparagraph (b) shall be credited to
the Computation Period --
(i) In which the absence from work begins, if the Employee
would be prevented from incurring a One Year Break in Service in that
Computation Period solely because the period of absence is treated as Hours
of Service under this Paragraph 1.33, or
(ii) In any other case, in the immediately following
Computation Period.
(d) The above provisions of Subparagraphs (a)-(c) of this
Paragraph 1.33 shall not apply unless the Employee provides such timely
information as the Committee may reasonably require to establish:
(i) That the absence is for one or more of the reasons
described in Subparagraph (a), and
(ii) The number of days for which there was such an absence.
1.34 "Participant" shall mean any person for whom an account is
maintained under this Plan and whose account, representing such person's
interest in the Trust Fund, has not been distributed or otherwise disposed of in
accordance with applicable law.
1.35 "Plan" shall mean the Deferred Savings Plan set forth in and by
this document and the related Trust and all subsequent amendments thereto.
1.36 "Plan Year" shall mean a twelve-month period beginning on each
January l and ending on each subsequent December 31; provided, however, the
first Plan Year of the Plan shall be the period beginning on the Effective Date
and ending December 31, 1990.
13
<PAGE>
1.37 "Qualified Election" shall mean a Participant's designation of
Beneficiary made under this Plan in accordance with the requirements of this
Paragraph 1.37 and in the manner and form as prescribed by the Committee. No
designation of Beneficiary other than or in addition to the Participant's Spouse
shall be deemed to be a Qualified Election unless the Spouse, if any, of the
Participant consents in writing to such designation of Beneficiary and
acknowledges the effect of such consent. The Spouse's consent to a designation
of Beneficiary must be witnessed by a notary public or a Plan Representative.
Notwithstanding this consent requirement, if the Participant warrants to the
Committee that such written consent may not be obtained because there is no
Spouse or the Spouse cannot be located or for any other reason as the Committee
determines to be consistent with the requirements of Section 417 of the Code, a
related designation of Beneficiary without spousal consent may be deemed a
Qualified Election; provided, however, that the Committee may require the
Participant in such case to produce such evidence of the Spouse's unavailability
or other circumstances as the Committee deems to be appropriate. A Qualified
Election under this provision will be valid only with respect to the Spouse who
consented to the Qualified Election, or in the event of a Qualified Election to
which the Spouse's consent has not been obtained, with respect to that Spouse
whose consent was not obtained (e.g., that Spouse who cannot be located). Any
change in a prior designation of Beneficiary by a Participant shall be subject
to the foregoing rules. Subject to the foregoing (relating to a change by a
Participant), the consent by a Spouse to a designation of Beneficiary shall be
irrevocable. The number of changes in Beneficiary designations shall not be
limited. A designation of Beneficiary which, by reason of a failure to obtain
required spousal consent could not be given effect when made, may later be given
effect if at the relevant date the Participant has no Spouse or is not then
otherwise required to have spousal consent.
1.38 "Service" or "Employment" means service for or employment by the
Company or an Affiliate, which service or employment is completed as an
Employee. Except as determined in writing by the Chief Executive Officer of the
Company or his designee, or as required under Section 414(a) of the Code, any
service or employment completed by an individual as an employee of a corporation
or trade or business prior to the date on which the corporation or trade or
business becomes an Affiliate shall not be taken into account for purposes of
determining Hours of Service or for any other purposes under this Plan.
14
<PAGE>
1.39 "Spouse" shall mean, for purposes of payment of benefits
following the death of a Participant, the person to whom the Participant was
married on the date of such Participant's death.
1.40 "Total and Permanent Disability" means total and permanent
incapacity of a Participant, due to physical impairment or legally established
mental incompetence, to perform the usual duties of his Employment, which
disability shall be determined by the Committee based on competent medical
advice.
1.41 "Trust Agreement" means the Agreement between the Company and the
Trustee or Trustees covering the administration of the Trust Fund and includes
the succession of the Trustee or Trustees.
1.42 "Trust Fund" means the assets of the Trust established pursuant
to this Plan and the Trust Agreement hereinafter referred to, out of which the
benefits under this Plan shall be paid.
1.43 "Trustee" means the Trustee or Trustees of the Trust Fund
established pursuant to this Plan and any successor Trustee or Trustees.
1.44 "Valuation Date" shall mean the last business day of each Plan
quarter which shall be the last business day in each March, June, September, and
December. These shall be the dates as of which the dollar value of each
Participant's account is determined in accordance with the terms of the Trust
Agreement and such dollar value, plus Participant Compensation Deferral
Contributions and Employer Contributions credited to the Participant's account
during the Plan quarter and minus any withdrawals or distributions during the
Plan quarter, shall be the Participant's interest for all purposes until the
next Valuation Date.
1.45 "Year of Service" shall mean each Computation Period in which the
Employee has completed not less than one thousand (1,000) Hours of Service,
except as modified by Paragraph 5.2 of Article V. Notwithstanding any provision
of this Plan to the contrary, except as determined in writing by the Chief
Executive Officer of the Company or his designee, or as required under Section
414(a) of the Code, any service or employment completed by an individual as an
employee of a corporation or trade or business prior to the date on which the
corporation or trade or business becomes an Affiliate shall not be taken into
account for purposes of determining Hours of Service or for any other purposes
under this Plan.
15
<PAGE>
ARTICLE II
COMMITTEE AND OTHER FIDUCIARIES
2.1 Duties and Relationship of Fiduciaries
--------------------------------------
Each Fiduciary shall at all times discharge his duties in
conformance with the provisions of the Act and as required for the
administration of a qualified plan under the Code.
It shall be the responsibility of every Fiduciary and of every
person handling funds or other property of the plan to be bonded to the extent
required by the Act. The Committee may direct the Trustee to pay the cost of all
such bonds from the Trust assets, if and to the extent that the Company does not
pay such costs in a timely fashion, and the Trustee shall be protected in
relying on such directions.
Each Fiduciary, and each member of the Board of Directors, the
Compensation Committee, the Committee, the Claims Coordinator designated under
paragraph 10.6.1 of Article x, the Trustee, and each executive officer (as such
term is used in rules of the Securities and Exchange Commission promulgated
under the Securities Exchange Act of 1934) performing duties in connection with
the Plan, shall be responsible only for acts and omissions in connection with
the exercise of the Powers, duties and functions specifically allocated to such
person under the terms of this Plan and the Trust Agreement. No person shall be
responsible for any acts or omissions in connection with the powers, functions
and duties allocated to any other person under the terms of this Plan and the
Trust Agreement. Except to the extent provided in the Act or the Code, no
person shall have any duty to question whether any other person is fulfilling
the responsibilities imposed on such other Person by this Plan, the Trust
Agreement, or the Act. No Person shall have any liability for a breach of
fiduciary responsibility of any other person with respect to the Plan or the
Trust unless such person participates knowingly in such breach, knowingly
undertakes to conceal such breach, has actual knowledge of such breach and fails
to take reasonable remedial action to remedy such breach, or, through negligence
in performing his own specific fiduciary responsibilities, has enabled such
other person to commit a breach of such other person's fiduciary
responsibilities. Wherever this Plan or the Trust Agreement provides that a
Fiduciary has the power to
16
<PAGE>
appoint another person or entity with discretionary authority or control
respecting the operation or administration of the Plan or the Trust Fund, the
responsibility of the appointing Fiduciary with respect to such appointment
shall be limited to the selection of the appointee and periodic review of the
performance of the appointee in accordance with the standards of the Act. Any
violation of fiduciary responsibilities by the appointee which is not a
proximate result of the failure of the appointing Fiduciary properly to select
or supervise the appointee, and in which breach the appointing Fiduciary did not
otherwise participate, will not be considered to be a breach by the appointing
Fiduciary.
2.2 Appointment of Committee
------------------------
The Committee shall be appointed by the Compensation Committee
and shall consist of not less than three (3) nor more than five (5) Employees,
the exact number of which shall be established by the Compensation Committee
from time to time. Such members of the Committee shall hold office for a term
certain, as designated by the Compensation Committee, unless a member resigns or
is removed by the Compensation Committee prior to the expiration of the
designated term of office.
2.3 Powers and Duties of Committee
------------------------------
The Committee shall have all discretionary powers necessary to
supervise the administration of the Plan and control its operations, except such
as may be expressly reserved to the Company, its Board of Directors, or the
Compensation Committee. In addition to any powers and authority conferred on
the Committee elsewhere in the Plan or by law, the Committee shall have, but not
by way of limitation, the discretionary fiduciary power and authority to
establish rules and regulations from time to time for the conduct of the
Committee's business and the administration and effectuation of this Plan, to
administer, interpret, construe and apply this Plan and to decide all questions
which may arise or which may be raised under this Plan by any Employee,
Participant, former Participant, Beneficiary or other person whatsoever,
including but not limited to all questions relating to eligibility to
participate in the Plan, the amount of Years of Service of any Participant, and
the amount of benefits to which any Participant or his Beneficiary may be
entitled. Further, the Committee shall have the discretionary power and
authority to perform or cause to be performed such acts as it may deem in its
sole
17
<PAGE>
discretion to be necessary, appropriate or convenient in the efficient
administration of the Plan. Any action taken in good faith by the Committee in
the exercise of authority conferred upon it by this Plan shall be conclusive and
binding upon the participants and their Beneficiaries. All discretionary powers
conferred upon the Committee shall be absolute. All such discretionary powers
shall be exercised in a uniform and nondiscriminatorY manner.
Any action taken by the Committee shall be by majority vote. In
the event that the members reach a tie decision on an issue before the
Committee, a temporary member shall be appointed by the Compensation Committee
in order to create an odd number of voting members. The Compensation Committee
may in its discretion appoint a standby temporary member to act in such capacity
until replaced or removed.
The Committee, from time to time, shall direct the Trustee
concerning the payments to be made out of the Trust Fund pursuant to this Plan
and shall have such other powers respecting the administration of the Trust Fund
as may be conferred upon it hereunder or under the Trust Agreement.
The Trustee shall invest and reinvest the Trust Fund, or any part
thereof, in any manner that it deems advisable subject to the right hereby
reserved to the Committee to direct the Trustee with respect to the investment
and reinvestment of the Trust Fund, including the right to direct the Trustee to
establish segregated investment funds for the investment of participant
accounts, in accordance with participant directions &nd the provisions of the
plan. In its sole discretion, the Committee may appoint an Investment Committee
consisting of from three (3) to five (5) members to act in its place with
respect to the direction of the Trustee as to the investment of the Trust Fund
in accordance with this paragraph 2.3, the determination of a funding policy in
accordance with paragraph 2.4, and the appointment of an Investment Manager in
accordance with paragraph 2.5.
With respect to its powers to direct the Trustee on the
investment of the Trust Fund, the Committee shall have the power to direct the
Trustee to invest and reinvest any and all money or property of any description
at any time held by it and constituting part of the Trust Fund in accordance
with the following powers:
18
<PAGE>
The Committee, without previous application to or subsequent
ratification of any court, tribunal or commission, or any federal or state
governmental agency, except as hereinafter provided, may direct the Trustee to
invest in bonds, notes, debentures, mortgages, commercial paper, preferred
stock, common stocks, sell covered call options or invest in other securities,
rights, obligations, or property, real or personal, including shares and
certificates of participation issued by investment companies or investment
trusts, trust funds of the Trust created for qualified employee benefit plans,
annuity contracts, life insurance contracts, including ordinary and term life
insurance contracts on the lives of key employees of the Company, for the
benefit of the Trust Fund and the employee Participants as a whole in order to
protect their interests in the premises.
The Committee may direct the Trustee to invest in the stock or
securities of the Employer, including any bonds or debentures of the Employer,
provided, however, that such investments may be made only in "qualifying
employer securities," as that term is defined in the Act.
The Committee may direct the Trustee to sell, grant options
therefor, exchange, pledge, or encumber, mortgage, deed in trust or other form
of hypothecation, or otherwise dispose of the whole or any part of the Trust
Fund on such terms and for such property or cash, or part cash and credit as the
Committee may deem best, and it may direct the Trustee to retain, hold,
maintain, or continue any securities or investments which the Trustee may hold
as part of the Trust Fund for such length of time as the Committee may deem
advisable, and generally, in all respects, the Committee may direct the Trustee
to do all such other things and exercise each and every right, power and
privilege in connection with and in relation to the Trust Fund as could be done,
exercised or executed by an individual holding and owning said property in
absolute and unconditional ownership including directing the Trustee as to the
manner of voting any stock or securities, whether of the Employer or otherwise,
held in said Trust Fund. The Committee, in directing the Trustee as to the
investment of the Trust Fund, shall not be bound as to the character of any
investment by any statute, rule of court, or custom governing the investment of
trust funds other than the Act or the Code, and Amendments thereto, and other
Regulations and Rulings thereunder which are valid interpretations of the Act,
Code and Amendments.
19
<PAGE>
The Committee shall have no right or authority to authorize the
Trustee to make advances to a Participant or to make any distribution except as
provided in Article VII herein.
2.4 Funding Policy
--------------
The Committee, promptly upon its formation and periodically
thereafter shall determine, at a duly constituted meeting of said Committee, a
funding policy and method consistent with the objectives of the Plan, and with
all requirements of law and an investment and reinvestment policy consistent
therewith. All actions taken at such meeting, and the reasons therefor, shall be
recorded in the minutes of the meeting. Such policy and method shall be
communicated in writing to the Trustee and any then acting Investment Manager.
and thereafter none of the powers of the Committee, the Trustee or any
Investment Manager set forth herein shall be exercised in any manner
inconsistent with such objectives.
2.5 Investment Manager
------------------
The Committee may, from time to time, and in writing, authorize
or direct the Trustee to delegate the management of the plan assets or any part
thereof, including the right to acquire and dispose of such assets, to an
Investment Manager. Such authority or direction of the Trustee to so delegate
may be revoked by the Committee at any time, and the Committee may authorize or
direct the Trustee at any time to revoke any such delegation.
2.6 Organization of Committee - Allocation and Delegation of Duties
---------------------------------------------------------------
The Committee may appoint one of its own members as Chairman, and
may adopt such by-laws and regulations as it deems desirable for the conduct" of
its affairs and appoint a secretary and one or more assistant secretary or
secretaries. The Committee may, at any duly constituted meeting thereof,
allocate specific fiduciary responsibilities, other than trustee
responsibilities, among the members of the Committee. Any member of such
Committee may also, at such meeting, designate other persons to carry out any
fiduciary duties which are the responsibility of such member, other than trustee
responsibilities. Either of such actions shall be recorded in the minutes of
said meeting, and may be revoked at any time by action taken at another such
meeting recorded in the minutes thereof, and communicated to the person to whom
such duties were delegated.
20
<PAGE>
Any determination of the Committee may be made by a majority of
the Committee at a meeting thereof or without a meeting by a resolution or
memorandum signed by all members, and, except as provided otherwise herein,
shall be final and conclusive on the Employer, the Trustee, all Participants and
Beneficiaries claiming any rights hereunder, and as to all third parties dealing
with the Committee or with the Trustee. All notices, directions, information and
other communications from the Committee to the Trustee shall be in writing.
2.7 Compensation and Expenses of Committee
--------------------------------------
The members of the Committee shall serve without compensation but
shall be reimbursed for any necessary expenditures incurred in the discharge of
their duties as members of said Committee. The compensation of all agents,
counsel, or other persons (who may be officers or members of the Employer)
retained or employed by the Committee shall be fixed by the Committee, subject
to the approval of the Compensation Committee. Any such reimbursement or
payment shall be made by the Trustee out of the Trust Fund; provided, however,
that all or any part of any such reimbursement or payment may be made by the
Employer if it shall so determine.
2.8 Records of the Committee
------------------------
The Committee shall keep a record of all of its proceedings and
shall keep or cause to be kept all such books of account, records and other data
as may be necessary or advisable in its judgment for the administration of this
Plan and to reflect properly the affairs thereof, and to determine the amounts
of vested and forfeitable interests of the respective Participants in the Trust
Fund, and the amount of all retirement benefits or other benefits hereunder. As
a part thereof, it shall maintain or cause to be maintained a separate account
for each Participant, which account in each year shall reflect such information
required by Paragraph 5.1(c). Any person dealing with the Committee may rely on
a certificate or memorandum signed by a person who, pursuant to a written
resolution of the Committee, is authorized to execute such instrument.
2.9 Resignation and Removal of Members
----------------------------------
Any member of the Committee may resign at any time by giving
written notice to the other members and to the Compensation Committee, effective
as therein stated or otherwise upon receipt. Any member who leaves the
21
<PAGE>
Employment of the Employer shall be deemed to have resigned as a member of the
Committee on the date of his termination of Employment. Any member of the
Committee may at any time be removed by the Compensation Committee.
2.10 Appointment of Successors
-------------------------
Upon the death, resignation or removal of any member, the
Compensation Committee shall at its next regular meeting, or at a special
meeting or by unanimous written consent if so desired, appoint a successor
member by resolution. Notice of appointment of a successor member shall be made
by an authorized member of the Compensation Committee in writing to the Trustee
and to the Committee. Until receipt by the Trustee of such written notice of any
change in membership of the Committee, the Trustee shall not be charged with
knowledge or notice of such change.
22
<PAGE>
ARTICLE III
PARTICIPATION OF EMPLOYEES
3.1 Eligibility to Participate
--------------------------
(a) Any Employee shall be eligible to become an Active
Participant as of the Effective Date, provided that on such Effective Date such
person is a Covered Employee.
(b) Any Employee who is not an Active Participant solely because
he is not a Covered Employee shall be eligible to become an Active Participant
following commencement or recommencement of Covered Employee status, provided
the Committee receives his application to enroll in the Plan within thirty (30)
days following the date the Covered Employee is notified of his status as a
Covered Employee and receives an application to enroll, Such Covered Employee
shall become an Active Participant as soon as administratively feasible
following the Committee's receipt of the properly completed application to
enroll, but in no event earlier than the first day of the first payroll period
after the Committee's receipt of the application. Commencement or recommencement
of active participation shall be subject to such requirements as the Committee
reasonably may establish regarding applications to enroll and verification of
eligibility and Covered Employee status.
(c) Any Employee who has not become an Active Participant solely
because of a failure or declination to enroll within the thirty (30) day period
described in Paragraph 3.1(b) shall be eligible to become an Active Participant
as of any subsequent Entry Date that such person is a Covered Employee.
(d) Any Employee who previously was an Active Participant shall
be eligible to become an Active Participant again, subject to the provisions of
Paragraph 3.4.
3.2 Application for Participation
-----------------------------
Active Participation in this Plan by Covered Employees is
voluntary. In order to become an Active Participant, except as provided in
Section 3.1(b), a Covered Employee must apply for participation prior to the
23
<PAGE>
Entry Date on which he desires to become an Active Participant and must make
Employee Mandatory Compensation Deferral Contributions hereunder as provided in
Article IV. Except as provided in paragraph 3.4, each applicant who is
determined by the Committee to be eligible for active participation shall become
an Active Participant as of the next Entry Date following such application.
3.3 committee to Determine Eligibility
----------------------------------
As soon as feasible after a properly completed application of a
Covered Employee is received by the Employer, the Employer shall certify to the
Committee in writing such information as the Committee may require in order to
perform its duties hereunder. Any such certification of information to the
Committee pursuant to this Plan shall, for all purposes of the Plan, be binding
on all interested parties provided that whenever any Employee proves to the
satisfaction of the Employer that his period of employment or his compensation
as so certified is incorrect, the Employer shall correct such certification.
The determination of the Committee as to the identity of the
respective Participants and as to their respective interests shall be binding
upon the Company or Affiliates, the Trustee, the Employees, the Participants,
and all BeneficiarieS.
3.4 Termination and Recommencement of Active Participation
------------------------------------------------------
A person shall cease to be an Active Participant upon cessation
of status as a Covered Employee, or upon suspension of Employee Mandatory
Compensation Deferral ContributionS in accordance with paragraph 4.2. A
Participant shall not be entitled to a distribution of any portion of an amount
solely by reason of cessation of Active Participant status. A Participant whose
Active Participant status ceases solely because such person ceases to be a
Covered Employee shall again be eligible to be an Active Participant following
recommencement of Covered Employee status in accordance with the provisions of
paragraph 3.1(b), the terms and conditionS of the Plan as then in effect and
such requirements as the Committee reasonably may establish regarding
applications to enroll and verification of eligibility and Covered Employee
status. A Participant whose Active Participant status ends solely by reason of
suspension of Employee Mandatory Compensation Deferral
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<PAGE>
Contributions shall be eligible to recommence Active participant status in
accordance with the provisions of Article IV.
3.5 Termination of Participation
----------------------------
Following admission, participation of a Participant as such shall
continue until such Participant's interest hereunder shall have been distributed
pursuant to the provisions of Articles VI and VII hereof, or otherwise disposed
of in accordance with applicable law.
3.6 Military Service
----------------
A Participant's Employment shall be deemed to have terminated
when he leaves his Employment with the Company or an Affiliate to become a
member of the Armed Forces of the United States. If he returns to the Employment
by the Company or an Affiliate within ninety (90) days (or such longer period as
may be prescribed by law) from the date he first became entitled to his
discharge (and after submitting proof of his honorable discharge), he shall
receive credit for vesting purposes for such time spent in the military and if,
subsequent to his becoming a member of the Armed Forces of the United States,
the unvested portion of his account is forfeited pursuant to Article VI, it
shall be restored to what it was prior to such military leave (adjusted to
reflect investment earnings or losses for the period of military service). His
vested interest in any such restored account shall be determined as provided in
Paragraph 6.7.
3.7 Leaves of Absence
-----------------
An Employee's Employment shall not be considered terminated for
purposes of the Plan during a period of leave of absence with the consent of the
Company or an Affiliate, provided that he returns to the employ of the Company
or an Affiliate at the expiration of such leave. Leaves of absence shall mean
leaves granted by the Company or an Affiliate, in accordance with rules
uniformly applied to all Employees, for reasons of health or public service or
for reasons determined by the Company or an Affiliate to be in its best
interests.
25
<PAGE>
ARTICLE IV
COMPENSATION DEFERRAL CONTRIBUTIONS
4.1 Compensation Deferral Contributions by Participants
---------------------------------------------------
4.1.1 Employee Mandatory Compensation Deferral Contributions
------------------------------------------------------
Subject to the limitations on contributions under this
Article IV, commencing as of the Effective Date each Active Participant shall
contribute to the Trust Fund under the Plan for each pay Period during which he
is an Active Participant a sum equal to three percent (3%) of the Compensation
which otherwise would have been paid to him by the Employed for such pay Period,
excluding any port ion of such Compensation Payable to him by the Employer as a
bonus. An Active Participant's election to make Employee Mandatory Compensation
Deferrals with respect to Compensation otherwise Payable as a bonus shall be in
accordance with Paragraph 4.1.3. The Employee Mandatory Compensation Deferral
Contributions of Active Participants shall be collected by the Employer by
payroll deductions and shall be paid over by the Employee to the Trustee to be
held and administered in trust for said Participants.
4.1.2 Employee Voluntary Compensation Deferral Contributions
------------------------------------------------------
Subject to the limitations on contributions under this
Article IV, any Active Participant who is making Employee Mandatory Compensation
Deferral Contributions for a pay period in accordance with Paragraph 4.1.1 may
also make Employee Voluntary Compensation Deferral Contributions to the Trust
Fund under the Plan for each such pay Period in an amount not in excess of seven
Percent (7%) of the Compensation which otherwise would have been Paid to him by
the Employer for such pay period, excluding any Portion of Compensation Payable
to him by the Employer as a bonus. An Active Participant's election to make
Employee Voluntary Compensation Deferrals with respect to Compensation otherwise
Payable as a bonus shall be in accordance with Paragraph 4.1.3. Notwithstanding
the foregoing seven percent (7%) of Compensation limitation on an Active
Participant's Employee Voluntary Compensation Contributions for a Payroll
Period, prior to any Entry Date coinciding with the first day of a Plan Year the
Committee may determine to increase the maximum percentage
26
<PAGE>
amount each Active Participant may defer under this Paragraph 4.1.2 for such
Plan Year, up to the maximum permissible under this Article IV and Paragraph
5.1(e). The Active Participant will notify the Committee of the amount he
desires to contribute. Employee Voluntary Compensation Deferral Contributions
shall be made by payroll deduction and shall be paid over by the Employer to the
Trustee to be held and administered in trust for said Participant. The
contributions described in this Paragraph 4.l.2 and Paragraph 4.1.3(b) shall be
purely voluntary.
4.1.3 Separate Bonus Deferral Election
--------------------------------
An Active Participant's election to make Compensation
Deferrals shall not apply to that portion of his Compensation payable to him by
the Employer as a bonus, unless such Active Participant makes a separate
Compensation Deferral election with respect to that portion otherwise payable as
a bonus, as follows:
(a) An Active Participant who is making Employee Mandatory
Compensation Deferrals for a pay period in accordance with Paragraph 4.1.1 may
elect to make Employee Mandatory Compensation Deferrals for each pay period in
an amount equal to three percent (3%) of that portion of his Compensation which
would otherwise be payable to him by the Employer for the pay period as a bonus.
(b) An Active Participant who is making Employee Mandatory
Compensation Deferrals for a pay period with respect to that portion of his
Compensation otherwise payable as a bonus may also elect to make Employee
Voluntary Compensation Deferrals for each pay period in an amount equal to up to
ninety-seven percent (97%) of that portion of his Compensation which would
otherwise be payable to him by the Employer for the pay period as a bonus.
(c) Notwithstanding any provision to the contrary in this
Plan, the effective date of an Active Participant's Compensation Deferral
election with respect to the portion of such Active Participant's Compensation
otherwise payable to him by the Employer as a bonus shall be determined in
accordance with rules prescribed by the Committee; provided, however, such rules
shall not permit a Compensation Deferral election to be made by an Active
Participant on a date that is later than a date otherwise determined in
accordance with Article III or this Article IV.
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<PAGE>
4.1.4 Payover of Compensation Deferral Contributions
----------------------------------------------
The Compensation Deferral Contributions on behalf of
Active Participants shall be paid over by the Employer to the Trustee as soon as
practicable after the receipt thereof, but in any event not later than the close
of the Plan Year following the Plan Year to which they pertain.
4.2 Elections to Change Compensation Deferral Contributions
-------------------------------------------------------
(a) Upon written notice filed with the Committee prior to an
Entry Date, an Active Participant may suspend his Employee Mandatory
Compensation Deferral Contributions altogether as of such Entry Date. Such
Participant may recommence making Compensation Deferral Contributions as of any
subsequent Entry Date by filing appropriate forms with the Committee prior to
such Entry Date so long as he is a Covered Employee on such Entry Date. Employee
Voluntary Compensation Deferral Contributions shall be suspended automatically
during any period in which the Participants Employee Mandatory Compensation
Deferral Contributions are suspended.
(b) Upon written notice filed with the Committee prior to an
Entry Date, an Active Participant may increase, decrease, or suspend altogether
his Employee Voluntary Compensation Deferral Contributions as of such Entry
Date.
(c) Participants shall not be permitted to make up suspended
Compensation Deferral Contributions.
4.3 Maximum Amount Subject to Deferral
----------------------------------
No Participant shall be permitted to make Compensation Deferral
Contributions to this Plan in excess of $7,000 during any calendar year, as that
amount may be adjusted from time to time by the Secretary of the Treasury (the
"Deferral Limitation"). In the event a Participant's Compensation Deferral
Contributions exceed the Deferral Limitation for any calendar year for any
reason, such excess contributions and any income allocable thereto shall be
returned to the Participant, as provided in Paragraph 4.5.
28
<PAGE>
4.4 Non-Applicability of Limitation on Compensation Deferrals by
------------------------------------------------------------
Highly Compensated Employees
- ----------------------------
Participant Compensation Deferral Contributions under the Plan
for the Plan Year by or on behalf of Highly Compensated Employees shall not
exceed the limitations on such contributions under Section 401(k) of the Code
because no Employee who is a Highly Compensated Employee is eligible to
participate in this Plan. In the event Compensation Deferral Contributions are
made on behalf of a Highly Compensated Employee in any Plan Year due to error or
otherwise, such contributions shall be deemed to have been made due to a mistake
of fact and shall be returned to the Employer in accordance with Paragraph 4.9.
4.5 Provisions for Return of Annual Compensation Deferral
-----------------------------------------------------
Contributions in Excess of Deferral Limitation
- ----------------------------------------------
(a) In the event that due to error or otherwise, an amount of a
Participant's Compensation in excess of the Deferral Limitation as defined in
Paragraph 4.3 is deferred for any calendar year under this Plan pursuant to such
Participant's Compensation deferral agreement (but without regard to amounts
deferred under any other plan), to the extent administratively feasible, the
excess Compensation Deferral Contribution, if any, together with income
allocable to such amount shall be distributed to the Participant on or before
the first April 15 following the close of the calendar year in which such excess
contribution is made. The amount of excess Compensation Deferral Contributions
that may be distributed to a Participant under this Section for any taxable year
shall be reduced by any excess Compensation Deferral Contributions previously
distributed to such Participant in accordance with this Paragraph 4.5 for the
Plan Year beginning with or within such taxable year.
(i) Income on Compensation Deferral Contributions in excess
of the Deferral Limitation shall be determined by multiplying the income
for the calendar year allocable to the Participant's Compensation Deferral
Contributions by a fraction, the numerator of which is the excess amount
for the calendar year, and the denominator of which is the balance of the
Participant's Compensation Deferral Account as of the last day of the
calendar year, reduced by the gain allocable to such contributions for the
calendar year and increased by the loss allocable to such contributions for
the calendar year.
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<PAGE>
(ii) Allocable income for the period between the last day of
the calendar year and the date of the corrective distribution may be
calculated under the fractional method ((i) above), or under the "safe
harbor" method set forth in the regulations prescribed by the Secretary of
the Treasury under Section 401(k) of the Code. Under the "safe harbor"
method, allocable income is ten (10%) of the income calculated under the
fractional method for the prior calendar year multiplied by the number of
calendar months since the last day of the calendar year. A distribution on
or before the 15th of the month is treated as made on the last day of the
preceding month, a distribution after the 15th of the month is treated as
made on the first day of the next month.
(iii) The Committee shall not be liable to any Participant
(or his Beneficiary, if applicable) for any losses caused by misestimating
the amount of any Compensation Deferral Contributions in excess of the
limitations of this Article IV and any income allocable to such excess.
(b) In accordance with rules and procedures as may be
established by the Committee, a Participant may submit a claim to the Committee
in which he certifies in writing the specific amount of his Compensation
Deferral Contributions for the current or preceding calendar year which, when
added to amounts deferred for such calendar year under other plans or
arrangements described in Section 401(k), 408(k) or 403(b) of the Code, will
cause the Participant to exceed the Deferral Limitation under Section 402(g) of
the Code for the calendar year in which the deferral occurred. Any such claim
must be submitted to the Committee no later than the March 1 of the calendar
year following the calendar year of deferral. To the extent the amount specified
by the Participant does not exceed the amount of the Participant's Compensation
Deferral Contributions under the Plan for the applicable calendar year, the
Committee shall treat the amount specified by the Participant in his claim as a
Compensation Deferral Contribution in excess of the Deferral Limitation for such
calendar year and return such excess and any income allocable thereto to the
Participant, as provided in (a) above.
(c) In the event that for any reason a Participant's
Compensation Deferral Contributions in excess of the Deferral Limitation for any
calendar year are not distributed to the Participant by the time prescribed in
(a) above, such excess shall be held in the
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<PAGE>
Participant's Compensation Deferral Account until distribution can be made in
accordance with the provisions of this Plan.
(d) To the extent required by regulations under Section 402(g)
or 415 of the Code, any excess Compensation Deferral Contributions distributed
to a Participant in accordance with this Paragraph shall be treated as an Annual
Addition under Paragraph 5.1(e) for the Plan Year for which the excess
Compensation Deferral Contribution was made.
4.6 Employer's Contribution
-----------------------
4.6.1 Contribution
------------
Subject to amendment or termination of the Plan and
applicable limitations herein, as of the last day of each pay period following
the Effective Date, the Employer will contribute for each Active Participant who
has completed at least three (3) Years of Service as of the last day of such pay
period an amount equal to the Participant's Compensation Deferral Contributions
pursuant to Paragraph 4.1 above for the pay period not in excess of the first
four percent (4%) of the Participant's Compensation for the pay period.
4.6.2 Requirement for Net Profits
---------------------------
Contributions by an Employer shall be made without regard
to current or accumulated profits for the year; provided, however, that the Plan
shall be designed to qualify as a profit sharing plan for purposes of Sections
401(a) et seq. of the Code.
4.6.3 Entity Contributing
-------------------
The Contribution attributable to each Participant shall be
made by his Employer. If a Participant has been employed by more than one
Employer during any pay period, each such Employer shall be responsible for the
portion of the Contribution attributable to the Compensation earned by the
Participant from such Employer.
4.6.4 Time for Payment
----------------
The Employer shall make payment of its Contributions for
each pay period in cash as soon as administratively practicable following the
last day of such payroll period, provided that the total amount of the
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<PAGE>
Employer Contribution for each taxable year shall be paid in full not later than
the date prescribed by the federal income tax law to entitle the Employer to a
deduction for the year with respect to which said Contribution is made.
4.7 Non-Applicability of Limitations on Matching Contributions for
--------------------------------------------------------------
Highly Compensated Employees
- ----------------------------
Employer's Contributions under the Plan for the Plan Year can not
exceed the limitations on contributions on behalf of Highly Compensated
Employees under Section 401(m) of the Code because no Employee who is a Highly
Compensated Employee is eligible to participate in this Plan. In the event
Employer Contributions are made on behalf of a Highly Compensated Employee in
any Plan Year due to error or otherwise, such contributions shall be deemed to
have been made due to a mistake of fact and shall be returned to the Employer in
accordance with Paragraph 4.9.
4.8 Separate Accounts
-----------------
The Committee shall keep or cause to be kept separate accounts
for each Participant; however, the Trustee shall not be required to make
physical segregation of Contributions, and the Trustee shall be authorized to
hold both Employer and Participant Compensation Deferral Contributions in a
common trust fund if the Trustee decides that such would be preferable for
reasons of investment or management.
4.9 Conditional Contributions
-------------------------
Notwithstanding anything to the contrary herein contained,
contributions of the Employer shall be, and hereby are, made subject to the
conditions that (l) the Plan and Trust qualify as a tax exempt plan under
Section 401 of the Code and (2) such contributions are deductible under Section
404 of the Code. In the event that the Commissioner of Internal Revenue shall
determine that the Plan and Trust shall not qualify initially, any contribution
of the Employer made while the Plan and Trust shall not have qualified shall be
repaid to the Employer, in whole or in part, by the Trustee, within one year
after the date of the denial of qualification of the Plan and Trust. In the
event that the Commissioner of Internal Revenue shall determine that a deduction
for the Employer's contribution shall be disallowed, the excess of such
contribution over the amount that would have been contributed had there not
occurred a mistake in determining the deductibility of the contribution shall be
repaid to the Employer, in whole or in part, by the
32
<PAGE>
Trustee, within one year after the disallowance of the deduction. In the case of
a contribution of the Employer which is made by reason of mistake of fact, the
excess of such contribution over the amount that would have been contributed had
there not occurred a mistake of fact shall be repaid to the Employer, in whole
or in part, by the Trustee, within one year after the payment of the
contribution. With respect to contributions for which a deduction is disallowed
or made by reason of mistake of fact, (l) earnings attributable to the excess
contribution, shall not be returned to the Employer, but shall be applied as
soon as administratively feasible to reduce Employer Contributions to the Plan,
(2) losses attributable thereto shall reduce the amount to be repaid and (3) if
the repayment of the excess would cause the balance of a Participant's account
to be reduced to less than the amount of the Participant's account had the
excess contribution not been made, the amount of the repayment shall be limited
to the excess of the excess contribution over the amount of the Participant's
account had the excess contribution not been made. Any amounts repaid to the
Employer by the Trustee pursuant to this Paragraph shall be repaid without
liability therefor on the part of the Trustee, to any Participant, Beneficiary
or any other person whomsoever.
The Trustee shall have no duty to inquire into the existence of a
mistake of fact when informed thereof by the Committee. By way of example, and
not by way of limitation, any contribution made by the Employer which causes the
Plan or any other plan to be disqualified under the provisions of Section
401(k), 401(m) or 415 of the Code shall be deemed to have been made by a mistake
of fact to the extent of the portion of such contribution which would cause such
disqualification.
33
<PAGE>
ARTICLE V
DETERMINATION AND VESTING OF PARTICIPANTS' INTERESTS
5.1 Determination of Participants' Interests
----------------------------------------
Each participant shall be credited with:
(a) Allocation of Contributions: The Employer Contributions to
---------------------------
the Trust Fund for a pay period calculated in accordance with paragraph 4.6.1
shall be allocated to the accounts of Active participants who have completed at
least three (3) Years of Service as of the last day of the pay period. Employee
Compensation Deferral Contributions to the Trust Fund for a pay period shall be
allocated to the accounts of participants in the actual amounts of Compensation
Deferral Contributions on behalf of such participants for the pay period.
(b) Investment of Participants' Accounts: Contributions on
behalf of a participant shall be invested in the Investment Fund established by
the Committee for this purpose. The Committee shall maintain an account for each
participant showing the dollar value of his current interest in the Investment
Fund as of each Valuation Date.
(c) Allocation of Earnings of Investment Funds: Earnings,
------------------------------------------
losses, gains and changes in fair market value of the Investment Fund shall be
allocated as of each Valuation Date to the accounts of participants. The amount
of said earnings, losses, gains and changes in fair market value shall be
allocated in the ratio which the dollar value of each participant's account in
an Investment Fund prior to allocation hereunder and prior to allocation of
contributions under subparagraph (a) above plus one-half (1/2) of his Employee
Mandatory Compensation Deferral Employee Voluntary Compensation Deferral
Contributions and Employer Contributions made since the previous allocation
date, less any distribution since the previous allocation date, bears to the
dollar value of the accounts of all participants prior to such allocation plus
one-half (1/2) of their Employee Mandatory Compensation Deferral, Employee
Voluntary Compensation Deferral Contribution, and Employer Contributions made
since the previous allocation date, less any distribution since the previous
allocation date.
(d) Forfeitures: All amounts representing forfeitures described
-----------
in paragraph 6.5, shall be used to restore forfeitures in accordance with
paragraph 6.5 or to reduce the amount the Employer agrees to pay to the
34
<PAGE>
Trustee as its Contribution hereunder and shall be allocated as a portion of the
Employer Contribution under Paragraph 5.1(a). The amount represented by
forfeitures shall not be applied to increase the benefits any Participant would
otherwise receive hereunder at any time prior to the termination of the Trust or
upon complete discontinuance by the Employer of contributions hereunder.
(e) Overall Contribution Limitation: Notwithstanding the
-------------------------------
foregoing provisions of this Paragraph 5.1, the annual additions allocated to
the account of any Participant, together with the annual additions to his
account in any other defined contribution plan, as defined in Section 414(i) of
the Code maintained by the Company or an Affiliate shall not for any Plan Year
(the "Limitation Year") exceed the lesser of (1) twenty-five percent (25%) of
such Participant's Limitation Earnings or (2) $30,000 (or if greater, one-fourth
(1/4) of the defined benefit dollar limitation set forth in Section 415(b) of
the Code as in effect for the Plan Year). For purposes of this Subparagraph (e),
annual additions for a Plan Year shall mean the sum for such Plan Year of (l)
the Participant's share of Employer Contributions, (2) such Participant's
Compensation Deferral Contributions, (3) any forfeitures allocated to the
Participant, and (4) any amounts described in Section 415(l)(1) or 419(A)(d)(2)
of the Code, but shall not include the amount of any rollover contributions as
that term is used in Section 415(c)(2) of the Code or any transfers from another
tax-qualified plan.
(f) Combined Plan Limitation: In the event a Participant
------------------------
hereunder notifies the Committee that he also is a participant in any qualified
defined benefit plan (within the meaning of Section 415(k) of the Code) of the
Company or an Affiliate, then the benefit payable under such other defined
benefit plan, or any of them, shall be reduced for so long and to the extent
necessary to provide that the sum of the "defined benefit fraction" as defined
and the "defined contribution fraction" as defined in Section 415(e) of the
Code, for any Plan Year shall not exceed 1.
(g) Corrective Adjustments: In the event that corrective
----------------------
adjustments in any Participant's account are required pursuant to Subparagraph
5.1(e), the annual addition to his account shall be reduced by one or more of
the following corrective adjustments, as determined by the Committee:
35
<PAGE>
(i) Return to the Employer of that portion, or all of the
Employer Contributions under Subparagraph 5.1(a) required to ensure
compliance with Subparagraph 5.1(e);
(ii) Return to the Employer that portion, or all, of the
Participant's Employee Voluntary Compensation Deferral Contributions under
Paragraph 4.1 required to ensure compliance with Subparagraph 5.1(e);
(iii) Return to the Employer that portion, or all, of a
Participant's Employee Mandatory Compensation Deferral Contributions under
Paragraph 4.1 required to ensure compliance with Subparagraph 5.1(e).
The amount of any Participant's Compensation Deferral Contributions returned to
the Employer in accordance with this Paragraph shall thereafter be paid to the
Participant as current Compensation, after the withholding of any federal, state
or local income taxes on such amount.
(h) For purposes of Subparagraphs 5.1(e), (f), and (g), the
status of an entity as an Affiliate shall be determined by reference to the
percentage tests set forth in Code Section 415(h).
5.2 Vesting of Participants' Interests
----------------------------------
A Participant shall always be 100% vested in the value of all
accounts attributable to his Compensation Deferral Contributions to this Plan. A
Participant shall be vested in accounts attributable to Employer's Contributions
to this Plan under Paragraph 4.6.1 of Article IV and allocated to him under
Paragraph 5.1 of this Article V, in accordance with the following schedule
(subject to the provisions of Section 5.3):
<TABLE>
<CAPTION>
Years of Service Percentage Vested
---------------- -----------------
<S> <C>
Less than 3 0%
3 30%
4 40%
5 60%
6 80%
7 100%
</TABLE>
36
<PAGE>
provided, that when any Participant shall reach his Normal Retirement Date or
shall die or shall suffer Total and Permanent Disability (in each such case
while an Employee), his entire interest in the Trust Fund shall become vested
without regard to his period of Employment. Any portion of the interest of a
Participant which shall not have become vested, as herein provided, shall be a
forfeitable interest.
Any interest in the Trust Fund shall be and become payable to
such Participant or his Beneficiaries only as and to the extent provided in this
Plan; and a Participant or former Participant" who dies having designated a
Beneficiary, shall cease to have any interest hereunder or in his separate trust
account, and his Beneficiary shall become entitled to payment thereof as herein
provided by virtue of the terms of this Plan and not as a result of any transfer
of said interest or account.
For purposes of computing Years of Service for use in the
application of Paragraph 4.6.1 and this Paragraph 5.2, the following rules shall
apply:
(a) Years of Service credited to a Participant subsequent to the
Participant's incurring five (5) consecutive One Year Breaks in Service shall
not be taken into account for purposes of calculating the percentage of vesting
of that portion of such Participant's"account which is attributable to Employer
Contributions made prior to the first such One Year Break in Service.
(b) In the case of a Participant who has not completed at least
three (3) Years of Service, if such a Participant sustains at least five (5)
consecutive One Year Breaks in Service, Years of Service before the first such
One Year Break in Service shall not be taken into account for purposes of the
allocation of the Employer Contributions in accordance with Paragraph 4.6.1 or
calculating the percentage of vesting of that portion of such Participant's
account which is attributable to Employer Contributions made after the last such
One Year Break in Service. (Such aggregate number of Years of Service before the
first such break shall not include any Years of Service not required to be taken
into account by reason of any prior One Year Break in Service.)
37
<PAGE>
5.3 Forfeiture For Cause
--------------------
To the extent permitted by applicable law, the Committee shall
cause any and all of the Employer Contributions credited to a Participant'S
account, including earnings credited thereon in accordance with Paragraph
5.1(c), to be forfeited (subject to the provisions of Section 6.5) if the
participant has not completed at least-five (5) Years of Service and the
Committee at any time determineS that:
(a) The participant has been convicted in a court of law of the
crime of embezzlement of funds or assets of the Employer or of its nursing home
residents;
(b) The participant has consciously and intentionally divulged
Employer confidential information to the competitors of the Employer which is
clearly and unequivocally detrimental to the Employer and such action has been
fully and completely documented under oath;
(c) The participant has engaged in other criminal conduct which
is clearly and unequivocally detrimental to the Employer, and such conduct has
been fully and completely documented under oath; or
(d) Within the two (2) years immediately following his
termination of Employment with the Employer, the participant engages in any
capacity in a business other than National Medical Enterprises or one of its
subsidiaries that is in substantial, direct competition with the business of,
and in the geographical areas served by, any of the operating units, including
the Corporate office of Hillhaven for which the Employee worked during the three
(3) years immediately preceding his or her termination.
5.4 Election of Former Vesting Schedule
-----------------------------------
In the event the vesting schedule of this Plan is amended within
the meaning of Code Section 411(a)(10), then, to the extent required by said
Section 411(a)(10), any participant who has completed at least three (3) Years
of Service, may elect to have his vested interest in Employer Contributions
determined without regard to such amendment by notifying the Committee in
writing during the election period as hereafter defined. The election period
shall begin on the date such amendment is adopted and shall end no earlier than
the latest of the following dates:
38
<PAGE>
(a) the date which is sixty (60) days after the date the
amendment is adopted;
(b) the date which is sixty (60) days after the day the
amendment becomes effective; or
(c) the date which is sixty (60) days after the day the
Participant is issued written notice of the amendment by the Committee. Such
election shall be available only to an individual who is a Participant at the
time such election is made and such election shall be irrevocable.
5.5 Changes in Vesting Schedule
---------------------------
In the event that the vesting schedule of this Plan is amended,
the vested interest of any person who is a Participant on the date such
amendment is adopted, or on the effective date of such amendment, if later,
shall not be less than the vested interest computed under the Plan without
regard to such amendment.
39
<PAGE>
ARTICLE VI
PAYMENT OF BENEFITS OTHER THAN DEATH BENEFITS
6.1 Termination of Employment
-------------------------
(a) If a Participant's Employment terminates for any reason
other than death, the Participant shall be entitled to a payment of his vested
interest in the Trust in the form of distribution provided in Paragraph 6.3,
commencing as provided in Paragraph 6.2. No distribution shall be made under
this or any other provision of this Plan of any amount which has not become
vested under the express provisions of this Plan. In the event a Participant's
Employment terminates but his Employment has recommenced prior to the
distribution of his entire vested interest, any undistributed portion of his
vested interest shall remain in the Plan until such Participant's account again
becomes distributable due to termination of Employment.
(b) Notwithstanding the foregoing, if a Participant ceases to be
an Employee by reason of a transaction described in Code Section
401(k)(10)(A)(ii) or (iii), such Participant shall be entitled to distribution
of his entire vested interest in the Trust Fund under this Article VI as if, for
purposes of this Plan only, such event constitutes a termination of Employment.
6.2 Commencement of Benefits
------------------------
(a) A Participant's vested interest in the Trust that becomes
payable for any reason shall be distributed as soon as practicable following
such Participant's attainment of age seventy (70) and not later than the April 1
following the calendar year in which the Participant attains age seventy and
one-half (70 1/2), unless (i) the Participant elects, in accordance with the
following provisions of this Paragraph 6.2, distribution as of an earlier date
which is administratively practicable and acceptable to the Committee following
the Committee's verification of termination of Employment and any other relevant
information, or (ii) the provisions of Paragraph 6.4 apply.
(b) In the case of a Participant whose distributable interest,
determined as of the Valuation Date immediately preceding the date of the
Participant's termination of Employment, adjusted as provided in Paragraph 1.44,
exceeds thirty-five hundred dollars ($3,500), distribution shall be made as soon
as
40
<PAGE>
administratively practicable following the valuation Date coinciding with or
next following the later of (i) the Participant's termination of Employment, or
(ii) the receipt by the Committee of the properly completed application of the
Participant, and any other required documentation to request distribution,
including the Participant'S consent to the distribution in accordance with (d)
below. The amount to be distributed shall be the Participant's account balance
as of the Valuation Date last preceding the date of distribution, adjusted as
provided in Paragraph l.44.
(c) If a Participant described in (b) above fails to consent to
distribution of his distributable interest following the Participant's
termination of Employment such a Participant shall be deemed to have made an
election to defer distribution. to attainment of age seventy (70), unless prior
to and in accordance with (b) above, the Participant submits a request for an
earlier distribution.
(d) Any written consent by a Participant to receive distribution
of his distributable interest prior to his attainment of age seventy (70) shall
not be valid unless such consent is made both (A) after the Participant receives
a written notice advising him of his right to defer distribution to his
attainment of age seventy (70) and (B) within the ninety (90) day period ending
on the Participant's "Benefit Payment Date." The notice to the Participant
advising him of his right to defer distribution shall be given no less than
thirty (30) nor more than ninety (90) days prior to the Participant's Benefit
Payment Date. For purposes of this Subparagraph (d), "Benefit Payment Date"
shall mean the first day of the first period for which the Participant's
distributable interest is paid.
6.3 Normal Form of Benefits. The distributable interest of a
-----------------------
Participant shall be paid in a single sum payment.
6.4 Automatic Cashouts
------------------
Notwithstanding the preceding provisions of this Article VI or
the provisions of Article VII, if the value of a Participant's distributable
interest, determined as of the Valuation Date immediately preceding the date of
the Participant's termination of Employment, adjusted as provided in Paragraph
1.44 does not exceed thirty-five hundred dollars ($3,500), the Committee shall
direct that the distributable interest be paid in a single
41
<PAGE>
sum as soon as practicable following such termination of Employment, without
regard to whether the Participant consents to payment prior to the Participant's
attainment of age seventy (70). The amount to be distributed shall be the
Participant's account balance as of the Valuation Date preceding the date his
Employment terminated, adjusted as provided in Paragraph 1.44.
6.5 Forfeitures: Restoration
------------------------
(a) Any non-vested amounts held in the Trust shall be forfeited
as of the earlier of the date the Participant's total distributable interest is
paid to him, or the date such Participant incurs five (5) consecutive One Year
Breaks in Service.
(b) Any amounts forfeited by Participants during the Plan Year
in accordance with Subparagraph (a) above shall be applied to reduce Employer
Contributions to the Plan.
(c) A Participant whose distributable interest is paid prior to
sustaining five (5) consecutive One Year Breaks in Service and who subsequently
is reemployed as an Employee prior to incurring five (5) consecutive One Year
Breaks in Service, shall notify the Committee of such reemployment (and supply
the Committee with such information regarding the Participant's Employment and
participation as the Committee may require). As soon as practicable following
such notification (and furnishing of such information to the Committee), if
the Committee determines that the Participant is entitled to a restoration, the
Participant shall be fully restored in amounts forfeited in accordance with (a)
above (without adjustment of such forfeited amounts for Trust gain or loss
occurring between the date of forfeiture and the date of restoration). Such
restored amounts may be paid from forfeitures in the Plan Year of restoration,
or succeeding Plan Years, if necessary. Any subsequent distribution of benefits
shall be offset by an amount reflecting the distributable interest previously
paid to the participant, so that the distribution is computed as follows:
(i) First, the values P, AB, D, and R shall be determined,
where P is the vested percentage applicable to such distribution, AB is the
value for purposes of such distribution of the Participant's accounts
attributable to Employer's Contributions to this Plan under Paragraph 4.6.1
and allocated to him under Paragraph 5.1, D is the amount previously
42
<PAGE>
distributed to the Participant with respect to Employer Contributions to
this Plan under Paragraph 4.6.1 and allocated to him under Paragraph 5.1,
and R is the ratio of AB to the amount previously forfeited.
(ii) Second, the Employee's vested portion of the accounts
attributable to Employer's Contributions to this Plan under Paragraph 4.6.1
and allocated to him under Paragraph 5.1 shall not be less than amount
("X") determined by the formula:
X = (P (AB + (R x D))) - (R x D).
These rules shall in all cases be applied so that the distribution is determined
in a manner consistent with Treas. Reg. (S) 1.411(a)-7(d).
6.6 Facility of Payment
-------------------
If any payee under the Plan is a minor, or if the Committee
reasonably believes that any payee is legally incapable of giving a valid
receipt and discharge for any payment due him, the Administration Committee may
have such payment, or any part thereof, made to the person (or persons or
institution) whom it reasonably believes is caring for or supporting such payee,
unless it has received due notice of claim therefor from a duly appointed
guardian of such payee. Any such payment shall be a payment for the account of
such payee and shall, to the extent thereof, be a complete discharge of any
liability under the Plan to such payee.
6.7 Special Distribution Rules
--------------------------
Notwithstanding the provisions of Paragraph 6.2 relating to
distribution of benefits to a Participant prior to his attainment of age seventy
(70), distribution of a Participant's vested interest in the Plan shall be paid
or commence to be paid within sixty (60) days following the later of (i) the
Plan Year in which he attains age sixty-two (62), or (ii) the Plan Year in which
his termination of Employment occurs; provided, however, that if an election by
the Participant is required to be made for distribution to commence, such
election is filed with the Committee in a timely manner.
43
<PAGE>
6.8 Withdrawal of Compensation Deferrals by Participants
----------------------------------------------------
Subject to the succeeding provisions of this Paragraph 6.8, while
still employed by the Employer, a Participant may make a withdrawal of his
Compensation Deferral Contributions.
(a) A withdrawal of a Participant's Compensation Deferral
Contributions may be made in accordance with rules of uniform application which
the Committee may from time to time prescribe; provided, however, that no
Participant may make a withdrawal from such Account prior to a determination by
the Committee that such Participant has a hardship need determined in accordance
with (b) below, and such withdrawal is necessary on account of such need, in
accordance with (c) below.
(b) For purposes of this Paragraph 6.8, a withdrawal may be
considered to be on account of a hardship need if the Committee determines that
such withdrawal is necessary to meet an immediate and heavy financial need of
the Participant. In accordance with regulations prescribed by the Secretary of
the Treasury under Section 401(k) of the Code, an immediate and heavy financial
need shall include, but shall not be limited to, the following:
(i) A medical need incurred by the Participant, his Spouse
or dependents;
(ii) The purchase of primary residence for the Participant
(excluding mortgage payments);
(iii) Payment of tuition for the next semester or quarter of
post-secondary education for the Participant, his Spouse, children, or
dependents;
(iv) The need to prevent either the eviction of the
Participant from his principal residence or the foreclosure of a mortgage
on such principal residence.
(c) For purposes of this Paragraph 6.8, a withdrawal will be
treated as necessary on account of a hardship need of the Participant to the
extent the amount of the withdrawal is not in excess of the amount required to
meet such hardship need and to the extent such hardship may not be satisfied
from other resources reasonably available to the Participant. A distribution
generally
44
<PAGE>
may be treated as necessary on account of a hardship need of a Participant if
the Committee reasonably relies on the Participant's written representations to
the Committee that the hardship cannot be relieved
(i) through reimbursement or compensation by insurance or
otherwise,
(ii) by reasonable liquidation of assets, if such
liquidation would not itself cause an immediate and heavy financial need,
(iii) by the cessation of Participant Compensation Deferral
Contributions to the Plan, or
(iv) by other distributions or non-taxable loans from plans
of the Company or any other Employer, or by borrowing from commercial
sources on reasonable commercial terms.
For purposes of this Paragraph 6.8, a Participant's resources shall be deemed to
include those assets of his spouse and minor children that are reasonably
available to the Participant.
(d) The amount available for withdrawal shall not exceed the
lesser of (i) the amount of the hardship need, or (ii) the Participant's
Compensation Deferral Contributions (less any amounts previously withdrawn). The
Participant's Compensation Deferral Contributions shall be determined as of the
Valuation Date which occurs at least thirty (30) days prior to the delivery of
the Participant's written request for withdrawal to the Committee, plus any
Compensation that was deferred after such Valuation Date pursuant to such
Participant's Compensation deferral agreement. If the total amount of the
Participant's Compensation Deferral Contributions available for withdrawal,
calculated as provided in this subsection (d) is more than five hundred
dollars ($500) the minimum amount which may be withdrawn shall be five hundred
dollars ($500). If the total amount of such Participant's Compensation Deferral
Contributions available for withdrawal is five hundred dollars ($500) or less,
the total available amount must be withdrawn.
(e) Distribution of a hardship withdrawal shall be made within
sixty (60) days after the approval by the Committee of the Participant's written
request for the hardship withdrawal.
45
<PAGE>
ARTICLE VII
DISTRIBUTIONS UPON DEATH;
DESIGNATIONS OF BENEFICIARIES
7.1 Form of Death Benefits Provided
-------------------------------
(a) In the case of a Participant who dies before payment of his
distributable interest, his interest which becomes available for distribution on
account of death shall be paid to the Participant's Beneficiary in a single sum
payment within one (1) year after the interest becomes available for
distribution.
(b) In the case of a Participant who dies after payment of his
distributable interest, no benefits shall be payable to any person.
(c) For purposes of this Paragraph 7.l, the value of a
Participant's distributable interest shall be the Participant's account balance,
adjusted as provided in Paragraph 1.44, as of the Valuation Date last preceding
the date as of which the Participant's interest is distributed.
(d) A Participant's interest in the Trust which becomes
distributable by reason of the Participant's death shall be distributed as soon
as practicable after the Committee receives the necessary documentation of the
Participant's death.
7.2 Designation of Beneficiary
--------------------------
(a) Whenever a Participant may be permitted to designate a
Beneficiary to receive benefits under this Plan, such designation shall be made,
pursuant to a Qualified Election, by the execution and delivery to the Committee
of an instrument in a form satisfactory to the Committee. A Participant shall
have the right to change or revoke any such Beneficiary designation by filing a
new designation and notice of revocation with the Committee, and, subject to the
rules governing Qualified Elections, no notice to any Beneficiary nor consent by
any Beneficiary shall be required to effect any such change or revocation.
(b) If a deceased Participant shall have failed properly to
designate a Beneficiary, or if the Administration Committee receives no response
from a designated Beneficiary after giving notice to such
46
<PAGE>
Beneficiary by certified mail to such person at his last known address as shown
in the Plan's records (or if the certified letter is returned to the Committee
by the United States Postal Service as undeliverable), or if for any reason the
designations shall be legally ineffective, or if all Beneficiaries shall have
predeceased the Participant, any distribution required to be made under the
provisions of this Plan from the Trust Fund shall be made by payment: (i) in the
form of a single sum, to the person to whom the Participant lawfully is married
as of the date of the Participant's death, or if no such Spouse survives, (ii)
in a single sum, to the qualified representative of Participant's estate who
files notice of a claim with the Committee, provided however, that if no
qualified representative of the deceased Participant's estate has filed notice
of a claim within one year following the Participant's death, the Committee in
its discretion may (I) make the distribution under this Subparagraph (b) to such
persons as establish to the satisfaction of the Committee that they are heirs at
law of the Participant, or (II) deposit such distributable amount into a general
account at Trustee's bank which holds such undeliverable distributions;
provided, however, that Trustee's bank may cause property held by it to escheat
to the State of Washington or to such other state as may be required or
permitted by applicable law.
(c) The determination by the Committee as to which persons, if
any, qualify within the foregoing categories (including the categories referred
to in Subparagraphs (b)(i) and (ii)) shall be final and conclusive upon all
persons. In the event that the deceased Participant was not a resident of
Washington at the date of his death, the Committee, in its discretion, may
require the establishment of ancillary administration in Washington.
7.3 Additional Requirements for Distribution
----------------------------------------
(a) The Committee or Trustee, or both, may require the execution
and delivery of such documents, papers and receipts as the Committee or Trustee
may determine necessary or appropriate in order to establish the fact of death
of the deceased Participant and of the right and identity of any Beneficiary or
other person or persons claiming any benefits under this Article VII.
(b) The Committee or the Trustee, or both, may as a condition
precedent to the payment of death benefits hereunder, require an inheritance tax
release and/or such security as the Committee or Trustee, or both,
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may deem appropriate as protection against possible liability for state or
federal death taxes attributable to any death benefits.
(c) Notwithstanding any other provision in this Article VII regarding
the time within which a Participant's distributable interest will be paid, if,
in the opinion of the Committee, there are or reasonably may be conflicting
claims or other legal impediments to the payment of such distributable interest
to a payee, such payment may be delayed for so long as is necessary to resolve
such conflict, potential conflict, or other legal impediment, but not beyond the
date permitted by applicable law.
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ARTICLE VIII
CONTINUANCE AND AMENDMENT OF PLAN
8.1 Continuance of the Plan Not a Contractual Obligation of the
-----------------------------------------------------------
Company
- -------
It is the expectation of the Company that it will continue this
Plan indefinitely, but the continuance of this Plan is not assumed as a
contractual obligation by the Company, and is not a consideration for or an
inducement or condition of the employment of any person and the right is
reserved to the Company by action of its Board of Directors at any time to
discontinue this Plan, which action shall be binding on all Affiliates. The
discontinuance of this Plan by the Company shall not have the effect of
revesting in the Company or any Affiliate any part of the Trust Fund.
Upon the termination or partial termination of the Plan or
complete discontinuance of contributions by Board resolution or otherwise, the
interests of affected Participants at such times shall thereupon be
nonforfeitable and the Trustee shall continue to administer the Trust in
accordance with the provisions hereof.
Notwithstanding any provision to the contrary in this Paragraph,
a termination or partial termination shall not be deemed to occur by reason of
any event unless such event is required by Code Section 411 to be treated as a
termination or partial termination, and further, Participant's interests in the
Plan in the case of such event shall vest only to the extent required by Code
Section 411.
8.2 Plan Merger or Consolidation
----------------------------
Notwithstanding the foregoing provisions hereof, no merger or
consolidation of this Plan with any other plan, nor transfer of the assets or
liabilities of this Plan to any other plan, shall be permitted or be effective
unless the provisions of such merged, consolidated or transferee plan are such
that each participant of this Plan would, if said new plan were terminated
immediately following said merger consolidation or transfer, receive a
benefit equal to or greater than each said participant would have received had
this Plan been terminated immediately prior to such merger, consolidation or
transfer.
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8.3 Distribution of Trust Fund on Termination or Partial Termination
----------------------------------------------------------------
of Plan
- -------
If the Plan shall at any time be deemed terminated or partially
terminated within the meaning of Section 411 of the Code, the Committee shall
determine or cause to be determined the value of the Trust Fund and of the
respective interests of the Participants and the manner of disposition of
Participants' interests. To the extent permitted by Code Section
401(k)(10)(A)(i) following the termination or partial termination of the Plan,
the Committee may direct the Trustee to distribute each affected Participant's
interest in the Trust Fund in accordance with the applicable provisions of
Article VI without regard to whether such Participant's Employment is then
terminated.
8.4 Amendments
----------
The Company, by action of the Compensation Committee, may at any
time and from time to time amend this Plan; provided, however, that no amendment
shall be made at any time pursuant to which the Trust Fund may be diverted to
purposes other than for the exclusive benefit of the Participants and their
Beneficiaries; and provided further, that no amendment shall decrease the
percentage of the interest of any Participant which shall theretofore have
become vested, nor shall any amendment discriminate in favor of Employees who
are officers, shareholders, or highly compensated Employees. Any amendment of
the Plan by the Company shall be binding on each Affiliate, without any further
action by any such Affiliate.
Notwithstanding anything herein to the contrary, however, the
Plan may be amended at any time if necessary to conform to the provisions and
requirements of the Act and the Code, or any amendments thereto, or regulations
issued pursuant thereto, or any similar act or any amendments thereto, and no
such amendment shall be considered prejudicial to any interest of any
Participant hereunder or his Beneficiaries.
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ARTICLE IX
ADMINISTRATION OF THE TRUST FUND
9.1 The Trust Agreement
-------------------
Concurrently with the adoption of this Plan, the Company has
executed a Trust Agreement providing for the administration of the Trust Fund by
[to be determined], herein called "Trustee," containing such provisions as the
Company has deemed appropriate with respect to the powers and authority of the
Trustee as to the investment and reinvestment of the Trust Fund, the income
therefrom and the general administration thereof, subject to the right of the
Committee to direct the Trustee with respect to investment of the Trust Fund and
to remove therefrom any such investment as hereinbefore provided, the
limitations on the liability of the Trustee, on authority of the Committee to
settle the accounts of the Trustee on behalf of all persons having any interest
in the Trust Fund, and from time to time to appoint a new Trustee in place of
any then acting Trustee of the Trust Fund. All taxes upon or in respect of the
Trust Fund or its assets and all expenses of administration (including
reasonable compensation of the Trustee, its agents and counsel) of the Trust
Fund and special trust accounts established pursuant to this Plan shall be
withdrawn by the Trustee from the Trust Fund, or, as to items clearly allocable
to any special trust account, from such special trust account prior to
distribution thereof, unless the Company shall elect to bear such expenses. At
the election of the Company, any or all expense incurred in the preparation or
adoption of the Plan or Trust Agreement may be chargeable to and withdrawn from
the Trust Fund or said expenses may be borne by the Company. The Trust Agreement
shall be deemed to form a part of this Plan, and any and all rights or benefits
which accrue to any person under this Plan shall be subject to all the terms and
provisions of said Trust Agreement insofar as they are not in direct conflict
with this Plan.
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ARTICLE X
MISCELLANEOUS
10.1 Right of Company and Affiliates to Dismiss Employees
----------------------------------------------------
The adoption and maintenance of the Plan shall not be deemed to
constitute a contract between the Company or Employer or any Affiliate and any
Employee, or to be a consideration for or an inducement or condition of the
Employment of any person. Neither the action of the Company in establishing this
Plan nor any action taken by it or by the Committee under the provisions hereof,
nor any provisions of this Plan shall be construed as giving to any Employee the
right to be retained in its employ or the employ of an Affiliate or any right to
any payment whatsoever except to the extent of the benefits provided for by this
Plan to be paid from the Trust Fund. The Company and its Affiliates expressly
reserve the right at any time to dismiss any Employee without any liability for
any claim either against the Company or any of its Affiliates or against the
Trust Fund for any payment whatsoever except to the extent provided for in this
Plan.
10.2 Benefits Provided Solely From the Trust Fund
--------------------------------------------
All benefits payable under this Plan shall be paid or provided
for solely from the Trust Fund and the Employer assumes no liability or
responsibility therefor.
10.3 Notice of Participants to be Filed with Committee
-------------------------------------------------
Whenever provision is made herein that a Participant may exercise
any option or designate any Beneficiary, the action of each Participant shall be
evidenced by a written notice thereof signed by the Participant on a form, if
any, furnished by the Committee for such purpose and filed with such Committee,
which shall not be effective until received by the Committee.
10.4 Plan Intended to Conform to Provisions of Federal Internal
----------------------------------------------------------
Revenue Code Relative to Employee's Trusts
- ------------------------------------------
It is the intention of the Company that it shall be impossible
for any part of the Trust Fund to be used for or diverted to purposes other than
for the exclusive benefit of Participants and their Beneficiaries. This
Paragraph shall be construed to
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follow the spirit and intent of the present Act, Code and Regulations or any
future federal law and regulations governing trusts for the exclusive benefit of
employees, to the end that the Trust Fund shall be incapable of such diversion,
whether by operation or natural termination of the Trust by power of revocation,
by amendment or by any other means, except as expressly allowed by any such law
or regulations.
10.5 Amendment and Successor Code or Act or Sections Thereof
-------------------------------------------------------
Whenever a reference is made in this Plan to the Code or Act or
to a section of the Code or Act, such reference shall be deemed to refer to such
Code or Act or section as the same may be amended from time to time, and to any
successor Code or Act or section thereto.
10.6 Claims Procedure
----------------
10.6.1 Filing of Claims
----------------
If a Participant, former Participant, or Beneficiary does
not receive payment of the benefits to which such person believes he is entitled
under the Plan or has any other grievance with respect to his benefits under the
Plan, such person or his authorized representative (such person or his
authorized representative, if any, is hereinafter referred to as the "Claimant")
may make a claim in the manner herein provided. For purposes of this Paragraph
10.6, the pension benefit election form completed by a Participant or a
Beneficiary shall not be deemed a claim, and such requesting party shall not be
deemed a Claimant. All claims under the Plan shall be made in writing, signed by
the Claimant and submitted to the Claims Coordinator to be designated from time
to time by the Committee. The Claims Coordinator shall be designated by the
Committee and may be, but need not be, an Employee or a member of the Committee.
The Claims Coordinator may require all claims to be filed on forms supplied by
him. Each claim shall contain sufficient information (other than information
available to the Committee and the Claims Coordinator from their own records) to
allow the Claims Coordinator to make a determination as to said claim; a claim
shall not be deemed to be properly filed unless it contains such sufficient
information. If a claim does not contain such sufficient information, the Claims
Coordinator shall indicate to the Claimant any additional information which is
necessary for the Claims Coordinator to make a determination as to the claim.
The Claims Coordinator
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<PAGE>
shall consider each claim which is properly filed and shall issue his
determination thereon in writing within ninety (90) days after the date on which
such claim is properly filed, unless special circumstances require an extension
of time for processing the claim, in which event the Claims Coordinator shall
(a) furnish the Claimant with written notice of such extension within ninety
(90) days after the date on which the claim is properly filed, and (b) issue his
written determination on the claim not later than one hundred eighty (180) days
after the date on which the claim is properly filed. If the claim is granted,
the appropriate distribution, adjustment or other action shall be made or taken.
If the Claims Coordinator denies the claim in whole or in part, he shall furnish
a copy of his written determination to the Claimant upon the issuance thereof,
and such written determination shall set forth, in a manner calculated to be
understood by the Claimant, the following information:
(a) The specific reasons for the denial;
(b) Specific references to the pertinent Plan provisions upon
which the denial is based;
(c) An explanation of the appeals procedure and arbitration
provisions of this Plan.
If the Claims Coordinator takes no action on a claim within
ninety (90) days after it is properly filed, the Claims Coordinator shall be
deemed to have denied such claim for purposes of the appeals procedure set forth
in Paragraph 10.6.2 of this Article X.
10.6.2 Appeals Procedure
-----------------
If the Claims Coordinator denies a claim in whole or in
part, the Claimant who made such claim may appeal from such denial. Such appeal
must be submitted in writing and signed by the Claimant within sixty (60) days
after the denial is communicated to the Claimant. The Committee may require
appeals to be made on forms supplied by it. An appeal may be accompanied by such
issues, comments and documentation as the Claimant deems pertinent. The Claimant
may review pertinent documents at reasonable times throughout the period
beginning with the communication to the Claimant of the denial of the claim and
ending with the date of the communication to the Claimant of the decision
reached by the Committee upon the Claimant's appeal. The Committee, in its
discretion, may hold a hearing on any appeal upon reasonable notice to the
Claimant. The Committee shall
54
<PAGE>
issue its written decision on each appeal within sixty (60) days after the
receipt thereof, unless special circumstances (such as the need to hold a
hearing or obtain additional information) require an extension of the time for
processing the appeal, in which event the Committee shall issue its decision as
soon as possible but not later than one hundred twenty (120) days after the date
on which the appeal was filed. Each decision issued by the Committee shall set
forth, in a manner calculated to be understood by the Claimant, the specific
reasons for the decision, specific references to the pertinent Plan provisions
on which the decision is based and an explanation of the arbitration provisions
set forth in Paragraph 10.6.3 of this Article X. If the Committee fails to issue
a written decision on an appeal within one hundred twenty (120) days after the
date on which the appeal was filed, the Committee shall be deemed to have denied
the appeal.
10.6.3 Arbitration
-----------
A Claimant may contest the Committee's denial of his
appeal only by submitting the matter to arbitration. In such event, the Claimant
and the Committee shall select an arbitrator from a list of names supplied by
the American Arbitration Association in accordance with such Association's
procedures for selection of arbitrators, and the arbitration shall be conducted
in accordance with the rules of such Association. The arbitrator's authority
shall be limited to the affirmance or reversal of the Committee's denial of the
appeal, and the arbitrator shall have no power to alter, add to or subtract from
any provision of this Plan or the Trust Agreement. Except as otherwise required
by the Act, the arbitrator's decision shall be final and binding on all parties,
if warranted on the record and reasonably based on applicable law and the
provisions of this Plan and the Trust Agreement. No action for distribution of
benefits or with respect to a Participant's, former Participant's or
Beneficiary's interest in the Plan shall be brought in any court unless and
until all of his rights and remedies under this Paragraph 10.6. including the
arbitration provisions of this Paragraph 10.6.3. have been exhausted.
10.7 Context to Control
------------------
The headings of articles and paragraphs are included solely for
convenience or reference, and if there be any conflict between such headings and
the text of the Plan, the text shall control.
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10.8 Gender and Number
-----------------
Any gender, including neuter, shall include the other(s) and the
singular shall include the plural, and vice versa.
10.9 More Than One Capacity
----------------------
Any person or group of persons may serve in more than one
fiduciary capacity with respect to this Plan and/or the Trust created hereunder,
including service both as a Trustee or Co-Trustee and as a member of the
Committee.
10.10 Service of Process
------------------
Any member of the Committee who is then acting as such or the
chief legal officer of The Hillhaven Corporation shall be authorized to receive
service of process on behalf of the Plan.
10.11 Indemnification
---------------
The Company hereby agrees to indemnify and hold harmless any
member of the Committee, the Claims Coordinator, any member of the Compensation
Committee and any member of the Board of Directors and any other Employee
(including any "executive officer" as such term is used in rules of the
Securities and Exchange Commission promulgated under the Securities Exchange Act
of 1934), and the estate and heirs of such Committee member, Claims Coordinator,
Board member or Employee, from and against any and all liabilities, expenses,
penalties, costs, damages or losses (including, without limitation, reasonable
attorneys' fees and court costs) incurred by such Committee member, Board
member, Employee, estate or heirs arising out of or in connection with any
actual or alleged act or omission of such person in connection with the
operation or administration of the Plan or the Trust Fund; provided, however,
(a) the Company shall not indemnify or hold harmless any such Committee member,
Claims Coordinator, Board member, Employee or estate or heirs from or against
any such liability, expense, penalty, costs, damage or loss to the extent that
such liability, expense, penalty, cost, damage or loss is covered by fiduciary
liability insurance, (b) the Employer shall not indemnify or hold harmless any
such Committee member, Claims Coordinator, Board member, Employee or estate or
heirs from any liability, expense, penalty, cost, damage or loss arising out of
or in connection with the willful misconduct of such Committee member, Claims
Coordinator, Board member or Employee, and (c) in no event shall the Company's
duty to indemnify any such Committee member, Claims
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Coordinator, Board member, Employee, estate or heirs be satisfied out of Plan
assets.
10.12 Missing Participants
--------------------
If the Trustee is unable to effect delivery of any amount payable
hereunder to the Participant entitled thereto, it shall so advise the Committee
and the Committee shall give written notice by certified mail to such
Participant at his or her last known address as shown in the Plan's records. If
there is no response to such certified notice or the certified letter is
returned to the Committee by the United States Postal Service as undeliverable,
then in that event the Committee shall so advise the Trustee. The Trustee, upon
such notice, shall deposit the amount payable to such Participant into a general
account at Trustee's bank which holds such undeliverable distributions;
provided, however, that Trustee's bank may cause property held by it to escheat
to the State of Washington or to such other state as may be required or
permitted by applicable law.
10.13 Administrative Mistake
----------------------
Notwithstanding anything to the contrary herein contained, if the
Committee should discover that a mistake has been made in crediting Compensation
Deferral Contributions or Employer contributions, or earnings to the account of
any Participant, the Committee may request the Employer to make a special
contribution to the account of said Participant and may take any other
administrative action which it deems necessary or appropriate to remedy the
mistake in question. If the Committee should discover that a mistake has been
made in calculating the amount of any excess Compensation Deferral
Contributions, or earnings on such excess amount, which amount is required to be
distributed to a Participant, as provided in Paragraph 4.5, the Committee may
take such administrative action as it deems necessary or appropriate to remedy
the mistake in question.
10.14 Information to be Furnished to Committee
----------------------------------------
For the purpose of enabling the Committee to determine the
portion of the Participant's interest in the Trust Fund which is vested and
distributable, the Company or its Affiliate shall certify to the Committee in
writing any of the following information specified by the Committee as soon as
possible following the Participant's
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(a) retirement, or (b) death, or (c) possible Total and Permanent Disability,
(d) termination of Employment, or (e) the occurrence after termination of
Employment of one or more One Year Break(s) in Service:
(i) Name, address, and Social Security number;
(ii) Date on which Participant shall have retired or died or
on which his Employment otherwise terminated;
(iii) Number of Years of Service;
(iv) Reason for termination of Employment; and
(v) The date upon which any One Year Break in Service
occurs subsequent to a termination of Employment.
10.15 Spendthrift Trust Provisions
----------------------------
Except as otherwise provided under this Plan, all distributions
by the Trustee shall be paid only to the person or persons entitled thereto, and
all such payments shall be made directly into the hands of such person or
persons and not into the hands of any other person or corporation whatsoever, to
the end that said payments shall not be liable for the debts, contracts, or
engagements of any such designated person or persons, or taken in execution by
attachment or garnishment, or by any other legal or equitable proceedings; nor
shall any such designated person or persons have any right to alienate,
anticipate, commute, pledge, encumber, assign, or hypothecate any such payments
or the benefits, proceeds or any interest arising out of this Plan and Trust.
To the extent required under Section 414(p) of the Code, the
value of a Participant's vested interest in the Trust Fund may be paid in
accordance with the applicable provisions of a "qualifying domestic relations
order" which creates or recognizes the existence of an alternate payee's right
to, or assigns to an alternate payee the right to, receive all or a portion of
the Participant's vested interest in the Trust Fund.
For purposes of this Paragraph 10.16, a "qualified domestic
relations order" means any judgment, decree, or order (including approval of a
property settlement agreement) which relates to the provision of
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<PAGE>
child support, alimony payments, or marital property rights to a spouse, former
spouse, child or other dependent of the Participant, is made pursuant to a State
domestic relations law (including community property law), and satisfies the
requirements of Section 414(p) of the Code. Notwithstanding the requirements of
Section 414(p) of the Code, the Committee may direct the Trustee to distribute
all or a portion of a Participant's vested interest in the Trust fund to an
alternate payee in accordance with a qualified domestic relations order which
provides for distribution prior to the date the Participant attains age fifty
(50).
The Committee shall adopt procedures for determining the
qualified status of an order and for the payment of benefits in accordance with
such order. Such procedures shall be in writing, provide for the prompt
notification upon the receipt of such order of each person specified in the
order as entitled to benefits, and shall permit an alternate payee to designate
a representative to receive copies of notices with respect to such order. Within
a reasonable period of time after the receipt of a domestic relations order the
Committee shall determine whether such order is a qualified domestic relations
order and notify the Participant and alternate payee of such determination. Any
requirement pursuant to Section 414(p) of the Code that any amount subject to or
potentially subject to a domestic relations order be segregated shall be deemed
satisfied by a notation on the books and records of the Plan that such amount is
or may be so subject; provided, however, that each Participant and alternate
payee, shall be obligated to keep the Committee fully informed of the status of
any potential legal claims involving an account under the Plan and in the
absence of any such information the Committee may rely on information previously
supplied to it or may make such other determinations regarding the existence or
non-existence of such claims as it deems reasonable under the circumstances, and
shall have no liability for so doing.
10.16 Withholding
-----------
There shall be deducted from all payments under this Plan the
amount of any taxes required to be withheld by any federal, state or local
government. The Participants and their Beneficiaries, distributees and personal
representatives will bear any and all federal, foreign, state, local or other
income or other taxes imposed on amounts paid under this Plan.
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<PAGE>
10.17 Severability
------------
In the event any provision of this Plan would invalidate the
Plan, that provision shall be deemed null and void, and the Plan shall be
construed as if it did not contain such provision.
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<PAGE>
ARTICLE XI
TOP HEAVY PLAN RULES
11.1 Applicability
-------------
(a) Notwithstanding any provision in this Plan to the contrary,
the provisions of this Article XI shall apply in the case of any Plan Year in
which the Plan is determined to be a Top-Heavy Plan under the rules of Paragraph
11.3.
(b) Except as is expressly provided to the contrary, the rules
of this Article XI shall be applied after the application of the Affiliate rules
of Paragraph 1.5.
11.2 Definitions
-----------
(a) For purposes of this Article XI, the term "Key Employee"
shall mean any Employee or former Employee who, at any time during the Plan Year
or any of the four (4) preceding Plan Years, is or was --
(i) An officer of the Company having an annual compensation
greater than fifty percent (50%) of the amount in effect under Code Section
415(b)(1)(A) for this Plan Year. However, no more than fifty (50)
Employees (or, if lesser, the greater of three (3) or ten percent (10%) of
the Employees) shall be treated as officers;
(ii) One of the ten (10) employees having annual
compensation from the Company of more than the limitation in effect under
Code Section 415(c)(1)(A) and owning (or considered as owning within the
meaning of Code Section 318) the largest interests in the Company. For this
purpose, if two (2) Employees have the same interest in the Company, the
employee having greater annual compensation from the Company shall be
treated as having a larger interest;
(iii) A Five Percent Owner of the Company; or
(iv) A One Percent Owner of the Company having an annual
compensation from the Company of more than one hundred fifty thousand
dollars ($150,000).
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(b) For purposes of this Paragraph 11.2, the term "Five Percent
Owner" means any person who owns (or is considered as owning within the meaning
of Code Section 318) more than five percent (5%) of the outstanding stock of the
Company or stock possessing more than five percent (5%) of the total combined
voting power of all stock of the Company. The rules of Subsections (b), (c). and
(m) of Code Section 414 shall not apply for purposes of applying these ownership
rules. Thus, this ownership test shall be applied separately with respect to
every Affiliate.
(c) For purposes of this Paragraph 11.2, the term "One Percent
Owner" means any person who would be described in Paragraph (b) if "one percent
(1%)" were substituted for "five percent (5%)" each place where it appears
therein.
(d) For purposes of this Paragraph 11.2, the rules of Code
Section 318(a)(2)(C) shall be applied by substituting "five percent (5%)" for
"fifty percent (50%)."
(e) For purposes of this Article XI. the term "Non-Key Employee"
shall mean any Employee who is not a Key Employee.
(f) For purposes of this Article XI, the terms "Key Employee"
and "Non-Key Employee" include their Beneficiaries.
11.3 Top-Heavy Status
----------------
(a) The term "Top-Heavy Plan" means, with respect to any Plan
Year --
(i) Any defined benefit plan if, as of the Determination
Date, the present value of the cumulative accrued benefits under the Plan
for Key Employees exceeds sixty percent (60%) of the present value of the
cumulative accrued benefits under the plan for all Employees, and
(ii) Any defined contribution plan if, as of the
Determination Date. the aggregate of the account balances of Key Employees
under the Plan exceeds sixty percent (60%) of the present value of the
aggregate of the account balances of all Employees under the plan.
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<PAGE>
For purposes of this Paragraph (a), the term "Determination Date" means, with
respect to any Plan Year, the last day of the preceding Plan Year. In the case
of the first Plan Year of any plan, the term "Determination Date" shall mean the
last day of that Plan Year.
The present value of account balances under a defined
contribution plan shall be determined as of the most recent Valuation Date that
falls within a twelve (12) month period ending on the Determination Date. The
present value of accrued benefits under a defined benefit plan shall be
determined as of the same Valuation Date used for computing plan costs for
minimum funding. The present value of the cumulative accrued benefits of a Non-
Key Employee shall be determined under either:
(i) the method, if any, that uniformly applies for accrual
purposes under all plans maintained by affiliated companies, within the
meaning of Code Sections 414(b), (c), (m) or (o); or
(ii) if there is no such method, as if such benefit accrued
not more rapidly than the lowest accrual rate permitted under the
fractional accrual rate of Section 411(b)(1)(C) of the Code.
(b) Each plan maintained by the Company required to be included
in an Aggregation Group shall be treated as a Top-Heavy Plan if the Aggregation
Group is a Top-Heavy Group.
(i) The term "Aggregation Group" means --
(A) Each Plan of the Company in which a Key Employee
is a Participant, and
(B) Each other plan of the Company which enables any
plan described in Subdivision (A) to meet the requirements of Code
Sections 401(a)(4) or 410.
Also, any plan not required to be included in an Aggregation Group under
the preceding rules may be treated as being part of such group if the group
would continue to meet the requirements of Code Sections 401(a) (4) and 410
with the plan being taken into account. If an Aggregation Group is not a
Top Heavy Group, no plan included in the Top Heavy Group shall be a Top
Heavy Plan, whether or not such Plan would be a Top Heavy Plan under any
other test.
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(ii) The term "Top-Heavy Group" means any Aggregation Group
if the sum (as of the Determination Date) of --
(A) The present value of the cumulative accrued
benefits for Key Employees under all defined benefit plans included in
the group, and
(B) The aggregate of the account balances of Key
Employees under all defined contribution plans included in the group
exceeds sixty percent (60%) "of a similar sum determined for all Employees.
(iii) For purposes of determining --
(A) The present value of the cumulative accrued
benefit of any Employee, or
(B) The amount of the account balance of any Employee,
such present value or amount shall be increased by the aggregate
distributions made with respect to the Employee under the plan during the
five (5) year period ending on the Determination Date. The preceding rule
shall also apply to distributions under a terminated plan which, if it had
not been terminated, would have been required to be included in an
Aggregation Group. Also, any rollover contribution or similar transfer
initiated by the Employee and made after December 31, 1983 to a plan shall
not be taken into account with respect to the transferee plan for purposes
of determining whether such plan is a Top-Heavy Plan (or whether any
Aggregation Group which includes such plan is a Top-Heavy Group).
(c) If any individual is a Non-Key Employee with respect to any
plan for any Plan Year, but the individual was a Key Employee with respect to
the plan for any prior Plan Year, any accrued benefit for the individual (and
the account balance of the individual) shall not be taken into account for
purposes of this Paragraph 11.3.
(d) If any individual has not received any Compensation from the
Company (other than benefits under the Plan) at any time during the five (5)
year period ending on the Determination Date, any accrued benefit for
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<PAGE>
such individual (and the account balance of the individual) shall not be taken
into account for purposes of this Paragraph 11.3
11.4 Minimum Contributions
---------------------
For each Plan Year in which the Plan is Top-Heavy, the minimum
contributions for that year shall be determined in accordance with the rules of
this Paragraph 11.4.
(a) Except as provided below, the minimum contribution
(including amounts deferred under a cash or deferred arrangement under Section
401(k) of the Code) for each Non-Key Employee who satisfies the requirements of
Article III to be a Participant in the Plan (including but not limited to the
"One Year of Service" requirement, but without regard to any requirements (i)
that a Participant complete a minimum number of Hours of Service in order to
share in an allocation of Company Contributions for a year, other than the "One
Year of Service" requirement for participation, as set forth in Article III,
(ii) that a Participant elected to make Compensation Deferral Contributions to
the Plan, or (iii) relating to the Non-Key Employee's level of Compensation)
shall be not less than three percent (3%) of his Compensation.
(b) Subject to the following rules of this Paragraph (b), the
percentage set forth in Paragraph (a) above shall not be required to exceed the
percentage at which contributions (including amounts deferred under a cash or
deferred arrangement under Section 401(k) of the Code) are made (or are required
to be made) under the Plan for the year for the Key Employee for whom the
percentage is the highest for the year. This determination shall be made by
dividing the contributions for each Key Employee by so much of his total
compensation for the year as does not exceed two hundred thousand dollars
($200,000). For purposes of this Paragraph (b), all defined contribution plans
required to be included in an Aggregation Group shall be treated as one plan.
However, the rules of this Paragraph (b) shall not apply to any plan required to
be included if an Aggregation Group if the plan enables a defined benefit plan
to meet the requirements of Code Sections 401(a)(4) or 410.
(c) The requirements of this Paragraph 11.4 must be satisfied
without taking into account contributions under chapters 2 or 21 of the Code,
title II of the Social Security Act, or any other Federal or State law.
65
<PAGE>
(d) In the event a Participant is covered by both a defined
contribution and a defined benefit plan maintained by the Company, both of which
are determined to be top-heavy, the defined minimum benefit will be satisfied
under the defined benefit plan, offset by any contributions under the defined
contribution plan, in accordance with regulations issued under Code Section
416(f).
(e) In no instance may the Plan take into account an Employee's
compensation in excess of the first two hundred thousand dollars ($200,000) (or
such greater amount as may be permitted pursuant to Section 416(d) (2) of the
Code). For purposes of this Paragraph 11.4, an Employee's Compensation shall be
determined in accordance with the rules of Code Section 415.
11.5 Maximum Annual Addition
-----------------------
(a) Except as set forth below, in the case of any Top-Heavy Plan
the rules of 415 of the Code shall be applied by substituting "1.0" for "1.25."
(b) The rule set forth in Paragraph (a) above shall not apply if
the requirements of both Subparagraphs (i) and (ii), below, are satisfied.
(i) The requirements of this Subparagraph (i) are satisfied
if the rules of Paragraph 11.4(a) above would be satisfied after
substituting "four percent (4%)" for "three percent (3%)" where it appears
therein.
(ii) The requirements of this Subparagraph (ii) are
satisfied if the Plan would not be a Top-Heavy Plan if "ninety percent
(90%)" were substituted for "sixty percent (60%)" each place it appears in
Paragraph 11.3(a)(ii).
(c) The rules of Paragraph (a) shall not apply with respect to
any Employee as long as there are no --
(i) Company Contributions," forfeitures, or voluntary
nondeductible contributions allocated to the Employee under a defined
contribution plan maintained by the Company, or
(ii) Accruals by the Employee under a defined benefit plan
maintained by the Company.
66
<PAGE>
11.6 Vesting Rules
-------------
In the event that the Plan is determined to be Top-Heavy in
accordance with the rules of Paragraph 11.3, then the vested status of each
Non.Key Employee as of such date shall be equal to the vested status determined
under the vesting provisions of this Plan as then in effect, or if better, under
the vesting schedule set forth below:
<TABLE>
<CAPTION>
Years of Service Nonforfeitable Percentage
---------------- -------------------------
<S> <C>
2 20%
3 40%
4 60%
5 80%
6 or more 100%
</TABLE>
11.7 Non-Eligible Employees
----------------------
The rules of this Article XI shall not apply to any Employee
included in a unit of employees covered by an agreement which the Secretary of
Labor finds to be a collective bargaining agreement between employee
representatives and one or more employers if there is evidence that retirement
benefits were the subject of good faith bargaining between such employee
representatives and the employer or employers.
If the Plan is or becomes a Top.Heavy Plan, as defined in
Paragraph 11.1(b), in any Plan Year, the provisions of this Article XI shall
Supersede any conflicting provisions in the Plan.
IN WITNESS WHEREOF, this document has been executed this 31st day of
January, 1990.
THE HILLHAVEN CORPORATION
By [NOT LEGIBLE]
------------------------------
By [NOT LEGIBLE]
------------------------------
<PAGE>
EXHIBIT 10.27
THE HILLHAVEN CORPORATION
ANNUAL INCENTIVE PLAN
Adopted December 28, 1989
Amended as of December 6, 1994
1. Purposes. The purpose of the Annual Incentive Plan (the
"Plan") of The Hillhaven Corporation (the "Company") is to promote the
interests of the Company and its stockholders by basing a portion of selected
employees' compensation on the performance of such employee, his or her
Operating Unit and the Company.
2. Definitions.
a. "Fair Return to Stockholders" shall be determined
with reference to inflation, financial leverage of the Company and such other
factors as may have a bearing on the return on a stockholder's investment
taking into account the overall performance of the Company as measured against
the business plans approved by the Board of Directors of the Company.
b. "Operating Unit" means any division, subsidiary or
other functional unit within the Company which is designated by the Committee
to constitute an Operating Unit.
c. "Performance Goals" are the annual performance
objectives established by the Committee for the Company, Operating Unit, or an
employee for the purpose of determining whether, and the extent to which,
awards under the Plan will be made for that Year.
d. "Year" means the Company's fiscal year.
3. Administration. The Plan shall be administered by the
Compensation Committee (the "Committee") of the Company's Board of Directors
(the "Board"). The Committee shall have the discretion to (a) determine the
Plan participants; (b) determine Performance Goals at the beginning of each
Year; (c) determine whether the Performance Goals have been met; (d) determine
what constitutes a Fair Return to Stockholders; (e) determine the total amount
of funds available for distribution as bonuses at the end of a Year; and (f)
determine the award, if any, to each participant each year. Subject to the
provisions of the Plan, the Committee shall be authorized to interpret the
Plan, to make,
<PAGE>
amend and rescind such rules as it deems necessary for the proper
administration of the Plan, to make all other determinations necessary or
advisable for the administration of the Plan and to correct any defect or
supply any omission or reconcile any inconsistency in the Plan in the manner
and to the extent the Committee deems desirable to carry the Plan into effect.
Any change in the Fair Return to Stockholders shall be approved by the Board.
Any action taken or determination made by the Committee shall be conclusive on
all parties.
4. Eligible Persons. Any key employee of the Company that the
Committee determines, in its discretion, will be responsible for producing
profits of the Company or otherwise have a significant effect on the operations
of the Company shall be eligible to participate in the Plan. Committee members
are not eligible to participate in the Plan. No employee shall have a right to
be selected under the Plan.
5. Amount Available for Awards. The amount of Company profits
available for awards under the Plan in any Year shall be determined by the
Committee.
6. Determination of Awards. The Committee shall select the Plan
participants prior to each Year. The Committee shall determine the award to
each participant for each Year, taking into consideration, as it deems
appropriate, the performance for the Year of the Company or an Operating Unit,
as the case may be, in relation to the Performance Goals theretofore
established by the Committee, and the performance of the respective
participants during such Year. The fact that an employee is selected as a
participant for any Year shall not mean such employee will necessarily receive
an award for that Year under the Plan.
7. Distribution of Awards. Awards under the Plan for a
particular Year shall be paid in cash after the end of that Year.
8. Change in Control. In the event of a Change in Control Event,
the Committee may, in its sole discretion, determine that all or any portion of
conditions associated with any award under the Plan have been met. A Change of
Control Event shall be deemed to occur if any of the following events has
occurred:
a. A Person, alone or together with its Affiliates and
Associates, or "group", within the meaning of Section 13(d)(3) of the
Securities Exchange Act of 1934, becomes, after the date hereof, the beneficial
owner of 20% or more of the general voting power of the Company.
Notwithstanding the preceding sentence, a Change of Control Event shall not be
deemed to occur if the "Person" described in the preceding sentence has
2
<PAGE>
acquired 20% or more of the general voting power of the Company as
consideration in a transaction or series of related transactions involving the
Company's acquisition (by stock acquisition, merger, asset purchase or
otherwise) of one or more businesses approved prior to such transactions or
series of transactions by the Incumbent Board (as defined in (ii) below), and
provided that, if such transaction or series of transactions results in the
merger, consolidation or reorganization of the Company and such Person, the
Company is the surviving entity following such merger, consolidation or
reorganization.
b. Individuals who, as of the date hereof, constitute
the Board (the "Incumbent Board"), cease for any reason to constitute at least
a majority of the Board, provided that any person becoming a director
subsequent to the date hereof whose election, or nomination for election by the
Company's stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
directors of the Company, as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Securities Exchange Act of 1934) shall be considered
as though such person were a member of the Incumbent Board.
c. Consummation or effectiveness of:
(1) a merger, consolidation or reorganization involving
the Company (a "Business Combination"), unless
(a) the stockholders of the Company, immediately
before the Business Combination, own, directly or indirectly
immediately following the Business Combination, at least
fifty-one percent (51%) of the combined voting power of the
outstanding voting securities of the corporation resulting
from the Business Combination (the "Surviving Corporation") in
substantially the same proportion as their ownership of the
voting securities immediately and before the Business
Combination, and
(b) the individuals who were members of the
Incumbent Board immediately prior to the execution of the
agreement providing for the Business Combination constitute at
least a majority of the members of the Board of Directors of
the Surviving Corporation, and
3
<PAGE>
(c) no Person (other than any Person who,
immediately prior to the Business Combination, had beneficial
ownership of twenty percent (20%) or more of the then
outstanding Voting Securities) has Beneficial Ownership of
twenty percent (20%) or more of the combined voting power of
the Surviving Corporation's then outstanding voting
securities;
(2) a complete liquidation or dissolution of the Company;
or
(3) the sale or other disposition of all or substantially
all of the assets of the Company to any Person.
For purposes of determining whether a Change of Control Event has
occurred, the following additional definitions apply:
"Affiliate or Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934.
"Person," means an individual, firm, corporation or other
entity or any successor to such entity, but "Person" shall not
include the Company, any subsidiary of the Company, any
employee benefit plan or employee stock plan (including a
trust relating thereto) of the Company or any subsidiary of
the Company, or any Person organized, appointed, established
or holding Voting Stock by, for or pursuant to the terms of
such a plan. "Person" shall also not include National Medical
Enterprises, Inc. ("NME"), any subsidiary of NME, any
Affiliate or Associate of NME, any employee benefit plan or
employee stock plan of NME or any subsidiary of NME to the
extent that such entities, individually or collectively, own
any or all of (x) 8,878,147 shares of the Company's common
stock (approximately 31% of the general voting power of the
Company as of December 6, 1994) registered in the name of NME
or any subsidiary of NME as of the date of this Agreement, or
(y) such additional number of shares of the Company's common
stock issued to NME or any subsidiary of NME in exchange for
shares of the Company's Series C Preferred Stock or Series D
Preferred Stock so long as such exchange has been approved in
advance by the Incumbent Board.
4
<PAGE>
"Voting Stock" means shares of the Company's capital stock
having general voting power, with "voting power" meaning the
power under ordinary circumstances (and not merely upon the
happening of a contingency) to vote in the election of
directors.
9. Termination of Employment. A participant must be actively
employed at the end of a Year in order to be entitled to payment of the full
amount of any award for that Year. In the event active employment of a
participant shall be terminated before the end of a Year for any reason other
than discharge for cause or voluntary resignation, such participant shall
receive such portion of his or her award for the Year as may be determined by
the Committee. A participant discharged for cause or who voluntarily resigns
shall not be entitled to receive any award for the Year, unless otherwise
determined by the Committee. For purposes of this Plan the term "discharge for
cause" shall mean any discharge for violation of the policies and procedures of
the Company or for other job performance or conduct which, as determined by the
Committee, is detrimental to the best interests of the Company.
10. No Guarantee of Employment. Participation in the Plan shall
not constitute an assurance of continued employment for any period.
11. Governing Law. The Plan and all actions taken thereunder
shall be governed by and construed in accordance with the laws of the State of
Washington.
12. Effective Date. The Plan effective date is January 31, 1990.
THE HILLHAVEN CORPORATION
By ________________________________
Its ____________________________
5
<PAGE>
EXHIBIT 10.28
THE HILLHAVEN CORPORATION
DEFERRED COMPENSATION PLAN
(AMENDED AND RESTATED, EFFECTIVE OCTOBER 1, 1994)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 SELECTION, ENROLLMENT, ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.1 Selection by Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.2 Enrollment Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.3 Eligibility; Commencement of Participation . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 3 DEFERRAL COMMITMENTS/INTEREST CREDITING . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.1 Minimum and Maximum Deferral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.2 Company Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.3 Election to Defer; Effect of Election Form . . . . . . . . . . . . . . . . . . . . . . . . 10
3.4 Withholding of Deferral Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.5 Interest Crediting Prior to Distribution . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.6 Installment Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.7 FICA and Other Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 4 SHORT-TERM PAYOUT; UNFORESEEABLE FINANCIAL
EMERGENCIES; WITHDRAWAL ELECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.1 Short-Term Payout . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.2 Withdrawal Payout/Suspensions for Unforeseeable Financial Emergencies . . . . . . . . . . 12
4.3 Withdrawal Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 5 RETIREMENT BENEFIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.1 Retirement Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.2 Payment of Retirement Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.3 Death Prior to Completion of Retirement Benefits . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 6 PRE-RETIREMENT SURVIVOR BENEFIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.1 Pre-Retirement Survivor Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.2 Payment of Pre-Retirement Survivor Benefits . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE 7 TERMINATION BENEFIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.1 Termination Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.2 Payment of Termination Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 8 DISABILITY WAIVER AND BENEFIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.1 Disability Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.2 Disability Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 9 BENEFICIARY DESIGNATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
9.1 Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
9.2 Beneficiary Designation; Change; Spousal Consent . . . . . . . . . . . . . . . . . . . . . 16
9.3 Acknowledgment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
9.4 No Beneficiary Designation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
9.5 Doubt as to Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
9.6 Discharge of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 10 LEAVE OF ABSENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.1 Paid Leave of Absence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.2 Unpaid Leave of Absence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 11 TERMINATION, AMENDMENT OR MODIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . 17
11.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
11.2 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
11.3 Effect of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 12 ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
12.1 Committee Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
12.2 Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
12.3 Binding Effect of Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
12.4 Indemnity of Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
12.5 Employer Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 13 OTHER BENEFITS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 14 CLAIMS PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
14.1 Presentation of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
14.2 Notification of Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
14.3 Review of a Denied Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.4 Decision on Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.5 Legal Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 15 TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
15.1 Establishment of the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
15.2 Interrelationship of the Plan and the Trust . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 16 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
16.1 Unsecured General Creditor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
16.2 Employer's Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
16.3 Nonassignability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
16.4 Not a Contract of Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
16.5 Furnishing Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
16.6 Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
16.7 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
16.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
16.9 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
16.10 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
16.11 Spouse's Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
16.12 Incompetent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
16.13 Court Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
16.14 Distribution in the Event of Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . 23
16.15 Legal Fees to Enforce Rights After a Change of Control Event . . . . . . . . . . . . . . . 24
16.16 Taxes and Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
16.17 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
iii
<PAGE>
THE HILLHAVEN CORPORATION
DEFERRED COMPENSATION PLAN
AMENDED AND RESTATED, EFFECTIVE OCTOBER 1, 1994
PURPOSE
The purpose of this Plan is to provide specified benefits to a select
group of management or highly compensated Employees who contribute materially
to the continued growth, development and future business success of The
Hillhaven Corporation, a Nevada corporation, and its subsidiaries, if any, that
sponsor this Plan. This Plan shall be unfunded for tax purposes and for
purposes of Title I of ERISA.
This Plan represents a combination and continuation of The Hillhaven
Corporation Deferred Compensation Master Plan, Third Restatement and The
Hillhaven Corporation Senior Management Deferred Compensation Plan (either a
"Predecessor Plan"). All amounts previously deferred under and account
balances maintained under either of such plans shall, as of October 1, 1994,
become subject to the terms and conditions of The Hillhaven Corporation
Deferred Compensation Plan as set forth herein, and as this instrument may be
amended from time to time.
Notwithstanding the foregoing sentence, any Participant in pay status
shall receive payment of his or her deferred compensation pursuant to the terms
of the Predecessor Plan and any short-term payout election made pursuant to the
Predecessor Plan shall be paid out pursuant to the election made thereunder.
ARTICLE 1.
DEFINITIONS
For purposes hereof, unless otherwise clearly apparent from the
context, the following phrases or terms shall have the following indicated
meanings:
1.1 "Account Balance" shall mean with respect to a Participant the sum of
(i) his or her Deferral Amount, plus (ii) his or her company
contributions, contributed under Section 3.2 hereof plus (iii)
interest credited in accordance with all the applicable interest
crediting provisions of this Plan, less (iv) all distributions. This
account shall be a bookkeeping entry only and shall be utilized solely
as a device for the measurement and determination of the amounts to be
paid to a Participant pursuant to this Plan.
1.2 "Annual Bonus" shall mean any compensation, in addition to Base Annual
Salary, paid annually to a Participant as an Employee under any
Employer's annual bonus plan or plans.
<PAGE>
1.3 "Annual Deferral Amount" shall mean that portion of a Participant's
Base Annual Salary and/or Annual Bonus to be paid during a Plan Year
that a Participant elects to have and is deferred in accordance with
Article 3, for any one Plan Year. In the event of a Participant's
Retirement, Disability (if deferrals cease in accordance with Section
8.1), death or a Termination of Employment prior to the end of a Plan
Year, such year's Annual Deferral Amount shall be the actual amount
deferred and withheld prior to such event.
1.4 "Base Annual Salary" shall mean the annual compensation, including
commissions, overtime, and incentive payments (other than amounts
considered part of the Annual Bonus), but excluding severance pay,
compensation received as a result of deferral, any equity-based
compensation and fringe benefits (including but not limited to
relocation expenses, non-monetary awards, directors fees and other
fees, automobile, educational, uniform, professional dues, and
employee expense allowances), paid to a Participant for employment
services rendered to any Employer before reduction for compensation
deferred pursuant to all qualified, non-qualified and Code Section 125
plans of any Employer. Notwithstanding the foregoing, the Company may
elect to permit directors fees to be included in the definition of
Base Annual Salary by written notice to affected Participants.
1.5 "Beneficiary" shall mean one or more persons, trusts, estates or other
entities, designated in accordance with Article 9, that are entitled
to receive benefits under this Plan upon the death of a Participant.
1.6 "Beneficiary Designation Form" shall mean the form established from
time to time by the Committee that a Participant completes, signs and
returns to the Committee to designate one or more Beneficiaries.
1.7 "Board" shall mean the board of directors of the Company.
1.8 A "Change of Control Event" shall be deemed to occur if any of the
following events has occurred:
(i) A Person, alone or together with its
Affiliates and Associates, or "group", within the meaning of
Section 13(d)(3) of the Securities Exchange Act of 1934,
becomes, after the date hereof, the beneficial owner of 20% or
more of the general voting power of the Company.
Notwithstanding the preceding sentence, a Change of Control
Event shall not be deemed to occur if the "Person" described
in the preceding sentence has acquired 20% or more of the
general voting power of the Company as consideration in a
transaction or series of related transactions involving the
Company's acquisition (by stock acquisition, merger, asset
purchase or otherwise) of one or more businesses approved
prior to such transactions or series of transactions by the
Incumbent
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<PAGE>
Board (as defined in (ii) below), and provided that, if such
transaction or series of transactions results in the merger,
consolidation or reorganization of the Company and such
Person, the Company is the surviving entity following such
merger, consolidation or reorganization.
(ii) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board"), cease for any
reason to constitute at least a majority of the Board,
provided that any person becoming a director subsequent to the
date hereof whose election, or nomination for election by the
Company's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
(other than an election or nomination of an individual whose
initial assumption of office is in connection with an actual
or threatened election contest relating to the election of the
directors of the Company, as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Securities
Exchange Act of 1934) shall be considered as though such
person were a member of the Incumbent Board.
(iii) Consummation or effectiveness of:
a. a merger, consolidation or reorganization
involving the Company (a "Business Combination"),
unless
1. the stockholders of the
Company, immediately before the Business
Combination, own, directly or indirectly
immediately following the Business
Combination, at least fifty-one percent (51%)
of the combined voting power of the
outstanding voting securities of the
corporation resulting from the Business
Combination (the "Surviving Corporation") in
substantially the same proportion as their
ownership of the voting securities
immediately and before the Business
Combination, and
2. the individuals who were
members of the Incumbent Board immediately
prior to the execution of the agreement
providing for the Business Combination
constitute at least a majority of the members
of the Board of Directors of the Surviving
Corporation, and
3. no Person (other than any
Person who, immediately prior to the Business
Combination, had beneficial ownership of
twenty percent (20%) or more of the then
outstanding Voting Securities) has Beneficial
Ownership of twenty percent (20%) or more of
the combined voting power of the Surviving
Corporation's then outstanding voting
securities;
3
<PAGE>
b. a complete liquidation or dissolution of
the Company; or
c. the sale or other disposition of all or
substantially all of the assets of the Company to any Person.
For purposes of determining whether a Change of Control Event
has occurred, the following additional definitions apply:
"Affiliate or Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934.
"Person," means an individual, firm, corporation or other
entity or any successor to such entity, but "Person" shall not
include the Company, any subsidiary of the Company, any
employee benefit plan or employee stock plan (including a
trust relating thereto) of the Company or any subsidiary of
the Company, or any Person organized, appointed, established
or holding Voting Stock by, for or pursuant to the terms of
such a plan. "Person" shall also not include National Medical
Enterprises, Inc. ("NME"), any subsidiary of NME, any
Affiliate or Associate of NME, any employee benefit plan or
employee stock plan of NME or any subsidiary of NME to the
extent that such entities, individually or collectively, own
any or all of (x) 8,878,147 shares of the Company's common
stock (approximately 31% of the general voting power of the
Company as of December 6, 1994) registered in the name of NME
or any subsidiary of NME as of the date of this Agreement, or
(y) such additional number of shares of the Company's common
stock issued to NME or any subsidiary of NME in exchange for
shares of the Company's Series C Preferred Stock or Series D
Preferred Stock so long as such exchange has been approved in
advance by the Incumbent Board.
"Voting Stock" means shares of the Company's capital stock
having general voting power, with "voting power" meaning the
power under ordinary circumstances (and not merely upon the
happening of a contingency) to vote in the election of
directors.
1.9 "Claimant" shall have the meaning set forth in Section 14.1.
1.10 "Code" shall mean the Internal Revenue Code of 1986, as may be amended
from time to time.
1.11 "Committee" shall mean the committee described in Article 12.
1.12 "Company" shall mean The Hillhaven Corporation, a Nevada corporation.
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<PAGE>
1.13 "Crediting Rate" shall mean, starting October 1, 1994 and for each
Plan Year starting thereafter, an interest rate determined and
announced by the Committee before the Plan Year for which it is to be
used that is equal to 110% of the Moody's Rate. The Moody's Rate for
a Plan Year shall be an interest rate that (i) is published in Moody's
Bond Record under the heading of "Moody's Corporate Bond Yield
Averages -- Av. Corp," and (ii) is equal to the average corporate bond
yield published for the month which precedes the enrollment date for
the Plan Year for which the rate is to be used. The Crediting Rate
for the last quarter of 1994 shall equal 9.46%.
1.14 "Deferral Amount" shall mean the sum of all of a Participant's Annual
Deferral Amounts.
1.15 "Deduction Limitation" shall mean the following described limitation
on the annual benefit that may be distributed pursuant to the
provisions of this Plan. The limitation shall be applied to
distributions under this Plan as set forth in this Plan. If the
Company determines in good faith prior to a Change of Control Event
that there is a reasonable likelihood that any compensation paid to a
Participant for a taxable year of the Company would not be deductible
by the Company solely by reason of the limitation under Code Section
162(m), then to the extent deemed necessary by the Company to ensure
that the entire amount of any distribution to the Participant pursuant
to this Plan prior to the Change of Control Event is deductible, the
Company may defer all or any portion of the distribution. Any amounts
deferred pursuant to this limitation shall continue to be credited
with interest in accordance with Section 3.5 below. The amounts so
deferred and interest thereon shall be distributed to the Participant
or his or her Beneficiary (in the event of the Participant's death)
at the earliest possible date, as determined by the Company in good
faith, on which the deductibility of compensation paid or payable to
the Participant for the taxable year of the Company during which the
distribution is made will not be limited by Section 162(m), or if
earlier, the effective date of a Change of Control Event.
1.16 "Disability" shall mean a period of disability during which a
Participant qualifies for benefits under the Participant's Employer's
long-term disability plan.
1.17 "Disability Benefit" shall mean the benefit set forth in Article 8.
1.18 "Election Form" shall mean the form established from time to time by
the Committee that a Participant completes, signs and returns to the
Committee to make an election under the Plan.
1.19 "Employee" shall mean a person who is an employee of any Employer.
1.20 "Employer(s)" shall mean the (i) the Company, (ii) its wholly-owned
subsidiaries, (iii) partnerships in which the Company or a wholly-
owned subsidiary owns in excess of
5
<PAGE>
50% and (iv) any Employer that has entered into a contract with the
Company or a subsidiary for the receipt of management services at one
or more facilities owned by such Employer if the Employer has been
selected by the Committee to participate in the Plan. Obligations of
each Employer hereunder shall be separate except where The Hillhaven
Corporation has by specific action of its Board of Directors or other
written agreement executed by a duly authorized officer agreed that it
and/or its wholly-owned subsidiaries will undertake joint and several
liability.
1.21 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as may be amended from time to time.
1.22 "Participant" shall mean any Employee who was a Participant in either
of the Predecessor Plans before October 1, 1994 and still has an
Account Balance maintained hereunder or an Employee (i) who is
selected to participate in the Plan, (ii) who elects to participate in
the Plan, (iii) who signs a Plan Agreement, an Election Form and a
Beneficiary Designation Form, (iv) whose signed Plan Agreement,
Election Form and Beneficiary Designation Form are accepted by the
Committee, (v) who commences participation in the Plan, and (vi) a)
whose Plan Agreement has not terminated. By addendum to this Plan,
the Board or the Committee may permit directors of any of the
Employers to become Participants hereunder regardless of whether they
are Employees.
1.23 "Plan" shall mean the Company's Deferred Compensation Plan, which
shall be evidenced by this instrument and, with respect to each
Participant, by his or her one or more Plan Agreements, as may be
amended from time to time.
1.24 "Plan Agreement" shall mean a written agreement, as may be amended
from time to time, which is entered into by and between the Company
and a Participant. A Participant may be required to enter into more
than one Agreement depending on the entity employing him or her any
time and the manner in which the Company and another Employer have
agreed to allocate and assume responsibility for liabilities accrued
hereunder.
1.25 "Years of Plan Participation" shall mean the total number of full Plan
Years a Participant has been a Participant in the Plan. For purposes
of a Participant's first Plan Year of participation only, any partial
Plan Year of participation shall be treated as a full Plan Year.
1.26 "Plan Year" shall be the calendar year.
1.27 "Pre-Retirement Survivor Benefit" shall mean the benefit set forth in
Article 6.
6
<PAGE>
1.28 "Retirement", "Retires" or "Retired" shall mean, with respect to an
Employee, severance from employment from all Employers for any reason
other than a leave of absence, death or Disability on or after the
attainment of age 60.
1.29 "Retirement Benefit" shall mean the benefit set forth in Article 5.
1.30 "Short-Term Payout" shall mean the payout set forth in Section 4.1.
1.31 "Termination Benefit" shall mean the benefit set forth in Article 7.
1.32 "Termination of Employment" shall mean the ceasing of employment with
all Employers voluntarily or involuntarily, for any reason other than
death.
1.33 "Trust" shall mean the grantor, or "rabbi" trust, within the meaning
of Code Section 671, known as The Hillhaven Corporation Master
Executive Deferred Compensation Trust established pursuant to The
Hillhaven Corporation Master Trust Agreement for Executive Deferral
Plans, dated as of October 1, 1994, between the Company and the
trustee named therein, as amended from time to time.
1.34 "Unforeseeable Financial Emergency" shall mean an unanticipated
emergency that is caused by an event beyond the control of the
Participant that would result in severe financial hardship to the
Participant resulting from (i) a sudden and unexpected illness or
accident of the Participant or a dependent of the Participant, (ii) a
loss of the Participant's property due to casualty, or (iii) such
other extraordinary and unforeseeable circumstances arising as a
result of events beyond the control of the Participant, all as
determined in the sole discretion of the Committee.
1.35 "Years of Service" shall mean the total number of full 12 month
periods of service in which a Participant has been employed by one or
more Employers. Any partial year of employment or service shall not
be counted. Except as may be determined by the Committee, service
with an entity prior to its becoming an Employer or a unit thereof
shall not be taken into account.
ARTICLE 2
SELECTION, ENROLLMENT, ELIGIBILITY
2.1 Selection by Committee. Participation in the Plan shall be limited to
a select group of management or highly compensated Employees. From
that group, the Committee shall select, in its sole discretion,
Employees to participate in the Plan.
2.2 Enrollment Requirements. Individuals participating in either
Predecessor Plan as of October 1, 1994 need not complete any initial
enrollment materials except as may be necessary to defer compensation
in Plan Years starting on or after January 1, 1995.
7
<PAGE>
Individuals initially selected to participate in this Plan after
October 1, 1994 may commence participation as soon as they complete,
execute and return to the Committee a Plan Agreement, Election Form
and Beneficiary Designation Form, provided such documents are returned
within 30 days of selection. In addition, the Committee shall
establish from time to time such other enrollment requirements as it
determines, in its sole discretion, are necessary.
2.3 Eligibility; Commencement of Participation. In the case of Employees
selected for participation in this Plan after October 1, 1994,
participation in this Plan shall commence on the first day of the
month following the month in which the Employee completes all
enrollment requirements. If an Employee fails to meet in a timely
fashion all such requirements that he or she shall not be eligible
toparticipate in the Plan until the first day of the Plan Year
following the delivery to and acceptance by the Committee of the
required documents.
ARTICLE III.
DEFERRAL COMMITMENTS/INTEREST CREDITING
3.1 Minimum and Maximum Deferral.
(a) Minimum. For each Plan Year, a Participant may elect to defer
Base Annual Salary and/or Annual Bonus that would otherwise be
received during a Plan Year in the following minimum and
maximum amounts for each type of deferral elected.
<TABLE>
<CAPTION>
Minimum Maximum
Deferral Amount Amount
-------- ------- -------
<S> <C> <C>
Base Annual Salary 1% 100%
Annual Bonus 1% 100%
</TABLE>
If no election is made, the amount deferred for each type of
compensation shall be zero. All amounts deferred under this
Section 3.1(a) shall at all times be fully vested and
nonforfeitable.
(b) Short Plan Year. If a Participant first becomes a Participant
after the first day of a Plan Year, or in the case of the
first Plan Year of the Plan itself, the minimum Base Annual
Salary deferral shall be an amount equal to the minimum set
forth above, multiplied by a fraction, the numerator of which
is the number of complete months remaining in the Plan Year
and the denominator of which is 12.
8
<PAGE>
3.2 Company Contribution.
(a) Subject to amendment or termination of the Plan and applicable
limitations herein, as of the last day of each pay period,
each Employer shall credit to the account of each Participant
in its employ as of the last day of such period an amount
equal to a percentage of the Participant's Annual Deferral
Amount for the period, not in excess of the first 4% of the
Participant's Base Annual Salary and Annual Bonus received
during such period based on the Participant's Years of Service
as of the last day of the pay period, as follows:
<TABLE>
<CAPTION>
Years of Service Percentage of Compensation
---------------- --------------------------
(up to first 4%)
<S> <C>
Less than 1 25%
At least 1 but less than 2 50%
At least 2 but less than 3 75%
3 or more 100%
</TABLE>
(b) A Participant shall be vested in amounts attributable to
Employer contributions (and earnings) credited to his or her
Account Balance, as follows:
<TABLE>
<CAPTION>
Years of Service Percentage Vested
---------------- -----------------
<S> <C>
Less than 3 0%
3 30%
4 40%
5 60%
6 80%
7 or more 100%
</TABLE>
Notwithstanding the foregoing, a Participant shall become
fully vested in Employer contributions and earnings credited
to his or her Account Balance if and when the Participant,
while employed by an Employer, attains age 60, dies or incurs
a Disability, or upon the occurrence of a Change of Control
Event.
(c) Notwithstanding any other provision of this Plan including
Section 3.2(b), the Committee shall have the right in its sole
discretion to cause any or all of the Employer contributions
credited to an Account Balance, including earnings, to be
forfeited if the Committee at any time determines that:
(i) The Participant has consciously and
intentionally divulged Employer confidential information to
the competitors of the Employer which is clearly and
9
<PAGE>
unequivocally detrimental to the Employer, and such action has
been fully and completely documented under oath;
(ii) The Participant has engaged in criminal conduct
which is clearly and unequivocally detrimental to the
Employer, and such conduct has been fully and completely
documented under oath; or
(iii) Within the two years immediately following his
or her Termination of Employment date, the Participant engages
in any capacity in a business, other than National Medical
Enterprises or one of its subsidiaries, that is in
substantial, direct competition with the business of, and in
the geographical areas served by, any of the operating units,
including the corporate office of the Company for which the
Employee worked during the 3 years immediately preceding his
or her Termination of Employment date.
3.3 Election to Defer; Effect of Election Form. In connection with a
Participant's commencement of participation in the Plan, the
Participant shall make a deferral election by delivering to the
Committee a completed and signed Election Form, which election and
form must be accepted by the Committee for valid election to exist.
For each succeeding Plan Year, a new Election Form must be delivered
to the Committee, in accordance with its rules and procedures, before
the end of the Plan Year preceding the Plan Year for which the
election is made. If no Election Form is timely delivered for a Plan
Year, no Annual Deferral Amount shall be withheld for that Plan Year.
3.4 Withholding of Deferral Amounts. For each Plan Year, the Base Annual
Salary portion of the Annual Deferral Amount shall be withheld each
payroll period in accordance with the Participant's election as a
percentage of Base Annual Salary. The Annual Bonus portion of the
Annual Deferral Amount shall be withheld at the time the Annual Bonus
is or otherwise would be paid to the Participant.
3.5 Interest Crediting Prior to Distribution. Prior to any distribution
of benefits under Articles 4, 5, 6, 7 or 8, interest shall be credited
and compounded quarterly on a Participant's Account Balance as though
the quarterly portion of the Participant's Annual Deferral Amount and
Employer contributions were made in two installments, half at the
beginning of the quarter and half at quarter-end. Provided, that
portion of the Annual Deferral Amount deferred from an annual bonus
(and Employer contribution attributable thereto) shall be treated as
credited at the beginning of the quarter in which the bonus is paid.
The rate of interest for crediting shall be the Crediting Rate.
3.6 Installment Distributions. In the event a benefit is paid in
installments under Articles 5, 6, 7, 8 or 11, installment payment
amounts shall be determined in the following manner:
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<PAGE>
(a) Interest Rate. The interest rate to be used to calculate
installment payment amounts shall be a fixed interest rate
that is determined by averaging the Crediting Rates for the
Plan Year in which installment payments commence and the four
(4) preceding Plan Years. If a Participant has completed fewer
than five (5) Plan Years, or if the Plan has been in existence
fewer than five (5) Plan Years, this average shall be
determined using the Crediting Rates for the Plan Years during
which the Participant participated in the Plan.
(b) "Deemed" Installment Payments. For purposes of calculating
installment payment amounts only (and notwithstanding the fact
that installment payments shall be paid monthly), installment
payments for each 3 month period, starting with the date that
the Participant became eligible to receive a benefit under
this Plan (the "Eligibility Date") and continuing thereafter
for each additional 3 month period until the Participant's
Account Balance is paid in full, shall be deemed to have been
paid in one sum as of the first day of each such 3 month
period.
(c) Amortization. Based on the interest rate determined in
accordance with Section 3.6(a) above and the "deemed" form of
installment payments determined in accordance with Section
3.6(b) above, the Participant's Account Balance shall be
amortized in equal quarterly installment payments over the
term of the specified payment period (starting as of the
Eligibility Date and stated in quarters rather than months).
(d) Monthly Payments. The quarterly installment payment
determined in Section 3.6(c) above shall be divided by 3, and
the resulting number shall be the monthly installment payment
that is to be paid each month during the specified monthly
installment payment period in accordance with the other terms
and conditions of this Plan.
3.7 FICA and Other Taxes. For each Plan Year in which an Annual Deferral
Amount is being withheld, the Participant's Employer(s) shall ratably
withhold from that portion of the Participant's Base Annual Salary
that is not being deferred, the Participant's share of FICA and other
employment taxes. If necessary, the Committee shall reduce the Annual
Deferral Amount in order to comply with this Section 3.7.
ARTICLE 4
SHORT-TERM PAYOUT; UNFORESEEABLE FINANCIAL
EMERGENCIES; WITHDRAWAL ELECTION
4.1 Short-Term Payout. Subject to the Deduction Limitation, in connection
with each annual election to defer compensation, a Participant may,
but need not, elect to receive a future "Short-Term Payout" from the
Plan with respect to the Annual Deferral
11
<PAGE>
Amount for such Plan Year. The Short-Term Payout shall be a lump sum
payment in an amount that is equal to the Annual Deferral Amount plus
interest credited in the manner provided in Section 3.5 above on that
amount. Subject to the other terms and conditions of this Plan, each
Short-Term payout elected shall be paid within 60 days of the first
day of the Plan Year that is a number of years, not less than three,
elected by the Participant, beginning on the first day of the Plan
Year following the Plan Year in which the Annual Deferral Amount is
actually deferred.
4.2 Withdrawal Payout/Suspensions for Unforeseeable Financial Emergencies.
If the Participant experiences an Unforeseeable Financial Emergency,
the Participant may petition the Committee to (i) suspend any
deferrals required to be made by a Participant and/or (ii) receive a
partial or full payout from the Plan. The payout shall not exceed the
lesser of the Participant's Account Balance, calculated as if such
Participant were receiving a Termination Benefit, or the amount
reasonably needed to satisfy the Unforeseeable Financial Emergency.
If, subject to the sole discretion of the Committee, the petition for
a suspension and/or payout is approved, suspension shall take effect
upon the date of approval and any payout shall be made within 60 days
of the date of approval.
4.3 Withdrawal Election. A Participant may elect, at any time, to
withdraw all of his or her vested Account Balance prior to the time
such Account Balance is otherwise due and payable in whole or in part,
subject to a 10% withdrawal penalty (the net amount shall be referred
to as the "Withdrawal Amount"). No partial withdrawals of that
balance shall be allowed. The Participant shall make this election by
giving the Committee advance written notice of the election in a form
determined from time to time by the Committee. The penalty shall be
equal to 10% of the Participant's vested Account Balance determined
immediately prior to the withdrawal. Provided, the penalty shall not
apply to any portion of the vested Account Balance that is otherwise
payable to the Participant during the year of the withdrawal. The
Participant shall be paid the Withdrawal Amount within 60 days of his
or her election. Once the Withdrawal Amount is paid, the
Participant's participation in the Plan shall terminate and the
Participant shall not be eligible to participate in the Plan in the
future. The payment of this Withdrawal Amount shall not be subject to
the Deduction Limitation.
ARTICLE 5
RETIREMENT BENEFIT
5.1 Retirement Benefit. Subject to the Deduction Limitation, a
Participant who Retires shall receive, as a Retirement Benefit, his or
her Account Balance.
5.2 Payment of Retirement Benefits. A Participant, in connection with his
or her commencement of participation in the Plan, or, if later, during
the enrollment period for the Plan Year beginning in January 1995,
shall elect on an Election Form to receive
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<PAGE>
the Retirement Benefit in a lump sum or in equal monthly payments (the
latter determined in accordance with Section 3.6 above) over a period,
stated in an even number of years, of not less than two but not more
than fifteen years. The Participant may change his or her election to
an allowable alternative payout period by submitting a new Election
Form to the Committee, provided that any such Election Form is
submitted at least 3 years prior to the Participant's Retirement and
is accepted by the Committee in its sole discretion. The Election
Form most recently accepted by the Committee shall govern the payout
of the Retirement Benefit. The lump sum payment shall be made, or
installment payments shall commence, no later than 60 days after the
date the Participant Retires.
5.3 Death Prior to Completion of Retirement Benefits. If a Participant
dies after Retirement but before the Retirement Benefit is paid in
full, the Participant's unpaid Retirement Benefit payments shall
continue and shall be paid to the Participant's Beneficiary (a) over
the remaining number of months and in the same amounts as that benefit
would have been paid to the Participant had the Participant survived,
or (b) in a lump sum, if requested by the Beneficiary and allowed in
the sole discretion of the Committee, that is equal to the
Participant's unpaid remaining Account Balance.
ARTICLE 6
PRE-RETIREMENT SURVIVOR BENEFIT
6.1 Pre-Retirement Survivor Benefit. Subject to the Deduction Limitation,
if a Participant dies before he or she Retires, experiences a
Termination of Employment or suffers a Disability, the Participant's
Beneficiary shall receive a Pre-Retirement Survivor Benefit equal to
the Participant's Account Balance.
6.2 Payment of Pre-Retirement Survivor Benefits. A Participant, in
connection with his or her commencement of participation in the Plan
or, if later, during the enrollment period for the Plan Year starting
in January 1995, shall elect on an Election Form whether the Pre-
Retirement Survivor Benefit shall be received by his or her
Beneficiary in a lump sum or in equal monthly payments (the latter
determined in accordance with Section 3.6 above) over a period of 60,
120 or 180 months. The Participant may change this election to an
allowable alternative payout period by submitting a new Election Form
to the Committee, which form must be accepted by the Committee in its
sole discretion. The Election Form most recently accepted by the
Committee prior to the Participant's death shall govern the payout of
the Participant's Pre-Retirement Survivor Benefit. Despite the
foregoing, if the Participant's Account Balance at the time of his or
her death is less than $50,000, payment of the Pre-Retirement Survivor
Benefit may be made, in the sole discretion of the Committee, in a
lump sum or in installment payments that do no exceed five years in
duration. The lump sum payment shall be made, or installment payments
shall commence, no later than 60 days after the date the Committee is
provided with proof that is satisfactory to the Committee of the
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<PAGE>
Participant's death. In no event may the Beneficiary select the
manner of payment either before or after the Participant's death.
ARTICLE 7
TERMINATION BENEFIT
7.1 Termination Benefits. Subject to the Deduction Limitation, if a
Participant experiences a Termination of Employment prior to his or
her Retirement, death or Disability, the Participant shall receive a
Termination Benefit, which shall be equal to the Participant's vested
Account Balance, with interest credited in the manner provided in
Section 3.5 above.
7.2 Payment of Termination Benefit. The Termination Benefit shall be paid
commencing within 60 days of the Termination of Employment as follows:
(a) A Termination Benefit of $50,000 or less shall be paid in a
lump sum.
(b) A Termination Benefit in excess of $50,000 shall be paid in 60
approximately equal monthly installments.
(c) Notwithstanding (b), the Committee in its sole discretion may
authorize a lump sum payment or installments over a period of
less than five years.
If payment is made in installments, the interest rate to be credited
to the Account Balance during the installment payout shall be the
otherwise applicable rate determined in accordance with Section 3.6.
ARTICLE 8
DISABILITY WAIVER AND BENEFIT
8.1 Disability Waiver.
(a) Eligibility. By participating in the Plan, all Participants
are eligible for this waiver.
(b) Waiver of Deferral. A Participant who is determined by the
Committee to be suffering from a Disability shall, if the
Disability originated while the Participant was employed by an
Employer, become fully vested in his or her Account Balance
and shall be excused from fulfilling that portion of the
Annual Deferral Amount commitment that would otherwise have
been withheld from a Participant's Base Annual Salary or
Annual Bonus for the Plan Year during which the Participant
first suffers a Disability. During the period of Disability,
the Participant shall not be allowed to make any additional
deferral elections.
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(c) Return to Work. If a Participant returns to employment with
an Employer after a Disability ceases, the Participant may
elect to defer an Annual Deferral Amount for the Plan Year of
his or her return to employment or service and for every Plan
Year thereafter while a Participant in the Plan; provided such
deferral elections are otherwise allowed and an Election Form
is delivered to and accepted by the Committee for each such
election in accordance with Section 3.3 above.
8.2 Disability Benefit. A Participant suffering a Disability shall, for
all purposes under this Plan, continue to be considered to be employed
by an Employer and shall be eligible for the benefits provided for in
Articles 4, 5, 6 or 7 in accordance with the provisions of those
Articles. Notwithstanding the above, the Committee shall have the
right, in its sole and absolute discretion and for purposes of this
Plan only, to terminate a Participant's employment at any time after
such Participant is determined to be permanently disabled under the
Participant Employer's long-term disability plan.
ARTICLE 9
BENEFICIARY DESIGNATION
9.1 Beneficiary. Each Participant shall have the right, at any time, to
designate his or her Beneficiary(ies) (both primary as well as
contingent) to receive any benefits payable under the Plan to a
beneficiary upon the death of a Participant. The Beneficiary
designated under this Plan may be the same as or different from the
Beneficiary designation under any other plan of an Employer in which
the Participant participates.
9.2 Beneficiary Designation; Change; Spousal Consent. A Participant shall
designate his or her Beneficiary by completing and signing the
Beneficiary Designation Form, and returning it to the Committee or its
designated agent. A Participant shall have the right to change a
Beneficiary by completing, signing, and otherwise complying with the
terms of the Beneficiary Designation Form and the Committee's rules
and procedures, as in effect from time to time. If the Participant
names someone other than his or her spouse as a Beneficiary, a spousal
consent, in the form designated by the Committee, must be signed by
that Participant's spouse and returned to the Committee. Upon the
acceptance by the Committee of a new Beneficiary Designation Form, all
Beneficiary designations previously filed shall be cancelled. The
Committee shall be entitled to rely on the last Beneficiary
Designation Form filed by the Participant and accepted by the
Committee prior to his or her death.
9.3 Acknowledgment. No designation or change in designation of a
Beneficiary shall be effective until received, accepted and
acknowledged in writing by the Committee or its designated agent.
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9.4 No Beneficiary Designation. If a Participant fails to designate a
Beneficiary as provided in Sections 9.1, 9.2 and 9.3 above or, if all
designated Beneficiaries predecease the Participant or die prior to
complete distribution of the Participant's benefits, then the
Participant's designated Beneficiary shall be deemed to be his or her
surviving spouse. If the Participant has no surviving spouse, the
benefits remaining under the Plan to be paid to a Beneficiary shall be
payable to the executor or personal representative of the
Participant's estate.
9.5 Doubt as to Beneficiary. If the Committee has any doubt as to the
proper Beneficiary to receive payments pursuant to this Plan, the
Committee shall have the right, exercisable in its discretion, to
cause the Participant's Employer to withhold such payments until this
matter is resolved to the Committee's satisfaction.
9.6 Discharge of Obligations. The payment of benefits under the Plan to a
Beneficiary shall fully and completely discharge all Employers and the
Committee from all further obligations under this Plan with respect to
the Participant, and that Participant's Plan Agreement shall terminate
upon such full payment of benefits.
ARTICLE 10
LEAVE OF ABSENCE
10.1 Paid Leave of Absence. If a Participant is authorized by the
Participant's Employer for any reason to take a paid leave of absence
from the employment of the Employer, the Participant shall continue to
be considered employed by the Employer and the Annual Deferral Amount
shall continue to be withheld during such paid leave of absence in
accordance with Article 3.
10.2 Unpaid Leave of Absence. If a Participant is authorized by the
Participant's Employer for any reason to take an unpaid leave of
absence from the employment of the Employer, the Participant shall
continue to be considered employed by the Employer and the Participant
shall be excused from making deferrals until the earlier of the date
the leave of absence expires or the Participant returns to a paid
employment status. Upon such expiration or return, deferrals shall
resume for the remaining portion of the Plan Year in which the
expiration or return occurs, based on the deferral election, if any,
made for that Plan Year. If no election was made for that Plan Year,
no deferral shall be withheld.
ARTICLE 11
TERMINATION, AMENDMENT OR MODIFICATION
11.1 Termination. Any Employer reserves the right to terminate the Plan at
any time with respect to its participating Employees by the action of
its board of directors. Upon the termination of the Plan, all Plan
Agreements of a Participant shall terminate and his or
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her Account Balance, determined as if he or she had experienced a
Termination of Employment on the date of Plan termination or, if Plan
termination occurs after the date upon which the Participant was
eligible to Retire, the Participant had Retired on the date of Plan
termination, shall be paid to the Participant as follows. Prior to a
Change of Control Event, an Employer shall have the right, in its sole
discretion, and notwithstanding any elections made by the Participant,
to pay such benefits in a lump sum or in monthly installments for up
to 15 years, with interest credited during the installment period as
provided in Section 3.6. After a Change of Control Event, the
Employer shall be required to pay such benefits in a lump sum. The
termination of the Plan shall not adversely affect any Participant or
Beneficiary who has become entitled to the payment of any benefits
under the Plan as of the date of termination; provided however, that
the Employer shall have the right to accelerate installment payments
by paying the Participant's remaining Account Balance in one lump sum
amount.
11.2 Amendment. Any Employer may, at any time, amend or modify the Plan in
whole or in part with respect to that Employer by the action of its
board of directors; provided, however, that no amendment or
modification shall be effective to decrease or restrict the value of a
Participant's Account Balance in existence at the time the amendment
or modification is made, calculated as if the Participant had
experienced a Termination of Employment as of the effective date of
the amendment or modification, or, if the amendment or modification
occurs after the date upon which the Participant was eligible to
Retire, the Participant had Retired as of the effective date of the
amendment or modification. The amendment or modification of the Plan
shall not affect any Participant or Beneficiary who has become
entitled to the payment of benefits under the Plan as of the date of
the amendment or modification; provided, however, that the Employer
shall have the right to accelerate installment payments by paying
Participant's remaining Account Balance in one lump sum amount.
11.3 Effect of Payment. The full payment of the applicable benefit under
Articles 5, 6, or 7 of the Plan shall completely discharge all
obligations to a Participant and his or her designated Beneficiaries
under this Plan and the Participant's Plan Agreement shall terminate.
ARTICLE 12
ADMINISTRATION
12.1 Committee Duties. This Plan shall be administered by a Committee
which shall consist of the Compensation Committee of the Board.
Members of the Committee may be Participants under this Plan. The
Committee shall have the authority in its sole and unfettered
discretion to (i) make, amend, interpret, and enforce all appropriate
rules and regulations for the administration of this Plan and (ii)
decide or resolve any and all questions including claims for benefits
and interpretations of this Plan, as may arise in connection with the
Plan.
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12.2 Agents. In the administration of this Plan, the Committee may, from
time to time, employ agents and delegate to them such administrative
duties as it sees fit (including acting through a duly appointed
representative) and may from time to time consult with counsel who may
be counsel to any Employer.
12.3 Binding Effect of Decisions. The decision or action of the Committee
with respect to any question arising out of or in connection with the
administration, interpretation and application of the Plan and the
rules and regulations promulgated hereunder shall be final and
conclusive and binding upon all persons having any interest in the
Plan.
12.4 Indemnity of Committee. All Employers shall indemnify and hold
harmless the members of the Committee against any and all claims,
losses, damages, expenses or liabilities arising from any action or
failure to act with respect to this Plan, except in the case of
willful misconduct by the Committee or any of its members.
12.5 Employer Information. To enable the Committee to perform its
functions, each Employer shall supply full and timely information to
the Committee on all matters relating to the compensation of its
Participants, the date and circumstances of the Retirement,
Disability, death or Termination of Employment of its Participants,
and such other pertinent information as the Committee may reasonably
require.
ARTICLE 13
OTHER BENEFITS AND AGREEMENTS
The benefits provided for a Participant and Participant's Beneficiary
under the Plan are in addition to any other benefits available to such
Participant under any other plan or program for employees of the Participant's
Employer. The Plan shall supplement and shall not supersede, modify or amend
any other such plan or program except as may otherwise be expressly provided.
ARTICLE 14
CLAIMS PROCEDURES
14.1 Presentation of Claim. Any Participant or Beneficiary of a deceased
Participant (such Participant or Beneficiary being referred to below
as a "Claimant") may deliver to the Committee a written claim for a
determination with respect to the amounts distributable to such
Claimant from the Plan. If such a claim relates to the contents of a
notice received by the Claimant, the claim must be made within 60 days
after such notice was received by the Claimant. The claim must state
with particularity the determination desired by the Claimant. All
other claims must be made within 180 days of the date on which the
event that caused the claim to arise occurred. The claim must state
with particularity the determination desired by the Claimant.
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14.2 Notification of Decision. The Committee shall consider a Claimant's
claim within a reasonable time, and shall notify the Claimant in
writing:
(a) that the Claimant's requested determination has been made, and
that the claim has been allowed in full; or
(b) that the Committee has reached a conclusion contrary, in whole
or in part, to the Claimant's requested determination, and
such notice must set forth in a manner calculated to be
understood by the Claimant:
(i) the specific reason(s) for the denial of the claim,
or any part of it;
(ii) specific reference(s) to pertinent provisions of the
Plan upon which such denial was based;
(iii) a description of any additional material or
information necessary for the Claimant to perfect the
claim, and an explanation of why such material or
information is necessary; and
(iv) an explanation of the claim review procedure set
forth in Section 14.3 below.
14.3 Review of a Denied Claim. Within 60 days after receiving a notice
from the Committee that a claim has been denied, in whole or in part,
a Claimant (or the Claimant's duly authorized representative) may file
with the Committee a written request for a review of the denial of the
claim. Thereafter, but not later than 30 days after the review
procedure began, the Claimant (or the Claimant's duly authorized
representative):
(a) may review pertinent documents;
(b) may submit written comments or other documents; and/or
(c) may request a hearing, which the Committee, in its sole
discretion, may grant.
14.4 Decision on Review. The Committee shall render its decision on review
promptly, and not later than 60 days after the filing of a written
request for review of the denial, unless a hearing is held or other
special circumstances require additional time, in which case the
Committee's decision must be rendered within 120 days after such date.
Such decision must be written in a manner calculated to be understood
by the Claimant, and it must contain:
(a) specific reasons for the decision;
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(b) specific reference(s) to the pertinent Plan provisions upon
which the decision was based; and
(c) such other matters as the Committee deems relevant.
14.5 Legal Action. A Claimant's compliance with the foregoing provisions
of this Article 14 is a mandatory prerequisite to a Claimant's right
to commence any legal action with respect to any claim for benefits
under this Plan.
ARTICLE 15
TRUST
15.1 Establishment of the Trust. The Company shall establish the Trust,
and the Employers shall transfer over to the Trust such assets as the
Employers determine, in their sole discretion, are necessary to assist
in providing funds to meet the Employers' liabilities created
hereunder.
15.2 Interrelationship of the Plan and the Trust. The provisions of the
Plan and the Plan Agreement shall govern the rights of a Participant
to receive distributions pursuant to the Plan. The provisions of the
Trust shall govern the rights of the Employers, Participants and the
creditors of the Employers to the assets transferred to the Trust.
Each Employer shall at all times remain liable to carry out its
obligations under the Plan. Each Employer's obligations under the
Plan may be satisfied with Trust assets distributed pursuant to the
terms of the Trust, and any such distribution shall reduce the
Employer's obligations under this Agreement.
ARTICLE 16
MISCELLANEOUS
16.1 Unsecured General Creditor. Participants and their Beneficiaries,
heirs, successors and assigns shall have no legal or equitable rights,
interests or claims in any property or assets of any Employer. Any
and all of all Employers' assets shall be, and remain, the general,
unpledged unrestricted assets of the Employers. An Employer's
obligation under the Plan shall be merely that of an unfunded and
unsecured promise to pay money in the future and a Participant shall
have only an unsecured contractual right to the amounts, if any,
payable hereunder, against the Company or a particular Employer, as
reflected in the Participant's one or more Plan Agreements.
16.2 Employer's Liability. An Employer's liability for the payment of
benefits shall be defined only by the Plan and the Plan Agreement, as
entered into between the Employer and a Participant. An Employer
shall have no obligation to a Participant under the Plan except as
expressly provided in the Plan and his or her Plan Agreement.
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16.3 Nonassignability. Neither a Participant nor any other person shall
have any right to commute, sell, assign, transfer, pledge, anticipate,
mortgage or otherwise encumber, transfer, hypothecate or convey in
advance of actual receipt, the amounts, if any, payable hereunder, or
any part thereof, which are, and all rights to which are expressly
declared to be, unassignable and non-transferable, except that the
foregoing shall not apply to any family support obligations set forth
in a court order. No part of the amounts payable shall, prior to
actual payment, be subject to seizure or sequestration for the payment
of any debts, judgments, alimony or separate maintenance owed by a
Participant or any other person, nor be transferable by operation of
law in the event of a Participant's or any other person's bankruptcy
or insolvency.
16.4 Not a Contract of Employment. The terms and conditions of this Plan
shall not be deemed to constitute a contract of employment between any
Employer and the Participant. Such employment is hereby acknowledged
to be an "at will" employment relationship that can be terminated at
any time for any reason, with or without cause, unless expressly
provided in a written employment agreement. Nothing in this Plan
shall be deemed to give a Participant the right to be retained in the
service of any Employer, either as an Employee or a Director, or to
interfere with the right of any Employer to discipline or discharge
the Participant at any time.
16.5 Furnishing Information. A Participant or his or her Beneficiary will
cooperate with the Committee by furnishing any and all information
requested by the Committee and take such other actions as may be
requested in order to facilitate the administration of the Plan and
the payments of benefits hereunder, including but not limited to
taking such physical examinations as the Committee may deem necessary.
16.6 Terms. Whenever any words are used herein in the masculine, they
shall be construed as though they were also in the feminine in all
cases where they would so apply; and whenever any words are used
herein in the singular or in the plural, they shall be construed as
though they were used in the plural or the singular, as the case may
be, in all cases where they would so apply.
16.7 Captions. The captions of the articles, sections and paragraphs of
this Plan are for convenience only and shall not control or affect the
meaning or construction of any of its provisions.
16.8 Governing Law. Subject to ERISA, the provisions of this Plan shall be
construed and interpreted according to the laws of the State of
Washington without regard to its conflicts of laws principles.
16.9 Notice. Any notice or filing required or permitted to be given to the
Committee under this Plan shall be sufficient if in writing and
hand-delivered, or sent by registered or certified mail, to the
address below:
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Plan Administrator of the Deferred Compensation Plan
The Hillhaven Corporation
The Cornerstone Building
1148 Broadway Plaza
Caller Service 2264
Tacoma, Washington 98402
Attn: Senior Vice President,
Human Resources and Administration
cc: General Counsel
Such notice shall be deemed given as of the date of delivery or, if
delivery is made by mail, as of the date shown on the postmark on the
receipt for registration or certification.
Any notice or filing required or permitted to be given to a
Participant under this Plan shall be sufficient if in writing and
hand- delivered, or sent by mail, to the last known address of the
Participant.
16.10 Successors. The provisions of this Plan shall bind and inure to the
benefit of the Participant's Employer and its successors and assigns
and the Participant and the Participant's designated Beneficiaries.
16.11 Spouse's Interest. The interest in the benefits hereunder of a spouse
of a Participant who has predeceased the Participant shall
automatically pass to the Participant and shall not be transferable by
such spouse in any manner, including but not limited to such spouse's
will, nor shall such interest pass under the laws of intestate
succession.
16.12 Incompetent. If the Committee determines in its discretion that a
benefit under this Plan is to be paid to a minor, a person declared
incompetent or to a person incapable of handling the disposition of
that person's property, the Committee may direct payment of such
benefit to the guardian, legal representative or person having the
care and custody of such minor, incompetent or incapable person. The
Committee may require proof of minority, incompetency, incapacity or
guardianship, as it may deem appropriate prior to distribution of the
benefit. Any payment of a benefit shall be a payment for the account
of the Participant and the Participant's Beneficiary, as the case may
be, and shall be a complete discharge of any liability under the Plan
for such payment amount.
16.13 Court Order. The Committee is authorized to make any payments
directed by court order in any action in which the Plan or the
Committee has been named as a party.
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16.4 Distribution in the Event of Taxation.
(a) General. If, for any reason, all or any portion of a
Participant's benefit under this Plan becomes taxable to the
Participant prior to receipt, a Participant may petition the
Committee for a distribution of that portion of his or her
benefit that has become taxable. Upon the grant of such a
petition, which grant shall not be unreasonably withheld, a
Participant's Employer shall distribute to the Participant
immediately available funds in an amount equal to the taxable
portion of his or her benefit (which amount shall not exceed a
Participant's unpaid vested Account Balance under the Plan).
If the petition is granted, the tax liability distribution
shall be made within 90 days of the date when the
Participant's petition is granted. Such a distribution shall
affect and reduce the benefits to be paid under this Plan.
(b) Trust. If the Trust terminates and benefits are distributed
from the Trust to a Participant, the Participant's benefits
under this Plan shall be reduced to the extent of such
distributions.
16.15 Legal Fees to Enforce Rights After a Change of Control Event. The
Company is aware that upon the occurrence of a Change of Control
Event, the Board (which might then be composed of new members) or a
shareholder of the Company, or of any successor corporation might then
cause or attempt to cause the Company or such successor to refuse to
comply with its obligations under the Plan and might cause or attempt
to cause the Company to institute, or may institute, litigation
seeking to deny Participants the benefits intended under the Plan. In
these circumstances, the purpose of the Plan could be frustrated.
Accordingly, if, following a Change of Control Event, it should appear
to any Participant that the Company or the Trustee has failed to
comply with any of its obligations under the Plan or any agreement
thereunder or, if the Company or any other person takes any action to
declare the Plan void or unenforceable or institutes any litigation or
other legal action designed to deny, diminish or to recover from any
Participant the benefits intended to be provided, then the Company
irrevocably authorizes such Participant to retain counsel of his or
her choice at the expense of the Company to represent such Participant
in connection with the initiation or defense of any litigation or
other legal action, whether by or against the Company or any director,
officer, shareholder or other person affiliated with the Company or
any successor thereto in any jurisdiction.
16.16 Taxes and Withholding. The Participant's Employer(s), or the trustee
of the Trust, may withhold from any distribution under this Plan any
and all employment and income taxes that are required to be withheld
under applicable law.
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16.17 Severability. If and to the extent any provision hereof is held to be
void or unenforceable, the Plan shall remain in full-force and effect
with such provision severed as though such provision had not been
included in the original Plan.
IN WITNESS WHEREOF, the Company has executed this Plan document as of
October 1, 1994.
THE HILLHAVEN CORPORATION, a Nevada corporation
By:____________________________________________
Title:_________________________________________
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EXHIBIT 10.29
THE HILLHAVEN CORPORATION
SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN
AMENDED AND RESTATED EFFECTIVE OCTOBER 1, 1994
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 1 - Statement of Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2 - Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Actual Final Average Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3 Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.4 Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.5 Change of Control Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.6 Date of Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 Date of Enrollment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.8 Disability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 Early Retirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.11 Eligible Children . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.13 Employment or Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.14 Existing Retirement Benefit Plans Adjustment Factor . . . . . . . . . . . . . . . . . 5
2.15 Final Average Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.16 Normal Retirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.17 Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.18 Prior Service Credit Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.19 Projected Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.20 Projected Final Average Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.21 Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.22 Surviving Spouse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.23 Termination of Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.24 Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.25 Year of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3 - Retirement Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.1 Normal Retirement Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2 Early Retirement Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 Vesting of Retirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.4 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 Duration of Benefit Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.6 Recipients of Benefit Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
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<TABLE>
<S> <C>
3.7 Disability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.8 Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4 - Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.1 Commencement of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.2 Withholding; Unemployment Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.3 Recipients of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.4 No Other Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.5 Withdrawal Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5 - Conditions Related to Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.1 Administration of Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.2 No Right to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.3 No Employment Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.4 Right to Terminate or Amend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.5 Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.6 Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.7 Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 6 - Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.1 Nonassignability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.2 Gender and Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.3 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.4 Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.5 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.6 Successors in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.7 No Representation on Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
ii
<PAGE>
THE HILLHAVEN CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
AMENDED AND RESTATED EFFECTIVE OCTOBER 1, 1994
SECTION 1 - STATEMENT OF PURPOSE
The Supplemental Executive Retirement Plan (the "Plan") was originally
adopted effective January 31, 1990, by The Hillhaven Corporation ("THC") to
attract, retain, motivate and provide financial security to highly compensated
management employees (the "Participants") who render valuable services to THC
and its Subsidiaries. The Plan is hereby amended and restated, effective
October 1, 1994.
SECTION 2 - DEFINITIONS
2.1 Acquisition. "Acquisition" refers to a company of
which substantially all of its assets or a majority of its capital stock are
acquired by, or which is merged with or into, THC or a Subsidiary.
2.2 Actual Final Average Earnings. "Actual Final Average
Earnings" means the highest average monthly Earnings for any 60 consecutive
months during the ten years, or actual employment period if less, preceding
Termination of Employment.
2.3 Agreement. "Agreement" means a written agreement
substantially in the form of Exhibit A between THC (or a Subsidiary or both)
and a Participant.
2.4 Committee. "Committee" means the Compensation
Committee of the Board of Directors of THC.
2.5 Change of Control Event. A "Change of Control Event"
shall be deemed to occur if any of the following events has occurred:
(i) A Person, alone or together with its
Affiliates and Associates, or "group", within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934, becomes, after the
date hereof, the beneficial owner of 20% or more of the general voting
power of the Company. Notwithstanding the preceding sentence, a
Change of Control Event shall not be deemed to occur if the "Person"
described in the preceding sentence has acquired 20% or more of the
general voting power of the Company as consideration in a transaction
or series of related transactions involving the Company's acquisition
(by stock acquisition, merger, asset purchase or otherwise) of one or
more businesses approved prior to such transactions or series of
transactions by the Incumbent Board (as defined in (ii) below),
andprovided that, if such
<PAGE>
transaction or series of transactions results in the merger,
consolidation or reorganization of the Company and such Person, the
Company is the surviving entity following such merger, consolidation
or reorganization.
(ii) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board"), cease for any reason to
constitute at least a majority of the Board, provided that any person
becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's stockholders, was approved by
a vote of at least a majority of the directors then comprising the
Incumbent Board (other than an election or nomination of an individual
whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the directors
of the Company, as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Securities Exchange Act of 1934) shall be
considered as though such person were a member of the Incumbent Board.
(iii) Consummation or effectiveness of:
a. a merger, consolidation or
reorganization involving the Company (a "Business
Combination"), unless
1. the stockholders of the
Company, immediately before the Business Combination,
own, directly or indirectly immediately following the
Business Combination, at least fifty-one percent
(51%) of the combined voting power of the outstanding
voting securities of the corporation resulting from
the Business Combination (the "Surviving
Corporation") in substantially the same proportion as
their ownership of the voting securities immediately
and before the Business Combination, and
2. the individuals who were
members of the Incumbent Board immediately prior to
the execution of the agreement providing for the
Business Combination constitute at least a majority
of the members of the Board of Directors of the
Surviving Corporation, and
3. no Person (other than any
Person who, immediately prior to the Business
Combination, had beneficial ownership of twenty
percent (20%) or more of the then outstanding Voting
Securities) has Beneficial Ownership of twenty
percent (20%) or more of the combined voting power of
the Surviving Corporation's then outstanding voting
securities;
2
<PAGE>
b. a complete liquidation or
dissolution of the Company; or
c. the sale or other disposition of all
or substantially all of the assets of the Company to any
Person.
For purposes of determining whether a Change of Control Event has
occurred, the following additional definitions apply:
"Affiliate or Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934.
"Person" shall mean an individual, firm, corporation or other entity
or any successor to such entity, but "Person" shall not include the
Company, any subsidiary of the Company, any employee benefit plan or
employee stock plan (including a trust relating thereto) of the
Company or any subsidiary of the Company, or any Person organized,
appointed, established or holding Voting Stock by, for or pursuant to
the terms of such a plan. "Person" shall also not include National
Medical Enterprises, Inc. ("NME"), any subsidiary of NME, any
Affiliate or Associate of NME, any employee benefit plan or employee
stock plan of NME or any subsidiary of NME to the extent that such
entities, individually or collectively, own any or all of (x)
8,878,147 shares of the Company's common stock (approximately 31% of
the general voting power of the Company as of December 6, 1994)
registered in the name of NME or any subsidiary of NME as of the date
of this Agreement, or (y) such additional number of shares of the
Company's common stock issued to NME or any subsidiary of NME in
exchange for shares of the Company's Series C Preferred Stock or
Series D Preferred Stock so long as such exchange has been approved in
advance by the Incumbent Board.
"Voting Stock" shall mean shares of the Company's capital stock having
general voting power, with "voting power" meaning the power under
ordinary circumstances (and not merely upon the happening of a
contingency) to vote in the election of directors.
2.6 Date of Employment. "Date of Employment" means the
date on which a person became an Employee of THC or a Subsidiary, or the date
on which a person became an employee of NME or a subsidiary of NME prior to the
divestiture of THC by NME. Where a person is an employee of an entity that is
acquired by THC or a Subsidiary through an Acquisition, "Date of Employment"
means the effective date of the Acquisition; provided, the Committee, in its
sole discretion, may approve as a Date of Employment the date on which a person
began to perform services for the acquired entity in a position comparable to
one at THC which would have been eligible for participation in the Plan.
3
<PAGE>
2.7 Date of Enrollment. For purposes of determining
benefits under the Plan, "Date of Enrollment" means the date on which an
Employee first becomes a Participant in the Plan.
2.8 Disability. "Disability" means any Termination of
Employment during the life of a Participant and prior to Normal Retirement or
Early Retirement by reason of a Participant's total and permanent disability,
as determined by the Committee, in its sole and absolute discretion. A
Participant, who makes application for and qualifies for disability benefits
under THC's Group Long-Term Disability Plan or under any similar plan provided
by THC or a Subsidiary, as now in effect or as hereinafter amended (the "LTD
Plans"), shall usually qualify for Disability under this Plan, unless the
Committee determines that the Participant is not totally and permanently
disabled. A Participant who fails to qualify for disability benefits under the
LTD Plans (whether or not the Participant makes application for disability
benefits thereunder) shall not be deemed to be totally and permanently disabled
under this Plan, unless the Committee otherwise determines, based upon the
opinion of a qualified physician or medical clinic selected by the Committee to
the effect that a condition of total and permanent disability exists.
2.9 Early Retirement. "Early Retirement" means any
Termination of Employment during the life of a Participant prior to Normal
Retirement and after the Participant attains age 55 and has completed ten Years
of Service or attains age 62 with no minimum Years of Service.
2.10 Earnings. "Earnings" means the base salary paid to a
Participant by THC or a Subsidiary prior to any reduction as a result of
participation in The Hillhaven Corporation Deferred Compensation Plan,
Retirement Savings Plan, Deferred Savings Plan, or Flexible Benefit Plan (Code
Section 125), excluding bonuses, car and other allowances and other cash and
non-cash compensation.
2.11 Eligible Children. "Eligible Children" means all
natural or adopted children of a Participant under the age of 21, including any
child conceived prior to the death of a Participant.
2.12 Employee. "Employee" means any person who regularly
performs Services on a full-time basis (that is, works a minimum of 32 hours a
week) for THC or a Subsidiary and receives a salary plus employee benefits
normally made available to persons of similar status.
2.13 Employment or Service. "Employment" or "Service"
means any continuous period during which an Employee is actively engaged in
performing services for THC and its Subsidiaries plus the term of any leave of
absence approved by the Committee plus any continuous period of service
performed with NME or a subsidiary of NME immediately prior to the divestiture
of THC by NME. Service with an entity prior to its
4
<PAGE>
becoming a Subsidiary or a unit thereof or of THC shall be determined by the
Committee in its absolute discretion.
2.14 Existing Retirement Benefit Plans Adjustment Factor.
"Existing Retirement Benefit Plans Adjustment Factor" means the assumed benefit
the Participant would be eligible for under Social Security and all retirement
plans of THC and its Subsidiaries whether or not he participates in such plans.
This Factor will be used for calculating all benefits under the Plan and is a
projection of the benefits payable under the Social Security regulations and
retirement plans in effect on June 1, 1984 and once established for a
Participant will not thereafter be altered to reflect any reduction in benefits
under Social Security or such retirement plans unless the Participant is
transferred to different retirement plans or unless such company sponsored
retirement plans are substantially altered in terms of benefit provided. The
existing Retirement Benefit Plans Adjustment Factor is expressed as a
percentage and is determined by specific formula as approved by the Committee.
2.15 Final Average Earnings. "Final Average Earnings"
means the lesser of (i) Actual Final Average Earnings or (ii) if the
Participant has completed at least 60 months of Service, Projected Final
Average Earnings; provided that in the case of a Participant who receives one
or more Promotions, as described in Section 2.19 hereof, and whose most recent
(or only) Promotion is less than 60 months prior to his or her Termination of
Employment, "Final Average Earnings" shall mean Actual Final Average Earnings.
2.16 Normal Retirement. "Normal Retirement" means any
Termination of Employment during the life of a Participant on or after the date
on which the Participant attains age 65.
2.17 Participant. "Participant" means any Employee
selected to participate in this Plan by the Committee, in its sole and absolute
discretion and who completes a Plan Agreement with either THC or one or more
Subsidiaries or any combination of them. An Employee shall be eligible for
selection upon completion of a Year of Service in an eligible position. The
Date of Enrollment shall be retroactive to the date of appointment to an
eligible position. A Participant may be required to enter into more than one
Agreement depending on the entity employing him or her at any time and the
manner in which THC and such entity have agreed to allocate and assume
responsibility and liability for benefits accrued hereunder.
5
<PAGE>
2.18 Prior Service Credit Percentage. "Prior Service
Credit Percentage" means the percent to be applied to a Participant's Years of
Service with THC and its subsidiaries (and NME and its subsidiaries prior to
the divestiture of THC by NME) which is Prior to his Date of Enrollment in the
Plan, in accordance with the following formula:
<TABLE>
<CAPTION>
Years of Service Prior Service Credit
After Date of Enrollment Percentage
------------------------ --------------------
<S> <C>
During 1st year 25
During 2nd year 35
During 3rd year 45
During 4th year 55
During 5th year 75
After 5th year 100
</TABLE>
2.19 Projected Earnings. "Projected Earnings" means the
actual Earnings of an Employee on the Date of Enrollment plus an assumed
increase of 8% per annum. In the case of a Participant who receives one or
more Promotions, his or her Date of Enrollment for purposes of this Section
2.19 shall be the effective date of his or her new salary pursuant to the most
recent Promotion. For purposes of this Section 2.19, a "Promotion" shall be a
substantial increase in duties and responsibilities with an attendant
substantial increase in compensation, as determined by the Committee in its
absolute discretion.
2.20 Projected Final Average Earnings. "Projected Final
Average Earnings" means the average of a Participant's Projected Earnings
during the 60 months preceding Termination of Employment.
2.21 Subsidiary. A "Subsidiary" of the Company is (i) any
corporation, partnership, venture or other entity in which the Company owns 50%
of the capital stock or otherwise has a controlling interest, or (ii) any
employer that has entered into a contract with THC or a Subsidiary (as defined
in clause (i) of this Section 2.21) for the receipt of management services at
one or more facilities owned by such entity, and, in either case, which has
adopted this Plan with the consent of the Committee.
2.22 Surviving Spouse. "Surviving Spouse" means the
person legally married to a Participant for at least one year prior to the
Participant's death or Termination of Employment.
2.23 Termination of Employment. "Termination of
Employment" means the ceasing of the Participant's Employment for any reason
whatsoever, whether voluntarily or involuntarily.
6
<PAGE>
2.24 Year. A "Year" is a period of twelve consecutive
calendar months.
2.25 Year of Service. "Year of Service" means each
complete Year (up to a maximum of 20) of continuous Service (up to age 65) as
an Employee of THC and its Subsidiaries beginning with the Date of Employment
with THC and its Subsidiaries or with NME and its subsidiaries immediately
prior to the divestiture of THC by NME. Years of Service shall be deemed to
have begun as of the first day of the calendar month of Employment and to have
ceased on the last day of the calendar month of Employment.
SECTION 3 - RETIREMENT BENEFITS
3.1 Normal Retirement Benefit.
(a) Upon a Participant's Normal Retirement, the
Company agrees to pay to the Participant a monthly Normal Retirement Benefit
for the Participant's lifetime which is determined in accordance with the
Benefit Formula set forth below, adjusted by the Vesting Percentage in Section
3.3 Except as provided below, the amount of such monthly Normal Retirement
Benefit will be determined by using the following formula:
R = A x [B1 + [B2 x C]] x [2.7% - D] x E
<TABLE>
<S> <C> <C>
R = Normal Retirement Benefit
A = Final Average Earnings
B1 = Years of Service After Date of Enrollment
B2 = Years of Service Prior to Date of Enrollment
C = Prior Service Credit Percentage
D = Existing Retirement Benefit Plans Adjustment Factor
E = Vesting Percentage
</TABLE>
Note: B1 and B2 Years of Service combined cannot exceed 20 years.
(b) In the event of the death or Disability of a
Participant at any age or the Normal or Early Retirement of a Participant after
age 60, the Normal or Early Retirement Benefit will be determined on the basis
of a Prior Service Credit Percentage of 100.
(c) If a Participant who is receiving a Normal
Retirement Benefit dies, his Surviving Spouse or Eligible Children shall be
entitled to receive (in accordance with Sections 3.5 and 3.6) 50% of the
Participant's Normal Retirement Benefit.
7
<PAGE>
(d) If a Participant who is eligible for Normal
Retirement dies while an Employee of the Company after attaining age 65, his
Surviving Spouse or Eligible Children shall be entitled to receive (in
accordance with Sections 3.5 and 3.6) the installments of the Normal Retirement
Benefit which would have been payable to the Surviving Spouse or Eligible
Children in accordance with this Section 3.1 as if the Participant had retired
on the day before he died.
3.2 Early Retirement Benefit.
(a) Upon a Participant's Early Retirement, THC
shall pay the Participant a monthly Early Retirement Benefit for the
Participant's lifetime commencing on the first day of the calendar month
following the date he attains age 65, calculated in accordance with Section 3.1
and Section 3.3 with the following adjustments:
(i) Only the Participant's actual Years of Service,
adjusted appropriately for the Prior Service Credit
Percentage, as of the date of Early Retirement shall
be used.
(ii) For purposes of determining the Actual Final Average
Earnings and Projected Final Average Earnings, only
the Participant's Earnings and Projected Earnings as
of the date of Early Retirement shall be used.
(iii) To arrive at the payments to commence at age 65 the
amount calculated under paragraphs (a)(i) and (a)(ii)
of this Section 3.2 will be reduced by .42% for each
month Early Retirement commences before age 62.
(b) Upon the written request of the Participant
prior to Termination of Employment, the Committee, in its sole and absolute
discretion, may authorize payment of the Early Retirement Benefit at a date
prior to the Participant's attainment of age 65; provided, however, that in
such event the amount calculated under paragraphs a(i), (ii) and (iii) of this
Section 3.2 shall be further reduced by .42% for each month that the date of
the commencement of payment precedes the date on which the Participant will
attain age 62.
(c) If a Participant dies after commencement of
payment of his Early Retirement Benefit, the Surviving Spouse or Eligible
Children shall be entitled to receive (in accordance with Sections 3.5 and 3.6)
50% of the Participant's Early Retirement Benefit.
(d) If a Participant dies after his Early
Retirement but before benefits have commenced, or while on Disability, the
Surviving Spouse or Eligible Children shall be entitled to receive (in
accordance with Sections 3.5 and 3.6) 50% of the benefit that would have been
payable on the date the Participant elected to have benefits commence.
8
<PAGE>
(e) If a Participant dies after becoming eligible
for Early Retirement but before taking Early Retirement or while on Disability,
the Surviving Spouse or Eligible Children shall entitled to receive (in
accordance with Sections 3.5 and 3.6) 50% of the Participant's Early Retirement
Benefit determined as if the Participant had retired on the day prior to his
death, with payments commencing on the first of the month following the
Participant's death. The benefits payable to a Surviving Spouse or Eligible
Children under this paragraph shall be no less than the benefits payable to a
Surviving Spouse or Eligible Children under Section 3.4 as if the Participant
had died immediately prior to age 55.
3.3 Vesting of Retirement. A Participant's interest in
his Retirement Benefit shall, subject to Sections 5.5 and 5.7, vest in
accordance with the following schedule:
<TABLE>
<CAPTION>
Years of Service Vesting
---------------- -------
<S> <C>
Less than 5 -0-
5 but less than 6 25%
6 through 20 5% per year additional
</TABLE>
Notwithstanding the foregoing, a Participant who is at least 60 years old and
who has completed at least 5 Years of Service will be fully vested, subject to
Sections 5.5 and 5.7, in his Retirement Benefits. No Years of Service will be
credited for Service after age 65 or for more than 20 years.
3.4 Termination. Upon any Termination of Employment of
the Participant before Normal Retirement or Early Retirement for reasons other
than death or Disability, THC shall pay, commencing at age 65, to the
Participant a Retirement Benefit calculated under Sections 3.1 and 3.3 but with
the following adjustments:
(a) Only the Participant's actual Years of
Service, adjusted appropriately for the Prior Service Credit Percentage, as of
the date of Termination of Employment shall be used.
(b) For purposes of determining the Actual Final
Average Earnings and the Projected Final Average Earnings as used in Section
3.1, only the Participant's Earnings and Projected Earnings prior to the date
of his Termination of Employment shall be used.
(c)(i) If a Participant dies after commencement of
payment of his Retirement Benefit under this
Section 3.4, the Surviving Spouse or Eligible
Children shall be entitled at the
Participant's death to receive (in accordance
with Sections 3.5 and 3.6) 50% of the
Participant's Retirement Benefit.
9
<PAGE>
(ii) If a Participant, who has a vested interest
under Section 3.3, dies after Termination of
Employment but at death is not receiving any
Retirement Benefits under this Plan, the
Surviving Spouse or Eligible Children shall
be entitled to receive (in accordance with
Sections 3.5 and 3.6), commencing on the date
when the Participant would have attained age
65, 50% of the Retirement Benefit which would
have been payable to the Participant at age
65.
(iii) If a Participant, who has a vested interest
under Section 3.3, dies while still actively
employed by THC or a Subsidiary or on
Disability before he was eligible for Early
Retirement, his Surviving Spouse or Eligible
Children shall be entitled at Participant's
death to receive (in accordance with Sections
3.5 ad 3.6) 50% of the Retirement Benefit
calculated as if Participant were age 55 and
eligible for Early Retirement on the day
before Participant's death; however, the
combined reductions for Early Retirement and
early payment shall not exceed 35.28% of the
amount calculated under paragraphs a(i) and
(ii) of Section 3.2.
(d) To arrive at the payments to commence
at age 65, the amount calculated under paragraphs (a), (b), (c)(i) and (c)(ii)
of this Section 3.4 will be reduced by the maximum percentage reduction for
Early Retirement at age 55 (i.e., 35.28%).
3.5 Duration of Benefit Payment. Normal and Early
Retirement Benefit payments shall be for the life of the Participant.
Surviving Spouse Benefit payments shall be for the Surviving
Spouse's lifetime. All benefits payable to the Surviving Spouse are subject to
actuarial reduction if the Surviving Spouse is more than 3 years younger than
the Participant.
Eligible Children Benefit payments shall be made until the
youngest of the Eligible Children reaches 21.
3.6 Recipients of Benefit Payments. If a Participant
dies without a Surviving Spouse but is survived by any Eligible Children, then
benefits will be paid to the Eligible Children or their legal guardian, if
applicable. The total monthly benefit payable will be equal to the monthly
benefit that a Surviving Spouse would have received without actuarial
reduction. This benefit will be paid in equal shares to all Eligible Children
until the youngest of the Eligible Children attains age 21.
10
<PAGE>
If the Surviving Spouse dies after the death of the
Participant but is survived by Eligible Children, then the total monthly
benefit previously paid to the Surviving Spouse will be paid in equal shares to
all Eligible Children until the youngest of the Eligible Children attains age
21. When any of the Eligible Children reaches 21, his share will be
reallocated equally to the remaining Eligible Children.
3.7 Disability. Any Participant who is under Disability
upon reaching age 65 will be paid the Normal Retirement Benefit in accordance
with Sections 3.1 and 3.3.
Upon a Participant's Disability while an Employee of the
Company, the Participant will continue to accrue Years of Service during his
Disability until the earliest of:
(a) Recovery from Disability,
(b) 65th birthday, or
(c) Death.
If a Participant is receiving Disability payments, he shall
not be entitled to receive an Early Retirement Benefit.
For purposes of calculating the foregoing benefits, the
Participant's Actual Final Average Earnings and Projected Final Average
Earnings shall be determined using his Earnings and Projected Earnings up to
the date of Disability.
3.8 Change in Control. In the event of a Change of
Control Event while this Plan remains in effect, (i) a Participant's Retirement
Benefits hereunder (a) will be determined on the basis of receiving full Prior
Service Credit under Sections 3.1 and 3.2 for all Years of Service prior to his
Date of Enrollment and (b) will be fully vested in the Participant without
regard to his Years of Service with THC and its Subsidiaries, and (ii)
notwithstanding any other provisions of the Plan, a Participant will be
entitled to receive the Normal Retirement Benefit on or after age 60 with no
reduction by virtue of paragraphs (a)(iii) and (b) of Section 3.2.
SECTION 4 - PAYMENT
4.1 Commencement of Payments. Payments under this Plan
shall begin not later than the first day of the calendar month following the
occurrence of an event which entitles a Participant (or a Surviving Spouse or
Eligible Children) to payments under this Plan.
11
<PAGE>
4.2 Withholding; Unemployment Taxes. To the extent
required by the law in effect at the time payments are made, THC shall withhold
from payments made hereunder any taxes required to be withheld by the Federal
or any state or local government.
4.3 Recipients of Payments. All payments to be made by
THC under the Plan shall be made to the Participant during his lifetime. All
subsequent payments under the Plan shall be made by THC to Participant's
Surviving Spouse, Eligible Children or their legal guardian, if applicable.
4.4 No Other Benefits. THC shall pay no benefits
hereunder to the Participant, his Surviving Spouse, Eligible Children or their
legal guardian, if applicable, by reason of Termination of Employment or
otherwise, except as specifically provided herein.
4.5 Withdrawal Election. A Participant or his or her
beneficiary, as the case may be, may elect, at any time after he or she
commences to receive benefit payments under this Plan, to receive those
payments in a lump sum equal to 90% of the actuarial equivalent value of his or
her remaining vested benefits hereunder. No election to partially accelerate
benefits shall be allowed. The Participant shall make this election by giving
the Plan Administrator advance written notice of the election in a form
determined from time to time by the Committee. The actuarial equivalent of the
Participant's remaining vested benefit hereunder shall be, as determined by the
Committee in its absolute discretion, the single premium required, at the time
of distribution, to purchase the Participant's remaining vested benefits
hereunder as a nonqualified annuity from an insurance company rated AAA by both
Moody's and Standard and Poors. The Participant shall be paid the reduced
benefit amount within 60 days of his or her election. Once such amount is
paid, the Participant's participation in the Plan shall permanently terminate
for all purposes.
SECTION 5 - CONDITIONS RELATED TO BENEFITS
5.1 Administration of Plan. The Committee is hereby
authorized to administer the Plan and is given the authority in its sole and
unfettered discretion to interpret, construe and apply its provisions in
accordance with its terms. The Committee shall administer the Plan and shall
establish, adopt or revise such rules and regulations as it may deem necessary
or advisable for the administration of the Plan. All decisions of the
Committee shall be by vote or written consent of the majority of its members
and shall be final and binding. Members of the Committee shall not be eligible
to participate in the Plan while serving as a member of the Committee.
5.2 No Right to Assets. Neither a Participant nor any
other person shall acquire by reason of the Plan any right in or title to any
assets, funds or property of THC and its Subsidiaries whatsoever, including,
without limiting the generality of the foregoing, any specific funds or assets
which THC, in its sole discretion, may set aside in anticipation of a liability
hereunder. No trust shall be created in accordance with or by the execution or
12
<PAGE>
adoption of this Plan or any Agreement with a Participant, and any benefits
which become payable hereunder shall be paid from the general assets of THC;
provided, that one or more grantor trusts described in Section 671 of the
Internal Revenue Code of 1986, as amended, may be established to fund the Plan
in whole or in part, and benefits under this Plan may be paid in whole or in
part from such trust or trusts. A Participant shall have only an unsecured
contractual right to the amounts, if any, payable hereunder, against THC or one
or more Subsidiaries, as reflected in the Participant's one or more Agreements.
5.3 No Employment Rights. Nothing herein shall
constitute a contract of continuing employment or in any manner obligate THC
and its Subsidiaries to continue the service of a Participant, or obligate a
Participant to continue in the service of THC and its Subsidiaries, and nothing
herein shall be construed as fixing or regulating the compensation paid to a
Participant.
5.4 Right to Terminate or Amend. Except during any
two-year period after any Change of Control Event of THC, THC reserves the sole
right to terminate the Plan at any time and to terminate an Agreement with any
Participant at any time. In the event of termination of the Plan or of a
Participant's Agreement, a Participant shall be entitled to only the vested
portion of his accrued benefits under Section 3 of the Plan as of the time of
the termination of the Plan or his Agreement. All further vesting and benefit
accrual shall cease on the date of Plan or Agreement termination. Benefit
payments would be in the amounts specified and would commence at the time
specified in Section 3 as appropriate. THC further reserves the right in its
sole discretion to amend the Plan in any respect except that Plan benefits
cannot be reduced during any two-year period after any Change of Control Event
of THC. No amendment of the Plan (whether there has or has not been a Change
of Control Event of THC) that reduces the value of the benefits theretofore
accrued by and vested with respect to the Participant shall be effective.
5.5 Eligibility. Eligibility to participate in the Plan
is expressly conditional upon an Employee's furnishing to THC certain
information and taking physical examinations and such other relevant action as
may be reasonably requested by THC. Any Employee Participant who refuses to
provide such information or to take such action shall not be enrolled as or
cease to be a Participant under the Plan. Any Participant who commits suicide
during the two-year period beginning on the date of his Agreement, or who makes
any material misstatement of information or non-disclosure of medical history,
will not receive any benefits hereunder unless, in the sole discretion of the
Committee, benefits in a reduced amount are awarded.
13
<PAGE>
5.6 Offset. If at the time payments or installments of
payments are to be made hereunder, any Participant or his Surviving Spouse or
both are indebted to THC and its Subsidiaries, then the payments remaining to
be made to the Participant or his Surviving Spouse or both may, at the
discretion of the Committee, be reduced by the amount of such indebtedness;
provided, however, that an election by the Committee not to reduce any such
payment or payments shall not constitute a waiver of any claim for such
indebtedness.
5.7 Conditions Precedent. No Retirement Benefits will be
payable hereunder to any Participant (i) whose Employment with THC or a
Subsidiary is terminated because of his willful misconduct or gross negligence
in the performance of his duties or (ii) who within 3 years after Termination
of Employment becomes an employee with or consultant to any third party engaged
in any line of business in competition with THC and/or its Subsidiaries (a) in
a line of business in which Participant has performed Services for THC and its
Subsidiaries provided that a person who is also an employee of NME shall not be
construed to be a third party engaged in competition with THC and/or its
Subsidiaries or (b) that accounts for more than 10% of the gross revenues of
THC and its Subsidiaries taken as a whole. Notwithstanding the foregoing
paragraph, the Committee, in its sole discretion, may approve the payment of
Retirement Benefits to an Employee who would otherwise be ineligible under (ii)
above if the Committee determines that it is in THC's best interest to do so.
SECTION 6 - MISCELLANEOUS
6.1 Nonassignability. Neither a Participant nor any
other person shall have any right to commute, sell, assign, transfer, pledge,
anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in
advance any provision hereunder, or any part thereof, which are, and all rights
to which are, expressly declared to be unassignable and non-transferable. No
part of the amounts payable shall, prior to actual payment, be subject to
seizure or sequestration for the payment of any debts, judgments, alimony or
separate maintenance owed by a Participant or any other person, nor be
transferable by operation of law in the event of a Participant's or any
person's bankruptcy or insolvency. THC may assign this Plan to any Subsidiary
which employs any Participant.
6.2 Gender and Number. Wherever appropriate herein, the
masculine may mean the feminine and the singular may mean the plural or vice
versa.
6.3 Notice. Any notice required or permitted to be given
to the Committee under the Plan shall be sufficient if in writing and hand
delivered, or sent by registered or certified mail, to the principal office of
THC, directed to the attention of the Secretary of the Committee. Such notice
shall be deemed given as of the date of delivery or, if delivery is made by
mail, as of the date shown on the postmark or on the receipt for registration
or certification.
14
<PAGE>
6.4 Validity. In the event any provision of this Plan is
held invalid, void or unenforceable, the same shall not affect, in any respect
whatsoever, the validity of any other provision of this Plan.
6.5 Applicable Law. This Plan shall be governed and
construed in accordance with the laws of the State of Washington.
6.6 Successors in Interest. This Plan shall inure to the
benefit of, be binding upon, and be enforceable by, any corporate successor to
THC or successor to substantially all of the assets of THC.
6.7 No Representation on Tax Matters. THC makes no
representation to Participants regarding current or future income tax
ramifications of the Plan.
IN WITNESS WHEREOF, THC has executed this instrument effective
October 1, 1994.
THE HILLHAVEN CORPORATION, a Nevada corporation
By
------------------------------------------
Its
--------------------------------------
15
<PAGE>
EXHIBIT 10.30
HILLHAVEN
INDIVIDUAL RETIREMENT ANNUITY PLAN
1. Purpose: To assist the Hillhaven Corporation ("the Company") in
-------
retaining employees and to promote employee interest in saving for retirement
years.
2. Eligibility: All full time Category I employees of the Company or its
-----------
subsidiaries ("Employees") are eligible to participate in The Hillhaven
Individual Retirement Annuity Plan (the "Plan"). Employees may elect to enroll
in the Plan at any time during their full time employment with the Company or
one of its subsidiaries. For purposes of this Plan, "Category I" employees are
all full-time employees of The Hillhaven Corporation who are assigned to the
Corporate Office in Tacoma, Washington, working a minimum of 30 hours per week;
regional office staff; and at the facility level, administrators, assistant
administrators, directors of nursing, and administrators in training.
3. The Plan: Participating Employees may elect to contribute a minimum of
--------
$300 to a maximum of $2,000 into their respective Plan accounts each calendar
year. The maximum contribution is established by Federal law as the maximum
amount that may be contributed annually as an Individual Retirement Account
(IRA) contribution. Interest is accrued on Employees' accounts on a
tax-deferred basis; interest is credited to accounts monthly. Participating
Employees' contributions are conveyed to a financial institution selected by the
Company; the institution maintains an account for each participating Employee.
4. Company Contributions: The Company will contribute to participating
---------------------
Employee Plan accounts according to the participating Employee's tenure with the
Company as described below. Company contributions will be prorated based on the
participating Employee's hire date anniversary.
o After completion of two years' service, the Company will contribute
33% of Employee contribution to a minimum of $55.56 per month or
$666.67 annually.
o After completion of five years' service, the Company will contribute
50% of Employee contribution to a maximum of $83.33 per month or
$1,000 each year.
o After completion of ten years' service, the Company will contribute
100% of Employee contribution to a maximum of $2,000 each year.
1
<PAGE>
5. Service With Prior Employer: Employees who became Hillhaven Employees
---------------------------
as a result of an acquisition of their prior employer by the Company may enroll
in the Plan immediately. Prior service credit will be honored for contributions
when the Employee has been a Hillhaven Employee for one year.
6. Alternate IRA Accounts: Employees may elect to participate in a
----------------------
qualified IRA other than provided by this Plan. To qualify for matching
contributions from the Company as described in paragraph 4, the Participating
Employee must submit written proof of deposit to a qualified IRA to the
Corporate Employee Relations department by December 1 each year. The
appropriate Company contribution will be paid to the participating Employee in a
lump sum before the end of the calendar year.
7. Amendment and Termination: This Plan may be amended or terminated at
-------------------------
any time at the sole discretion of the Compensation Committee of the Board of
Directors.
September 1, 1989
2
<PAGE>
EXHIBIT 10.31
AGREEMENT
---------
This Agreement, made and entered into as of the ____ day of ____________,
19__ ("Agreement"), by and between Vencor, Inc., a Delaware corporation
("Company"), and __________________________ ("Indemnitee"):
RECITALS:
--------
A. Highly competent persons are becoming more reluctant to serve publicly
held corporations as officers, counsel or other key employees or in other
capacities unless they are provided with adequate protection through insurance
or adequate indemnification against inordinate risks of claims and actions
against them arising out of their service to and activities on behalf of the
corporation.
B. The increasing difficulties of obtaining adequate insurance and the
uncertainties relating to indemnification may impair the ability of the Company
to continue to attract and retain such persons.
C. The Board of Directors of the Company (the "Board") has determined that
the potential inability to attract and retain such persons is detrimental to the
best interest of the Company's stockholders and that the Company should act to
assure such persons that there will be increased certainty of such protection in
the future.
D. It is reasonable, prudent and necessary for the Company contractually
to obligate itself to indemnify such persons to the fullest extent permitted by
applicable law so that they will serve or continue to serve the Company free
from undue concern that they will not be so indemnified.
E. Indemnitee is willing to serve, continue to serve and to take on
additional service for or on behalf of the Company on the condition that she be
so indemnified.
AGREEMENT:
---------
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
1. SERVICES BY INDEMNITEE. Indemnitee agrees to serve as an officer,
----------------------
employee, agent or fiduciary of the Company, and may at the request of the
Company, agree to serve as a director, officer, employee, agent or fiduciary of
another corporation, partnership, joint venture, trust or other enterprise.
Indemnitee may at any time and for any reason resign from such position (subject
to any other contractual obligation or any obligation imposed by operation of
law), in which event the Company shall have no obligation under this Agreement
to continue Indemnitee in any such position.
2. INDEMNIFICATION - GENERAL. The Company shall indemnify and advance
-------------------------
Expenses (as hereinafter defined) to Indemnitee as provided in this Agreement
and to the fullest extent permitted by applicable law in effect on the date
hereof and to such greater extent as applicable law may thereafter from time to
time permit. The rights of Indemnitee provided under the preceding sentence
shall include, but shall not be limited to, the rights set forth in the other
Sections of the Agreement. This Agreement shall also apply to any claims
brought against the
<PAGE>
Indemnitee which antedate the date hereof, so long as Indemnitee was serving in
a Corporate Status (as hereinafter defined) with respect to any such claims.
3. PROCEEDINGS OTHER THAN PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY.
--------------------------------------------------------------------
Indemnitee shall be entitled to the rights of indemnification provided in this
Section 3 if, by reason of her Corporate Status, she is, or is threatened to be
made, a party to any threatened, pending, or completed Proceeding (as
hereinafter defined), other than a Proceeding by or in the right of the Company.
Pursuant to this Section 3,
Indemnitee shall be indemnified against Expenses, judgments, penalties, fines
and amounts paid in settlement actually and reasonably incurred by her or on her
behalf in connection with such Proceeding or any claim, issue or matter therein,
if she acted in good faith and in a manner she reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal Proceeding, had no reasonable cause to believe her conduct was
unlawful.
4. PROCEEDING BY OR IN THE RIGHT OF THE COMPANY. Indemnitee shall be
--------------------------------------------
entitled to the rights of indemnification provided in this Section 4 if, by
reason of her Corporate Status, she is, or is threatened to be made, a party to
any threatened, pending or completed Proceeding brought by or in the right of
the Company to procure a judgment in its favor. Pursuant to this Section,
Indemnitee shall be indemnified against Expenses, judgments, penalties, fines
and amounts paid in settlement actually and reasonably incurred by her or on her
behalf in connection with such Proceeding if she acted in good faith and in a
manner she reasonably believed to be in or not opposed to the best interests of
the Company. Notwithstanding the foregoing, no indemnification against such
Expenses and against judgments, penalties, fines and amounts paid in settlement
shall be made in respect of any claim, issue or matter in any such Proceeding as
to which Indemnitee shall have been adjudged to be liable to the Company if
applicable law prohibits such indemnification; provided, however, that, if
applicable law so permits, indemnification against Expenses shall nevertheless
be made by the Company in such event if and only to the extent that the Court of
Chancery of the State of Delaware, or the court in which such Proceeding shall
have been brought or is pending, shall determine.
5. INDEMNIFICATION FOR EXPENSES OF A PARTY WHO IS WHOLLY OR PARTLY
---------------------------------------------------------------
SUCCESSFUL. Notwithstanding any other provision of this Agreement, to the
- ----------
extent that Indemnitee is, by reason of her Corporate Status, a party to and is
successful, on the merits or otherwise, in any Proceeding, she shall be
indemnified against all Expenses actually and reasonably incurred by her or on
her behalf in connection therewith. If Indemnitee is not wholly successful in
such Proceeding but is successful, on the merits or otherwise, as to one or more
but less than all claims, issues or matters in such Proceeding, the Company
shall indemnify Indemnitee against all Expenses actually and reasonably incurred
by her or on her behalf in connection with each successfully resolved claim,
issue or matter. If Indemnitee is not successful with respect to a claim, issue
or matter, Indemnitee's right to indemnification for Expenses with regard to
such claim, issue or matter shall be governed by Sections 3 and 4 of this
Agreement. For purposes of this Section and without limitation, the termination
of any claim, issue or matter in such a Proceeding by dismissal, with or without
prejudice, shall be deemed to be a successful result as to such claim, issue or
matter.
6. INDEMNIFICATION FOR EXPENSES OF A WITNESS. Notwithstanding any other
-----------------------------------------
provision of this Agreement, to the extent that Indemnitee is or is threatened
to be made, by reason of her Corporate Status, a witness in any Proceeding, she
shall be indemnified against all Expenses actually and reasonably incurred by
her or on her behalf in connection therewith.
2
<PAGE>
7. ADVANCEMENT OF EXPENSES. The Company shall advance all reasonable
-----------------------
Expenses incurred by or on behalf of Indemnitee in connection with any
Proceeding within twenty days after the receipt by the Company of a statement or
statements from Indemnitee requesting such advance or advances from time to
time, whether prior to or after final disposition of such Proceeding. Such
statements shall reasonably evidence the Expenses incurred by Indemnitee and
shall include or be preceded or accompanied by an undertaking by or on behalf of
Indemnitee to repay any Expenses advanced if it shall ultimately be determined
that Indemnitee is not entitled to be indemnified against such Expenses.
8. PROCEDURE FOR DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION.
-------------------------------------------------------------
(A) To obtain indemnification under this Agreement, Indemnitee shall
submit to the Company a written request, including therein or therewith such
documentation and information as is reasonably available to Indemnitee and is
reasonably necessary to determine whether and to what extent Indemnitee is
entitled to indemnification. The Secretary of the Company shall, promptly upon
receipt of such a request for indemnification, advise the Board of Directors in
writing that Indemnitee has requested indemnification.
(B) Upon written request by Indemnitee for indemnification pursuant to
the first sentence of Section 8(a) hereof, a determination, if required by
applicable law, with respect to Indemnitee's entitlement thereto shall be made
in the specific case: (i) if a Change in Control (as hereinafter defined) shall
have occurred, by Independent Counsel (as hereinafter defined) (unless
Indemnitee shall request that such determination be made by the Board of
Directors or the stockholders, in which case by the person or persons or in the
manner provided for in clauses (ii) or (iii) of this Section 8(b)) in a written
opinion to the Board of Directors, a copy of which shall be delivered to
Indemnitee; (ii) if a Change of Control shall not have occurred, (A) by the
Board of Directors by a majority vote of a quorum consisting of Disinterested
Directors (as hereinafter defined), or (B) if a quorum of the Board of Directors
consisting of Disinterested Directors is not obtainable or, even if obtainable,
if such quorum of Disinterested Directors so directs, by Independent Counsel in
a written opinion to the Board of Directors, a copy of which shall be delivered
to Indemnitee or (C) by the stockholders of the Company; or (iii) as provided in
Section 9(b) of this Agreement; and, if it is so determined that Indemnitee is
entitled to indemnification, payment to Indemnitee shall be made within ten (10)
days after such determination. Indemnitee shall cooperate with the person,
persons or entity making such determination with respect to Indemnitee's
entitlement to indemnification, including providing to such person, persons or
entity upon reasonable advance request any documentation or information which is
not privileged or otherwise protected from disclosure and which is reasonably
available to Indemnitee and reasonably necessary to such determination. Any
costs or expenses (including attorneys' fees and disbursements) incurred by
Indemnitee in so cooperating with the person, persons or entity making such
determination shall be borne by the Company (irrespective of the determination
as to Indemnitee's entitlement to indemnification) and the Company hereby
indemnifies and agrees to hold Indemnitee harmless therefrom.
(C) In the event the determination of entitlement to indemnification
is to be made by Independent Counsel pursuant to Section 8(b) hereof, the
Independent Counsel shall be selected as provided in this Section 8(c). If a
Change of Control shall not have occurred, the Independent Counsel shall be
selected by the Board of Directors, and the Company shall give written notice to
Indemnitee advising her of the identity of the Independent Counsel so selected.
If a Change of Control shall have occurred, the Independent Counsel shall be
selected by Indemnitee (unless Indemnitee shall request that such selection be
made by the Board of Directors, in which event the
3
<PAGE>
preceding sentence shall apply), and Indemnitee shall give written notice to the
Company advising it of the identity of the Independent Counsel so selected. In
either event, Indemnitee or the Company, as the case may be, may, within seven
(7) days after such written notice of selection shall have been given, deliver
to the Company or to Indemnitee, as the case may be, a written objection to such
selection. Such objection may be asserted only on the ground that the
Independent Counsel so selected does not meet the requirements of "Independent
Counsel" as defined in Section 17 of this Agreement, and the objection shall set
forth with particularity the factual basis of such assertion. If such written
objection is made, the Independent Counsel so selected may not serve as
Independent Counsel unless and until a court has determined that such objection
is without merit. If, within twenty (20) days after submission by Indemnitee of
a written request for indemnification pursuant to Section 8(a) hereof, no
Independent Counsel shall have been selected and not objected to, either the
Company or Indemnitee may petition the Court of Chancery of the State of
Delaware or other court of competent jurisdiction for resolution of any
objection which shall have been made by the Company or Indemnitee to the other's
selection of Independent Counsel and/or for the appointment as Independent
Counsel of a person selected by the Court or by such other person as the Court
shall designate, and the person with respect to whom an objection is so resolved
or the person so appointed shall act as Independent Counsel under Section 8(b)
hereof. The Company shall pay any and all reasonable fees and expenses of
Independent Counsel incurred by such Independent Counsel in connection with
acting pursuant to Section 8(b) hereof, and the Company shall pay all reasonable
fees and expenses incident to the procedures of this Section 8(c), regardless of
the manner in which such Independent Counsel was selected or appointed. Upon the
due commencement of any judicial proceeding or arbitration pursuant to Section
10(a)(iii) of this Agreement, Independent Counsel shall be discharged and
relieved of any further responsibility in such capacity (subject to the
applicable standards of professional conduct then prevailing).
9. PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS.
----------------------------------------------
(A) If a Change of Control shall have occurred, in making a
determination with respect to entitlement to indemnification hereunder, the
person, persons or entity making such determination shall presume that
Indemnitee is entitled to indemnification under this Agreement if Indemnitee has
submitted a request for indemnification in accordance with Section 8(a) of this
Agreement, and the Company shall have the burden of proof to overcome that
presumption in connection with the making by any person, persons or entity of
any determination contrary to that presumption.
(B) If the person, persons or entity empowered or selected under
Section 8 of this Agreement to determine whether Indemnitee is entitled to
indemnification shall not have made a determination within sixty (60) days after
receipt by the Company of the request therefor, the requisite determination of
entitlement to indemnification shall be deemed to have been made and Indemnitee
shall be entitled to such indemnification, absent (i) a misstatement by
Indemnitee of a material fact, or an omission of a material fact necessary to
make Indemnitee's statement not materially misleading, in connection with the
request for indemnification, or (ii) a prohibition of such indemnification under
applicable law; provided, however, that such sixty (60) day period may be
extended for a reasonable time, not to exceed an additional thirty (30) days, if
the person, persons or entity making the determination with respect to
entitlement to indemnification in good faith requires such additional time for
the obtaining or evaluating of documentation and/or information relating
thereto; and provided, further, that the foregoing provisions of this Section
9(b) shall not apply (i) if the determination of entitlement to indemnification
is to be made by the stockholders pursuant to Section 8(b) of this Agreement and
if (A) within fifteen (15) days after
4
<PAGE>
receipt by the Company of the request for such determination the Board of
Directors has resolved to submit such determination to the stockholders for
their consideration at an annual meeting thereof to be held within seventy-five
(75) days after such receipt and such determination is made at such meeting, or
(B) a special meeting of stockholders is called within fifteen (15) days after
such receipt for the purpose of making such determination, such meeting is held
for such purpose within sixty (60) days after having been so called and such
determination is made at such meeting, or (ii) if the determination of
entitlement to indemnification is to be made by Independent Counsel pursuant to
Section 8(b) of this Agreement.
(C) The termination of any Proceeding or of any claim, issue or matter
therein, by judgment, order, settlement or conviction, or upon a plea of nolo
contendere or its equivalent, shall not (except as otherwise expressly provided
in this Agreement) of itself adversely affect the right of Indemnitee to
indemnification or create a presumption that Indemnitee did not act in good
faith and in a manner which she reasonably believed to be in or not opposed to
the best interests of the Company or, with respect to any criminal Proceeding,
that Indemnitee had reasonable cause to believe that her conduct was unlawful.
10. REMEDIES OF INDEMNITEE.
----------------------
(A) In the event that (i) a determination is made pursuant to Section 8
of this Agreement that Indemnitee is not entitled to indemnification under this
Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 7
of this Agreement, (iii) the determination of entitlement to indemnification is
to be made by Independent Counsel pursuant to Section 8(b) of this Agreement and
such determination shall not have been made and delivered in a written opinion
within ninety (90) days after receipt by the Company of the request for
indemnification, or (iv) payment of indemnification is not made pursuant to
Section 6 of this Agreement within ten (10) days after receipt by the Company of
a written request therefor, or (v) payment of indemnification is not made within
ten (10) days after a determination has been made that Indemnitee is entitled to
indemnification or such determination is deemed to have been made pursuant to
Section 8 or 9 of this Agreement, Indemnitee shall be entitled to an
adjudication in an appropriate court of the State of Delaware, or in any other
court of competent jurisdiction, of her entitlement to such indemnification or
advancement of Expenses. Alternatively, Indemnitee, at her option, may seek an
award in arbitration to be conducted by a single arbitrator pursuant to the
rules of the American Arbitration Association. Indemnitee shall commence such
proceeding seeking an adjudication or an award in arbitration within one hundred
eighty (180) days following the date on which Indemnitee first has the right to
commence such proceeding pursuant to this Section 10(a). The Company shall not
oppose Indemnitee's right to seek any such adjudication or award in arbitration.
(B) In the event that a determination shall have been made pursuant to
Section 8 of this Agreement that Indemnitee is not entitled to indemnification,
any judicial proceeding or arbitration commenced pursuant to this Section 10
shall be conducted in all respects as a de novo trial, or arbitration, on the
merits and Indemnitee shall not be prejudiced by reason of that adverse
determination. If a Change of Control shall have occurred, in any judicial
proceeding or arbitration commenced pursuant to this Section 10 the Company
shall have the burden of proving that Indemnitee is not entitled to
indemnification or advancement of Expenses, as the case may be.
(C) If a determination shall have been made or deemed to have been made
pursuant to Section 8 or 9 of this Agreement that Indemnitee is entitled to
indemnification, the Company shall be bound by such determination in any
judicial proceeding or arbitration commenced
5
<PAGE>
pursuant to this Section 10, absent (i) a misstatement by Indemnitee of a
material fact, or an omission of a material fact necessary to make Indemnitee's
statement not materially misleading, in connection with the request for
indemnification, or (ii) a prohibition of such indemnification under applicable
law.
(D) The Company shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section 10 that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such arbitrator
that the Company is bound by all the provisions of this Agreement.
(E) In the event that Indemnitee, pursuant to this Section 10, seeks a
judicial adjudication of or an award in arbitration to enforce her rights under,
or to recover damages for breach of, this Agreement, Indemnitee shall be
entitled to recover from the Company, and shall be indemnified by the Company
against, any and all expenses (of the types described in the definition of
Expenses in Section 17 of this Agreement) actually and reasonably incurred by
her in such judicial adjudication or arbitration, but only if she prevails
therein. If it shall be determined in said judicial adjudication or arbitration
that Indemnitee is entitled to receive part but not all of the indemnification
or advancement of expenses sought, the expenses incurred by Indemnitee in
connection with such judicial adjudication or arbitration shall be appropriately
prorated.
11. NON-EXCLUSIVITY; SURVIVAL OF RIGHTS; INSURANCE; SUBROGATION.
-----------------------------------------------------------
(A) The rights of indemnification and to receive advancement of
Expenses as provided by this Agreement shall not be deemed exclusive of any
other rights to which Indemnitee may at any time be entitled under applicable
law, the Restated Certificate of Incorporation, the Bylaws, any agreement, a
vote of stockholders or a resolution of directors, or otherwise. No amendment,
alteration or repeal of this Agreement or any provision hereof shall be
effective as to any Indemnitee with respect to any action taken or omitted by
such Indemnitee in her Corporate Status prior to such amendment, alteration or
repeal.
(B) To the extent that the Company maintains an insurance policy or
policies providing liability insurance for directors, officers, employees,
agents or fiduciaries of the Company or of any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise which such
person serves at the request of the Company, Indemnitee shall be covered by such
policy or policies in accordance with its or their terms to the maximum extent
of the coverage available for any such director, officer, employee or agent
under such policy or policies.
(C) In the event of any payment under this Agreement, the Company shall
be subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and take all action necessary
to secure such rights, including execution of such documents as are necessary to
enable the Company to bring suit to enforce such rights.
(D) The Company shall not be liable under this Agreement to make any
payment of amounts otherwise indemnifiable hereunder if and to the extent that
Indemnitee has otherwise actually received such payment under any insurance
policy, contract, agreement or otherwise.
12. DURATION OF AGREEMENT. This Agreement shall continue until and
---------------------
terminate upon the later of: (a) ten (10) years after the date that Indemnitee
shall have ceased to serve as an officer, employee, agent or fiduciary of the
Company or a director, officer, employee, agent or
6
<PAGE>
fiduciary of any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise which Indemnitee served at the request of the
Company; or (b) the final termination of all pending Proceedings in respect of
which Indemnitee is granted rights of indemnification or advancement of expenses
hereunder and of any Proceeding commenced by Indemnitee pursuant to Section 10
of this Agreement relating thereto. This Agreement shall be binding upon the
Company and its successors and assigns and shall inure to the benefit of
Indemnitee and her heirs, executors and administrators.
13. SEVERABILITY. If any provision or provisions of this Agreement shall
------------
be held to be invalid, illegal or unenforceable for any reason whatsoever: (a)
the validity, legality and enforceability of the remaining provisions of this
Agreement (including without limitation, each portion of any Section of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall not
in any way be affected or impaired thereby; and (b) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, each
portion of any Section of this Agreement containing any such provision held to
be invalid, illegal or unenforceable, that is not itself invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.
14. EXCEPTION TO RIGHT OF INDEMNIFICATION OR ADVANCEMENT OF EXPENSES.
----------------------------------------------------------------
Notwithstanding any other provision of this Agreement, Indemnitee shall not be
entitled to indemnification or advancement of Expenses under this Agreement with
respect to any Proceeding, or any claim therein, brought or made by her against
the Company.
15. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or more
----------------------
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute one and the same Agreement. Only one
such counterpart signed by the party against whom enforceability is sought needs
to be produced to evidence the existence of this Agreement.
16. HEADINGS. The headings of the paragraphs of this Agreement are
--------
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction thereof.
17. DEFINITIONS. For purposes of this Agreement:
-----------
(A) "Change in Control" means a change in control of the Company
occurring after the Effective Date of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in
response to any similar item on any similar schedule or form) promulgated under
the Securities Exchange Act of 1934 (the "Act"), whether or not the Company is
then subject to such reporting requirement; provided, however, that, without
limitation, such a Change in Control shall be deemed to have occurred if after
the Effective Date (i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities without the prior approval of at least two-thirds of the
members of the Board of Directors in office immediately prior to such person
attaining such percentage interest; (ii) the Company is a party to a merger,
consolidation, sale of assets or other reorganization, or a proxy contest, as a
consequence of which members of the Board of Directors in office immediately
prior to such transaction or event constitute less than a majority of the Board
of
7
<PAGE>
Directors thereafter; or (iii) during any period of two (2) consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors (including for this purpose any new director whose election or
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds of the directors then still in office who were directors at
the beginning of such period) cease for any reason to constitute a majority of
the Board of Directors.
(B) "Corporate Status" describes the status of a person who is or was
an officer, employee, agent or fiduciary of the Company or a director, officer,
employee, agent or fiduciary of any other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise which such person is
or was serving at the request of the Company.
(C) "Disinterested Director" means a director of the Company who is
not and was not a party to the Proceeding in respect of which indemnification is
sought by Indemnitee.
(D) "Effective Date" means _______________________, 19__.
(E) "Expenses" shall include all reasonable attorneys' fees,
retainers, court costs, transcript costs, fees of expert, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees, and all other disbursements or expenses of the
types customarily incurred in connection with prosecuting, defending, preparing
to prosecute or defend, investigating, or being or preparing to be a witness in
a Proceeding.
(F) "Independent Counsel" means a law firm, or a member of a law firm,
that is experienced in matters of corporation law and neither presently is, nor
in the past five (5) years has been, retained to represent: (i) the Company or
Indemnitee in any matter material to either such party, or (ii) any other party
to the Proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Counsel" shall not include
any person who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either the Company
or Indemnitee in an action to determine Indemnitee's rights under this
Agreement.
(G) "Proceeding" includes any action, suit, arbitration, alternate
dispute resolution mechanism, investigation, administrative hearing or any other
proceeding whether civil, criminal, administrative or investigative, except one
initiated by an Indemnitee pursuant to Section 10 of this Agreement to enforce
her rights under this Agreement.
18. MODIFICATION AND WAIVER. No supplement, modification or amendment of
-----------------------
this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
19. NOTICE BY INDEMNITEE. Indemnitee agrees promptly to notify the Company
--------------------
in writing upon being served with any summons, citation, subpoena, complaint,
indictment, information or other document relating to any Proceeding or matter
which may be subject to indemnification or advancement of Expenses covered
hereunder.
20. NOTICES. All notices, requests, demands and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if (i)
delivered by hand and receipted for by the party to whom said notice or other
communication shall have been directed, or (ii) mailed
8
<PAGE>
by certified or registered mail with postage prepaid, on the third business day
after the date on which it is so mailed:
(A) If to Indemnitee, to: ______________________________
______________________________
______________________________
(B) If to the Company to: Vencor, Inc.
3300 Providian Center
Louisville, KY 40202
Attn: President and Chief Executive
Officer
cc: General Counsel
or to such other address as may have been furnished to Indemnitee by the Company
or to the Company by Indemnitee, as the case may be.
21. GOVERNING LAW. The parties agree that this Agreement shall be governed
-------------
by, and construed and enforced in accordance with, the laws of the State of
Delaware.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
ATTEST: VENCOR, INC.
By:______________________ By:_________________________
INDEMNITEE
_____________________________
9
<PAGE>
EXHIBIT 10.32
CHANGE-IN-CONTROL SEVERANCE AGREEMENT
-------------------------------------
THIS CHANGE-IN-CONTROL SEVERANCE AGREEMENT (the "Agreement") is made as of
the ____ day of _____________, 19__, by and between VENCOR, INC., a Delaware
corporation ( "Vencor"), and ___________________________ (the "Employee").
RECITALS:
--------
A. The Employee is employed by Vencor, either directly or through one of
its wholly owned subsidiaries (collectively, the "Company").
B. The Company recognizes that the Employee's contribution to the
Company's growth and success has been and continues to be significant.
C. The Company wishes to encourage the Employee to remain with and devote
full time and attention to the business affairs of the Company and wishes to
provide income protection to the Employee for a period of time in the event of a
Change in Control.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
AGREEMENT:
---------
1. DEFINITIONS.
-----------
A. "BASE SALARY" shall mean the Employee's regular annual rate of
-----------
base pay in gross as of the date in question as elected under Paragraph 3(a).
B. "CAUSE" shall mean the Employee's (i) conviction of or plea of
-----
nolo contendere to a crime involving moral turpitude; or (ii) willful and
material breach by Employee of his duties and responsibilities, which is
committed in bad faith or without reasonable belief that such breaching conduct
is in the best interests of the Company, but with respect to (ii) only if the
Board of Directors adopts a resolution by a vote of at least 75% of its members
so finding after giving the Employee and his attorney an opportunity to be heard
by the Board of Directors.
C. CHANGE IN CONTROL. The term "Change in Control" shall mean any
-----------------
one of the following events:
(i) An acquisition (other than directly from Vencor) of any
voting securities of Vencor (the "Voting Securities") by any "Person" (as
defined in Paragraph 1(f) hereof) immediately after which such Person has
"Beneficial Ownership" (within the meaning of Rule 13d-3 under the 1934 Act) of
20% or more of the combined voting power of Vencor's then outstanding Voting
Securities; provided, however, that in determining whether a Change in Control
has occurred, Voting Securities which are acquired in an acquisition by (i)
Vencor or any of its subsidiaries, (ii) an employee benefit plan (or a trust
forming a part thereof) maintained by Vencor or any of its subsidiaries or (iii)
any Person in connection with an acquisition referred to in
<PAGE>
the immediately preceding clauses (i) and (ii) shall not constitute an
acquisition which would cause a Change in Control.
(ii) The individuals who, as of ____________, 19__, constituted
the Board of Directors of Vencor (the "Incumbent Board") cease for any reason to
constitute over 50% of the Board; provided, however, that if the election, or
nomination for election by Vencor's stockholders, of any new director was
approved by a vote of over 50% of the Incumbent Board, such new director shall,
for purposes of this Section 6.7(b), be considered as though such person were a
member of the Incumbent Board; provided, further, however, that no individual
shall be considered a member of the Incumbent Board if such individual initially
assumed office as a result of either an actual or threatened "Election Contest"
(as described in Rule 14a-11 promulgated under the 1934 Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board of Directors of Vencor (a "Proxy Contest"), including by reason
of any agreement intended to avoid or settle any Election Contest or Proxy
Contest.
(iii) Approval by stockholders of Vencor of a merger,
consolidation or reorganization involving Vencor, unless each of the following
events occurs in connection with such merger, consolidation or reorganization:
(A) the stockholders of Vencor, immediately before such
merger, consolidation or reorganization, own, directly or indirectly immediately
following such merger, consolidation or reorganization, over 50% of the combined
voting power of all voting securities of the corporation resulting from such
merger or consolidation or reorganization (the "Surviving Company") over which
any Person has Beneficial Ownership in substantially the same proportion as
their ownership of the Voting Securities immediately before such merger,
consolidation or reorganization;
(B) the individuals who were members of the Incumbent Board
consolidation or reorganization constitute over 50% of the members of the board
of directors of the Surviving Company; and
(C) no Person (other than Vencor, any of its subsidiaries,
any employee benefit plan [or any trust forming a part thereof] maintained by
Vencor, the Surviving Company or any Person who, immediately prior to such
merger, consolidation or reorganization had Beneficial Ownership of 20% or more
of the then outstanding Voting Securities) has Beneficial Ownership of 20% or
more of the combined voting power of the Surviving Company's then outstanding
voting securities.
(iv) Approval by Vencor's stockholders of a complete liquidation
or dissolution of Vencor.
(v) Approval by stockholders of an agreement for the sale or
other disposition of all or substantially all of the assets of Vencor to any
Person (other than a transfer to a subsidiary of Vencor).
(vi) Any other event that the Committee shall determine
constitutes an effective Change in Control of Vencor.
2
<PAGE>
(vii) Notwithstanding the foregoing, a Change in Control shall
not be deemed to occur solely because any Person (the "Subject Person") acquired
Beneficial Ownership of more than the permitted amount of the outstanding Voting
Securities as a result of the acquisition of Voting Securities by Vencor which,
by reducing the number of Voting Securities outstanding, increases the
proportional number of shares Beneficially Owned by the Subject Person; provided
that if a Change in Control would occur (but for the operation of this sentence)
as a result of the acquisition of Voting Securities by Vencor, and after such
share acquisition by Vencor, the Subject Person becomes the Beneficial Owner of
any additional Voting Securities which increases the percentage of the then
outstanding Voting Securities Beneficially Owned by the Subject Person, then a
Change in Control shall occur.
D. "CHANGE-IN-CONTROL DATE" shall mean the date immediately prior to
----------------------
the effectiveness of the Change in Control.
E. "GOOD REASON." The Employee shall have good reason to terminate
-----------
employment with the Company if (i) the Employee's title, duties,
responsibilities or authority is reduced or diminished from those in effect on
the Change-in-Control Date without the Employee's written consent; (ii) the
Employee's compensation is reduced; (iii) the Employee's benefits are reduced,
other than pursuant to a uniform reduction applicable to all managers of the
Company; or (iv) the Employee is asked to relocate his office to a place more
than 30 miles from his business office on the Change-in-Control Date.
F. "PERSON" shall have the meaning ascribed to such term in Section
------
3(a)(9) of the Securities Exchange Act of 1934 and used in Sections 13(d) and
14(d) thereof, including a "group" as defined in Section 13(d).
G. "PRIOR YEAR'S BONUS" shall mean the full amount of bonuses and/or
------------------
performance compensation (other than Base Salary and awards under the Company's
1987 Incentive Compensation Program) to the Employee from Vencor and its
subsidiaries in respect of services for the most recent calendar year
immediately preceding the date in question.
H. "TERMINATION OF EMPLOYMENT" shall mean (i) the termination of the
-------------------------
Employee's employment by the Company other than such a termination in connection
with an offer of immediate reemployment by a successor or assign of the Company
or a purchaser of the Company or its assets under terms and conditions which
would not permit the Employee to terminate his employment for Good Reason or
otherwise during any Window Period; or (ii) the Employee's termination of
employment with the Company for Good Reason or during any Window Period.
I. "WINDOW PERIOD" shall mean either of two 30-day periods of time
-------------
commencing 30 days after (i) a Change in Control and (ii) one year after a
Change in Control.
2. TERM. The initial term of this Agreement shall be for a three-year
----
period commencing on _______________, 19__ (the "Effective Date"). The Term
shall be automatically extended by one additional day for each day beyond the
Effective Date that the Employee remains employed by the Company until such time
as the Company elects to cease such extension by giving written notice of such
election to the Employee. In such event, the Agreement shall terminate on the
third anniversary of the effective date of such election notice. Notwithstanding
the foregoing, this Agreement shall automatically terminate if and when the
3
<PAGE>
Employee terminates his employment with the Company or two years after the
Change-in-Control Date, whichever first occurs.
3. SEVERANCE BENEFITS. If at any time following a Change in Control and
------------------
continuing for two years thereafter, the Company terminates the Employee without
Cause, or the Employee terminates employment with the Company either for Good
Reason or during any Window Period, then as compensation for services previously
rendered the Employee shall be entitled to the following benefits:
A. CASH PAYMENT. The Employee shall be paid cash equal to two times
------------
the greater of:
(i) the sum of the Employee's Base Salary and Prior Year's
Bonus as of the Termination of Employment, or
(ii) the sum of the Employee's Base Salary and Prior Year's
Bonus as of the Change-in-Control Date.
Payment shall be made in a single lump sum upon the Employee's effective date of
termination unless the Employee shall have elected another method on the
signature page hereof.
B. CONTINUATION OF BENEFITS.
------------------------
(i) For a period of two year(s) following the Termination of
Employment, the Employee shall be treated as if he or she had continued to be an
employee for all purposes under the Company's Health Insurance Plan and Dental
Insurance Plan; or if the Employee is prohibited from participating in such
plan, the Company shall otherwise provide such benefits. Following this
continuation period, the Employee shall be entitled to receive continuation
coverage under Part 6 of Title I or ERISA ("COBRA Benefits") treating the end of
this period as a termination of the Employee's employment if allowed by law.
(ii) For a period of two year(s) following the Termination of
Employment, the Company shall maintain in force, at its expense, the Employee's
life insurance in effect under the Company's Voluntary Life Insurance Benefit
Plan as of the Change-in-Control Date or as of the date of Termination of
Employment, whichever coverage limits are greater.
(iii) For a period of two year(s) following the Employee's
Termination of Employment, the Company shall provide short-term and long-term
disability insurance benefits to Employee equivalent to the coverage that the
Employee would have had had he remained employed under the Company's disability
insurance plans applicable to Employee on the date of Termination of Employment,
or, at the Employee's election, the plans applicable to Employee as of the
Change-in-Control Date. Should Employee become disabled during such period,
Employee shall be entitled to receive such benefits, and for such duration, as
the applicable plan provides.
C. RETIREMENT SAVINGS PLAN. To the extent not already vested
-----------------------
pursuant to the terms of such plan, the Employee's interests under the Company's
Retirement Savings Plan shall be automatically fully (i.e., 100%) vested,
without regard to otherwise applicable percentages for the vesting of employer
matching contributions based upon the Employee's years of service with the
Company.
4
<PAGE>
D. PLAN AMENDMENTS. The Company shall adopt such amendments to its
---------------
employee benefit plans, if any, as are necessary to effectuate the provisions of
this Agreement.
4. GOLDEN PARACHUTE TAX REIMBURSEMENT. Whether or not any payments are
----------------------------------
made pursuant to Section 3 above, if a Change in Control of the Company occurs
at any time and the Employee reasonably determines that any payment or
distribution by the Company to or for the benefit of the Employee, whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise pursuant to or by reason of any other agreement, policy,
plan, program or arrangement, including without limitation any restricted stock,
stock option, stock appreciation right or similar right, or the lapse or
termination of any restriction on or the vesting or exerciseablility of any of
the foregoing (individually and collectively, the "Payment"), would be subject
to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986,
as amended (the "Code") (or any successor provision thereto) by reason of being
considered "contingent on a change in ownership or control" of the Company,
within the meaning of Section 280G of the Code (or any successor provision
thereto), or any interest or penalties with respect to such excise tax (such
excise tax, together with any such interest and penalties, being hereinafter
collectively referred to as the "Excise Tax"), then the Company shall pay to the
Employee an additional payment or payments (individually and collectively, the
"Gross-Up Payment"). The Gross-Up Payment shall be in an amount such that, after
payment by the Employee of all taxes required to be paid by the Employee with
respect to the receipt thereof under the terms of any federal, state or local
government or taxing authority (including any interest or penalties imposed with
respect to such taxes), including any Excise Tax imposed with respect to the
Gross-Up Payment, the Employee retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payment. The Company shall pay the Gross-Up
Payment to the Employee within 30 days of its receipt of written notice from the
Employee that such Excise Tax has been paid or will be payable at any time in
the future.
5. NO MITIGATION REQUIRED OR SETOFF PERMITTED. In no event shall
------------------------------------------
Employee be obligated to seek other employment or take other action by way of
mitigation of the amounts payable to Employee under the terms of this Agreement,
and all such amounts shall not be reduced whether or not Employee obtains other
employment. Further, the Company's obligations to make any payments hereunder
shall not be subject to or affected by any setoff, counterclaims or defenses
which the Company may have against Employee or others.
6. WAIVER OF OTHER SEVERANCE BENEFITS. The benefits payable pursuant to
----------------------------------
this Agreement are in lieu of any other severance benefits which may otherwise
be payable by the Company to the Employee upon termination of employment
pursuant to a Company-wide severance program (including, without limitation, any
benefits to which Employee might otherwise be entitled under any other severance
or change in control or similar agreement previously entered into between
Employee and Company).
7. EMPLOYMENT AT WILL. Notwithstanding anything to the contrary
------------------
contained herein, the Employee's employment with the Company is not for any
specified term and may be terminated by the Employee or by the Company at any
time, for any reason, with or without cause, without any liability, except with
respect to the payments provided hereunder or as required by law or any other
contract or employee benefit plan.
8. DISPUTES. Any dispute or controversy arising under, out of, or in
--------
connection with this Agreement shall, at the election and upon written demand of
either party, be finally determined and settled by binding arbitration in the
City of Louisville, Kentucky, in accordance with
5
<PAGE>
the Labor Arbitration rules and procedures of the American Arbitration
Association, and judgment upon the award may be entered in any court having
jurisdiction thereof. The Company shall pay all costs of the arbitration and all
attorneys' and accountants' fees of the Employee in connection therewith,
including any litigation to enforce any arbitration award.
9. SUCCESSORS; BINDING AGREEMENT. This Agreement shall not be terminated
-----------------------------
by the voluntary or involuntary dissolution of the Company or by any merger or
consolidation where the Company is not the surviving corporation, or upon any
transfer of all or substantially all of the Company's stock assets or any other
Change in Control. In the event of such merger, consolidation or transfer, or
other Change in Control, the provisions of this Agreement shall be binding upon
and shall inure to the benefit of the surviving corporation or corporation to
which such stock or assets of the Company shall be transferred.
10. NOTICES. Any notice or other communication hereunder shall be in
-------
writing and shall be effective upon receipt (or refusal of receipt) if delivered
personally, or sent by overnight courier if signature for the receiving party is
obtained, or sent by certified or registered mail, postage prepaid, to the other
party at the address set forth below:
If to the Company: Vencor, Inc.
3300 Providian Center
Louisville, KY 40202
Attention: Secretary
If to Employee: __________________________________
__________________________________
__________________________________
Either party may change its specified address by giving notice in
writing to the other.
11. INDEMNIFICATION. The Company shall indemnify, defend and hold the
---------------
Employee harmless from and against any liability, damages, costs and expenses
(including attorneys' fees) in connection with any claim, cause of action,
investigation, litigation or proceeding involving him by reason of his having
been an officer, director, employee or agent of the Company, except to the
extent it is judicially determined that the Employee was guilty of gross
negligence or willful misconduct in connection with the matter giving rise to
the claim for indemnification. This indemnification shall be in addition to and
shall not be substituted for any other indemnification or similar agreement or
arrangement which may be in effect between the Employee and the Company or may
otherwise exist. The Company also agrees to maintain adequate directors and
officers liability insurance, if applicable, for the benefit of Employee for the
term of this Agreement and for five years thereafter.
12. ERISA. Many or all of the employee benefits addressed in Paragraph
-----
3(c) and (d) exist under plans which constitute employee welfare benefit plans
("Welfare Plans") within the meaning of Section 3(1) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). Any payments pursuant to this
Agreement which could cause any of such Plans not to constitute a Welfare Plan
shall be deemed instead to be made pursuant to a separate "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA or a "top hat" plan
under Section 201(2) of ERISA as to which the applicable portions of the
document constituting the Welfare Plan shall be deemed to be incorporated by
reference. None of the benefits hereunder may be assigned in any way.
6
<PAGE>
13. SEVERABILITY. The invalidity or unenforceability of any provision of
------------
this Agreement shall not affect the validity or enforceability of any other
provision, which other provisions shall remain in full force and effect.
14. INTERPRETATION. The headings used herein are for convenience only and
--------------
do not limit or expand the contents of this Agreement. Use of any male gender
pronoun shall be deemed to include the female gender also.
15. NO WAIVER. No waiver of a breach of any provision of this Agreement
---------
shall be construed to be a waiver of any other breach of this Agreement. No
waiver of any provision of this Agreement shall be enforceable unless it is in
writing and signed by the party against whom it is sought to be enforced.
16. SURVIVAL. Any provisions of this Agreement creating obligations
--------
extending beyond the term of this Agreement shall survive the expiration or
termination of this Agreement, regardless of the reason for such termination.
17. AMENDMENTS. Any amendments to this Agreement shall be effective only
----------
if in writing and signed by the parties hereto.
18. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of
----------------
the parties with respect to the subject matter hereof.
19. GOVERNING LAW. This Agreement shall be interpreted in accordance with
-------------
and governed by the law of the State of Delaware.
20. COUNTERPARTS. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original, and all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
VENCOR, INC. EMPLOYEE
By:____________________________ _____________________________________
W. Bruce Lunsford
Chairman, President and
Chief Executive Officer
Form of Cash Benefit Payment to Employee per Section 3(a):
_____ One lump sum payment
_____ Equal monthly installment payments over the two-year period.
7
<PAGE>
EXHIBIT 10.33
_____________________________________________________________________________
SERVICES AGREEMENT
dated as of January 31, 1990
between
NATIONAL MEDICAL ENTERPRISES, INC.
and
THE HILLHAVEN CORPORATION
_____________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
------------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
I. CERTAIN MANAGEMENT RELATED SERVICES................... 2
1.01. Services to be Made Available by NME........... 2
1.02. Services to be Made Available by the Company... 3
1.03. Limitations on Obligation to Provide Services.. 4
1.04. Standards and Levels of Services............... 6
1.05. Payment for Services........................... 6
1.06. Term for Which Services to be Provided.......... 9
II. JOINT PURCHASING AGREEMENTS........................... 10
2.01. Joint Purchasing............................... 10
2.02. Limitation on Joint Purchasing Obligations..... 12
III. USE OF PREMISES....................................... 12
3.01. Old Hillhaven Operations....................... 12
3.02. Medical Ambulatory Care, Inc................... 13
IV. MISCELLANEOUS......................................... 13
4.01. Independent Contractor Status.................. 13
4.02. Insurance...................................... 13
4.03. Disclaimer; Limited Liability.................. 14
4.04. Confidentiality................................ 14
4.05. Retention of Records........................... 15
4.06. Entire Agreement; Amendment.................... 16
4.07. Waivers........................................ 17
4.08. Legal Enforceability........................... 17
4.09. Further Assurances............................. 18
4.10. Assignment..................................... 18
4.11. Dispute Resolution Procedures.................. 19
4.12. Parties in Interest............................ 20
4.13. Governing Law.................................. 21
4.14. Notices........................................ 21
4.15. Construction................................... 22
4.16. Counterparts................................... 22
</TABLE>
i January 4, 1990
<PAGE>
THIS SERVICES AGREEMENT, dated as of January 31, 1990 (the
"Agreement"), is by and between NATIONAL MEDICAL ENTERPRISES, INC., a Nevada
corporation ("NME"), on behalf of itself and its affiliates other than the
Company Group (as hereinafter defined) (NME and such affiliates being herein
sometimes collectively referred to as the "NME Group"), and THE HILLHAVEN
CORPORATION, a Nevada corporation (the "Company"), on behalf of itself and its
affiliates other than the NME Group (the Company and such affiliates being
herein sometimes collectively referred to as the "Company Group").
WHEREAS, NME and the Company are, as of the date hereof, entering into
a Reorganization and Distribution Agreement providing for a reorganization of
certain of the businesses heretofore conducted by NME's long-term care group and
a pro rata distribution to the holders of NME's capital stock, as of the record
date established by NME in connection therewith, of approximately 85% of the
outstanding shares of common stock, par value $0.15 per share, of the Company
(the "Distribution") on or about January 31, 1990 (the date on which the
Distribution shall actually occur being herein referred to as the "Distribution
Date").
WHEREAS, as a result of said reorganization and the Distribution,
substantially all of NME's long-term care business will be conducted by the
Company Group, and the Company will become a separate publicly held company.
<PAGE>
WHEREAS, by reason of the expertise and experience of certain
personnel of NME and the Company, such personnel are uniquely suited to perform
certain services for the other that would otherwise be unavailable to the other.
WHEREAS, the Company and NME desire to provide for access to such
personnel and for the exchange of certain services for a limited period of time
following the Distribution.
NOW, THEREFORE, in consideration of the mutual promises contained
herein and other valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I.
CERTAIN MANAGEMENT RELATED SERVICES
SECTION 1.01. Services to be Made Available by NME. Subject to the
------------------------------------
terms and provisions of this Agreement, NME shall provide, deliver and/or make
available, or cause to be provided, delivered and/or made available to members
of the Company Group, and the Company Group shall accept, (i) the services set
forth in Schedule 1 hereto, (ii) such other services of a substantial character
----------
as the parties may from time to time hereafter agree upon and (iii) such
Incidental Services (as hereinafter defined)
2 January 4, 1990
<PAGE>
as the Company may from time to time reasonably request (subject, in each case,
however, to the provisions of Section 1.03 below). For the purposes of this
Agreement, "Incidental Services" shall mean occasional consulting or advisory
services and access to personnel and data which involve an insubstantial
commitment of the resources of the party providing such services (the
"Provider"), which determination shall be made by the Provider in the exercise
of its reasonable judgment.
The foregoing services may be rendered by NME or by another member of
the NME Group or by third parties as NME shall determine (including the specific
individuals and corporate facilities by which the services are rendered);
provided, however, that before any services which heretofore have been rendered
- -------- -------
by NME or another member of the NME Group are contracted out to third parties,
NME shall so notify the Company and the Company may discontinue such services
upon notice to NME in accordance with the provisions of this Agreement.
SECTION 1.02. Services to be Made Available by the Company. Subject
--------------------------------------------
to the terms and provisions of this Agreement, the Company shall provide,
deliver and/or make available, or cause to be provided, delivered and/or made
available to members of the NME Group, and the NME Group shall accept, (i) the
services set forth in Schedule 2 hereto, (ii) such other services of a
----------
substantial character as the parties may from time to time
3 January 4, 1990
<PAGE>
hereafter agree upon and (iii) such Incidental Services as NME may from time to
time reasonably request (subject, in each case, however, to the provisions of
Section 1.03 below).
The foregoing services may be rendered by the Company or another
member of the Company Group or by third parties as the Company shall determine
(including the specific individuals and corporate facilities by which the
services are rendered); provided, however, that before any services which
-------- -------
heretofore have been rendered by the Company or another member of the Company
Group are contracted out to third parties, the Company shall so notify NME and
NME may discontinue such services upon notice to the Company in accordance with
the provisions of this Agreement.
The services to be provided pursuant to Sections 1.01 and 1.02 above
are herein collectively referred to as the "Services."
SECTION 1.03. Limitations on Obligation to Provide Services.
---------------------------------------------
(a) Notwithstanding the provisions of Section 1.01 or 1.02, neither
party shall be required to make available to the other any Services to the
extent that doing so would (i) violate the terms of any contract or obligation
of such party in effect at that time or (ii) require, in the opinion of such
party's
4 January 4, 1990
<PAGE>
legal counsel, the procurement of additional licenses or permits not required by
such party for the operation of its own business.
(b) The provisions of Sections 1.01 and 1.02 shall apply only to
Services relating to or arising out of or in connection with matters which the
Provider is in a position to provide by reason of past participation,
involvement or familiarity with such matters and, in addition, which the other
party (the "Recipient") has a reasonable requirement to obtain from the
Provider. Except as may be necessary to effect a separation of matters relating
to the NME Group from those relating to the Company Group directly or indirectly
arising out of the reorganization and Distribution, nothing in this Agreement
will require the Provider to provide or develop additional systems or support
programs or to render Services in quantities substantially greater than the
quantities taken by the operations of the Recipient during the twelve-month
period immediately preceding the Distribution Date, or in a manner or methods
different from the manner or methods employed for the benefit of the Provider,
or, in performing Services hereunder, to make any change or addition which will
require capital expenditures.
(c) The duties of the parties under this Agreement are subject to
interruption or discontinuance at any time and from time to time, without
liability to the other party or any other person for any loss, damage or expense
which may result there-
5 January 4, 1990
<PAGE>
from, for force majeure or other causes beyond such party's control.
SECTION 1.04. Standards and Levels of Services.
--------------------------------
(a) The standards and technologies employed in the provision of each
Service shall be as determined from time to time by the Provider hereunder in
accordance with the Provider's then-existing requirements for comparable
services for itself and its affiliates but giving due consideration to the
historical requirements for such Service by the Recipient.
(b) The Provider will use reasonable efforts to make the Services
available in substantially the same manner as it makes the same Services
available for its own operations, but the Provider shall not be liable to the
Recipient or any other person for any loss, damage or expense which may result
therefrom, for negligent performance by the Provider or from changing its manner
of rendering the Services if the Provider deems the same necessary or desirable
in the conduct of its own operations.
SECTION 1.05. Payment for Services.
--------------------
(a) The Recipient agrees to pay the Provider for the Services
requested pursuant to Section 1.01 or 1.02, upon presentation to it of
reasonably detailed invoices therefor, the
6 January 4, 1990
<PAGE>
applicable fee therefor set forth in Schedule 1 or 2 hereto or, if no specific
fee is so set forth or in the case of Services not specifically set forth in
Schedule 1 or 2, such amount as the parties may in good faith agree upon;
provided, however, that no fee shall be charged hereunder with respect to the
- -------- -------
provision of Incidental Services (other than the reimbursement to the Provider
of actual out-of-pocket expenses incurred by it in rendering such Incidental
Services).
For the purposes of such Schedules 1 and 2, "Cost" shall mean the
direct and indirect expenses incurred by the Provider in connection with
furnishing the applicable Service (including, but not by way of limitation, the
salaries and related fringe benefits (calculated at the rate of 30% of base
salary) of the Provider's employees allocable to the provision of the applicable
Services, all travel and out-of-pocket expenses incurred by such employees in
rendering such Services, applicable data processing charges and all other
out-of-pocket costs). In any case where such Schedules provide that the
applicable fees for a Service may subsequently be adjusted to "Fair Market
Value" at the option of the Provider, the Provider shall give written notice to
the Recipient of its intention to do so, effective sixty days after the
Recipient's receipt of such notice (the "Effective Date"). For the purposes
hereof, "Fair Market Value" shall mean the cost at which a particular Service
could be obtained from an unaffiliated third party in any arms' length
7 January 4, 1990
<PAGE>
transaction. Following receipt of any such notice, the parties shall negotiate
in good faith to arrive at the Fair Market Value of the applicable Service. In
the event the parties are unable to agree upon such Fair Market Value within
thirty days after the Recipient's receipt of the Provider's notice, the
Recipient may, at its option, elect to discontinue such Service as of a date
specified by the Recipient, but in no event later than the Effective Date. If
the Recipient does not so elect, the issue of Fair Market Value shall be
promptly submitted to arbitration in Los Angeles, California, at the equal
expense of NME and the Company, pursuant to the rules then obtaining of the
American Arbitration Association. The decision of such arbitrator(s) shall be
final and binding on the parties hereto, and judgment may be entered thereon in
any court of competent jurisdiction. Pending such determination, the Provider
shall continue to provide such Services without interruption and the Recipient
thereof shall continue to pay there for at the rate in effect prior to receipt
of the Provider's notice; provided, however, that the Fair Market Value rate
-------- -------
determined in such arbitration shall be retroactively effective as of the
Effective Date. The difference between the prior rate in effect and the Fair
Market Value for the period between the Effective Date and the date of the
determination of Fair Market Value shall be paid by the Recipient within thirty
days after the determination of Fair Market Value.
8 January 4, 1990
<PAGE>
(b) Invoices for Services rendered hereunder shall be rendered within
thirty days after the end of each calendar month, covering the Services rendered
pursuant to this Agreement during the preceding calendar month, and payment
therefor shall be made within thirty days after receipt of such invoice. The
Provider shall cause to be kept accurate books and records with respect to the
costs and expenses incurred in connection with the Services provided hereunder
where the fees to be paid there for are based on such costs or expenses and the
Recipient shall be permitted to inspect such books and records with respect to
such costs and expenses during normal business hours upon reasonable notice.
SECTION 1.06. Term for Which Services to be Provided.
--------------------------------------
(a) Subject to the provisions of Section 1.03 above and further
provisions hereof, the Services called for hereby shall be provided for the
applicable term set forth in Schedule l or 2 hereto or, if no specific term is
so set forth, for such period as shall be mutually agreed upon by the parties.
To the extent that any of the Services are rendered by a Provider after the time
Bet forth above, at the request of the Recipient as part of ongoing projects,
the term therefor shall be deemed extended accordingly.
(b) Notwithstanding any other provision of this Agreement, the
obligation of the Provider to provide Services and
9 January 4, 1990
<PAGE>
of the Recipient to accept Services may be terminated by mutual agreement of the
parties (which shall not be unreasonably withheld by either party). In addition,
if the Recipient desires to discontinue one or more of the Services, or a part
of a particular Service, during the term of this Agreement, the Recipient shall
give the Provider at least 90 days' prior written notice requesting
discontinuance of such Service or part thereof and specifying the date of
discontinuance. If the requested discontinuance by the Recipient would result in
the Provider incurring or absorbing expenses which the Provider would not have
incurred or absorbed but for the discontinuance prior to the expiration of the
term contemplated hereby, the Recipient shall reimburse the Provider for such
reasonable expenses. Once so discontinued, a Service need not again be
rendered by the Provider unless the Provider, in its sole discretion, is willing
to do so upon terms and conditions to be agreed upon.
ARTICLE II.
JOINT PURCHASING AGREEMENTS
SECTION 2.01. Joint Purchasing. NME and the Company acknowledge that
----------------
various members of their respective Groups participate in joint or shared
purchasing arrangements, as more fully described in Schedule 3 hereto, and as
----------
amended from time to time. Following the Distribution, the parties agree to
cooperate with each other with respect to such joint or shared purchasing
10 January 4, 1990
<PAGE>
arrangements. The primary negotiating party (as outlined in Schedule 3, but as
may be from time to time changed by agreement of the parties) agrees to use all
reasonable efforts to consider the unique needs of the other party when
negotiating the respective agreements. Each party agrees that in each case
where such party has had negotiating responsibility for any shared purchasing
arrangement, such party (herein referred to as the "Contracting Party") shall
give the other party (the "Joint Purchaser") the opportunity to continue to
participate in such joint or shared purchasing arrangements for a period of up
to three years after the Distribution Date on terms no less favorable than those
of the Contracting Party. It is the parties' intention that this opportunity to
participate in shared or joint arrangements continue notwithstanding anticipated
changes in the contracting or joint purchase relationships.
In areas where regional contracts become beneficial to both parties,
the Company and NME will use all reasonable efforts to coordinate and negotiate
agreements to the mutual benefit of each party. In particular, food and
nutritional agreements are well suited to this approach and are the primary
responsibility of NME with advice and consent of the Company.
It is expressly understood and agreed, however, that neither party
shall be under any obligation, express or implied, to continue to so
participate, if after a good faith effort to
11 January 4, 1990
<PAGE>
resolve disputes, the party concludes that participation in the arrangement is
not in its best interest.
Neither party shall be entitled to compensation hereunder for normal
administrative expenses incurred by such party in administering such agreements.
SECTION 2.02. Limitation on Joint Purchasing Obligations.
------------------------------------------
Notwithstanding the foregoing provisions, neither party shall be required to
continue any joint or shared purchasing arrangement to the extent that to do so
would violate the contractual arrangement such party has with any third party
supplier or vendor or is otherwise unacceptable to such third party supplier or
vendor.
ARTICLE III.
USE OF PREMISES
SECTION 3.01. Old Hillhaven Operations. The Company shall provide
------------------------
NME with the use of such office space and attendant services, facilities and
equipment located at the Company's headquarters at 1148 Broadway Plaza, Tacoma,
Washington, as shall be reasonably required for NME's personnel (not to exceed
ten people) engaged in the management of the operations of Old Hillhaven and the
Old Hillhaven Subsidiaries (as such terms are defined in the Distribution
Agreement) until such time as NME
12 January 4, 1990
<PAGE>
shall have relocated such operations to other facilities, but in no event later
than December 31, 1990. The foregoing shall be made available to NME free of
charge.
SECTION 3.02. Medical Ambulatory Care, Inc. The Company shall
----------------------------
provide Medical Ambulatory Care, Inc., a subsidiary of NME ("MAC"), with the use
of such office space and attendant services, facilities and equipment located at
the Company's headquarters at 1016 South 28th Street, Tacoma, Washington as are
currently utilized by MAC until such time as MAC shall have relocated its
operations to other facilities, but in no event later than May 31, 1990 for a
fee of $5,980 per month (which sum includes a charge of $1,500 per month for
utilities and other services).
ARTICLE IV.
MISCELLANEOUS
SECTION 4.01. Independent Contractor Status. Each party shall render
-----------------------------
and perform the services as an independent contractor in accordance with its own
standards, subject to its compliance with the provisions of this Agreement and
with all applicable laws, ordinances and regulations.
SECTION 4.02. Insurance. Except to the extent otherwise provided in
---------
the Distribution Agreement or the Insurance
13 January 4, 1990
<PAGE>
Agreement (as defined in the Distribution Agreement), neither party shall have
any obligation to obtain or provide the other party with any level of insurance
in respect of the services provided or received under this Agreement, or to
provide the other party with the benefits of any such insurance now or hereafter
held by such party.
SECTION 4.03. Disclaimer; Limited Liability.
-----------------------------
(a) Neither party makes any express or implied representations,
warranties, or guarantees relating to the services or the quality or results of
services to be performed under this Agreement.
(b) Neither party shall be liable to the other for any expense,
claim, loss or damage, including, but not by way of limitation, indirect,
special, consequential or exemplary damages suffered by such party, other than
by reason of such party's intentional failure to perform, or gross negligence in
performing, the services under this Agreement.
SECTION 4.04. Confidentiality. Subject to any contrary requirement
---------------
of law and the right of each party to enforce its rights hereunder in any legal
action, each party shall keep strictly confidential, and shall cause it;
employees and agents to keep strictly confidential, any information of or
14 January 4, 1990
<PAGE>
concerning the other party which it or any of its agents or employees may
acquire pursuant to, or in the course of performing its obligations under, any
provision of this Agreement; provided, however, that such obligation to maintain
-------- -------
confidentiality shall not apply to information which (i) at the time of
disclosure was in the public domain, (ii) after disclosure enters the public
domain not as a result of acts by the receiving party, (iii) was already
independently in the possession of the receiving party at the time of disclosure
or (iv) is received by the receiving party from a third party who did not
receive such information from the disclosing party under an obligation of
confidentiality. The confidentiality obligations contained in this Section 4.04
shall expire three (3) years after the furnishing of such information.
SECTION 4.05. Retention of Records. Each of NME and the Company
--------------------
shall retain, and shall cause each member of its respective Group to retain,
pursuant to NME's Record Retention Program, a copy of which has been made
available to each party, all information relating to the other and the other's
subsidiaries, except as otherwise required by law or except to the extent that
such information is in the public domain or in the possession of the other
party; provided, that after the expiration of the applicable retention period
--------
set forth in such Program, such information shall not be destroyed or otherwise
disposed of at any time, unless, prior to such destruction or disposal, (a) the
party proposing to destroy or otherwise dispose
15 January 4, 1990
<PAGE>
of such information, shall provide no less than 90 days prior written notice to
the other, specifying in reasonable detail the information proposed to be
destroyed or disposed of and (b) if a recipient of such notice shall request in
writing prior to the scheduled date for such destruction or disposal that any of
the information proposed to be destroyed or disposed of be delivered to such
requesting party, the party proposing the destruction or disposal shall promptly
arrange for the delivery of such of the information as was requested at the
expense of the party requesting such information.
SECTION 4.06. Entire Agreement; Amendment. This Agreement, the
---------------------------
Distribution Agreement and the other agreements referred to herein or therein or
entered into in connection herewith or therewith set forth the entire agreement
and understanding of the parties with respect to the transactions contemplated
hereby and supersede all prior agreements, arrangements and understandings
relating to the subject matter hereof. No representation, promise, inducement or
statement of intention has been made by either party hereto which is not
embodied in this Agreement or such other agreements, the Schedules or Exhibits
hereto or thereto, or the written statements or other documents delivered
pursuant hereto or thereto, and neither party hereto shall be bound by or liable
for any alleged representation, promise, inducement or statement of intention
not so set forth. This Agreement may be amended or modified only by
16 January 4, 1990
<PAGE>
a written instrument executed by both parties hereto or by their successors and
permitted assigns.
SECTION 4.07. Waivers. No failure or delay on the part of NME or the
-------
Company in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. No modification or waiver of any provision of this Agreement
nor consent to any departure by NME or the Company there from shall in any event
be effective unless the same shall be in writing, and then such waiver or
consent shall be effective only in the specific instance and for the purpose for
which given.
SECTION 4.08. Legal Enforceability. Any provision of this Agreement
--------------------
which is prohibited or unenforceable in any jurisdiction shall as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision or remedies otherwise available to any party
hereto. Without prejudice to any rights or remedies otherwise available to any
party hereto, each party hereto acknowledges that damages would be an
17 January 4, 1990
<PAGE>
inadequate remedy for any breach of the provisions of this Agreement and agrees
that the obligations of the parties hereunder shall be specifically enforceable.
SECTION 4.09. Further Assurances. Subject to the provisions hereof,
------------------
each of NME and the Company shall make, execute, acknowledge and deliver such
other instruments and documents, and take all such other actions as may be
reasonably required in order to effectuate the purposes of this Agreement and to
consummate the transactions contemplated hereby. Subject to the provisions
hereof, each of NME and the Company shall, in connection with entering into this
Agreement, performing its obligations hereunder and taking any and all actions
relating hereto, comply with all applicable laws, regulations, orders and
decrees, obtain all required consents and approvals and make all required
filings with any governmental agency, other regulatory or administrative agency,
commission or similar authority and promptly provide the other with all such
information as the other may reasonably request in order to be able to comply
with the provisions of this Section.
SECTION 4.10. Assignment. This Agreement shall not be assignable or
----------
otherwise transferable, in whole or in part, directly or indirectly, voluntarily
or by operation of law, whether by merger, sale of assets or otherwise, by
either party hereto without the prior written consent of the other, and any
18 January 4, 1990
<PAGE>
attempt to assign any rights or obligations arising under this Agreement without
such consent shall be void; provided, however, that (i) this Agreement and all
-------- -------
of the provisions hereof shall be binding upon, inure to the benefit of and be
enforceable by NME and the Company and their respective affiliates and
successors and permitted assigns and (ii) in the event of any sale or other
disposition of any member of the NME Group or the Company Group that is a
recipient of any services hereunder, the provisions of this Agreement inuring to
the benefit of such member may be assigned to the purchaser of such member
provided that such purchaser shall execute and deliver to the other party an
instrument in form and substance satisfactory to the other party agreeing to
assume and be bound by the terms and provisions hereof.
SECTION 4.11. Dispute Resolution Procedures. Except as otherwise
-----------------------------
provided in Section 1.05(a) above with respect to disputes over the
determination of Fair Market Value, all disputes arising out of or relating to
this Agreement shall be resolved pursuant to the reference procedure set forth
in California Code of Civil Procedure Sections 638 et seq. The parties hereby
-- ---
agree to submit to the jurisdiction of the Superior Court of the County of Los
Angeles, State of California (the "Superior Court") for such purpose. Either
party may initiate the procedure set forth in this Section by providing the
other party with notice setting forth the nature of the dispute
19 January 4, 1990
<PAGE>
(the "Reference Notice"). The parties shall designate to the Superior Court a
referee who is an active attorney or retired judge living in the County of Los
Angeles who shall resolve the dispute. If the parties are unable to designate a
referee within 20 days after the receipt of the Reference Notice, the parties
shall request that the Superior Court appoint a referee. In connection with any
proceeding pursuant to this Section, the parties shall have all discovery rights
which would have been available had the matters which are the subject of the
dispute been decided by the Superior Court. Discovery proceedings may be noticed
and commenced immediately after delivery of the Reference Notice. The hearing
before the referee shall begin no later than 60 days after the receipt of the
Reference Notice. All discovery in connection with the reference proceeding
shall be concluded no later than 15 days prior to the commencement of the
hearing. Judgment upon the award rendered by the referee shall be entered in the
Superior Court. Nothing in this Section shall be construed to impair the right
of either party to appeal from such judgment.
SECTION 4.12. Parties in Interest. Nothing in this Agreement,
-------------------
expressed or implied, is intended or shall be construed to confer any right,
benefit or remedy upon any person, firm or corporation other than NME and the
Company and their respective affiliates and successors and permitted assigns.
20 January 4, 1990
<PAGE>
SECTION 4.13. Governing Law. This Agreement shall be governed by and
-------------
construed and enforced in accordance with the laws of the State of California.
SECTION 4.14. Notices. All notices, consents, requests,
-------
instructions, approvals and other communications hereunder shall be in writing
and shall be deemed to have been duly given, if delivered in person or by
courier, telegraphed, telexed or by facsimile transmission or mailed, by
certified or registered mail, postage prepaid at the following address (or at
such other address provided by one party to the other in writing):
If to NME:
National Medical Enterprises, Inc.
2700 Colorado Avenue
Post Office Box 4070
Santa Monica, California 90404
Telecopy No.: (213) 315-6506
Attention: Raymond L. Mathiasen
Senior Vice President, Corporate
Financing and Accounting
with copies to:
National Medical Enterprises, Inc.
2700 Colorado Avenue
Post Office Box 4070
Santa Monica, California 90404
Telecopy No.: (213) 315-6688
Attention: General Counsel
and
21 January 4, 1990
<PAGE>
NME Properties, Inc.
1148 Broadway Plaza
Tacoma, Washington 98401-2264
Telecopy No. (206) 756-4743
Attention: Senior Vice President -
Operations
If to the Company:
The Hillhaven Corporation
1148 Broadway Plaza
Tacoma, Washington 98401-4901
Telecopy No.: (206) 756-4714
Attention: President
with a copy to:
The Hillhaven Corporation
1148 Broadway Plaza
Tacoma, Washington 98401-4901
Telecopy No.: (206) 756-4845
Attention: General Counsel
SECTION 4.15. Construction. In this Agreement,
------------
(i) unless the context otherwise requires, the terms "herein,"
"hereof," "hereto" and "hereunder" refer to this Agreement; and
(ii) the titles and headings of the sections and subsections hereof
and the table of contents hereof are inserted for convenience of reference only
and are not intended to be a part of or to affect the meaning or interpretation
of this Agreement.
22 January 4, 1990
<PAGE>
SECTION 4.16. Counterparts. This Agreement may be executed in
------------
several counterparts, each of which shall be deemed an original, but such
counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
NATIONAL MEDICAL ENTERPRISES, INC.
By /S/ Marcus E. Powers
--------------------------------
Name: Marcus E. Powers
---------------------------
Title: Senior Vice President
--------------------------
THE HILLHAVEN CORPORATION
By /S/ Christopher J. Marker
--------------------------------
Name: Christopher J. Marker
---------------------------
Title: President
--------------------------
23 January 4, 1990
<PAGE>
Schedule 1
to
Services Agreement
------------------
SERVICES TO BE PROVIDED BY NME
------------------------------
<TABLE>
<CAPTION>
Description of Service Fee Term
---------------------- --- ----
<S> <C> <C> <C>
1A. Advice and assistance with respect
to the restructuring and/or sale of At the hourly 3 years
retirement housing and nursing rates set forth in
home partnerships. Schedule 1-A
attached for the
personnel
indicated. In
other cases, at
NME's Cost.
1B. Consulting services of Free of charge, Remainder
Messrs. Daniel P. Baty and Marvin other than pass- of term of
Wilensky under consulting through of any consulting
agreements dated December 3, 1986 additional charges agreements
and March 2, 1988, respectively. to NME under said
consulting
agreements
directly
attributable to
services rendered
to the Company.
</TABLE>
<PAGE>
Schedule 3
to
Services Agreement
------------------
SHARED PURCHASING AGREEMENTS
----------------------------
<TABLE>
<CAPTION>
Primary
Negotiating
Responsibility Categories
- -------------- ----------
Equipment
---------
<S> <C> <C>
*Company Food Distribution Systems
Company Bathing Tubs/Systems
NME Micro Computers
*Company Charting Systems
NME Wheelchair Replacement Parts
NME Scales, including Electronic
NME Hoyer Lifts
NME Therapy Tubs
NME Pressure Packs
*Company Physical Therapy Equipment
*Company Dietary Equipment
*Company Wire Shelving, Carts
NME Wheelchairs, Patient Aids
NME Electronic Thermometers
NME Patient Aids
*NME Mailing Machines, Scales
*Company Enteral Feeding Pumps
Company Small Volume Copiers
*NME Large Volume Copiers
NME Televisions
Supplies
--------
*NME Overnight Express
NME Needles and Syringes
*Company Office Supplies and Computer Supplies
*Company Laundry/Dietary Chemicals
*NME Medical Distributor Agreement
*Company General Electric Lamps
NME Respiratory Supplies
*Company Housekeeping Chemicals
*NME Dressings
*NME Urologicals
NME Surgical Tapes
NME Business Forms
*Company Patient Safety Aids
Company Paint and Accessories
*NME Vaseline Gauze Dressings
Company Arts and Craft Supplies
*Company Paper Products
*Company Poly Bags
</TABLE>
_____________________
* Require advance planning and coordination prior to negotiating
contract.
January 4, 1990
<PAGE>
Schedule 3
to
Services Agreement
------------------
SHARED PURCHASING AGREEMENTS (continued)
----------------------------
<TABLE>
<CAPTION>
Primary
Negotiating
Responsibility Pharmaceuticals
- -------------- ---------------
<S> <C>
*NME Pharmaceutical Contract Vendors
*NME Prime Vendor Wholesalers
*NME I.V. Solutions and Sets
</TABLE>
January 4, 1990
<PAGE>
Schedule 2
to
Services Agreement
------------------
SERVICES TO BE PROVIDED BY THE COMPANY(continued)
--------------------------------------
<TABLE>
<CAPTION>
Description of Service Fee Term
---------------------- --- ----
<S> <C> <C> <C>
- Maintain and distribute reports In addition to the
on fixed asset management foregoing fees, to
system which automatically the extent that
interface with accounts payable custom reports are
and general ledger requested by MAC,
applications. NME shall
reimburse the
- Process summarized financial Company for the
information from automatic Company's Cost for
interfaces with all applications any systems
in the form of a general ledger analysts or
(monthly and year-to-date). programmers
preparing such
- Process monthly and customized reports.
financial reports, such as:
income statements, balance
sheets, operational analysis
with budget interface, variance
reports, cost report trial
balances and income tax
schedules.
- Maintain and transmit bank
reconciliation interface data to
Bank of New York.
- Provide hardware support for
micro computers and software
support for accounting
application enhancements and
micro computer software.
</TABLE>
January 4, 1990
<PAGE>
Schedule 2
to
Services Agreement
------------------
SERVICES TO BE PROVIDED BY THE COMPANY (continued)
--------------------------------------
<TABLE>
<CAPTION>
Description of Service Fee Term
---------------------- --- ----
<S> <C> <C> <C>
2C. Accounting services and financial Free of charge At least
information preparation for Old through completion through
Hillhaven and the Old Hillhaven of all reports for completion of
Subsidiaries, including, without NME's fiscal year all reports
limitation, balance sheet and ending May 31, for NME's
income statement preparation, 1990. Thereafter, fiscal year
general ledger maintenance and at Company's Cost, ending
preparation of such other determined May 31, 1990
financial reports and information pursuant to Thereafter,
as NME may reasonably request. Section 1.05(a). as agreed
upon by the
parties.
Data processing, information Free of charge, 5 years.
system services and related support except to the Thereafter,
facilities related to the extent that custom for such
maintenance of accounting systems reports are longer term
and preparation of financial requested by NME, as shall be
information for Old Hillhaven and in which case NME agreed upon.
the Old Hillhaven Subsidiaries as shall reimburse
may from time to time be required the Company for
after the services described in the Company's Cost
Item 2C above are no longer to be for any systems
furnished. analysts or
programmers
preparing such
reports.
</TABLE>
January 4, 1990
<PAGE>
Schedule 2
to
Services Agreement
------------------
SERVICES TO BE PROVIDED BY THE COMPANY
--------------------------------------
<TABLE>
<CAPTION>
Description of Service Fee Term
---------------------- --- ----
<S> <C> <C> <C>
2A. Advice and assistance in connection Company's Cost 3 years
with the management and operations subject to
of Westminster Health Care Limited adjustment to Fair
and subsidiaries. Market Value at
the option of the
Provider after
initial six-month
term.
2B. Accounting application hardware, $3,000 per month 3 years
software and data processing through May 31,
support to MAC, including the 1990. Thereafter,
following: at the rate of
$5,000 per month
- Process accounts receivable as from time to
input, maintain history files time adjusted to
and distribute operational reflect usage or
reports, insurance invoices, volume changes
UB-82 intermediary invoices and subsequent to the
medical primary and cross-over Distribution Date,
invoices. as hereinafter
provided.
- Process accounts payable batch
terminal input, maintain history From and after
files and distribute processing June 1, 1990, the
reports, vendor reports, annual rate in effect
1099's and checks. shall be increased
2% for each
- Process payroll input, maintain increase in the
history file and distribute number of MAC
processing reports, payroll units required to
registers, quarterly tax be processed by
reports, annual W-2's and the Company from
checks. the number of MAC
units being
processed as of
the Distribution
Date.
</TABLE>
January 4, 1990
<PAGE>
Schedule 1-A
to
Services Agreement
------------------
SCHEDULE OF HOURLY RATES FOR
----------------------------
CONSULTING SERVICES
-------------------
<TABLE>
<CAPTION>
Distribution June 1, June 1,
Date through 1991 through 1992 through
May 31, 1991 May 31, 1992 May 31, 1993
------------ ------------ ------------
<S> <C> <C> <C>
Senior Vice President - $90 $100 $110
Operations
Vice President, Finance 70 77 85
Controller 45 50 55
Tax Manager 40 45 50
All other administrative
and accounting staff 30 35 40
</TABLE>
January 4, 1990
<PAGE>
EXHIBIT 10.34
- --------------------------------------------------------------------------------
GOVERNMENT PROGRAMS AGREEMENT
dated as of January 31, 1990
between
NATIONAL MEDICAL ENTERPRISES, INC.
and
THE HILLHAVEN CORPORATION
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
CERTAIN DEFINITIONS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
section 1.1 "Cost Report".................................... 2
Section 1.2 "Departing NME Member" .......................... 2
Section 1.3 "New Hillhaven Group"............................ 2
Section 1.4 "NME Group"...................................... 2
Section 1.5 "Open Cost Reports".............................. 2
Section 1.6 "Regulations".................................... 2
Section 1.7 "Related Parties"................................ 2
Section 1.8 "Termination Cost Report"........................ 3
ARTICLE II
COST REPORT FILING
Section 2.1 Termination Cost Reports......................... 3
Section 2.2 Prior Cost Reports............................... 3
Section 2.3 Open Cost Reports and Other Matters ............. 3
Section 2.4 Cost Reporting Program........................... 4
Section 2.5 Recapture........................................ 4
Section 2.6 Supporting Documentation......................... 4
ARTICLE III
COOPERATION AND EXCHANGE OF INFORMATION
Section 3.1 Timely Notification.............................. 5
Section 3.2 Other Action..................................... 5
Section 3.3 Exchange of Information.......................... 5
Section 3.4 Retention of Records............................. 5
Section 3.5 Confidentiality.................................. 6
ARTICLE IV
MISCELLANEOUS
Section 4.l Expenses......................................... 6
Section 4.2 Notices.......................................... 6
Section 4.3 Compliance by Subsidiaries....................... 7
Section 4.4 Successors and Assigns........................... 7
Section 4.5 Titles and Headings.............................. 8
Section 4.6 Legal Enforceability............................. 8
Section 4.7 Governing Law.................................... 8
Section 4.8 Dispute Resolution Procedures.................... 8
</TABLE>
<PAGE>
GOVERNMENT PROGRAMS AGREEMENT
GOVERNMENT PROGRAMS AGREEMENT, dated as of January 31, 1990 (this
"Agreement"), between NATIONAL MEDICAL ENTERPRISES, INC., a Nevada corporation
("NME") , on behalf of itself and the NME Group (as hereinafter defined) and THE
HILLHAVEN CORPORATION, a Nevada corporation ("New Hillhaven"), on behalf of
itself and the New Hillhaven Group (as hereinafter defined).
_________________
WHEREAS, NME and New Hillhaven have entered into a Reorganization and
Distribution Agreement (as amended to the date hereof, the "Distribution
Agreement") providing for a reorganization of certain of the businesses
heretofore conducted by NME's long term care group including, without
limitation, any businesses heretofore disposed of (collectively, the
"Business"), and a pro rata distribution to the holders of NME's capital stock,
as of the record date established by NME in connection therewith, of
approximately 85% of the outstanding shares of capital stock of New Hillhaven
(the "Distribution") on or about January 31, 1990 (the "Distribution Date");
WHEREAS, pursuant to the Distribution Agreement, NME and New Hillhaven
will, among other things, provide for the transfer of certain assets and rights
of the Business to New Hillhaven and the assumption of certain liabilities and
obligations of the Business by New Hillhaven;
WHEREAS, except to the extent set forth in this Agreement, all of the
assets, rights, liabilities and obligations of the Business relating to
governmental health care programs, including without limitation Medicare and
Medicaid programs (collectively, the "Government Programs"), are included in the
assets, rights, liabilities and obligations of the Business that are being
transferred to and assumed by New Hillhaven pursuant to the Distribution
Agreement; and
WHEREAS, NME and New Hillhaven desire to provide specifically for the
treatment as between NME and New Hillhaven of certain matters relating to or
affecting the Government Programs as set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
<PAGE>
ARTICLE I
CERTAIN DEFINITIONS
-------------------
As used in this Agreement, the following defined terms shall have the
meanings set forth below (such meanings to be equally applicable to both the
singular and the plural forms of the terms defined):
Section 1.1 "Cost Report" means the annual cost report, required to
-----------
be filed as of the end of a provider cost year, or for any other required
period, with federal and/or state agencies or their designated intermediaries
with respect to reimbursement under the Regulations.
Section 1.2 "Departing NME Member" means (i) any direct or indirect
--------------------
subsidiary of NME which, as a result of the Distribution, will become a member
of the New Hillhaven Group or (ii) any direct or indirect subsidiary of NME
which has transferred its interests in long term care facilities pursuant to the
transactions contemplated by the Distribution Agreement.
Section 1.3 "New Hillhaven Group" means New Hillhaven and its present
-------------------
and future direct and indirect subsidiaries and, in addition, any partnerships
in which New Hillhaven or any such subsidiary has or will have an interest.
Section 1.4 "NME Group" means NME and its present and future direct
---------
and indirect subsidiaries (including Old Hillhaven, as defined in Section 2.2),
other than members of the New Hillhaven Group.
Section 1.5 "Open Cost Reports" means any Cost Reports that are or
-----------------
will be, and Termination Cost Reports that will be, in various stages of audit,
appeal, reopening and/or litigation, including any Cost Report filed by Old
Hillhaven that is considered by Old Hillhaven to be closed but which, within the
applicable statute of limitations, is reopened by action of any federal or state
agency seeking to make corrections, adjustments or new determinations on issues
previously considered to have been settled.
Section 1.6 "Regulations" means all federal and state regulations
-----------
governing payments by federal or state agencies under Government Programs.
Section 1.7 "Related Parties" means parties which are deemed to be
---------------
related under 42 C.F.R. (S) 413.17 by virtue of ownership or control and/or
under applicable state regulations with respect to Medicaid.
2
<PAGE>
Section 1.8 "Termination Cost Report" means a Cost Report covering
-----------------------
the period from June 1, 1989 to and including the Distribution Date, to be
prepared and filed by New Hillhaven on behalf of members of the NME Group with
federal or state agencies under the Regulations.
ARTICLE II
COST REPORT FILING
------------------
Section 2.1 Termination Cost Reports. It is the intent of the
------------------------
parties to treat the transactions contemplated by the Distribution Agreement
(the "Transactions") as being among Related Parties. New Hillhaven and the
Departing NME Members shall be solely responsible for preparing and filing all
Termination Cost Reports required by the Regulations as a consequence of the
Transactions. Each such Termination Cost Report shall be filed on a timely
basis, subject to any extensions that may be granted, and prepared in a manner
consistent with the previous Cost Report filings for the Departing NME Member,
including all elections taken therein.
Section 2.2 Prior Cost Reports. The Hillhaven Corporation, a
------------------
Tennessee corporation and a Wholly-owned subsidiary of NME ("Old Hillhaven"),
has filed Cost Reports with respect to the Business for all Departing NME
Members for all periods prior to the Distribution Date, as required by the
Regulations.
Section 2.3 Open Cost Reports and Other Matters. In addition to Open
-----------------------------------
Cost Reports, the federal and state agencies may make adjustments resulting from
the audit of the NME home office and any subsidiary or any other person or
entity deemed to be a Related Party which has provided services to Old Hillhaven
and New Hillhaven. The parties hereto acknowledge and agree that among the
assets, rights, liabilities and obligations of the Business being transferred to
and assumed by New Hillhaven pursuant to the Distribution Agreement are the
accounts receivable and accounts payable recorded on the books of Old Hillhaven
or of any direct or indirect subsidiary thereof relating to Open Cost Reports,
any other asset or liability (whether or not recorded on the books of Old
Hillhaven or of any such subsidiary) relating to Open Cost Reports and all other
administrative responsibilities and financial or other obligations relating to
such Open Cost Reports. Any benefit or detriment resulting from the finalization
of the Open Cost Reports, other than with respect to such Open Cost Reports
relating to facilities subject to Management Agreements (as defined in the
Distribution Agreement), shall accrue to or be the responsibility of New
Hillhaven, and New Hillhaven shall indemnify and hold harmless NME and all
members of the NME Group from and against any loss, liability, claim, expense or
damage arising out of any Open
3
<PAGE>
Cost Report. New Hillhaven shall be responsible for the preparation and filing
of all Costs Reports relating to each facility subject to a Management Agreement
as long as such Agreement is in effect.
Section 2.4 Cost Reporting Program. NME is a party to a License
----------------------
Agreement, dated March 20, 1987 (the "License Agreement"), with Peat Marwick
Main & Co. ("PMM") pursuant to which NME has acquired the exclusive right to use
PMM's cost report preparation package, known as "CompuCost," a copy of which has
previously been furnished to New Hillhaven. The License Agreement has been
amended to grant to New Hillhaven the non-exclusive right to use the CompuCost
package until the expiration of the License Agreement in 1992. Following the
Distribution, both NME and New Hillhaven shall have rights to use the CompuCost
package. For so long as New Hillhaven elects to use the CompuCost package, New
Hillhaven shall pay promptly to NME upon demand 50% of any and all costs and
expenses required to be paid to PMM pursuant to the License Agreement. New
Hillhaven shall be under no obligation to continue the use of such cost
reporting package and, at its election, New Hillhaven may terminate such
arrangement and make other arrangements either directly with PMM or any other
cost reporting vendor of New Hillhaven's choice. Except as otherwise provided in
the Services Agreement dated as of the Distribution Date between NME and New
Hillhaven, NME shall not be responsible for any training in the proper use of
the software program.
Section 2.5 Recapture. If there shall occur any event (other than
---------
an event arising solely from the Distribution as provided in the Distribution
Agreement) which (i) results in recapture or other costs under the Regulations
being imposed upon NME or any member of the NME Group and (ii) relates to the
Business, New Hillhaven shall indemnify and hold harmless NME and all such
members from and against any loss, liability, claim, expense or damage arising
therefrom.
Section 2.6 Supporting Documentation. (a) NME shall furnish to New
------------------------
Hillhaven, annually within 30 days after the end of NME's fiscal year and from
time to time at New Hillhaven's written request and upon reasonable notice, the
book basis of the assets, the actual depreciation for the period and the
liability and interest expense for all retained assets which are the subject of
separate lease arrangements between the parties. In addition, the related
property records will be made available to program auditors and to New Hillhaven
for their inspection and audit subject to reasonable notification of such
audits. If New Hillhaven has such access to the foregoing information and
records, New Hillhaven shall be solely responsible for supporting the basis of
the assets and liabilities reflected on its Cost
4
<PAGE>
Report (except where inaccurate information has been provided to New Hillhaven
by NME) and for making appropriate arrangements for the review of the
documentation referred to above in support of these bases.
(b) Each party hereto will furnish to the other party, annually
within 75 days after the end of such party's fiscal year and from time to time
at such other party's request and upon reasonable notice, such information set
forth in subsection (a) above and such other information as will enable such
other party to file its home office cost reports in a timely manner.
ARTICLE III
COOPERATION AND EXCHANGE OF INFORMATION
---------------------------------------
Section 3.1 Timely Notification. Each party shall notify the other
-------------------
of all significant issues (determined in good faith by the notifying party)
arising out of an audit with respect to the Termination Cost Reports and/or any
other material or significant issues relating to the Government Programs. NME
shall participate in Providing information with respect to such issues,
including making available its records relating to such Government Programs.
Section 3.2 Other Action. New Hillhaven shall have the right to take
------------
all reasonable and appropriate action in connection with the conduct of any
audit or other proceeding with respect to reimbursement under the Regulations,
provided that New Hillhaven shall not take any such action which could
- --------
reasonably be expected to have an adverse impact on NME or any member of the NME
Group with respect to such reimbursement.
Section 3.3 Exchange of Information. Each of NME and New Hillhaven
-----------------------
shall cooperate with the other and provide the other with information upon
request in connection with the preparation or filing of a Cost Report or in
conducting any audit or other proceeding relating to Government Programs.
Section 3.4 Retention of Records. Each of NME and New Hillhaven
--------------------
shall retain, and shall cause its subsidiaries to retain, pursuant to NME's
Record Retention Program, a copy of which has been made available to New
Hillhaven, all Termination Cost Reports, Cost Reports, schedules, workpapers,
and other records and documents related to the Business and the Regulations
filed through the Distribution Date ("Information"), except as otherwise
required by law or except to the extent that such Information is in the public
domain or in the possess ion of the other party; provided, that after the
--------
expiration of the
5
<PAGE>
applicable retention period set forth in such Program, such Information shall
not be destroyed or otherwise disposed of at any time, unless, prior to such
destruction or disposal, (a) the party proposing to destroy or otherwise dispose
of such Information, shall provide no less than 90 days' prior written notice to
the other, specifying in reasonable detail the Information proposed to be
destroyed or disposed of and (b) if a recipient of such notice shall request in
writing prior to the scheduled date for such destruction or disposal that any of
the Information proposed to be destroyed or disposed of be delivered to such
requesting party, the party proposing the destruction or disposal shall promptly
arrange for the delivery of such of the Information as was requested at the
expense of such requesting party.
Section 3.5 Confidentiality. Subject to any contrary requirement of
---------------
law and the right of each party to enforce its rights hereunder in any legal
action, each party shall keep strictly confidential, and shall cause its
employees and agents to keep strictly confidential, any information of or
concerning the other party which it or any of its agents or employees may
acquire pursuant to, or in the course of performing its obligations under, any
provision of this Agreement; provided, however, that such obligation to maintain
-----------------
confidentiality shall not apply to information which (i) at the time of
disclosure was in the public domain, (ii) after disclosure enters the public
domain not as a result of acts by the receiving party, (iii) was already
independently in the possession of the receiving party at the time of disclosure
or (iv) is received by the receiving party from a third party who did not
receive such information from the disclosing party under an obligation of
confidentiality.
ARTICLE IV
MISCELLANEOUS
-------------
Section 4.1 Expenses. Unless otherwise expressly provided in this
--------
Agreement, each party shall bear any and all expenses that result from its
fulfillment of its obligations under the Agreement.
Section 4.2 Notices. All notices, consents, requests, instructions,
-------
approvals and other communications hereunder shall be in writing and shall be
deemed to have been duly given, if delivered in person or by courier,
telegraphed, telexed or sent by facsimile transmission or mailed, by certified
or registered mail, postage prepaid at the following address (or at such other
address provided by one party to the other party in writing):
6
<PAGE>
If to NME:
National Medical Enterprises, Inc.
2700 Colorado Avenue
P.O. Box 4070
Santa Monica, California 90404
Telecopy no.: (213) 315-6514
Attention: Senior Vice President,
Government Programs
with a copy to:
National Medical Enterprises, Inc.
2700 Colorado Avenue
P.O. Box 4070
Santa Monica, California 90404
Telecopy no.: (213) 315-6688
Attention: General Counsel
If to New Hillhaven:
The Hillhaven Corporation
1148 Broadway Plaza
Tacoma, Washington 98401-2264
Telecopy no.: (206) 756-4714
Attention: President
with a copy to:
The Hillhaven Corporation
1148 Broadway Plaza
Tacoma, Washington 98401-2264
Telecopy no.: (206) 756-4845
Attention: General Counsel
Section 4.3 Compliance by Subsidiaries. Each of the parties hereto
--------------------------
agrees to take all necessary steps to cause its present and future subsidiaries
to comply with the provision: of this Agreement.
Section 4.4 Successors and Assigns. This Agreement and all of the
----------------------
provisions hereof shall be binding upon and inure to the benefit of the parties
and their respective successors and permitted assigns, except that New Hillhaven
may not assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of NME.
7
<PAGE>
Section 4.5 Titles and Headings. Titles and headings to sections herein
-------------------
are inserted for the convenience of reference only and are not intended to be a
part or to affect the meaning or interpretation of this Agreement.
Section 4.6 Legal Enforceability. Any provision of this Agreement which
--------------------
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision or remedies otherwise available to any party
hereto. Without prejudice to any rights or remedies otherwise available to any
party hereto, each party hereto acknowledges that damages would be an inadequate
remedy for any breach of the provisions of this Agreement and agrees that the
obligations of the parties hereunder shall be specifically enforceable.
Section 4.7 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of California.
Section 4.8 Dispute Resolution Procedures. All disputes arising out of or
-----------------------------
relating to this Agreement shall be resolved pursuant to the reference procedure
set forth in California Code of Civil Procedure Sections 638 et seq. The
-- ---
parties hereby agree to submit to the jurisdiction of the Superior Court of the
County of Los Angeles, State of California (the "Superior Court") for such
purpose. Either party may initiate the procedure set forth in this Section by
providing the other party with notice setting forth the nature of the dispute
(the "Reference Notice"). The parties shall designate to the Superior Court a
referee who is an active attorney or retired judge living in the County of Los
Angeles who shall resolve the dispute. If the parties are unable to designate a
referee within 20 days after the receipt of the Reference Notice, the parties
shall request that the Superior Court appoint a referee. In connection with any
proceeding pursuant to this Section, the parties shall have all discovery rights
which would have been available had the matters which are the subject of the
dispute been decided by the Superior Court. Discovery proceedings may be noticed
and commenced immediately after delivery of the Reference Notice. The hearing
before the referee shall begin no later than 60 days after the receipt of the
Reference Notice. All discovery in connection with the reference proceeding
shall be concluded no later than 15 days prior to the commencement of the
hearing. Judgment upon the award rendered by the referee shall be entered in the
Superior Court. Nothing in this Section shall be construed to impair the right
of either party to appeal from such judgment.
8
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
NATIONAL MEDICAL ENTERPRISES, INC.
By: /s/ Marcus E. Powers
-------------------------------
Name: Marcus E. Powers
Title: Senior Vice President
THE HILLHAVEN CORPORATION
By: /s/ Christopher J. Marker
-------------------------------
Name: Christopher J. Marker
Title: Ptesident
9
<PAGE>
EXHIBIT 10.35
- --------------------------------------------------------------------------------
INSURANCE AGREEMENT
dated as of January 31, 1990
between
NATIONAL MEDICAL ENTERPRISES, INC.
and
THE HILLHAVEN CORPORATION
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Parties ....................................................... 1
Recitals ....................................................... 1
Section 1. Allocation of Existing Benefits and
Liabilities............................................. 2
Section 2. Cooperation and Joint Insurance......................... 3
Section 3. Amendment of Documents.................................. 5
Section 4. Access to Records and Other
Information............................................. 5
Section 5. Successors and Assigns.................................. 6
Section 6. Counterparts............................................ 6
Section 7. Governing Law........................................... 6
Section 8. No Impairments of Other Rights.......................... 6
Section 9. Subrogation............................................. 6
Section 10. Titles and Headings..................................... 7
Section 11. Subsidiaries............................................ 7
Section 12. No Third Party Beneficiaries............................ 7
Section 13. Schedules............................................... 7
Section 14. Construction............................................ 7
Section 15. Entire Agreement; Amendment............................. 7
Section 16. Waivers................................................. 8
Section 17. Confidentiality......................................... 8
Section 18. Notices................................................. 8
Section 19. Legal Enforceability.................................... 9
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
Section 20 Survival of Agreements.................................. 10
Signatures ....................................................... 10
Schedules
Schedule 1.02(a) - Fully Reserved Policies
Schedule 1.02(b) - Allocation of Retroactive Rate Adjustments
under Pre-Distribution Date Documents
Schedule 1.03(c) - Reallocation of Claims Payments
Under Pre-Distribution Date Documents
Schedule 2.02(a) - Post-Distribution Date Insurance Coverage
Schedule 2.02(b) - Allocations Relating to Post-Distribution
Date Documents
</TABLE>
ii
<PAGE>
INSURANCE AGREEMENT dated as of January 31, 1990 (this "Agreement") between
NATIONAL MEDICAL ENTERPRISES, INC., a Nevada corporation ("NME"), and THE
HILLHAVEN CORPORATION, a Nevada corporation ("New Hillhaven"). All capitalized
terms used herein without definition shall have the meanings assigned to them in
the Distribution Agreement (as defined below).
WHEREAS, NME and New Hillhaven have entered into a Reorganization and
Distribution Agreement (as amended to the date hereof, the "Distribution
Agreement") providing for a reorganization of certain of the businesses
heretofore conducted by NME's long term care group and a pro rata distribution
to the holders of NME's capital stock, as of the record date established by NME
in connection therewith, of approximately 85% of the outstanding shares of
common stock, par value $0.15 per share, of New Hillhaven (the "Distribution")
on or about January 31, 1990 (the "Distribution Date"); and
WHEREAS, NME or The Hillhaven Corporation, a Tennessee corporation ("Old
Hillhaven"), or one of Old Hillhaven's subsidiaries (the "Old Hillhaven
Subsidiaries") has entered into various agreements relating to the conduct of
the long term care business, substantially all of which (with the exception of
certain minor businesses) will be transferred to New Hillhaven in connection
with the Distribution; and
WHEREAS, claims in respect of liabilities of Old Hillhaven and Old
Hillhaven Subsidiaries remain outstanding as of the date hereof and claims and
obligations under policies of insurance held by NME which covered or related to
properties and assets to be transferred to New Hillhaven remain outstanding as
of the Distribution Date; and
WHEREAS, the parties desire to provide for cooperation in the acquisition
of insurance and the handling of claims and the joint purchase of certain
insurance to cover their properties and liabilities (each policy of insurance
which heretofore covered or hereafter covers properties or liabilities of Old
Hillhaven, the Old Hillhaven Subsidiaries, New Hillhaven or the New Hillhaven
Subsidiaries is hereinafter referred to as a "Document" and are collectively
referred to as "Documents"); and
<PAGE>
WHEREAS, the parties desire to enter into this Agreement in order to
define the relationship between the parties regarding insurance of their
respective properties and liabilities and the exercise of certain rights,
remedies and options by the respective parties hereto under the Documents.
NOW, THEREFORE, in consideration of the mutual promises contained
herein and other valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
Section 1. Allocation of Existing Benefits and Liabilities.
-----------------------------------------------
1.01 Claims in Process. Any claims made against insurers under the
-----------------
Documents prior to the Distribution Date and unpaid as of such date shall be for
the account of the party whose asset after the Distribution Date is the basis
for the claim. For the purposes of this Agreement, a Leased Facility shall be
deemed to be a New Hillhaven asset, and with regard to such Leased Facilities,
New Hillhaven shall be deemed to be "the party whose asset is the basis of the
claim." If the Proceeds of the claim are received by a party other than the
party entitled to receive such proceeds pursuant to this Section 1.01, such
receiving party shall pay over such proceeds to such other party. In the event
that any deductible, co-insurance or self-insured retention in respect of such
claim has not been paid or accounted for prior to the Distribution Date, it
shall be charged to the account of the party entitled to receive or who receives
the benefit of the claim payment; provided, however, that if the Document under
-------- -------
which the claim was made provides for any aggregate deductible, co-insurance or
self-insured retention or if the claim is not fully covered because the
aggregate policy limits have been exhausted, the allocation of payments under
such Document shall be reallocated in accordance with the procedure shown in
Schedule 1.03(c).
1.02 Retroactive Rate Adjustments. Retroactive adjustments in respect
----------------------------
of the Documents listed on Schedule 1.02(a) shall be paid by NME or any
Subsidiary of NME designated by it, and New Hillhaven shall have no liability
therefor regardless of the reason for the adjustment. Such adjustments in
respect of all Documents other than those listed on Schedule 1.02(a) shall be
allocated between NME and New Hillhaven in accordance with the formulae shown on
Schedule 1.02(b).
2
<PAGE>
1.03 Incurred But Not Reported Claims. (a) The parties shall do all
--------------------------------
things necessary to assure that all Documents which provide coverage remain
applicable to New Hillhaven and its Subsidiaries and its assets after the
Distribution Date, to the extent they were applicable prior to the Distribution
Date.
(b) The parties shall do all commercially reasonable things necessary
to assure continued coverage for incurred but not reported claims and incidents
which have not been filed with insurers which would have been covered under
Documents which provide coverage on a claims made basis had they been made and
reported prior to the Distribution Date.
(c) Indemnity payments under Documents in respect of claims made
after the Distribution Date arising out of occurrences prior to the Distribution
Date shall be for the account of the party whose asset after the Distribution
Date was the basis for the claim; provided, however, that if the Document under
-------- -------
which the claim was made provides for any aggregate deductible, co-insurance or
self-insured retention or if the claim is not fully covered because the
aggregate policy limits have been exhausted, the allocation of payments under
such Document shall be reallocated in accordance with the procedure shown in
Schedule 1.03(c).
Section 2. Cooperation and Joint Insurance.
-------------------------------
2.01 Joint Insurance Coverage. For fiscal year 1990 ("FY90") , the
------------------------
parties have acquired insurance coverage as shown on Schedule 2.02(a). If any
party desires to cancel or non-renew its participation in coverage under an
existing Document under which both parties and/or their respective Subsidiaries
are insured, it shall notify the other party in writing not later than ninety
(90) days prior to the end of the policy period. Premiums payable under joint
coverage shall be as shown on Schedule 2.02(a) for FY90 and as agreed upon at
the time of purchase or renewal for future fiscal years. Deductibles, co-
insurance, self-insured retentions, policy limits and retroactive rate
adjustments shall be allocated among the parties and their covered Subsidiaries
based upon experience in accordance with the formula provided for in Schedule
2.02(b).
2.02 Cooperation in Acquiring Insurance. NME and New Hillhaven shall
----------------------------------
cooperate with each other in
3
<PAGE>
the purchase of insurance coverage as shown on Schedule 2.02(a) for periods
commencing after the Distribution Date with the aim of obtaining appropriate
insurance coverage on the best available terms and conditions and at the most
reasonable rates, always taking into account the quality of the insurers with
which coverage is being placed. Each party shall be entitled to purchase its own
separate coverage in the event it believes that, after a good faith attempt to
obtain appropriate joint coverage (which shall include an attempt to agree upon
allocation of premium on an other than pro rata basis in the event the insurer
views one party as a higher risk than the other), its own interests dictate that
course of action. In situations in which the parties are required by law to
maintain separate coverage or to make changes in existing joint coverage, they
shall cooperate in so doing.
2.03 Joint Liability and Claims. (a) In the event that a claim by a
third party is made against both NME and New Hillhaven (or a Subsidiary of
either party and the other party or a Subsidiary thereof) (a "Joint Claim"),
Article IV of the Distribution Agreement shall govern to the extent applicable
to the facts. In the event that no indemnification is provided for under said
Article IV and there is no other existing agreement or indemnification with
respect to such Joint Claim, NME and New Hillhaven agree to handle such Joint
Claim in accordance with this Section 2.03. NME and New Hillhaven shall jointly
defend such Joint Claim and shall attempt to agree upon the appropriate
allocation of any uninsured liability or expenses. In the event that NME and New
Hillhaven cannot agree upon an appropriate allocation, the issue shall be
referred to arbitration in accordance with the procedures described in
subsection (b) below, but only after a final determination of liability (through
final court judgment, settlement or otherwise) has been made. Neither NME or New
Hillhaven, nor any Subsidiary of either of them, shall institute any court
proceedings against the other involving a Joint Claim.
In the event that NME and New Hillhaven purchase separate liability
coverage, each of them shall make known to its insurer this agreement and assure
itself that the terms of such coverage do not conflict with this Agreement and
obligate the insurer under the Document to abide by the allocation of liability
and expenses determined in accordance herewith unless it agrees with the other
insurer as to a different allocation which does not affect any uninsured
liabilities of either party.
4
<PAGE>
(b) All disputes arising out of or relating to the Agreement shall be
resolved pursuant to the reference procedure set forth in California Code of
Civil Procedure sections 638 et seq. The parties hereby agree to submit to the
-- ---
jurisdiction of the Superior Court of the County of Los Angeles, State of
California (the "Superior Court") for such purpose. Either party may initiate
the procedure set forth in this Schedule 2.03(b) by providing the other party
with notice setting forth the nature of the dispute (the "Reference Notice").
The parties shall designate to the Superior Court a referee who is an active
attorney or retired judge living in the County of Los Angeles who shall resolve
the dispute. If the parties are unable to designate a referee within 20 days
after the receipt of the Reference Notice, the parties shall request that the
Superior Court appoint a referee. In connection with any proceeding pursuant to
this Schedule 2.03(b), the parties shall have all discovery rights which would
have been available had the matters which are the subject of the dispute been
decided by the Superior Court. Discovery proceedings may be noticed and
commenced immediately after delivery of the Reference Notice. The hearing before
the referee shall begin no later than 60 days after the receipt of the Reference
Notice. All discovery in connection with the reference proceeding shall be
concluded no later than 15 days prior to the commencement of the hearing.
Judgment upon the award rendered by the referee shall be entered in the Superior
Court. Nothing in this Schedule 2.03(b) shall be construed to impair the right
of either party to appeal from such judgment.
Section 3. Amendment of Documents. So long as New Hillhaven is
----------------------
covered by any Document, NME will not enter into any material amendment, change
or modification of any such Document which would materially adversely affect New
Hillhaven's rights under such Document without the express prior written consent
to such amendment, change or modification by New Hillhaven.
Section 4. Access to Records and Other Information. In order to
---------------------------------------
enable it to prosecute any claim or determine coverage thereunder, either party,
at its expense, may at any reasonable time examine or copy any letter, account,
or other documentation or information in the possession or control of the other
party or any affiliate of such party relating to or connected with any Document
with respect to a policy period during which such party or an affiliate was
covered thereby and relating to
5
<PAGE>
prior losses which are the subject of this Agreement. The other party shall, at
the request and expense of the requesting party, take reasonable steps to obtain
for the requesting party any information or documents in the possession of any
third party relating to or in connection with the Documents and identified by
the requesting party.
Section 5. Successors and Assigns. This Agreement and all of the
----------------------
provisions hereof shall be binding upon and inure to the benefit of the parties
and their respective successors and permitted assigns. Neither party hereto may
assign its rights or delegate its obligations under this Agreement without the
prior written consent of the other party.
Section 6. Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitute one and the same instrument.
Section 7. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of California.
Section 8. No Impairments of Other Rights. Nothing in this Agreement
------------------------------
is intended or shall be construed to impair, diminish or otherwise adversely
affect any other rights either party may have or may obtain against any person
other than the other party to this Agreement under the Documents or otherwise.
Section 9. Subrogation. Each party agrees that the other party shall
-----------
be subrogated to such party's rights and remedies under the Documents to the
extent of the portion of any amounts recoverable thereunder determined in
accordance with the terms of this Agreement regarding allocation of liabilities,
losses, claims and expenses. Each party further agrees to cooperate with the
other party in connection with the other party's enforcement of any such rights
and remedies and agrees not to take any actions that would prejudice the
exercise of such right of subrogation. This Section is not intended to result in
any reallocation of amounts recoverable under this Agreement. It is intended to
avoid any waiver of subrogation.
6
<PAGE>
Section 10. Titles and Headings. Titles and headings to sections
-------------------
herein are inserted for convenience of reference only and are not intended to be
part of or to affect the meaning or interpretation of this Agreement.
Section 11. Subsidiaries. Each of the parties hereto shall cause to
------------
be performed, and hereby guarantees the performance of, all actions, agreements
and obligations set forth herein to be performed by any Subsidiary of such party
which is contemplated to be a Subsidiary of such party on and after the
Distribution Date; provided, however, that this Section 11 shall not apply to
-------- -------
any obligation of Health Facilities Insurance Corp. Ltd., Hospital Underwriting
Group, Inc. or Cascade Insurance Company Ltd. pursuant to any Document under
which any of them is an insurer.
Section 12. No Third Party Beneficiaries. This Agreement is solely
----------------------------
for the benefit of the parties hereto and their respective Subsidiaries and
Affiliates and should not be deemed to confer upon third parties any remedy,
claim, liability, reimbursement, claim of action or other right in excess of
those existing without reference to this Agreement.
Section 13. Schedules. The Schedules hereto shall be construed with
---------
and as an integral part of this Agreement to the same extent as if the same had
been set forth verbatim herein.
Section 14. Construction. In this Agreement,
------------
(i) unless the context otherwise requires, the terms "herein",
"hereof," "hereto", and "hereunder" refer to this Agreement; and
(ii) the headings of the sections and subsections hereof and the
table of contents hereof are inserted for convenience only and do not
constitute a part of this Agreement.
Section 15. Entire Agreement; Amendment. This Agreement, the
---------------------------
Distribution Agreement and the other agreements referred to herein or therein or
entered into in connection herewith or therewith set forth the entire agreement
and understanding of the parties with respect to the transactions contemplated
hereby and supersede all prior agreements, arrangements and understandings
relating to the subject matter hereof. No representation, promise,
7
<PAGE>
inducement or statement of intention has been made by either party hereto which
is not embodied in this Agreement or such other agreements, the Schedules or
Exhibits hereto or thereto, or the written statements or other documents
delivered pursuant hereto and thereto, and neither party hereto shall be bound
by or liable for any alleged representation, promise, inducement or statement of
intention not so set forth. This Agreement may be amended or modified only by a
written instrument executed by both parties hereto or by their successors and
permitted assigns.
Section 16. Waivers. No failure or delay on the part of NME or New
-------
Hillhaven in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. No modification or waiver of any provision of this Agreement nor
consent to any departure by NME or New Hillhaven therefrom shall in any event
be effective unless the same shall be in writing, and then such waiver or
consent shall be effective only in the specific instance and for the purpose for
which given.
Section 17. Confidentiality. Subject to any contrary requirement of
---------------
law and the right of each party to enforce its rights hereunder in any legal
action, each party shall keep strictly confidential, and shall cause its
employees and agents to keep strictly confidential, any information of or
concerning the other party which it or any of its agents or employees may
acquire pursuant to, or in the course of performing its obligations under, any
provision of this Agreement; provided, however, that such obligation to maintain
-------- -------
confidentiality shall not apply to information which (i) at the time of
disclosure was in the public domain, (ii) after disclosure enters the public
domain not as a result of acts by the receiving party, (iii) was already
independently in the possession of the receiving party at the time of
disclosure or (iv) is received by the receiving party from a third party who did
not receive such information from the disclosing party under an obligation of
confidentiality.
Section 18. Notices. All notices, consents, requests, instructions,
-------
approvals and other communications hereunder shall be in writing and shall be
deemed to have been duly given, if delivered in person or by courier,
8
<PAGE>
telegraphed, telexed or by facsimile transmission or mailed, by certified or
registered mail, postage prepaid at the following address (or at such other
address provided by one party to the other in writing):
If to NME:
National Medical Enterprises, Inc.
2700 Colorado Avenue
P.O. Box 4070
Santa Monica, California 90404
Telecopy no.: (213) 315-8329
Attention: Vice President, Risk Management
with a copy to:
National Medical Enterprises, Inc.
2700 Colorado Avenue
P.O. Box 4070
Santa Monica, California 90404
Telecopy no.: (213) 315-6688
Attention: General Counsel
If to New Hillhaven:
The Hillhaven Corporation
1148 Broadway Plaza
Tacoma, Washington 98401-2264
Telecopy no.: (206) 756-4743
Attention: Director, Risk Management
with a copy to:
The Hillhaven Corporation
1148 Broadway Plaza
Tacoma, Washington 98401-2264
Telecopy no.: (206) 756-4845
Attention: General Counsel
Section 19. Legal Enforceability. Any provision of this
--------------------
Agreement which is prohibited or unenforceable in any jurisdiction shall as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision
9
<PAGE>
or remedies otherwise available to any party hereto. Without prejudice to any
rights or remedies otherwise available to any party hereto, each party hereto
acknowledges that damages would be an inadequate remedy for any breach of the
provisions of this Agreement and agrees that the obligations of the parties
hereunder shall be specifically enforceable.
Section 20. Survival of Agreements. Except as otherwise contemplated by
----------------------
this Agreement, all covenants and agreements of the parties contained in this
Agreement shall survive the Distribution Date.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
NATIONAL MEDICAL ENTERPRISES, INC.
By /s/ Marcus E. Powers
--------------------------------
Name: Marcus E. Powers
Title: Senior Vice President
THE HILLHAVEN CORPORATION
By /s/ Christopher J. Marker
--------------------------------
Name: Christopher J.Marker
Title: President
10
<PAGE>
EXHIBIT X Worker's Compensation
Page 1 Allocation of "Current Year" Premium
Year Ended 5-31-01
<TABLE>
<CAPTION>
Month #1 Ending 6-30-00
- -----------------------
% Relationship of Hillhaven In- Allocation of Premium Billings Allocation of
curred Losses to NME Incurred Premium Billing Paid Allocate Prior to Premium Billing
Losses From Preceding Year Through 6-30-00 6-30-00. for 6-30-00
- -------------------------- --------------- -------- -------------
<S> <C> <C> <C>
Hillhaven $ 7,440,000 = 62% 1,860,000 0 1,860,000
NME - Total $12,000,000 = 100% 3,000,000 0 3,000,000
Month #6 Ending 11-30-00
- --------------------------
% Relationship of Hillhaven In- Allocation of Pre- Premium Billing Allocation of
curred Losses to NME Incurred mium Billing Paid Allocated Prior Premium Billing
Losses From Preceding Year Through 11-30-00 to 11-30-00 for 11-30-00
- -------------------------- -------------------- ----------------- ---------------
Hillhaven 7,440,000 = 62% 11,160,000 9,300,000 1,860,000
NME - Total 12,000,000 = 100% 18,000,000 15,000,000 3,000,000
<CAPTION>
Comparison of Hillhaven % Factors
For First 6 Months of Current Year
- ----------------------------------
% Used % Developed From 11-30-00 Premium Billing Paid Amount Due from
For 1st 6 Mos. Incurred Loss Data Diff Through 11-30-00 Hillhaven
- --------------- ---------------------- ----- ---------------- ---------
<S> <C> <C> <C> <C>
62% 63% +1% 18,000,000 +180,000
</TABLE>
<PAGE>
EXHIBIT X
Page 2
Month #12 Ending 5-31-01
- ------------------------
<TABLE>
<CAPTION>
% Relationship of Hill-
haven Incurred Losses Allocation of Premium Premium Billing Allocation of
to NME Incurred Losses from Billing Paid Through Allocated Prior Premium Billing
11-30-00 Incurred Loss Data 5-31-01 to 5-31-01 For 5-31-01
--------------------------- ------- ---------- ------------
<S> <C> <C> <C>
Hillhaven 3,150,000 = 63% 22,680,000 20,790,000 1,890,000
NME - Total 5,000,000 = 100% 36,000,000 33,000,000 3,000,000
Comparison of Hillhaven % Factors
For Last 6 Months of Current Year
- ---------------------------------
% Used % Developed From 04-30-01 Prem. Billing Amount Due
Last 6 Mos. Incurred Loss Data Diff. Pd. Thru 5-31-01 to Hillhaven
- ------------ ------------------ ----- ---------------- ------------
<S> <C> <C> <C> <C>
63% 61% -2% 36,000,000 -720,000
</TABLE>
<PAGE>
EXHIBIT X Worker's Compensation
Page 3 Allocation of "Retrospective" Premium
Related to Fiscal Year 5-31-01
Allocation Made During 5-31-04
<TABLE>
<CAPTION>
Allocation of First 5-31-01 Shortfall Payment
6-30-03
- -------
% Relationship of Hill- Allocation of Premium Billing Allocation of
haven Incurred Losses to NME Premium Billing Allocated Prior Premium Billing
Incurred Losses From Most Recent Thru to @
Incurred Loss Data 6-30-03 6-30-03 6-30-03
------------------ ------------- ------- -----------
<S> <C> <C> <C>
Hillhaven 15,128,000 = 61% 23,058,000 21,960,000 1,098,000
NME - Total 24,800,000 = 100% 37,800,000 36,000,000 1,800,000
Allocation of Second 5-31-01 Shortfall Payment
9-30-03
- -------
% Relationship of Hill- Allocation of Premium Billing Allocation of
haven Incurred Losses to NME Premium Billing Allocated Prior Premium Billing
Incurred Losses From Most Recent Thru To @
Loss Data 9-30-03 6-30-03 09-30-03
--------- ----------- ------------ --------
Hillhaven 5,806,000 = 61.5% 24,292,500 23,058,000 1,234,500
NME - Total 25,700,000 = 100% 39,500,000 37,800,000 1,700,000
</TABLE>
<PAGE>
Schedule 1.02(a)
FULLY RESERVED POLICIES
-----------------------
1. Cascade Insurance Company, Ltd. (Workers' Compensation).
2. HFIC (General and Professional Liability).
<PAGE>
Schedule 1.02(b)
ALLOCATION OF RETROACTIVE RATE ADJUSTMENTS UNDER
------------------------------------------------
PRE-DISTRIBUTION DATE DOCUMENTS
-------------------------------
1. Workers Compensation Program with American International Group, Inc.
--------------------------------------------------------------------
affiliates.
-----------
Definition of Terms
-------------------
"AIG Premiums" -- Premium billings received from American International Group,
- --------------
Inc. and affiliates, including special assessments, (AIG), insurance
brokerage fees, Crawford ASC charges and data processing timesharing fees
charged by Risk Sciences Group.
"AIG Program" -- The overall NME Worker's Compensation Program insured through
- -------------
AIG.
"Hillhaven Incurred Losses" -- Total Incurred Losses of Old Hillhaven and its
- ---------------------------
Subsidiaries and Affiliates, including New Hillhaven, and excluding Arkmo
Lumber & Supply Company, Inc. and Medical Ambulatory Care, Inc. and the
campus facilities subject to Management Agreements (as defined in the
Distribution Agreement).
"Current Year Premiums" -- AIG Premiums paid during the applicable Policy
- -----------------------
Period.
I-2
<PAGE>
"Incurred Losses" -- The sum of all losses including indemnity and medical
- -----------------
amounts paid and reserved and allocated loss adjustment expenses paid and
reserved.
"NME Incurred Losses" -- total Incurred Losses for all NME Subsidiaries and
- ---------------------
Affiliates (including Hillhaven Incurred Losses) which are insured through
the AIG Program for each applicable policy period. (Total incurred medical
losses for California acute hospitals and the NME corporate office are not
insured through the AIG Program.)
"Policy Period" -- The effective date and time that coverage begins to the
- ---------------
effective date and time that coverage terminates.
"Retrospective Premiums" -- AIG Premiums paid for a particular Policy Period
- ------------------------
during any period subsequent to such Policy Period.
Allocation
----------
The allocation of AIG Premiums to New Hillhaven will be based on the
relationship of Hillhaven Incurred Losses to NME Incurred Losses with the
objective that when the final premium payment has been made, New Hillhaven will
have been allocated its share of total AIG Premiums for that Policy Period based
on the relationship of Hillhaven Incurred
I-3
<PAGE>
Losses to the NME Incurred Losses. As of the date of this Agreement, no final
premium payment has been made for any Policy Period under the AIG Program. Until
a final premium payment is made for a Policy Period, New Hillhaven's share of
each AIG Premium payment will be determined using the formulas described below.
Any Retrospective Premiums will be allocated and billed or refunded to New
Hillhaven when the AIG Premium is paid by NME. The following formula will be
used for the allocation:
A) Based on the most recent Incurred Loss data pertaining to the relevant
Policy Period, the percentage relationship of Hillhaven Incurred Losses
to NME Incurred Losses will be calculated.
B) The percentage developed in A) will be multiplied by the total Current
Year and Retrospective Premiums paid by NME relating to the relevant
Policy Period.
C) New Hillhaven's share of the AIG Premiums developed in B) will be
compared to the total AIG Premiums previously billed to Old Hillhaven and
New Hillhaven for the relevant Policy Period. The difference represents
the Retrospective Premiums which will be billed or refunded to New
Hillhaven.
Examples of the AIG Premium allocation calculation for Current Year and
Retrospective Premiums are shown on Exhibit X.
I-4
<PAGE>
Schedule 1.03(c)
REALLOCATION OF CLAIMS PAYMENTS UNDER
-------------------------------------
PRE-DISTRIBUTION DATE DOCUMENTS
-------------------------------
In the event payment in respect of a claim is made under a
Document for the policy period covered thereby not covered by Section
1.02(b) in respect of which any aggregate deductible, co-insurance or
self-insured retention or aggregate policy limit has, after taking
into account such claim, been exceeded, uninsured payments in respect
of said Document shall be reallocated among those parties having made
claims thereunder as follows:
(1) The total value all claims covered under the Document
shall be calculated;
(2) The total value of claims of New Hillhaven under the
Document for the policy period covered thereby shall
be calculated;
(3) A percentage (the "Hillhaven percentage") shall be
derived by dividing (2) by (1);
(4) The Hillhaven percentage shall be multiplied by either
(a) or (b) below, as appropriate:
(a) In the event the aggregate deductible, co-
insurance or self-insured retention has been
exceeded, to the amount of such aggregate; or
(b) In the event the aggregate policy limit has been
exceeded, to the amount by which such limit has
been exceeded;
(5) The amount or amounts determined in (4) shall be taken
together and compared to the sum of any deductibles,
co-insurance payments, self-insured retentions and
payments in excess of policy limits, of New Hillhaven
as well as previous reallocations under the Document;
I-5
<PAGE>
(6) The difference determined in (5) shall be paid by New Hillhaven to NME
if New Hillhaven has previously paid less than its share or by NME to
New Hillhaven if New Hillhaven has previously paid more than its
share.
Each claim made under a Document shall necessitate a new calculation and
reallocation payment under Section 1.03(c).
I-6
<PAGE>
Schedule 2.02(a)
----------------
POST-DISTRIBUTION DATE INSURANCE COVERAGE
-----------------------------------------
A. GENERAL AND PROFESSIONAL LIABILITY INSURANCE.
--------------------------------------------
i. Primary insurance.
-----------------
1. Provider - New Hillhaven purchases from Health Facilities
--------
Insurance Corp. ("HFIC"), NME's wholly-owned captive insurance company.
2. June 1, 1989 - May 31, 1990 ("FY90") - Policy limit - $15
------------------------------------
million per occurrence and in the aggregate; first dollar coverage on a
claims made basis. No deductible.
3. Cost - Guaranteed cost program for FY90 (full risk
----
transfer with no retrospective adjustments), with a total cost, including
administrative fees, of $82 per bed for $15 million limit. Estimated cost
of $3,444,000 (42,000 beds).
4. Post FY90 - New Hillhaven and HFIC to negotiate rates and
---------
determine whether to continue annually.
ii. Excess liability coverage.
-------------------------
1. FY90 Provider - New Hillhaven will remain under the NME
-------------
plan. Policy limit of underlying coverage for FY90 - $75 million, on a
claims made basis per occurrence and in the aggregate.
2. Cost - Pass through cost of $8 per bed.
----
3. Post FY90 - Both parties to determine whether to continue
---------
present arrangements.
iii. Medi$ave (New Hillhaven's pharmacy subsidiary).
----------------------------------------------
1. Provider - Hospital Underwriting Group ("HUG"), an
--------
association captive insurance company.
2. FY90 - Claims made coverage with five year discovery
----
period; $500,000 deductible per claim. Policy limit - $25 million per
occurrence and $30 million in the aggregate, on a claims made basis.
3. Cost - $150,000 annual premium with limits as per HUG
----
policy with $75 million excess through various London policies.
<PAGE>
4. Medi$ave is to expense and pay the deductible (currently $500,000
per claim) as incurred, beginning June l, 1989.
5. Post FY90 - Medi$ave will purchase such coverage outside of the
---------
HUG program.
B. PROPERTY INSURANCE.
------------------
i. All risk property.
-----------------
1. Provider. Aetna Casualty & Surety Company and American Motorists
--------
Insurance Company.
2. FY90 - Hillhaven, including Medi$ave, will stay with the NME
----
program; the coverage is written on a replacement cost basis; the costs passed
through to New Hillhaven from NME will be determined by the rate set by the
insurers multiplied by the replacement costs of the properties insured. Policy
limit - $500 million per occurrence.
3. Cost - $.04 per $100 of values with a $25,000 per claim
----
deductible is the current rate for FY90.
ii. California earthquake insurance.
-------------------------------
1. Provider. Covered by all risk property policy for first $25
--------
million, and by various other insurers for an additional $150 million. Total
policy limit - $175 million, per occurrence and in the aggregate. Deductible -
$25,000 per claim, except for California where it is 5% of the total values at
the time of loss at the location where the loss occurred, subject to a maximum
of $2 million in any one occurrence.
2. Cost - No additional cost for FY90.
----
iii. Contingent Property insurance.
-----------------------------
1. Provider - Covered by all risk property policy on buildings only.
--------
Excludes earthquake and flood.
2. Cost - Additional premium as charged by underwriter.
----
<PAGE>
iv. Flood insurance.
---------------
1. Provider - Covered by all risk property policy for first $25
--------
million, and by various other insurers for an additional $150 million. Total
policy limit - $175 million per occurrence and in the aggregate. Deductible -
$25,000 per occurrence.
2. Cost - No additional cost for FY90.
----
v. Loss of rents insurance.
-----------------------
1. Provider - To be determined; on properties leased by New
--------
Hillhaven from NME, the Lease Agreement requires that New Hillhaven purchase
loss of rents insurance to protect NME.
2. New Hillhaven to secure coverage from the insurance market
effective on distribution, or endorse to current NME property policy with a cost
pass through.
vi. Business interruption insurance.
-------------------------------
1. Provider - NME's current property policy as written; 180 day
--------
extended period of indemnity coverage provided in current all risk property
insurance policy.
C. CRIME AND FIDELITY INSURANCE.
----------------------------
1. Provider - NME/Arkwright.
--------
2. Cost - New Hillhaven to be allocated $200,000 for this coverage
----
for FY90. Policy limit - $100 million. Deductible - $25,000 per claim.
3. Post FY90 - New Hillhaven/Medi$ave to obtain separate coverage
---------
effective June 1, 1990.
D. AUTOMOBILE INSURANCE.
--------------------
i. Liability.
---------
1. Provider - NME/Kemper/Lexington.
--------
2. Cost - $625 per vehicle, direct cost pass through to New
----
Hillhaven; $100,000 deductible per incident, plus claims handling fee. Policy
limit - $5 million combined single limit.
<PAGE>
3. Post FY90 - To be determined; New Hillhaven may obtain separate
---------
coverage.
ii. Comprehensive and collision.
---------------------------
1. Provider - New Hillhaven self-insures.
--------
2. Post FY90 - New Hillhaven may obtain insurance, or may continue
---------
to self-insure.
E. FIDUCIARY LIABILITY INSURANCE.
-----------------------------
1. Provider - New Hillhaven to obtain separate coverage.
--------
F. DIRECTORS' AND OFFICERS' LIABILITY INSURANCE.
--------------------------------------------
1. Provider - New Hillhaven to obtain separate coverage with
--------
reasonably approved limits.
G. TRAVEL ACCIDENT INSURANCE.
-------------------------
1. Provider - New Hillhaven purchases from AIG Life Insurance
--------
Company through Raleigh, Mann and Powell. The policy covers New Hillhaven,
Medi$ave and MAC. Policy limit - $350,000 per accident for scheduled employees
and $100,000 per accident for non-scheduled employees, subject to $1 million
aggregate per accident. No deductible.
2. Cost - Annual premium is approximately $6,630.
----
3. Post FY90 - New Hillhaven to continue to purchase this coverage
---------
and to determine whether other entities should be included in this program.
H. OFFICERS' PERSONAL UMBRELLA LIABILITY INSURANCE.
-----------------------------------------------
1. Provider - Prudential Property & Casualty Company.
--------
2. Cost - $520 per person for $5.0 million policy limit, passed
----
through to New Hillhaven; the aggregate annual cost to New Hillhaven is
approximately $20,000 per year. Policy limit - $5 million per occurrence and in
the aggregate. Deductible - $300,000 for officers.
<PAGE>
3. Post FY90 - New Hillhaven to secure its own coverage.
---------
I. LAWYERS' PROFESSIONAL LIABILITY INSURANCE.
-----------------------------------------
1. Provider - National Union Indemnity Company.
--------
2. Cost - $8,500 per attorney for $10.0 million policy limit, passed
----
through to New Hillhaven. Policy limit - $10 million per occurrence and in the
aggregate. Deductible - $100,000 per lawyer and $250,000 for the corporation.
3. Post FY90 - New Hillhaven to secure its own coverage.
---------
J. SEC LIABILITY INSURANCE.
-----------------------
1. New Hillhaven to consider on a case-by-case basis.
K. BONDS.
-----
1. Provider - New Hillhaven currently purchases bonds separately
--------
from NME for, e.g., patient trust funds, utility, construction/performance,
litigation appeal, liquor license, notary and self insurance. Spin-off to have
no expected cost impact, but may impact bonding capacity, premium and security
requirements.
L. COURSE OF CONSTRUCTION INSURANCE.
--------------------------------
1. Provider - New Hillhaven purchases from Aetna or Fred S. James.
--------
Should not be affected by spin-off.
M. WORKERS' COMPENSATION INSURANCE.
-------------------------------
1. Provider - AIG.
--------
2. Cost - Costs allocated to New Hillhaven on basis described in
----
Schedule 2.02(b).
3. FY 90 et seq. - Various state statutes may require separate
------------
coverages; costs and allocations to be determined; in states where NME self-
insures, New Hillhaven will reapply in its own name and renegotiate related
surety bonds.
<PAGE>
Schedule 2.02(b)
ALLOCATIONS RELATING TO POST-DISTRIBUTION
-----------------------------------------
DATE DOCUMENTS
--------------
1. Deductibles, Co-Insurance, Self-Insured Retentions
--------------------------------------------------
and Policy Limits
-----------------
(a) Each party shall bear the responsibility for deductibles,
co-insurance payments, self-insured retentions and payments in
excess of policy limits that are measured on a per occurrence
basis.
(b) In the event any aggregate deductible, coinsurance payment, self-
insured retention or policy limit is exceeded, such payments will
be reallocated in accordance with the procedures provided in
Schedule 1.03(c).
2. Workers Compensation
--------------------
Definition of Terms
-------------------
See Schedule 1.02(b).
Current Year Premiums
---------------------
The Current Year Premiums will be allocated to New Hillhaven
and billed monthly based on the following formula:
A) The allocation of AIG Premiums for the first six months of the current
Policy Period will be based on the percentage relationship of Hillhaven
Incurred Losses to NME Incurred Losses from the preceding Policy Period.
B) The Premium payment allocation for the last six months of the Policy Period
will be based on the
<PAGE>
percentage relationship of Hillhaven Incurred Losses to NME Incurred Losses
developed from the current year's actual Incurred Loss data through
November 30th of each Policy Period.
C) The percentage developed in B) above will be compared to the percentage
developed in A). Any difference from this comparison will be multiplied by
the total AIG Premiums paid through November 30th. Any amount due to or
from New Hillhaven as a result of this difference will be included in the
December allocation and billing to New Hillhaven.
D) The percentage of Hillhaven Incurred Losses to NME Incurred Losses through
April 30th will be compared to the percentage developed in B). Any
difference from this comparison will be multiplied by the total AIG
Premiums paid through May 31st. Any amount due to or from New Hillhaven as
a result of this difference will be included in the May allocation and
billing to New Hillhaven so that the total Current Year Premiums allocated
and billed to New Hillhaven will represent the percentage relationship of
Hillhaven Incurred Losses to NME Incurred Losses for the current Policy
Period.
<PAGE>
Retroactive Rate Adjustments
----------------------------
To be calculated and allocated by use of the formula provided in Schedule
1.02(b).
<PAGE>
EXHIBIT 10.36
----------------------------------------
EMPLOYEE AND EMPLOYEE BENEFITS AGREEMENT
dated as of January 31, 1990
between
NATIONAL MEDICAL ENTERPRISES, INC.
and
THE HILLHAVEN CORPORATION
----------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I ...................................................... 2
1.1. Definitions ........................................ 2
ARTICLE II Employee Benefit Plans .......................... 4
2.1. New Hillhaven Deferred Savings Plan ................ 4
2.2. Old Hillhaven Annuity Plan ......................... 4
2.3. NME Retirement Plan and NME ESOP ................... 4
ARTICLE III Executive and Incentive Compensation
Plans of New Hillhaven ........................ 5
3.1. New Hillhaven AIP .................................. 5
3.2. New Hillhaven LTIP ................................. 5
3.3. New Hillhaven Stock Incentive Plan ................. 5
3.4. New Hillhaven SERP ................................. 6
3.5. New Hillhaven DCMP ................................. 6
3.6. New Hillhaven Senior DCP ........................... 6
3.7. New Hillhaven Directors' Option Plan ............... 6
ARTICLE IV Executive and Incentive Compensation
Plans of NME and Old Hillhaven ................ 7
4.1. NME AIP ............................................ 7
4.2. NME LTIP ........................................... 7
4.3. NME Stock Incentive Plan ........................... 8
4.4. NME SERP ........................................... 9
4.5. Old Hillhaven Deferred Compensation Plan ........... 9
4.6. Old Hillhaven Short Term DCP ....................... 10
4.7. NME Deferred Compensation Plan ..................... 10
4.8. Excluded Employees ................................. 10
ARTICLE V Employee Welfare Benefit Plans .................. 10
5.1. New Hillhaven Welfare Plans ........................ 10
5.2. Welfare Benefits and Liabilities ................... 11
ARTICLE VI Indemnification ................................. 11
6.1. In General ......................................... 11
6.2. Procedures for Indemnification ..................... 11
ARTICLE VII Assumption of Liability ......................... 12
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE VIII No Acceleration of Benefit Entitlement
or Payment..................................... 12
ARTICLE IX Dispute Resolution Procedures.................... 13
ARTICLE X Miscellaneous.................................... 13
10.1. Entire Agreement; Amendment......................... 13
10.2. Access to Information............................... 14
10.3. No Right to Continued Employment.................... 14
10.4. No Third Party Beneficiaries........................ 14
10.5. Successors and Assigns.............................. 14
10.6. Notices............................................. 14
10.7. Termination......................................... 15
10.8. Counterparts........................................ 15
10.9. Governing Law....................................... 15
10.10. Construction........................................ 15
</TABLE>
<PAGE>
EMPLOYEE AND EMPLOYEE BENEFITS AGREEMENT, dated as of January 31,
1990, between NATIONAL MEDICAL ENTERPRISES, INC., a Nevada corporation ("NME"),
and THE HILLHAVEN CORPORATION, a Nevada corporation ("New Hillhaven") and a
wholly-owned subsidiary of The Hillhaven Corporation, a Tennessee corporation
("Old Hillhaven"), which in turn is wholly-owned by NME.
WHEREAS, NME and New Hillhaven have entered into a Reorganization and
Distribution Agreement (the "Distribution Agreement") providing for a
reorganization of certain of the businesses heretofore conducted by NME's long
term care group and a pro rata distribution to the holders of NME's capital
stock, as of the record date established by NME in connection therewith, of
approximately 85% of the outstanding shares of common stock, par value $0.15 per
share, of New Hillhaven (the "Distribution") on or about the date hereof;
WHEREAS, NME and New Hillhaven have determined that it is appropriate
and desirable for all of the employees (with certain exceptions) of Old
Hillhaven and its subsidiaries who are engaged in the business to be conducted
by New Hillhaven to become employees of New Hillhaven and for New Hillhaven to
assume any and all obligations of NME, Old Hillhaven and any of their
subsidiaries with respect to employee benefits, employee welfare and any other
matters relating to the compensation and employment of such New Hillhaven
Employees and all employees, past or present, of Old Hillhaven and its
subsidiaries, excluding certain persons or entities identified herein who are
not New Hillhaven Employees; and
WHEREAS, NME and New Hillhaven have determined that it is necessary
and desirable to make certain agreements regarding employee benefits, employee
welfare and other matters relating to the compensation and employment of New
Hillhaven Employees in order to effect such determinations in connection with
the above-mentioned transactions;
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained in this Agreement, the parties hereto hereby agree as
follows:
<PAGE>
ARTICLE I
1.1. Definitions.
-----------
Capitalized terms used in this Agreement shall have the meanings
herein specified. Capitalized terms that are used in this Agreement and which
are not defined herein shall have the meanings specified in the Distribution
Agreement.
"Agreement": this Employee and Employee Benefits Agreement, together
---------
with the Exhibits attached hereto, as the same may be amended from time to time
in accordance with the terms hereof.
"Code": the Internal Revenue Code of 1986, as amended, or any
----
successor legislation.
"Distribution Date": January 31, 1990.
-----------------
"ERISA": the Employee Retirement Income Security Act of 1974, as
-----
amended.
"New Hillhaven AIP": the Annual Incentive Plan of New Hillhaven for
-----------------
certain New Hillhaven employees.
"New Hillhaven DCMP": the New Hillhaven Deferred Compensation Master
------------------
Plan for certain New Hillhaven employees who generally are members of
management.
"New Hillhaven Deferred Savings Plan": the New Hillhaven Deferred
-----------------------------------
Savings Plan for certain non-highly compensated employees.
"New Hillhaven Directors' Option Plan": the New Hillhaven Directors'
------------------------------------
Stock Option Plan for members of the New Hillhaven Board of Directors who are
not New Hillhaven employees.
"New Hillhaven Employee" (hereinafter sometimes also called
----------------------
"Employee"): any individual who, immediately prior to the Distribution Date, was
employed by NME or Old Hillhaven or any of the Old Hillhaven Subsidiaries and
who, immediately after the Distribution Date, is employed by New Hillhaven or a
Subsidiary of New Hillhaven.
"New Hillhaven Employee Plans": the New Hillhaven AIP, the New
----------------------------
Hillhaven DCMP, the New Hillhaven LTIP, the New Hillhaven Senior DCP, the New
Hillhaven SERP, the New Hillhaven Stock Incentive Plan, the New Hillhaven
Welfare Plans, and each other employee benefit plan or arrangement, whether or
not subject to ERISA, to be maintained by New
2
<PAGE>
Hillhaven or a Subsidiary of New Hillhaven for the benefit of eligible New
Hillhaven employees.
"New Hillhaven LTIP": the Long Term Incentive Plan of New Hillhaven
------------------
for key executives of New Hillhaven.
"New Hillhaven Senior DCP": the New Hillhaven Senior Management
------------------------
Deferred Compensation Plan for certain highly compensated New Hillhaven
executives.
"New Hillhaven SERP": the New Hillhaven Supplemental Executive
------------------
Retirement Plan for certain highly compensated or managerial New Hillhaven
employees.
"New Hillhaven Stock Incentive Plan": the New Hillhaven 1990 Stock
----------------------------------
Incentive Plan for certain key New Hillhaven employees.
"New Hillhaven Welfare Plans": the "employee welfare benefit plans"
---------------------------
(as defined in ERISA Section 3(1)) to be established by New Hillhaven or
Subsidiaries of New Hillhaven for the benefit of their eligible employees in
accordance with Section 5.1(a).
"NME AIP": the NME Annual Incentive Plan for key employees of NME,
------
Old Hillhaven and other Subsidiaries of NME.
"NME Deferred Compensation Plan": the NME Deferred Compensation Plan
------------------------------
for certain employees of NME, Old Hillhaven and other Subsidiaries of NME.
"NME Employee Plans": the NME AIP, the NME LTIP, the Old Hillhaven
------------------
Deferred Compensation Plan, the Old Hillhaven Short Term DCP, the NME SERP,
the NME Stock Incentive Plan, the NME Deferred Compensation Plan, NME ESOP, NME
Retirement Plan and each other employee benefit plan or arrangement, whether or
not subject to ERISA, maintained by NME or Old Hillhaven for the benefit of its
eligible employees.
"NME ESOP": the NME Employee Stock Ownership Plan for certain
--------
participating facilities.
"NME LTIP": the NME Long Term Incentive Plan for certain key
--------
management employees of NME.
"NME Retirement Plan": the Employees' Retirement Plan of NME for
-------------------
certain participating facilities.
"NME SERP": the NME Supplemental Executive Retirement Plan for
--------
certain executive officers of NME and other management employees of NME.
3
<PAGE>
"NME Stock Incentive Plan": the NME 1983 Stock Incentive Plan for
------------------------
certain key employees of NME.
"Old Hillhaven Annuity Plan": the Old Hillhaven Individual Retirement
--------------------------
Annuity Plan which is a contributory individual retirement account available to
certain employees.
"Old Hillhaven Deferred Compensation Plan": the two Old Hillhaven
----------------------------------------
Corporation Deferred Compensation Plans, effective January 1, 1989, for certain
key management employees of Old Hillhaven, in the one case, and for certain
selected key management employees of Old Hillhaven, in the other case.
"Old Hillhaven Short Term DCP": the Old Hillhaven Short Term Deferred
----------------------------
Compensation Plan for certain selected key management employees of Old
Hillhaven.
ARTICLE II
Employee Benefit Plans
----------------------
2.1. New Hillhaven Deferred Savings Plan. New Hillhaven has adopted
-----------------------------------
the New Hillhaven Deferred Savings Plan, which shall be effective as soon as
practicable after the Distribution Date but in no event later than 60 days after
the Distribution Date. The New Hillhaven Deferred Savings Plan is in
substantially the form provided in Exhibit A hereto; provided, however, that
this Agreement may not be construed or interpreted to restrict New Hillhaven's
right or authority to amend or terminate the New Hillhaven Deferred Savings Plan
effective as of a date following the Distribution Date.
2.2. Old Hillhaven Annuity Plan. New Hillhaven has assumed the Old
--------------------------
Hillhaven Annuity Plan; provided, however, that this Agreement may not be
construed or interpreted to restrict New Hillhaven's right or authority to amend
or terminate such Plan effective as of a date following the Distribution Date.
2.3. NME Retirement Plan and NME ESOP. NME shall cause the NME
--------------------------------
Retirement Plan to be amended effective as of the Distribution Date to provide
for the continued coverage under the NME Retirement Plan of each of the Old
Hillhaven facilities covered under the NME Retirement Plan identified in Exhibit
K hereto immediately prior to the Distribution Date; provided, however, that no
individual employed in any such facility shall be entitled to participate in the
NME Retirement Plan during any period that such individual is
4
<PAGE>
employed as a Category I employee.
ARTICLE III
Executive and Incentive Compensation Plans of New Hillhaven.
-----------------------------------------------------------
3.1. New Hillhaven AIP.
-----------------
(a) New Hillhaven has adopted the New Hillhaven AIP, which shall be
effective as of the Distribution Date. The New Hillhaven AIP is in substantially
the form provided in Exhibit B hereto; provided, however, that this Agreement
may not be construed or interpreted to restrict New Hillhaven's right or
authority to amend or terminate the New Hillhaven AIP effective as of a date
following the Distribution Date.
(b) The New Hillhaven AIP has been approved by NME, as the
beneficial owner of all of the outstanding capital stock of New Hillhaven.
3.2. New Hillhaven LTIP.
------------------
(a) New Hillhaven has adopted the New Hillhaven LTIP, which shall be
effective as of the Distribution Date. The New Hillhaven LTIP is in
substantially the form provided in Exhibit C hereto; provided, however, that
this Agreement may not be construed or interpreted to restrict New Hillhaven's
right or authority to amend or terminate the New Hillhaven LTIP effective as of
a date following the Distribution Date.
(b) The New Hillhaven LTIP has been approved by NME, as the
beneficial owner of all of the outstanding capital stock of New Hillhaven.
3.3. New Hillhaven Stock Incentive Plan.
----------------------------------
(a) New Hillhaven has adopted the New Hillhaven Stock Incentive Plan,
which shall be effective as of the Distribution Date. The New Hillhaven Stock
Incentive Plan is in substantially the form provided in Exhibit D hereto;
provided, however, that this Agreement may not be construed or interpreted to
restrict New Hillhaven's right or authority to amend or terminate the New
Hillhaven Stock Incentive Plan effective as of a date following the Distribution
Date.
(b) The New Hillhaven Stock Incentive Plan has been approved by NME,
as the beneficial owner of all of the outstanding capital stock of New
Hillhaven.
5
<PAGE>
3.4. New Hillhaven SERP.
------------------
(a) New Hillhaven has adopted the New Hillhaven SERP, which shall be
effective as of the Distribution Date. The New Hillhaven SERP is in
substantially the form provided in Exhibit E hereto; provided, however, that
this Agreement may not be construed or interpreted to restrict New Hillhaven's
right or authority to amend or terminate the New Hillhaven SERP effective as of
a date following the Distribution Date.
(b) The New Hillhaven SERP has been approved by NME, as the
beneficial owner of all of the outstanding capital stock of New Hillhaven.
3.5. New Hillhaven DCMP.
------------------
(a) New Hillhaven has adopted the New Hillhaven DCMP, which shall be
effective as soon as practicable after the Distribution Date but in no event
later than 60 days after the Distribution Date. The New Hillhaven DCMP is in
substantially the form provided in Exhibit F hereto; provided, however, that
this Agreement may not be construed or interpreted to restrict New Hillhaven's
right or authority to amend or terminate the New Hillhaven DCMP effective as of
a date following the Distribution Date.
(b) The New Hillhaven DCMP has been approved by NME, as the
beneficial owner of all of the outstanding capital stock of New Hillhaven.
3.6. New Hillhaven Senior DCP.
------------------------
(a) New Hillhaven has adopted the New Hillhaven Senior DCP, which
shall be effective as soon as practicable after the Distribution Date but in no
event later than 60 days after the Distribution Date. The New Hillhaven Senior
DCP is in substantially the form provided in Exhibit G hereto; provided,
however, that this Agreement may not be construed or interpreted to restrict New
Hillhaven's right or authority to amend or terminate the New Hillhaven Senior
DCP effective as of a date following the Distribution Date.
(b) The New Hillhaven Senior DCP, has been approved by NME, as the
beneficial owner of all of the outstanding capital stock of New Hillhaven.
3.7. New Hillhaven Directors' Option Plan.
------------------------------------
(a) New Hillhaven has adopted the New Hillhaven Directors' Option
Plan, which shall be effective as of the Distribution Date. The New Hillhaven
Directors' Option Plan
6
<PAGE>
is in substantially the form provided in Exhibit H hereto; provided, however,
that this Agreement may not be construed or interpreted to restrict New
Hillhaven's right or authority to amend or terminate the New Hillhaven
Directors' Option Plan effective as of a date following the Distribution Date.
(b) The New Hillhaven Directors' Option Plan has been approved by
NME, as the beneficial owner of all of the outstanding capital stock of New
Hillhaven.
ARTICLE IV
Executive and Incentive Compensation Plans of NME and Old Hillhaven.
-------------------------------------------------------------------
4.1. NME AIP. NME shall take all action necessary (including
-------
amending the NME AIP, if required) to provide that with respect to any New
Hillhaven Employee who was a participant in the NME AIP on the Distribution
Date, no forfeiture of the right of such Employee to receive any NME AIP award
for the fiscal year ending May 31, 1990 shall occur by virtue of the transfer of
such Employee's employment with NME, Old Hillhaven or any Old Hillhaven
Subsidiary as effected by the Distribution, and such awards shall be paid to
such Employees by New Hillhaven after the end of such fiscal year. As of the
Distribution Date, NME shall (a) estimate prorated AIP awards for such New
Hillhaven Employees based upon the financial performance of Old Hillhaven and
its subsidiaries for the period beginning June 1, 1989 and ending on the
Distribution Date and (b) accrue an amount equal to such estimated prorated NME
AIP awards as a liability to be assumed by New Hillhaven in connection with the
Distribution.
4.2. NME LTIP. NME shall take all action necessary (including
--------
amending the NME LTIP, if required) to provide that (a) with respect to any New
Hillhaven Employee who was a participant on May 31, 1989 in Cycle V beginning
June 1, 1987 or Cycle VI beginning June 1, 1988 of the NME LTIP, (i) awards to
any such New Hillhaven Employee for such Performance Cycle (as such term is
defined in the NME LTIP) shall entail a cash award opportunity that is
equivalent to the cash award opportunity that would have been applicable to such
Employee for such Performance Cycle had the Distribution not occurred; (ii) with
respect to the cash award opportunities of New Hillhaven Employees for Cycle V
and Cycle VI, New Hillhaven shall establish a single transitional Performance
Cycle beginning on the Distribution Date and ending on May 31, 1991, which
transitional Performance Cycle shall provide for an interim pay-out following
May 31, 1990 based on cash award opportunities that are equivalent to
participants' cash award
7
<PAGE>
opportunities for Cycle V and a final pay-out following May 31, 1991 based on
cash award opportunities that are equivalent to participants' cash award
opportunities for Cycle VI and (iii) with respect to the pay-out Corresponding
to Cycle V following May 31, 1990, NME shall accrue, as a liability to be
assumed by New Hillhaven in connection with the Distribution, an amount
estimated by NME to be equal to the prorated awards that would have been earned
by New Hillhaven Employees who were participants in Cycle V of the NME LTIP
during the period beginning June 1, 1987 and ending on the Distribution Date and
(b) with respect to any New Hillhaven Employee who was a participant in Cycle
VII beginning June 1, 1989 of the NME LTIP as of the Distribution Date (i)
awards to any such New Hillhaven Employee for Cycle VII shall entail a cash
award opportunity that is equivalent to the cash award opportunity that would
have been applicable to such Employee for such Performance Cycle had the
Distribution not occurred and (ii) the pay-out under Cycle VII shall occur
following May 31, 1992. New Hillhaven shall assume the payment of the awards
specified in Sections 4.2(a) and (b) as of the Distribution Date, and, except as
provided in Section 4.2(a)(iii), the amounts payable under such awards shall be
based on New Hillhaven performance after the Distribution Date.
4.3. NME Stock Incentive Plan. NME shall take all action necessary
------------------------
(including obtaining the consent of holders of restricted share grants and stock
options and amending the NME Stock Incentive Plan, if required) to provide that
(a) any stock options issued to New Hillhaven Employees under the NME Stock
Incentive Plan which vest on or before the Distribution Date are exercisable
during the two-year period beginning on the Distribution Date, unless by their
terms they would expire sooner for reasons other than termination of employment,
in which case such period of exercisability shall extend only to such expiration
dates; (b) to the extent that restricted shares and stock options issued under
the NME Stock Incentive Plan and held by New Hillhaven Employees are scheduled
to vest after the Distribution Date, such restricted shares and stock options
shall be replaced as of the Distribution Date by New Hillhaven restricted shares
and New Hillhaven stock options, the fair market value of such New Hillhaven
restricted shares and New Hillhaven stock options being equal to the fair market
value of the restricted shares and stock options being replaced, with the
replacement restricted shares and the replacement stock options having
equivalent vesting schedules to the vesting schedules for the restricted stock
and the stock options being replaced and (c) with respect to the dividends
payable to holders of unvested NME restricted shares that are foregone by New
Hillhaven Employees as a result of the replacement of NME restricted shares with
New Hillhaven restricted shares, (i) NME will estimate the
8
<PAGE>
dollar amount of dividends foregone by each such New Hillhaven Employee based on
a consideration of NME's projected quarterly dividend rates and the number of
unvested NME restricted shares each such Employee would have held on each future
dividend payment date following the distribution Date were it not far the
replacement of unvested NME restricted shares with New Hillhaven restricted
shares and (ii) New Hillhaven restricted shares will be granted to each such
employee as of the Distribution Date, such that the aggregate fair market value
of each such Employee's grant will equal the estimated dollar amount of
dividends foregone as determined in Section 4.3(c)(i) and the vesting schedule
of each such Employee's grant will replicate the Vesting schedule of the
unvested NME restricted shares which would have been a basis for a dividend
payment to the Employee. The purchase price of New Hillhaven Common Stock under
the replacement stock options shall be equal to 50% of the fair market value of
the shares of New Hillhaven Common Stock Purchasable under such stock options.
For purposes of this Section 4.3, "fair market value" shall mean (i) for New
Hillhaven Common Stock, the fair Market value per share on the Distribution Date
as determined by the Board of Directors of NME or a committee thereof for
Purposes of adjusting the exercise price of outstanding NME Stock options or
convertible securities, as conclusively set forth in a certificate of the
Secretary or an Assistant Secretary of NME delivered to New Hillhaven as soon as
practicable after the Distribution Date, provided that if such fair market value
is less than $2 on such date, the fair market value shall be deemed to be $2 on
such date, and (ii) for NME Common Stock, the average of the reported last per
share sales price reguLar way on the Composite Tape of the New York Stock
Exchange for the ten consecutive trading days immediately preceding the record
date for the Distribution, provided that if such fair Market value exceeds $40,
the fair market value stall be deemed to be $40.
4.4. NME SERP. NME shall take all action necessary (including
--------
amending the NME SERP, if required) to provide that (a) all Nev Hillhaven
employees shall be terminated as participants in the NME SERP as at the
Distribution Date without any vesting of such Employees' benefits with respect
to the NME SERP and (b) all New Hillhaven Employees who are participants in the
NME SERP on the Distribution Date shall become participants in the New Hillhaven
SERP as of the Distribution Date, shall be provided with benefits identical to
their NME SERP benefits as of the Distribution Date and shall receive full
credit under the New Hillhaven SERP for years of credited service and vesting
earned under the NME SERP.
4.5. Old Hillhaven Deferred Compensation Plan. NME shall have
----------------------------------------
caused Old Hillhaven to take all action necessary (including amending the Old
Hillhaven Deferred
9
<PAGE>
Compensation Plan, if required) to provide that (a) such Plan shall have been
terminated effective no less than 30 calendar days prior to the Distribution
Date and (b) all vested and unvested balances under the Old Hillhaven Deferred
Compensation Plan shall have been paid to the participants under the Plan in
lump-sum cash payments no later than 22 calendar days after the Old Hillhaven
Deferred Compensation Plan was terminated.
4.6 Old Hillhaven Short Term DCP. NME shall have caused Old
----------------------------
Hillhaven to take all action necessary (including amending the Old Hillhaven
Short Term DCP, if required) to provide that (a) such Plan shall have been
terminated prior to the Distribution Date and (b) all balances under such Plan
shall be paid to the participants under the Plan in lump-sum cash payments on or
prior to the Distribution Date.
4.7 NME Deferred Compensation Plan. NME shall take all action
------------------------------
necessary to provide that all New Hillhaven Employees shall be terminated as
participants in the NME Deferred Compensation Plan as of the Distribution Date
and that all Participants' account balances, which consist of employee deferrals
under the Plan and accrued interest thereon, shall be paid out under the terms
of the Plan as soon as practicable following the Distribution Date.
4.8 Excluded Employees. Notwithstanding any other section of this
------------------
Agreement, the term "New Hillhaven Employee" shall be deemed not to include the
persons identified in Exhibit J hereto for the purposes of this Article IV.
ARTICLE V
Employee Welfare Benefit Plans
------------------------------
5.1 New Hillhaven Welfare Plans.
---------------------------
(a) New Hillhaven has adopted the New Hillhaven Welfare Plans, which
shall be effective as of the Distribution Date and which in material respects
are the same as the employee welfare benefit plans maintained by Old Hillhaven
for the benefit of Old Hillhaven employees as of the Distribution Date (the "Old
Hillhaven Welfare Plans"); provided, however, that this Agreement may not be
construed or interpreted to restrict New Hillhaven's right or authority to amend
or terminate the New Hillhaven Welfare Plans effective as of a date following
the Distribution Date.
(b) In the case of any New Hillhaven Employee or any dependent of
such person who was covered under a
10
<PAGE>
corresponding Old Hillhaven Welfare Plan immediately prior to the date on which
the New Hillhaven Employee became a New Hillhaven Employee, the New Hillhaven
Welfare Plans shall not deny or restrict coverage or benefits based on length of
service, pre-existing conditions or other provisions which would not have
restricted or denied coverage or benefits for such individual had such
individual continued to participate in the Old Hillhaven Welfare Plans.
5.2. Welfare Benefits and Liabilities. New Hillhaven shall assume
--------------------------------
and shall be solely responsible for all claims incurred before, on or after the
Distribution Date in connection with the New Hillhaven Welfare Plans by
individuals who are New Hillhaven Employees, including dependents thereof.
Neither NME or Old Hillhaven nor any affiliate of NME or Old Hillhaven shall
have any liability in connection with the New Hillhaven Welfare Plans arising
out of any such claims on or after the Distribution Date.
ARTICLE VI
Indemnification
---------------
6.1. In General. Each party hereto or any of the Subsidiaries of
----------
each such party to whom certain responsibilities and liabilities have been
allocated hereunder (the "Indemnifying Party") shall indemnify, defend and hold
harmless each other party and any such Subsidiary of such party (the
"Indemnitee"), including the Indemnitee's respective directors, officers,
employees, agents and Affiliates (and the heirs, executors, successors and
assigns of any of the foregoing) from and against any and all losses,
liabilities, claims, damages, obligations, payments, costs and expenses, matured
or unmatured, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, known or unknown (including, without limitation, the costs and
expenses of any and all Actions, threatened Actions, demands, assessments,
judgments, settlements and compromises relating thereto and attorneys' fees and
any and all expenses whatsoever reasonably incurred in investigating, preparing
or defending against any such Actions or threatened Actions) arising out of or
due to the failure or alleged failure of the Indemnifying Party to pay, perform
or otherwise discharge in due course any of its responsibilities or liabilities.
6.2. Procedures for Indemnification. The procedures for
------------------------------
indemnification set forth in the Distribution Agreement are incorporated herein
by reference.
11
<PAGE>
ARTICLE VII
Assumption of Liability
-----------------------
New Hillhaven shall, effective as of the Distribution Date, assume and
be solely responsible for all liabilities, obligations, claims and payments,
matured or unmatured, known or unknown, absolute or contingent, accrued or
unaccrued, arising out of this Agreement and the transactions contemplated
thereby, including without limitation all liabilities, obligations, claims and
payments, matured or unmatured, known or unknown, absolute or contingent,
accrued or unaccrued, in respect of claims made by or on behalf of New Hillhaven
Employees and any employees, past or present, of Old Hillhaven or a Subsidiary
of Old Hillhaven, excluding the persons or entities identified in Exhibit I
hereto who are not New Hillhaven Employees and excluding the persons identified
in Exhibit J hereto with respect to claims made in connection with the
employment of any such person with NME, relating to acts or omissions arising
before, on or after the Distribution Date, including but not limited to claims,
grievances or disputes concerning wrongful termination, Title VII of the Civil
Rights Act of 1964, the Age Discrimination in Employment Act, the Consolidated
Omnibus Budget Reconciliation Act, ERISA, the Fair Labor Standards Act or any
other similar federal or state employee-related statute which could give rise
to an employer liability.
ARTICLE VIII
No Acceleration of Benefit Entitlement or Payment.
-------------------------------------------------
Any person who is an employee of Old Hillhaven or any Old Hillhaven
Subsidiary (excluding the persons or entities identified in Exhibit I hereto)
immediately prior to the Distribution shall be an employee of New Hillhaven or a
Subsidiary of New Hillhaven immediately after the Distribution, and, except as
provided in Sections 4.5, 4.6 and 4.7 with respect to the Old Hillhaven Deferred
Compensation Plan, the Old Hillhaven Short Term DCP and the NME Deferred
Compensation Plan, and except as provided by the terms of the NME Retirement
Plan and the NME ESOP, to the extent permitted by law, each of the pension and
welfare and other plans and benefit arrangements, policies and practices of NME
or Old Hillhaven shall be amended to provide that a transfer of any such
employee's employment with Old Hillhaven or any Old Hillhaven Subsidiary to New
Hillhaven or a Subsidiary of New Hillhaven as effected by the Distribution shall
not be deemed to be a termination of employment or separation from service or
other event giving
12
<PAGE>
rise to an entitlement or payment under any such plan, arrangement, policy or
practice.
ARTICLE IX
Dispute Resolution Procedures
-----------------------------
All disputes arising out of or relating to this Agreement shall be
resolved pursuant to the reference procedure set forth in California Code of
Civil Procedure Sections 638 et seq. The parties hereby agree to submit to the
-- ---
jurisdiction of the Superior Court of the County of Los Angeles, State of
California (the "Superior Court") for such purpose. Either party may initiate
the procedure set forth in this Article by providing the other party with notice
setting forth the nature of the dispute (the "Reference Notice"). The parties
shall designate to the Superior Court a referee who is an active attorney or
retired judge living in the County of Los Angeles who shall resolve the dispute.
If the parties are unable to designate a referee within 20 days after the
receipt of the Reference Notice, the parties shall request that the Superior
Court appoint a referee. In connection with any proceeding pursuant to this
Article, the parties shall have all discovery rights which would have been
available had the matters which are the subject of the dispute been decided by
the Superior Court. Discovery proceedings may be noticed and commenced
immediately after delivery of the Reference Notice. The hearing before the
referee shall begin no later than 60 days after the receipt of the Reference
Notice. All discovery in connection with the reference proceeding shall be
concluded no later than 15 days prior to the commencement of the hearing.
Judgment upon the award rendered by the referee shall be entered in the Superior
Court. Nothing in this Article shall be construed to impair the right of either
party to appeal from such judgment.
ARTICLE X
Miscellaneous
-------------
10.1. Entire Agreement; Amendment. This Agreement and the other
---------------------------
agreements referred to herein or therein or entered into in connection herewith
or therewith set forth the entire agreement and understanding of the parties
with respect to the transactions contemplated hereby and supersede all prior
agreements, arrangements and understandings relating to the subject matter
hereof. No representation, promise, inducement or statement of intention has
been made by either party hereto which is not embodied in this Agreement or such
other agreements, the
13
<PAGE>
Annexes, Schedules or Exhibits hereto or thereto, or the written statements or
other documents delivered pursuant hereto or thereto, and neither party hereto
shall be bound by or liable for any alleged representation, promise, inducement
or statement of intention not so set forth. This Agreement may be amended or
modified only by a written instrument executed by both parties hereto or by
their successors and permitted assigns.
10.2. Access to Information. NME and New Hillhaven shall each
---------------------
cooperate with the other and each agree to provide the other with such
information as may be reasonably requested and necessary in order effectively to
administer and maintain the NME Employee Plans and the New Hillhaven Employee
Plans and the undertakings contemplated herein.
10.3. No Right to Continued Employment. Nothing herein shall be
--------------------------------
construed to confer upon any New Hillhaven Employee any right to be retained in
the employ of New Hillhaven or any Subsidiary of New Hillhaven.
10.4. No Third Party Beneficiaries. This Agreement is solely for the
----------------------------
benefit of the parties hereto and their respective Subsidiaries and Affiliates
and should not be deemed to confer upon third parties any remedy, claim,
liability, reimbursement, claim of action or other right in excess of those
existing without reference to this Agreement.
10.5. Successors and Assigns. This Agreement and all of the
----------------------
provisions hereof shall be binding upon and inure to the benefit of the parties
hereof and their respective successors and permitted assigns.
10.6. Notices. All notices, consents, requests, instructions,
-------
approvals and other communications hereunder shall be in writing and shall be
deemed to have been duly given, if delivered in person or by courier,
telegraphed, telexed or sent by facsimile transmission or mailed, by certified
or registered mail, postage prepaid at the following address (or at such other
address provided by one party to the other in writing):
If to NME:
National Medical Enterprises, Inc.
2700 Colorado Avenue
Santa Monica, California 90904
Telecopy no.: (213) 315-6567
Attention: Senior Vice President,
Human Resources
14
<PAGE>
with a copy to:
National Medical Enterprises, Inc.
2700 Colorado Avenue
Santa Monica, California 90904
Telecopy no.: (213) 315-6688
Attention: General Counsel
If to New Hillhaven:
The Hillhaven Corporation
1148 Broadway Plaza
Tacoma, Washington 98401-2264
Telecopy no.: (206) 756-4714
Attention: President
with a copy to:
The Hillhaven Corporation
1148 Broadway Plaza
Tacoma, Washington 98401-2264
Telecopy no.: (206) 756-4714
Attention: General Counsel
10.7. Termination. This Agreement may be terminated in the event
-----------
that the Distribution Agreement is terminated and the Distribution abandoned
prior to the Distribution Date. In the event of such termination, no party shall
have any liability of any kind to the other party.
10.8. Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitute but one and the same agreement.
10.9. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of California.
10.10. Construction. In this Agreement,
------------
(i) unless the context otherwise requires, the terms "herein,"
"hereof," "hereto," and "hereunder" refer to this Agreement; and
(ii) the headings of the sections and subsections hereof and the
table of contents hereof are inserted for convenience only and do not
constitute a part of this Agreement.
15
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
NATIONAL MEDICAL ENTERPRISES,
INC.
By: /s/ Marcus E. Powers
-----------------------------
Name: MARCUS E. POWERS
Title: SENIOR VICE PRESIDENT
THE HILLHAVEN CORPORATION
By: /s/ Christopher J. Marken
-----------------------------
Name: CHRISTOPHER J. MARKEN
Title: PRESIDENT
<PAGE>
EXHIBIT I
EXCLUDED PERSONS
AND ENTITIES
----------------
Persons:
Daniel P. Baty*
Martin Bradford
Deborah L. Carlson
Patrick Carter
Laura A. Ficke
David R. Mayeux
Timothy M. McCoy
Timothy L. Pullen
Marvin Wilensky*
Employees of the Following Entities:
Medical Ambulatory Care, Inc.
AK, Inc.
________________________
*Notwithstanding the provisions of this Agreement, liabilities with respect to
these employees will be assumed by New Hillhaven to the extent described in
Exhibit B of the Assignment and Assumption Agreement, dated as of January 31,
1990, between the subsidiaries of NME signatories thereto, on the one hand, and
New Hillhaven, on the other hand.
<PAGE>
EXHIBIT J
EXCLUDED EMPLOYEES
------------------
Mr. Richard K. Eamer
Mr. Leonard Cohen
<PAGE>
EXHIBIT K
COVERED OLD HILLHAVEN FACILITIES
--------------------------------
1. Alvarado Convalescent and Rehabilitation Hospital
San Diego, California
2. Hillhaven Health Care Center
Monterey Park, California
3. Fifth Avenue Convalescent Hospital
San Rafael, California
4. Hillside Manor Convalescent Hospital
San Rafael, California
5. Pine Towers Convalescent Hospital
San Francisco, California
6. Hillhaven Victorian
San Francisco, California
7. Pasatiempo Development
Tacoma, Washington
<PAGE>
EXHIBIT 10.37
ASSIGNMENT AND ASSUMPTION OF LEASE AGREEMENT
--------------------------------------------
ASSIGNMENT AND ASSUMPTION OF LEASE AGREEMENT (this "Agreement") dated
as of January 31, 1990 between the subsidiary of National Medical Enterprises,
Inc. ("NME") signatory hereto ("Assignor") and the subsidiary of The Hillhaven
corporation, a Nevada corporation ("New Hillhaven"), signatory hereto
("Assignee").
WHEREAS, NME and New Hillhaven have entered into a Reorganization and
Distribution Agreement providing for a reorganization of certain of the
businesses heretofore conducted by NME's long term care group and a pro rata
distribution to the holders of NME's capital stock, as of the record date
established by NME in connection therewith, of approximately 85% of the
outstanding shares of common stock, par value $0.15 per share, of New Hillhaven
(the "Distribution") on or about January 31, 1990; and
WHEREAS, Assignor is the tenant under that certain lease described in
Exhibit A attached hereto wherein Assignor leased that certain real property
described in Exhibit B attached hereto (the "Lease") and, in connection with the
Distribution, Assignor desires to assign all of its interest under the Lease
except for certain rights to renew or extend the term of the Lease and Assignee
desires to assume all of Assignor's obligations thereunder.
NOW, THEREFORE, the parties agree as follows:
1. Assignment of Lease. Assignor hereby assigns to Assignee all of
-------------------
the interest of Assignor in the Lease; provided, however, Assignor shall retain
-------- -------
all rights, if any, to renew or extend the term of the Lease to the extent set
forth in Exhibit C hereto.
2. Assumption of Lease Obligations. Assignee hereby assumes all of
-------------------------------
the obligations of Assignor under the Lease arising after the date hereof.
3. Further Assurances. Assignor and Assignee agree, from time to
------------------
time upon request therefor, to execute and deliver to the other party any
confirmatory instruments and perform any other acts which the other party may
<PAGE>
reasonably request in order to carry out the purposes of this Agreement.
4. Notices. All notices, consents,requests, instructions, approvals
-------
and other communications hereunder shall be in writing and shall be deemed to
have been duly given, if delivered in person or by courier, telegraphed, telexed
or by facsimile transmission or mailed, by certified or registered mail, postage
prepaid at the following address (or at such other address provided by one party
to the other party in writing):
[Name of Assignor]
c/o National Medical
Enterprises, Inc.
2700 Colorado Avenue
P.O. box 4070
Santa Monica, California 90404
Telecopy No.: (213) 315-8329
Attention: President
with a copy to: National Medical Enterprises, Inc.
2700 Colorado Avenue
P.O. Box 4070
Santa Monica, California 90404
Telecopy No.: (213) 315-6688
Attention: General Counsel
If to Assignee: [Name of Assignee]
c/o The Hillhaven Corporation
1148 Broadway Plaza
Tacoma, Washington 98401-4901
Telecopy No.: (206) 756-4743
Attention: President
with a copy to: The Hillhaven Corporation
1148 Broadway Plaza
Tacoma, Washington 98401-4901
Telecopy No.: (206) 756-4845
Attention: General Counsel
5. Successors and Assigns. This Agreement and all of the provisions
----------------------
hereof shall be binding upon and inure to the benefit of the parties and their
respective successors and permitted assigns, except that Assignee may not assign
or transfer any of its rights or obligations under this Agreement without the
prior written consent of Assignor.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
[Name of Assignor]
By ________________________________
Name:
Title:
[Name of Assignee]
By ________________________________
Name:
Title:
GUARANTY
--------
Performance of the obligations of Assignee pursuant to the above
Agreement is hereby irrevocably and unconditionally guaranteed by the
undersigned as primary obligor.
The Hillhaven Corporation,
(a Nevada corporation)
By ________________________________
Name:
Title:
3
<PAGE>
EXHIBIT 10.38
------------------------------------------------------------------
MANAGEMENT AGREEMENT
dated as of January 31, 1990
between
FIRST HEALTHCARE CORPORATION
and
[OWNER]
------------------------------------------------------------------
<PAGE>
MANAGEMENT AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 1. Retention of Managers............................. 2
Section 2. Responsibilities of Manager....................... 2
A. Employees............................................ 2
B. Fiscal Year; Budgets................................. 3
C. Bank Accounts; Payment of Facility Expenses;
Distribution of Facility Net Cash Flow............. 4
D. Operational Policies................................. 6
E. Charges.............................................. 6
F. Information.......................................... 7
G. Certification........................................ 7
H. Capital Equipment and Improvements................... 7
I. Supplies and Non-Capital Equipment................... 3
J. Ancillary Services................................... 8
K. Legal Matters........................................ 9
L. Bookkeeping and Accounting........................... 9
M. Collection of Accounts............................... 10
N. Reports.............................................. 10
O. Insurance............................................ 10
Section 3. Term; Termination................................. 11
Section 4. Management Fees................................... 13
A. Basic Management Fee................................. 13
B. Expense Reimbursement................................ 13
C. Incentive Fee........................................ 14
D. Late Charges......................................... 15
E. Method of Payment.................................... 16
F. Determination of Incentive Fee for Fiscal
Year Ending May 31, 1990........................... 16
Section 5. Proprietary Interest.............................. 17
Section 6. No Guaranty of Profitability...................... 17
Section 7. Owner Inspection.................................. 17
Section 8. Maintenance of Minimum Bank Balance............... 17
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 9. Default........................................... 18
A. By Manager........................................... 18
B. By Owner............................................. 19
Section 10. Remedies Upon Default............................ 21
A. Remedies of Manager.................................. 21
B. Remedies of Owner.................................... 21
C. Rights Cumulative; No Waiver......................... 22
D. Dispute Resolution Procedures........................ 22
Section 11. Miscellaneous.................................... 24
A. Relationship of the Parties; Disclaimer of
Liability; Indemnification......................... 24
B. Assignment; Binding Effect........................... 24
C. Entire Agreement; Amendment.......................... 25
D. Notices.............................................. 25
E. Representatives...................................... 26
F. Attorney's Fees...................................... 27
G. Construction......................................... 27
H. Legal Enforceability................................. 27
I. Counterparts......................................... 28
J. Governing Law........................................ 28
</TABLE>
ii
<PAGE>
MANAGEMENT AGREEMENT
This MANAGEMENT AGREEMENT (the "Agreement") dated as of January 31,
1990, between First Healthcare Corporation, a Delaware corporation ("Manager"),
and _______________________, a ________________ corporation ("Owner").
WITNESSETH:
----------
WHEREAS, National Medical Enterprises, Inc., a Nevada corporation
("NME"), and The Hillhaven Corporation, a Nevada corporation ("New Hillhaven"),
are, as of the date hereof, entering into a Reorganization and Distribution
Agreement providing for a reorganization of certain of the businesses heretofore
conducted by NME's long term care group and a pro rata distribution to the
holders of NME's common stock, as of the record date established by NME in
connection therewith, of approximately 85% of the outstanding shares of capital
stock of New Hillhaven on or about January 31, 1990 (the "Distribution Date");
and
WHEREAS, Manager, as of the Distribution Date will be a wholly-owned
subsidiary of New Hillhaven;
WHEREAS, Owner has been managing the long term care facility described
below and Owner wishes Manager to continue to so manage said facility;
WHEREAS, Owner owns the license to operate that certain long term care
facility known as __________ and
<PAGE>
located at __________ (the "Facility") and has the sole right to operate the
same;
WHEREAS, the Facility is located in proximity to an acute care
hospital (the "Hospital") the license relating to which is owned by Owner or an
affiliate of Owner;
WHEREAS, Manager is an experienced and qualified manager in the field
of nursing home management; and
WHEREAS, Owner desires to engage Manager, and Manager desires, to
manage the Facility pursuant to the terms and conditions set forth herein.
NOW THEREFORE, for and in consideration of the premises and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Retention of Manager. Owner hereby retains Manager to provide
--------------------
management services in connection with the Facility under the terms and
conditions set forth herein.
2. Responsibilities of Manager. During the Term, as defined below,
---------------------------
Manager shall provide the following management, consulting and advisory services
to Owner in connection with the operation of the Facility:
A. Employees. Subject to Owner's review and approval, which
---------
approval shall not be unreasonably withheld or delayed, Manager shall
recruit, select, employ, train, direct, promote and terminate all
2
<PAGE>
Facility personnel including the Administrator and Director of Nursing;
establish the salary levels, personnel policies and employee benefits with
respect thereto; and establish employee performance standards as needed
during the Term to ensure the efficient operation of all departments within
and services offered by the Facility. Manager shall be responsible for the
payment of employee payroll, benefits and related employee expenses
(including payroll taxes) as part of Facility operating expenses (payable
out of Facility funds) and the distribution of employee income tax
withholding forms at year end.
B. Fiscal Year; Budgets. The fiscal year for the Facility shall
--------------------
be June l through May 31. At least forty-five (45) days prior to the start
of each fiscal year, Manager shall prepare and submit to Owner for its
review and approval, which approval shall not be unreasonably withheld or
delayed, an annual operating budget and an annual capital expenditure
budget for the following year (collectively, the "Budgets"). In addition,
Manager shall concurrently prepare and submit to Owner for its review and
approval, which approval shall not be unreasonably withheld or delayed,
budget projections for the two years following such annual Budgets.
Representatives of Owner and Manager shall meet promptly thereafter to
3
<PAGE>
resolve any disagreements concerning such Budgets and projections.
Thereafter, Manager shall be entitled to make or to commit Owner to make
expenditures which are reflected in the Budgets or which are not expected
to result in total "routine" expenses accrued during the then current
fiscal year exceeding the budgeted amount therefor by 5% or more (the
"Budget Threshold"). Except for emergency repairs referred to in Section
2H. hereof, any unbudgeted expenditures and/or expenditures in excess of
the Budget Threshold shall be subject to Owner's approval, which
approval shall not be unreasonably withheld or delayed.
Notwithstanding the foregoing, Manager shall have the right to
propose reasonable adjustments to the budget applicable to the fiscal year
ending May 31, 1990, which adjustments Owner may in its reasonable
discretion implement to the extent feasible.
C. Bank Accounts; Payment of Facility Expenses; Distribution of
------------------------------------------------------------
Facility Net Cash Flow. Manager shall, consistent with its current banking
----------------------
arrangements, open and maintain a checking account(s) in the name of Owner
and/or the Facility, as appropriate, for the benefit and account of Owner
in a bank of Owner's selection and shall deposit therein all moneys
received in the course of the operation of the Facility. Manager shall be
responsible for the payment
4
<PAGE>
of, and shall pay for the benefit of Owner, all expenses incurred in the
operation of the Facility, including, but not limited to, payment of
payroll, benefits and related employee expenses, repayment of working
capital loans and the interest thereon, and Facility debt service payments,
all of which shall be paid by check drawn on such accounts. Manager shall
apply revenues derived from the Operation of the Facility in the following
order:
(i) Subject to the provisions of Section 4E. hereof,
payment of Facility operating expenses (which shall include any and
all costs, expenses or fees associated with the operation of the
Facility) other than debt service.
(ii) Payment of Facility debt service expenses, including
working capital loans, if any.
(iii) Deposit into bank account(s) to satisfy the
requirements of Section 8 hereof.
(iv) The balance of the cash, if any, to Owner.
Within 5 days after each month end, Manager will furnish to
Owner a statement setting forth in reasonable detail all facility expenses,
payments and cash flows for the prior month. Any shortfalls in cash for
such period shall be promptly remitted by Owner to Manager, and any excess
cash for such period shall be
5
<PAGE>
promptly remitted by Manager to Owner, in each case without interest
thereon. Owner will advance to Manager prior to the expiration of the first
month of the Term an amount of cash equal to the shortfall projected by
Manager to result from facility operations for such period. Notwithstanding
the foregoing, Owner may, at its option, elect to settle daily any
shortfall in cash or excess cash on the basis of information provided to
Owner by Manager.
D. Operational Policies. Subject to Owner's prior written
--------------------
approval, which approval shall not be unreasonably withheld or delayed,
Manager shall develop all admissions and operational polices and procedures
necessary to establish and maintain the standard of patient care
appropriate for the Facility. Manager shall accept patients from the
Hospital consistent with the standard of patient care which the Facility
can provide.
E. Charges. Subject to Owner's prior written approval, which
-------
approval shall not be unreasonably withheld or delayed, manager shall
establish the schedules of recommended charges, including any and all
special charges for services rendered to patients and residents of the
Facility.
F. Information. Subject to Owner's prior written approval,
-----------
which approval shall not be
6
<PAGE>
unreasonably withheld or delayed, Manager may develop any necessary
informational material, mass media releases and other related publicity
materials in connection with the Facility.
G. Certification. Manager shall use its best efforts to obtain
-------------
and maintain in the name of Owner or Manager, as appropriate under
applicable federal or state law, and at the expense of Owner (i)
certification of the Facility as a provider of services under Title XVIII
(Medicare) and/or XIX (Medicaid) of the Social Security Act, and (ii)
licensure of the Facility as a long term care facility under all applicable
federal and state laws.
H. Capital Equipment and Improvements. Manager shall advise
----------------------------------
Owner as to capital equipment and improvements of the Facility which are
needed to maintain certification and licensure, to maintain or upgrade the
quality of the Facility and said equipment, or to replace obsolete or run-
down equipment. Owner shall review and act upon (which action may include a
rejection thereof) Manager's recommendations as expeditiously as possible.
Subject to Owner's prior written approval for any capital expenditure
in excess of $25,000, Manager shall make all necessary and approved
repairs, replacements and maintenance within the budgetary limits set forth
in the annual capital
7
<PAGE>
expenditure budget prepared by Manager pursuant to Section 2B. hereof.
Notwithstanding any contrary provisions in this Agreement, Manager shall be
entitled, without Owner's consent, to make or commit Owner to make
unbudgeted expenditures and/or expenditures in excess of the Budget
Threshold for the purposes of emergency repairs involving manifest danger
to persons or property or required to avoid suspension of any necessary
service at the Facility.
I. Supplies and Non-Capital Equipment. Manager shall purchase
----------------------------------
supplies and non-capital equipment needed to operate the Facility within
the budgetary limits set forth in the annual operating budget prepared by
Manager pursuant to Section 2B. hereof. Manager shall purchase such
supplies and non-capital equipment from vendors covered by Owner's or
Manager's existing national purchasing agreements unless Owner approves in
advance purchases from other sources.
J. Ancillary Services. Subject to Owner's prior written
------------------
approval, which approval shall not be unreasonably withheld or delayed,
Manager shall negotiate for the provision of necessary ancillary services
through qualified contractors and shall review and analyze the performance
of said ancillary services contractors, on an ongoing basis, and, if
necessary,
8
<PAGE>
shall negotiate additional or alternative contractual arrangements
therefor. Where economically practical and to the extent permitted by law,
Manager shall endeavor to utilize ancillary services provided by Owner and
other providers related to Owner, including any such services provided
pursuant to the Services Agreement dated as of January 31, 1990 between NME
and New Hillhaven.
K. Legal Matters. Manager shall, through Manager's legal
-------------
counsel, coordinate all legal matters and proceedings with Owner's counsel.
Except for disputes between Owner and Manager, Owner shall reimburse
Manager for the reasonable cost of Manager's outside counsel. Manager shall
obtain Owner's written approval, which approval shall not be unreasonably
withheld or delayed, prior to commencing any legal action in any court in
Owner's name or on Owner's behalf. Owner and Manager shall cooperate with
one another in connection with any such legal matter or proceeding.
L. Bookkeeping and Accounting. Manager shall provide
--------------------------
bookkeeping and accounting procedures necessary for the operation of the
Facility and the preparation of proper financial records. Bookkeeping and
accounting procedures and systems shall be in accordance with the operating
capital and cash programs
9
<PAGE>
developed by Manager, which programs shall conform to generally accepted
accounting principles consistently applied.
M. Collection of Accounts. Manager shall issue bills and
collect accounts and monies owed for services and materials furnished by
the Facility, and shall be entitled to enforce the rights of Owner or the
Facility as creditor under any contract or in connection with the rendering
of any services; provided, however, that any expenses incurred by Manager
-------- -------
in so doing shall be treated as Facility operating expenses, which shall be
payable out of Facility funds.
N. Reports. Manager shall prepare and provide to Owner in a
-------
timely manner any reasonable operational and financial information and
reports which may from time to time be specifically requested by Owner. The
Chief Executive Officer of the Hospital and the Facility Administrator
shall endeavor to meet at least monthly in order to discuss the business
and operation of the Facility.
O. Insurance. Owner, at its own expense, shall obtain and
---------
maintain all necessary insurance coverage pertaining to the Facility and
its operations for the mutual protection of Owner, Manager, employees of
the Facility and volunteers of the Facility,
10
<PAGE>
provided that if Manager is able to procure any such insurance coverage at
lesser expense than that to be incurred by Owner, Manager will so advise
Owner and undertake to obtain such insurance at Owner's expense. Such
insurance shall include, but not be limited to, property damage insurance
covering the Facility and the furniture, fixtures and equipment situated
therein, and comprehensive general liability and professional liability
insurance. Such insurance shall be in such amounts, in such form and
written by such carriers reasonably selected by Owner. Such insurance shall
designate Manager as an additional insured and shall provide for written
notice to Manager at assayed 15 days prior to cancellation or material
modification. Owner shall provide Manager with annual certificates
evidencing such insurance. Manager shall cooperate with and assist Owner in
obtaining necessary information for insurance purposes.
3. Term; Termination. The initial term of this Agreement (the
-----------------
"Term") shall commence on the day after the Distribution Date and continue until
May 31, 1990, and thereafter for a period of one year commencing June l, 1990,
unless earlier terminated as herein provided. This Agreement shall automatically
renew annually for additional terms of one year each commencing each succeeding
June 1. Notwithstanding anything to the contrary contained herein,
11
<PAGE>
Owner shall be entitled to terminate this Agreement (a) on May 31, 1991 and (b)
at any time after May 31, 1992, in either case upon at least 90 days' prior
written notice; provided, however, that upon any termination of this Agreement
-------- -------
by Owner other than for cause, Owner shall pay to Manager upon termination a fee
equal to the product of three multiplied by the average monthly Basic Fee
computed pursuant to Section 4 hereof for the three full months immediately
preceding the termination of this Agreement. Manager shall be entitled to
terminate this Agreement at any time after May 31, 1992 upon at least 90 days'
prior written notice. Upon any termination of this Agreement for any reason
Manager and Owner, as the case may be, will cooperate in the orderly transfer of
employees of the Facility so as to limit or avoid liability for severance pay
whenever possible. For all employees of the Facility, other than the
Administrator and the Director of Nursing, Owner will assume the liabilities and
expenses related to employee terminations by Manager. For the Administrator and
the Director of Nursing, Manager will assume all liabilities and expenses
related to termination of the employment of such persons by Manager. Upon any
termination of this Agreement for any reason, Manager shall assist Owner with an
orderly transition of the Facility's operations.
12
<PAGE>
4. Management Fees. For services performed hereunder, Owner shall
---------------
pay to Manager the following:
A. Basic Management Fee. Commencing with the commencement of
--------------------
Facility operations, Owner shall pay to Manager a basic monthly management
fee ("Basic Fee") equal to five and one-half percent (5-1/2%) of the Net
Revenues generated during the immediately preceding month. "Net Revenues"
shall mean all revenues generated by the Facility, less revenue deductions
which include all contractual allowances to third-party payors and write-
offs of bad debts. If the services of Manager commence or terminate other
than on the first day of a month, the compensation set forth in this
Section 4A. shall be prorated for the number of days for which services
are actually rendered.
B. Expense Reimbursement. Owner shall reimburse Manager for the
---------------------
following items:
(i) Salary, benefits and related employee expenses payable with
respect to all Facility personnel including the
Administrator and Director of Nursing;
(ii) Out-of-pocket travel and other expenses incurred by the
Administrator and Director of Nursing and other employees or
agents of Manager in connection with the performance of its
obligations
13
<PAGE>
hereunder, all in accordance with the Budgets; and
(iii) Any other items set forth in this Agreement as reimbursable
items.
C. Incentive Fee. In addition to the amounts payable hereunder,
-------------
Owner shall pay an annual incentive fee ("Incentive Fee") to Manager as
follows: after the end of each fiscal year of the Term, actual net income
(loss) for such fiscal year shall be compared against net income (loss)
projected in the Budgets for such year, and Manager shall be entitled to an
Incentive Fee equal to the product of the relevant amount set forth in
Column (C) below multiplied by the aggregate Basic Fee for such year.
Manager shall furnish to Owner a statement within 60 days after the close
of the fiscal year, setting forth in reasonable detail the calculations by
which the Incentive Fee for such year has been derived. Owner shall pay the
Incentive Fee to Manager within thirty days after the receipt of such
statement unless Owner contests the amount of, or basis for deriving, such
Incentive Fee.
14
<PAGE>
<TABLE>
<CAPTION>
(A) (B) (C)
Actual Net Income Actual Net Loss
as a Percentage of as a Percentage of
Budgeted Net Income Budgeted Net Loss Incentive Fee
- ------------------- ------------------ -------------
<S> <C> <C>
less than 90% less than -0-
91% or equal to 110% 1%
92% 109% 2%
93% 108% 3%
94% 107% 4%
95% 106% 5%
96% 105% 6%
97% 104% 7%
98% 103% 8%
99% 102% 9%
101%
more than
or equal
to 100% less than 100% 10%
</TABLE>
In addition to the amount of Incentive Fee determined above, if
actual net income exceeds budgeted net income, or if the actual net loss is
less than the budgeted net loss, for such fiscal year, Manager shall also
be entitled to additional Incentive Fee in an amount equal to 20%
multiplied by the difference between actual net income (loss) minus
budgeted net income (loss). If unanticipated transfers from the Hospital to
the Facility of residents whose care requirements exceed those of nursing
home residents generally cause the Facility's actual net income (loss) to
be less (greater) than budgeted net income (loss), the parties will discuss
good faith adjustments, in order to preserve Manager's ability to earn an
incentive fee.
D. Late Charges. Owner shall pay to Manager, to the extent
------------
permitted by applicable law, interest on
15
<PAGE>
any amount owing to Manager under this Agreement which is not paid when
due, for any period for which any of the same is overdue (without regard to
any grace period), at a rate equal to the lesser of (i) two percent in
excess of the rate announced from time to time by The Chase Manhattan Bank,
N.A. as its prime or reference rate, as such rate may change from time to
time, or (ii) the maximum rate of interest permitted by applicable law.
E. Method of Payment. Owner shall pay the amounts set forth in
-----------------
Sections 4A. and 4B. hereof monthly, in arrears, no later than ten days
after Manager furnishes Owner with invoices and reasonable supporting
documentation for such amounts. Owner shall pay the amount owing pursuant
to Section 4C. hereof for any fiscal year within 30 days after Manager
furnishes Owner with financial reports supporting the amounts owing. Owner
shall pay any amounts owing pursuant to Section 4D. hereof upon Manager's
demand. Manager shall be entitled to disburse all Facility expenses other
than the foregoing Manager's Basic Fee and Incentive Fee and the expenses
reimbursable pursuant to Section 4B. hereof out of the accounts provided
for in Section 2C. hereof.
F. Determination of Incentive Fee for Fiscal Year Ending May 31,
-------------------------------------------------------------
1990. For the period commencing
----
16
<PAGE>
the first day of the Term to and including May 31, 1990, Owner shall pay to
Manager an Incentive Fee, prorated for the number of days for which
services were actually rendered, in accordance with the provisions of
Section 4C.
5. Proprietary Interest. The systems, methods, procedures and
--------------------
controls employed by Manager, including, without limitation, any operating
manuals and computer software developed by Manager, and any written materials or
brochures developed by Manager to document the same are to remain the property
of Manager, and Owner shall not, at any time, utilize, distribute, copy or
otherwise employ or acquire any such materials or brochures without Manager's
prior written consent, which Manager may withhold in its sole discretion.
6. No Guaranty of Profitability. Owner acknowledges that Manager
----------------------------
does not guarantee that the Facility will be profitable.
7. Owner Inspection. During the Term, Owner shall have the right,
----------------
upon request and at reasonable times, to inspect the Facility and to inspect
and/or audit all books and records pertaining to the operation thereof.
8. Maintenance of Minimum Bank Balance. Owner shall maintain a
-----------------------------------
minimum cash balance in the account(s) referred to in Section 2C. hereof greater
than or equal to such amount as Manager and Owner reasonably agree is
17
<PAGE>
necessary for the proper operation of, or improvements or repairs to, the
Facility.
9. Default. Either party may terminate this Agreement in the event
-------
of any of the following events ("Events of Default") by or with respect to the
other party:
A. By Manager. With respect to Manager, the following shall
----------
constitute Events of Default hereunder:
(i) Manager shall fail to keep, observe or perform any material
agreement, term or provision of this Agreement including without limitation
the provisions of Section 2G. hereof, and such failure shall continue for a
period of 30 days after notice thereof shall have been given to Manager by
Owner, which notice shall specify the event or events constituting the
failure; provided, however, that Manager shall not be deemed to be in
-------- -------
violation of this Agreement, and no Event of Default shall have occurred,
if Manager is prevented from performing any of its obligations hereunder
for any reason beyond its control, including, without limitation, strikes,
shortages, war, acts of God, lack of Owner's financial resources, or any
statute, regulation or rule of federal, state or local government or agency
thereof; or
(ii) Manager shall be dissolved or shall apply for or consent to
the appointment of a receiver,
18
<PAGE>
trustee or liquidator of Manager or of all or a substantial part of its
assets, file a voluntary petition in bankruptcy, or admit in writing its
inability to pay its debts as they become due, make a general assignment
for the benefit of creditors, file a petition or an answer seeking
reorganization or arrangement with creditors or taking advantage of any
insolvency law; or an order, judgment or decree shall be entered by a court
of competent jurisdiction, on the application of a creditor, adjudicating
Manager a bankrupt or insolvent or approving a petition seeking
reorganization of Manager, or appointing a receiver, trustee or liquidator
of Manager or of all or a substantial part of Manager's assets, and such
order shall remain undismissed, undischarged or unbounded for a period of
60 days.
B. By Owner. With respect to Owner, the following shall
--------
constitute Events of Default hereunder:
(i) Owner shall fail to keep, observe or perform any material
agreement, term or provision of this Agreement and such failure shall
continue for a period of 30 days after notice thereof shall have been given
to Owner by Manager, which notice shall specify the event or events
constituting the failure; provided, however, that Owner shall not be deemed
-------- -------
to be in violation of this Agreement, and no Event of Default
19
<PAGE>
shall have occurred, if Owner is prevented from performing any of its
obligations hereunder for any reason beyond its control, including, without
limitation, strikes, shortages, war, acts of God, or any statute,
regulation or rule of federal, state or local government or agency thereof;
or
(ii) Owner shall be dissolved or shall apply for or consent to
the appointment of a receiver, trustee or liquidator of Owner or of all or
a substantial part of Owner's assets, file a voluntary petition in
bankruptcy, or admit in writing its inability to pay its debts as they
become due, make a general assignment for the benefit or creditors, file a
petition or an answer seeking reorganization or arrangement with creditors
or taking advantage of any insolvency law; or an order, judgment or decree
shall be entered by a court of competent jurisdiction, on the application
of a creditor, adjudicating Owner a bankrupt or insolvent or approving a
petition seeking reorganization of Owner, or appointing a receiver, trustee
or liquidator of Owner or of all or a substantial part of its assets, and
such order shall remain undismissed, undischarged or unbounded for a period
of 60 days.
20
<PAGE>
10. Remedies Upon Default.
---------------------
A. Remedies of Manager. Upon the occurrence and during the
-------------------
continuation of an Event of Default by Owner, Manager may, in its
discretion, do any one or more of the following: (i) terminate this
Agreement, terminate the employment of any or all employees of the Facility
and declare all sums earned but unpaid to the date of termination to be
immediately due and payable; or (ii) exercise any other right or remedy
available to it under applicable law, including without limitation the
right to recover damages for the breach hereof.
B. Remedies of Owner. Upon the occurrence and during the
-----------------
continuation of any Event of Default by Manager, Owner may, in its
discretion do any one or more of the following: (i) terminate this
Agreement, whereupon Manager shall terminate the employment of any or all
of the employees of the Facility and neither party shall have any further
obligation whatsoever under this Agreement; or (ii) exercise any other
right or remedy available to it under applicable law, including without
limitation the right to recover damages for the breach hereof; provided,
--------
however, that nothing contained herein shall terminate Manager's right to
-------
receive all amounts due and owing to Manager through the date of
termination.
21
<PAGE>
C. Rights Cumulative; No Waiver. No right or remedy herein conferred
----------------------------
upon or reserved to either of the parties hereto is intended to be
exclusive of any other right or remedy, and each and every right and remedy
shall be cumulative and in addition to any other right or remedy given
hereunder, or now or hereafter legally existing. The failure of either
party hereto to insist at any time upon the strict observance or
performance of any of the provisions of this Agreement or to exercise any
right or remedy as provided in this Agreement shall not impair any such
right or remedy or be construed as a waiver or relinquishment thereof with
respect to subsequent defaults. Every right and remedy given by this
Agreement to the parties hereof may be exercised from time to time and as
often as may be deemed expedient by the parties hereto, as the case may be.
D. Dispute Resolution Procedures. All disputes arising out of or
-----------------------------
relating to this Agreement shall be resolved pursuant to the reference
procedure set forth in California Code of Civil Procedure Sections 638 et
--
seq. The parties hereby agree to submit to the jurisdiction of the
---
Superior Court of the County of Los Angeles, State of California (the
"Superior Court") for such purpose. Either party may initiate the
procedure set forth in this Subsection by
22
<PAGE>
providing the other party with notice setting forth the nature of the
dispute (the "Reference Notice"). The parties shall designate to the
Superior Court a referee who is an active attorney or retired judge living
in the County of Los Angeles who shall resolve the dispute. If the parties
are unable to designate a referee within 20 days after the receipt of the
Reference Notice, the parties shall request that the Superior Court appoint
a referee. In connection with any proceeding pursuant to this Subsection,
the parties shall have all discovery rights which would have been available
had the matters which are the subject of the dispute been decided by the
Superior Court. Discovery proceedings may be noticed and commenced
immediately after delivery of the Reference Notice. The hearing before the
referee shall begin no later than 60 days after the receipt of the
Reference Notice. All discovery in connection with the reference proceeding
shall be concluded no later than 15 days prior to the commencement of the
hearing. Judgment upon the reward rendered by the referee shall be entered
in the Superior Court. Nothing in this Section shall be construed to impair
the right of either party to appeal from such judgment.
23
<PAGE>
11. Miscellaneous.
-------------
A. Relationship of the Parties; Disclaimer of Liability;
----------------------------------------------------
Indemnification. The relationship of Manager to Owner shall be that of an
---------------
independent contractor, and all acts performed by Manager pursuant to this
Agreement during the Term shall be deemed to be performed in its capacity
as an independent contractor. Manager shall not be liable for any loss,
expense, cost or liability relating to the Facility incurred by or asserted
against Owner, unless such loss, expense, cost or liability results from
the negligence or willful misconduct of Manager. Owner shall indemnify and
hold Manager harmless from and against any and all loss, expense, cost or
liability incurred by or asserted against Manager arising from or related
to the Facility; provided, however, that Owner shall not be obligated to
-------- -------
indemnify Manager for any loss, expense, cost or liability which results
from Manager's negligence or willful misconduct. Manager shall indemnify
Owner and hold Owner harmless from and against any and all loss, expense,
cost or liability arising from or related to Manager's negligence or
willful misconduct.
B. Assignment; Binding Effect. This Agreement shall not be
--------------------------
assigned by either party without the prior written consent of the other
party, which
24
<PAGE>
consent shall not be unreasonably withheld. Notwithstanding the foregoing,
either party may assign its rights and obligations hereunder to an entity
controlling, controlled by or under common control with such party. This
Agreement shall be binding upon and inure to the benefit of the permitted
successors and assigns of the parties.
C. Entire Agreement; Amendment. This Agreement sets forth the
---------------------------
entire agreement and understanding of the parties with respect to the
transactions contemplated hereby and supersedes all prior agreements,
arrangements and understandings relating to the subject matter hereof. No
representation, promise, inducement or statement of intention has been made
by either party hereto which is not embodied in this Agreement or the
written statements or other documents delivered pursuant hereto and neither
party hereto shall be bound by or liable for any alleged representation,
promise, inducement or statement of intention not so set forth. This
Agreement may be amended or modified only by a written instrument executed
by both parties hereto or by their successors and permitted assigns.
D. Notices. All notices, consents, requests, instructions,
-------
approvals and other communications hereunder shall be given in writing and
shall be deemed
25
<PAGE>
to have been duly given, if delivered in person or by courier, telegraphed,
telexed or sent by facsimile transmission or mailed, by certified or
registered mail, postage prepaid at the following address (or at such other
address provided by one party to the other in writing):
If to Manager: FIRST HEALTHCARE CORPORATION
c/o THE HILLHAVEN CORPORATION
1148 Broadway Plaza
Tacoma, Washington 98401
Attention: Executive Vice
President/Operations
Telecopy no.: (206) 756-4743
With copies to: THE HILLHAVEN CORPORATION
1148 Broadway Plaza
Tacoma, Washington 98401
Attention: General Counsel
If to Owner: THE HILLHAVEN CORPORATION (Tennessee)
c/o NATIONAL MEDICAL ENTERPRISES, INC.
2700 Colorado Avenue
P.O. Box 4070
Santa Monica, California 90404
Attention: Executive Vice
President
With copies to: NATIONAL MEDICAL ENTERPRISES, INC.
2700 Colorado Avenue
P.O. Box 4070
Santa Monica, California 90404
Attention: General Counsel
Telecopy no.: (213) 315-6688
E. Representatives. Owner and Manager shall each designate one
---------------
or more representatives for the purpose of giving approvals required
hereunder and meeting approximately quarterly to discuss Facility
operations and annually to discuss Budgets.
26
<PAGE>
F. Attorney's Fees. In the event either party brings an action
---------------
to enforce this Agreement, the prevailing party in such action shall be
entitled to recover from the other all costs incurred in connection
therewith, including reasonable attorney's fees. Reasonable attorney's fees
shall include reasonable charges allocated for internal counsel.
G. Construction. In this Agreement,
------------
(i) unless the context otherwise requires, the terms "herein",
"hereof", and "hereunder" refer to this Agreement; and
(ii) the headings of the sections and subsections hereof and the
table of contents hereof are inserted for convenience only and do not
constitute a part of this Agreement.
H. Legal Enforceability. Any provision of this Agreement which
--------------------
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any
such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision or remedies otherwise
available to any party hereto. Without prejudice to any rights or remedies
otherwise available to any party hereto, each party hereto
27
<PAGE>
acknowledges that damages would be an inadequate remedy for any breach of
the provisions of this Agreement and agrees that the obligations of the
parties hereunder shall be specifically enforceable.
I. Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be an original, but all of which together shall
constitute but one and the same instrument.
J. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of California.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
[OWNER]
By________________________________
Name:
Title:
FIRST HEALTHCARE CORPORATION
By_______________________________
Name:
Title:
28
<PAGE>
EXHIBIT 10.39
[Conformed Copy]
AGREEMENT TO AMEND
REORGANIZATION AND DISTRIBUTION AGREEMENT
AGREEMENT TO AMEND, dated January 30, 1990 (this "Amendment Agreement"),
between National Medical Enterprises, Inc., a Nevada corporation ("NME"), and
The Hillhaven Corporation, a Nevada corporation ("New Hillhaven").
WITNESSETH;
WHEREAS, the parties to this Amendment Agreement are parties to a
Reorganization and Distribution Agreement, dated as of January 8, 1990 (the
"Original Agreement", which term shall include the Annexes, Exhibits and
Schedules thereto); and
WHEREAS, the parties to this Amendment Agreement deem it advisable that the
Original Agreement be amended and restated to read in its entirety as set forth
in Exhibit A hereto.
NOW THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereto hereby agree as follows:
1. The Original Agreement shall be amended and restated, effective as of
January 8, 1990, to read in its entirety as set forth in Exhibit A hereto.
2. This Amendment Agreement shall be governed by and construed in
accordance with the laws of the State of California.
3. This Amendment Agreement may be executed simultaneously in two or more
counterparts and by the different parties hereto on separate counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument, and this Amendment Agreement shall become effective
when one or more counterparts have been signed by each party and delivered to
the other party.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment Agreement
to be duly executed as of the date and year first above written.
NATIONAL MEDICAL ENTERPRISES, INC.
By /s/ MARCUS E. POWERS
--------------------------------
Name: Marcus E. Powers
Title: Senior Vice President
and General Counsel
THE HILLHAVEN CORPORATION
By /s/ CHRISTOPHER J. MARKER
--------------------------------
Name: Christopher J. Marker
Title: President
2
<PAGE>
EXHIBIT A
================================================================================
REORGANIZATION AND DISTRIBUTION AGREEMENT
effective as of January 8, 1990
between
NATIONAL MEDICAL ENTERPRISES, INC.
and
THE HILLHAVEN CORPORATION
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I
DEFINITIONS
Section 1.01 General................................................... 1
Section 1.02 Exhibits, etc............................................. 7
ARTICLE II
PRELIMINARY ACTION
Section 2.01 Cooperation Prior to the Distribution .................... 7
Section 2.02 Plan of Reorganization and Related
Transactions............................................. 8
Section 2.03 Cash Management and Bank Accounts After
the Distribution Date.................................... 8
Section 2.04 Transfers Not Effected Prior to the
Distribution; Transfers Deemed
Effective as of the Distribution Date.................... 9
Section 2.05 No Representations or Warranties;
Consents................................................. 10
Section 2.06 Conveyancing and Assumption Instruments................... 10
Section 2.07 Further Assurances........................................ 11
ARTICLE III
THE DISTRIBUTION
Section 3.01 Conditions Precedent to the
Distribution............................................. 11
Section 3.02 The Distribution.......................................... 12
ARTICLE IV
INDEMNIFICATION
Section 4.01 Indemnification by NME.................................... 12
Section 4.02 Indemnification by New Hillhaven ......................... 13
Section 4.03 Limitations on Indemnification
Obligations.............................................. 13
Section 4.04 Procedure for Indemnification............................. 13
Section 4.05 Remedies Cumulative....................................... 16
Section 4.06 Survival of Indemnities................................... 16
ARTICLE V
CERTAIN ADDITIONAL MATTERS
Section 5.01 Resignations.............................................. 17
Section 5.02 Outside Auditors.......................................... 17
Section 5.03 Relationships; Name Changes............................... 17
Section 5.04 Post-Distribution Adjustments............................. 18
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE VI
ACCESS TO INFORMATION AND SERVICES
Section 6.01 Provision of Corporate Records............................ 18
Section 6.02 Access to Information..................................... 19
Section 6.03 Provision of Services..................................... 19
Section 6.04 Production of Witnesses................................... 20
Section 6.05 Reimbursement............................................. 20
Section 6.06 Retention of Records...................................... 20
Section 6.07 Confidentiality........................................... 20
ARTICLE VII
MISCELLANEOUS
Section 7.01 Entire Agreement; Amendment............................... 21
Section 7.02 Survival of Agreements.................................... 21
Section 7.03 Expenses.................................................. 21
Section 7.04 Governing Law............................................. 22
Section 7.05 Notices................................................... 22
Section 7.06 Construction.............................................. 23
Section 7.07 Successors and Assigns.................................... 23
Section 7.08 Termination............................................... 23
Section 7.09 Subsidiaries.............................................. 23
Section 7.10 No Third Party Beneficiaries.............................. 23
Section 7.11 Further Assurances........................................ 23
Section 7.12 Annexes, Exhibits and Schedules........................... 24
Section 7.13 Legal Enforceability...................................... 24
</TABLE>
ii
<PAGE>
ANNEXES
I. Plan of Reorganization
II. Long Term Care Subsidiaries of NME Prior to the Plan of
Reorganization
III(a). Subsidiaries of Old Hillhaven after the Plan of Reorganization Is
Effected
III(b). Subsidiaries of New Hillhaven After the Plan of Reorganization Is
Effected
EXHIBITS
A. Benefits Agreement
B. Distribution Agency Agreement
C. Government Programs Agreement
D. Guarantee Agreement
E. Insurance Agreement
F. Form of Lease Agreement
G. Form of Lease Assumption Agreement
H. Form of Management Agreement
I. New Hillhaven By-Laws
J. New Hillhaven Charter
K-1. Form of New Hillhaven Subsidiary Note to be issued by FHC
K-2. Form of New Hillhaven Subsidiary Note to be issued by Medi$ave Pharmacies,
Inc.
L. Note Guarantee Agreement
M. Revolving Credit and Term Loan Agreement
N. Rights Agreement
O. Services Agreement
P. Tax Sharing Agreement
Q. Warrant and Registration Rights Agreement
SCHEDULES
4.01(b) NME Responsibility for Information Statement
4.02(b) New Hillhaven Responsibility for Information Statement
iii
<PAGE>
REORGANIZATION AND DISTRIBUTION AGREEMENT, effective as of January 8,
1990 (this "Agreement"), between NATIONAL MEDICAL ENTERPRISES INC., a Nevada
corporation ("NME"), and THE HILLHAVEN CORPORATION, a Nevada corporation ("New
Hillhaven") and a wholly-owned subsidiary of The Hillhaven Corporation, a
Tennessee corporation ("Old Hillhaven") which in turn is wholly-owned by NME.
_________________________________
WHEREAS, the NME board of directors has determined it is appropriate
and desirable to separate the long term care business presently conducted by NME
through Old Hillhaven and the other businesses of NME by transferring certain
assets and related liabilities of Old Hillhaven and certain of its subsidiaries
to New Hillhaven and distributing approximately 85% of the outstanding shares of
New Hillhaven Common Stock on a pro rata basis to the holders of NME Common
Stock; and
WHEREAS, NME and New Hillhaven have determined that it is necessary
and desirable to set forth the principal corporate transactions required to
effect such separation and such distribution and to set forth other agreements
that will govern certain other matters following such distribution and, in
connection therewith, have entered into a Reorganization and Distribution
Agreement dated as of January 8, 1990 (the "Original Agreement"); and
WHEREAS, NME and New Hillhaven have further determined that it would
be desirable to amend certain provisions of the Original Agreement and to enter
into an amended and restated version thereof, as set forth below (the Original
Agreement as so amended and restated being herein called the "Agreement")
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained in this Agreement, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS
-----------
Section 1.01 General. As used in this Agreement and the Annexes,
-------
Exhibits and Schedules hereto, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
<PAGE>
Action: any action, suit, arbitration, inquiry, proceeding or
------
investigation by or before any court, any governmental or other regulatory or
administrative agency or commission or any arbitration tribunal.
Affiliate: as defined in Regulation 12b-2 promulgated under the
---------
Exchange Act, as such Regulation is in effect on the date hereof.
Agent: Manufacturers Hanover Trust Company, the distribution agent
-----
appointed by NME under the Distribution Agency Agreement to assist in the
distribution of copies of the Information Statement and to distribute
certificates for shares of New Hillhaven Common Stock in connection with the
Distribution.
Ancillary Agreements: all of the agreements, instruments,
--------------------
understandings, assignments or other arrangements entered into in connection
with the transactions contemplated hereby, including, without limitation, the
Benefits Agreement, the Distribution Agency Agreement, the Government Programs
Agreement, the Guarantee Agreement, the Insurance Agreement, the Lease
Agreements, the Lease Assumption Agreements, the Management Agreements, the New
Hillhaven Subsidiary Notes, the Note Guarantee Agreement, the Revolving Credit
and Term Loan Agreement, the Rights Agreement, the Services Agreement, the Tax
Sharing Agreement and the Warrant and Registration Rights Agreement.
Benefits Agreement: the Employee and Employee Benefits Agreement, to
------------------
be dated as of the Distribution Date, between NME and New Hillhaven, the
proposed form of which is attached as Exhibit A, providing for, among other
things, the establishment of executive and incentive compensation plans for New
Hillhaven and certain adjustments under NME benefit plans.
Commission: the Securities and Exchange Commission.
----------
Conveyancing and Assumption Instruments: collectively, the various
---------------------------------------
agreements, instruments and other documents to be entered into to effect the
transfer of assets and the assumption of Liabilities, effective on or prior to
the Distribution Date, in the manner contemplated by this Agreement and the
Ancillary Agreements.
Distribution: the distribution to holders of NME Common Stock of
------------
approximately 85% of the shares of New Hillhaven Common Stock to be owned by NME
immediately following completion of the Plan of Reorganization.
2
<PAGE>
Distribution Agency Agreement: the Distribution Agency Agreement,
-----------------------------
dated as of January 8, 1990, between NME and the Agent, the proposed form of
which is attached as Exhibit B, providing for, among other things, the
dissemination of the Information Statement to NME shareholders as of the Record
Date and the distribution of certificates evidencing shares of New Hillhaven
Common Stock to such shareholders.
Distribution Date: January 31, 1990.
-----------------
Exchange Act: the Securities Exchange Act of 1934, as amended.
------------
FHC: First Healthcare Corporation, a Delaware corporation and
---
Subsidiary of NME which will become a New Hillhaven Subsidiary pursuant to the
Plan of Reorganization.
FORM 10: the Registration Statement on Form 10 to be filed by New
-------
Hillhaven with the Commission to effect the registration of the New Hillhaven
Common Stock pursuant to the Exchange Act.
Government Programs Agreement: the Government Programs Agreement, to
-----------------------------
be dated as of the Distribution Date, between NME and New Hillhaven, the
proposed form of which is attached as Exhibit C, providing for, among other
things, the administration of certain matters, including cost reports, under
Medicare and Medicaid programs.
Guarantee Agreement: the Guarantee Reimbursement Agreement, to be
-------------------
dated as of the Distribution Date, between NME and New Hillhaven, the proposed
form of which is attached as Exhibit D, providing for, among other things, a
guarantee fee and the reimbursement by New Hillhaven to NME of amounts paid by
NME in respect of certain guarantee, lease or other obligations.
Information Statement: the information statement, constituting a
---------------------
part of the Form 10, in the form to be distributed to the holders of NME Common
Stock as of the Record Date in connection with the Distribution, and as it may
be amended or supplemented subsequent to such dissemination.
Insurance Agreement: the Insurance Agreement, to be dated as of the
-------------------
Distribution Date, between NME and New Hillhaven, the proposed form of which is
attached as Exhibit E, providing for, among other things, the allocation of
certain insurance claims and joint insurance arrangements on a transitional
basis.
3
<PAGE>
Lease Agreements: the Lease Agreements, to be dated on or prior to
----------------
the Distribution Date, between an NME Subsidiary, on the one hand, and FHC, on
the other hand, the proposed form of which is, together with the proposed
related Guarantee of Lease of New Hillhaven, attached as Exhibit F, respectively
providing for, among other things, the lease on a triple net basis by FHC of
long term care facilities or retirement housing centers and the guarantee by New
Hillhaven of such lease obligations of FHC.
Lease Assumption Agreements: the Assignment and Assumption of Lease
---------------------------
Agreements, to be dated on or prior to the Distribution Date, between NME or an
NME Subsidiary, on the one hand, and a New Hillhaven Subsidiary, on the other
hand, the proposed form of which, together with the proposed related Guaranty of
New Hillhaven, is attached as Exhibit G, providing for, among other things, the
assumption by a New Hillhaven Subsidiary of certain obligations and the
assignment to a New Hillhaven Subsidiary of certain rights under leases or
subleases and the guarantee of such obligations by New Hillhaven.
Liabilities: any and all debts, liabilities and obligations,
-----------
absolute or contingent, mature or unmature, liquidated or unliquidated, accrued
or unaccrued, known or unknown, whenever arising (unless otherwise specified in
this Agreement), including all costs and expenses relating thereto, and those
debts, liabilities and obligations arising under any law, rule, regulation,
Action, threatened Action, order or consent decree of any governmental entity or
any award of any arbitrator of any kind, and those arising under any contract,
commitment or undertaking.
Management Agreements: the Management Agreements, to be dated as of
---------------------
the Distribution Date, between FHC, as manager, and certain NME Subsidiaries,
the proposed form of which is attached as Exhibit H, providing for, among other
things, the management by FHC of such facilities.
New Hillhaven BY-Laws: the By-Laws of New Hillhaven, attached as
---------------------
Exhibit I and as in effect at the date hereof.
New Hillhaven Charter: the Amended and Restated Articles of
---------------------
Incorporation of New Hillhaven, attached as Exhibit J and as in effect at the
date hereof.
New Hillhaven Common Stock: the common stock, par value $0.15 per
--------------------------
share, of New Hillhaven.
New Hillhaven Employee: any individual who, immediately prior to the
----------------------
Distribution, was employed by NME or Old Hillhaven or any of the Old Hillhaven
Subsidiaries
4
<PAGE>
and who, immediately after the Distribution, is to be employed by New Hillhaven
or a Subsidiary of New Hillhaven.
New Hillhaven Liabilities: all of (i) the Liabilities of New
-------------------------
Hillhaven or any New Hillhaven Subsidiary under this Agreement or any of the
Ancillary Agreements to which any of them is a party and (ii) the Liabilities
arising out of any of the documents or instruments executed and delivered by New
Hillhaven or any New Hillhaven Subsidiary pursuant to the transactions
contemplated by the Plan of Reorganization or pursuant to any supplemental
agreement contemplated by Section 2.07.
New Hillhaven Subsidiaries: the corporations identified in Annex
--------------------------
III(b) hereto, which are now Subsidiaries of NME but which immediately following
the Distribution will be Subsidiaries of New Hillhaven.
New Hillhaven Subsidiary Notes: the promissory notes, to be dated
------------------------------
the Distribution Date, of (i) FHC, the proposed form of which is attached as
Exhibit K-1, to be issued to Old Hillhaven and (ii) Medi-$ave Pharmacies, Inc.,
the proposed form of which is attached as Exhibit K-2, to be issued to Hillhaven
Inc., in each case pursuant to the Plan of Reorganization.
NME Board: the Board of Directors of NME.
---------
NME Common Stock: the common stock, par value $0.15 per share, of
----------------
NME.
NME Liabilities: all of the Liabilities of NME or any NME Subsidiary
---------------
under this Agreement or any of the Ancillary Agreements to which any of them is
a party.
NME Subsidiary: any corporation that will be a Subsidiary of NME
--------------
immediately following the Distribution, including, without limitation, Old
Hillhaven and the Old Hillhaven Subsidiaries.
Note Guarantee Agreement: the Note Guarantee Agreement, to be dated
------------------------
as of the Distribution Date, among New Hillhaven, NME and the payees on the New
Hillhaven Subsidiary Notes, the proposed form of which is attached as Exhibit L,
providing for, among other things, the guarantee by New Hillhaven of all the
obligations of the obligors on the New Hillhaven Subsidiary Notes.
Old Hillhaven Subsidiary: any corporation that was a Subsidiary of
------------------------
Old Hillhaven prior to the Distribution, other than New Hillhaven and the New
Hillhaven Subsidiaries.
5
<PAGE>
Plan of Reorganization: the series of transactions, more
----------------------
particularly described on Annex I hereto, providing, effective on or prior to
the Distribution Date, for the transfer of assets and liabilities to New
Hillhaven and New Hillhaven Subsidiaries, as contemplated by this Agreement and
the Information Statement.
Record Date: the close of business on January 12, 1990.
-----------
Revolving Credit and Term Loan Agreement: the Revolving Credit and
----------------------------------------
Term Loan Agreement, to be dated as of the Distribution Date, between NME and
New Hillhaven, the proposed form of which is attached as Exhibit M, providing
for, among other things, borrowings by New Hillhaven from NME from time to time
in order to meet the working capital and other cash flow needs of certain of New
Hillhaven's retirement housing and other discontinued operations and for capital
improvements on long term care facilities.
Rights: the preferred stock purchase rights, to be issued pursuant
------
to the Rights Agreement, which will initially be evidenced by the New Hillhaven
Common Stock certificates.
Rights Agreement: the Rights Agreement, to be dated as of the
----------------
Distribution Date, between New Hillhaven and Manufacturers Hanover Trust Company
of California, as Rights Agent, the proposed form of which is attached as
Exhibit N, providing for, among other things, the issuance of the Rights.
Services Agreement: the Services Agreement, to be dated as of the
------------------
Distribution Date, between NME and New Hillhaven, the proposed form of which is
attached as Exhibit O, providing for, among other things, the provision on a
transitional basis of certain management and incidental services and certain
joint purchasing and space-sharing arrangements.
Subsidiary: any corporation of which more than 50% of the
----------
outstanding shares of stock having ordinary voting power to elect a majority of
the board of directors (other than stock having such power only by reason of the
happening of a contingency) is at the time directly or indirectly owned by NME
or New Hillhaven, as the case may be.
Tax Sharing Agreement: the Tax Sharing Agreement, to be dated as of
---------------------
the Distribution Date, between NME and New Hillhaven, the proposed form of which
is attached as Exhibit P, providing for, among other things, the allocation of
liabilities with respect to federal, state and local income
6
<PAGE>
taxes and the procedures for filing returns with respect to such taxes.
Warrant and Registration Rights Agreement: the Warrant and
-----------------------------------------
Registration Rights Agreement, to be dated as of the Distribution Date, among
NME, New Hillhaven and Manufacturers Hanover Trust Company of California, as
Warrant Agent, the proposed form of which is attached as Exhibit Q, providing
for, among other things, the issuance of warrants to purchase New Hillhaven
Common Stock and certain registration rights with respect to such stock and the
New Hillhaven Common Stock to be retained by NME.
Section 1.02 Exhibits, etc. References to an "Exhibit" or to an
-------------
"Annex" or to a "Schedule" are, unless otherwise specified, to one of the
Exhibits or Annexes or Schedules attached to this Agreement, and references to a
"Section" are, unless otherwise specified, to one of the Sections of this
Agreement.
ARTICLE II
PRELIMINARY ACTION
------------------
Section 2.01 Cooperation Prior to the Distribution.
-------------------------------------
(a) Form 10; Information Statement. NME and New Hillhaven
------------------------------
have prepared, and New Hillhaven shall file with the Commission, the Form 10,
which shall include or incorporate by reference the Information Statement. NME
and New Hillhaven shall use reasonable efforts to cause the Form 10 to become
effective under the Exchange Act. NME and New Hillhaven shall also prepare, and
NME shall cause to be mailed, prior to midnight, January 12, 1990, to the
holders of NME Common Stock as of the Record Date, the Information Statement,
which shall set forth appropriate disclosures concerning New Hillhaven, the
Distribution and other matters.
(b) Benefit Plan Registrations. NME and New Hillhaven shall
--------------------------
cooperate in preparing, filing with the Commission and causing to become
effective any registration statements or amendments thereto which are necessary
to be so filed prior to the Distribution Date and appropriate to reflect the
establishment of, or amendments to, any employee benefit and other plans
contemplated by the Benefits Agreement.
(c) Blue Sky. NME and New Hillhaven shall take all such action
--------
as may be necessary or appropriate under the securities or blue sky laws of
states or other political subdivisions of the United States in connection
7
<PAGE>
with the transactions contemplated by this Agreement and the Ancillary
Agreements.
(d) Listing. NME and New Hillhaven have prepared, and New
-------
Hillhaven shall file and pursue, an application to effect the listing of the New
Hillhaven Common Stock and the Rights on the American Stock Exchange ("ASE")
Section 2.02 Plan of Reorganization and Related Transactions. It is
-----------------------------------------------
the intention of the parties hereto that the transactions contemplated by this
Section 2.02 shall, to the extent practicable, be effected in the order in which
such transactions are set forth in this Section 2.02.
(a) Corporate Action. All necessary corporate action on the
----------------
part of NME, New Hillhaven, the New Hillhaven Subsidiaries, Old Hillhaven and
the Old Hillhaven Subsidiaries necessary to implement the transactions
contemplated hereby and by the Plan of Reorganization shall be taken.
(b) Plan of Reorganization. All of the transactions
----------------------
contemplated by the Plan of Reorganization shall be substantially completed as
provided therein. Annex II identifies and indicates the ownership of all of the
Subsidiaries of Old Hillhaven immediately prior to implementation of the Plan of
Reorganization. Annexes III(a) and III(b) identify and indicate the ownership of
all of the Subsidiaries of Old Hillhaven and New Hillhaven, respectively,
immediately after implementation of the Plan of Reorganization.
(c) Ancillary Agreements. Each of the Ancillary Agreements
--------------------
shall be executed and delivered by the parties thereto, with such additions,
deletions or other changes as may be authorized by the respective boards of
directors of the parties hereto.
(d) NME Capital Contribution. NME shall have made, either
------------------------
directly or through one or more of its Subsidiaries, capital contributions to
New Hillhaven of assets sufficient to increase the Stockholders' equity of New
Hillhaven to at least $170 million, after giving effect to the transaction
contemplated by the Plan of Reorganization.
Section 2.03 Cash Management and Bank Accounts After the
-------------------------------------------
Distribution Date. All cash management systems and bank accounts currently in
- -----------------
place will be subject to the procedures set forth in a memorandum to be
initialed by the parties hereto.
8
<PAGE>
Section 2.04 Transfers Not Effected Prior to the Distribution;
-------------------------------------------------
Transfers Deemed Effective as of the Distribution Date. To the extent that any
- ------------------------------------------------------
transfers and assumptions contemplated by this Article II and Article III shall
not have been consummated prior to the Distribution Date, the parties shall
cooperate to effect such transfers as promptly following the Distribution Date
as shall be practicable, it nonetheless being agreed and understood by the
parties that neither party shall be liable in any manner to any other party for
any failure of any of the transfers or assumptions contemplated by this Article
II or Article III to be consummated prior to the Distribution Date. Nothing
herein shall be deemed to require the transfer of any assets or the assumption
of any Liabilities which by their terms or operation of law cannot be
transferred or assumed; provided, however, that NME, Old Hillhaven and their
-------- -------
respective Subsidiaries and New Hillhaven and the New Hillhaven Subsidiaries
shall cooperate to seek to obtain any necessary consents or approvals for the
transfer of all assets and assumption of all Liabilities contemplated to be
transferred or assumed pursuant to this Article II and Article III. In the event
that any such transfer of assets or assumption of Liabilities has not been
consummated, effective as of and after the Distribution Date, the party
retaining such asset or Liability shall thereafter hold such asset for the party
entitled thereto (at the expense of the party entitled thereto) and retain such
Liability for the account of the party by whom such Liability is to be assumed,
and take such other action as may be reasonably requested by the party to whom
such asset is to be transferred, or by whom such Liability is to be assumed, as
the case may be, in order to place such party, insofar as reasonably possible,
in the same position as would have existed had such asset or Liability been
transferred or assumed as of the Distribution Date. As and when any such asset
or Liability becomes transferable or assumable, such transfer or assumption
shall be effected forthwith. The parties agree that, as of the Distribution
Date, each party hereto shall be deemed to have assumed in accordance with the
terms of this Agreement and the Ancillary Agreements all of the Liabilities, and
all duties, obligations and responsibilities incident thereto, which such party
is required to assume pursuant to the terms hereof and thereof. New Hillhaven
shall take all necessary steps, with the assistance of NME if appropriate, to
effect any transfer of assets or assumption of Liabilities not transferred or
assumed effective as of the Distribution Date, and NME shall reimburse New
Hillhaven for all out-of-pocket expenses incurred in effecting such transfer or
assumption, provided that (i) New Hillhaven shall have provided back-up for such
expenses reasonably acceptable to NME and (ii) NME shall have approved in
advance any item of expense in excess of $5,000 to be incurred after the
Distribution Date, which approval shall not be unreasonably withheld.
9
<PAGE>
Section 2.05 No Representations or Warranties; Consents. Each of
------------------------------------------
the parties hereto understands and agrees that no party hereto is, in this
Agreement or in any Ancillary Agreement or in any other agreement or document
contemplated by this Agreement or otherwise, representing or warranting in any
way (i) as to the value or freedom from encumbrance of, or any other matter
concerning, any assets of such party or (ii) as to the legal sufficiency to
convey title to any asset of the execution and delivery of this Agreement or any
Ancillary Agreement, including, without limitation, any Conveyancing and
Assumption Instruments, it being agreed and understood that all such assets are
being transferred "as is, where is" and that the party to which such assets are
to be transferred hereunder shall bear the economic and legal risk that any
conveyances of such assets shall prove to be insufficient or that such party or
any of its Subsidiaries' title to any such assets shall be other than good and
marketable and free from encumbrances. Similarly, each party hereto understands
and agrees that no party hereto is, in this Agreement or in any other agreement
or document contemplated by this Agreement or otherwise, representing or
warranting in any way that the obtaining of any consents or approvals, the
execution and delivery of any amendatory agreements and the making of any
filings or applications contemplated by this Agreement will satisfy the
provisions of any or all applicable agreements or the requirements of any or all
applicable laws or judgments, it being agreed and understood that the party to
which any assets are transferred shall bear the economic and legal risk that any
necessary consents or approvals are not obtained or that any requirements of
laws or judgments are not complied with. Notwithstanding the foregoing, the
parties shall use reasonable efforts to obtain all consents and approvals, to
enter into all amendatory agreements and to make all filings and applications
which may be required for the consummation of the transactions contemplated by
this Agreement, including, without limitation, all applicable regulatory filings
or consents under federal or state health care laws and all necessary consents,
approvals, agreements, filings and applications.
Section 2.06 Conveyancing and Assumption Instruments. In connection
---------------------------------------
with the transfers of assets (other than capital stock) and the assumptions of
Liabilities contemplated by this Agreement, and except as otherwise provided in
the Plan of Reorganization, the parties shall execute or cause to be executed by
the appropriate entities the Conveyancing and Assumption Instruments in such
forms as the parties shall agree. The transfer of capital stock shall be
effected by means of delivery of stock certificates and executed stock powers
and notation on the stock record books of the corporation or
10
<PAGE>
other legal entities involved and, to the extent required by applicable law, by
notation on public registries.
Section 2.07 Further Assurances. Each of NME and New Hillhaven
------------------
agrees to execute, acknowledge and deliver, and to cause their respective
Subsidiaries to execute, acknowledge and deliver, any assurances, documents and
instruments of transfer reasonably requested by the other and will take any
other action consistent with the terms of this Agreement that may reasonably be
requested by the other for the purpose of consummating the transactions
contemplated by this Agreement. In particular, the parties agree to enter into
any supplemental agreements necessary or appropriate to provide for temporary
operation by NME or its Subsidiaries of facilities intended to be transferred to
New Hillhaven or its Subsidiaries in cases where any necessary consents or
approvals have not been obtained, or any other required actions have not been
completed, prior to the Distribution Date.
ARTICLE III
THE DISTRIBUTION
----------------
Section 3.01 Conditions Precedent to the Distribution. In no event
----------------------------------------
shall the Distribution occur unless prior to such time the following conditions
shall have been satisfied:
(i) the transactions contemplated by Section 2.02 shall have
been consummated in all material respects, except to the extent waived by NME;
(ii) the New Hillhaven Common Stock and the Rights shall have
been approved for listing on the ASE, subject to official notice of issuance;
(iii) the New Hillhaven Charter and New Hillhaven By-Laws shall
have been adopted and shall be in effect; and
(iv) the Form 10 shall have become effective under the Exchange
Act and no stop order which has not been lifted shall be in effect with respect
thereto;
provided, however, that the satisfaction of such conditions shall not create any
- -------- -------
obligation on the part of NME to effect the Distribution or in any way limit
NME's power of termination set forth in Section 7.08 or alter the consequences
of any such termination from those specified in such Section.
11
<PAGE>
Section 3.02 The Distribution. New Hillhaven shall take all steps
----------------
required by NME or the Agent to effect the transactions contemplated by the
Distribution Agency Agreement. Prior to the Distribution, and in connection with
the Plan of Reorganization, New Hillhaven shall cause to be issued to NME or
Subsidiaries of NME (i) a certificate or certificates representing a sufficient
number of shares of New Hillhaven Common Stock so that one share of New
Hillhaven Common Stock may be distributed for each share of NME Common Stock
held by NME shareholders on the Record Date and (ii) a certificate or
certificates representing a sufficient number of shares of New Hillhaven Common
Stock so that, after giving effect to the issuance of the shares referred to in
clause (i) above, NME and Subsidiaries of NME will own in the aggregate 15% of
the outstanding New Hillhaven Common Stock.
ARTICLE IV
INDEMNIFICATION
---------------
Section 4.01 Indemnification by NME.
----------------------
(a) NME Liabilities. Except as otherwise set forth in an
---------------
Ancillary Agreement, NME shall indemnify, defend and hold harmless New
Hillhaven, each New Hillhaven Subsidiary and each of their directors, officers,
employees and agents and each of the heirs, executors, successors and assigns of
any of the foregoing (the "New Hillhaven Indemnitees") from and against the NME
Liabilities and any and all losses, liabilities, claims, damages, obligations,
payments, costs and expenses, matured or unmatured, absolute or contingent,
accrued or unaccrued, liquidated or unliquidated, known or unknown, including,
without limitation, the costs and expenses of any and all Actions, threatened
Actions, demands, assessments, judgments, settlements and compromises relating
thereto and attorneys' fees and any and all expenses whatsoever reasonably
incurred in investigating, preparing or defending against any such Actions or
threatened Actions (collectively, "Indemnifiable Losses" and, individually, an
"Indemnifiable Loss"), of the New Hillhaven Indemnitees arising out of or due to
the failure or alleged failure of NME to pay, perform or otherwise discharge in
due course any of the NME Liabilities.
(b) Exchange Act Liabilities. NME shall also indemnify, defend
------------------------
and hold harmless each of the New Hillhaven Indemnitees from and against any and
all Indemnifiable Losses of the New Hillhaven Indemnitees arising out of or
based upon any untrue statement or alleged untrue statement of a material fact
contained in any portion of the Information Statement specified in Schedule
4.01(b),
12
<PAGE>
or the omission or alleged omission to state in any such portion a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading.
Section 4.02 Indemnification by New Hillhaven.
--------------------------------
(a) New Hillhaven Liabilities. Except as otherwise set forth in
-------------------------
an Ancillary Agreement, New Hillhaven shall indemnify, defend and hold harmless
NME, each NME Subsidiary and each of their directors, officers, employees and
agents and each of the heirs, executors, successors and assigns of any of the
foregoing (the "NME Indemnitees") from and against the New Hillhaven Liabilities
and any and all Indemnifiable Losses of the NME Indemnitees arising out of or
due to the failure or alleged failure of New Hillhaven to pay, perform or
otherwise discharge in due course any of the New Hillhaven Liabilities.
(b) Exchange Act Liabilities. New Hillhaven shall also
------------------------
indemnify, defend and hold harmless each of the NME Indemnitees from and against
any and all Indemnifiable Losses of the NME Indemnitees arising out of or based
upon any untrue statement or alleged untrue statement of a material fact
contained in any portion of the Information Statement specified in Schedule
4.02(b), or the omission or alleged omission to state in any such portion a
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.
Section 4.03 Limitations on Indemnification Obligations. The amount
------------------------------------------
which any party (an "Indemnifying Party") is or may be required to pay to any
other party (an "Indemnitee") pursuant to Section 4.01 or Section 4.02 shall be
reduced (including, without limitation, retroactively) by any such amounts which
such Indemnifying Party is or may be required to pay to such Indemnitee with
respect to the same matter under rights of indemnification pursuant to any
Ancillary Agreement, to the end that no duplicate payments will be required with
respect to any indemnified amount.
Section 4.04 Procedure for Indemnification.
-----------------------------
(a) If an Indemnitee shall receive notice or otherwise learn of
the assertion by a person (including, without limitation, any governmental
entity) who is not a party to this Agreement or to any of the Ancillary
Agreements of any claim or of the commencement by any such person of any Action
(a "Third Party Claim") with respect to which an Indemnifying Party may be
obligated to provide indemnification pursuant to this Agreement, such Indemnitee
13
<PAGE>
shall give such Indemnifying Party written notice thereof promptly after
becoming aware of such Third Party Claim; provided, that the failure of any
--------
Indemnitee to give notice as provided in this Section 4.04 shall not relieve the
related Indemnifying Party of its obligations under this Article IV, except to
the extent that such Indemnifying Party is prejudiced by such failure to give
notice. Such notice shall describe the Third Party Claim in reasonable detail,
and shall indicate the amount (estimated if necessary) of the Indemnifiable Loss
that has been or may be sustained by such Indemnitee.
(b) An Indemnifying Party may elect to defend or to seek to
settle or compromise, at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel, any Third Party Claim. Within 30 days of the
receipt of notice from an Indemnitee in accordance with Section 4.04(a) (or
sooner, if the nature of such Third Party Claim so requires), the Indemnifying
Party shall notify the related Indemnitee if the Indemnifying Party elects not
to defend or to seek to settle or compromise such Third Party Claim (which
election may be made only in the event of a good faith assertion by the
Indemnifying Party that a claim was inappropriately tendered under Section 4.01
or 4.02, as the case may be). Unless an Indemnifying Party elects not to assume
the defense of or to seek to settle or compromise a Third Party Claim, such
Indemnifying Party shall not be liable to such Indemnitee under this Article IV
for any legal or other expenses subsequently incurred by such Indemnitee in
connection with the defense thereof; provided, that, if the defendants in any
-------- ----
such claim include both the Indemnifying Party and one or more Indemnitees and
in any Indemnitee's reasonable judgment a conflict of interest between one or
more of such Indemnitees and such Indemnifying Party exists in respect of such
claim, such Indemnitees shall have the right to employ separate counsel to
represent such Indemnitees and in that event the reasonable fees and expenses of
such separate counsel (but not more than one separate counsel reasonably
satisfactory to the Indemnifying Party) shall be paid by such Indemnifying
Party. If an Indemnifying Party elects not to defend, or elects not to seek to
settle or compromise a Third Party Claim, such Indemnitee may defend or seek to
compromise or settle such Third Party Claim.
(c) If an Indemnifying Party chooses to defend or to seek to
compromise or settle any Third Party Claim, the related Indemnitee shall make
available to such Indemnifying Party any personnel or any books, records or
other documents within its control or which it otherwise has the ability to make
available that are necessary or appropriate for such defense, settlement or
compromise, and
14
<PAGE>
shall otherwise cooperate in the defense, settlement or compromise of such Third
Party Claim.
(d) Notwithstanding anything else in this Section 4.04 to the
contrary, neither an Indemnifying Party nor an Indemnitee shall settle or
compromise any Third Party Claim unless such settlement or compromise
contemplates as an unconditional term thereof the giving by such claimant or
plaintiff to the Indemnitee or the Indemnifying Party, respectively, of a
written release from all liability with respect to such Third Party Claim.
(e) Any claim on account of an Indemnifiable Loss which does not
result from a Third Party Claim shall be asserted by written notice given by the
Indemnitee to the related Indemnifying Party. Such Indemnifying Party shall have
a period of 30 days after the receipt of such notice within which to respond
thereto. If such Indemnifying Party does not respond within such 30 day period,
such Indemnifying Party shall be deemed to have accepted responsibility to make
payment and shall have no further right to contest the validity of such claim.
If such Indemnifying Party does respond within such 30 day period and rejects
such claim in whole or in part, such Indemnitee shall be free to pursue such
remedies as may be available to such party under applicable law.
(f) In addition to any adjustments required pursuant to Section
4.03, if the amount of any Indemnifiable Loss shall, at any time subsequent to
the payment required by this Agreement, be reduced by recovery, settlement or
otherwise, the amount of such reduction, less any expenses incurred in
connection therewith, shall promptly be repaid by the Indemnitee to the
Indemnifying Party.
(g) In the event of payment by an Indemnifying Party to any
Indemnitee in connection with any Third Party Claim, such Indemnifying Party
shall be subrogated to and shall stand in the place of such Indemnitee as to any
events or circumstances in respect of which such Indemnitee may have any right
or claim relating to such Third Party Claim against any claimant or plaintiff
asserting such Third Party Claim. Such Indemnitee shall cooperate with such
Indemnifying Party in a reasonable manner, and at the cost and expense of such
Indemnifying Party, in prosecuting any subrogated right or claim.
(h) All disputes arising out of or relating to this Agreement
shall be resolved pursuant to the reference procedure set forth in California
Code of Civil Procedure Sections 638 et seq. The parties hereby agree to submit
-- ---
to the jurisdiction of the Superior Court of the County of Los Angeles, State
of California (the "Superior
15
<PAGE>
Court") for such purpose. Either party may initiate the procedure set forth in
this subsection by providing the other party with notice setting forth the
nature of the dispute (the "Reference Notice"). The parties shall designate to
the Superior Court a referee who is an active attorney or retired judge living
in the County of Los Angeles who shall resolve the dispute. If the parties are
unable to designate a referee within 20 days after the receipt of the Reference
Notice, the parties shall request that the Superior Court appoint a referee. In
connection with any proceeding pursuant to this subsection, the parties shall
have any discovery rights which would have been available had the matters which
are the subject of the dispute been decided by the Superior Court. Discovery
proceedings may be noticed and commenced immediately after delivery of the
Reference Notice. The hearing before the referee shall begin no later than 60
days after the receipt of the Reference Notice. All discovery in connection with
the reference proceeding shall be concluded no later than 15 days prior to the
commencement of the hearing. Judgment upon the award rendered by the referee
shall be entered in the Superior Court. Nothing in this Section shall be
construed to impair the right of either party to appeal from such judgment.
(i) The parties hereto agree that the procedures set forth in
subsections (a) through (g) of this Section 4.04 shall be applicable to all
Ancillary Agreements and are deemed to be set forth therein as if such
procedures were fully set forth therein.
Section 4.05 Remedies Cumulative. The remedies provided in this
-------------------
Article IV shall be cumulative and shall not preclude assertion by any
Indemnitee of any other rights or the seeking of any and all other remedies
against any Indemnifying Party; provided, however, that all remedies sought or
-------- -------
asserted by an Indemnitee against an Indemnifying Party with respect to an
Indemnifiable Loss shall be limited by and be subject to the provisions of this
Article IV.
Section 4.06 Survival of Indemnities. The obligations of each of
-----------------------
(i) New Hillhaven, on the one hand, and (ii) NME, on the other hand, under this
Article IV, shall survive the sale or other transfer to or by it of any assets
or businesses or the assignment to or assumption by it of any Liabilities, with
respect to any Indemnifiable Loss of the other related to such assets,
businesses or Liabilities.
16
<PAGE>
ARTICLE V
CERTAIN ADDITIONAL MATTERS
--------------------------
Section 5.01 Resignations. (a) New Hillhaven shall cause all New
------------
Hillhaven Employees, other than Messrs. Richard K. Eamer and Leonard Cohen, to
resign, effective as of the Distribution Date, from all boards of directors or
similar governing bodies of any NME Subsidiary on which they serve, and from all
positions as officers of NME or any NME Subsidiary in which they serve.
(b) NME shall cause all NME employees who are not also New
Hillhaven Employees to resign, effective as of the Distribution Date, from all
boards of directors or similar governing bodies of any New Hillhaven Subsidiary
on which they serve and from all positions as officers of any New Hillhaven
Subsidiary in which they serve.
Section 5.02 Outside Auditors. For periods ending through May 31,
----------------
1992, New Hillhaven shall appoint an accounting firm which is one of the "Big
Six" accounting firms or a successor thereto to perform the audit of New
Hillhaven's consolidated financial statements. During such periods, New
Hillhaven shall, and shall cause such auditors to, consult, within a reasonable
period of time prior to taking any action, with NME and its auditors in the
event that (i) New Hillhaven proposes to use accounting principles with respect
to New Hillhaven's consolidated financial statements different in any material
respect from the accounting principles currently used by NME in connection with
the preparation and audit of NME's consolidated financial statements or (ii) New
Hillhaven proposes to change its corporate structure from that indicated on
Annex III(b).
Section 5.03 Relationships; Name Changes.
---------------------------
(a) Relationships. As soon as practicable, and in any event not
-------------
later than one year after the Distribution, NME shall, and shall cause the NME
Subsidiaries to, cease using any existing printed material showing that New
Hillhaven or any New Hillhaven Subsidiary is a Subsidiary of NME, and New
Hillhaven shall, and shall cause the New Hillhaven Subsidiaries to, cease using
any existing printed material showing that New Hillhaven or any New Hillhaven
Subsidiary is a Subsidiary of NME.
(b) Name Changes. As soon as practicable, and in any event not
------------
later than one year after the Distribution, NME shall take all necessary steps
to change the corporate name of Old Hillhaven and any Old Hillhaven Subsidiary
using the word "Hillhaven" or any variation
17
<PAGE>
thereof in its corporate name to eliminate such word or variation.
Section 5.04 Post-Distribution Adjustments. Promptly after the
-----------------------------
Distribution, New Hillhaven shall arrange for the preparation of a consolidated
balance sheet prepared in accordance with generally accepted accounting
principles applied on a basis consistent with past practice (the "Distribution
Date Balance Sheet") as of the Distribution Date and the delivery of such
Distribution Date Balance Sheet to NME not later than March 31, 1990. NME shall
have the right to oversee and participate fully in the preparation of the
Distribution Date Balance Sheet, and such balance sheet shall also be reviewed,
in accordance with the standards established by the American Institute of
Certified Public Accountants, by KPMG Peat Marwick prior to May 31, 1990. Based
upon the Distribution Date Balance Sheet as so reviewed, New Hillhaven and NME
shall execute and deliver the addendum set forth in the New Hillhaven Subsidiary
Note to be delivered by FHC, which will reflect the adjusted principal amount
determined in accordance with the formula set forth in such Note.
ARTICLE VI
ACCESS TO INFORMATION AND SERVICES
----------------------------------
Section 6.01 Provision of Corporate Records.
------------------------------
(a) Upon New Hillhaven's request NME shall arrange as soon as
practicable following the Distribution Date for the delivery to New Hillhaven of
existing corporate records in the possession of NME relating to New Hillhaven
and the New Hillhaven Subsidiaries and all active agreements and active
litigation files relating to the businesses to be transferred to New Hillhaven
or any New Hillhaven Subsidiary in connection with the Plan of Reorganization,
except to the extent such items are already in the possession of New Hillhaven
or any New Hillhaven Subsidiary. Such records shall be the property of New
Hillhaven, but shall be available to NME for review and duplication until NME
shall notify New Hillhaven in writing that such records are no longer of use to
NME.
(b) Upon NME's request New Hillhaven shall arrange as soon as
practicable following the Distribution Date, to the extent not previously
delivered in connection with the transactions contemplated in Article II and
Article III, for the delivery to NME of existing corporate records in its
possession relating to the real properties currently held by Old Hillhaven which
will not be transferred to New Hillhaven and other records relating to matters
other than the businesses to be transferred to New Hillhaven or any New
18
<PAGE>
Hillhaven Subsidiary in connection with the Plan of Reorganization, except to
the extent such items are already in the possession of NME. Such records shall
be the property of NME, but shall be available to New Hillhaven for review and
duplication until New Hillhaven shall notify NME in writing that such records
are no longer of use to New Hillhaven.
Section 6.02 Access to Information.
---------------------
(a) From and after the Distribution Date, NME shall afford to
New Hillhaven and its authorized accountants, counsel and other designated
representatives reasonable access (including using reasonable efforts to give
access to persons or firms possessing information) and duplicating rights during
normal business hours to all records, books, contracts, instruments, computer
data and other data and information (collectively, "Information") within NME's
possession relating to the businesses to be transferred to New Hillhaven or any
New Hillhaven Subsidiary in connection with the Plan of Reorganization, insofar
as such access is reasonably required by New Hillhaven. Similarly, New Hillhaven
shall afford to NME and its authorized accountants, counsel and other designated
representatives reasonable access (including using reasonable efforts to give
access to persons or firms possessing Information) and duplicating rights during
normal business hours to Information within New Hillhaven's possession relating
to the NME business as constituted after the Distribution, insofar as such
access is reasonably required by NME. Information may be requested under this
Article VI for, without limitation, audit, accounting, claims, litigation
and tax purposes, as well as for purposes of fulfilling disclosure and reporting
obligations and for performing this Agreement and the Ancillary Agreements and
the transactions contemplated hereby and thereby.
(b) For a period of five years following the Distribution Date,
New Hillhaven shall provide to NME, promptly following such time at which such
documents shall be filed with the Commission, copies of all documents which
shall be filed by New Hillhaven or any of its Subsidiaries with the Commission
pursuant to the periodic and interim reporting requirements of the Exchange Act
and the rules and regulations of the Commission promulgated thereunder.
Section 6.03 Provision of Services. In addition to any services
---------------------
contemplated to be provided following the Distribution Date by the Services
Agreement or any other Ancillary Agreement, each party, upon written request,
shall make available to the other party, during normal business hours and in a
manner that will not unreasonably interfere with such party's business, its
financial, tax, accounting, legal, employee benefits and similar staff services
19
<PAGE>
(collectively "Services") whenever and to the extent that they may be reasonably
required in connection with the preparation of tax returns, audits, claims,
litigation or administration of employee benefit plans, and otherwise to assist
in effecting an orderly transition following the Distribution.
Section 6.04 Production of Witnesses. At all times from and after
-----------------------
the Distribution Date, each of New Hillhaven and NME shall use reasonable
efforts to make available to the other upon written request its and its
Subsidiaries' officers, directors, employees and agents as witnesses to the
extent that such persons may reasonably be required in connection with legal,
administrative or other proceedings in which the requesting party may from time
to time be involved.
Section 6.05 Reimbursement. Except to the extent otherwise
-------------
contemplated by the Services Agreement or any other Ancillary Agreement, a party
providing Information or Services to the other party under this Article VI shall
be entitled to receive from the recipient, upon the presentation of invoices
therefor, payments for such amounts, relating to supplies, disbursements and
other out-of-pocket expenses, as may be reasonably incurred in providing such
Information or Services.
Section 6.06 Retention of Records. Each of NME and New Hillhaven
--------------------
shall retain, and shall cause its Subsidiaries to retain, pursuant to NME's
Record Retention Program, a copy of which has been made available to New
Hillhaven, all Information relating to the other and the other's Subsidiaries,
except as otherwise required by law or set forth in an Ancillary Agreement or
except to the extent that such Information is in the public domain or in the
possession of the other party; provided, that, after the expiration of the
-------- ----
applicable retention period set forth in such Program, such Information shall
not be destroyed or otherwise disposed of at any time, unless, prior to such
destruction or disposal, (a) the party proposing to destroy or otherwise dispose
of such Information shall provide no less than 90 days' prior written notice to
the other, specifying in reasonable detail the Information proposed to be
destroyed or disposed of and (b) if a recipient of such notice shall request in
writing prior to the scheduled date for such destruction or disposal that any of
the Information proposed to be destroyed or disposed of be delivered to such
requesting party, the party proposing the destruction or disposal shall promptly
arrange for the delivery of such of the Information as was requested at the
expense of the party requesting such Information.
Section 6.07 Confidentiality. Subject to any contrary requirement
---------------
of law and the right of each party to
20
<PAGE>
enforce its rights hereunder in any legal action, each party shall keep strictly
confidential, and shall cause its employees and agents to keep strictly
confidential, any Information of or concerning the other party which it or any
of its agents or employees may acquire pursuant to, or in the course of
performing its obligations under, any provisions of this Agreement; provided,
--------
however, that such obligation to maintain confidentiality shall not apply to
- -------
Information which (i) at the time of disclosure was in the public domain, (ii)
after disclosure enters the public domain not as a result of acts by the
receiving party, (iii) was already independently in the possession of the
receiving party at the time of disclosure or (iv) is received by the receiving
party from a third party who did not receive such Information from the
disclosing party under an obligation of confidentiality.
ARTICLE VII
MISCELLANEOUS
-------------
Section 7.01 Entire Agreement; Amendment. This Agreement and the
---------------------------
other agreements referred to herein or therein or entered into in connection
herewith or therewith set forth the entire agreement and understanding of the
parties with respect to the transactions contemplated hereby and supersede all
prior agreements, arrangements and understandings relating to the subject matter
hereof, including the Original Agreement. No representation, promise, inducement
or statement of intention has been made by either party hereto which is not
embodied in this Agreement or such other agreements, the Annexes, Schedules or
Exhibits hereto or thereto, or the written statements or other documents
delivered pursuant hereto or thereto, and neither party hereto shall be bound by
or liable for any alleged representation, promise, inducement or statement of
intention not so set forth. This Agreement may be amended or modified only by a
written instrument executed by both parties hereto or by their successors and
permitted assigns.
Section 7.02 Survival of Agreements. Except as otherwise
----------------------
contemplated by this Agreement, all covenants and agreements of the parties
contained in this Agreement shall survive the Distribution Date.
Section 7.03 Expenses. Except as otherwise set forth in this
--------
Agreement or any Ancillary Agreement, all costs and expenses in connection with
the preparation, execution, delivery and implementation of this Agreement and
with the consummation of the transactions contemplated by this Agreement shall
be paid by NME to the extent that appropriate documentation concerning such
costs and expenses shall be provided to NME, provided that NME shall have
approved in advance any item of expense in excess of $5,000 to be incurred after
the Distribution Date, which approval
21
<PAGE>
shall not be unreasonably withheld. Such costs and expenses shall include,
without limitation, printing costs and other expenses related to the
preparation, printing and distribution of the Information Statement.
Section 7.04 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of California.
Section 7.05 Notices. All notices, consent, requests,
-------
instructions, approvals and other communications hereunder shall be in writing
and shall be deemed to have been duly given, if delivered in person or by
courier, telegraphed, telexed or sent by facsimile transmission or mailed, by
certified or registered mail, postage prepaid at the following address (or at
such other address provided by one party to the other in writing):
If to NME:
National Medical Enterprises, Inc.
2700 Colorado Avenue
P.O. Box 4070
Santa Monica, California 90404
Telecopy No.: (213) 315-6688
Attention: General Counsel
If to New Hillhaven:
The Hillhaven Corporation
1148 Broadway Plaza
Tacoma, Washington 98401-2264
Telecopy No.: (206) 756-4714
Attention: President
with a copy to:
The Hillhaven Corporation
1148 Broadway Plaza
Tacoma, Washington 98401-2264
Telecopy No.: (206) 756-4845
Attention: General Counsel
22
<PAGE>
Section 7.06 Construction. In this Agreement,
------------
(i) unless the context otherwise requires, the terms "herein",
"hereof", "hereto", and "hereunder" refer to this Agreement; and
(ii) the headings of the sections and subsections hereof and the
table of contents hereof are inserted for convenience only and do not constitute
a part of this Agreement.
Section 7.07 Successors and Assigns. This Agreement and all of the
----------------------
provisions hereof shall be binding upon and inure to the benefit of the parties
and their respective successors and permitted assigns.
Section 7.08 Termination. This Agreement may be terminated and the
-----------
Distribution abandoned at any time prior to the Distribution Date by and in the
sole discretion of the NME Board without the approval of New Hillhaven or of
NME's shareholders. In the event of such termination, no party shall have any
liability of any kind to any other party.
Section 7.09 Subsidiaries. Each of the parties hereto shall cause
------------
to be performed, and hereby guarantees the performance of, all actions,
agreements and obligations set forth herein to be performed by any Subsidiary of
such party which is contemplated to be a Subsidiary of such party on and after
the Distribution Date.
Section 7.10 No Third Party Beneficiaries. Except for the
----------------------------
provisions of Article IV relating to Indemnitees, this Agreement is solely for
the benefit of the parties hereto and their respective Subsidiaries and
Affiliates and should not be deemed to confer upon third parties any remedy,
claim, Liability, reimbursement, claim of action or other right in excess of
those existing without reference to this Agreement.
Section 7.11 Further Assurances. The parties acknowledge and agree
------------------
that the execution, delivery and performance of this Agreement and the Ancillary
Agreements will give rise to substantial long term relationships and that the
exercise of certain contractual rights by one party under such agreements may
have an adverse effect on the other party. In light of such relationships
referred, to above, and so long as such relationships continue in substantially
the form contemplated by this Agreement and the Ancillary Agreements taken
together, each of the parties agrees to use its best efforts to consult with
each other in good faith as to such actions which may be taken under such
23
<PAGE>
agreements or otherwise and which are reasonably believed to have a potentially
adverse effect on the business and affairs of the other. Notwithstanding the
foregoing, nothing in this Section shall be construed as limiting or otherwise
impairing the contractual rights and remedies exercisable by either party under
this Agreement or any of the Ancillary Agreements or otherwise in the conduct of
the business and affairs of either party.
Section 7.12 Annexes Exhibits and Schedules. The Annexes, Exhibits
------------------------------
and Schedules hereto shall be construed with and as an integral part of this
Agreement to the same extent as if the same had been set forth verbatim herein.
Section 7.13 Legal Enforceability. Any provision of this Agreement
--------------------
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision or remedies otherwise available to any party
hereto. Without prejudice to any rights or remedies otherwise available to any
party hereto, each party here to acknowledges that damages would be an
inadequate remedy for any breach of the provisions of this Agreement and agrees
that the obligations of the parties hereunder shall be specifically enforceable.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date and year first above written.
[signatures omitted]
24
<PAGE>
ANNEX I
to
REORGANIZATION AND
DISTRIBUTION AGREEMENT
PLAN OF REORGANIZATION
Promptly following execution of the Agreement, the parties thereto
will commence implementation of the steps set forth below, in the sequence set
forth below, in order to permit the Distribution to be made as of the
Distribution Date. All such steps shall be implemented in accordance with the
Rules of Procedure set forth at the end of this Plan of Reorganization.
The key to abbreviations designating the nature of a transferor's
interest in the long term care facilities referred to herein is set forth in
paragraph (c) of the Rules of Procedure. Other defined terms used herein
without definition shall have the meaning ascribed to them in the Agreement.
Step 1. (i) FHC will sell and transfer its interest in all the
------
property, plant and equipment located at the 14 long term care facilities
identified below in this Step 1, together with any deferred finance charges,
prepaid interest and/or other assets related to the mortgage debt with respect
to such facilities including, without limitation, any sinking funds, escrow
accounts and replacement reserves (such deferred charges, prepaid
<PAGE>
interest and other assets relating to the mortgage debt being referred to herein
collectively as the "Financing Assets"), to the NME Subsidiary listed below
under the caption "Purchaser" opposite the name of such facility. Each such NME
Subsidiary will purchase such assets on the terms contemplated hereby and, in
connection therewith, will assume all of the long-term mortgage debt, including
any accrued interest thereon, relating to the facilities so purchased. In each
case, the purchase price for such assets will equal the Book Value thereof.
Payment of the portion of such purchase price that exceeds the amount of debt so
assumed (such debt being valued for this purpose at its Book Value) will be made
via a credit in favor of FHC in the Purchaser's intercompany account with FHC.
All assets (other than the aforesaid property, plant and equipment and Financing
Assets) existing as of the respective effective dates of such transfers, and all
Liabilities other than the aforesaid long-term mortgage debt and any accrued
interest thereon existing as of such dates, related to such facilities will be
retained by FHC.
<TABLE>
<CAPTION>
Facility Facility Transferor's
State Number Name and Address Interest Purchaser
----- -------- ---------------- ------------ ---------
<S> <C> <C> <C> <C>
CONNECTICUT
(1) 561 Adams House O HH Holding
Healthcare Co., Inc.
Torrington, Ct.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Facility Facility Transferor's
State Number Name and Address Interest Purchaser
----- -------- ---------------- ------------ ---------
<S> <C> <C> <C> <C>
(2) 562 Andrew House
Healthcare O HH Holding
New Britain, Ct. Co., Inc.
(3) 563 Camelot Nursing Home O HH Holding
New London, Ct. Co., Inc.
(4) 565 Hamilton Pavilion O HH Holding
Healthcare Co., Inc.
Norwich, Ct.
(5) 566 Mountain View O HH Holding
Healthcare Co., Inc.
Windsor, Ct.
(6) 567 Nutmeg Pavilion O HH Holding
Healthcare Co., Inc.
New London, Ct.
(7) 568 Parkway Pavilion O HH Holding
Healthcare Co., Inc.
Enfield, Ct.
NEW
HAMPSHIRE
(8) 591/8591 Dover House O Hillhaven,
Healthcare/Dover Inc.
Head Trauma Unit
Dover, NH
(9) 592 Greenbriar Terrace OB Old Hillhaven
Healthcare
Nusha, NH
(10) 593 Hanover Terrace O Hillhaven,
Healthcare Inc.
Hanover, NH
OHIO
(11) 560 Franklin Woods O Old Hillhaven
Health
Center
Columbus, OH
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Facility Facility Transferor's
State Number Name and Address Interest Purchaser
----- -------- ---------------- ------------ ---------
<S> <C> <C> <C> <C>
(12) 570 Pickerington Health O Old Hillhaven
Convalescent Center
Pickerington, OH
(13) 572 Winchester Place I L Old Hillhaven
Winchester Place II O
Winchester, OH
VERMONT
(14) 559 Birchwood Terrace OB Hillhaven
Healthcare Inc.
Burlington, VT
</TABLE>
(ii) The subsidiaries of NME identified as transferors in Exhibit
1(ii) hereto, each of which will either become a New Hillhaven Subsidiary or be
merged into a New Hillhaven Subsidiary pursuant to this Plan of Reorganization,
will sell and transfer the assets set forth in such Exhibit opposite the name of
such subsidiary to the transferees identified in such Exhibit, in each case for
a purchase price for such assets equal to the Book Value thereof. In connection
with such purchase, each transferee will assume all of the Liabilities of its
respective transferors existing as of the dates of such transfers relating to
the assets so transferred. Payment of the portion of such purchase price that
exceeds the amount of Liabilities so assumed-(such Liabilities being valued-for
this purpose at their Book Value) will be made via a credit in favor of each
transferor in the applicable transferee's intercompany account with such
transferor.
4
<PAGE>
(iii) Old Hillhaven will assume the Liabilities described in
Exhibit l(iii) hereto of the subsidiaries identified as a transferor in such
Exhibit (each of which transferors will either become a New Hillhaven Subsidiary
or be merged into a New Hillhaven Subsidiary), such assumption to be reflected
as a charge against their respective intercompany accounts with Old Hillhaven.
Step 2. Medi-$ave Pharmacies, Inc. will declare a dividend in the
------
form of a New Hillhaven Subsidiary Note in the principal amount of $10 million,
payable to Hillhaven Inc., its stockholder of record as of the date of such
declaration, such dividend to be payable on January 31, 1990.
Step 3. FHC will, as lessee, enter into Lease Agreements covering
------
each of the 120 long term care facilities identified in Parts I and II of
Exhibit 3 hereto with the party listed in such Exhibit under the caption
"Owner/Lessor" opposite the name of such facility and management agreements with
respect to facility number 825 and facility number 829. The principal financial
terms of each such Lease Agreement are outlined on a Schedule of Lease Terms
initialed by the parties on January 8, 1990. All assets (other than property,
plant and equipment and Financing Assets) existing as of the respective
effective dates of such Lease Agreements and relating to the foregoing
facilities identified in Exhibit 3 owned by each such NME
5
<PAGE>
Subsidiary will be sold and transferred by such NME Subsidiary to FHC, which
will purchase such assets on the terms contemplated hereby. In connection
therewith, FHC will assume all of the Liabilities (other than long-term mortgage
debt and any accrued interest thereon existing as of such date) of such NME
Subsidiary existing as of such dates related to the facilities so leased or the
assets so sold and transferred. The purchase price for such assets will equal
the Book Value thereof. Payment of the portion of such purchase price that
exceeds the amount of Liabilities so assumed (such Liabilities being valued for
this purpose at their Book Value) will be made via a credit in favor of the
transferor in FHC's intercompany account with such transferor.
Step 4. The following wholly-owned subsidiaries of HH Holding Co.,
------
Inc. will be merged upstream into HH Holding Co., Inc.:
(1) Aurora's Golden Age Nursing Home, Inc.
(2) NHE/Arizona, Inc.
(3) NHE/Lindenwood Nursing Home, Inc.
(4) NILE/South Carolina, Inc.
(5) Nursing Home of Cherry Hills, Inc.
By reason of such mergers, NH Holding Co., Inc. will succeed to all assets and
Liabilities of such merged corporations, including the interests in real
property and improvements thereon relating to the seven long term care
facilities of the corporations named above in this Step 4, as identified in
Exhibit 4 hereto.
6
<PAGE>
Step 5. (i) Integrated Health Systems, Inc., a wholly-owned
------
Subsidiary of The Cadem Corporation, will be merged upstream into The Cadem
Corporation.
(ii) NME, owner of all of the outstanding capital stock of
The Cadem Corporation, will transfer such stock as a capital contribution to Old
Hillhaven.
Step 6. (i) Hillhaven West, Inc., owner of all the outstanding
------
capital stock of Pasatiempo Development, will sell that stock to FHC for a
purchase price equal to the Book Value of such stock. Payment of such purchase
price will be made via a credit in favor of the transferor in FHC's intercompany
account with such transferor.
(ii) The corporations listed in Exhibits 6(ii)(A) and
6(ii)(b) hereto will sell and transfer to FHC, and FHC will purchase on the
terms contemplated hereby, all (A) the assets of such transferor corporations
related to each of the 25 long term care facilities identified in Exhibit 6(ii)
(A) hereto under the respective names of such transferor corporations existing
as of the respective effective dates of such transfers related to such
facilities and (B) the notes receivable identified in Exhibit 6(ii) (B) hereto.
In connection with such sale and purchase, FHC will assume all of the
Liabilities of the transferors existing as of such dates related to the assets
so purchased. In each case, the purchase price for such assets will equal the
Book Value thereof. Payment of the portion of such purchase
7
<PAGE>
price that exceeds the amount of Liabilities so assumed (such Liabilities being
valued for this purpose at their Book Value) will be made via a credit in favor
of the transferor in FHC's intercompany account with such transferor.
Step 7. (i) (a) Old Hillhaven, owner of all of the outstanding
------
capital stock of the corporations listed below in this Step 7, will transfer all
of such stock as a capital contribution to Hillhaven Inc., also a wholly-owned
subsidiary of Old Hillhaven:
(1) Brim of Massachusetts, Inc.
(2) The Cadem Corporation
(3) Chastain's of Ava, Inc.
(4) Chastain's of Buffalo, Inc.
(5) Chastain's of Clinton, Inc.
(6) Chastain's of Des Peres, Inc.
(7) Chastain's of Joplin, Inc.
(8) Chastain's of Lamar, Inc.
(9) Chastain's of Thayer, Inc.
(10) Cornerstone Child Care Centers, Inc.
(11) Hillhaven of Central Florida, Inc.
(12) Hillhaven of Hawaii, Inc.
(13) Hillhaven Properties, Ltd.
(14) Postcare Rehabilitation, Inc.
(15) Postcare Rehabilitation of Northern
California, Inc.
(16) Smith, Harst, Siebel and Associates Inc.
(b) Old Hillhaven, owner of all of the
outstanding preferred stock of Flagg Industries, Inc., will transfer all of such
stock as a capital contribution to Hillhaven Inc.
(ii) Old Hillhaven will transfer as a capital contribution to
Hillhaven Inc. all the assets
8
<PAGE>
of Old Hillhaven related to each of the 68 long term care facilities identified
in Exhibit 7(ii) hereto, with the exception of that certain Option Agreement,
dated May 24, 1985, between Cardinal Medical Corporation and Old Hillhaven,
existing as of the respective effective dates of such transfers related to such
facilities. In connection with such transfer, Hillhaven Inc. will assume all of
the Liabilities of Old Hillhaven existing as of such dates related to the
facilities so transferred.
(iii) Old Hillhaven will transfer as a capital contribution to
Hillhaven Inc. all of the interest of Old Hillhaven in the
Partnership/stockholder interests and interests in real estate and improvements
thereon identified in Exhibit 7(iii) (A) hereto and the notes receivable
identified in Exhibits 7(iii) (B) and 7(iii) (C) hereto.
Step 8. HH Holding Co., Inc. will transfer to Hillhaven Inc., on the
------
terms contemplated hereby, all of the following assets:
(i) all of the outstanding common stock of Flagg Industries,
Inc. and Mediplex Pharmacy, Inc.
(ii) all of (A) the assets of HH Holding Co., Inc. related to
each of the 47 long term care facilities identified in Exhibit 8(ii)(A) hereto
existing as of the respective effective dates of such transfers related
9
<PAGE>
to such facilities, and (B) the notes receivable identified in Exhibits 8(ii)(B)
and 8(ii)(C) hereto.
(iii) all of the assets related to the seven long term care
facilities acquired by HH Holding Co., Inc. pursuant to the mergers specified in
Step 4 hereof except the property, plant and equipment located at facility
number 742 (Bells Lodge Nursing Home) and any Financing Assets relating to such
facility.
In connection with the transfers provided for in paragraphs (ii) and
(iii) above of this Step 8, Hillhaven, Inc. will assume all of the Liabilities
of HH Holding Co., Inc. existing as of the respective effective dates of such
transfers related to the facilities referred to therein and other assets so
transferred, except Liabilities in respect of the mortgage debt (including
accrued interest thereon) relating to facility number 742. In exchange for the
transfers of assets referred to in paragraphs (i), (ii) and (iii) of this Step
8, net of the Liabilities assumed, Hillhaven Inc. will issue to HH Holding Co.,
Inc. 500 shares of Hillhaven Inc. common stock (such number of shares (the
"Estimate") constituting the best estimate of NME and New Hillhaven as of the
date of such transfer of the actual number of such shares issuable pursuant to
the formula set forth in the next sentence). As soon as practicable after the
Distribution, the actual number of such shares issuable in exchange for the
transfer of the aforesaid assets will be
10
<PAGE>
determined for this purpose by calculating the Book Value per share of Hillhaven
Inc. common stock before giving effect to the transfers Provided for in this
Step 8 and then dividing the Book Value of such net assets transferred pursuant
to this Step 8 by such Book Value per share. To the extent the actual number of
shares issuable pursuant to such formula exceeds the Estimate, Hillhaven Inc.
will forthwith issue to HH Holding Co., Inc. a number of such shares equal to
such excess; to the extent such actual number of shares is less than the
Estimate, HH Holding Co., Inc. will forthwith return to Hillhaven Inc. a number
of such shares equal to such shortfall.
Step 9. Flagg Industries, Inc. will be merged upstream into
------
Hillhaven Inc.
Stem 10. (i) Hillhaven Inc., owner of all of the outstanding capital
-------
stock of the corporations listed below in this paragraph (i) of this Step 10,
will transfer all of such stock as a capital contribution to FHC:
(1) The Cadem Corporation
(2) Chastain's of Ava, Inc.
(3) Chastain's of Buffalo, Inc.
(4) Chastain's of Clinton, Inc.
(5) Chastain's of Des Peres, Inc.
(6) Chastain's of Joplin, Inc.
(7) Chastain's of Lamar, Inc.
(8) Chastain's of Thayer, Inc.
(9) Cornerstone Child Care Centers Inc.
(10) Hillhaven of Central Florida, Inc.
(11) Hillhaven of Hawaii, Inc.
(12) Hillhaven Properties, Ltd.
(13) Northwest Health Care, Inc.
(14) Postcare Rehabilitation, Inc.
(15) Postcare Rehabilitation of Northern California, Inc.
(16) Smith, Harst, Siebel and Associates, Inc.
11
<PAGE>
(ii) Hillhaven Inc. will transfer to FHC without consideration,
other than the assumption of the Liabilities referred to in the next sentence,
all of the assets acquired by Hillhaven Inc. pursuant to Paragraphs (ii) and
(iii) of Step 7, Paragraphs (ii) and (iii) of Step 8 (with the exception of the
notes receivable identified in Exhibits 7(iii)(B) and 8(ii)(B)) and Step 9 (with
the exception of (1) the partnership interest in Healthcare Property Partners
(2) the property, plant and equipment located at facility number 203 (Hillhaven
Willow Pass) and any Financing Assets relating to such facility, and (3) any
prepaid Taxes (as defined in the Tax Sharing Agreement) and investment in life
insurance net of policy borrowings related to insurance policies issued on
November 1, 1984 and 1985 by Security Life of Denver originally obtained for
SERP participants and related prepaid interest on such policy borrowings). In
connection with such transfer, FHC will assume all of the Liabilities of
Hillhaven Inc. existing as of the date of such transfer relating to the assets
so transferred (with the exception, in the case of Liabilities to which
Hillhaven Inc. has succeeded by virtue of the merger into Hillhaven Inc. of
Flagg Industries, Inc., of (1) any Liability in respect of cash overdrafts in
disbursement and payroll bank accounts, (2) any Liability in respect of Taxes
for periods through and including the Distribution Date (including any Liability
in respect of deferred Taxes),
12
<PAGE>
and (3) any Liability in respect of expenses related to the Distribution as set
forth in Section 7.03 of the Distribution Agreement.
(iii) (a) Old Hillhaven will transfer to Hillhaven Inc. as a
capital contribution a 98% limited partnership interest in facility number 7185.
(b) Old Hillhaven will transfer to Hillhaven Inc. as a capital
corporation the promissory note, in the principal amount of $1,750,000 dated as
of February 3, 1988 from Stockton Nursing Home Partners.
(c) Hillhaven Inc. will transfer to FHC without consideration other
than the assumption of associated Liabilities, including intercompany accounts,
(A) all the assets of Hillhaven Inc. related to the 49 long term care facilities
identified in Exhibit 10(iii)(A) hereto existing as of the respective dates of
such transfers related thereto, (B) the partnership interests and interests in
non-facility real estate and improvements thereon identified in Exhibit
10(iii)(B) hereto and (C) the notes receivable identified in Exhibit 10(iii)(C)
hereto. In connection with the transfer of the assets related to the 49 long
term care facilities referred to in clause (A) of the preceding sentence, FHC
will assume all of the Liabilities of Hillhaven Inc. existing as of the date of
such transfer relating to the assets so transferred.
13
<PAGE>
Stem 11. (i) The following wholly-owned subsidiaries of FHC will be
-------
merged upstream into FHC:
(1) The Cadem Corporation
(2) Chastain's of Ava, Inc.
(3) Chastain's of Buffalo, Inc.
(4) Chastain's of Clinton, Inc.
(5) Chastain's of Des Peres, Inc.
(6) Chastain's of Joplin, Inc.
(7) Chastain's of Lamar, Inc.
(8) Chastain's of Thayer, Inc.
(9) Hillhaven of Hawaii, Inc.
(10) Postcare Rehabilitation, Inc.
(11) Postcare Rehabilitation of Northern
California, Inc.
(12) Smith, Harst, Siebel and Associates, Inc.
By reason of such mergers and the merger described in Step 5(i), FHC will
succeed to all the assets and Liabilities of such merged corporations, including
the assets relating to the 16 long term care facilities of certain of the
corporations identified in 11(i) (A) hereto and the note receivable identified
in Exhibit 11(i) (B) hereto.
(ii) FHC will execute and deliver to Old Hillhaven a New
Hillhaven Subsidiary Note evidencing existing intercompany indebtedness,
including such indebtedness assumed in connection with the transfers described
above, of FHC to Old Hillhaven (the initial aggregate principal amount of such
Note to be $127.3 million, subject to adjustment as provided in such Note). In
connection therewith and with the New Hillhaven Subsidiary Note referred to in
Step 2, the Note Guarantee Agreement will be executed and delivered.
14
<PAGE>
Step 12. (i) Hillhaven Inc., owner of all of the outstanding capital
-------
stock of the corporations listed below in this Step 12, will transfer all of
such stock to New Hillhaven:
(1) Brim of Massachusetts, Inc.
(2) FHC
(3) Mediplex Pharmacy, Inc.
(4) Medi-$ave Pharmacies Inc.
(ii) Hillhaven Inc. will transfer to New Hillhaven (A) all the
notes receivable identified in Exhibits 7(iii) (B) and 8(ii) (B) hereto and
previously transferred to Hillhaven Inc. plus $30 million of cash and (B) all
its interests in the notes receivable identified in Exhibit 12(ii) hereto.
(iii) In exchange for the assets transferred pursuant to
paragraphs (i) and (ii) of this Step 12, New Hillhaven will transfer to
Hillhaven Inc. (1) such number of shares of New Hillhaven Common Stock so that
immediately after such issuance and after giving effect thereto, NME and its
Subsidiaries will own a number of such shares sufficient to enable NME to (a)
distribute to its shareholders one share of New Hillhaven Common Stock for each
share of NME Common Stock held on the record date for the Distribution and (b)
retain for its own account or the account of one of its Subsidiaries, in the
aggregate, a number of shares equal to 15% (rounded to the next highest full
share) of the outstanding New Hillhaven Common Stock and (2) warrants to
purchase 30 million shares of New Hillhaven Common Stock.
15
<PAGE>
Step 13. New Hillhaven will transfer as a capital contribution all of
-------
the outstanding capital stock of Mediplex Pharmacy, Inc. to Medi-$ave Pharmacies
Inc.
Step 14. Hillhaven Inc. will distribute as a dividend to its
-------
shareholders, HH Holding Co., Inc. and Old Hillhaven, 85% of the shares of New
Hillhaven Common Stock it received in Step 12.
Step 15. HH Holding Co., Inc. will distribute as a dividend to its
-------
shareholder, Old Hillhaven, all of the shares of New Hillhaven Common Stock it
received in Step 14.
Step 16. Old Hillhaven will distribute as a dividend to its
-------
shareholder, NME, all of the shares of New Hillhaven Common Stock it received in
Steps 14 and 15.
Step 17. New Hillhaven will enter into an Assignment and Assumption
-------
Agreement, substantially in the form attached hereto as Exhibit 17, with each of
the NME Subsidiaries in order to accomplish the transfer from such NME
Subsidiaries to New Hillhaven of all additional miscellaneous assets and
Liabilities of such NME Subsidiaries that are not otherwise provided for in this
Plan of Reorganization, subject to the specific exclusions contemplated by such
Assignment and Assumption Agreement.
Rules of Procedure. The parties to the Agreement have established the
------------------
following Rules of Procedure for purposes of this Plan of Reorganization:
16
<PAGE>
(a) Effectiveness of Transactions. The parties agree that the
-----------------------------
transactions contemplated in the various steps to this Plan of Reorganization
shall be deemed to take place in the sequence set forth herein and on the dates
set forth in the various instruments giving effect to such transactions, without
regard to the date of recordation of any instrument of conveyance or other
similar document or the date of the perfection of any security interest;
provided, however, that the effective date of any merger provided for in this
- -------- -------
Plan of Reorganization shall be determined in accordance with the applicable law
of the jurisdiction in question.
(b) Accounting. For purposes of this Plan of Reorganization, all
----------
references to "Book Value" shall be deemed to mean the amount at which the
particular asset or liability in question would, but for the transfers
contemplated hereby, have been reflected as of the Distribution Date on the
balance sheet of the entity which owns such asset or owes such liability on the
date of the Agreement.
The parties agree that such balance sheets will be prepared as of the
Distribution Date in accordance with generally accepted accounting principles
applied on a basis consistent with the audited balance sheet of NME as of May
31, 1989. A consolidated balance sheet of New Hillhaven as of the Distribution
Date is to be prepared by New
17
<PAGE>
Hillhaven. Such balance sheet will be reviewed, in accordance with the standards
established by the American Institute of Certified Public Accountants, by KPMG
Peat Marwick. The books and records as of the Distribution Date that are to
serve as a basis for any computations contemplated by this Plan of
Reorganization shall have given effect to any changes therein required by such
accounting firm as a result of their review.
(c) Key to Transferor's Interest in Real Estate. The nature of the
-------------------------------------------
transferor's interest in the various long term care facilities to be transferred
pursuant to this Plan of Reorganization is designated in the lists referred to
above in accordance with the following key:
<TABLE>
<CAPTION>
Nature of Interest Designation
------------------ -----------
<S> <C>
Transferor is owner O
Transferor is sole lessee L
Transferor is co-lessee CL
Transferor is owner and O/L
lessor
Transferor is lessee and L/SL
sublessor
Transferor is manager, but M
not the owner or lessee
Transferor is owner of improvements,
but lessee of the land OB
Transferor is sublessee A
Transferor has contract to purchase
land L/C
</TABLE>
(d) Definition of "Assets". For purposes of this Plan of
----------------------
Reorganization, references to "assets" unless otherwise indicated and except for
the transfers contemplated in Step 17 include, but are not limited to, property,
plant and equipment, including interests in real
18
<PAGE>
property and improvements thereon, cash, inventory, accounts receivable,
intangible and other assets (including deferred financing costs).
(e) Settlement of Intercompany Accounts. The transfers of assets and
-----------------------------------
assumptions of Liabilities effected pursuant to this Plan of Reorganization will
result in the creation of net credits in favor of each transferor in FHC's
intercompany accounts with such transferor. Upon completion of the steps
provided above in this Plan of Reorganization, Old Hillhaven will cause all of
such transferors (all of which are Subsidiaries of Old Hillhaven) to transfer to
Old Hillhaven, by means of entries to the intercompany accounts, all of such
credits so created. Old Hillhaven will then deliver to FHC $127.3 million of
such credits in exchange for the issuance by FHC to Old Hillhaven of a New
Hillhaven Subsidiary Note in like principal amount, as contemplated by paragraph
(ii) of Step II of this Plan of Reorganization. Any additional credits
thereafter remaining at Old Hillhaven will then be contributed by Old Hillhaven
to the capital of New Hillhaven or to any New Hillhaven Subsidiary designated
for this purpose by New Hillhaven. Notwithstanding the foregoing, such
additional contribution may be effected in the accounts of the respective
companies in connection with any other step of this Plan of Reorganization.
19
<PAGE>
EXHIBIT 1(ii)
to
Plan of Reorganization
----------------------
TRANSFER OF ASSETS FROM FHC
TO OLD HILLHAVEN AND HILLHAVEN INC.
-----------------------------------
<TABLE>
<CAPTION>
Transferor Transferee Description of Assets
- ---------- ---------- ---------------------
<S> <C> <C>
Brim of Massachusetts, Inc. Old (1) All prepaid Taxes
FHC Hillhaven (as defined in the Tax
Cornerstone Child Care Centers, Inc. Sharing Agreement); and
Hillhaven of Central Florida, Inc. (2) investment in life
Hillhaven Properties, Ltd. insurance net of policy
Brim - Olive Grove, Inc. borrowings related to
Fairview Living Centers, Inc. insurance policies
Northwest Health Care, Inc. issued on November 1,
Professional Medical Enterprises, Inc. 1984 and 1985 by
Medi-Save Pharmacies, Inc. Security Life of Denver
Mediplex Pharmacy, Inc. originally obtained for
Pasatiempo Development SERP participants and
The Cadem Corporation related prepaid interest
Chastain's of Ava, Inc. on such policy
Chastain's of Buffalo, Inc. borrowings.
Chastain's of Clinton, Inc.
Chastain's of Des Peres, Inc.
Chastain's of Joplin, Inc.
Chastain's of Lamar, Inc.
Chastain's of Thayer, Inc.
Hillhaven of Hawaii, Inc.
Integrated Health Systems, Inc.
Postcare Rehabilitation, Inc.
Postcare Rehabilitation of Northern
California, Inc.
Smith, Harst, Siebel and Associates, Inc.
Twenty-Nine Hundred Corporation
FHC Hillhaven Partnership interest in
Inc. Health Care Property
Partners
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Transferor Transferee Description of Assets
- ---------- ---------- ---------------------
<S> <C> <C>
FHC Hillhaven "Excess Land" consisting
Inc. of one-half of property
parcel related to
facility number 591 in
Dover, N.H. as shall
subsequently be more
particularly described.
</TABLE>
EXHIBIT 1(ii), page 2
<PAGE>
EXHIBIT 1(iii)
to
Plan of Reorganization
----------------------
ASSUMPTION OF LIABILITIES BY OLD HILLHAVEN
------------------------------------------
<TABLE>
<CAPTION>
Transferor Description of Liability
- ---------- ------------------------
<S> <C>
Brim of Massachusetts, Inc. (1) Any Liability in
FHC respect of cash
Cornerstone Child Care Centers, Inc. overdrafts in
Hillhaven of Central Florida, Inc. disbursement and
Hillhaven Properties, Ltd. payroll bank accounts
Brim - Olive Grove, Inc. maintained by
Fairview Living Centers, Inc. transferor; (2) any
Northwest Health Care, Inc. Liability in respect
Professional Medical Enterprises, Inc. of Taxes for periods
Medi-Save Pharmacies, Inc. through and including
Mediplex Pharmacy, Inc. the Distribution Date
Pasatiempo Development (including any
The Cadem Corporation Liability in respect
Chastain's of Ava, Inc. of deferred Taxes);
Chastain's of Buffalo, Inc. and (3) any Liability
Chastain's of Clinton, Inc. in respect of expenses
Chastain's of Des Peres, Inc. related to the
Chastain's of Joplin, Inc. Distribution as set
Chastain's of Lamar, Inc. forth in Section 7.03
Chastain's of Thayer, Inc. of the Distribution
Hillhaven of Hawaii, Inc. Agreement.
Integrated Health Systems, Inc.
Postcare Rehabilitation, Inc.
Postcare Rehabilitation of Northern
California, Inc.
Smith, Harst, Siebel and Associates, Inc.
Twenty-Nine Hundred Corporation
</TABLE>
EXHIBIT 1(iii), page 1
<PAGE>
EXHIBIT 3
to
Plan of Reorganization
----------------------
FACILITIES LEASED TO FHC
BY OLD HILLHAVEN OR ITS SUBSIDIARIES
------------------------------------
PART I
Facilities Owned Or Leased by NME Subsidiaries
<TABLE>
<CAPTION>
Facility Owner/
State Number Facility Name and Address Lessor
----- -------- ------------------------- ------
<C> <S> <C> <C> <C>
ALABAMA
(1) 791 Whitesburg Manor Health HH Holding Co.,
Care Center Inc.
105 Teakwood Drive
Huntsville, AL
ARIZONA
(2,3) 436, 437 Valley House Healthcare Hillhaven West,
5545 East Lee Street Inc.
Tucson, AZ
(4) 742 Bells Lodge Nursing Home NHE/Arizona,
4202 North 20th Avenue Inc.
Phoenix, AZ
(5) 851 Villa Campana Healthcare Old Hillhaven
6651 Carondelet Drive East
Tucson, AZ
ARKANSAS
(6) 818 Hillhaven Little Rock Old Hillhaven
5720 West Markam
Little Rock, AR
CALIFORNIA
</TABLE>
EXHIBIT 3, page 1
<PAGE>
<TABLE>
<CAPTION>
Facility Owner/
State Number Facility Name and Address Lessor
----- -------- ------------------------- ------
<C> <S> <C> <C> <C>
(7) 149 Fair Oaks Health Care Center Hillhaven Inc.
8845 Fair Oaks Boulevard
Sacramento, CA
(8) 150 Hillhaven San Francisco Hillhaven, Inc
1359 Pine Street
San Francisco, CA
(9) 203 Hillhaven Willow Pass Flagg
3318 Willow Pass Industries Inc.
Concord, CA
(10) 320 Hillhaven Convalescent Hillhaven, Inc
Hospital
1609 Trousdale Drive
Burlingame, CA
(11) 410 Santa Paula Healthcare Hillhaven West,
220 West Main Street Inc.
Santa Paula, CA
(12) 411 Alta Vista Healthcare Hillhaven West.
9020 Garfield Inc.
Arlington, CA
(13) 420 Maywood Acres Healthcare Hillhaven West,
South "C" Street Inc.
Oxnard, CA
(14) 427 Twin Pines Healthcare Hillhaven West,
250 March Street Inc.
Santa Paula, CA
(15) 727 Broodview Convalescent HH Holding Co..
Hospital Inc.
13228 San Pablo Avenue
San Pablo, CA
(16) 737 Hillhaven San Leandro HH Holding Co.
368 Juana Avenue Inc.
San Leandro, CA
(17) 738 Hillhaven Alameda HH Holding Co.
2116 Otis Drive Inc.
Alameda, CA
</TABLE>
EXHIBIT 3, page 2
<PAGE>
<TABLE>
<CAPTION>
Facility Owner/
State Number Facility Name and Address Lessor
----- -------- ------------------------- ------
<C> <S> <C> <C> <C>
COLORADO
(18) 859 Castle Gardens Nursing Home Old Hillhaven
401 Malley Drive
Northglenn, CO
CONNECTICUT
(19) 561 Adams House Health Care HH Holding Co.,
80 Fern Drive Inc.
Torrington, CT
(20) 562 Andrew House Health Care HH Holding Co.,
66 Clinic Drive Inc.
New Britain, CT
(21) 563 Camelot Nursing Home HH Holding Co.,
89 Viets Street Inc.
New London, CT
(22) 565 Hamilton Pavilion Health Care HH Holding Co.,
50 Palmer Street Inc.
Norwich, CT
(23) 566 Mountain View Health Care HH Holding Co.,
581 Poquonock Avenue Inc.
Windsor, CT
(24) 567 Nutmeg Pavilion Health Care HH Holding Co.,
78 Viets Street Extension Inc.
New London, CT
(25) 568 Parkway Pavilion Health Care HH Holding Co.,
1157 Enfield Street Inc.
Enfield, CT
FLORIDA
(26) 115 Convalescent Center of the Hillhaven, Inc.
Palm Beaches
300 15th Street
West Palm Beach, FL
(27) 117 East Manor Medical Center Hillhaven, Inc.
1524 East Avenue South
Sarasota, FL
</TABLE>
EXHIBIT 3, page 3
<PAGE>
<TABLE>
<CAPTION>
Facility Owner/
State Number Facility Name and Address Lessor
----- -------- ------------------------- ------
<C> <S> <C> <C> <C>
(28) 124 Hillhaven Health Care Center Old Hillhaven
950 Mellonville Avenue
Sanford, FL
(29) 125 Titusville Nursing and Old Hillhaven
Convalescent Center
1705 Jess Parrish Court
Titusville, FL
(30) 610 Boca Raton Convalescent Center Hillhaven, Inc.
755 Meadows Road
Boca Raton, FL
(31) 836 Medicenter - Tampa Old Hillhaven
4411 North Habana
Tampa, FL
GEORGIA
(32) 155 Savannah Convalescent Center Hillhaven, Inc.
815 East 63rd Street
Savannah, GA
(33) 645 Hillhaven Rehabilitation and Hillhaven, Inc.
Convalescent Center
26 Tower Road
Merrietta, GA
(34) 660 Hillhaven Convalescent Center Hillhaven, Inc.
11800 Abercorn Street
Savannah, GA
ILLINOIS
(35) 448 Dirkson House Health Care Hillhaven West,
555 West Carpenter Street Inc.
Box 7025
Springfield, IL
INDIANA
(36) 286 Columbia Nursing Plaza HH Holding Co.,
621 West Columbia Inc.
Evansville, IN
</TABLE>
EXHIBIT 3, page 4
<PAGE>
<TABLE>
<CAPTION>
Facility Owner/
State Number Facility Name and Address Lessor
----- -------- ------------------------- ------
<C> <S> <C> <C> <C>
(37) 779 Westview Manor Healthcare HH Holding Co.,
Center Inc.
1510 Clinic Drive
Bedford, IN
(38) 780 Columbus Convalescent Center HH Holding Co.,
2100 Midway Inc.
Columbia, IN
KANSAS
(39) 838 Hillhaven - Topeka Old Hillhaven
711 Garfield
Topeka, KS
(40) 844 Hillhaven - Wichita Old Hillhaven
932 North Topeka
Wichita, KS
KENTUCKY
(41) 783 Lexington Manor Healthcare HH Holding Co.,
Facility Inc.
353 Waller Avenue
Lexington, KY
MISSOURI
(42) 445 Clayton House Health Care Hillhaven West,
Center Inc.
13995 East Clayton Road
Manchester, MO
(43) 446 Columbia House Health Care Hillhaven West,
1801 Towne Drive Inc.
Columbia, MO
(44) 834 Medicenter - Springfield Old Hillhaven
1911 South National
Springfield, MO
MONTANA
(45) 416 Park Place Hillhaven Hillhaven West,
Convalescent Center Inc.
P.O. Box 5001
Great Falls, MT
</TABLE>
EXHIBIT 3, page 5
<PAGE>
<TABLE>
<CAPTION>
Facility Owner/
State Number Facility Name and Address Lessor
----- -------- ------------------------- ------
<C> <S> <C> <C> <C>
(46) 433 Parkview Acres Convalescent Hillhaven West,
Center Inc.
200 Oregon Street
Dillon, MT
NEVADA
(47) 145 Reno Healthcare Hillhaven, Inc.
1300 Mill Street
Reno, NV
(48) 640 Las Vegas Convalescent Center Hillhaven, Inc.
2832 Maryland Parkway
Las Vegas, NV
(49) 641 Torrey Pines Care Center Hillhaven, Inc.
1701 South Torrey Pines Drive
P.O. Box 26209
Las Vegas, NV
NEW HAMPSHIRE
(50) 593 Hanover Terrace Hillhaven, Inc.
Lyme Road
Hanover, NH
(51) 591/8591 Dover House Health Care/ Hillhaven, Inc.
Dover Trauma Unit
Plaza Drive
Dover, NH
NORTH CAROLINA
(52) 116 Durham Hillhaven Hillhaven, Inc.
Rehabilitation
and Convalescent Center
1515 West Pettigrew
Durham, NC
(53) 136 Hillhaven La Salle Nursing Hillhaven, Inc.
Center
411 South La Salle Street
Durhum, NC
(54) 137 Hillhaven - Sunnybrook Hillhaven, Inc.
Convalescent Center
25 Sunnybrook Road
Raleigh, NC
</TABLE>
EXHIBIT 3, PAGE 6
<PAGE>
<TABLE>
<CAPTION>
Facility Owner/
State Number Facility Name and Address Lessor
----- -------- ------------------------- ------
<C> <S> <C> <C> <C>
(55) 138 Hillhaven Rehabilitation and Hillhaven, Inc.
Care Center
91 Victoria Road
Asheville, NC
(56) 143 Hillhaven Convalescent Center Hillhaven, Inc.
616 Wade Avenue
Raleigh, NC
(57) 146 Hillhaven - Rose Manor Hillhaven, Inc
Convalescent Center
4230 North Roxboro Road
Durham, NC
(58) 176 Hillhaven - Orange Nursing Hillhaven, Inc.
Center
Route 1, Box 155
Durham, NC
(59) 188 Hillhaven Convalescent Center Hillhaven, Inc.
2006 South 16th Street
Wilmington, NC
(60) 190 Winston-Salem Convalescent Hillhaven, Inc.
Center
1900 West First Street
Winston-Salem, NC
(61) 191 Silas Creek Manor Hillhaven, Inc.
3350 Silas Creek Parkway
Winston Salem, NC
(62) 704 Guardian Care of Roanoke Guardian Medical
Rapids Services, Inc.
305 14th Street
Roanoke Rapids, NC
(63) 706 Guardian Care of Henderson Guardian Medical
519 Roanoke Avenue Services, Inc.
P.O. Box 1616
Henderson, NC
(64) 707 Guardian Care Center of Monroe Guardian Medical
1212 Sunset Drive Services, Inc.
P.O. Box 1189
Monroe, NC
</TABLE>
EXHBIT 3, page 7
<PAGE>
<TABLE>
<CAPTION>
Facility Owner/
State Number Facility Name and Address Lessor
----- -------- -------------------------- ------
<C> <S> <C> <C> <C>
(65) 710 Guardian Care of New Bern Guardian Medical
836 Hospital Drive Services, Inc.
P.O. Box 2037
New Bern, NC
(66) 711 Guardian Care of Kinston Guardian Medical
Cunningham Road Services, Inc.
P.O. Box 1438
Kinston, NC
(67) 713 Guardian Care of Zebulon Guardian Medical
509 Gannon Avenue Services, Ltd.
Zebulon, NC
(68) 724 Hillhaven Health Care of Guardian Medical
Gastonia Services, Ltd.
416 North Highland Street
Gastonia, NC
(69) 806 Hillhaven Convalescent of Hillhaven, Inc.
Chapel Hill
1602 East Franklin Street
Chapel Hill, NC
OHIO
(70) 560 Franklin Woods Nursing Home Old Hillhaven
2770 Clime Road
Columbus, OH
(71) 570 Pickerington Health Care Old Hillhaven
Center
1300 Hill Road North
Pickerington, OH
(72) 572 Winchester Place II Old Hillhaven
36 Lehman Drive
Canal Winchester, OH
(73) 802 Hillhaven Convalescent Center Old Hillhaven
145 Olive Street
Akron, OH
</TABLE>
EXHIBIT 3, page 8
<PAGE>
<TABLE>
<CAPTION>
Facility Owner/
State Number Facility Name and Address Lessor
----- -------- -------------------------- ------
<C> <S> <C> <C> <C>
OKLAHOMA
(74, 75) 233, 234 Heritage Manor Nursing and Old Hillhaven
Convalescent Center
215 Southeast Howard Street
Bartlesville, OK
TENNESSEE
(76) 132 Hillhaven Convalescent Center Hillhaven, Inc.
431 Larkin Springs Road
Madison, Tennessee
TEXAS
(77) 750 Golden Age Manor/Belfort HH Holding Co.,
7633 Belfort Inc.
Houston, TX
(78) 752 Golden Age Manor/Long Point HH Holding Co.,
8810 Long Point Road Inc.
Houston, TX
(79) 753 Golden Age Manor/North Loop HH Holding Co.,
1737 North Loop West Inc.
Houston, TX
(80) 754 Golden Age Manor/Rookin HH Holding Co.,
6500 Rookin Inc.
Houston, TX
UTAH
(81) 655 Hillhaven Convalescent Center Hillhaven, Inc.
41 South 9th East
Salt Lake City, UT
(82) 690 Wasatch Villa Convalescent Hillhaven, Inc.
Nursing Home
2200 East 33rd Street
Salt Lake City, UT
VIRGINIA
(83) 825 Nasamond Convalescent Center Old Hillhaven
200 Constance Road
Suffolk, VA
</TABLE>
EXHIBIT 3, page 9
<PAGE>
<TABLE>
<CAPTION>
Facility Owner/
State Number Facility Name and Address Lessor
----- -------- -------------------------- ------
<C> <S> <C> <C> <C>
(84) 826 Hillhaven Rehabilitation and Old Hillhaven
Convalescent Center
1005 Hampton Road
Norfolk, VA
(85) 829 Holmes Convalescent Home Old Hillhaven
4142 Bonney Road
Virginia Beach, VA
(86) 842 Medicenter - Virginia Beach Old Hillhaven
1148 First Colonial Road
Virginia Beach, VA
WASHINGTON
(87) 114 Arden Nursing Home Hillhaven, Inc.
16357 Aurora Avenue North
Seattle, WA
(88) 127 North West Continuum Care Northwest
Center Continuum Care
128 Beacon Hill Center, Inc. and
Longview, WA Hillhaven, Inc.
(89) 158 Bellingham Care Center Hillhaven, Inc.
1200 Birchwood Avenue
Bellingham, WA
(90) 160 First Hill Care Center Hillhaven, Inc.
1334 Terry Avenue
Seattle, WA
(91) 180 Hillhaven Convalescent Center Hillhaven, Inc.
400 East 33rd Street
Vancouver, WA
(92) 185 Hillhaven Nursing Home Hillhaven, Inc.
3605 "Y" Street
Vancouver, WA
(93) 461 Edmonds Care Center Hillhaven West,
21008 76th Avenue West Inc.
Edmonds, WA
(94) 462 Queen Anne Care Center Hillhaven West,
2717 Dexter Avenue North Inc.
Seattle, WA
</TABLE>
EXHIBIT 3, page 10
<PAGE>
<TABLE>
<CAPTION>
Facility Owner/
State Number Facility Name and Address Lessor
----- -------- -------------------------- ------
<C> <S> <C> <C> <C>
WISCONSIN
(95) 765 Eastview Manor HH Holding Co.,
729 Park Street Inc.
Antigo, WI
(96) 767 Colony Oaks Care Center HR Holding Co.,
602 Briarcliff Drive Inc.
Appleton, WI
(97) 770 Vallhaven Care Center HH Holding Co.,
125 Byrd Avenue Inc.
Neenah, WI
(98) 774 Mount Carmel Nursing Home HH Holding Co.,
5700 West Layton Avenue Inc.
Milwaukee, WI
(99) 775 Sheridan Nursing Home HH Holding Co.,
2400 Sheridan Road Inc.
Kenosha, WI
(100) 776 Woodstock/Kenosha Health HH Holding Co.,
Care Center Inc.
3415 Sheraton Road
Kenosha, WI
WYOMING
(101) 441 Mountain Towers Health Hillhaven West
Care Center Inc.
3129 Acacia Drive
Cheyenne, WY
(102) 481 Park Manor Nursing and Hillhaven West
Convalescent Home Inc.
542-16th Street
P.O. Box 1150
Rawlings, WY
(103) 482 Fremont Manor Nursing and Hillhaven West
Convalescent Home Inc.
1002 Forest Avenue
Riverton, WY
</TABLE>
EXHIBIT 3, page 11
<PAGE>
<TABLE>
<CAPTION>
Facility Owner/
State Number Facility Name and Address Lessor
----- -------- -------------------------- ------
<C> <S> <C> <C> <C>
(104) 483 Kimberly Manor Nursing and Hillhaven West,
Convalescent Home Inc.
1325 Sage Street
P.O. 1146
Rock Springs, WY
</TABLE>
EXHIBIT 3, page 12
<PAGE>
PART II
(Facilities Subject to a Master Lease)
<TABLE>
<CAPTION>
Facility Facility Name Description of Owner/
State Number and Address Master Lease Lessor
----- -------- ------------- -------------- ------
<C> <S> <C> <C> <C> <C>
ALABAMA
(105) 804 Hillhaven Lease dated Old Hillhaven
Convalescent Center July 3, 1969, by
and Nursing Home and between
27RE28 10th Avenue St. Vincent's
Birmingham, AL Hospital, as
lessor, and
Medicenters of
America, Inc., as
lessee (ground
lease).
(106) 824 Hillhaven Lease dated Old Hillhaven
Convalescent Center November 30, 1966,
and Nursing Home by and between
1758 Springhill Earl B. Wert and
Avenue Ellen R. Wert, as
Mobile, AL lessors, and
Medicenters of
America, Inc., as
lessee (ground
lease).
ARIZONA
(107) 7104 Villa Campana Lease and Old Hillhaven &
Retirement Center Acquisition Hillhaven, Inc.
6653 E. Carondelet Agreement dated
Drive February 1, 1983
Tucson, AZ by and between the
Industrial
Development
Authority of the
County of Pima, as
lessor, and The
Hillhaven
Corporation, as
lessee.
</TABLE>
EXHIBIT 3, page 13
<PAGE>
<TABLE>
<CAPTION>
Facility Facility Name Description of Owner/
State Number and Address Master Lease Lessor
----- -------- ------------- -------------- ------
<S> <C> <C> <C> <C> <C>
CALIFORNIA
(108) 525 Hillhaven Lease dated June Hillhaven, Inc.
Convalescent 11, 1962, by and
Hospital between Mary G.
920 W. LaVeta Newcom, Richard B.
Orange, CA Newcom and Mary
Beth Potter
Querfurth, as
lessor, and Orange
Square Development
Corporation, as
lessee (ground
lease).
KANSAS
(109) 809 Country Club Home Lease and Old Hillhaven
400 Sunset Dr. Agreement dated
P.O. Box 319 January 1, 1973 by
Council Grove, KS and between the
City of Council
Grove, as lessor,
and Country Club
Home, Inc., as
lessee.
(110) 833 Sedgewick Lease and Sedgewick
Convalescent Agreement dated Convalescent
Center September 20, 1974 Center, Inc.
712 Monroe by and between the
Box 49 City of Sedgewick,
Sedgewick, KS as lessor, and
Sedgewick
Convalescent
Center, Inc., a
Kansas
corporation, as
lessee.
</TABLE>
EXHIBIT 3, page 14
<PAGE>
<TABLE>
<CAPTION>
Facility Facility Name Description of Owner/
State Number and Address Master Lease Lessor
----- -------- ------------- -------------- ------
<C> <S> <C> <C> <C> <C>
(111, 857, Hammond Holiday Lease dated Hammond Holiday
112) 858 Home January 1, 1980 by House, Inc.
114 West 11th and between the
Larned, KS City of Larned,
Kansas, as lessor,
and Hammond
Holiday Home,
Inc., a Kansas
corporation, as
lessee.
(113) 861 Green Meadows Lease dated July Old Hillhaven
Nursing Center 1, 1982 by and
215 N. Larmar St. between the City
Haysville, KS of Haysville,
Sedgewick County,
Kansas, as lessor,
and Green Meadows
Nursing Center,
Inc., as lessee.
KENTUCKY
(114) 781 Bashford East Lease dated HH Holding Co.,
Healthcare February 13, 1962 Inc.
3535 Bardstown Road by and between
Louisville, KY Cesare Bertoli and
Kathleen H.
Bertoli, as
lessor, and
Heritage Home
Nursing and
Convalescent Care.
NEW HAMPSHIRE
(115) 592 Greenbriar Terrace Lease dated Old Hillhaven
55 Harris Road October 1, 1972 by
Nashua, NH and between Samuel
A. Tamposi, Gerald
Q. Nash, as
lessor, and
Greenbriar Nursing
Home Corp., as
lessee (ground
lease).
</TABLE>
EXHIBIT 3, page 15
<PAGE>
<TABLE>
<CAPTION>
Facility Facility Name Description of Owner/
State Number and Address Master Lease Lessor
----- -------- ------------- -------------- ------
<C> <S> <C> <C> <C> <C>
OHIO
(116) 572 Winchester Place I Lease agreement Old Hillhaven
36 Lehman Drive dated October 29,
Canal Winchester, 1976 by and
Ohio between Harley B.
and George J.
Reynolds, as
lessor, and AEON,
Inc., as lessee.
TENNESSEE
(117) 822 Hillhaven Lease agreement Hillhaven, Inc.
Convalescent Center dated December 1,
605 Primary Parkway 1979 by and
Memphis, TN between The Health
and Educational
Facilities Board
of the County of
Shelby, Tennessee
and Hillhaven,
Inc.
VERMONT
(118) 559 Birchwood Lease dated June Hillhaven, Inc.
Healthcare Center 17, 1964 by and
43 Starr Farm Road between Henry H.
Burlington, VT Riordan and
Charles W. Jones,
Trustees of the
Will of John H.
Flynn, as lessor,
and Birchwood
Development
Corporation, as
lessee.
</TABLE>
EXHIBIT 3, page 16
<PAGE>
<TABLE>
<CAPTION>
Facility Facility Name Description of Owner/
State Number and Address Master Lease Lessor
----- -------- ------------- -------------- ------
<S> <C> <C> <C> <C> <C>
WISCONSIN
(119) 769 North Ridge Care Lease agreement HH Holding Co.,
Center dated June 1, 1983 Inc.
1445 N. 7th Street by and between
Manitowoc, WI City of Manitowoc,
Wisconsin, as
lessor, and HH
Holding Co., Inc.,
a Delaware
corporation, as
lessee.
(120) 773 Mount Carmel Lease agreement HH Holding Co.,
Healthcare Center dated June 1, Inc.
677 E. State St. 1983 by and
Burlington, WI between City of
Burlington, as
lessor, and HH
Holding Co., Inc.,
a Delaware
corporation, as
lessee.
</TABLE>
EXHIBIT 3, page 17
<PAGE>
EXHIBIT 4
to
Plan of Reorganization
----------------------
ASSETS ACQUIRED BY HH HOLDING CO., INC. BY MERGER
-------------------------------------------------
<TABLE>
<CAPTION>
Facility Facility Transferor's
State Number Name and Address Interest
----- --------- ---------------- -------------
<S> <C> <C> <C> <C>
PRIOR OWNER: AURORA'S GOLDEN AGE NURSING HOME, INC.
-----------
COLORADO
(1) 745 Aurora Care Center L
Aurora, CO
PRIOR OWNER: NHE/ARIZONA, INC.
-----------
ARIZONA
(2) 742 Bells Lodge 0
Phoenix, AZ
(3) 743 Desert Life Healthcare Center 0
Tucson, AZ
PRIOR OWNER: NHE/LINDENWOOD NURSING HOME, INC.
-----------
NEBRASKA
(4) 793 Lindenwood 0/L
Omaha, NE
PRIOR OWNER: NHE/SOUTH CAROLINA, INC.
-----------
SOUTH CAROLINA
(5) 792 Hillhaven Health Care 0
Greenville, SC
(6) 984 Meridian Care Center M
Columbia, SC
PRIOR OWNER: NURSING HOME OF CHERRY HILLS, INC.
-----------
COLORADO
(7) 744 Cherry Hills Nursing Home L
Englewood, CO
</TABLE>
EXHIBIT 4, page 1
<PAGE>
EXHIBIT 6(ii)(A)
to
Plan of Reorganization
----------------------
ASSETS PURCHASED BY FHC
FROM OLD HILLHAVEN SUBSIDIARIES
-------------------------------
<TABLE>
<CAPTION>
Facility Facility Name Transferor's
State Number and Address Interest
----- ------ ----------- --------
<S> <C> <C> <C> <C>
TRANSFEROR: THE HILLHAVEN CORPORATION OF TEXAS
----------
TEXAS
(1) 840 University Manor Nursing L/SL
Home, Lubbock, TX
(2) 841 Quaker Villa Nursing Home L/SL
Lubbock, TX
TRANSFEROR: HILLHAVEN WEST, INC.
----------
IDAHO
(3) 409 Shoshone Living Center 0
Kellogg, ID
CALIFORNIA
(4) 415 Hillhaven Highland House L
Highland, CA
(5) 428 Sunset Boulevard L
Convalescent Hospital,
Hayward, CA
MONTANA
(6) 418 Carbon County Healthcare L
Center, Red Lodge, MT
(7) 434 Livingston Convalescent L
Center, Livingston, MT
</TABLE>
EXHIBIT 6(ii)(A), page 1
<PAGE>
<TABLE>
<CAPTION>
Facility Facility Name Transferor's
State Number and Address Interest
----- ------ ----------- --------
<C> <S> <C> <C> <C>
OREGON
(8) 451 Oak Crest Care Center L
Salem, OR
(9) 453 Villa Royal Healthcare L
Center, Medford, OR
(10) 455 Hyland Hills Care Center L
Beaverton, OR
CALIFORNIA
(11) 413 Hillhaven Care Center L/SL
Santa Barbara, CA
OREGON
(12) 452 Sunnyside Care Center L/SL
Salem, OR
(13) 454 Sunnyglen L/SL
Salem, OR
TRANSFEROR: GUARDIAN MEDICAL SERVICES, INC.
NORTH CAROLINA
(14) 716 Guardian Care of Farmville 0
Farmville, NC
(15) 708 Guardian Care of Goldsboro L
Goldsboro, NC
(16) 709 Guardian Care of Burgaw L
Burgaw, NC
(17) 717 Guardian Care of Scotland L
Neck, Scotland Neck, NC
(18) 718 Guardian Care of Ahoskie L
Ahoskie, NC
(19) 719 Guardian Care of Walnut L
Cove, Walnut Cove, NC
(20) 721 Guardin Care of Elkin L
Elkin, NC
</TABLE>
EXHIBIT 6(ii)(A), page 2
<PAGE>
<TABLE>
<CAPTION>
Facility Facility Name Transferor's
State Number and Address Interest
----- ------ ----------- --------
<C> <S> <C> <C> <C>
(21) 722 Guardian Care of L
Kenansville
Kenansville, NC
(22) 723 Guardian Care of Rocky L
Mount, Rocky Mount, NC
(23) 726 Guardian Care of Elizabeth L
City, Elizabeth City, NC
TRANSFEROR: LAKE HEALTHCARE FACILITIES, INC.
----------
WISCONSIN
(24) 601 Columbus Care Center L
Columbus, WI
(25) 604 Omro Care Center L
Omro, WI
</TABLE>
EXHIBIT 6(ii)(A), page 3
<PAGE>
EXHIBIT 6(ii)(B)
to
Plan of Reorganization
----------------------
NOTES RECEIVABLE TRANSFERRED TO FHC
-----------------------------------
TRANSFEROR: Hillhaven West, Inc.
----------
<TABLE>
<CAPTION> General Ledger
Facility Original Balance (As of
Number Payor Payee Term August 31, 1989)
------ ----- ----- ---- ---------------
<S> <C> <C> <C> <C>
414 Mid-Valley Associates Hillhaven 08/85 - 10/05 $2,250,000.00
West, Inc.
450 Royal Oak Corp. Hillhaven 01/88 - 10/89 $ 1,359.07
West, Inc.
TRANSFEROR: Lake Health Care Facilities, Inc.
----------
<CAPTION>
General Ledger
Facility Original Balance (As of
Number Payor Payee Term August 31. 1989)
- ------- ----- ----- ---- ---------------
<S> <C> <C> <C> <C>
600 Equity Associates Elm Row 10/81 - 11/96 $1,065,992.92
Jefferson,
Inc.
602 Peter C. Kern Lake Health 05/88 - 06/96 $2,953,871.43
Care
Facilities,
Inc.
605 Cal-Iowa Associates Lake Health 05/86 - 05/06 $1,909,728.14
Care
Facilities,
Inc.
</TABLE>
EXHIBIT 6(ii)(B), page 1
<PAGE>
TRANSFEROR: Hillhaven of Michigan, Inc.
----------
<TABLE>
<CAPTION>
General Ledger
Facility Original Balance (As of
Number Payor Payee Term August 31. 1989)
------ ----- ----- ---- ---------------
<S> <C> <C> <C> <C>
698 Peter C. Kern Hillhaven 05/88 - 06/96 $2,054,973.26
of
Michigan,
Inc.
TRANSFEROR: The Hillhaven Corporation of Texas
----------
<CAPTION>
General Ledger
Facility Original Balance (As of
Number Payor Payee Term August 31. 1989)
------ ----- ----- ---- ---------------
<S> <C> <C> <C> <C>
840 Texas Health Enterprises, The 04/88 - 04/94 $ 49,115.36
Inc. Hillhaven
Corporation
of Texas
841 Texas Health Enterprises, The 04/88 - 04/94 $ 98,230.76
Inc. Hillhaven
Corporation
of Texas
</TABLE>
EXHIBIT 6(ii)(B), page 2
<PAGE>
EXHIBIT 7(ii)
to
Plan of Reorganization
----------------------
OLD HILLHAVEN FACILITY ASSETS TRANSFERRED
-----------------------------------------
TO HILLHAVEN. INC. AS A CAPITAL CONTRIBUTION
--------------------------------------------
<TABLE>
<CAPTION>
Facility Facility Name Transferor's
State Number and Address Interest
----- -------- ------------- ------------
<S> <C> <C> <C> <C>
FLORIDA
(1) 122 Bradenton Convalescent 0
Center
Bradenton, FL
KANSAS
(2) 895 Indian Creek Nursing Center 0
Overland Park, KS
(3) 896 Indian Meadows Nursing 0
Center
Overland Park, KS
KENTUCKY
(4) 864 Harrodsburg Health Care 0
Manor
Harrodsburg, KY
LOUISIANA
(5) 816 Lake Charles Care Center 0
Lake Charles, IA
MISSOURI
(6) 260 Tradition House Healthcare 0
Joplin, MO
(7) 823 Charlevoix Nursing Center 0
St. Charles, MO
(8) 7180/ Villa Ventura 0
821 Kansas City, MO
</TABLE>
EXHIBIT 7(ii), page 1
<PAGE>
<TABLE>
<CAPTION>
Facility Facility Name Transferor's
State Number and Address Interest
----- -------- ------------- ------------
<S> <C> <C> <C> <C>
OHIO
(9) 868 Lebanon Country Manor 0
Nursing Home
Lebanon, OH
TENNESSEE
(10) 884 Masters Health Care Center 0
Algood, TN
WISCONSIN
(11) 771 Heritage Haven Care Center 0
Schofield, WI
ARIZONA
(12) 796 Sierra Vista Care Center L
Sierra, AZ
(13) 885 Hillhaven Health Care L
Center
Yuma, AZ
(14) 886 Devon Gables Health Care L
Center
Tucson, AZ
(15) 887 Devon Gables Apartments L
Tucson, AZ
COLORADO
(16) 696 Bear Creek Nursing Center L
Morrison, CO
(17) 849 Iliff Care Center L
Denver, CO
(18) 872 Inglenook Retirement Center L
Brighton, CO
(19) 873 Brighton Care Center L
Brighton, CO
(20) 883 Golden West Nursing Home L
Fort Collins, CO
</TABLE>
EXHIBIT 7(ii), page 2
<PAGE>
<TABLE>
<CAPTION>
Facility Facility Name Transferor's
State Number and Address Interest
----- -------- ------------- ------------
<S> <C> <C> <C> <C>
FLORIDA
(21) 123 Orlando Memorial L
Convalescent Center
Orlando, FL
(22) 837 Cape Coral Nursing Pavilion L
Cape Coral, FL
ILLINOIS
(23) 258 Chastain's of Highland L
Highland, IL
KANSAS
(24) 803 Bethesda Nursing Center L
Chanute, KS
(25) 845 Colonial Terrace - L
Independence
Independence, KS
(26) 846 Colonial Lodge - L
Independence
Independence, KS
KENTUCKY
(27) 277 Rosewood Manor Health Care L
Center
Bowling Green, KY
(28) 278 Oakview Manor Health Care L
Center
Calvert City, KY
(29) 279 Cedars of Lebanon Rest Home L
Lebanon, KY
(30) 280 Winchester Manor Health L
Care Center
Winchester, KY
(31) 281 Riverside Manor Health Care L
Center
Calhoun, KY
</TABLE>
EXHIBIT 7(ii), page 3
<PAGE>
<TABLE>
<CAPTION>
Facility Facility Name Transferor's
State Number and Address Interest
----- -------- ------------- ------------
<S> <C> <C> <C> <C>
(32) 282 Maple Manor Health Care L
Center
Greenville, KY
MISSOURI
(33) 263 Crane Health Care Center L
Crane, MO
(34) 264 Point Lookout Health Care L/SL
Center
Point Lookout, MO
(35) 265 Table Rock Health Care L
Center
Kimberling City, MO
(36) 266 Table Rock Health Care L
Center
Residential Project
Kimberling City, MO
(37) 267 Point Lookout Health Care L/SL
Center
Residential Project
Point Lookout, MO
(38) 819 Wornall Health Care Center L
Kansas City, MO
(39) 843 Blue Hills Living Center L
Kansas City, MO
(40) 860 Blue Hills Centre L
Kansas City, MO
MONTANA
(41) 439 Big Sky Care Center L
Helena, MT
OHIO
(42) 237 Newark Healthcare Center L
Newark, OH
(43) 295 Whitehouse Country Manor L
Whitehouse, OH
</TABLE>
EXHIBIT 7(ii), page 4
<PAGE>
<TABLE>
<CAPTION>
Facility Facility Name Transferor's
State Number and Address Interest
----- -------- ------------- ------------
<S> <C> <C> <C> <C>
(44) 870 Community Nursing Center L
Marion, OH
OKLAHOMA
(45) 889 Mayfair Nursing Home L
Tulsa, OK
TENNESSEE
(46) 171 Hillhaven Convalescent CL
Center - Bolivar
Bolivar, TN
(47) 174 Hillhaven Convalescent CL
Center - Camden
Camden, TN
(48) 175 Hillhaven of Jefferson City CL
Jefferson City, TN
(49) 177 Loudon Healthcare Center CL
Loudon, TN
(50) 179 Hillhaven Convalescent L
Center - Huntington,
Huntington, TN
(51) 182 Hillhaven Convalescent CL
Center - Germantown,
Germantown, TN
(52) 184 Greystone Healthcare Center L
Blountville, TN
(53) 877 Smith County Health Care A
Center
Carthage, TN
VIRGINIA
(54) 871 Montvue Nursing Home L
Luray, VA
OHIO
(55) 238 McMillen Senior Village L
Newark, OH
</TABLE>
EXHIBIT 7(ii), page 5
<PAGE>
<TABLE>
<CAPTION>
Facility Facility Name Transferor's
State Number and Address Interest
----- -------- ------------- ------------
<S> <C> <C> <C> <C>
(56) 297 Marigarde - Sylvania 0/L
Nursing Home
Toledo, OH
MISSISSIPPI
(57) 882 Hillhaven Convalescent L/SL
Center West Point
West Point, MS
TEXAS
(58) 879 Sun Valley Healthcare L/SL
Harlingen, TX
(59) 290 Oaks Living Center L/SL
Orange, TX
(60) 291 Jones Healthcare Center L/SL
Orange, TX
(61) 880 Four States Nursing Home L/SL
Texarkana, TX
FLORIDA
(62) 945/9945 Quality Care of Bay Point M
Nursing Pavilion
St. Petersburg, FL
(63) 972/9972 Carrollwood Care Center M
Tampa, FL
(64) 9918 Hillhaven Conv. Center M
Sarasota, FL
LOUISIANA
(65) 946/9972 Bayview Living Center M
Gretna, LA
(66) 7170 The Landing on Behrman M
Place
New Orleans, LA
MASSACHUSETTS
(67) 949/9949 Ledgewood Nursing Center M
Beverly, MA
</TABLE>
EXHIBIT 7(ii), page 6
<PAGE>
<TABLE>
<CAPTION>
Facility Facility Name Transferor's
State Number and Address Interest
----- -------- ------------- ------------
<S> <C> <C> <C> <C>
MISSISSIPPI
(68) 996/9996 Care Inn - Alcorn County M
Corinth, MS
</TABLE>
EXHIBIT 7(ii), page 7
<PAGE>
EXHIBIT 7(iii)(A)
to
Plan of Reorganization
----------------------
OLD HILLHAVEN TRANSFERRED TO HILLHAVEN INC. AS A CAPITAL CONTRIBUTION
(Partnership/stockholder interests and non-facility related
-----------------------------------------------------------
real estate interests)
---------------------
FACILITY PARTNERSHIP/STOCKHOLDERS INTERESTS
-------------------------------------------
<TABLE>
<CAPTION>
Facility Extent and Nature
State Number of Interest
----- -------- -----------------
<S> <C> <C> <C>
ARIZONA
7101 a 5% limited partnership interest
(1) in Kachina Pointe Limited
Partnership
Sedona, AZ
COLORADO
(2) 7125 a 98% limited partnership
interest in Castle Gardens
Retirement Center Limited
Partnership
FLORIDA
(3) 972 a 49% general partnership
interest in Carrollwood Care
Center
Tampa, FL
MASSACHUSETTS
(4) 949 7500 shares (a 50% stockholder's
interest) in Ledgewood Healthcare
Corporation
Beverly, MA
MISSISSIPPI
(5) 996 a 50% general partnership
interest in NHS, Inc., HH Inc.
Partnership
Corinth, MS
</TABLE>
EXHIBIT 7(iii)(A), page 1
<PAGE>
<TABLE>
<CAPTION>
Facility Extent and Nature
State Number of Interest
----- -------- -----------------
<S> <C> <C> <C>
NEW MEXICO
(6) 874 a 99% limited partnership
interest in Casa Arena Blanca
Limited Partnership
Alamagordo, NM
</TABLE>
NON-FACILITY RELATED PARTNERSHIP INTERESTS
------------------------------------------
<TABLE>
<S> <C>
(1) an 85.5% general
partnership interest in
Denver Convalescent
Company
(2) a 51% general
partnership interest in
Southfield Convalescent
Company
</TABLE>
NON-FACILITY RELATED REAL ESTATE INTERESTS
------------------------------------------
<TABLE>
<CAPTION>
Transferor's Interest
---------------------
<S> <C> <C>
(1) Aurora Hillhaven L
Regional Office
Denver, CO
(2) Hillhaven Regional L
Office
Sarasota, FL
(3) Hillhaven Regional L
Office
Overland Park, KS
(4) Hillhaven Regional L
Office
Lexington, MA
(5) Haverhill Warehouse L
Haverhill, MA
</TABLE>
EXHIBIT 7(iii)(A), page 2
<PAGE>
<TABLE>
<CAPTION>
Transferor's Interest
---------------------
<S> <C> <C>
(6) Hillhaven Regional L
Office
Charlotte, NC
(7) Hillhaven Regional L
Office
Winston-Salem, NC
(8) Hillhaven Regional L
Office
Columbus, OH
(9) Hillhaven Regional L
Office
Memphis, TN
(10) Hillhaven Regional L
Office
Virginia Beach, VA
(11) Broadway Building L
1132-1136 Broadway
Plaza
Tacoma, WA 98402
(12) The Annex L
1140 Court C
Tacoma, WA 98402
(13) The Warehouse L
3003-B South Pine
Street
Tacoma, WA 98409
(14) Hillhaven Regional L
Office
Menasha, WI
(1) condominium located 0
at the following
address:
5101 North Casa
Blanca Drive
Unit #22
Scottsdale, AZ
85253
(2) Hillhaven Corporate L
Headquarters Office
Tacoma, WA
</TABLE>
EXHIBIT 7(iii)(A), page 3
<PAGE>
<TABLE>
<CAPTION>
Transferor's Interest
---------------------
<S> <C> <C>
(3) Contract to buy land L/C
and improvements
thereon at the
following address:
The Print Shop,
1016 South 28th
Street
Tacoma, WA 98409
</TABLE>
EXHIBIT 7(iii)(A), page 4
<PAGE>
EXHIBIT 7(iii)(B)
to
Plan of Reorganization
----------------------
OLD HILLHAVEN NOTES RECEIVABLE TRANSFERRED TO
---------------------------------------------
HILLHAVEN INC, AS A CAPITAL CONTRIBUTION
----------------------------------------
(Non-Working Capital Notes - Subsequent Transfer
To New Hillhaven Pursuant To Step 12(ii))
<TABLE>
<CAPTION> General Ledger
Facility Original Balance (As of
Number Payor Payee Term August 31, 1989)
- ------- ----- ----- ---- ---------------
<S> <C> <C> <C> <C>
9949 Ledgewood Healthcare Old 12/87 - $ 750,000.00
Corporation Hillhaven
9949 Ledgewood Healthcare Old 12/87 - $ 150,000.00
Corporation Hillhaven
050 D. Zulauf Old 01/87 - 01/91 $ 1,100.21
Hillhaven
141 Gal-Farm Associates Sentry 11/86 - 11/01 $ 850,000.00
Investment
Company,
Inc.
142 Gal-Farm Associates Argus 11/86 - 11/01 $ 850,000.00
Investment
Company,
Inc.
297 Health Enterprises of Old 05/88 - 06/94 $ 98,462.33
Michigan, Inc. Hillhaven
800/ Prowestern Developers Old 10/87 - 11/89 $ 697,500.00
1002 Financial, Inc. and Hillhaven
Executive Capital
Corporation
800 Royal Oak Old 08/85 - 08/89 $ 20,000.00
Hillhaven
800 Quality Care Management Old 06/85 - 05/90 $ 412,000.00
Co., Inc. Hillhaven
</TABLE>
EXHIBIT 7(iii)(B), page 1
<PAGE>
<TABLE>
<CAPTION> General Ledger
Facility Original Balance (As of
Number Payor Payee Term August 31, 1989)
- ------- ----- ----- ---- ---------------
<S> <C> <C> <C> <C>
800 Angell Care Incorporated Old 06/87 - 06/90 $ 204,009.91
Hillhaven
800/ NHS Properties, Inc. Old 01/88 - 07/88 $ 262,500.00
7175 Hillhaven
800 NHS Properties, Inc. Old 01/88 - 07/88 $ 680,000.00
Hillhaven
800 Bob Latch, Gail Carnes Old 05/86 - _____ $ 400,000.00
and George Carnes Hillhaven
101 Joseph D. Livingston and Old 08/82 - 09/86 $ 202,498.52
Patricia Blaney Hillhaven
Livingston
811 Mark V Ltd. #2 Old 07/75 - 12/90 $ 89,773.10
Hillhaven
811 Mark V Ltd. #3 Old 05/70 - 01/91 $ 156,434.47
Hillhaven
812 Peter C. Kern Old 05/88 - 06/08 $2,427,097.72
Hillhaven
813 Cal-Iowa Associates Old 05/86 - 05/06 $2,224,824.03
Hillhaven
820 Pavilion Louisville Old 05/84 - 07/94 $2,570,847.18
Partnership Hillhaven
830 Omaha Associates Old 10/89 - 10/04 $3,428,000.00
Hillhaven
839 Peter C. Kern Old 05/88 - 06/96 $3,396,952.19
Hillhaven
878 Tri-State Associates Old 08/86 - 08/06 $3,577,533.08
Hillhaven
</TABLE>
EXHIBIT 7(iii)(B), page 2
<PAGE>
<TABLE>
<CAPTION> General Ledger
Facility Original Balance (As of
Number Payor Payee Term August 31, 1989)
- ------- ----- ----- ---- ---------------
<S> <C> <C> <C> <C>
9972 Carrollwood Care Center Old ______________ $ 153,629.00
Partnership Hillhaven
808 Peter C. Kern Old 04/88 - 04/96 $1,974,439.27
Hillhaven
879 Texas Health Enterprises, Old 04/88 - 04/94 $ 98,230.76
Inc. Hillhaven
9972 Carrollwood Care Center Old 03/87 - _____ $ 112,182.11
Partnership Hillhaven,
Robert
Whitcomb,
Fred Beene
and Dixie
Taylor
9996 Johnson, Mooney-Bond, Old _____________ $ 119,500.00
Inc. Hillhaven
799 Cal-Bax Associates Old 08/87 - 08/90 $ 360,000.00
Hillhaven
946 Bayview Living Center, Old 1/89 - 2/94 $3,200,000.00
Ltd. Hillhaven
</TABLE>
EXHIBIT 7(iii)(B), page 3
<PAGE>
EXHIBIT 7(iii)(C)
to
Plan of Reorganization
----------------------
OLD HILLHAVEN NOTES RECEIVABLE TRANSFERRED TO
---------------------------------------------
HILLHAVEN INC. AS A CAPITAL CONTRIBUTION
----------------------------------------
(Working Capital Notes - Subsequent Transfer
To FHC Pursuant To Step 10 (ii))
<TABLE>
<CAPTION> General Ledger
Facility Original Balance (As of
Number Payor Payee Term August 31, 1989)
- ------- ----- ----- ---- ---------------
<S> <C> <C> <C> <C>
800/ Casa Arena Blanca Limited Old 11/86 - 11/93 $ 1,270,988.51
1874 Partnership Hillhaven
800 Stockton Health Care Old 12/86 - sale of $ 904,805.46
Center, Limited Hillhaven facility
Partnership
800 Casa Arena Blanca Limited Old $ 238,000.00
Partnership Hillhaven ______________
9922 Windsor Woods Ltd. Old 08/87 - ______ $ 1,551,543.51
Hillhaven
9976 Windsor Woods Ltd. Old $ 531,949.18
Hillhaven _____________
9919 Gene E. Lynn, Michael S. Old $ 870,000.00
Lynn, Ron Hayes and Nancy Hillhaven _____________
Hayes
9973 Gene E. Lynn, Michael S. Old 03/87 - 12/93 $ 810,000.00
Lynn, Ron Hayes and Nancy Hillhaven or sale of
Hayes facility
9975 Gene E. Lynn, Michael S. 03/87 - 12/94 $ 1,042,500.00
Lynn, Ron Hayes and Nancy or sale of
Hayes facility
9992 Paull Randle Associates Old $ 1,580,043.95
Hillhaven _____________
</TABLE>
EXHIBIT 7(iii)(C), page 1
<PAGE>
EXHIBIT 8(ii)(A)
to
Plan of Reorganization
----------------------
FACILITY ASSETS OF HH HOLDING CO., INC. TRANSFERRED TO HILLHAVEN INC.
---------------------------------------------------------------------
<TABLE>
<CAPTION>
Facility Facility Name Transferor's
State Number and Address Interest
----- ------ ----------- --------
<S> <C> <C> <C> <C>
ARIZONA
(1) 853 Kachina Point Health Center 0
Sedona, AZ
CALIFORNIA
(2) 729 Hillhaven Convalescent Hospital 0
Castro Valley, CA
KENTUCKY
(3) 784 Northfield Manor Healthcare 0
Facility
Louisville, KY
(4) 785 Hillcrest Healthcare Center 0
Owensboro, KY
(5) 787 Woodland Terrace 0
Healthcare Facility
Elizabethtown, KY
MINNESOTA
(6) 764 Woodside Convalescent Center 0
Rochester, MN
WISCONSIN
(7) 772 Family Heritage Nursing 0
Home/Wisconsin Rapids
Wisconsin Rapids, WI
CALIFORNIA
(8) 730 Del Rosa Convalescent Hospital L
San Bernardino, CA
(9) 736 Oakridge Convalescent Hospital L
Oakland, CA
</TABLE>
EXHIBIT 8(ii)(A), page 1
<PAGE>
<TABLE>
<CAPTION>
Facility Facility Name Transferor' s
State Number and Address Interest
----- ------ ----------- --------
<S> <C> <C> <C> <C>
INDIANA
(10) 285 Gertha's Nursing Center L
Evansville, IN
(11) 287 Crestview Convalescent Home L
Vincennes, IN
(12) 288 Indian Creek Convalescent Center L
Corydon, IN
(13) 293 Westfield Village L
Westfield, IN
(14) 294 Windsor Estates of Kokomo L
Kokomo, IN
(15) 694 Wedgewood Manor Convalescent L
Center
Clarksville, IN
KENTUCKY
(16) 271 Heritage Manor Healthcare Center L
Mayfield, KY
(17) 782 Fellowship Home & Friendship L
House
Danville, KY
(18) 786 River Front Terrace Healthcare L
Facility
Paducah, KY
NEBRASKA
(19) 746 Homestead Nursing Home L
Lincoln, NE
TENNESSEE
(20) 789 Northhaven Healthcare Center L
Knoxville, TN
</TABLE>
EXHIBIT 8(ii)(A), page 2
<PAGE>
<TABLE>
<CAPTION>
Facility Facility Name Transferor's
State Number and Address Interest
----- ------ ----------- --------
<S> <C> <C> <C> <C>
WISCONSIN
(21) 289 San Luis Manors L
Green Bay, WI
(22) 766 Colonial Manor L
Wausau, WI
CALIFORNIA
(23) 731 High Street Convalescent 0/L
Hospital
Oakland, CA
(24) 734 MacArthur Convalescent Hospital 0/L
Oakland, CA
(25) 735 Oak Manor Convalescent Hospital 0/L
Oakland, CA
MICHIGAN
(26) 695 Grayling Health Care Center 0/L
Grayling, MI
(27) 777 Clara Barton Terrace 0/L
Convalescent Home
Flint, MI
(28) 778 Mary Ave Care Center 0/L
Lansing, MI
(29) 302 Birchwood Care Center L/C
Marne, MI
TEXAS
(30) 749 Garrett Park Manor O/L
Dallas, TX
CALIFORNIA
(31) 298 Driftwood Convalescent Hospital L/SL
Yuba City, CA
(32) 299 Marysville Convalescent Hospital L/SL
Marysville, CA
</TABLE>
EXHIBIT 8(ii)(A), page 3
<PAGE>
<TABLE>
<CAPTION>
Facility Facility Name Transferor' s
State Number and Address Interest
----- ------ ----------- --------
<S> <C> <C> <C> <C>
(33) 728 Cabrillo Convalescent Hospital L/SL
Santa Cruz, CA
(34) 741 Hillhaven Manor L/SL
Yuba City, CA
INDIANA
(35) 292 Twin City Nursing Home L/SL
Gas City, IN
(36) 305 University Nursing Center L/SL
Upland, IN
MICHIGAN
(37) 300 Autumnwood of McBain L/SL
McBain, MI
(38) 301 Autumnwood of Deckerville Rd. L/SL
Deckerville, MI
(39) 303 Greenbriar Nursing Home L/SL
Sterling, MI
(40) 304 Pineview of Hillman L/SL
Hillman, MI
TEXAS
(41) 272 Hughes Spring Nursing Home L/SL
Hughes Springs, TX
(42) 273 Pinecrest Convalescent Home L/SL
Dangerfield, TX
(43) 274 Coastal Care Center L/SL
Texas City, TX
(44) 275 Great South West Convalescent L/SL
Center
Grant Prairie, TX
(45) 283 Country Club Manor Nursing Home L/SL
Amarillo, TX
</TABLE>
EXHIBIT 8(ii)(A), page 4
<PAGE>
<TABLE>
<CAPTION>
Facility Facility Name Transferor' s
State Number and Address Interest
----- --------- ---------------- -------------
<S> <C> <C> <C> <C>
(46) 755 Greencrest Manor L/SL
Greenville, TX
(47) 760 Ridgeview Nursing and L/SL
Convalescent Center
Wichita Falls, TX
</TABLE>
EXHIBIT 8(ii)(A), page 5
<PAGE>
EXHIBIT 8(ii)(B)
to
Plan of Reorganization
----------------------
HH HOLDING CO., INC. NOTES RECEIVABLE TRANSFERRED TO HILLHAVEN INC.
-------------------------------------------------------------------
(Non.Working Capital Notes - Subsequent Transfer
To New Hillhaven Pursuant To Step 12 (ii))
<TABLE>
<CAPTION> General Ledger
Facility Original Balance (As of
Number Payor Payee Term August 31, 1989)
- ------- ----- ----- ---- ---------------
<S> <C> <C> <C> <C>
749 Southeastern Health Care, HH Holding 04/89 - 10/89 $ 20,491.78
Inc. and Prentiss Smith Co., Inc.
799 Jewell Brothers HH Holding 05/85 - 05/89 $ 50,000.00
Co., Inc.
075 R. Karman HH Holding 09/85 - 08/89 $ 99.00
Co., Inc.
075 S. Waeckerle HH Holding 11/85 - 10/89 $ 230.00
Co., Inc.
276 Texas Health Enterprises, HH Holding 10/86 - 02/97 $2,850,000.00
Inc. Co., Inc.
284 Odessa Associates HH Holding 11/86 - 11/01 $2,250,000.00
Co., Inc.
300 Health Enterprises of HH Holding 05/88 - 06/94 $ 49,231.15
Michigan, Inc. Co., Inc.
301 Health Enterprises of HH Holding 05/88 - 06/94 $ 49,231.15
Michigan, Inc. Co., Inc.
303 Health Enterprises of HH Holding 05/88 - 06/94 $ 49,231.15
Michigan, Inc. Co., Inc.
304 Health Enterprises of HH Holding 05/88 - 06/94 $ 49,231.15
Michigan, Inc. Co., Inc.
695 Health Enterprises of HH Holding 05/88 - 06/94 $ 49,231.15
Michigan, Inc. Co., Inc.
</TABLE>
EXHIBIT 8(ii)(B), page 1
<PAGE>
<TABLE>
<CAPTION> General Ledger
Facility Original Balance (As of
Number Payor Payee Term August 31, 1989)
- ------- ----- ----- ---- ---------------
<S> <C> <C> <C> <C>
703 M-Z Invest HH Holding _____ - 03/93 $ 453,332.05
Co., Inc.
728 Peter C. Kern and Susan HH Holding 09/88 - 09/97 $ 240,528.40
B.Kern Co. , Inc.
732 M.V. Associates HH Holding 10/85 - 10/05 $1,300,000.00
Co., Inc.
740 Yuba Associates Limited HH Holding 09/87 - 10/94 $ 840,510.35
Partnership dba Yuba-Zev Co., Inc.
Associates Limited
Partnership
747 Odessa Associates HH Holding 11/86 - 11/01 $1,440,000.00
Co., Inc.
748 Tri-State Associates HH Holding 11/86 - 11/01 $1,900,000.00
Co., Inc.
751 MWT Associates HH Holding 11/85 - 11/05 $1,817,378.81
Co., Inc.
755 Texas Health Enterprises, HH Holding 04/88 - 04/94 $ 98,230.76
Inc. Co., Inc.
756 Odessa Associates HH Holding 11/86 - 11/01 $1,000,000.00
Co., Inc.
759 Sunbelt 3 HH Holding 12/82 - 11/07 $1,299,907.19
Co., Inc.
761 Tri-State Associates HH Holding 11/86 - 11/01 $ 835,000.00
Co., Inc.
768 Cal-Iowa Associates HH Holding 05/86 - 05/06 $2,856,957.70
Co., Inc.
</TABLE>
EXHIBIT 8(ii)(B), page 2
<PAGE>
<TABLE>
<CAPTION> General Ledger
Facility Original Balance (As of
Number Payor Payee Term August 31, 1989)
- ------- ----- ----- ---- ---------------
<S> <C> <C> <C> <C>
788 Cove Manor HH Holding 08/84 - 11/10 $3,890,000.00
Co., Inc.
790 Court Manor HH Holding 08/84 - 12/10 $2,100,000.00
Co., Inc.
200/ Hill-Cal Properties NHE 10/84 - 12/04 $2,790,105.72
799 Northern
California,
Inc.
(25.54%)
and Flagg
Industries,
Inc.
(74.46%)
799 Jack Easterday U.S. Care 08/86 - 10/90 $ 617,861.90
Corporation
799 Oak/Jones, Inc. HH Holding 08/87 - 09/93 $ 148,158.17
Co., Inc.
757 Peter C. Kern HH Holding 04/88 - 04/96 $1,620,808.36
Co., Inc.
758 Peter C. Kern HH Holding 04/88 - 04/96 $1,448,904.47
Co., Inc.
760 Texas Health Enterprises, HH Holding 04/88 - 04/94 $ 49,115.36
Inc. Co., Inc.
606 MI-CON Associates HH Holding 05/86 - 05/06 $2,110,002.87
Co., Inc.
</TABLE>
EXHIBIT 8(ii)(B), page 3
<PAGE>
EXHIBIT 8(ii)(C)
to
Plan of Reorganization
----------------------
HH HOLDING CO., INC. NOTES RECEIVABLE TRANSFERRED TO HILLHAVEN INC.
-------------------------------------------------------------------
(Working Capital Notes - Subsequent Transfer
To FHC Pursuant To Step 10 (ii))
<TABLE>
<CAPTION>
General Ledger
Facility Original Balance (As of
Number Payor Payee Term August 31, 1989)
- ------- ----- ----- ---- ---------------
<S> <C> <C> <C> <C>
9928 Meridian Care Center NHE/South 6/88 - sale of $466,505.16
Partners Carolina, the facility
Inc.
</TABLE>
EXHIBIT 8(ii)(C)
<PAGE>
EXHIBIT 10(iii)(A)
to
Plan of Reorganization
----------------------
FACILITY ASSETS OF HILLHAVEN INC.
TRANSFERRED TO FHC
---------------------------------
<TABLE>
<CAPTION>
Facility Facility Name Transferor's
State Number and Address Interest
----- -------- ------------- ------------
<S> <C> <C> <C> <C>
CALIFORNIA
(1) 167 Canyonwood Care Center 0
Redding, CA
NEVADA
(2) 144 Carson Convalescent Center 0
Carson City, NV
UTAH
(3) 140 Wasatch Care Center 0
Ogden, UT
CALIFORNIA
(4) 151 Buena Vista Convalescent L
Hospital
Anaheim, CA
(5) 170 Saylor Lane Convalescent L
Hospital
Sacramento, CA
(6) 330 Hillhaven Convalescent L
Hospital Claremont, CA
(7) 335 Hillhaven Lawton L
Convalescent Center
San Francisco, CA
(8) 340 Hillhaven Convalescent L
Hospital
Menlo Park, CA
(9) 342 Hillhaven Convalescent L
Center
Mill Valley, CA
</TABLE>
EXHIBIT 10(iii)(A), page 1
<PAGE>
<TABLE>
<CAPTION>
Facility Facility Name Transferor's
State Number and Address Interest
----- -------- ------------- ------------
<S> <C> <C> <C> <C>
(10) 343 Hillhaven Convalescent L
Center
Modesto, CA
(11) 345 Hillhaven Convalescent L
Center
Oakland, CA
(12) 358 San Jose-Hillhaven L/SL
Convalescent
Center
San Jose, CA
(13) 360 San Rafael, Hillhaven L
Convalescent Hospital
San Rafael, CA
(14) 368 Hillhaven Extended Care
Santa Cruz, CA
(15) 370 Hillhaven-Sherwood L
Convalescent Hospital
Sacramento, CA
FLORIDA
(16) 121 Town & Country Convalescent L
Center
Tampa, FL
NORTH CAROLINA
(17) 192 Country Villa L
Rockingham, NC
(18) 193 Hillhaven of Alamance L
Graham, NC
(19) 307 Lincoln Nursing Center, L
Inc.
Lincolnton, NC
TENNESSEE
(20) 171 Hillhaven Convalescent CL
Center - Bolivar
Bolivar, TN
</TABLE>
EXHIBIT 10(iii)(A), page 2
<PAGE>
<TABLE>
<CAPTION>
Facility Facility Name Transferor's
State Number and Address Interest
----- ------- ------------ ------------
<S> <C> <C> <C> <C>
(21) 174 Hillhaven Convalescent CL
Center - Camden
Camden, TN
(22) 175 Hillhaven of Jefferson City CL
Jefferson City, TN
(23) 177 Loudon Healthcare Center CL
Loudon, TN
(24) 178 Hillhaven Convalescent L
Center - Raleigh
Memphis, TN
(25) 179 Hillhaven Convalescent L
Center - Huntington
Huntington, TN
(26) 182 Hillhaven Convalescent CL
Center - Germantown
Germantown, TN
(27) 183 Hillhaven Convalescent L
Center-Ripley
Ripley, TN
(28) 184 Greystone Healthcare Center L
Blountville, TN
(29) 187 Hillhaven Maryville L
Convalescent Center
Maryville, TN
(30) 189 Fairpark HealthCare Center L
Maryville, TN
WASHINGTON
(31) 161 Issaquah Care Center L
Issaquah, WA
(32) 162 Mercer Island Care Center L
Mercer Island, WA
(33) 163 Valley HealthCare Center L
South Renton, WA
</TABLE>
EXHIBIT 10(iii)(A), page 3
<PAGE>
<TABLE>
<CAPTION>
Facility Facility Name Transferor's
State Number and Address Interest
----- -------- ------------- ------------
<S> <C> <C> <C> <C>
(34) 186 Park Manor Convalescent L
Center
Walla Walla, WA
WISCONSIN
(35) 195 Colonial Manor Nursing & L
Convalescent Home
Madison, WI
(36) 197 Oshkosh Care Center L
Oshkosh, WI
NEVADA
(37) 642 Las Vegas-Hillhaven 0/L
Convalescent Hospital
Las Vegas, NV
WASHINGTON
(38) *164 The Emeritus 0/L
Seattle, WA
CALIFORNIA
(39) 9926 Hillhaven Convalescent M
Hospital
San Francisco, CA
(40) 9940 Valley Gardens Health Care M
Stockton, CA
(41) 9981 Foothill Health Center M
Glendora, CA
(42) 9919 Carmel Mtn. Nursing Home M
San Diego, CA
(43) 9975 The Californian Care Center M
Bakersfield, CA
</TABLE>
___________________
* A Title Commitment has been ordered from Chicago Title in order to
verify ownership of the facility.
EXHIBIT 10(iii)(A), page 4
<PAGE>
<TABLE>
<CAPTION>
Facility Facility Name Transferor's
State Number and Address Interest
----- --------- ---------------- -------------
<S> <C> <C> <C> <C>
FLORIDA
(44) 918 Hillhaven Convalescent M
Center
Sarasota, FL
(45) 922 Windsor Woods Convalescent M
Center
Hudson, FL
OKLAHOMA
(46) 9955 Heritage Villa Nursing M
Center
Bartlesville, OK
UTAH
(47) 9947 St. George Care Center M
St. George, UT
(48) 9992 Holladay Healthcare Center M
Salt Lake City, UT
(49) 9973 Crosslands Healthcare M
Center
Sandy, UT
</TABLE>
EXHIBIT 10(iii)(A), Page 5
<PAGE>
EXHIBIT 10(iii)(B)
to
Plan of Reorganization
----------------------
ASSETS OF HILLHAVEN INC. TRANSFERRED TO FHC
-------------------------------------------
(Partnership interests and
non-facility related real estate interests)
PARTNERSHIP INTERESTS
---------------------
<TABLE>
<CAPTION>
Facility Extent and
State Number Nature of Interest
----- -------- ------------------
<S> <C> <C> <C>
CALIFORNIA
(1) 919 a 50% general partnership
interest in Carmel Mountain
Nursing Home Partnership
San Diego, CA
(2) 926 a 50% general Partnership
interest in Hillhaven - MSC
Partnership
San Francisco, CA
(3) 940 a 50% general partnership
interest in Stockton
Nursing Home Partners
Stockton, CA
(4) 975 a 50% general partnership
interest in Bakersfield
Nursing Home Partnership
Bakersfield, CA
(5) 981 a 50% general partnership
interest in Foothill
Nursing Company Partnership
Glendora, CA
(6) 982 a 50% general partnership
interest in San Marcos
Nursing Home Partnership
San Marcos, CA
</TABLE>
EXHIBIT 10(iii)(B), Page 1
<PAGE>
<TABLE>
<CAPTION>
Facility Extent and
State Number Nature of Interest
----- -------- ------------------
<S> <C> <C> <C>
(7) 1003 a 90% general partnership
interest in Modesto Region
II investments
Modesto, CA
FLORIDA
(8) 918 a 50% general partnership
interest in Hillhaven
Community Health
Partnership
Sarasota, FL
(9) 922 a 50% general partnership
interest in Windsor Woods
Nursing Home Partnership
Hudson, FL
KANSAS
(10) 7165 a 90% general partnership
interest in Topeka
Retirement Center, Ltd.
Topeka, KS
OKLAHOMA
(11) 955 a 50% general partnership
interest in Bartlesville
Nursing Home Partnership
Bartlesville, OK
SOUTH CAROLINA
(12) 928/ a 50% general partnership
984 interest in Meridian
Operating Partners
Columbia, SC
UTAH
(13) 973 a 50% general partnership
interest in Sandy Nursing
Home Partnership
Sandy, UT
</TABLE>
EXHIBIT 10(iii)(B), Page 2
<PAGE>
<TABLE>
<CAPTION>
Facility Extent and
State Number Nature of Interest
----- -------- ------------------
<S> <C> <C> <C>
(14) 7185 a 98% limited partnership
interest in Sandy
Retirement Center Limited
Partnership
Sandy, UT
WASHINGTON
(15) 165 an 80% general partnership
interest in Rainier Vista
Partnership
Puyallup, WA
</TABLE>
EXHIBIT 10(iii)(B), page 3
<PAGE>
NON-FACILITY RELATED REAL ESTATE INTERESTS
------------------------------------------
<TABLE>
<CAPTION>
Facility Transferor's
No. Assets Interest
-------- ------ ------------
<S> <C> <C> <C>
(1) 104 Center Street Building 0
1016 So. 28th Street
Tacoma, WA
(2) 100 Lakewood Medical Office 0
Building
11311 Bridgeport Way
Tacoma, WA 98499
(3) 168 "Excess Land" consisting of 0
6.0 acres located on the
Lakewood Hospital Campus
Tacoma, WA 98499
(4) 022 Hillhaven Regional Office L
Richmond, CA
(5) 072 Hillhaven Regional Office L
Louisville, KY
(6) 041 Hillhaven Regional Office, L
Raleigh, NC
</TABLE>
EXHIBIT 10(iii)(B), page 4
<PAGE>
EXHIBIT 10(iii)(C)
to
Plan of Reorganization
----------------------
HILLHAVEN INC. NOTES RECEIVABLE TRANSFERRED TO FHC
--------------------------------------------------
(Working Capital Notes)
<TABLE>
<CAPTION>
General Ledger
Facility Original Balance (As of
Number Payor Payor Terms August 31, 1989)
- -------- ----- ----- ----- ----------------
<S> <C> <C> <C> <C>
9984 Meridian Operating Hillhaven 2/89 - ____ $ 83,000.00
Partners Inc.
</TABLE>
EXHIBIT 10(iii)(C)
<PAGE>
EXHIBIT 11(i)A
to
Plan of Reorganization
----------------------
ASSETS ACQUIRED BY FHC BY UPSTREAM MERGER
-----------------------------------------
<TABLE>
<CAPTION>
Facility Facility Transferor's
State Number Name and Address Interest
----- -------- ---------------- ------------
<S> <C> <C> <C> <C>
PRIOR OWNER: CHASTAIN'S OF AVA, INC.
------------
ARKANSAS
(1) 252 Pine Lane Healthcare L
Mountain Home, AR
MISSOURI
(2) 251 Crestview Healthcare L
Ava, MO
PRIOR OWNER: CHASTAIN'S OF BUFFALO, INC.
-----------
MISSOURI
(3) 253 Hickory Lane Care Center L
Buffalo, MO
PRIOR OWNER: CHASTAIN'S OF CLINTON, INC.
-----------
MISSOURI
(4) 254 Sycamore View Healthcare L
Clinton, MO
PRIOR OWNER: CHASTAIN'S OF DES PERES, INC.
-----------
MISSOURI
(5) 255 Des Peres Health Care L
Des Peres, MO
(6) 256 Hillside Healthcare L
Jefferson, MO
(7) 257 Marceline Healthcare L
Marceline, MO
</TABLE>
EXHIBIT 11(i)(A), page 1
<PAGE>
<TABLE>
<CAPTION>
Facility Facility Transferor's
State Number Name and Address Interest
----- -------- ---------------- --------
<S> <C> <C> <C> <C>
PRIOR OWNER: CHASTAIN'S OF JOPLIN, INC.
-----------
MISSOURI
(3) 259 Joplin House Healthcare L
Joplin, MO
PRIOR OWNER: CHASTAIN'S OF LAMAR, INC.
-----------
MISSOURI
(9) 261 Lakeview Health Care L
Center,
Lamar, MO
PRIOR OWNER: CHASTAIN'S OF THAYER, INC.
-----------
MISSOURI
(10) 262 Shady Oaks Healthcare L
Center
Thayer, MO
PRIOR OWNER: HILLHAVEN OF HAWAII, INC.
-----------
HAWAII
(11) 166 Keauhou Kona Hawaii Project O
PRIOR OWNER: INTEGRATED HEALTh SYSTEMS, INC.
-----------
WASHINGTON
(12) 168 Lakewood Health Care Center O
Tacoma, WA
PRIOR OWNER: SMITH, HARST, SIEBEL AND ASSOCIATES, INC.
-----------
NEW MEXICO
(13) 854 Casa Real-Santa Fe L
Santa Fe, NM
(14) 817 Casa Del Sol Senior Care L
Center
Las Cruces, NM
</TABLE>
EXHIBIT 11(i)(A), page 2
<PAGE>
<TABLE>
<CAPTION>
Facility Facility Transferor's
State Number Name and Address Interest
----- ------ ---------------- --------
<S> <C> <C> <C> <C>
(15) 874 Casa Arena Blanca Nursing L
Center
Alamogordo, NM
(16) 881 Southwest Senior Care O/L
Center
Las Vegas, NM
</TABLE>
EXHIBIT 11(i)(A), page 3
<PAGE>
EXHIBIT 11(i)(3)
to
Plan of Reorganization
----------------------
ASSETS ACQUIRED BY FHC BY UPSTREAM MERGER
-----------------------------------------
(note receivable - working capital)
<TABLE>
<CAPTION>
General Ledger
Balance
Facility Facility (as of
Number Name and Address August 31, 1989)
-------- ---------------- ----------------
<S> <C> <C> <C>
874 Casa Arena Blanca Nursing $
Center
Alamogordo, NM
</TABLE>
EXHIBIT 11(i)(B), page 1
<PAGE>
EXHIBIT 12(ii)
to
Plan of Reorganization
----------------------
HILLHAVEN INC, NOTES RECEIVABLE TRANSFERRED TO NEW HILLHAVEN
------------------------------------------------------------
(Non-Working Capital Notes)
<TABLE>
<CAPTION>
General Ledger
Facility Original Balance (As of
Number Payor Payee Term August 31, 1989)
- ------ ----- ----- ---- ----------------
<S> <C> <C> <C> <C>
100 Mosca Hillhaven 08/86 - 08/90 $ 801.96
Inc.
100 Bowen Hillhaven 10/86 - 10/90 $ 2,391.44
Inc.
100 Dwyer Hillhaven 10/88 - 10/90 $ 778.50
Inc.
100 Esau Hillhaven 07/89 - 07/91 $ 1,750.00
Inc.
100 Fischer Hillhaven 03/87 - 03/91 $ 1,500.10
Inc.
100 Holloman Hillhaven 03/88 - 09/89 $ 175.87
Inc.
100 Ingram Hillhaven 04/89 - 04/90 $ 3,604.87
Inc.
100 Keiser Hillhaven 07/86 - 07/87 $ 84.21
Inc.
100 Kenney Hillhaven 07/89 - 07/91 $ 1,000.00
Inc.
100 Powell Hillhaven 12/87 - 06/89 $ 132.11
Inc.
100 Shipman Hillhaven 03/88 - 09/89 $ 316.95
Inc.
</TABLE>
EXHIBIT 12(ii), page 1
<PAGE>
<TABLE>
<CAPTION>
General Ledger
Facility Original Balance (As of
Number Payor Payee Term August 31, 1989)
- ------ ----- ----- ---- ----------------
<S> <C> <C> <C> <C>
100 Spencer Hillhaven 07/89 - 07/91 $ 2,139.29
Inc.
100 Tobie Hillhaven 07/86 - 01/89 $ 1,576.74
Inc.
100 Toclan Hillhaven 07/86 - 05/87 $ 600.00
Inc.
100 Whitted Hillhaven 10/88 - 10/89 $ 66.53
Inc.
100 Bisaro Hillhaven 02/89 - 02/91 $ 750.00
Inc.
100 Scharfenberg Hillhaven 02/89 - 02/91 $ 632.50
Inc.
100 D.R.B. Holding, Inc. Hillhaven 02/85 - 12/92 $ 455,000.00
Inc.
100 Taravainen Hillhaven 03/86 - 08/86 $ 332.475.01
Inc.
100 Lakewood Hospital Hillhaven 08/88 - 12/89 $2,000,000.00
Inc.
100 Robert Miller, Agnes Hillhaven 02/85 - 12/90 $ 410,000.00
Miller and Chateau Inc.
Convalescent Hospital
105 Texville (former payor: Hillhaven 11/82 - 11/07 $1,133,052.35
Jewell Enterprises) Inc.
105 AMWAC Associates Hillhaven 09/92 - 09/97 $ 263,804.56
Inc.
173 Tri-State Associates Hillhaven 08/86 - 08/06 $2,039,598.01
Inc.
</TABLE>
EXHIBIT 12(ii), page 2
<PAGE>
<TABLE>
<CAPTION>
General Ledger
Facility Original Balance (As of
Number Payor Payee Term August 31, 1989)
- ------ ----- ----- ---- ----------------
<S> <C> <C> <C> <C>
220 AMWAC Associates (former Hillhaven 09/82 - 09/91 $ 478,029.07
payor: Jewell Inc.
Enterprises)
240 AMWAC Associates (former Hillhaven 09/82 - 12/93 $ 982,628.29
payor: Jewell Inc.
Enterprises)
250 Tri-State Associates Hillhaven 11/86 - 01/03 $1,337,060.98
Inc.
347 Palo Alto Nursing Hillhaven 03/82 - 03/02 $ 553,607.44
Inc.
375 Tri-State Associates Hillhaven 09/86 - 08/06 $1,728,510.01
Inc.
377 Tri-State Associates Hillhaven 08/86 - 08/06 $2,087,931.25
Inc.
6000/ Foothill Hursing Company Hillhaven 08/86 - _____ $2,500,000.00
981 Partnership Inc.
270 Peter C. Kern Hillhaven 04/88 - 04/96 $2,946,924.33
Inc.
9940 Stockton Nursing Home Old 02/88 - _____ $1,500,943.27
Partners Hillhaven
9947 St. George Hillhaven _____________ $1,314,849.75
Inc.
200/ Hill-Cal Properties Flagg In- 10/84 - 12/04 $8,134,349.14
799 dustries,
Inc.
(74.46%)
and NHE/
Northern
California,
Inc.
(25.54%)
</TABLE>
EXHIBIT 12(ii), page 3
<PAGE>
EXHIBIT 17
to
Plan of Reorganization
----------------------
ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of January 31, 1990 (this
"Agreement"), between the subsidiaries of National Medical Enterprises, Inc.
("NME") signatories hereto (individually, an "NME Party" and collectively, the
"NME Parties"), on the one hand, and The Hillhaven Corporation, a Nevada
corporation ("New Hillhaven"), on the other hand. Defined terms used herein
without definition shall have the meanings ascribed to them in the
Reorganization and Distribution Agreement, dated as of January 8, 1990 and as
amended and restated as of January 30, 1990 (as from time to time amended, the
"Distribution Agreement").
_____________________________
WHEREAS, NME and New Hillhaven have entered into the Distribution Agreement
providing for the reorganization of certain of the businesses heretofore
conducted by NME's long term care group and a pro rata distribution to the
holders of NME's capital stock as of the record date established by NME in
connection therewith, of approximately 85% of the outstanding shares of capital
stock of New Hillhaven (the "Distribution") on or about January 31, 1990 (the
date on which the Distribution shall actually occur being herein referred to as
the "Distribution Date"); and
EXHIBIT 17, Page 1
<PAGE>
WHEREAS, in connection with, and immediately prior to, the Distribution NME
and certain of its long term care subsidiaries are concurrently .entering into
the transactions contemplated by the Plan of Reorganization pursuant to which
NME and such subsidiaries will transfer, effective on or prior to the
Distribution Date, to New Hillhaven and those companies which will become
subsidiaries of New Hillhaven certain of the assets and liabilities relating to
the business to be conducted after the Distribution by New Hillhaven, as
contemplated by the Information Statement (the "New Hillhaven Business"); and
WHEREAS, the NME Parties desire to transfer to New Hillhaven, concurrently
with the aforementioned transfers, all of their remaining assets except for the
Excluded Assets (defined below), and New Hillhaven desires to assume all of the
NME Parties' remaining obligations and liabilities except for the Excluded
Liabilities (defined below).
NOW, THEREFORE, the parties hereto agree as follows:
1. Scope of Agreement. The parties hereto understand and agree that NME
------------------
and/or certain of its subsidiaries and New Hillhaven and/or certain of its
subsidiaries have effected various transfers of assets and assumptions of
liabilities in accordance with the Plan of Reorganization and have entered or
will enter into the Ancillary Agreements providing, among other things, for
EXHIBIT 17, Page 2
<PAGE>
various additional transfers of assets and assumptions of liabilities and that
this Agreement effects certain transfers of assets and assumptions of
liabilities not covered by the Plan of Reorganization or the Ancillary
Agreements.
2. Assignment of Assets. Each of the NME Parties hereby sells, assigns,
--------------------
transfers and conveys to, and vests in, New Hillhaven, its successors and
assigns forever, and New Hillhaven agrees to accept, each of such NME Party's
right, title and interest, legal and equitable, in and to all of its assets
other than the Excluded Assets, including, without limitation, the right to
receive all of such Party's assets, properties, rights and business of every
type and description, real, personal and mixed, tangible and intangible,
constituting any portion of the New Hillhaven Business, wherever located and
whether or not reflected on the books and records of such Party. The "Excluded
Assets", with respect to each NME Party, shall mean the assets specified on
Exhibit A hereto. Notwithstanding anything to the contrary contained in any
other instrument of conveyance executed by any NME Party in connection with the
Distribution Agreement, the assets conveyed by such instrument shall not include
any assets specified on Exhibit A hereto with respect to such NME Party.
3. Assumption of Liabilities. New Hillhaven hereby assumes and agrees to
-------------------------
pay, perform or discharge all
EXHIBIT 17, Page 3
<PAGE>
of the obligations and Liabilities of each of the NME Parties except for the
Excluded Liabilities. The "Excluded Liabilities", with respect to each NME
Party, shall mean the liabilities specified on Exhibit B hereto. Notwithstanding
anything to the contrary contained in any other instrument of assumption
executed by New Hillhaven in connection with the Distribution Agreement, the
Liabilities assumed pursuant to such instrument shall not include any
liabilities specified on Exhibit B hereto.
4. Further Actions.
---------------
4.1 Each of the NME Parties shall, at the request of New Hillhaven,
execute and deliver to New Hillhaven such further instruments and take such
further action as may reasonably be necessary or proper to effectuate the
assignment contemplated hereby, including, in connection with any notes
receivable being transferred to New Hillhaven hereunder, causing any such note
to be duly endorsed and registered in the name of New Hillhaven by means of an
instrument of assignment and, where appropriate, to be recorded.
4.2 New Hillhaven shall, whenever, and as often as required to do so by
any NME Party or its successors and assigns, execute, acknowledge and deliver
any and all further instruments, documents and agreements as may reasonably be
necessary or proper to complete, assure and perfect the assumption of the
obligations and liabilities assumed hereby.
EXHIBIT 17, Page 4
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
THE HILLHAVEN CORPORATION,
a Tennessee corporation
By:________________________________
Name: _________________________
Title: _________________________
GUARDIAN MEDICAL SERVICES, INC.
By:________________________________
Name: _________________________
Title: _________________________
HAMMOND HOLIDAY HOME, INC.
By:________________________________
Name: _________________________
Title: _________________________
HH HOLDING CO., INC.
By:________________________________
Name: _________________________
Title: _________________________
HILLHAVEN INC.
By:________________________________
Name: _________________________
Title: _________________________
EXHIBIT 17, Page 5
<PAGE>
HILLHAVEN OF MICHIGAN, INC.
By:________________________________
Name: _________________________
Title: _________________________
HILLHAVEN WEST, INC.
By:________________________________
Name: _________________________
Title: _________________________
MORGAN MANORS, INC.
By:________________________________
Name: _________________________
Title: _________________________
LAKE HEALTH CARE FACILITIES, INC.
By:________________________________
Name: _________________________
Title: _________________________
NORTHWEST CONTINUUM CARE
CENTER, INC.
By:________________________________
Name: _________________________
Title: _________________________
EXHIBIT 17, Page 6
<PAGE>
SEDGEWICK CONVALESCENT CENTER, INC.
By:________________________________
Name: _________________________
Title: _________________________
THE HILLHAVEN CORPORATION
OF TEXAS
By:________________________________
Name: _________________________
Title: _________________________
THE HILLHAVEN CORPORATION,
a Nevada Corporation
By:________________________________
Name: _________________________
Title: _________________________
EXHIBIT 17, Page 7
<PAGE>
EXHIBIT A
TO
ASSIGNMENT AND ASSUMPTION
AGREEMENT
EXCLUDED ASSETS
---------------
I. General Excluded Assets:
1. All of the capital stock of the NME Parties directly or indirectly
owned by The Hillhaven Corporation, a Tennessee corporation ("Old
Hillhaven").
2. All prepaid Taxes (as defined in the Tax Sharing Agreement)
of the NME Parties.
3. Any investment in life insurance net of policy borrowings
related to insurance policies issued on November 1, 1984 and
1985 by Security Life of Denver originally obtained for SERP
participants and related prepaid interest on such policy
borrowings of the NME Parties.
4. All assets related to the following 8 "campus" facilities,
including investment accounts and partnership interests
related to two campus facilities currently owned by
partnerships (Slidell and Jo Ellen Smith):
Facility Number, Name and Address
---------------------------------
902
Alvarado Convalescent and
Rehabilitation Hospital
6599 Alvarado Road
San Diego, California 92120
904
Hillhaven Healthcare
610 North Garfield Avenue
Monterey Park, California 91754
974
J. D. French Center - Alzheimer's
3951 Katella Avenue
Los Alamitos, California
169
Menorah Hospital Campus
Palm Beach, Florida
EXHIBIT A, Page 1
<PAGE>
815
Convalescent Center of Del
Ray Beach
5430 Linton Boulevard
Del Ray Beach, Florida 33445
954
Jo Ellen Smith Convalescent
Center
4502 General Mayer Avenue
New Orleans, Louisiana 70114
978
Northshore Living Center
106 Medical Center Drive
Slidell, Louisiana 70459
993
Brookhaven Nursing Center
1855 Cheyenne
Carrollton, Texas 75008
5. All intercompany accounts receivable.
6. Any and all partnership interests in Healthcare Property
Partners.
II. Specific Excluded Assets: In addition to those Excluded Assets set forth
above, the assets of the NME Party set forth below opposite such Party are
to be excluded and not transferred to New Hillhaven pursuant to the
Agreement:
<TABLE>
<CAPTION>
Assets NME Party
------ ---------
<S> <C> <C>
1. Any assets subject to lease The applicable NME
pursuant to the Lease Agreements Party that is a
described in Step 3 of the Plan of party to the
Reorganization and any related relevant Lease
deferred finance charges, prepaid Agreement
interest or other assets related to
the mortgage debt (including any
accrued interest thereon) of the
facilities subject to such Lease
Agreements, such as escrow
accounts, replacement reserves and
sinking funds.
2. Any assets listed on Exhibit l(ii) Old Hillhaven and
to the Plan of Reorganization. Hillhaven Inc.
</TABLE>
EXHIBIT A, page 2
<PAGE>
Assets NME Party
------ ---------
3. All property, plant and equipment Hillhaven Inc. (as
located at facility number 203 and successor by merger
any deferred financing charges, to Flagg Industries,
prepaid interest and/or other Inc.)
assets related to the mortgage
debt, including any accrued
interest thereon, with respect to
such facility, including, without
limitation, any sinking funds,
escrow accounts and replacement
reserves.
4. Any shares of stock of Health Old Hillhaven
Facilities Insurance Corp. Ltd. or
Futura West.
5. Promissory Note, dated August 23, Hillhaven Inc.
1988 in the original principal
amount of $1.4 million due from
Lakewood Hospital (balance of $1.33
million as of August 31, 1989).
6. Annuity held for the benefit of Old Hillhaven
Marvin Wilensky.
7. "Excess land" consisting of (1) Hillhaven Inc.
parcel #01416-05-014 in Durham, NC;
(2) a portion of parcel #602-9944-
001 in Mt. Carmel, WI; (3) parcel
#602-9945 in Mt. Carmel, WI; (4)
parcel #6-3315 Washburn DLC T-2B-4
except T-28-4A; (5) parcel #06-4-
0123-07-378-017 in Kenosha, WI; and
(6) parcel #6-3311-01 Washburn DLC
T-28-6, 2B-1, in each case as shall
subsequently be more particularly
described.
8. "Excess Land" consisting of parcel Old Hillhaven
#06-4-0123-07-378-016 in Kenosha,
WI.
EXHIBIT A, Page 3
<PAGE>
<TABLE>
<CAPTION>
Assets NME Party
------ ---------
<S> <C> <C>
9. "Excess Land" consisting of Adams Hammond Holiday
Add. east 35 feet Lot 16, all lots Home, Inc.
18 and 20 except condominiums A & H
Blk 3, Adams Add. Lot 22 and 24 Blk
3, Adams Add. south 50 feet lot 2,
south 50 feet, lot 4 and south 50
feet lot 6, in each case as shall
subsequently be more particularly
described.
10. "Excess Land" consisting of parcel
#2-618, 2-628, 2-622B, 2-624 and 2-
625 in Neenah, WI, as shall
subsequently be more particularly
described.HH Holding Co., Inc.
11. "Excess Land" consisting of parcel Hillhaven West, Inc.
#352600 in West Falls, MI, as shall
subsequently be more particularly
described.
12. The New Hillhaven Subsidiary Note Hillhaven Inc.
received from Medi-$ave pursuant to
Step 2 of the Plan of
Reorganization.
13. Any benefit of that certain Option Old Hillhaven
Agreement, dated May 24, 1985,
between Cardinal Medical
Corporation and Old Hillhaven.
14. #814 Hillhaven Convalescent Old Hillhaven
Center
815-8th Avenue
Forth Worth, TX 76309
15. #443 Medical office building Hillhaven West, Inc.
adjacent to Mountain
Towers Healthcare
3129 Acacia Drive
Cheyenne, WY 82001
16. The New Hillhaven Subsidiary Note Old Hillhaven
received from FHC pursuant to Step
11(ii) of the Plan of
Reorganization.
</TABLE>
EXHIBIT A, page 4
<PAGE>
Assets NME Party
------ ---------
17. Any benefit of that certain Option Old Hillhaven
Agreement, dated January 31, 1990,
between Old Hillhaven and FHC
related to facilities #277, #278,
#279, #280, #281, and #262,
commonly referred to by the parties
as the "Cardinal Facilities."
EXHIBIT A, Page 5
<PAGE>
EXHIBIT B
TO
ASSIGNMENT AND ASSUMPTION
AGREEMENT
EXCLUDED LIABILITIES
--------------------
I. General Excluded Liabilities:
1. Any Liability in respect of cash overdrafts in disbursement and
payroll bank accounts maintained by the NME Parties.
2. Any Liability of the NME Parties in respect of Taxes for periods
through and including the Distribution Date (including any Liability
in respect of deferred Taxes).
3. Any Liability of the NME Parties under the SERP program for any
current or former employees of the NME Parties who will not become
employees of New Hillhaven or a New Hillhaven Party.
4. Any Liability of the NME Parties to Daniel P. Baty or Marvin Wilensky,
other than the obligation to provide medical, dental and $50,000 life
insurance and related accidental death benefits for the individuals,
and dependents if so provided, pursuant to consulting agreements with
such individuals dated December 3, 1986 and March 2, 1988,
respectively.
5. Any Liability of the NME Parties in respect of expenses related to the
Distribution, as set forth in Section 7.03 of the Distribution
Agreement.
6. Any Liability of any NME Party related to the eight "campus"
facilities described in Exhibit A hereto.
7. Any intercompany payables.
8. Up to $1 million of state-required improvements on seven facilities in
Connecticut identified on Exhibit 3 (page 3) for work required to
relicense such facilities.
II. Specific Excluded Liabilities: In addition to those Excluded Liabilities
set forth above, the Liabilities of the NME Party set forth below opposite
such Party are to be excluded and not assumed by New Hillhaven pursuant to
the Agreement:
EXHIBIT B, Page 1
<PAGE>
Liabilities NME Party
----------- ---------
1. Any Liability in respect of First Healthcare
mortgage debt on the facilities Corporation
subject to lease pursuant to the
Lease Agreements described in Step
3 of the Plan of Reorganization,
together with all related interest
or other accrued Liabilities or
Liabilities for land leases related
to such facilities.
2. Subordinated Debenture Bonds in the Hillhaven Inc.
aggregate amount of approximately
$400,000.
3. Any Liability listed on Exhibit Old Hillhaven
1(iii) to the Plan of Reorganization.
4. Any Liability in respect of that Old Hillhaven
certain Option Agreement, dated May
24, 1985, between Cardinal Medical
Corporation and Old Hillhaven.
5. Any Liability in respect of that Old Hillhaven
certain Option Agreement, dated
January 31, 1990 between Old
Hillhaven and FHC related to
facilities #277, #278, #279, #280,
#281 and #282, commonly referred to
by the parties as the "Cardinal
Facilities."
EXHIBIT B, Page 2
<PAGE>
ANNEX II
TO REORGANIZATION AND DISTRIBUTION AGREEMENT
Long Term Care Subsidiaries of NME
Prior to the Plan of Reorganization
-----------------------------------
The Hillhaven Corporation
Arkmo Lumber & Supply Co., Inc.
Brim of Massachusetts, Inc.
Cascade Insurance Company Ltd.
Chastain's of Ava, Inc.
Chastain's of Buffalo, Inc.
Chastain's of Clinton, Inc.
Chastain's of Des Peres, Inc.
Chastain's of Joplin, Inc.
Chastain's of Lamar, Inc.
Chastain's of Thayer, Inc.
Cornerstore Child Care Centers, Inc.
Guardian Medical Services, Inc.
Hammond Holiday Home, Inc.
HH Holding Co., Inc.
Aurora's Golden Age Nursing Home, Inc.
Flagg Industries, Inc.
Northwest Health Care, Inc.
Mediplex Pharmacy, Inc.
NHE/Arizona, Inc.
NHE/Lindenwood Nursing Home, Inc.
NHE/South Carolina, Inc.
Nursing Home of Cherry Hills, Inc.
Hillhaven of Central Florida, Inc.
Hillhaven of Hawaii, Inc.
Hillhaven Inc.
First Healthcare Corporation
Professional Medical Enterprises, Inc.
Hillhaven of Michigan, Inc.
Hillhaven West, Inc.
Morgan Manors, Inc.
Pasatiempo Development
Lake Health Care Facilities, Inc.
Medi-$ave Pharmacies, Inc.
Northwest Continuum Care Center, Inc.
Hillhaven Properties, Ltd.
Brim-Olive Grove, Inc.
Fairview Living Centers, Inc.
Twenty-Nine Hundred Corporation
Medical Ambulatory Care, Inc.
Arizona/New Mexico Hemodialysis Community Services, Inc.
Kidney Dialysis Care Units, Inc.
New Mexico Dialysis Services, Inc.
Valley Dialysis Associates, Inc.
<PAGE>
Postcare Rehabilitation, Inc.
Postcare Rehabilitation of Northern California, Inc.
Sedgewick Convalescent Center, Inc.
Smith, Harst, Siebel and Associates, Inc.
The Hillhaven Corporation
The Hillhaven Corporation of Texas
The Caden Corporation
Integrated Health Systems, Inc.
2
<PAGE>
ANNEX III(a)
TO REORGANIZATION AND DISTRIBUTION AGREEMENT
Subsidiaries of Old Hillhaven
After the Plan of Reorganization Is Effected
--------------------------------------------
Arkmo Lumber & Supply Co., Inc.
Cascade Insurance Company, Ltd.
Guardian Medical Services, Inc.
Hammond Holiday Home, Inc.
HH Holding Co., Inc.
Hillhaven Inc.
Hillhaven of Michigan, Inc.
Hillhaven West, Inc.
Morgan Manors, Inc.
Lake Health Care Facilities, Inc.
Northwest Continuum Care Center, Inc.
Medical Ambulatory Care, Inc.
Arizona/New Mexico Hemodialysis Community Services, Inc.
Kidney Dialysis Care Units, Inc.
New Mexico Dialysis Services, Inc.
Valley Dialysis Associates, Inc.
Sedgewick Convalescent Center, Inc.
The Hillhaven Corporation of Texas
<PAGE>
ANNEX 111(b)
TO REORGANIZATION AND DISTRIBUTION AGREEMENT
Subsidiaries of New Hillhaven
After the Plan of Reorganization Is Effected
--------------------------------------------
Brim of Massachusetts, Inc.
First Healthcare Corporation
Cornerstone Child Care Centers, Inc.
Hillhaven of Central Florida, Inc.
Hillhaven Properties, Ltd.
Brim-Olive Grove, Inc.
Fairview Living Centers, Inc.
Twenty-Nine Hundred Corporation
Northwest Health Care, Inc.
Pasatiempo Development
Professional Medical Enterprises, Inc.
Medi-$ave Pharmacies, Inc.
Mediplex Pharmacy, Inc.
<PAGE>
EXHIBIT 10.40
- --------------------------------------------------------------------------------
GUARANTEE REIMBURSEMENT AGREEMENT
dated as of January 31, 1990
between
NATIONAL MEDICAL ENTERPRISES, INC.
and
THE HILLHAVEN CORPORATION
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. Agreement to Reimburse NME for Payments of the
Obligations....................................... 2
2. Guarantee Fee..................................... 4
3. Notice of Certain Payment Defaults, Prepayments or
Terminations of Assumed Leases.................... 5
4. Affirmative Covenants............................. 5
5. Negative Covenants................................ 11
6. Events of Default................................. 15
7. No Amendments or Waivers, etc. Except in Writing;
Remedies Cumulative............................... 18
8. Indemnification................................... 19
9. Miscellaneous..................................... 19
10. Reinstatement of Agreement; Termination;
Subrogation....................................... 21
11. Dispute Resolution Procedures..................... 22
12. Definitions....................................... 22
Appendix A .............................................. A-1
Appendix B .............................................. B-1
</TABLE>
i
<PAGE>
GUARANTEE REIMBURSEMENT AGREEMENT dated as of January 31, 1990 between
NATIONAL MEDICAL ENTERPRISES INC., a Nevada corporation ("NME"), and THE
HILLHAVEN CORPORATION, a Nevada corporation ("New Hillhaven").
WHEREAS, NME and New Hillhaven have entered into a Reorganization and
Distribution Agreement providing for a reorganization of certain of the
businesses heretofore conducted by NME's long term care group and a pro rata
distribution to the holders of NME's capital stock, as of the record date
established by NME in connection therewith, of approximately 85% of the
outstanding shares of common stock, par value $0.15 per share, of New Hillhaven
(the "Distribution") on or about the date hereof;
WHEREAS, New Hillhaven or subsidiaries of New Hillhaven are assuming
certain debt or other payment obligations of NME and/or certain subsidiaries of
NME, previously incurred in connection with, or relating to, the business being
transferred to New Hillhaven and/or its subsidiaries, the aggregate amount of
which obligations is set forth in Appendix A hereto (the "Debt Obligations");
WHEREAS, NME and/or certain of its subsidiaries nevertheless remain
obligated to pay the Debt Obligations in the event that New Hillhaven or its
subsidiaries default in the payment thereof;
WHEREAS, NME has guaranteed certain other debt and payment obligations the
aggregate amount of which is set forth in Appendix A (the "Other Obligations"),
and which obligations include (without limitation) obligations of certain
partnerships or other entities with respect to which guarantee fees have
heretofore been paid to NME or The Hillhaven Corporation, a Tennessee
corporation ("Old Hillhaven");
WHEREAS, NME is transferring the Other Obligations or a portion thereof to
New Hillhaven as of the date hereof, but NME nevertheless remains obligated to
pay the Other Obligations in the event of a default in the payment thereof;
WHEREAS, certain New Hillhaven subsidiaries, on the one hand, and NME
and/or certain of its subsidiaries, on the
<PAGE>
other hand, are entering into various Assignment and Assumption of Lease
Agreements dated on or prior to the Distribution Date pursuant to which certain
subsidiaries New Hillhaven are assuming all obligations under certain leases
(the "Assumed Leases"), which obligations heretofore have been the obligations
of NME and/or certain subsidiaries of NME and the aggregate amount of which is
set forth in Appendix A hereto (the "Lease Obligations") (the Debt Obligations,
the Other Obligations and the Lease Obligations sometimes hereinafter being
referred to collectively and severally as the "Obligations") and
WHEREAS, NME and/or certain of its subsidiaries nonetheless remain
contingently liable under the Assumed Leases to pay the Lease Obligations in the
event that New Hillhaven defaults in the payment thereof;
NOW, THEREFORE, in consideration of the mutual promises contained herein
and other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Agreement to Reimburse NME for Payments of the Obligations.
----------------------------------------------------------
(a) Reimbursement. New Hillhaven shall reimburse NME, promptly on demand,
-------------
for all Obligations (except the Obligations set forth in Appendix B hereto) paid
by NME or its subsidiaries after the Distribution Date not theretofore
reimbursed by New Hillhaven. Payments and notices shall b made or given, as the
case may be, in accordance with the provisions of Sections 1(c), 3 and 9(b).
(b) Interest on Unpaid Reimbursements. New Hillhaven shall pay to NME
---------------------------------
interest on all payments of the Obligations (except the Obligations set forth in
Appendix B hereto) by NME to the extent that payment of such Obligations is not
reimbursed by New Hillhaven on the same day NME or its subsidiaries me such
payments, such interest to accrue from the date of each payment until
reimbursement thereof has occurred in full, on demand, at the maximum interest
rate permitted by law. Interest payable shall be computed on the basis of a 365
(or 366, as the case may be) day year for the actual days elapsed.
(c) Payments. All payments due to NME her.under shall be made in lawful
--------
currency of the United States in immediately available funds, by transfer, with
sufficient information to identify the source and application of funds,
2
<PAGE>
to Account No. 1235-3-13182 at Bank of America, Corporate Service Center, San
Francisco, California; ABA #121000358 or such other account or in such other
manner or at such other address as may be designated by NME in writing. In the
event the date specified for any payment hereunder is not a Business Day, such
payment shall be made on the next following Business Day and interest shall be
paid at the rate provided for herein on any such payment to the Business Day on
which such payment is made.
(d) Duty to Pay Absolute. The duty of New Hillhaven to make any and all
--------------------
payments in the manner specified hereunder shall be unconditional, irrevocable
and absolute, and all such payments shall be made strictly in accordance with
the terms hereof under all circumstances, including, without limitation, the
following:
(i) Any lack of validity or enforceability of the agreements
pursuant to which the Obligations were incurred, this Agreement, or any
other document, instrument or agreement relating thereto or hereto
(including, without limitation, any Assumption Agreements or any guarantees
with respect to the Obligations) (sometimes hereinafter being referred to
collectively and severally as the "Related Documents");
(ii) Any change in the time, manner or place of payment of, or
any other term of, any or all of the Obligations;
(iii) Any release, amendment or waiver of, or any consent to or
departure from, any or all provisions of the Related Documents;
(iv) The existence of any claim, set-off, defense or other right
which New Hillhaven may have at any time against NME or any other Person,
whether in connection with a Related Document, a transaction contemplated
by a Related Document or any other transaction; and
(v) Any other circumstance which might otherwise constitute a
defense available to, or a discharge of, New Hillhaven, any Subsidiary or
NNE.
New Hillhaven hereby waives, to the fullest extent permitted by law, any right
to proceed or make a claim against NME arising out of NME's payment of any
amount, whether or not any of the foregoing circumstances shall exist at any
time.
3
<PAGE>
(e) Identification of Obligations. Concurrent with the execution and
-----------------------------
delivery of this Agreement NME shall deliver to New Hillhaven a schedule
identifying in reasonable detail all of the Obligations. Each of NME and New
Hillhaven shall initial two copies of such schedule and retain one such copy for
its records.
2. Guarantee Fee.
-------------
New Hillhaven shall pay to NME a guarantee fee equal to
(a) for the period beginning on the Distribution Date to and including May
31, 1990, $2,000,000;
(b) for the fiscal year ending May 31, 1991: (i) the principal amount of
Obligations outstanding at the close of business on May 31, 1990 multiplied by
(ii) a fraction the numerator of which is $7,200,000 and the denominator of
which is the principal amount of all Obligations outstanding as of the
Distribution Date; and
(c) for each subsequent fiscal year: (i) the principal amount of
Obligations outstanding at the close of business on May 31 of the preceding
fiscal year multiplied by (ii) a fraction which is equal to the applicable
fraction for the previous fiscal year multiplied by 1.2.
For the period beginning on the Distribution Date to and including May 31, 1990,
such fee is to be paid as follows: $500,000 on February 28, 1990 and $1,500,000
on May 21, 1990. For subsequent fiscal years, such fees are to be paid in equal
quarterly installments at the end of each fiscal quarter of the subsequent year.
In the event that the amount of outstanding Obligations is reduced to zero at
any time, the guarantee fee for the year during which such reduction occurs will
be pro-rated on the basis of a 365 (or, 366 as the case may be) day year for the
number of actual days elapsed until such reduction. Notwithstanding the
foregoing, the annual guarantee fee hereunder shall not exceed at any time 3/100
of the Obligations then outstanding.
NME hereby assigns to New Hillhaven any and all guarantee fees payable to
NME or Old Hillhaven with respect to NME's guarantee of any of the Obligations,
and delegates the collection of such guarantee fees to New Hillhaven.
4
<PAGE>
3. Notice of Certain Payment Defaults, Prepayments or Terminations of
------------------------------------------------------------------
Assumed Leases.
- --------------
If New Hillhaven or any Subsidiary defaults in the payment of any
Obligation or Prepays any Obligation, whether in whole or in part, or if any of
the Assumed Leases terminates, New Hillhaven shall give NME notice of such
payment default, prepayment or termination on the same day as the occurrence of
such payment default, prepayment or termination by telephonic notice confirmed
on the same day in writing or by telex or telecopy. Any confirmation in writing
provided pursuant to this Section 3 shall be provided in accordance with Section
9(b).
4. Affirmative Covenants.
---------------------
So long as NME or any subsidiary of NME remains obligated (either directly
or as guarantor or otherwise) with respect to any outstanding Obligations, or
any amount is owing to NME hereunder, New Hillhaven shall, unless otherwise
consented to in writing by NME:
(a) Financial Statements. Furnish to NME:
--------------------
(i) as soon as available, but in any event not later than 120 days
after the close of each fiscal year of New Hillhaven, a copy of the audited
consolidated balance sheet of New Hillhaven and the Consolidated
Subsidiaries as at the end of such fiscal year, and related audited
consolidated statements of income, cash flows and changes in stockholders,
equity of New Hillhaven and the Consolidated Subsidiaries for such fiscal
year, setting forth for each fiscal year beginning with the fiscal year
ending May 31, 1991 with respect to each such consolidated balance sheet
and May 31, 1992 with respect to each of such other financial statements in
comparative form the corresponding figures for the preceding fiscal year,
all in reasonable detail, prepared in accordance with GAAP applied on a
basis is consistently maintained throughout the period involved and with
the prior fiscal year, except as disclosed therein, such consolidated
financial statements to be certified by Independent Certified Public
Accountants (such certification not to be qualified or limited because of
any restricted or limited examination made by such accountants);
(ii) as soon as available, but in any event not later than 60 days
after the end of each of the first
5
<PAGE>
three quarterly period, of each fiscal year of New Hillhaven, unaudited
consolidated financial statements of New Hillhaven and the Consolidated
Subsidiaries, including a condensed consolidated balance sheet of New
Hillhaven and the Consolidated Subsidiaries as at the end of such fiscal
quarter, and related condensed consolidated statements of income, cash
flows and changes in stockholders' equity of New Hillhaven and the
Consolidated Subsidiaries for the period from the beginning of such fiscal
year to the end of such fiscal quarter, the consolidated financial
statements of New Hillhaven and the Consolidated Subsidiaries setting orth
for each fiscal quarter beginning with the fiscal quarter ending August 31,
1991 corresponding figures for the like period of the preceding fiscal
year; all (A) in reasonable detail, (B) prepared in accordance with the
instructions of the Securities and Exchange Commission for filings on Form
10-Q and in accordance with GAAP applicable to interim financial statements
on a basis consistently maintained throughout the period involved and with
prior periods except as disclosed therein and (C) certified to be correct
by the Chairman and Chief Executive Officer, the Vice Chairman and Deputy
Chief Executive Officer, the Chief Financial Officer, the President, an
Executive Vice President or a Senior Vice President of New Hillhaven;
(iii) concurrently with the delivery of the financial statements
referred to in clause (i) above, a certificate of such Independent
Certified Public Accountants, stating that in making the examination
necessary for certifying such financial statements no knowledge was
obtained of any Default or Event of Default hereunder, except as
specifically indicated;
(iv) concurrently with the delivery of the financial statements
referred to in clauses (i) and (ii) above, a certificate of the Chairman
and Chief Executive Officer, the Vice Chairman and Deputy Chief Executive
Officer, the Chief Financial Officer, the President, an Executive Vice
President or a Senior Vice President of New Hillhaven (A) stating that, to
the best of his or her knowledge, New Hillhaven and the Subsidiaries,
during such period, have kept, observed, performed and fulfilled each and
every covenant and condition in this Agreement, the Assumption Agreements,
the Leases, the Revolving Credit Agreement, the Note Guarantee Agreement
and the New Hillhaven subsidiary Notes and that he or she has obtained no
6
<PAGE>
knowledge of any Default or Event of Default hereunder except as
specifically indicated and (B) showing in detail the calculations
supporting such statement in respect of Sections 5(c), 5(f), 5(g) and 5(h)
of this Agreement (provided that the certificate showing in detail
calculations in respect of Section 5(c) need only be furnished concurrently
with the delivery of the financial statements referred to in clause (i)
above) and the delivery of any such certificate shall be deemed to be a
representation and warranty by New Hillhaven to NME as to the accuracy of
the statements contained therein;
(v) promptly after the same are sent, copies of all financial
statements and reports which New Hillhaven sends to its stockholders, and
promptly after the same are filed, copies of all financial statements and
reports which New Hillhaven may make to, or file with, the Securities and
Exchange Commission or any public body succeeding to any or all of the
functions of the Securities and Exchange Commission; and
(vi) promptly, such additional financial and other information as
NME may from time to time reasonably request.
(b) Payment of Obligations and Liabilities. Pay and discharge, and cause
--------------------------------------
the Subsidiaries to pay and discharge, at or before maturity, all their
respective obligations and liabilities, except (i) (other than with respect to
tax liabilities. and obligations and liabilities under the Assumption
Agreements, the Leases, the New Hillhaven Subsidiary Notes, the Revolving Credit
Agreement, the Note Guarantee Agreement and this Agreement, each of which shall
be paid and discharged on or before the due date thereof) where the failure to
pay or discharge, or to cause to be paid or discharged, would not in the
aggregate have a material adverse effect on the business, operations, properties
or financial or other condition of New Hillhaven and the Subsidiaries, taken as
a whole or (ii) (other than with respect to obligations and liabilities under
the Assumption Agreements, the Leases, the New Hillhaven Subsidiary Notes, the
Revolving Credit Agreement, the Note Guarantee Agreement and this Agreement,
each of which shall be paid and discharged on or before the due date thereof)
where the same may be contested in good faith, in which case New Hillhaven shall
maintain, and cause the Subsidiaries to maintain, in accordance with GAAP,
appropriate reserves for the accrual of any of the same.
7
<PAGE>
(C) Maintenance of Properties; Insurance. Keep, and cause the Subsidiaries
------------------------------------
to keep, all properties useful and necessary in the business of New Hillhaven
and the Subsidiaries in good working order and condition; maintain, and cause
the Subsidiaries to maintain, with financially sound and reputable insurance
companies (which insurance companies may be Affiliates of NME other than New
Hillhaven or any Subsidiary or, subject to the proviso below, Part of New
Hillhaven's self-insurance program) insurance on all their properties in at
least such amounts and against at least such risks as are usually insured
against in the same general area and by companies engaged in the same or a
similar business and maintain professional liability and malpractice insurance
against claims usually insured against by skilled nursing and other long term
care facilities and the personnel connected with such facilities, provided that
--------
for professional liability and malpractice insurance New Hillhaven shall not
increase the deductible (or self-insured retention) to more than $100,000 per
claim, unless it is financially advantageous for New Hillhaven to do so and such
increase is approved in writing by NME, which approval shall not be unreasonably
withheld; and furnish to NME, upon request, full information as to the insurance
carried.
(d) Notices. Promptly give notice to NME (i) of the occurrence of any
-------
Default or Event of Default hereunder, (ii) of any default or event of default
under any material instrument or other agreement of New Hillhaven or any
Subsidiary (except that with respect to any default in the payment by New
Hillhaven or any Subsidiary of any Obligation, the further provisions of Section
3 shall govern), (iii) of any litigation, proceeding, investigation or dispute
which may exist at any time between New Hillhaven or any Subsidiary and any
governmental authority which might have a material adverse effect upon the
business, operations, assets or condition, financial or otherwise, of New
Hillhaven and the Subsidiaries, taken as a whole, (iv) of all litigation and
proceedings affecting New Hillhaven or any Subsidiary (A) in which the amount
involved is equal to at least 5% of Consolidated Net Worth at the time of the
commencement, or at any time during the continuance, of such litigation or
proceeding and not fully covered by insurance (other than self-insurance, co-
insurance or insurance deductibles) or (3) in which injunctive or similar relief
is sought and which might have a material adverse effect on New Hillhaven and
the Subsidiaries, taken as a whole, (v) as soon as possible and in any event
within 30 days after New Hillhaven knows or has reason to know that (A) any
8
<PAGE>
Reportable Event has occurred with respect to any Plan, (3) a transaction
prohibited under Section 4975 of the Code or Section 406 of ERISA resulting in a
material liability to New Hillhaven, a Subsidiary or any Person that New
Hillhaven or a Subsidiary has an obligation to indemnify has occurred, (C) a
Plan has incurred an accumulated funding deficiency as described in Section 412
of the Code or Section 302 of ERISA, whether or not waived, (D) there has been a
failure to make contributions to a Plan which may give rise to a lien, (E) there
has been an amendment to a Plan which requires the granting of a security
interest, (F) there has been a termination of a Plan or there are proceedings
which are likely to be or have been instituted to terminate a Plan with unfunded
benefit liabilities as described in Section 4001(a) (18) of ERISA or unfunded
retiree medical benefits, or (G) New Hillhaven or a Subsidiary (or any
respective ERISA Affiliate other than NME or any entity that is a subsidiary of
NME after the date hereof) has incurred liability under Section 515 or Title IV
of ERISA (including withdrawal liability) with respect to a Plan, and deliver to
NME a certificate of the Chairman and Chief Executive Officer, the Vice Chairman
and Deputy Chief Executive Officer, the Chief Financial Officer, the President,
an Executive Vice President or a Senior Vice President of New Hillhaven setting
forth details as to such event and the action that New Hillhaven proposes to
take with respect thereto, together with a copy of any notices that may be
required to be filed with the Internal Revenue Service, the PBGC or any other
authority, or any notice delivered by such authority, and (vi) immediately after
the occurrence of a material adverse change in the business, operations, assets
or condition, financial or otherwise, of New Hillhaven and the Subsidiaries,
taken as a whole, and deliver to NME a certificate of the Chairman and Chief
Executive Officer, the Vice Chairman and Deputy Chief Executive Officer, the
Chief Financial Officer, the President, an Executive Vice President or a Senior
Vice President of New Hillhaven setting forth the details of such change and
what action New Hillhaven proposes to take with respect thereto. For all
purposes of Section 4(d)(v), New Hillhaven shall be deemed to have all knowledge
or knowledge of all facts attributable to the administrator of any such Plan.
(e) Conduct of Business; Maintenance of Existence and Compliance With Law.
----------------------------------------------------------------------
Continue, and cause the Significant Subsidiaries to continue, to engage
primarily in business of the same general type as now contemplated to be
conducted by New Hillhaven and the Significant Subsidiaries, and preserve, renew
and keep in full force and effect their
9
<PAGE>
corporate existence and take all reasonable action to maintain their rights,
privileges and franchises necessary or desirable in the normal conduct of
business, provided that the foregoing shall not be deemed to prohibit any
--------
actions expressly Permitted under Section 5(e) hereof; comply, and cause each
Significant Subsidiary to comply, with all material applicable laws, ordinances,
rules, regulations and requirements of governmental authorities (including
without limitation ERISA and the rules and regulations thereunder and Public Law
92-603), and hold and maintain, and at all times cause each Significant
Subsidiary to hold and maintain, in full force and effect all certifications,
favorable governmental reviews, governmental approvals, licenses and permits
necessary or desirable to enable New Hillhaven and the Subsidiaries to conduct
their respective businesses as now contemplated to be conducted except where the
failure to comply therewith or hold and maintain such certifications, favorable
governmental reviews, governmental approvals, licenses or permits would not,
individually or in the aggregate, have a material adverse effect on the
business, operations, properties or financial or other condition of New
Hillhaven and the Subsidiaries, taken as a whole, and except where compliance
with any such laws, ordinances, rules, regulations or requirements would cause
New Hillhaven or a Subsidiary to violate laws of the United States of America to
which New Hillhaven or such Subsidiary is subject; notwithstanding the
foregoing, (i) a Significant Subsidiary may reincorporate in another state or
merge with or into New Hillhaven or another Subsidiary wholly-owned by New
Hillhaven or other Subsidiaries and (ii) New Hillhaven may reincorporate in
another state or merge with or into a Subsidiary wholly-owned by New Hillhaven
or other Subsidiaries, provided that the successor corporation assumes in
--------
writing all the obligations of New Hillhaven hereunder and said successor
corporation delivers to NM' an opinion of Counsel for New Hillhaven, in form and
substance reasonably satisfactory to NM', to the effect that the assumption by
such successor corporation of such obligations is effective and is fully binding
upon and enforceable against such successor corporation.
(f) Books and Records: Inspection of Property. Keep, and cause each
-----------------------------------------
Subsidiary to keep, proper books of record and account in which full, true and
correct entries in conformity with generally accepted accounting principles
shall. be made of all dealings and transactions in relation to its business and
activities; and permit, and cause the Subsidiaries to permit, representatives of
NME to visit and inspect any of their respective properties and examine and
10
<PAGE>
make abstracts (at NME's expense, unless an Event of Default shall have occurred
and be continuing, in which case, at New Hillhaven's expense) from any of the
books and records of New Hillhaven and any Subsidiary upon reasonable notice at
any reasonable time and as often as may reasonably be desired.
(g) Retention of Records. Retain, and cause each Subsidiary to retain, all
--------------------
books and records of New Hillhaven and its Subsidiaries in accordance with NME's
Record Retention Program, a copy of which has previously been furnished to New
Hillhaven.
Any statement in any certificate, document, financial statement or other
statement whatsoever furnished by New Hillhaven to NME under or in connection
with this Agreement shall be deemed to be a representation and warranty of New
Hillhaven to NME of the accuracy of the statement or statements contained
therein.
5. Negative Covenants.
------------------
So long as NME or any subsidiary of NME remains obligated (either directly
or as guarantor or otherwise) with respect to any outstanding Obligations, or
any amount is owing to NME hereunder, New Hillhaven shall not, unless otherwise
consented to in writing by NME:
(a) Limitation on Indebtedness. Create, incur, assume or suffer to
--------------------------
exist, or permit any Subsidiary to create, (Pounds)incur, assume or suffer to
exist, any Indebtedness, except (i) Indebtedness evidenced by, under or in
respect of this Agreement, any New Hillhaven Subsidiary Note, the Note,
Guarantee Agreement, any Lease, any Assumption Agreement or the Revolving Credit
Agreement; (ii) other Indebtedness existing on the date hereof and reflected in
the financial statements included in the Information Statement, (iii) other
unsecured Indebtedness, provided that no Default or Event of Default has
--------
occurred and is continuing or shall have occurred after giving effect thereto
and in the case of any Subsidiary if the proceeds of such Indebtedness are
applied to the exercise of purchase options under any of the Leases or to the
reduction of the Indebtedness of New Hillhaven or any subsidiary to NME or any
subsidiary of NME; (iv) any nonrecourse debt incurred in connection with any
leveraged lease financing; (v) Indebtedness secured by Liens not prohibited by
Section 5(b), provided that no Default or Event of Default has occurred and is
--------
continuing or shall have occurred after giving effect thereto; and (vi)
11
<PAGE>
Indebtedness of New Hillhaven or Subsidiaries incurred or be incurred pursuant
to transactions involving MP Funding Corporation and the placement of first
mortgages on certain of the nursing home facilities transferred or to be
transferred to New Hillhaven or Subsidiaries.
(b) Limitations on Liens. Create, incur, assume or suffer to exist, or
--------------------
permit any Subsidiary to create, incur, assume or suffer to exist, any Lien upon
any of its properties, assets, income or profits, whether now owned or hereafter
acquired. except (i) the Liens referred to in the financial statements include
in the Information Statement (and any refinancing, extensions or renewals of
such Liens by reason of any refinancing, extension or renewal of the
Indebtedness secured by such Liens), provided that such Liens are not spread to
--------
cover other or additional Indebtedness of New Hillhaven or any Subsidiary and
provided further that any refinancing permitted by this clause (i) shall be on
- -------- -------
terms no less favorable to New Hillhaven or a Subsidiary than the Indebtedness
of New Hillhaven or such Subsidiary being refinanced and that no additional Lien
or Liens are created to cover such Indebtedness; (ii) Liens securing
Indebtedness of a Subsidiary to New Hillhaven; (iii) preexisting Liens on
property, or on property owned by corporations, acquired by New Hillhaven or any
Subsidiary after the date hereof; (iv) Liens securing all or any part of the
purchase price or the cost of construction of property or equipment acquired by
New Hillhaven or a Subsidiary, provided that the amount of the Indebtedness
--------
secured thereby does not exceed 100% of the purchase price or the cost of
construction and the Indebtedness so secured and the related Liens are incurred
within 90 days after acquisition, or completion of construction and full
operation, whichever is later; (v) Liens on property owned by New Hillhaven or a
Subsidiary required to secure Indebtedness incurred to construct additions or to
make substantial repairs or alterations or substantial improvements to
such properties, provided that the amount of the Indebtedness secured does not
--------
exceed 100% of the expense incurred to construct such additions or to make such
substantial repairs or alterations or substantial improvements and provided,
--------
further that the Indebtedness so secured and the related Liens are incurred
- -------
within one year after the completion of construction or the making of such
repairs, alterations or improvements and full operation; (vi) Liens in favor of
a government or a governmental entity which: (A) secure payments pursuant to a
contract, subcontract, statute or regulation or (B) secure Indebtedness incurred
to finance all or some of the purchase price or cost of
12
<PAGE>
construction of goods, products or facilities produced under contract or
subcontract for the government or a governmental entity; (vii) Liens on accounts
receivable or notes receivable of New Hillhaven or any Subsidiary which secure
borrowings made under financing facilities provided to New Hillhaven; (viii)
Liens securing Indebtedness incurred solely for the purpose of exercising any
purchase option under any Lease (provided that the proceeds of such Indebtedness
--------
are applied to the exercise of such purchase option) or to reduce Indebtedness
to NME or any subsidiary of NME; (ix) Liens securing the Indebtedness referred
to in Section 5(a) (vi); and (x) other Liens securing Indebtedness, provided
--------
that the aggregate amount of Indebtedness of New Hillhaven and the Subsidiaries
secured by Liens pursuant to this Section 5(b) (x) shall not exceed $5,000,000
of Indebtedness at any one time incurred after tee date hereof.
(c) Limitation on Consolidated Contingent Obligations. Permit at any time
-------------------------------------------------
the ratio of Consolidated Contingent Obligations to Consolidated Net Worth to
exceed 0.2 to 1.0.
(d) Limitation on Investments. Make or commit to make, or permit any
-------------------------
Subsidiary to make or commit to make, any investment (whether by.means of stock
purchase, capital contribution, loan or advance or any other type of investment)
in any Person at any time when a Default or an Event of Default has occurred and
is continuing or would occur after giving effect to such investment.
(e) Limitation on Fundamental Changes. Merge or consolidate with any
---------------------------------
other Person (except as expressly permitted by Section 4(e) hereof) unless New
Hillhaven is the surviving corporation and, after giving effect to such merger
or consolidation, no Default or Event of Default has occurred and is continuing,
or permit any Subsidiary to merge or consolidate with any other Person (except
as expressly permitted by Section 4(e) hereof) unless (i) such Subsidiary is the
surviving corporation or the consideration received by New Hillhaven in
connection therewith is at least equal to the fair market value of such
Subsidiary (as determined by the Board of Directors of New Hillhaven in good
faith) and (ii) after giving effect to such merger or consolidation, no Default
or Event of Default has occurred and is continuing, or liquidate or dissolve
itself (or suffer any liquidation or dissolution), or dispose of or lease or
sell, or permit any Subsidiary to dispose of or lease or sell, all or any
substantial portion of its properties, assets and business to any other Person,
except that New Hillhaven or any Subsidiary may lease, sell or
13
<PAGE>
otherwise dispose of all or any part of its property, assets or business
(including, without limitation, Stock) to any Person, including, without
limitation, New Hillhaven or a Consolidated Subsidiary for consideration at
least equal to the fair market value of such properties, assets or business (as
determined by the Board of Directors of New Hillhaven in good faith), provided
--------
that notwithstanding any of the foregoing to the contrary, in no event may New
Hillhaven lease, sell or otherwise dispose of or permit any Subsidiary to lease,
sell or otherwise dispose of all or any part of its property, assets or business
(including, without limitation, Stock) encumbered by a Lien in favor of NME or
an Affiliate of NME, or by a Lien securing Indebtedness guaranteed or in effect
guaranteed by NME or an Affiliate of NME, to any Person, including, without
limitation, New Hillhaven or a Consolidated Subsidiary, unless the cash portion
of the proceeds from such sale are sufficient, and are applied directly, to
repay such Indebtedness.
(f) Maintenance of Consolidated Net Worth. Permit at any time
-------------------------------------
Consolidated Net Worth to be less than $100,000,000.
(g) Fixed Charge Coverage. Permit at any time beginning with the fiscal
---------------------
quarter ending May 31, 1993 the ratio of Income from Continuing Operations
Available for Fixed Charges to Fixed Charges to be less than 1.15 to 1.0.
(h) Restrictions on Dividends. Declare or pay or set apart for payment,
-------------------------
whether directly or indirectly, any dividends (other than dividends payable in
capital stock of New Hillhaven) on, or declare or make, whether directly or
indirectly, any other distribution on account of any shares of, any class of its
capital stock now or hereafter outstanding, or set apart any sum for such
purpose, or redeem, retire, purchase or otherwise acquire beneficially any
shares of any class of its capital stock now or hereafter outstanding or set
aside any sum for such purpose, provided that in any fiscal quarter beginning on
--------
or after June 1, 1990 New Hillhaven may pay cash dividends aggregating not more
than the Consolidated Net Earnings of New Hillhaven during the immediately
preceding fiscal quarter if after giving effect thereto Consolidated Net Worth
is not less than $170,000,000, no Default or Event of Default has occurred and
is continuing or shall have occurred after giving effect thereto and beginning
with the fiscal quarter ending February 28, 1991 the ratio of Income from
Continuing Operations Available for Fixed Charges to Fixed Charges is not less
than 1.5 to 1.0.
14
<PAGE>
(i) Restriction on Transfer of Assets to Subsidiaries. Transfer any
-------------------------------------------------
assets to a Subsidiary, or permit a Subsidiary to transfer any assets to another
Subsidiary, for the purpose of improving the credit position of such Subsidiary
in order to enable it to borrow money, provided that New Hillhaven or a
--------
Subsidiary may transfer accounts receivable or notes receivable of New Hillhaven
or such Subsidiary to a Subsidiary for the purpose of securing borrowings made
under financing facilities provided to New Hillhaven.
6. Events of Default.
-----------------
Upon the occurrence of any of the following Events of Default:
(a) New Hillhaven shall (i) default in the payment of any amount payable
under this Agreement, when due and payable in respect of a guarantee fee or (ii)
default in the payment of any other amount payable under this Agreement, when
due and payable, and such default shall not have been remedied within 15 days;
or
(b) Any representation or warranty made or deemed made by New Hillhaven
which is contained in any certificate, document, financial statement or other
statement furnished at any time under or in connection with this Agreement shall
prove to have been incorrect in any material respect on or as of the date made
or deemed made; or
(c) New Hillhaven shall default in the observance or performance of any
agreement or covenant contained in Section 5 hereof; or
(d) New Hillhaven shall default in the observance or performance of any
other agreement or covenant contained in this Agreement, and such default shall
not have been remedied within 30 days after notice of the same; or
(e) New Hillhaven or any Subsidiary shall (i) default in any payment of
principal of or interest on any Indebtedness or in the payment of any Contingent
Obligation, beyond the period of grace, if any, provided in the instrument or
agreement under which such Indebtedness or Contingent Obligation was created; or
(ii) default in the observance or performance of any other agreement, ten or
condition contained in any such Indebtedness or Contingent Obligation or in any
instrument or agreement evidencing, securing or relating thereto (or if any
other event of default or
15
<PAGE>
default under any such agreement shall occur and be continuing), the effect of
which event of default or default is to cause, or to permit the holder or
holders of such Indebtedness or beneficiary or beneficiaries of such Contingent
Obligation (or a trustee or agent on behalf of a holder or holders or
beneficiary or beneficiaries) to cause, such Indebtedness or Contingent
Obligation to become due prior to its stated maturity, provided that (except as
--------
set forth in Section 6(a)) nothing contained in this Section 6(e) shall
constitute an Event of Default if (i) such default is in respect of any
Indebtedness stated to be In an amount that is less than $1,000,000 or in
respect of any Contingent Obligation that involves an ultimate liability of less
than $1,000,000 and (ii) such default is being contested in good faith; or
(f) New Hillhaven, any Subsidiary or any fiduciary of any Plan engages in
a transaction in connection with which New Hillhaven, any Subsidiary or any
entity that they have an obligation to indemnify could be subject to a civil
penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed pursuant
to Section 4975 of the Code; New Hillhaven or any Subsidiary (or any respective
ERISA Affiliate other than NME or any entity that is a subsidiary of NME after
the date hereof) incurs a lien or grants a security interest with respect to any
Plan; a Reportable Event shall occur with respect to a Plan or a proceeding
shall commence to terminate any Plan; a Plan shall incur an accumulated funding
deficiency as described in Section 412 of the Code or Section 302 of ERISA for
any plan year (whether or not waived); New Hillhaven or any Subsidiary (or any
respective ERISA Affiliate other than NME or any entity that is a subsidiary of
NME after the date hereof) terminates any Plan (including a medical Plan), takes
any action or fails to take any action which could result in liability
(including withdrawal liability) under Title IV of ERISA or Section 515 of ERISA
and such event (alone or taken together with any other event described herein)
in the reasonable opinion of NME will have a material adverse effect on the
business, financial condition, results of operations or prospects of New
Hillhaven and its Subsidiaries, taken as a whole; or
(g) New Hillhaven or any Significant Subsidiary shall commence any case,
proceeding or other action relating to it in bankruptcy or seeking
reorganization, liquidation, dissolution, winding up, arrangement, composition
or readjustment of its debts, or for any other relief, under any bankruptcy,
insolvency, reorganization, liquidation, dissolution,
16
<PAGE>
arrangement, composition, readjustment of debt or other similar act or law of
any jurisdiction, domestic or foreign, now or hereafter existing; or New
Hillhaven or any Significant Subsidiary shall apply for a receiver, custodian or
trustee of it or for all or a substantial part of its properties; or New
Hillhaven or any Significant Subsidiary shall make an assignment for the benefit
of creditors; or New Hillhaven or any Significant Subsidiary shall admit in
writing its inability to pay its debts generally as they become due; or a
receiver, custodian or trustee of New Hillhaven or any Significant Subsidiary or
for all or a substantial part of its or their respective properties shall be
appointed, and New Hillhaven or such Significant Subsidiary by any act expressly
indicates its approval thereof, consent thereto, or acquiescence therein; or an'
order, judgment or decree is entered adjudicating New Hillhaven or any
Significant Subsidiary bankrupt or insolvent, or approving the petition in any
such proceedings, and such order, judgment or decree remains unstayed and in
effect for more than 60 days; or
(h) Any case, proceeding or other action against New Hillhaven or any
Significant Subsidiary shall be commenced in bankruptcy or seeking
reorganization, liquidation, dissolution, winding up, arrangement, composition
or readjustment of its debts, or any other relief, under any bankruptcy,
insolvency, reorganization, liquidation, dissolution, arrangement, composition,
readjustment of debt or other similar act or law of any jurisdiction, domestic
or foreign, now or hereafter existing; or a warrant of attachment, execution or
distraint, or similar process, shall be issued against any substantial part of
the property of New Hillhaven or any Significant Subsidiary; and in each such
case such condition shall continue for a period of 60 days undismissed,
undischarged or unbonded; or
(i) Any order, judgment or decree is entered in any proceedings against
New Hillhaven decreeing the dissolution of New Hillhaven and such order,
judgment or decree remains unstayed and in effect for more than 60 days; or any
order, judgment or decree is entered in any proceedings against New Hillhaven or
any Subsidiary decreeing a split-up of New Hillhaven or such Subsidiary which
requires the divestiture of a substantial part, or the divestiture of the stock
of any Subsidiary whose assets constitute a substantial part, of the
consolidated assets of New Hillhaven and the Subsidiaries, or which requires the
divestiture of assets, or the stock of any Subsidiary, which shall have
contributed a substantial part of Consolidated Net earnings for any of
17
<PAGE>
the three fiscal years then most recently ended or for the Period from the start
of New Hillhaven's first fiscal year until the completion of the fiscal year
most recently ended, if such period is shorter than the aforementioned three
fiscal years, and such order, judgment or decree remains unstayed and in effect
for more than 60 days; or
(j) There shall occur and be continuing an event of default under any of
the Leases, any New Hillhaven Subsidiary Note, the Note Guarantee Agreement or
the Revolving Credit Agreement which in the reasonable opinion of NME Would have
a material adverse effect on the condition, financial or otherwise, of New
Hillhaven and the Subsidiaries, taken as a whole,
then (i) if an Event of Default specified in paragraph (g), (h) or (i) above
occurs, automatically all amounts accrued through the date of such Event of
Default and payable by New Hillhaven under this Agreement shall immediately be
due and payable, without presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived, anything contained herein to the
contrary notwithstanding or (ii) if an Event of Default other than an Event of
Default specified in paragraph (g), (h) or (i) above occurs, so long as such
Event of Default is continuing, NME, by notice to New Hillhaven, may declare any
or all amounts payable by New Hillhaven under this Agreement, to be due and
payable forthwith, whereupon the sue shall become immediately due and payable,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived, anything contained herein to the contrary
notwithstanding, provided that no payment by New Hillhaven pursuant to this
--------
Section 6 shall relieve New Hillhaven from making any and all future payments
pursuant to this Agreement when due and payable under this Agreement.
Notwithstanding the foregoing, none of the forgoing events shall be deemed an
Event of Default hereunder to the extent (and during the time period) NME has
provided a written waiver thereof pursuant hereto.
7. No Amendments or Waivers. etc. Except in Writing: Remedies Cumulative.
---------------------------------------------------------------------
No amendment or waiver of any provision of this Agreement or of any
provision of any debt instrument underlying any Obligation or consent to any
departure by New Hillhaven from any such provision shall in any event be
effective unless the sue shall be in writing and signed by NME, and any such
waiver or consent shall be effective only in the
18
<PAGE>
specific instance and for the specific purpose for which given. No remedy herein
conferred or reserved is intended to be exclusive of any other available remedy
or remedies, but each and every such remedy shall be cumulative and shall be in
addition to every other remedy given under this Agreement or now or hereafter
existing at law or in equity or by statute. No course of dealing between New
Hillhaven and NME shall operate as a waiver of any right of NME and no delay in
exercising or failure to exercise any right or power accruing upon any default,
omission or failure of performance hereunder shall impair any such right or
power or shall be construed to be a waiver thereof, but any such right or power
may be exercised from time to time and as often as may be deemed expedient. In
order to exercise any remedy reserved to NME in this Agreement, it shall not be
necessary to give any notice, other than such notice as may be herein expressly
required. In the event any provision contained in this Agreement should be
breached by any party and thereafter duly waived by the other party so empowered
to act, such waiver shall be limited to the particular breach so waived and
shall not be deemed to waive any other breach hereunder.
8. Indemnification.
---------------
In addition to the amounts payable under Sections l and 2, New Hillhaven
hereby agrees to protect, indemnify, pay and save NME harmless from and against
any and all claims, demands, liabilities, damages, losses, costs, charges and
expenses (including reasonable attorneys' fees) which NME incurs or becomes
subject to as a consequence, direct or indirect, of (i) any breach by New
Hillhaven of any covenant, term or condition in, or the occurrence of any
Default or Event of Default under, this Agreement, together with all expenses
resulting from the compromise or defense of any claims or liabilities arising as
a result of any such breach, Default or Event of Default and (ii) defense
against any legal action commenced to challenge this Agreement, all to the
extent not caused or incurred as a result of the gross negligence or willful
misconduct of NME.
The obligations of New Hillhaven under this Section 8 shall survive the
termination of this Agreement.
9. Miscellaneous.
-------------
(a) Binding Effect; Assignment. This Agreement is a continuing obligation
--------------------------
and shall be binding upon and inure to the benefit of and be enforceable by NME
and New Hillhaven and
19
<PAGE>
their respective successors, transferees and assigns, provided that New
--------
Hillhaven may not transfer or assign all or any part of this Agreement without
the prior written consent of NME. NME may assign, negotiate, pledge or otherwise
hypothecate grant participations herein.
(b) Notices. All notices, consents, requests, instructions, approvals and
-------
other communications hereunder
Shall be in writing and shall be deemed to have been duly given, if delivered in
person or by courier, telegraphed, telexed or sent by facsimile transmission or
mailed, by certified or registered mail, postage prepaid at the following
address (or at such other address provided by one party to the other in
writing):
If to NME:
National Medical Enterprises, Inc.
2700 Colorado Avenue
P.O. Box 4070
Santa Monica, California 90404
Telecopy no.: (213) 315-6507
Attention: Treasurer
with a copy to:
National Medical Enterprises, Inc.
2700 Colorado Avenue
P.O. Box 4070
Santa Monica, California 90404
Telecopy no.: (213) 315-6688
Attention: General Counsel
If to New Hillhaven:
The Hillhaven Corporation
1148 Broadway Plaza
Tacoma, Washington 98401-2264
Telecopy no.: (206) 756-4714
Attention: President
20
<PAGE>
with a copy to:
The Hillhaven Corporation
1148 Broadway Plaza
Tacoma, Washington 98401-2264
Telecopy no.: (206) 756-4845
Attention: General Counsel
(c) Counterparts. This Agreement may be executed in several counterparts,
------------
each of which shall be deemed an original, but such counterparts shall together
constitute but one and the same instrument.
(d) Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California.
(e) Construction. In this Agreement:
------------
(i) unless the context otherwise requires, the terms "herein",
"hereof," "hereto", and "hereunder" refer to this Agreement;
(ii) the headings of the sections and subsections hereof and the
table of-contents hereof are inserted for convenience only and do not constitute
a part of this Agreement; and
(iii) all references to the Assumption Agreements, the Leases, the
New Hillhaven Subsidiary Notes, the Note Guarantee Agreement or the Revolving
Credit Agreement shall mean such agreements as the same may be amended,
supplemented or modified from time to time.
10. Reinstatement of Agreement: Termination: Subrogation.
----------------------------------------------------
This Agreement shall continue to be effective or be reinstated, as the case
may be, if at any time payment of any Obligation is rescinded or must otherwise
be returned by NME upon the insolvency, bankruptcy or reorganization of New
Hillhaven or otherwise, all as though such payment had not been made. Except as
provided in Section 8, this Agreement shall terminate upon the payment in full
of the Obligations and all other amounts hereunder. New Hillhaven shall be
subrogated to and shall stand in the place of NME at the time New Hillhaven has
paid in full all of the Obligations
21
<PAGE>
and all other amounts hereunder, and NME shall cooperate with New Hillhaven in a
reasonable manner in Prosecuting any subrogated right or claim.
11. Dispute Resolution Procedures.
-----------------------------
All disputes arising out of or relating to this Agreement shall be
resolved Pursuant to the reference procedure set forth in California Code of
Civil Procedure Sections 638 et seq. The parties hereby agree to submit to the
-- ---
jurisdiction of the Superior Court of the County of Los Angeles, State of
California (the "Superior Court") for such Purpose. Either Party may initiate
the procedure set forth in this Section by providing the other party with notice
setting forth the nature of the dispute (the "Reference Notice"). The parties
shall designate to the Superior Court a referee who is an active attorney or
retired judge living in the County of Los Angeles who shall resolve the dispute.
If the parties are unable to designate a referee within 20 days after the
receipt of the Reference Notice, the Parties shall request that the Superior
Court appoint a referee. In connection with any proceeding pursuant to this
Section, the parties shall have all discovery rights which would have been
available had the matters which are the subject of the dispute been decided by
the Superior Court. Discovery proceedings may be noticed and commenced
immediately after delivery of the Reference Notice. The hearing before the
referee shall begin no later than 60 days after the receipt of the Reference
Notice. All discovery in connection with the reference proceeding shall be
concluded no later than 15 days prior to the commencement of the hearing.
Judgment upon the award rendered by the referee shall be entered in the Superior
Court. Nothing in this Section shall be construed to impair the right of either
party to appeal from such judgment.
12. Definitions.
-----------
The terms defined in this Section (unless the context otherwise requires)
for all purposes of this Agreement shall have the respective meanings specified
in this Section.
"Affiliate": as to any Person, any Person directly or indirectly
---------
controlling, controlled by or under common control with such Person, whether
through the ownership of voting securities, by contract or otherwise.
22
<PAGE>
"Agreement": this Guarantee Reimbursement Agreement, as the same may be
---------
amended, supplemented or modified from time to time.
"Assumption Agreements": the various Assignment and Assumption of Lease
---------------------
Agreements dated on or prior to the Distribution Date between NME and/or certain
NME subsidiaries, on the one hand, and certain Subsidiaries, on the other hand,
each together with the related Guaranty of Lease.
"Business Day": a day other than a Saturday, Sunday or other day on
------------
which commercial banks in the City of Los Angeles, the State of California, or
the City of Tacoma, the State of Washington, are authorized or required by law
to close.
"Code" means the United States Internal Revenue Code of 1986, as amended.
----
"Consolidated Contingent Obligations": at a particular date, all
-----------------------------------
Contingent Obligations (excluding Contingent Obligations to NME or Contingent
Obligations assumed from NME) of New Hillhaven and the Consolidated
Subsidiaries, on a consolidated basis, at such date.
"Consolidated Income (Loss) from Continuing Operations before Income
-------------------------------------------------------------------
Taxes": for a particular period, the consolidated income (loss) from continuing
- -----
operations, before income taxes, of New Hillhaven and the Consolidated
Subsidiaries as determined in accordance with GAAP for such period.
"Consolidated Net Earnings": for a particular period, the consolidated net
-------------------------
income or loss of New Hillhaven and the Consolidated Subsidiaries as determined
in accordance with GAAP for such period.
"Consolidated Net Worth": at a particular date, all amounts which, in
----------------------
conformity with ow, would be included under shareholders' equity on a
consolidated balance sheet of New Hillhaven and the Consolidated Subsidiaries at
such date.
"Consolidated Subsidiaries": all Subsidiaries, the accounts of which have
-------------------------
been, or which in accordance with GAAP should be, consolidated with the accounts
of New Hillhaven on a consolidated balance sheet of New Hillhaven.
24
<PAGE>
"Contingent Obligation": any obligation of New Hillhaven or any of the
---------------------
Consolidated Subsidiaries required by GAAP to be disclosed in the consolidated
financial statements of New Hillhaven and the Consolidated Subsidiaries or the
footnotes thereto guaranteeing or in effect guaranteeing any Indebtedness of any
Person (other than New Hillhaven or any of the Consolidated Subsidiaries),
including, without limitation, in the case of Indebtedness of others secured by
any lien upon property owned by New Hillhaven or any of the Consolidated
Subsidiaries, whether or not assumed, the lesser of the amount of such
Indebtedness and the fair market value of such property securing such
Indebtedness.
"Counsel for New Hillhaven": at any particular date, such counsel, who may
-------------------------
be the General Counsel or Assistant General Counsel of New Hillhaven at such
date, as may be selected by New Hillhaven.
"Default": any of the events specified in Section 6, whether or not any
-------
requirement for the giving of notice, the lapse of time, or both, has been
satisfied.
"Distribution Date": January 31, 1990.
-----------------
"S": dollars in lawful currency of the United States of America.
-
"ERISA": the Employee Retirement Income Security Act of 1974, as the same
-----
may be amended, supplemented or modified from time to time.
"ERISA Affiliate": each trade or business (whether or not incorporated)
---------------
which together with New Hillhaven or a Subsidiary would be deemed to be a
"single employer" within the meaning of Section 4001 of ERISA or under
subsection (b), (c), (m) or (o) of Section 414 of the Code.
"Event of Default": any of the events specified in Section 6 hereof,
----------------
provided that any requirement for the giving of notice, lapse of time, or both,
or any other condition, has been satisfied.
"Fixed Charges": at a particular date, the sum of (i) the amount of
-------------
interest (including without limitation any imputed interest) deducted in
computing Consolidated Income (Loss) from Continuing Operations before income
Taxes for the immediately preceding four fiscal quarters of New Hillhaven on all
indebtedness of New Hillhaven and the
24
<PAGE>
Consolidated Subsidiaries, plus (ii) an amount (excluding amounts
----
related to discontinued operations) equal to the aggregate amount of all rentals
paid or accrued by New Hillhaven and the Consolidated Subsidiaries during the
immediately preceding four fiscal quarters of New Hillhaven on lease
obligations.
"GAAP": generally accepted accounting principles as in effect from time to
----
time in the United States of America.
"Income from Continuing Operations Available For Fixed Charges": (a) at a
--------------------------------------------------------------
particular date, the sum of (i) Consolidated Income (plus) from Continuing
----
Operations before Income Taxes, plus (ii) Fixed Charges, plus (iii) depreciation
---- ----
and amortization expenses (excluding expenses related to discontinued
operations), minus (plus) (iv) gains (losses) from sales of assets (other than
----- -----
assets included in discontinued operations), in each case for the four most
recent fiscal quarters of New Hillhaven.
"Indebtedness": for any Person:
------------
(i) all obligations for borrowed money and for the deferred
purchase price of property or services, and obligations evidenced by bonds,
debentures, notes or other similar instruments which in accordance with
GAAP would be shown on the balance sheet of such Person as a liability; and
(ii) all rental obligations of such Person under leases required
to be capitalized under GAAP.
"Independent Certified Public Accountants": a firm of independent
-----------------------------------------
accountants which is known as one of the "Big Six" accounting firms, selected by
New Hillhaven.
"Information Statement": the Information Statement dated January 8, 1990,
---------------------
constituting part of New Hillhaven's Registration Statement on Form 10 in the
form declared effective by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended.
"Leases": the approximately 115 leases of nursing home facilities or
------
retirement housing centers dated on or prior to the Distribution Date between
NME or a subsidiary of NME, as Lessor, and First Healthcare Corporation or
another Subsidiary, as Lessee.
25
<PAGE>
"Lien": any mortgage, pledge, hypothecation, assignment, security interest,
----
lien, charge or encumbrance, or preference, priority or other security agreement
or arrangement of any kind or nature whatsoever (including, without limitation,
any conditional sale or other title retention agreement, any financing lease
having Substantially the same economic effect as any of the foregoing, and the
filing of, or agreement to give, any financing statement under the Uniform
Commercial Code or comparable law of any Jurisdiction), provided that the term
--------
"Liens" shall not be deemed to include: (a) liens for taxes not yet due or which
are being contested in good faith and by appropriate proceedings if adequate
reserves with respect thereto are maintained on the books of New Hillhaven or
the Subsidiaries, as the case may be, in accordance with GAAP; (b) carriers',
warehousemen's, mechanics', materialmen's, repairmen's or other like liens
arising in the ordinary course of business and deposits made in the ordinary
course of business to obtain the release of any such liens; (c) liens, pledges
or deposits in connection with workmen's compensation, unemployment insurance
and other social security legislation; (d) liens, pledges or deposits to secure
the performance of bids, trade contracts (other than for borrowed money),
leases, public or statutory obligations, surety and appeal bonds, performance
bonds and other obligations of a like nature; (e) leases entered into by New
Hillhaven or any Subsidiary as lessor in the ordinary course of business; (f)
landlord's liens imposed by law; (g) liens and encumbrances consisting of zoning
restrictions, easements, restrictions on the use of real property of New
Hillhaven or any Subsidiary and minor irregularities in title to such real
property, none of which encumbrances materially impairs the use of any property
by New Hillhaven or any Subsidiary or the operation of their respective
businesses; (h) liens created by or resulting from legal proceedings which are
being contested in good faith and by appropriate proceedings and the execution
or enforcement of which is effectively stayed; and (i) liens, pledges or
deposits securing (or in lieu of) surety, stay appeal or customs bonds, and
securing payment of taxes, assessments, customs duties or other similar charges.
"New Hillhaven Subsidiary Notes": the promissory notes of various
-------------------------------
Subsidiaries, in the initial aggregate principal amount of $137.3 million, each
dated the Distribution Date and delivered to certain subsidiaries of NME.
"Note Guarantee Agreement": the Note Guarantee Agreement dated as of the
------------------------
Distribution Date among New Hillhaven, NME and certain NME subsidiaries.
26
<PAGE>
"PBGC": the Pension Benefit Guaranty Corporation established pursuant to
----
Subtitle A of Title IV of ERISA.
"Person": an individual, Partnership, corporation, business trust, joint
------
stock company, trust, unincorporated association, joint venture or other entity
or a government or any agency or political subdivision thereof.
"Plan": any employee benefit plan described in Section 3(2) of ERISA
----
established or maintained by New Hillhaven or a Subsidiary in respect of which
New Hillhaven or a commonly controlled entity is an "employer" as defined in
Section 3(5) of ERISA or with respect to which New Hillhaven, a Subsidiary or a
commonly controlled entity has an obligation to contribute.
"Reportable Event": any of the events set forth in Section 4043(b) of
-----------------
ERISA or the regulations thereunder.
"Revolving Credit Agreement": the Revolving Credit and Term Loan Agreement
---------------------------
dated as of the Distribution Date between NME and New Hillhaven.
"Significant Subsidiary": Brim of Massachusetts, Inc., Brim-Olive Grove,
-----------------------
Inc., Fairview Living Centers, Inc., First Healthcare Corporation, Hillhaven of
Central Florida, Inc., Hillhaven Properties, Ltd., Medi-$ave Pharmacies, Inc.,
Northwest Health Care, Inc. and Pasatiempo Development and each other Subsidiary
having a net worth at the relevant time of at least. $150,000.
"Stock": the meaning assigned to the term 'margin stock' in subsection
-----
221.2(h) of Regulation U of the Board of Governors of the Federal Reserve
System, as the same may be amended, supplemented or modified from time to time.
"Subsidiary": any corporation of which more than 50% of the outstanding
-----------
shares of stock having ordinary voting power to elect a majority of the board of
directors (other than stock having such power only by reason of the happening of
a contingency) is at the time owned by New Hillhaven or by one or more of its
subsidiaries or by New Hillhaven and one or more of its subsidiaries.
27
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
NATIONAL MEDICAL ENTERPRISES, INC.
/s/ Marcus E. Poners
----------------------------------
By: Marcus E. Poners
Title: Senior Vice President
THE HILLHAVEN CORPORATION
/s/ Christopher J. Marker
---------------------------------
By: Christopher J. Marker
Title: President
28
<PAGE>
APPENDIX A
<TABLE>
<CAPTION>
A. DEBT OBLIGATIONS
----------------
<S> <C>
INDUSTRIAL REVENUE BONDS $ 62,970,000
LONG TERM BANK NOTES 5,574,996
LONG TERM BANK NOTES 7,894,292
LONG TERM CONTRACTS 800
FIRST MORTGAGE NOTES 17,815,766
M.P. FUNDING LOANS 95,000,000
---------------
$189,255,854
B. LEASE OBLIGATIONS 415,839,987
-----------------
C. OTHER OBLIGATIONS
-----------------
DEBTS OF PARTNERSHIPS GUARANTEED 121,678,412
OTHER CONTINGENT LIABILITIES OF NEW
HILLHAVEN 16,194,691
CARDINAL PUT OPTIONS 20,750,000
---------------
TOTAL OBLIGATIONS $763,718,944
============
</TABLE>
January 4, 1990
1
<PAGE>
APPENDIX 3
1. $9,500,000 aggregate Principal amount of Pasco County Board of County
Commissioners Variable Rate Demand Revenue Bonds (Woodhaven Partners, Ltd.
Project) Series 1985;
2. $8,000,000 aggregate principal amount of Palm Beach County, Florida
Adjustable/Fixed Rate Industrial Development Revenue Bonds (Meridian House
Project) Series 1985; and
3. $6,200,000 aggregate principal amount of The Industrial Development
Authority of the county of Yavapai Industrial Development Revenue Refunding
Bonds (Kachina Pointe Project) Series 1988.
2
<PAGE>
Exhibit 10.41
FIRST AMENDMENT TO GUARANTEE REIMBURSEMENT AGREEMENT
This FIRST AMENDMENT TO GUARANTEE REIMBURSEMENT AGREEMENT
(the "First Amendment") is being entered into as of October 30,
1990, between National Medical Enterprises, Inc., a Nevada
corporation ("NME") and The Hillhaven Corporation, a Nevada
corporation ("New Hillhaven").
RECITALS
A. NME and Hillhaven have entered into that certain
Guarantee Reimbursement Agreement, dated as of January 31, 1990
(the "Agreement").
B. Excluded from the reimbursement Obligations (as defined
in the Agreement) of New Hillhaven under Section 1(a) of the
Agreement are the Obligations set forth in Appendix B to the
Agreement ("Appendix B").
C. The Obligation set forth as item 3 of Appendix B is the
Obligation with respect to $6,200,000 aggregate principal amount
of The Industrial Development Authority of the County of Yavapai
Industrial Development Revenue Refunding Bonds (Kachina Pointe
Project) Series 1988 (the "Bonds").
D. Hillhaven Properties, Ltd. ("Hillhaven Properties")
desires to acquire the Kachina Pointe Project (the "Project").
In connection with its acquisition of the Project, Hillhaven
Properties must assume the Obligations of the Kachina Pointe
Limited Partnership (the "Partnership") under its Reimbursement
Agreement, dated as of August 1, 1988, with Swiss Bank
Corporation (the "Bank"). The reimbursement obligations of the
Partnership to the Bank are guarantied by NME pursuant to a
Guaranty Agreement, dated as of August 11, 1988 (the "Guaranty").
E. In order to induce the Bank to allow Hillhaven
Properties to assume the obligations of the Partnership under the
Reimbursement Agreement with the Bank, NME must affirm to the
Bank that its Guaranty will remain effective with respect to
Hillhaven Properties to the same extent that it is effective with
respect to the Partnership, which affirmation is evidenced by
that certain Affirmation of Guaranty, dated as of even date
herewith, from NME to the Bank (the "Affirmation").
F. In order to induce NME to execute the Affirmation, New
Hillhaven, which owns all of the issued and outstanding stock of
Hillhaven Properties, has agreed to amend the Guarantee
Reimbursement Agreement to delete item 3 from Appendix B.
NOW, THEREFORE, in consideration of the foregoing Recitals
and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
<PAGE>
AGREEMENT
1. Amendment of Agreement. New Hillhaven and NME hereby
agree to amend the Agreement by deleting item 3 from Appendix B
to the Agreement. Appendix B to the Agreement is hereby amended
by deleting in its entirety the following: "3. $6,200,000
aggregate principal amount of The Industrial Development
Authority of the County of Yavapai Industrial Development Revenue
Refunding Bonds (Kachina Pointe Project) Series 1988."
2. Obligations Includes Kachina Pointe Bonds. New
Hillhaven and NME hereby agree that upon NME's execution and
delivery of the above-referenced Affirmation, the Agreement shall
be amended to include within the definition of Obligations for
all purposes, including, without limitation, for purposes of
Section 1, the Kachina Pointe Bond Obligations referred to in
item 3 of Appendix B, which Obligations have been deleted from
Appendix B pursuant to paragraph 1 of this First Amendment.
3. Full Force and Effect. Except as expressly amended
hereby, the Agreement remains in full force and effect.
4. Counterparts. This First Amendment may be executed in
several counterparts, each of which shall be deemed an original,
but such counterparts shall together shall constitute but one and
the same instrument.
5. Governing Law. This First Amendment shall be governed
by and construed in accordance with the laws of the State of
California.
IN WITNESS WHEREOF, the parties hereto have caused this
First Amendment to be executed and delivered as of the day and
year first above stated.
The Hillhaven Corporation,
a Nevada corporation
By: /s/ Robert F. Pacquer
Name: Robert F. Pacquer
Title: Senior Vice President
National Medical Enterprises,
Inc., a Nevada corporation
By: /s/ Marcus E. Powers
Name: Marcus E. Powers
Title: Senior Vice President
<PAGE>
EXHIBIT 10.42
FIRST AMENDMENT TO GUARANTEE REIMBURSEMENT AGREEMENT
This First Amendment to Guarantee Reimbursement Agreement ("Amendment")
dated as of May 30, 1991, is entered into by and between National Medical
Enterprises, Inc., a Nevada corporation ("NME") and The Hillhaven Corporation, a
Nevada corporation ("New Hillhaven").
RECITALS
A. New Hillhaven and NME entered into that certain Guarantee
Reimbursement Agreement, dated as of January 31, 1990 (as the same may be
amended, restated, modified, supplemented, renewed or replaced from time to
time, the "Reimbursement Agreement"). Unless otherwise defined herein, the terms
defined in the Reimbursement Agreement are used herein as therein defined. The
Reimbursement Agreement provides, among other things, for the reimbursement by
New Hillhaven of all Obligations paid by NME after the Distribution Date.
B. New Hillhaven and certain of its Subsidiaries have entered into that
certain Master Loan Agreement, dated as of the date hereof (the "Master Loan
Agreement"), with THC Facilities Corp. (the "Lender") pursuant to which New
Hillhaven and such Subsidiaries (collectively, the "Borrowers") may borrow from
time to time amounts up to a total principal sum of $200,000,000 (the "THC
facilities Loans").
C. The THC Facilities Loans may be used by the Borrowers as follows: (l)
approximately $117,000,000 for the refinance of certain obligations described in
Appendix A to the Reimbursement Agreement, consisting of (a) the spinoff MP
Funding Loans, and (b) the Cardinal Put Option MP Funding Loans (collectively
referred to herein as the "MP Funding Loans" to the extent not refinanced with
THC Facilities Loans and "Refinance Loans" to the extent refinanced with THC
Facilities Loans), and (ii) approximately $83,000,000 to finance Parcels and
Projects (each as defined in the Master Loan Agreement) (collectively, the "New
THC Loans").
D. The Lender has entered into a Credit Agreement with Swiss Bank
Corporation and certain other banks (the "Banks"). It is necessary for the
Lender to enter into such Credit Agreement in order for the Lender to make the
THC Facilities Loans to the Borrowers. As an inducement to Swiss Bank
Corporation and the Banks to enter into the Credit Agreement with the Lender,
NME has agreed to guaranty the Lender's obligations under the Credit Agreement
up to the principal sum of $200,000,000, pursuant to that certain Guaranty,
dated as of the date hereof, in favor of Swiss Bank Corporation and the Banks.
E. New Hillhaven and NME desire to amend the Reimbursement Agreement (i)
to add the THC Facilities Loans as Obligations under the Reimbursement
Agreement, (ii) to provide for a special guarantee fee applicable to the New THC
Loans, and (iii) to modify the guarantee fee charged for the Refinance Loans
during the Interim Period (defined herein).
NOW THEREFORE, in consideration of the foregoing Recitals and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree to
amend, modify and supplement the Reimbursement Agreement as follows:
<PAGE>
AGREEMENT
1. THC Facilities Loan Obligations.
-------------------------------
The obligations of the Borrowers pursuant to the Master Loan Agreement,
including, without limitation, the THC Facilities Loans (collectively, the "THC
Facilities Loan Obligations") hereby are added as, and shall be deemed to be,
"Obligations" under (and as defined in) in the Reimbursement Agreement, and all
terms, covenants, and conditions of the Reimbursement Agreement, except as
expressly provided herein, shall apply to the THC Facilities Loan Obligations.
2. Guarantee Fee.
-------------
(a) New THC Loans. The guarantee fee provisions of Section 2 of the
-------------
Reimbursement Agreement shall not apply to the New THC Loans. Instead, New
Hillhaven shall pay to NME a guarantee fee equal to 1% per annum of the daily
outstanding balance of said New THC Loans. Such guarantee fee shall be paid in
quarterly installments on the last business day of each fiscal quarter, with the
first installment due August 30, 1991. The principal amount of the New THC Loans
shall not be included as part of the outstanding Obligations under Section
2(c)(i) of the Reimbursement Agreement for purposes of calculating the guarantee
fee referred to in Section 2 of the Reimbursement Agreement.
(b) Refinance Loans. For the period commencing on the date of the
---------------
Master Loan Agreement and continuing through May 31, 1995 (the "Interim
Period"), New Hillhaven shall pay NME a guarantee fee equal to 1% per annum on
the daily outstanding balance of the Refinance Loans rather than the guarantee
fee otherwise applicable to such Refinance Loans pursuant to the provisions of
Section 2 of the Reimbursement Agreement. In the event that any or all of the
Refinance Loans are refinanced with THC Facilities Loans after the date of the
Master Loan Agreement, the foregoing 1% guarantee fee shall be effective for
each Refinance Loan as of the date of such refinancing. Such guarantee fee shall
be paid in quarterly installments on the last business day of each fiscal
quarter, with the first installment due August 30, 1991. Commencing June l,
1995, the guarantee fee charged for the Refinance Loans shall revert back to the
guarantee fee applicable to such Refinance Loans and all other Obligations
(other than the New THC Loans) pursuant to the provisions of Section 2 of the
Reimbursement Agreement. During the Interim Period, the principal amount of the
Refinance Loans shall not be included as part of the outstanding Obligations
under Section 2(c)(l) of the Reimbursement Agreement for purposes of calculating
the guarantee fee referred to In Section 2 of the Reimbursement Agreement. From
and after May 31, 1995, the principal amount of the Refinance Loans shall be
Included as part of the outstanding Obligations under Section 2(c)(i) of the
Reimbursement Agreement for purposes of calculating the guarantee fee referred
to in Section 2 of the Reimbursement Agreement.
<PAGE>
(c) MP Funding Loans. To the extent not refinanced by Refinance
----------------
Loans, the Obligations consisting of MP Funding Loans shall continue to be
Obligations and shall be included as part of the outstanding Obligations under
Section 2(c)(i) of the Reimbursement Agreement for purposes of calculating the
guarantee fee referred to in Section 2 of the Reimbursement Agreement. The
guarantee fee payable with respect thereto shall be governed by the terms of the
Reimbursement Agreement.
3. Effect on Reimbursement Agreement.
---------------------------------
Except as expressly amended by this Amendment, all of the terms and
conditions of the Reimbursement Agreement shall remain in full force and effect.
4. Captions.
--------
The captions and headings used herein are for the convenience of reference
and shall not be construed in any manner to limit or modify any of the terms
hereof.
5. Governing Law.
-------------
This Amendment shall be governed by and construed in accordance with the
laws of the State of California.
6. Counterparts.
------------
This Amendment may be executed in counterparts, each of which shall be an
original, but all of which together shall constitute but one and the same
instrument.
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
be duly executed on its behalf as of the date first set forth above.
NATIONAL MEDICAL ENTERPRISES, INC.
By:[SIGNATURE NOT LEGIBLE]
--------------------------------
Title: Sr. V.P.
-----------------------------
THE HILLHAVEN CORPORATION
By:[SIGNATURE NOT LEGIBLE]
--------------------------------
Title:[SIGNATURE NOT LEGIBLE]
-----------------------------
<PAGE>
EXHIBIT 10.43
SECOND AMENDMENT TO GUARANTEE REIMBURSEMENT AGREEMENT
This Second Amendment to Guarantee Reimbursement Agreement ("Amendment") dated
as of October 2 , 1991, is entered into by and between National Medical
Enterprises, Inc., a Nevada corporation ("NME") and The Hillhaven Corporation, a
Nevada corporation ("New Hillhaven").
RECITALS
A. New Hillhaven and NME entered into that certain Guarantee Reimbursement
Agreement, dated as of January 31, 1990 (as amended by that certain first
Amendment To Guarantee Reimbursement Agreement, dated as of May 30, 1991 (the
"first Amendment"), and as the same may be amended, restated, modified,
supplemented, renewed or replaced from time to time, the "Reimbursement
Agreement"), which provides, among other things, for the reimbursement by New
Hillhaven of all Obligations paid by NME after the Distribution Date. Unless
otherwise defined herein, the terms defined in the Reimbursement Agreement are
used herein as therein defined.
B. New Hillhaven and certain of its Subsidiaries entered into that certain
Master Loan Agreement, dated as of May 29, 1991 (as the same may be amended,
restated, modified, supplemented, renewed or replaced from time to time, the
"Master Loan Agreement") with THC facilities Corp. (the "Lender") pursuant to
which New Hillhaven and such Subsidiaries (collectively, the "Borrowers") may
borrow from time to time amounts up to a total principal sum of $200,000,000
(the "THC facilities Loans"). In connection therewith, NME guaranteed the
obligations of Lender under that certain Credit Agreement, dated as of May 29,
1991, with Swiss Bank Corporation and certain other banks (the "Banks") to
assist Borrowers in obtaining the THC facilities Loans. New Hillhaven and NME
entered into the first Amendment to, among other things, specifically add the
obligations of the Borrowers pursuant to the Master Loan Agreement as
"Obligations" under (and as defined in) the Reimbursement Agreement.
C. First Healthcare Corporation ("FHC"), a wholly-owned subsidiary of New
Hillhaven, has exercised its option to purchase 20 facilities which it currently
leases from certain subsidiaries of NME, pursuant to that certain letter dated
August 9, 1991 (the "Letter of Intent").
D. To facilitate FHC's purchase of facilities from subsidiaries of NME, New
Hillhaven has requested and Lender has agreed to permit Borrowers to reclassify
$12,000,000 of the THC facilities Loans designated to refinance MP funding loans
(which funds are part of the funds designated as "Refinance Loans" in the First
Amendment) so that said $12,000,000 is available to finance Parcels and Projects
(as that term is defined in the Master Loan Agreement) (which funds are part of
the funds designated as "New THC funds" in the First Amendment). Accordingly,
the Master Loan Agreement and the Credit Agreement are being amended by that
certain first Amendment to Master Loan Agreement, dated October 2, 1991, and
that certain First Amendment to Credit Agreement, dated October 2, 1991,
respectively.
E. In connection with its acquisition of the facilities described in Recital
C, above, FHC will assume certain debt obligations, as more specifically defined
in Schedule 1, attached hereto and incorporated herein by this reference.
<PAGE>
F. Consistent with the amendment of the THC Facilities Loans, New Hillhaven
and NME desire to further amend the Reimbursement Agreement to (l).reallocate
the amounts designated as "New THC Loans" and "Refinance Loans" in the First
Amendment, and (ii) reaffirm that the guarantee fee applicable to the New THC
Loans, as reallocated, shall be as stated in Paragraph 2(a) of the First
Amendment. Additionally, New Hillhaven and NME desire to amend the Reimbursement
Agreement to add the debt obligations being assumed by FHC as described in
Schedule 1 hereto as Obligations under the Reimbursement Agreement.
NOW THEREFORE, in consideration of the foregoing Recitals and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree to
amend, modify and supplement the Reimbursement Agreement as follows:
AGREEMENT
1. Allocation of THC Facilities Loans.
----------------------------------
New Hillhaven and NME acknowledge that, consistent with the First Amendment
to Credit Agreement, the funds available under the THC Facilities Loans that are
designated as "Refinance Loans" in the First Amendment are hereby reduced from
$117,000,000 to $105,000,000, and the funds available under the THC Facilities
Loans that are designated as "New THC Loans" in the First Amendment shall be
increased from $83,000,000 to $95,000,000.
2. Assumed Obligations.
-------------------
The obligations identified in Schedule 1 hereto that are being assumed by
FHC in conjunction with its acquisition of certain facilities (the "Assumed
Obligations") are hereby added as, and shall be deemed to be, "Obligations"
under (and as defined in) the Reimbursement Agreement, and all terms, covenants
and conditions of the Reimbursement Agreement, except as expressly provided
herein, shall apply to the Assumed Obligations.
3. Guaranty Fee.
------------
(a) New THC Loans. The guaranty fee set forth in Section 2(a) of the
-------------
First Amendment shall be applicable to the New THC Loans, as reallocated
pursuant to Paragraph 1, above.
(b) Assumed Obligations. The guaranty fee provisions of Section 2 of the
-------------------
Reimbursement Agreement shall not apply to the Assumed Obligations. Instead, New
Hillhaven shall pay to NME a guaranty fee equal to 1% per annum of the daily
outstanding balance of the Assumed Obligations. Such guaranty fee shall be paid
in quarterly installments on the last business day of each fiscal quarter, with
the first Installment due November 30, 1991. The principal amount of the Assumed
Obligations shall not be included as part of the outstanding Obligations under
Section 2(c)(i) of the Reimbursement Agreement for the purposes of calculating
the guaranty fee referred to in Section 2 of the Reimbursement Agreement.
<PAGE>
4. Effect on Reimbursement Agreement.
----------------------------------
Except as expressly amended by this Amendment, all of the terms and
conditions of the Reimbursement Agreement shall remain in full force and effect.
5. Captions.
---------
The captions and headings used herein are for the convenience of reference
and shall not be construed in any manner to limit or modify any of the terms
hereof.
6. Governing Law.
--------------
This Amendment shall be governed by and construed in accordance with the
laws of the State of California.
7. Counterparts.
-------------
This Amendment may be executed in counterparts, each of which shall be an
original, but all of which together shall constitute but one and the same
instrument.
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
be duly executed on its behalf as of the date first set forth above.
NATIONAL MEDICAL ENTERPRISES, INC.
By: [SIGNATURE ILLEGIBLE]
-------------------------------
Title: Senior Vice President
----------------------------
THE HILLHAVEN CORPORATION
By: /s/ Robert F. Pacquer
-------------------------------
Title: Senior Vice President
----------------------------
<PAGE>
SCHEDULE 1
ASSUMED OBLIGATIONS
Facility 461: Edmonds, WA Promissory Note, dated 7/1/84, executed by
Hillhaven, Inc. in favor of Villa Care, Inc. in
the original sum of $5,875,572.99. Assumed portion
of Promissory Note allocable to facility 461 is
approximately $22,794.54.
Facility 825: Suffolk, VA Financing Agreement, dated 12/28/83, between
Suffolk Development Authority and The Hillhaven
Corporation with an outstanding balance of
$4,000,000.00.
Facility 829: Holmes, VA Financing Agreement, dated 12/29/83, between City
of Virginia Beach Development Authority and The
Hillhaven Corporation, with an outstanding balance
of $3,925,000.00.
<PAGE>
[LETTERHEAD OF HILLHAVEN]
August 9, 1991
Mr. Timothy L. Pullen
NME Properties Corp.
c/o NME Properties, Inc.
1148 Broadway Plaza, Suite 260
Tacoma, WA 98402
Re: Acquisition of NME Leased Facilities (File No. 2004)
----------------------------------------------------
Dear Tim:
First Healthcare Corporation ("FHC") leases the 20 facilities listed on
Schedule 1 (hereinafter, individually a "Facility" and collectively the
"Facilities") from NME Properties Corp. and/or its wholly-owned subsidiaries,
NME Properties, Inc., NME Properties West, Inc., NME Properties Holding Co.,
Inc. and Guardian Care Inc. (collectively, "NME Properties").
Pursuant to Section 30 of the respective Leases for the Facilities, FHC
hereby exercises its option to purchase each of the Facilities. The aggregate
purchase price for the Facilities is $90,300,000 (the "Purchase Price"). The
individual Facility purchase prices are set forth on Schedule 1.
Subject to receipt of all necessary regulatory and lender approvals and
consents, the proposed closing date for the transaction is September 30, 1991,
or as soon as possible thereafter. In compliance with the Leases, we will make
arrangements this week to forward to you the deposit of $4,515,000 which is an
amount equal to five percent of the purchase price. The deposit shall be
credited against the cash down payment requirement referenced below at time of
closing of each Facility sale.
The deposit shall be paid into an interest-bearing escrow account and all
interest shall accrue to FHC's benefit; provided, however, if the sale of any of
the Facilities is not completed as a result of a breach by FHC, the amount of
the deposit applicable to such Facility shall he paid to NME Properties as
liquidated damages. Withdrawals may be made from the escrow account only with
the signature of both NME Properties and FHC.
<PAGE>
Timothy L. Pullen
August 9, 1991
Page two
FHC shall pay the Purchase Price as follows: (a) $21,655,000 in cash and
(b) $68,645,000 by (i) assuming approximately $8,800,000 of existing debt and
(ii) subject to certain bank approvals, approximately $59,845,000 in borrowings
from THC Facilities Corp. FHC agrees to obtain $18,060,000 (20% required cash
down payment) of the cash consideration from sources other than borrowings
guaranteed by National Medical Enterprises, Inc. ("NME"). Such sources may
include, for example, net cash provided from operations or from the sale of
assets, notes receivable or other investments. The amount of debt being assumed
by FHC will have a l% guarantee fee as long as such debt is guaranteed by NME
or an affiliate. The parties also acknowledge that for the transaction to close
as contemplated, the amount designated for "New THC Loans" under the THC
Facilities Corp. financing line needs to be increased by approximately
$12,000,000. Our mutual intent is to have $12,000,000 of the existing
approximately $95 Million remaining and currently designated for "Refinancing
Loans be reclassified for use in this transaction. Once this $12,000,000 is
redesignated for use for a New THC Loan and such amount is drawn upon for this
transaction, the parties agree such amount will be subject to a guarantee fee as
provided for in Section 2(a) of the First Amendment to Guarantee Reimbursement
Agreement dated May 30,1991 between NME and The Hillhaven Corporation, FHC's
parent Company ("Hillhaven").
Also, NME is willing to agree, subject to final approval by NME's CERC and
Relationship Committees, to assist and cooperate with Hillhaven in expanding the
current THC Facilities Corp. line of credit, or if this is not possible,
obtaining new financing with terms and conditions similar to such line of credit
in an amount equal to that actually borrowed from THC Facilities Corp. to
acquire the facilities listed in Schedule l.
If you have any questions concerning this transaction, please contact me or
Jacinta Titialii at 572-4901.
Very truly yours,
/s/ Robert K. Schneider
Robert K. Schneider
Vice President
<PAGE>
Timothy L. Pullen
August 9, 1991
Page three
Accepted and acknowledged this 9 day of August, 1991.
---
NME PROPERTIES CORP.
By: /s/ Timothy L. Pullen
------------------------
Timothy L. Pullen
Vice President
cc: The Hillhaven Corporation
-------------------------
Robert F. Pacquer
Richard P. Adcock
Jacinta Titialii
Jean T. Fukuda
Carl Anderson
NME
---
Ray Mathiasen
Nita Heckendorn
Karen Rothberg
<PAGE>
SCHEDULE I
NME PROPERTIES
SALE OF FACILITIES
<TABLE>
<CAPTION>
-------------------------------------------------------------
Fac Facility Option
No. Name State Price
=============================================================
<C> <S> <C> <C>
143 Hillhaven Conv Ctr NC $5,900
146 HH Rose Manor Conv Ctr NC 3,800
190 Winston-Salem Conv Ctr NC 5,600
752 Golden Age Manor/Long Pt TX 3,600
825 Nansemond Conv Ctr VA 7,600 (Note 1)
829 Holmes Conv Ctr VA 6,800
861 Green Meadows Nrng Ctr KS 4,200
138 HH Rehab & Conv Ctr NC 4,200
765 Eastview Manor WI 4,100
137 HH Sunnybrook Conv Ctr NC 3,500
448 Dirksen House Healthcare IL 3,400
461 Edmonds Care Center WA 2,900
610 Boca Raton Conv Ctr FL 5,500
660 Hillhaven Conv Ctr GA 2,600
704 Guaridan Care of Roanoke Rapid NC 4,200
780 Columbus Conv Ctr IN 7,000
809 Country Club Home KS 3,000
760 Golden Age Manor-Bellfort TX 3,900
753 Golden Age Manor-No. Loop TX 4,600
754 Golden Age Manor-Rookin TX 4,000
-------
TOTAL $90,300
=============================================================
</TABLE>
Note 1: The Option Amount in the Lease is
$5.6 Million plus the Cost of the
Addition. An estimate of $2 Million
for the Cost of the Addition has
been included in the Option Price on
this schedule, however, it will be
adjusted to actual at closing.
<PAGE>
EXHIBIT 10.44
THIRD AMENDMENT TO GUARANTEE REIMBURSEMENT AGREEMENT
This Third Amendment to Guarantee Reimbursement Agreement ("Amendment")
dated as of April 1, 1992, is entered into by and between National Medical
Enterprises, Inc., a Nevada corporation ("NME") and The Hillhaven Corporation, a
Nevada corporation ("New Hillhaven").
RECITALS
A. New Hillhaven and NME entered into the Guarantee Reimbursement Agreement,
dated as of January 31, 1990, which provides, among other things, for the
reimbursement by New Hillhaven of all Obligations paid by NME after the
Distribution Date. The Guarantee Reimbursement Agreement, as amended by the
First Amendment to Guarantee Reimbursement Agreement, dated May 30, 1991, and
the Second Amendment to Guarantee Reimbursement Agreement, dated October 2,
1991, and as may be further amended, restated, modified, supplemented, renewed
or replaced from time to time, is referred to herein as the "Reimbursement
Agreement." Unless otherwise defined herein, the terms defined in the
Reimbursement Agreement are used herein as therein defined.
B. First Healthcare Corporation ("FHC"), a wholly-owned subsidiary of New
Hillhaven, currently leases nursing facilities and retirement centers
(collectively referred to herein as the "Properties," and individually as a
"Property") from certain subsidiaries of NME pursuant to 86 individual leases,
each dated January 26, 1990 (as such leases have been or hereafter may be
amended or modified from time to time, collectively referred to herein as the
"Leases," and Individually as a "Lease").
C. FHC has exercised its options to purchase nine of the 86 Properties, as
provided in the respective Leases, and in accordance with the terms of the
December 4, 1991 letter from FHC and New Hillhaven to NME Properties Corp.
D. Concurrently herewith, FHC and each of the subsidiaries of NME that is a
Landlord (as defined in the Leases) have entered into that certain Omnibus
Amendment to Leases, made as of April 1, 1992 ("Omnibus Amendment") which amends
each of the remaining 77 Leases to provide, among other things, options to sell
and options to purchase the Properties.
E. Certain of the Properties are currently subject to (1) third party
financing (individually, an "Existing Debt") or (2) a master lease superior and
prior to the Lease (individually, a "Master Lease"). In conjunction with FHC's
acquisition of the Properties pursuant to the exercised options referenced in
Recital C above, and its acquisition of the Properties for which the options to
sell and options to purchase contained in the Omnibus Amendment hereafter may be
exercised, FHC may elect to assume, subject to obtaining the consent of NME, the
applicable Landlord and the third party lender or master landlord, as the case
may be, certain Existing Debt and Master Leases covering such Properties.
F. NME and the Landlords are unwilling to permit FHC to assume any such
Existing Debt or Master Lease unless New Hillhaven agrees to guaranty the
payment and performance of such Existing Debt and Master Lease being assumed by
FHC, to the extent that NME or any subsidiary or affiliate of NME remains
primarily or contingently liable for such Existing Debt or Master Lease.
<PAGE>
G. New Hillhaven and NME desire to amend the Reimbursement Agreement to add
the Existing Debit and Master Leases which may be assumed by FHC, to the extent
NME or any subsidiary or affiliate of NME shall remain primarily or contingently
liable therefor, as Obligations under the Reimbursement Agreement.
NOW THEREFORE, in consideration of the foregoing Recitals and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree to
amend, modify and supplement the Reimbursement Agreement as follows:
AGREEMENT
1. Assumed Obligations. To the extent NME or any subsidiary or affiliate of
--------------------
NME remains primarily or contingently liable therefor, all Existing Debt and
Master Leases (respectively referred to herein as the "Assumed Existing Debt"
and the "Assumed Master Leases") assumed by FHC in conjunction with its
acquisition of the Properties for which (a) FHC has exercised its options to
purchase as described in Recital C above, or (b) the options to sell and options
to purchase contained in the Omnibus Amendment are hereafter exercised, are
hereby added as, and shall be deemed to be, "Obligations" under (and as defined
in) the Reimbursement Agreement, and all terms, covenants and conditions of the
Reimbursement Agreement, except as expressly provided in Paragraph 2 below,
shall apply to such Assumed Existing Debts and Assumed Master Leases.
2. Guaranty Fee. The guaranty fee provisions of Section 2 of the
-------------
Reimbursement Agreement shall not apply to either (a) the Assumed Existing Debts
or (b) the Assumed Master Leases. Instead, New Hillhaven shall pay to NME a
guaranty fee equal to 1% per annum, from the date FHC completes its purchase of
each such Property subject to any Assumed Existing Debt or Assumed Master Lease,
on (i) the daily outstanding balance of each such Assumed Existing Debt, and
(ii) the daily outstanding balance of all rent payments which will become due
under each such Assumed Master Lease, for the balance of the term of each such
Assumed Existing Debt or Assumed Master Lease. Such guaranty fee shall be paid
in quarterly installments on the last business day of each fiscal quarter,
commencing on the last day of the first fiscal quarter immediately following the
date on which such Assumed Existing Debt or Assumed Master Lease is assumed by
FHC. The principal amount of the Assumed Existing Debts and Assumed Master
Leases shall not be included as part of the outstanding Obligations under
Section 2(c)(i) of the Reimbursement Agreement for the purposes of calculating
the guaranty fee referred to in Section 2 of the Reimbursement Agreement.
3. Effect on Reimbursement Agreement. Except as expressly amended by this
----------------------------------
Amendment, all of the terms and conditions of the Reimbursement Agreement shall
remain in full force and effect.
4. Captions. The captions and headings used herein are for the convenience of
---------
reference and shall not be construed in any manner to limit or modify any of the
terms hereof.
5. Governing Law. This Amendment shall be governed by and construed in
--------------
accordance with the laws of the State of California.
<PAGE>
6. Counterparts. This Amendment may be executed in counterparts, each of
-------------
which shall be an original, but all of which together shall constitute but one
and the same Instrument.
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
be duly executed on its behalf as of the date first set forth above.
NATIONAL MEDICAL ENTERPRISES, INC.
By:[SIGNATURE NOT LEGIBLE]
----------------------------------
Title: SR. EXEC. V.P.
-------------------------------
THE HILLHAVEN CORPORATION
By: Robert F. Pacquer
----------------------------------
Title: /s/ ROBERT F. PACQUER
-------------------------------
SR VICE PRESIDENT
<PAGE>
EXHIBIT C
---------
(LEASES SUBJECT TO MASTER LEASES)
<TABLE>
<CAPTION>
Fac. Facility Name
No. and Address Description of Master Lease
- ----- ------------- ---------------------------
<S> <C> <C>
804 Hillhaven Convalescent Lease dated July 3, 1969, by
Center and Nursing and between St. Vincent's
Home Hospital, as lessor, and
2728 10th Avenue Medicenters of America, Inc.,
Birmingham, AL as lessee (ground lease).
824 Hillhaven Convalescent Lease dated November 30, 1966,
Center and Nursing by and between Earl B. Wert
Home and Ellen R. Wert, as lessors,
1758 Springhill Avenue and Medicenters of America,
Mobile, AL Inc., as lessee (ground lease)
525 Hillhaven Convalescent Lease dated June 11, 1962, by
Hospital and between Mary G. Newcom,
920 W. LaVeta Richard B. Newcom and Mary
Orange, CA Beth Potter Querfurth, as
lessor, and Orange Square
Development Corporation, as
lessee (ground lease).
781 Bashford East Lease dated February 13, 1962
Healthcare by and between Cesare Bertoli
3535 Bardstown Road and Kathleen H. Bertoli, as
Louisville, KY lessor, and Heritage Home
Nursing and Convalescent Care,
Inc. (formerly Wendav, Inc.),
as lessee.
572 Winchester Place I Lease Agreement dated October 29,
36 Lehman Drive 1976 by and between Harley and
Canal Winchester, OH George Reynolds, as Lessor and
AEON, Inc., as lessee.
</TABLE>
<PAGE>
PART II
(Subleases Subject to Master Lease)
<TABLE>
<CAPTION>
Fac. Facility Name
No. and Address Description of Lease
- ----- ---------------------- --------------------
<S> <C> <C>
804 Hillhaven Convalescent Lease dated July 3, 1969, by
Center and Nursing and between St. Vincent's
Home Hospital, as lessor, and
2728 10th Avenue Medicenters of America, Inc.,
Birmingham, AL as lessee [ground lease].
824 Hillhaven Convalescent Lease dated November 30, 1966,
Center and Nursing by and between Earl B. Wert
Home and Ellen R. Wert, as lessors,
1758 Springhill Avenue and Medicenters of America,
Mobile, AL Inc., as lessee [ground
lease].
7104 Villa Campana Lease and Aquisition Agreement
Retirement Center dated February 1, 1983 by and
6653 E. Carondelet Dr. between the Industrial
Tucson, AZ Development Authority of the
County of Pima, as lessor, and
The Hillhaven Corporation, as
lessee.
525 Hillhaven Convalescent Lease dated June 11, 1962, by
Hospital and between Mary G. Newcom,
920 W. LaVeta Richard B. Newcom and Mary
Orange, CA Beth Potter Querfurth, as
lessor, and Orange Square
Development Corporation, as
lessee [ground lease].
809 Country Club Home Lease and Agreement dated
400 Sunset Dr. January 1, 1973 by and between
P.O. Box 319 the City of Council Grove, as
Council Grove, KS lessor, and Country Club
Home, Inc., as lessee.
833 Sedgwick Convalescent Lease and Agreement dated
Center September 20, 1974 by and
712 Monroe between the City of Sedgwick,
Box 49 as lessor, and Sedgwick
Sedgwick, KS Convalescent Center, Inc., a
Kansas corporation, as lessee.
</TABLE>
EXHIBIT B January 4, 1990
---------
(Page 11 of 13)
<PAGE>
<TABLE>
<CAPTION>
Fac. Facility Name
No. and Address Description of Lease
- ----- ---------------------- --------------------
<S> <C> <C>
857, Hammond Holiday Home Lease dated January l, 1980 by
858 114 West 11th and between the City of
Larned, KS Larned, Kansas, as lessor,
and Hammond Holiday Home,
Inc., a Kansas corporation, as
lessee.
861 Green Meadows Nursing Lease dated July 1, 1982 by
Center and between the City of
215 N. Larmar St. Haysville, Sedgwick County,
Haysville, KS Kansas, as lessor, and Green
Meadows Nursing Center, Inc.,
as lessee.
781 Bashford East Lease dated February 13, 1962
Healthcare by and between Cesare Bertoli
3535 Bardstown Road and Kathleen H. Bertoli, as
Louisville, KY lessor, and Heritage Home
Nursing and Convalescent Care,
Inc. (formerly Wendav, Inc.),
as lessee.
592 Greenbriar Terrace Lease dated October 1, 1972 by
Healthcare and between Samuel A. Tamposi,
55 Harris Road Gerald Q. Nash, as lessor, and
Nashua, NH Greenbriar Nursing Home Corp.,
as lessee [ground lease].
572 Winchester Place I Lease Agreement dated October
36 Lehman Drive 29, 1976 by and between Harley
Canal Winchester, OH and George Reynolds, as Lessor
and AEON, Inc., as lessee.
822 Hillhaven Convalescent Lease Agreement dated
Center December 1, 1979 by and
605 Primacy Parkway between the Health and
Memphis, TN Educational Facilities Board
of the County of Shelby,
Tennessee, as lessor, and
Hillhaven, Inc., a Delaware
corporation, as lessee.
</TABLE>
EXHIBIT B January 4, 1990
---------
(Page 12 of 13)
<PAGE>
<TABLE>
<CAPTION>
Fac. Facility Name
No. and Address Description of Lease
- ----- ---------------------- --------------------
<S> <C> <C>
559 Birchwood Terrace Lease dated June 17, 1964 by
Healthcare and between Henry H. Riordan
43 Starr Farm Road and Charles M. Jones, trustees
Burlington, VT of the Will of John J. Flynn,
as lessor, and Birchwood
Development Corporation, as
lessee.
769 North Ridge Care Lease Agreement dated June 1,
Center 1983 by and between City of
1445 N. 7th Street Manitowoc, Wisconsin, as
Manitowoc, WI lessor, and HH Holding Co.,
Inc., a Delaware corporation,
as lessee.
773 Mount Carmel Lease Agreement dated June 1,
Healthcare Center 1983 by and between City of
677 E. State St. Burlington, as lessor, and HH
Burlington, WI Holding Co., Inc., a Delaware
corporation, as lessee.
</TABLE>
EXHIBIT B January 4, 1990
---------
(Page 13 of 13)
<PAGE>
THE HILLHAVEN CORPORATION
LIST OF LEASED NME FACILITIES
<TABLE>
<CAPTION>
FACILITIES UNDER CAPITALIZED NME LEASES
---------------------------------------
<S> <C> <C>
1 AL 804 BIRMINGHAM
2 AL 824 MOBILE
3 AV 818 LITTLE ROCK
4 AZ 436 VALLEY HOUSE
AZ 437 VALLEY HOUSE - HSE
5 AZ 742 BELLS LODGE - PHOENIX
6 AZ 851 VILLA CAMPANA
AZ 852 VILLA CAMPANA - HSE
7 CA 149 FAIR OAKS - SACRAMENTO
8 CA 150 SAN FRANCISCO
9 CA 203 CONCORD (HACIENDA)
10 CA 320 BURLINGAME
11 CA 410 SANTA PAULA
12 CA 411 ARLINGTON (ALTA VISTA)
13 CA 420 OXNARD (MAYWOOD ACRES)
14 CA 427 TWIN PINES-SANTA PAULA
15 CA 525 ORANGE
16 CA 727 SAN PABLO (BROOKVIEW)
17 CA 737 SAN LEANDRO
18 CA 738 ALAMEDA (SHORELINE)
19 CO 859 NORTHGLENN
20 CT 562 NEW BRITAIN (ANDREW HOUSE)
21 CT 563 CAMELOT-NEW LONDON
22 CT 565 NORWICH HAMILTON PAVILION
23 CT 566 WINDSOR (MOUNTAIN VIEW)
24 CT 567 NUTMEG PVLN NEW LONDON
25 CT 568 ENFIELD (PRKWY PAVILION)
26 FL 115 W PALM BEACH
27 FL 117 EAST MANOR-SARASOTA
28 FL 124 SANFORD
29 FL 125 TITUSVILLE
30 FL 836 MEDICENTER-TAMPA
31 GA 155 SAVANNAH
32 GA 645 MARIETTA
GA 8645 MARIETTA - HEAD INJURY
33 IN 286 COLOMBIA - EVANSVILLE
34 IN 779 BEDFORD (WESTVIEW MANOR)
35 KS 838 TOPEKA
36 KY 781 BASHFORD EAST LOUISVILLE
37 KY 783 LEXINGTON
38 MT 416 GREAT FALLS (PARK PLACE)
39 MT 433 DILLON (PARKVIEW ACRES)
48 NC 116 DURHAM
41 NC 136 LASALLE - DURHAM
42 NC 188 WILMINGTON
43 NC 191 SILAS CREEK-WINSTON
44 NC 706 HENDERSON (GUARDIAN CARE)
45 NC 707 MONROE (GUARDIAN CARE)
46 NC 710 NEW BERN (GUARDIAN CARE)
47 NC 711 KINSTON (GUARDIAN CARE)
48 NC 713 ZEBULON (GUARDIAN CARE)
49 NC 724 GASTONIA (HH HEALTH CARE)
50 NC 806 CHAPEL HILL (HHCC)
51 NH 593 HANOVER TERRACE
52 NV 145 RENO
53 NV 641 TORREY PINES - LAS VEGAS
54 OH 560 FRANKLIN WOODS COLOMBUS
55 OH 570 PICKERINGTON
56 OH 572 WINCHESTER CANAL
57 OH 802 AKRON
58 OK 233 BARTLESVILLE
OK 234 BARTLESVILLE - APTS.
59 TN 132 MADISON
60 UT 655 SALT LAKE CITY (CC)
61 UT 690 WASATCH VILLA-SLC
62 VA 026 NORFOLK
63 VA 842 MEDICENTER - VA BEACH
64 WA 114 ARDEN - SEATTLE
65 WA 127 LONGVIEW - NORTHWEST
66 WA 158 BELLINGHAM
67 WA 160 FIRST HILL - SEATTLE
68 WA 180 VANCOUVER (CC)
69 WA 105 HHNH-VANCOUVER
70 WA 462 QUEEN ANNE-SEATTLE
71 WI 767 APPLETON (COLONY OAKS)
72 WI 769 MANITOWOC (NORTH RIDGE)
73 WI 770 NEENAH (VALLHAVEN)
74 WY 481 RAWLINS (PARK MANOR)
75 WY 482 RIVERTON (FREMONT MANOR)
76 WY 483 ROCK SPRINGS KIMBERLY MNR
</TABLE>
<TABLE>
<CAPTION>
LEASED NME FACILITIES WITH EXECUTED PURCHASE OPTION
---------------------------------------------------
<S> <C> <C>
77 CT 561 TORRINGTON (ADAMS HOUSE),
78 KS 844 WICHITA
79 KS 857 LARNED (HAMMOND)
KS 858 LARNED (HAMMOND)
80 MO 446 COLOMBIA
81 KS 833 SEDGWICK
82 MO 834 SPRINGFIELD (HHCC)
83 NC 176 ORANGE-DURHAM
84 NV 640 LAS VEGAS (CC)
85 WY 441 MOUNTAIN TOWERS-CHEYENNE
</TABLE>
<PAGE>
EXHIBIT 10.45
FOURTH AMENDMENT TO GUARANTEE REIMBURSEMENT AGREEMENT
This Fourth Amendment to Guarantee Reimbursement Agreement ("Amendment")
dated as of November 12, 1992, is entered into by and between National Medical
Enterprises, Inc., a Nevada corporation ("NME") and The Hillhaven Corporation, a
Nevada corporation ("New Hillhaven").
RECITALS
A. New Hillhaven and NME entered into that certain Guarantee Reimbursement
Agreement, dated as of January 31, 1990 (as amended by that certain First
Amendment to Guarantee Reimbursement Agreement, dated as of May 30, 1991, that
certain Second Amendment to Guarantee Reimbursement Agreement, dated as of
October 2, 1991, and that certain Third Amendment to Guarantee Reimbursement
Agreement, dated as of April 1, 1992 ("the Third Amendment"), and as the same
may be amended, restated, modified, supplemented, renewed or replaced from time
to time, the "Reimbursement Agreement"), which provides, among other things, for
the reimbursement by New Hillhaven of all Obligations (as defined in the
Reimbursement Agreement) paid by NME. Unless otherwise defined herein, all
capitalized terms used herein shall have the same meaning ascribed to such terms
in the Reimbursement Agreement.
B. Pursuant to that certain letter agreement, dated July 14, 1992, as modified
by that certain letter dated August 4, 1992 from Timothy L. Pullen to Bruce
Busby, and as further amended and modified by that certain letter agreement
dated October 14, 1992 (collectively the "Letter Agreement"), NME and those
subsidiaries of NME that are signatories to the Letter Agreement (the "NME
Parties") agreed to sell to First Healthcare Corporation ("FHC"), a wholly owned
subsidiary of New Hillhaven, and FHC and New Hillhaven agreed to purchase from
the NME Parties, certain nursing facilities and retirement centers
(collectively, referred to herein as the "Properties," and individually as a
"Property") that FHC leases from certain of the NME Parties.
C. Certain of the Properties are currently subject to (1) third party financing
(individually, an "Existing Debt") or (2) a master lease superior and prior to
the Lease (individually, a "Master Lease"). In conjunction with FHC's
acquisition of the Properties pursuant to the Letter Agreement referenced in
Recital B above, FHC shall assume certain Existing Debt and Master Leases
covering such Properties (respectively referred to herein as the "Assumed
Existing Debt" and the "Assumed Master Leases"). The Assumed Existing Debt and
the Assumed Master Leases applicable to such Properties being acquired by FHC
are described in Schedule A attached hereto.
D. NME is unwilling to permit FHC to assume any such Existing Debt or Master
Lease unless New Hillhaven agrees to guaranty the payment and performance of
such Assumed Existing Debt and Assumed Master Lease, to the extent that NME or
any subsidiary or affiliate of NME remains primarily or contingently liable for
such Assumed Existing Debt or Assumed Master Lease. In accordance with the
Letter Agreement, New Hillhaven agreed to guarantee such Assumed Existing Debt
and Assumed Master Leases as "Obligations" under and as defined in the
Reimbursement Agreement.
<PAGE>
E. New Hillhaven and NME desire to amend the Reimbursement Agreement to add the
Assumed Existing Debt and the Assumed Master Leases, to the extent NME or any
subsidiary or affiliate of NME shall remain primarily or contingently liable
therefor, as Obligations under the Reimbursement Agreement.
NOW THEREFORE, in consideration of the foregoing Recitals and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree to
amend, modify and supplement the Reimbursement Agreement as follows:
AGREEMENT
1. Assumed Obligations. To the extent NME or any subsidiary or affiliate of
--------------------
NME remains primarily or contingently liable therefor, the Assumed Existing Debt
and the Assumed Master Leases as described in Schedule A attached hereto are
hereby added as, and shall be deemed to be, "Obligations" under (and as defined
in) the Reimbursement Agreement, and all terms, covenants and conditions of the
Reimbursement Agreement, except as expressly provided in Paragraph 2 below,
shall apply to such Assumed Existing Debt and Assumed Master Leases.
2. No Guaranty Fee. The guaranty fee provisions of Section 2 of the
----------------
Reimbursement Agreement and the guaranty fee provisions contained in Paragraph 2
of the Third Amendment shall not apply to either (a) the Assumed Existing Debt
described in Schedule A attached hereto or (b) the Assumed Master Leases
described in Schedule A attached hereto. The principal amount of the Assumed
Existing Debt and Assumed Master Leases described in Schedule A attached hereto
shall not be included as part of the outstanding Obligations under Section
2(c)(i) of the Reimbursement Agreement for the purposes of calculating the
guaranty fee referred to in Section 2 of the Reimbursement Agreement.
3. Effect on Reimbursement Agreement. Except as expressly amended by this
----------------------------------
Amendment, all of the terms and conditions of the Reimbursement Agreement shall
remain in full force and effect. Without limiting the generality of the
foregoing, the parties specifically agree that, except with respect to the
Assumed Existing Debt and the Assumed Master Leases described in Schedule A
hereto, the terms and provisions of Paragraph 2 of the Third Amendment shall
remain fully applicable to all Assumed Existing Debt and Assumed Master Leases
as provided in the Third Amendment.
4. Captions. The captions and headings used herein are for the convenience of
---------
reference and shall not be construed in any manner to limit or modify any of
the terms hereof.
5. Governing Law. This Amendment shall be governed by and construed in
--------------
accordance with the laws of the State of California.
<PAGE>
6. Counterparts. This Amendment may be executed in counterparts, each of
-------------
which shall be an original, but all of which together shall constitute but one
and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
be duly executed on its behalf as of the date first set forth above.
NATIONAL MEDICAL ENTERPRISES, INC.
By: [SIGNATURE NOT LEGIBLE]
-----------------------------
Title: [SIGNATURE NOT LEGIBLE]
---------------------------
THE HILLHAVEN CORPORATION
By: [SIGNATURE NOT LEGIBLE]
-----------------------------
Title: [SIGNATURE NOT LEGIBLE]
---------------------------
<PAGE>
SCHEDULE A
ASSUMED OBLIGATIONS
ASSUMED LEASES
- --------------
Facility 525: Orange, CA: Lease dated June 11, 1962, by and between Mary G.
Newcom, Richard B. Newcom and Mary Beth Potter
Querfurth, as lessor, and Orange Square
Development Corporation, as original lessee,
recorded June 29, 1962 in Book 6162, Page 162,
Official Records, Orange County, California. The
interest of lessee has since been assigned to
Hillhaven, Inc., a Delaware corporation, by merger
of H.H. of Orange, Inc., a California corporation,
recorded May 12, 1964 in Book 7040, Page 501 of
Official Records of Orange County, California.
Facility 781: Bashford, KY: Lease dated February 13, 1962 by and between
Cesare Bertoli and Kathleen H. Bertoli, as
lessor, and Extendicare of Kentucky, Inc., a
Kentucky corporation, as tenant,
successor-in-interest to Heritage House Nursing
and Convalescent Care, Inc. (formerly known as
Wendav, Inc., a Kentucky corporation). Tenant's
interest assigned to H.H. Holding Co., Inc., (now
known as NME Property Holding Co., Inc.) a
Delaware corporation, as successor by merger to
NHE/Kentucky, Inc., a Kentucky corporation, by an
Assignment of Lease dated August 28, 1972.
Facility 804: Birmingham, AL: Lease dated July 3, 1969, by and between St.
Vincent's Hospital, as lessor, and Medicenters of
America, Inc., as original lessee. NME Properties
Corp.; formerly known as The Hillhaven
Corporation, a Tennessee corporation, is the
successor in interest to Medicenters of America,
Inc.
Facility 824: Mobile, AL: Lease dated November 30, 1966, by and between
Earl B. Wert and Ellen R. Wert, as lessors, and
Medicenters of America, Inc., as lessee, recorded
in Real Property Book 779, Page 946 and Addendum
to Lease, dated October 13, 1967, recorded in Real
Property Book 788, Page 193. NME Properties Corp.,
formerly known as The Hillhaven Corporation, a
Tennessee corporation, is the successor in
interest to Medicenters of America, Inc.
Page 1 of 2
<PAGE>
SCHEDULE A
ASSUMED OBLIGATIONS
ASSUMED EXISTING DEBT
- ---------------------
Facility 160: First Hill, WA: Promissory Note, dated July 1, 1984, executed by
Hillhaven, Inc. in favor of Villa Care, Inc. in
the original sum of $5,875,572.99, only a portion
of which is being assumed by FHC. The assumed
portion of the Promissory Note allocable to
Facility 160 (i.e., the Assumed Existing Debt) is
approximately $26,677.21. The Promissory Note
represents an obligation relating to several
properties and is secured by a Deed of Trust on
the subject Property.
Facility 560: Franklin
Woods, OH: Loan Agreement dated as of October 1, 1984
between NME Properties Corp. (formerly known as
The Hillhaven Corporation), a Tennessee
corporation (as the assignee of First Healthcare
Corporation pursuant to an Assignment and
Assumption of Loan Agreement dated as of January
25, 1990, as successor in interest to franklin
Woods Associates and the County of Franklin, Ohio
(the "Issuer")); Promissory Note dated as of
October 1, 1984, in favor of the Issuer in the
sum of $2,700,000 (with an outstanding balance of
$2,330,000), secured by an Open-End Mortgage and
Security Agreement.
Facility 570: Pickerington, OH:
Loan Agreement between NME Properties Corp.
(formerly known as The Hillhaven Corporation), a
Tennessee corporation (as the assignee of First
Healthcare Corporation pursuant to the Assignment
and Assumption of Loan Agreement dated as of
January 25, 1990, as successor in interest to
Pickerington Health Care Center, Inc. and the
County of Fairfield, Ohio (the "Issuer")) dated
as of November 1, 1983; Promissory Note dated as
of October 1, 1984, in favor of the Issuer in the
sum of $2,700,000 (with an outstanding balance of
$2,225,000), secured by an Open-End Mortgage and
Security Agreement.
Page 2 of 2
<PAGE>
EXHIBIT 10.46
FIFTH AMENDMENT TO GUARANTEE REIMBURSEMENT AGREEMENT
This Fifth Amendment to Guarantee Reimbursement Agreement ("Amendment")
dated as of February 19, 1993, is entered into by and between National Medical
Enterprises, Inc., a Nevada corporation ("NME") and The Hillhaven Corporation, a
Nevada corporation ("New Hillhaven").
RECITALS
A. New Hillhaven and NME entered into that certain Guarantee Reimbursement
Agreement, dated as of January 31, 1990 (as amended by that certain First
Amendment to Guarantee Reimbursement Agreement, dated as of May 30, 1991, that
certain Second Amendment to Guarantee Reimbursement Agreement, dated as of
October 2, 1991, that certain Third Amendment to Guarantee Reimbursement
Agreement, dated as of April 1, 1992 (the "Third Amendment"), and that certain
fourth Amendment to Guarantee Reimbursement Agreement, dated as of November 12,
1992, and as the same may be amended, restated, modified, supplemented, renewed
or replaced from time to time, the "Reimbursement Agreement"), which provides,
among other things, for the reimbursement by New Hillhaven of all Obligations
(as defined in the Reimbursement Agreement) paid by NME. Unless otherwise
defined herein, all capitalized terms used herein shall have the same meaning
ascribed to such terms in the Reimbursement Agreement.
B. Pursuant to that certain letter dated January 26, 1993, from Timothy L.
Pullen to Robert F. Pacquer (the "Option Notice"), certain subsidiaries of NME
(the "NME Parties') exercised their respective options to sell to First
Healthcare Corporation ("FHC"), a wholly owned subsidiary of New Hillhaven,
seventeen nursing facilities (collectively, referred to herein as the
"Properties," and individually as a "Property") that FHC leases from certain of
the NME Parties.
C. One of the Properties, commonly known as Queen Anne Care Center, described
in Schedule A attached hereto, is currently subject to third party financing
(herein, an "Existing Debt"). In conjunction with FHC's acquisition of the
Properties pursuant to the Option Notice, FHC shall assume the Existing Debt
covering such Property (herein, an "Assumed Existing Debt"). The Assumed
Existing Debt applicable to such Property is described in Schedule A attached
hereto.
D. In accordance with the Third Amendment, New Hillhaven agreed to guarantee
the Assumed Existing Debt of Properties acquired by FHC pursuant to exercised
options to sell and options to purchase as provided in the Omnibus Amendment.
E. New Hillhaven and NME desire to amend the Reimbursement Agreement to add
such Assumed Existing Debt as an "Obligation" under (and as defined in) the
Reimbursement Agreement.
<PAGE>
NOW THEREfORE, In consideration of the foregoing Recitals and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree to
amend, modify and supplement the Reimbursement Agreement as follows:
AGREEMENT
1. Assumed Obligations. To the extent NME or any subsidiary or affiliate of
-------------------
NME remains primarily or contingently liable therefor, the Assumed Existing Debt
described in Schedule A attached hereto is hereby added as, and shall be deemed
to be, an "Obligation" under (and as defined in) the Reimbursement Agreement,
and all terms, covenants and conditions of the Reimbursement Agreement,
including but not limited to the guaranty fee of 1% per annum payable in
accordance with Paragraph 2 of the Third Amendment, shall apply to such Assumed
Existing Debt.
2. Reaffirmation of Reimbursement Agreement. New Hillhaven reaffirms that the
----------------------------------------
Reimbursement Agreement, as amended hereby, shall remain in full force and
effect, and shall continue to be binding upon New Hillhaven.
3. Captions. The captions and headings used herein are for the convenience of
--------
reference and shall not be construed in any manner to limit or modify any of the
terms hereof.
4. Governing Law. This Amendment shall be governed by and construed in
-------------
accordance with the laws of the State of California.
5. Counterparts. This Amendment may be executed in counterparts, each of
------------
which shall be an original, but all of which together shall constitute but one
and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
be duly executed on its behalf as of the date first set forth above.
NATIONAL MEDICAL ENTERPRISES, INC.
By: [SIGNATURE ILLEGIBLE]
------------------------------
Title: VICE PRESIDENT
---------------------------
THE HILLHAVEN CORPORATION
By: /s/ Robert F. Pacquer
------------------------------
ROBERT F. PACQUER
Title: SR. VICE PRESIDENT
---------------------------
<PAGE>
SCHEDULE A
ASSUMED OBLIGATIONS
ASSUMED EXISTING DEBT
- ---------------------
Facility 462: Quenn Anne, WA: Promissory Note, dated July 1, 1984, executed by
Hillhaven, Inc. in favor of Villa Care, Inc. in
the original sum of $5,875,572.99, only a portion
of which is being assumed by FHC. The assumed
portion of the Promissory Note allocable to
Facility 462 (i.e., the Assumed Existing Debt) is
approximately $22,952.29. The Promissory Note
represents an obligation relating to several
properties and is secured by a Deed of Trust on
the subject Property.
<PAGE>
EXHIBIT 10.47
SIXTH AMENDMENT TO GUARANTEE REIMBURSEMENT AGREEMENT
This Sixth Amendment to Guarantee Reimbursement Agreement ("Amendment")
dated as of May 28, 1993, is entered into by and between National Medical
Enterprises, Inc., a Nevada corporation ("NME"') and The Hillhaven Corporation,
a Nevada corporation ("New Hillhaven").
RECITALS
A. New Hillhaven and NME entered into that certain Guarantee Reimbursement
Agreement, dated as of January 31, 1990 (as amended by that certain First
Amendment to Guarantee Reimbursement Agreement, dated as of May 30, 1991, that
certain Second Amendment to Guarantee Reimbursement Agreement, dated as of
October 2, 1991, that certain Third Amendment to Guarantee Reimbursement
Agreement, dated as of April 1, 1992 (the "Third Amendment"), that certain
Fourth Amendment to Guarantee Reimbursement Agreement, dated as of November 12,
1992, and that certain fifth Amendment to Guarantee Reimbursement Agreement,
dated as of February 19, 1993, and as the same may be amended, restated,
modified, supplemented, renewed or replaced from time to time, the
"Reimbursement Agreement"), which provides, among other things, for the
reimbursement by New Hillhaven of all Obligations (as defined in the
Reimbursement Agreement) paid by NME. Unless otherwise defined herein, all
capitalized terms used herein shall have the same meaning ascribed to such terms
In the Reimbursement Agreement.
B. Pursuant to that certain letter dated May 10, 1993, from Timothy L. Pullen
to Robert F. Pacquer (the "Option Notice"), certain subsidiaries of NME (the
"NME Parties") exercised their respective options to sell to First Healthcare
Corporation ("FHC"), a wholly owned subsidiary of New Hillhaven, eleven nursing
facilities (collectively, referred to herein as the "Properties," and
individually as a "Property") that FHC leases from certain of the NME Parties.
C. One of the Properties, commonly known as Bellingham Care Center, described
in Schedule A attached hereto, is currently subject to third party financing
(herein, an "Existing Debt"). In conjunction with FHC's acquisition of the
Properties pursuant to the Option Notice, FHC shall assume the Existing Debt
covering such Property (herein, an "Assumed Existing Debt"). The Assumed
Existing Debt applicable to such Property is described in Schedule A attached
hereto.
D. In accordance with the Third Amendment, New Hillhaven agreed to guarantee
the Assumed Existing Debt of Properties acquired by FHC pursuant to exercised
options to sell and options to purchase as provided in the Omnibus Amendment.
E. New Hillhaven and NME desire to amend the Reimbursement Agreement to add
such Assumed Existing Debt as an "Obligation" under (and as defined in) the
Reimbursement Agreement.
<PAGE>
NOW THEREFORE, in consideration of the foregoing Recitals and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree to
amend, modify and supplement the Reimbursement Agreement as follows:
AGREEMENT
1. Assumed Obligations. To the extent NME or any subsidiary or affiliate of NME
-------------------
remains primarily or contingently liable therefor, the Assumed Existing Debt
described In Schedule A attached hereto is hereby added as, and shall be deemed
to be, an "Obligation" under (and as defined in) the Reimbursement Agreement,
and all terms, covenants and conditions of the Reimbursement Agreement,
including but not limited to the guaranty fee of 1% per annum payable In
accordance with Paragraph 2 of the Third Amendment, shall apply to such Assumed
Existing Debt.
2. Reaffirmation of Reimbursement Agreement. New Hillhaven reaffirms that the
-----------------------------------------
Reimbursement Agreement, as amended hereby, shall remain in full force and
effect, and shall continue to be binding upon New Hillhaven.
3. Captions. The captions and headings used herein are for the convenience of
---------
reference and shall not be construed in any manner to limit or modify any of
the terms hereof.
4. Governing Law. This Amendment shall be governed by and construed in
--------------
accordance with the laws of the State of California.
5. Counterparts. This Amendment may be executed in counterparts, each of which
-------------
shall be an original, but all of which together shall constitute but one and the
same instrument.
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
be duly executed on its behalf as of the date first set forth above.
NATIONAL MEDICAL ENTERPRISES, INC.
By: [SIGNATURE NOT LEGIBLE]
--------------------------------
Title: [SIGNATURE NOT LEGIBLE]
------------------------------
THE HILLHAVEN CORPORATION
By: [SIGNATURE NOT LEGIBLE]
--------------------------------
Title: [SIGNATURE NOT LEGIBLE]
------------------------------
<PAGE>
SCHEDULE A
ASSUMED OBLIGATIONS
ASSUMED EXISTING DEBT
- ---------------------
Facility 158: Bellingham, WA: Promissory Note, dated July 1, 1984, executed by
Hillhaven, Inc. in favor of Villa Care, Inc. in
the original sum of $5,875,572.99, only a portion
of which is being assumed by FHC. The assumed
portion of the Promissory Note allocable to
Facility 158 (i.e., the Assumed Existing Debt) is
approximately $243,527.40. The Promissory Note
represents an obligation relating to several
properties.
<PAGE>
Exhibit 10.48
SEVENTH AMENDMENT TO GUARANTEE REIMBURSEMENT AGREEMENT
THIS SEVENTH AMENDMENT TO GUARANTEE REIMBURSEMENT AGREEMENT
(the "Amendment") is made and dated as of May 28, 1993, between
National Medical Enterprises, Inc., a Nevada corporation ("NME")
and The Hillhaven Corporation, a Nevada corporation
("Hillhaven").
RECITALS
A. NME and Hillhaven are parties to that certain Guarantee
Reimbursement Agreement, dated as of January 31, 1990 (as the
same has been or may from time to time be amended, restated,
renewed, replaced, modified or supplemented from time to time,
the "Reimbursement Agreement").
B. Hillhaven has requested that NME enter into that
certain Pledge and Security Agreement and Master Assignment of
Mortgages, dated as of May 28, 1993 (the "Pledge Agreement"),
pursuant to which NME is assigning certain promissory notes from
Hillhaven to NME, and the mortgages securing such promissory
notes, to Swiss Bank Corporation, as Collateral Agent, to secure
NME's obligations under a guaranty of certain of Hillhaven's
"Obligations" (as defined in the Reimbursement Agreement).
C. In order to induce NME to enter into the Pledge
Agreement, Hillhaven has agreed to amend the Reimbursement
Agreement as set forth in this Agreement.
NOW THEREFORE, in consideration of the foregoing Recitals
and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
AGREEMENT
1. Section 1(a) of the Reimbursement Agreement hereby is
amended and restated to read in its entirety as follows:
(a) Reimbursement. New Hillhaven shall reimburse
NME, promptly on demand, for all Obligations (including
those Obligations set forth in Appendix B to the
Reimbursement Agreement) paid by NME or its
subsidiaries after the Distribution Date not
theretofore reimbursed by New Hillhaven. Without
limiting the generality of the foregoing, in the event
that NME pledges or assigns collateral directly or
indirectly to secure any Obligations or NME's
obligations with respect thereto, under a guaranty or
otherwise, the amount to be reimbursed by New Hillhaven
to NME hereunder with respect to such Obligations shall
be the greater of (x) the face value of any collateral
applied to the satisfaction of the Obligations, and any
other sums then outstanding with respect to such
collateral, including accrued and unpaid interest
<PAGE>
thereon, and (y) the fair market value of any collateral,
and any proceeds thereon, applied to the satisfacton of the
Obligations (provided, however, that if the collateral is a
note secured by a mortgage or deed of trust, the fair market
value of such note shall not include the fair market value
of the real property securing such note). Payments and
notices shall be made or given, as the case may be, in
accordance with the provisions of Sections 1(c), 3 and 9(b).
2. Reimbursement Agreement Remains in Effect. Except as
expressly amended hereby, the Reimbursement Agreement shall
remain in full force and effect.
3. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of
California.
4. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed an original,
but such counterparts shall together constitute but one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered as of the day and year
first above written.
NATIONAL MEDICAL ENTERPRISES, INC.,
a Nevada corporation
By: /s/ Maris Andersons
Title: Executive Vice President
THE HILLHAVEN CORPORATION,
a Nevada corporation
By: /s/ Robert K. Schneider
Title: Vice President & Treasurer
<PAGE>
Exhibit 10.49
EIGHTH AMENDMENT TO GUARANTEE REIMBURSEMENT AGREEMENT
This Eighth Amendment to Guarantee Reimbursement Agreement
("Amendment") dated as of September 2, 1993, is entered into by
and between National Medical Enterprises, Inc., a Nevada
corporation ("NME") and The Hillhaven Corporation, a Nevada
corporation ("New Hillhaven").
RECITALS
A. New Hillhaven and NME are parties to that certain Guarantee
Reimbursement Agreement, dated as of January 31, 1990 (as the
same has been or may be amended, restated, modified,
supplemented, renewed or replaced from time to time, the
"Reimbursement Agreement"), which provides, among other things,
for the reimbursement by New Hillhaven of all Obligations (as
defined in the Reimbursement Agreement) paid by NME. Unless
otherwise defined herein, all capitalized terms used herein shall
have the same meaning ascribed to such terms in the Reimbursement
Agreement.
B. New Hillhaven, NME, and certain subsidiaries of New
Hillhaven and NME, have entered into that certain letter
agreement dated June 22, 1993 (the "June 22 Letter"), which among
other things, restructures certain relationships of the
companies. Among the provisions contained in the June 22 letter
that are pertinent to this Reimbursement Agreement, are the
following:
(1) New Hillhaven will obtain financing consisting of
(a) third party bank financing in the approximate
amount of $400 million, and (b) public or private debt
financing in the approximate amount of $175 million
(collectively, the "Financing"), a portion of the
proceeds of which Financing will be used to (i) repay
certain Obligations currently guaranteed by NME, and
(ii) cause NME and/or certain of its subsidiaries to be
released from certain other Obligations currently
guaranteed by NME and/or certain of its subsidiaries;
(2) The annual guarantee fee payable by New Hillhaven
under this Reimbursement Agreement in connection with
the Obligations shall be limited to a maximum of 2% of
the Obligations outstanding and the manner of
calculating the fee charged on the Obligations
outstanding shall be revised; and
(3) NME and/or certain subsidiaries of NME shall assign
to New Hillhaven's subsidiary, First Healthcare
Corporation ("FHC"), and FHC shall assume the renewal
and/or purchase options contained in the Assumed Leases
(as that term is defined in the Reimbursement
Agreement) that were not assigned to FHC on or before
the Distribution Date for those facilities described in
<PAGE>
Exhibit 1 attached hereto and incorporated herein by this
reference (the "Assumed Lease Options"), and those Assumed
Lease Options shall be added to the Obligations covered by
this Reimbursement Agreement, as more specifically provided
herein.
C. New Hillhaven and NME desire to amend the Reimbursement
Agreement as set forth in this Agreement.
NOW THEREFORE, in consideration of the foregoing Recitals and for
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree to amend, modify and
supplement the Reimbursement Agreement as follows:
AGREEMENT
1. Calculation of the Guarantee Fee After Completion of
Financing. The provisions of Section 2(c) of the Reimbursement
Agreement are hereby amended to provide that, commencing with the
quarterly payment due for the fiscal quarter ending February 28,
1993, the guarantee fee for each quarter shall be the product of
(i) the amount of the Obligations outstanding at the close of
business on the last day of the preceding fiscal quarter
multiplied by (ii) a fraction which is equal to the applicable
fraction for the previous fiscal year multiplied by 1.2;
provided, however, that at no time shall the fraction to be used
in calculating the guarantee fee exceed 2%. Furthermore,
notwithstanding the foregoing guaranty fee provisions, the
principal amounts of the Obligations described in Exhibit 2 and
Exhibit 3 attached hereto shall not be included as part of the
Obligations for the purposes of calculating the guarantee fee in
the foregoing sentence. Instead, in accordance with prior
agreements, (x) New Hillhaven shall pay to NME a guarantee fee of
1% per annum on those Obligations described in Exhibit 2, and (y)
no guarantee fee shall be charged on those Obligations described
in Exhibit 3.
2. Proration of Guarantee Fee on Obligations Paid With Proceeds
of Financing. Notwithstanding any provisions to the contrary,
the guarantee fee paid with respect to those Obligations that are
paid in full, or as to which NME's guaranty has been released,
with proceeds of the Financing during the fiscal year ending May
31, 1994 shall be prorated to the date of payoff, based on the
actual number of days elapsed until such Obligation is paid in
full or such guaranty has been released.
3. Inclusion of the Assumed Lease Options as Obligations. The
Assumed Lease Options are hereby added as, and shall be deemed to
be, "Obligations" under (and as defined in) the Reimbursement
Agreement, and all terms, covenants and conditions of the
Reimbursement Agreement shall apply; provided, however, that the
guarantee fee set forth in Paragraph 1 above shall be charged on
the aggregate amount of the rents that will become due for the
renewal period for any such Assumed Lease, commencing on the
earlier of the date that FHC exercises or is required to exercise
such Assumed Lease Option, as provided by the terms of the
assignment of such Assumed Lease Option.
<PAGE>
4. Inclusion of Certain Assumed Obligations. To the extent NME
or any subsidiary or affiliate of NME remains primarily or
contingently liable therefor, each of the Assumed Existing Debt
and the Assumed Lease described in Exhibit 4 attached hereto is
hereby added as, and shall be deemed to be, an "Obligation" under
(and as defined in) the Reimbursement Agreement, and all terms,
covenants and conditions of the Reimbursement Agreement,
including payment of a guarantee fee as provided in Paragraph 1
above, shall apply to such Assumed Existing Debt and Assumed
Lease.
5. Reaffirmation of Reimbursement Agreement. New Hillhaven
reaffirms that the Reimbursement Agreement, as amended hereby,
shall remain in full force and effect, and shall continue to be
binding upon New Hillhaven.
6. Captions. The captions and headings used herein are for
the convenience of reference and shall not be construed in any
manner to limit or modify any of the terms hereof.
7. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of California.
8. Counterparts. This Amendment may be executed in
counterparts, each of which shall be an original, but all of
which together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has caused
this Amendment to be duly executed on its behalf as of the date
first set forth above.
NATIONAL MEDICAL ENTERPRISES,
INC.
By: _________________________
Title: ______________________
THE HILLHAVEN CORPORATION
By: _________________________
Title: ______________________
<PAGE>
EXHIBIT 1
No. Facility Name
272 Hughes Springs Nursing Home
Hughes Springs, Texas
273 Pinecrest Convalescent Home
Daingerfield, Texas
274 Coastal Care Center
Texas City, Texas
275 Great Southwest Convalescent Center
Grand Prairie, Texas
292 Twin City Nursing Home
Gas City, Indiana
298 Driftwood Convalescent Hospital
Yuba City, California
299 Marysville Convalescent Hospital
Marysville, California
305 University Nursing Center
Upland, Indiana
880 Four States Nursing Home
Texarkana, Texas
881 Southwest Senior Care Center
Las Vegas, New Mexico
760 Ridgeview Nursing and Convalescent Center
Wichita Falls, Texas 76392
860 Blue Hills Centre
Kansas City, Missouri
849 Iliff Care Center
Denver, Colorado
295 Whitehouse Country Manor
Whitehouse, Ohio
184 Greystone Healthcare Center
Blountville, Tennessee
183 Hillhaven Convalescent Center - Ripley
Ripley, Tennessee
189 Fairpark Healthcare Center
Maryville, Tennessee
179 Hillhaven Convalescent Center of Huntington
Huntington, Tennessee
<PAGE>
175 Hillhaven of Jefferson City
Jefferson City, Tennessee
171 Hillhaven Convalescent Center
Bolivar, Tennessee
EXHIBIT 2
A ONE PERCENT GUARANTEE FEE IS PAYABLE ON OBLIGATIONS COVERING
THE FOLLOWING FACILITIES:
Facility 462: Queen Anne Care Center, WA
Facility 158: Bellingham Care Center, Bellingham, WA
Facility 461: Edmonds Care Center, Edmonds, WA
Facility 825: Nansemond Convalescent Center, Suffolk, VA
Facility 829: Holmes Convalescent Center, Virginia Beach, VA
EXHIBIT 3
NO GUARANTEE FEE IS PAYABLE ON OBLIGATIONS COVERING THE FOLLOWING
FACILITIES:
Facility 525: Hillhaven Convalescent Hospital, Orange, CA
Facility 781: Bashford East Health Care Center, Bashford, KY
Facility 804: Hillhaven Convalescent Center and Nursing Home,
Birmingham, AL
Facility 824: Hillhaven Convalescent Center & Nursing Home,
Mobile, AL
Facility 160: First Hill Care Center, WA
Facility 560: Franklin Woods Healthcare Center, OH
Facility 570: Pickerington Health Care Center, OH
Facility 822: Hillhaven Convalescent Center, Memphis, TN
Facility 416: Park Place Hillhaven Convalescent Center, Great
Falls, MT
Facility 572: Canal Winchester, OH -- No guarantee fee shall be
payable on the Assumed Lease. A guarantee shall
be payable on the Assumed Existing Debt as
provided in Paragraph 1 of the Amendment.
EXHIBIT 4
ASSUMED OBLIGATIONS
ASSUMED EXISTING DEBT
Facility 572: Canal Winchester Loan Agreement, dated April 1,
1983, between County of
Franklin and Aeon, Inc., with
an outstanding principal
balance as of September 2,
1993 of $1,955,000, secured by
an Open-End Mortgage and
Security Agreement dated April
1, 1983.
<PAGE>
Facility 416: Park Place All-Inclusive Promissory
Note Secured by Mortgage,
dated September 1, 1983,
in favor of B.G.M.
Enterprises, with an
outstanding principal
balance as of September
2, 1993 of $257,998.44.
All-Inclusive Promissory
Note Secured by Mortgage,
dated September 1, 1983,
in favor of B.G.M.
Enterprises, with an
outstanding principal
balance as of September
2, 1993 of $1,357,016.39.
ASSUMED LEASE
Facility 572: Canal Winchester Lease and Sublease Agreement,
dated October 10, 1985,
between Aeon, Inc. and First
Healthcare Corporation, and
any amendments thereto.
<PAGE>
EXHIBIT 10.50
FACILITY AGREEMENT
Dated as of April 23, 1992
Among
FIRST HEALTHCARE CORPORATION
and
Certain Limited Partnerships
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<C> <S> <C>
RECITALS.................................................................. 1
ARTICLE I - DEFINITIONS................................................... 1
1.01 Certain Defined Terms.............................................. 1
1.02 Accounting Terms................................................... 7
1.03 Sections, Etc...................................................... 7
1.04 Construction of Certain Provisions................................. 7
ARTICLE II - TERMS OF PURCHASE AND SALE; SUBLEASE......................... 8
2.01 Purchase and Sale.................................................. 8
2.02 Excluded Assets.................................................... 9
2.03 Assumption of Liabilities.......................................... 9
2.04 Assignment of Contracts and Rights; No Adjustment of Purchase
Price or Rent or Termination of Agreement......................... 9
2.05 Deposit............................................................ 10
2.06 Purchase Price..................................................... 10
2.07 Allocation of Purchase Price....................................... 10
2.08 Payment of Purchase Price.......................................... 10
2.09 Security for Buyers' Obligations................................... 11
2.10 Subleases; Rent.................................................... 11
2.11 Subsidy............................................................ 11
2.12 Subsidy Reduction.................................................. 11
2.13 Guaranty of Buyers' Obligations.................................... 12
2.14 No Recourse........................................................ 12
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF SELLER.................... 13
3.01 Corporate Existence and Power...................................... 13
3.02 Corporate Authorization............................................ 13
3.03 Non-Contravention.................................................. 13
3.04 Litigation......................................................... 13
3.05 Bankruptcy......................................................... 13
3.06 Compliance with Laws............................................... 13
3.07 Reporting Requirements............................................. 13
3.08 License............................................................ 14
3.09 Personal Funds of Residents........................................ 14
3.10 Life Care Contracts................................................ 14
3.11 Admission Agreements and Patient Rolls............................. 14
3.12 Facility Financial Statements...................................... 14
3.13 Absence of Certain Changes......................................... 14
3.14 Collective Bargaining Agreements................................... 14
3.15 Taxes.............................................................. 14
3.16 Environmental Compliance........................................... 15
3.17 Finders' Fees...................................................... 15
3.18 Third Party Consents............................................... 15
</TABLE>
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3.19 No Default......................................................... 15
3.20 Schedules.......................................................... 15
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF BUYERS..................... 15
4.01 Partnership Existence and Power.................................... 15
4.02 Partnership Authorization, Etc..................................... 15
4.03 Non-Contravention.................................................. 16
4.04 Litigation......................................................... 16
4.05 Bankruptcy......................................................... 16
4.06 Finders' Fees...................................................... 16
4.07 Schedules.......................................................... 16
4.08 General Partner.................................................... 16
ARTICLE V - CERTAIN COVENANTS OF SELLER.................................... 16
5.01 Operation of the Facilities........................................ 16
5.02 Access to Information.............................................. 17
5.03 Notices of Certain Events.......................................... 17
5.04 Taxes.............................................................. 17
5.05 Reporting Requirements............................................. 17
5.06 Government Surveys, Reports and Other Information.................. 18
5.07 Confidentiality.................................................... 18
5.08 Non-Competition Agreement.......................................... 19
5.09 Further Encumbrances............................................... 19
5.10 Payment of Certain Senior Debt..................................... 19
5.11 Prepayments of Promissory Notes; Release Premium................... 19
5.12 Release of Mortgages............................................... 20
ARTICLE VI - CERTAIN COVENANTS OF BUYERS.................................. 20
6.01 Conduct............................................................ 20
6.02 Notices of Certain Events.......................................... 20
6.03 Confidentiality.................................................... 20
6.04 Access............................................................. 21
6.05 Removal of Signs, Etc.............................................. 21
6.06 Licenses, Etc...................................................... 21
6.07 Application of Certain Proceeds.................................... 21
6.08 Books, Records, Etc................................................ 21
ARTICLE VII - CERTAIN COVENANTS OF SELLER AND BUYERS...................... 22
7.01 Diligent Efforts; Further Assurances............................... 22
7.02 Certain Filings.................................................... 22
7.03 Public Announcements............................................... 22
7.04 Cooperation as to Taxes............................................ 22
7.05 Allocation of Taxes................................................ 22
7.06 Allocation of Other Charges........................................ 23
7.07 Employees.......................................................... 23
7.08 Receivables........................................................ 24
7.09 Patient Trust Funds................................................ 25
7.10 Preliminary Commitment for Title Insurance......................... 25
</TABLE>
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<TABLE>
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7.11 Condition of Purchased Assets and Leased Facilities; Disclaimer
of Warranties..................................................... 25
7.12 Inspection......................................................... 26
7.13 Destruction of or Damage to Facilities............................. 27
7.14 Consents........................................................... 28
7.15 Inventory.......................................................... 28
7.16 Schedules and Exhibits............................................. 28
7.17 Financing.......................................................... 28
7.18 Delivery of Certain Documents...................................... 29
ARTICLE VIII - CLOSING.................................................... 29
8.01 Closing............................................................ 29
8.02 Conveyance; Sublease............................................... 29
8.03 Possession and Risk of Loss........................................ 29
8.04 Seller's Delivery of Documents at Closing.......................... 29
8.05 Buyers' Delivery of Documents and Purchase Price at Closing........ 30
8.06 Certain Payments and Prorations.................................... 31
ARTICLE IX - CONDITIONS TO CLOSING........................................ 32
9.01 Conditions to the Obligations of Seller and Buyers................. 32
9.02 Additional Conditions to the Obligation of Buyers.................. 33
9.03 Additional Conditions to the Obligation of Seller.................. 33
ARTICLE X - SURVIVAL; INDEMNIFICATION..................................... 34
10.01 Survival........................................................... 34
10.02 Idemnification by Seller........................................... 34
10.03 Idemnification by Buyers........................................... 34
10.04 Procedures......................................................... 35
10.05 Exclusivity........................................................ 35
ARTICLE XI - TERMINATION.................................................. 35
11.01 Grounds for Termination............................................ 35
11.02 Effect of Termination.............................................. 36
ARTICLE XII - MISCELLANEOUS............................................... 36
12.01 Notices............................................................ 36
12.02 Amendments, Etc.................................................... 37
12.03 No Waivers; Remedies Cumulative.................................... 38
12.04 Expenses........................................................... 38
12.05 Successors and Assigns............................................. 38
12.06 Joint and Several Liability........................................ 38
12.07 Counterparts; Effectiveness........................................ 38
12.08 Entire Agreement................................................... 38
12.09 Severability....................................................... 38
12.10 Captions........................................................... 38
12.11 Arbitration........................................................ 39
12.12 Bulk Sales Laws.................................................... 39
</TABLE>
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<TABLE>
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12.13 Governing Law...................................................... 39
</TABLE>
Schedule 1.01A Assumed Contracts and Certain Consents
Schedule 1.01B Owned Facilities and Certain Bonds
Schedule 1.01C Leased Facilities
Schedule 1.01D Leased Facilities As to Which Buyers Shall Have Been
Assigned Option to Purchase
Schedule 1.01E Real Property Description and Certain Permitted Liens
Schedule 2.03(a) Certain Assumed Liabilities
Schedule 2.07 Allocation Schedule
Schedule 2.08(c) Promissory Note Principal Amounts
Schedule 2.11 Subsidy Reduction Upon Certain Sublease Terminations
Schedule 2.12 Subsidy Reduction
Schedule 3.04 Seller Litigation
Schedule 3.08 Licensure
Schedule 3.10 Life Care Contracts
Schedule 3.16 Environmental Disclosure
Schedule 4.04 Buyer Litigation
Exhibit A Form of Assignment and Assumption Agreement
Exhibit B Form of Promissory Note
Exhibit C-1 Form of Deed of Trust, Assignment, Security Agreement and
Financing Statement (Fixture Filing)
Exhibit C-2 Form of Mortgage, Assignment, Security Agreement and
Financing Statement (Fixture Filing)
Exhibit D Form of Guaranty
Exhibit E Form of Receipt and Assumption Agreement
Exhibit F Form of Deeds
Exhibit G Form of Bill of Sale and General Assignment
Exhibit H Form of Opinion of General Counsel to the Seller
Exhibit I Form of Pharmacy Partnership Agreement
Exhibit J Form of Pharmacy Management Agreement
Exhibit K Form of Rehab Partnership Agreement
Exhibit L Form of Rehab Management Agreement
Exhibit M Form of Accounting Services Agreement
Exhibit N Form of Opinion of House & Blanco, P.A.
-iv-
<PAGE>
FACILITY AGREEMENT
This FACILITY AGREEMENT, dated as of April 23, 1992, is made among
FIRST HEALTHCARE CORPORATION, a Delaware corporation (the "Seller"), and the
limited partnerships listed on the signature pages hereto (individually, a
"Buyer" and collectively, the "Buyers").
RECITALS
A. The Seller owns or, subject to certain purchase options, will
own the Owned Facilities (as defined below) and leases or subleases the Leased
Facilities (as defined below).
B. The Seller desires to sell to the Buyers, and the Buyers desire
to purchase from the Seller, the Seller's right, title and interest in and to
the Owned Facilities and the other Purchased Assets (as defined below), upon the
terms and subject to the conditions set forth in this Agreement.
C. The Seller desires to sublease to the Buyers, and the Buyers
desire to sublease from the Seller, the Leased Facilities, upon the terms and
subject to the conditions set forth in this Agreement and the Subleases (as
defined below).
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements set forth in this
Agreement, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.01 Certain Defined Terms. As used in this Agreement, the
---------------------
following terms shall have the following meanings:
"Accounting Services Agreements" has the meaning assigned to
that term in Section 8.04(p).
"Agreement" means this Facility Agreement, as it may be amended
or otherwise modified in accordance with Section 12.02.
"Allocation Schedule" has the meaning assigned to that term in
Section 2.07.
"Assignment and Assumption Agreements" has the meaning assigned
to that term in Section 2.03.
"Assumed Contracts" means, subject to Section 2.04, the leases,
licenses, contracts and agreements listed or otherwise described in Schedule
1.01A.
"Assumed Liabilities" has the meaning assigned to that term in
Section 2.03.
"Bethesda Sublease" has the meaning assigned to that term in
Section 2.01.
"Bills of Sale" has the meaning assigned to that term in Section
8.02.
"Bond-financed Owned Facilities" means the facilities listed in
Part B of Schedule 1.01B.
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<PAGE>
"Bonds" means the bonds listed in Part B of Schedule 1.01B.
"Buyers" has the meaning assigned to that term in the preamble
to this Agreement.
"Buyer Loss" means any loss, damage, injury, liability, Tax,
fine, penalty, cost and expense (including reasonable attorneys' fees and
disbursements) incurred or suffered by the Buyers. When calculating the dollar
amount of any Buyer Loss, an allowance shall be made for any insurance proceeds
or other recovery from third parties received by the Buyers in connection with
such Buyer Loss. In addition, the dollar amount of any Buyer Loss shall be
calculated net of any United States federal income tax benefit from such Buyer
Loss utilized by the Buyers in the taxable year in which such Buyer Loss arises.
The amount of any such United States federal income tax benefit shall be equal
to the difference between (i) the overall United States federal income tax
liability of the Buyers including such Buyer Loss for such taxable year and (ii)
the overall United States federal income tax liability of the Buyers excluding
such Buyer Loss for such taxable year.
"Charlevoix Lease" has the meaning assigned to that term in
Section 2.01.
"Closing" has the meaning assigned to that term in Section
8.01.
"Closing Date" means the date on which the Closing occurs.
"Deeds" has the meaning assigned to that term in Section 8.02.
"Deposit" has the meaning assigned to that term in Section
2.05.
"Employee" means any Person who is employed by the Seller as
an employee of any Facility and who, as of 11:00 p.m. on the day immediately
preceding the Closing Date, is actively employed by the Seller or is on short-
term disability leave, authorized leave of absence, military service or lay-off
with recall rights as of the Closing Date, but excludes any Person who is on
long-term disability leave or unauthorized leave of absence on the Closing Date
or who has died, retired or otherwise terminated his or her employment on or
before the Closing Date.
"Employee Benefit Program" has the meaning assigned to that
term in Section 7.07.
"Employment Law" means any of the Worker Adjustment and
Retraining Notification Act, the rules and regulations promulgated under that
act, and any similar federal, state or local law (including any law pertaining
to severance pay), as supplemented or amended.
"Environmental Law" means any federal, state or local statute,
rule, regulation, ordinance, order, judgment, decree, injunction or common law
pertaining to the protection of human health or the environment, including the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42
U.S.C. (S)(S)9601-9675), the Toxic Substance Control Act (15 U.S.C. (S)(S)2601-
2671), the Hazardous Materials Transportation Act (49 U.S.C. (S)(S)1801-1813),
the Federal Water Pollution Control Act (33 U.S.C. (S)(S)1251-1387), the Clean
Air Act (42 U.S.C. (S)(S)7401-7671q), the Safe Drinking Water Act (42 U.S.C.
(S)(S)300f-300j-26), the Solid Waste Disposal Act (42 U.S.C. (S)(S)6901-6992k),
the Coastal Zone Management Act (16 U.S.C. (S)(S)1451-1464), and the
Occupational Safety and Health Act (29 U.S.C. (S)651 et seq.), and any similar
-- ---
federal, state or local law, as supplemented or amended.
"Escrow Account" has the meaning assigned to that term in
section 2.05.
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<PAGE>
"Escrow" Agent" means Chicago Title Insurance Company, a
Missouri corporation, or an affiliate or agent of Chicago Title Insurance
Company or such other Person agreed to by the parties, and any successor.
"Event of Default" has the meaning assigned to that term in the
Promissory Notes.
"Excluded Assets" means the following assets whether or not
relating to or affecting any Facility: (a) all cash, bank accounts, profit-
sharing funds, pension funds and similar funds; (b) all accounts, notes and
other receivables (including all patient accounts and patient balances and other
accounts, notes and other receivables in respect of the ownership, lease, use
and operation of any Facility and the other Purchased Assets prior to the
Closing); (c) except as provided in Section 2.12, all rights to moneys and other
sums due and to become due from any governmental or regulatory authority in
respect of any cost report filed with respect to any Facility for any cost
reporting period ended on or prior to the Closing Date, whether by reason of an
adjustment in rates by such governmental or regulatory authority or otherwise;
(d) all personnel, employment and payroll records that relate to employees of
any Facility, except such records that are required by law to be kept at any
Facility; (e) all books, records, files and papers (whether in hard copy or
computer format) that are not used exclusively in, or that do not relate
exclusively to or exclusively affect, any Facility, including engineering
information, sales and promotional literature, manuals and data, sales and
purchase correspondence lists of suppliers, lists of patients and residents,
personnel and employment records, payroll records and information relating to
any Tax; (f) all Intellectual Property Rights; (g) all computers; (h) Purchased
Assets that are sold or otherwise disposed of in the ordinary course of the
operation of any Facility and not in vioLation of any provisions of this
Agreement from the date of this Agreement until the Closing Date; (i) any
license, permit or other governmental or regulatory authorization that relates
to or affects any Facility but is not assignable or transferable; (i) any Seller
Trade Name; and (k) any lease or license of, and any other contract or agreement
relating to or affecting, any Facility (1) if any consent by any Person is
required for the sale, assignment, transfer, conveyance or delivery of such
lease, license, contract or agreement and such consent is not obtained or (2) if
the sale, assignment transfer, conveyance or delivery of such lease, license,
contract or agreement is prohibited by law, contract or otherwise.
"Executive Committee" means the executive committee of the
board of directors of Hillhaven.
"Extended Review Period" has the meaning assigned to that term
in Section 7.10.
"Facilities" means the Owned Facilities and the Leased
Facilities.
"Facility Financial Statements" means (i) the unaudited Summary
of Financial Results of each Facility for the fiscal years ended May 31, 1990,
and May 31, 1991, respectively, (ii) the unaudited 1991 Operations Analysis for
each Facility for the fiscal year ended May 31, 1991, (iii) the unaudited 1990
Operations Analysis for each Facility for the fiscal year ended May 31, 1990,
and (iv) the unaudited monthly Operations Analyses for each Facility that are
provided to the Buyers pursuant to Section 5.02.
"First Lien Mortgage" has the meaning assigned to that term in
the applicable Mortgage.
-3-
<PAGE>
"General Partner" means Meadowbrook Manor of Kansas & Missouri,
Inc., a North Carolina corporation.
"Guarantors" means Don G. Angell and Daniel D. Mosca.
"Guaranty" has the meaning assigned to that term in Section
2.13.
"Hazardous Substance" means any hazardous, toxic, radioactive or
infectious substance, material, waste, pollutant or contaminant as defined,
listed or regulated under any Environmental Law, including asbestos and
petroleum oil and its fractions.
"Hillhaven" means The Hillhaven Corporation, a Nevada
corporation.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the rules and regulations promulgated under that act.
"Improvements" means all buildings, structures, facilities and
other improvements erected on, attached to or located in or upon any Real
Property, all building materials attached to or contained in such buildings,
structures, facilities or improvements, and all building equipment and fixtures
(including goods that are so related to such Real Property that an interest
therein arises under real estate law) located in or upon any Real Property or
attached to, contained in, or used exclusively in connection with, any such
buildings, structures, facilities or improvements.
"Indemnified Party" has the meaning assigned to that term in
Section 10.04.
"Indemnifying Party" has the meaning assigned to that term in
Section 10.04.
"Intellectual Property Rights" means all trademarks, service
marks, service names, registrations thereof or applications for registration
thereof, trade names, inventions, patents, patent applications, trade secrets,
technology, processes, know-how, proprietary data, formulae, research and
development data, computer software programs, copyrights, copyright
registrations, applications for copyright registration, and all similar types of
proprietary intellectual property rights.
"Inventory" means all central supplies, linen, housekeeping and
other supplies and all food used exclusively in the operation of any Facility
and located in or upon such Facility on the Closing Date.
"Leased Facilities" means the facilities listed in Schedule
1.01C.
"Leases" means the leases with respect to the Leased Facilities
that are referred to in, and attached as exhibits to, the Subleases.
"Lien" means, with respect to any asset, any mortgage, deed of
trust, financing statement, lien, pledge, charge, security interest (whether or
not perfected) or encumbrance of any kind in respect of such asset.
"Material Adverse Effect" means, with respect to any Facility, a
material adverse effect on the business, assets, condition (financial or
otherwise) or results of operations of such Facility.
"Mortgages" has the meaning assigned to that term in Section
2.09.
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<PAGE>
"Mortgagee's Title Policy" means, with respect to each Owned
Facility, an American Land Title Association mortgagee's or lender's standard
coverage policy of title insurance issued by the Title Company in an amount
equal to the amount of the Purchase Price Balance allocated to such Owned
Facility, effective as of the Closing Date at ordinary premium rates without any
requirement for additional premiums or charges for endorsements (including
comprehensive or extended coverage endorsements), surveys or otherwise, insuring
that the lien and the security interest created by the Mortgage are a valid and
enforceable lien on and security interest in the Real Property and the
Improvements constituting such Owned Facility, subject to no Liens other than
the Permitted Liens.
"Operator" means any Person who obtains from the Buyers the
right to operate any of the Facilities after the Closing.
"Owned Facilities" means the facilities listed in Schedule
1.01B.
"Owner's Title Policy" means, with respect to each Owned
Facility, an American Land Title Association owner's standard coverage policy of
title insurance issued by the Title Company in an amount equal to the portion of
the Purchase Price allocated to the Real Property and the Improvements
constituting such Owned Facility, effective as of the Closing Date at ordinary
premium rates without any requirement for additional premiums or charges for
endorsements (including comprehensive or extended coverage endorsements),
surveys or otherwise, insuring that good and marketable title to the Real
Property and the Improvements constituting such Owned Facility is vested in the
Buyers, subject to no Liens other than the Permitted Liens.
"Permits" means all assignable or transferable licenses, permits
and other governmental or regulatory authorizations relating to or affecting any
Facility.
"Permitted Liens" means, with respect to any asset, (a) rights
reserved in federal patents or state or commonwealth deeds, (b) building or use
restrictions general to the city, district or other political subdivision in
which such asset is located, (c) applicable building, use and zoning rules and
regulations, (d) existing easements not inconsistent with the Buyers' intended
use of such asset, (e) general real estate taxes for the year of the Closing and
for subsequent years which, on the Closing Date, shall not yet be due and
payable, (f) printed exceptions set forth in an American Land Title Association
Owner's standard coverage policy of title insurance, (g) any Lien listed or
otherwise described in Part B of Schedule 1.01E, (h) any Lien created by any
First Lien Mortgage, (i) all other Liens, reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases and other title defects and exceptions that pertain to such asset and
have been approved by the Buyers in writing, and (i) any extensions, renewals or
replacements of any of the foregoing Liens for the same or lesser amount whether
by reason of refinancing or otherwise.
"Person" means an individual, a corporation, a partnership, an
association, a trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
"Personal Property" means all furniture, furnishings, fixtures,
machinery and equipment owned by the Seller that is located in or upon or used
exclusively in connection with any Facility.
"Pharmacy Management Agreement" has the meaning assigned to that
term in Section 8.04(m).
"Pharmacy Partnership Agreement" has the meaning assigned to
that term in Section 8.04(l).
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"Post-Closing Tax Period" means any Tax period (or portion
thereof) ending after 5.00 p.m. on the Closing Date.
"Pre-Closing Tax Period" means any Tax period (or portion
thereof) ending at or before 5:00 p.m. on the Closing Date.
"Promissory Notes" has the meaning assigned to that term in
Section 2.08(c).
"Purchase Price" has the meaning assigned to that term in
Section 2.06.
"Purchase Price Balance" has the meaning assigned to that term
in Section 2.08(c).
"Purchased Assets" means the Seller's right, title and interest
in, to and under the Real Property, the Improvements, the Assumed Contracts, the
Inventory, the Permits, the Personal Property and the Records, but does not mean
the Seller's right, title or interest in, to or under the Excluded Assets.
"Real Property" means the tracts, lots, pieces or parcels of
land in respect of the Owned Facilities and more particularly described in Part
A of Schedule 1.01E.
"Receipt and Assumption Agreements" has the meaning assigned to
that term in Section 7.09.
"Records" means all documents, records and files exclusively
relating to or affecting any Facility, including all patient medical records.
"Rehab Management Agreement" has the meaning assigned to that
term in Section 8.04(o).
"Rehab Partnership Agreement" has the meaning assigned to that
term in Section 8.04(n).
"Release Premium" has the meaning assigned to that term in
Section 5.11.
"Rent" has the meaning assigned to that term in Section 2.10.
"Review Period" has the meaning assigned to that term in Section
7.10.
"Sedgwick Sublease" has the meaning assigned to that term in
Section 2.01.
"Seller" has the meaning assigned to that term in the preamble
to this Agreement.
"Seller Loss" means all loss, damage, injury, liability, Tax,
fine, penalty, cost and expense (including reasonable attorneys' fees and
disbursements) incurred or suffered by the Seller. When calculating the dollar
amount of any Seller Loss, an allowance shall be made for any insurance proceeds
or other recovery from third parties received by the Seller in connection with
such Seller Loss. In addition, the dollar amount of any Seller Loss shall be
calculated net of any United States federal income tax benefit from such Seller
Loss utilized by the Seller in the taxable year in which such Seller Loss
arises. The amount of any such United States federal income tax benefit shall be
equal to
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the difference between (i) the overall United States federal income tax
liability of the Seller including such Seller Loss for such taxable year and
(ii) the overall United States federal income tax liability of the Seller
excluding such Seller Loss for such taxable year.
"Seller Trade Name" means any of the names "First, Healthcare,"
"Guardian Care," "Hillhaven," "Medicenter," "Medisave," "Northwest Health Care,"
and any similar name or combination of such names.
"Social Security Act" means the Social Security Act, as amended.
"Subleases" has the meaning assigned to that term in Section
2.10.
"Tax" means any net income, alternative or add-on minimum tax,
gross income, gross receipts, sales, use, ad valorem, franchise, capital, paid-
up capital, profits, green mail, license, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, property, environmental or
windfall profit tax, custom, duty or other tax, governmental fee or other like
assessment or charge, together with any interest or any penalty, addition to tax
or additional amount imposed by any governmental authority.
"Title Company" means Chicago Title Insurance Company, a
Missouri corporation, or an affiliate or agent of Chicago Title Insurance
Company or such other Person agreed to by the parties, and any successor.
"Title Report" has the meaning assigned to that term in Section
7.10.
"Transaction Document" means any of this Agreement, the
Charlevoix Lease, the Bethesda Sublease, the Sedgwick Sublease, the Assignment
and Assumption Agreements, the Promissory Notes, the Mortgages, the Subleases,
the Guaranty, the Receipt and Assumption Agreements, the Deeds and the Bills of
Sale.
"Transferred Employee" means any Employee who commences
employment with the Buyers.
1.02 Accounting Terms. All accounting terms that are not specifically
----------------
defined in this Agreement shall be construed in accordance with accounting
principles and practices consistent with those applied in the preparation of the
Facility Financial Statements.
1.03 Sections, Etc. Unless stated otherwise in this Agreement,
-------------
references in this Agreement to Sections, Schedules and Exhibits are references
to Sections of and Schedules and Exhibits attached to this Agreement. Each
Schedule to this Agreement is by this reference incorporated in this Agreement.
1.04 Construction of Certain Provisions.
----------------------------------
(a) All recitals set forth in this Agreement are by this
reference incorporated in this Agreement.
(b) The term "consent" shall be construed as if followed by
the words "authorization or approval."
(c) The term "Purchased Assets" shall be construed as if
followed by the words "or any part thereof."
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<PAGE>
(d) The terms "include", "including" and similar terms
shall be construed as if followed by the words "but not limited to."
(e) The words "reasonable attorneys' fees and
disbursements" shall be construed as if followed by the words "including
reasonable charges allocated for internal corporate counsel."
(f) The term "provisions," when used with respect to this
Agreement or any other Transaction Document, shall be construed as if preceded
by the words "terms, covenants, agreements, requirements, conditions and/or."
(g) Words of masculine, feminine or neuter gender shall
mean and include the correlative words of the other genders, and words importing
the singular number shall mean and include the plural number, and vice versa.
---- -----
(h) No inference in favor of, or against, any party shall
be drawn from the fact that such party has drafted any portion of this
Agreement.
ARTICLE II
TERMS OF PURCHASE AND SALE; SUBLEASE
2.01 Purchase and Sale. Upon the terms and subject to the conditions
-----------------
set forth in this Agreement, the Seller agrees to sell, assign, transfer, convey
and deliver, or cause to be sold, assigned, transferred, conveyed and delivered,
to the Buyers at the Closing, and the Buyers agree to purchase, assume and
accept from the Seller at the Closing, the Purchased Assets, free and clear of
all Liens other than the Permitted Liens. Notwithstanding anything to the
contrary set forth in this Section 2.01 or elsewhere in this Agreement, the
Seller and the Buyers acknowledge and agree that the sale, assignment, transfer,
conveyance and delivery of the Bond-financed Owned Facilities are subject to the
payment or prepayment and redemption of the related Bonds. The Seller agrees to
take all actions, and with respect to the Bonds pertaining to the Sedgwick
Convalescent Center, to cause Sedgwick Convalescent Center, Inc. to take all
actions, required to be taken by such parties under the documents pertaining to
the Bonds, in order to prepay and redeem the Bonds on their respective earliest
possible optional redemption dates, except the Bonds pertaining to Charlevoix
Nursing Center, which are not subject to optional redemption. Until such payment
or prepayment and redemption, (i) pursuant to a Lease, dated as of April 23,
1992, with respect to the Charlevoix Nursing Center (the "Charlevoix Lease"),
the Seller agrees to lease to the Buyer that is a party thereto, and such Buyer
agrees to lease from the Seller, certain Purchased Assets with respect to such
Facility, (ii) pursuant to a Sublease, dated as of April 23, 1992, with respect
to the Bethesda Nursing Center (the "Bethesda Sublease"), the Seller agrees to
sublease to the Buyer that is a party thereto, and such Buyer agrees to sublease
from the Seller, certain Purchased Assets with respect to such Facility; and
(iii) pursuant to a Sublease, dated as of April 23, 1992, with respect to the
Sedgwick Convalescent Center (the "Sedgwick Sublease), the Seller agrees to
sublease to the Buyer that is a party thereto, and such Buyer agrees to sublease
from the Seller, certain Purchased Assets with respect to such Facility. Such
Buyers shall pay to the Seller under the Charlevoix Lease, the Bethesda Sublease
and the Sedgwick Sublease rent in the amounts, at the times and on such other
terms as provided in Section 2.08 for the payment of the Purchase Price
allocated to the Purchased Assets with resect to such Bond-financed Owned
Facilities. Accordingly, such Buyers shall pay to the Seller at the Closing rent
in an amount equal to the portion of such Purchase Price to be paid as provided
in Section 2.08(b), and thereafter such Buyers shall pay to the Seller rent in
such amounts and at such times as if such Buyers had executed and delivered
Promissory Notes in the principal amounts set
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forth in Schedule 2.08(c) with respect to such Bond-financed Owned Facilities
and bearing interest as provided in such Promissory Notes and Section 2.08(c).
Such Buyers shall receive a credit for payments of such rent against such
Buyers' obligations in respect of such Purchase Price and in respect of such
interest. As soon as reasonably practicable after the date of payment or
prepayment and redemption of the Bonds with respect to each Bond-financed Owned
Facility, upon the delivery of the applicable Deed, Bill of Sale, Owner's Title
Policy, affidavit of nonforeign status, Promissory Note, Mortgage, Uniform
Commercial Code financing statements, evidence of required insurance,
Mortgagee's Title Policy, opinions of counsel and such other documents required
under this Agreement for the transfer of the Purchased Assets, the Seller shall
sell, assign, transfer, convey and deliver, or cause to be sold, assigned,
transferred, conveyed and delivered, to the applicable Buyer, and such Buyer
shall purchase, assume and accept from the Seller, the Purchased Assets with
respect to such Bond-financed Owned Facility, free and clear of all Liens other
than Permitted Liens.
2.02 Excluded Assets. Notwithstanding anything to the contrary set
---------------
forth in Section 2.01 or elsewhere in this Agreement or any other Transaction
Document, the Buyers acknowledge and agree that the Seller shall not have any
obligation to sell, assign, transfer, convey, deliver, lease or sublease, or
cause to be sold, assigned, transferred, conveyed, delivered, leased or
subleased, to the Buyers (a) the Excluded Assets or (b) any telephone facsimile
equipment located in or upon any Facility that is owned by Medisave Pharmacies,
Inc.
2.03 Assumption of Liabilities. Upon the terms and subject to the
-------------------------
conditions set forth in this Agreement, the Buyers agree, effective at the time
of the Closing, to assume the following obligations and liabilities
(collectively, the "Assumed Liabilities"):
(a) all obligations and liabilities listed or otherwise
described in Schedule 2.03(a); and
(b) all duties, obligations and liabilities of the Seller
under the Assumed Contracts (other than obligations or liabilities attributable
to any failure by the Seller to comply with the terms of the Assured Contracts
prior to the Closing).
At the Closing, the Seller and the Buyers shall enter into assignment and
assumption agreements, each substantially in the form of Exhibit A (the
"Assignment and Assumption Agreements").
2.04 Assignment of Contracts and Rights; No Adjustment of Purchase
-------------------------------------------------------------
Price or Rent or Termination of Agreement. Notwithstanding anything in this
- -----------------------------------------
Agreement to the contrary, this Agreement shall not constitute an agreement to
assign any license, permit, governmental or regulatory authorization, lease,
contract, or other agreement, or any claim, right or benefit arising under or
resulting from any such license, permit, authorization, lease, contract or other
agreement, if an attempted assignment thereof, without the consent by any other
Person, would constitute a breach or other contravention of any such license,
permit, authorization, lease, contract or other agreement or would result in the
cancellation, termination, invalidity or unenforceability thereof or would in
any other way adversely affect the rights and benefits of the Seller or the
Buyers thereunder. Without limiting the generality of the foregoing, the Buyers
acknowledge and agree that (a) consents by other Persons may be required for the
sale, assignment, transfer, conveyance and delivery to the Buyers of certain of
the Assumed Contracts and claims, rights or benefits arising thereunder or
resulting therefrom and (b) no reduction in or other adjustment or modification
of the Purchase Price or the Rent or any terms of payment of the Purchase Price
or the Rent, and, subject to Section 9.01(c), no right to terminate this
Agreement or any of the other Transaction Documents, shall be made by reason of
(i) any failure or inability to obtain any such consents or (ii) the
cancellation, termination, invalidity or unenforceability of, or any other
adverse effect on the rights or benefits of the Seller or the Buyers under, any
of such Assumed Contracts.
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<PAGE>
2.05 Deposit. Immediately upon the execution and delivery of this
-------
Agreement, the Buyers shall pay to the Escrow Agent in cash or immediately
available funds, an amount (the "Deposit") equal to $150,000, which shall be
deposited in an interest-bearing escrow account (the "Escrow Account"). All
interest earned on the Deposit shall be for the benefit of the Buyers and shall
be held in the Escrow Account. At the Closing, the Deposit plus all accrued
interest on the Deposit shall be paid to the Seller as provided in Section
2.08(a), and an amount equal to the Deposit plus such interest shall be credited
and applied against the Purchase Price. If this Agreement is terminated, or if
the transactions contemplated by this Agreement are not consummated, by reason
of any willful failure of the Buyers to fulfill a condition to the performance
of the obligations of the Seller or to perform a covenant of this Agreement to
be performed by the Buyers, then the Deposit plus all accrued interest on the
Deposit shall be paid by the Escrow Agent to the Seller as a partial payment of
the liquidated damages specified in Section 11.02. If this Agreement is
otherwise terminated, or if the transactions contemplated by this Agreement are
otherwise not consummated, then the Deposit plus all accrued interest on the
Deposit shall be paid by the Escrow Agent to the Buyers.
2.06 Purchase Price. The purchase price (the "Purchase Price") for
--------------
the Purchased Assets is $38,500,000. The Buyers shall pay the Purchase Price to
the Seller as provided in Section 2.08.
2.07 Allocation of Purchase Price. The Purchase Price has been
----------------------------
allocated to and among the Purchased Assets as set forth in Schedule 2.07 (the
"Allocation Schedule"). Such allocation has been made in good faith negotiations
between the Seller and the Buyers, with knowledge of tax and other consequences
and with the Seller and the Buyers being represented by counsel and other
professional advisors. The Seller and the Buyers agree to report an allocation
of the Purchase Price among the Purchased Assets consistent with the Allocation
Schedule, and the Seller and the Buyers agree to act in accordance with the
Allocation Schedule in the preparation of financial statements and the filing of
all tax returns (including the filing of Form 8594 with their respective federal
income tax returns for the taxable year that includes the Closing Date) and in
the course of any tax audit, tax review or tax litigation relating thereto. Not
later than ten days prior to the filing of their respective Forms 8594 relating
to the transaction contemplated by this Agreement, the Seller and the Buyers
shall deliver a copy of such form to the other party.
2.08 Payment of Purchase Price. The Buyers shall pay the Purchase
-------------------------
Price to the Seller as follows:
(a) The Buyers shall instruct the Escrow Agent to pay the
Deposit plus all accrued interest on the Deposit, in cash or immediately
available funds, to the Seller at the Closing and, upon receipt by the Seller of
the Deposit plus such interest, an amount equal to the Deposit plus such
interest shall be credited and applied against the Purchase Price.
(b) The Buyers shall pay to the Seller at the Closing a
portion of the Purchase Price, in cash or immediately available funds, in an
amount equal to $3,850,000 less the amount credited and applied against the
Purchase Price pursuant to Section 2.08(a).
(c) The Buyers shall pay to the Seller the balance of the
Purchase Price (the "Purchase Price Balance"), plus interest thereon in
installments in accordance with the provisions of promissory notes each
substantially in the form of Exhibit B (the "Promissory Notes") in respect of
the Owned Facilities. The aggregate principal amount of the Promissory Notes
shall be equal to the Purchase Price Balance. The respective principal amounts
of the Promissory Notes shall be as set forth in Schedule 2.08(c). The Buyers
shall execute and deliver the Promissory Notes to the Seller at the Closing.
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2.09 Security for Buyers' Obligations. The payment and performance of
--------------------------------
the Buyers' obligations under this Agreement and the Promissory Notes shall be
secured by deeds of trust, assignments, security agreements and financing
statements (fixture filings) or mortgages, assignments, security agreements and
financing statements (fixture filings) each substantially in the form of Exhibit
C-1 and C-2, respectively (the "Mortgages"), in respect of the Owned Facilities,
executed by the Buyers for the benefit of the Seller.
2.10 Subleases: Rent. Upon the terms and subject to the condition set
---------------
forth in this Agreement and the Subleases, dated as of April 23, 1992, with
respect to the Leased Facilities (the "Subleases"), the Seller agrees to
sublease to the respective Buyers that are a party thereto, and such Buyers
agree to sublease from the Seller, the land, improvements and any leased
personal property (other than the Excluded Assets) constituting the Leased
Facilities. The Buyers shall pay to the Seller under each SubLease rent
(collectively for all Subleases, the "Rent") for the related Leased Facility as
set forth in such Sublease.
2.11 Subsidy. In consideration for the sublease of the Leased
-------
Facilities by the Buyers from the Seller, the Seller shall pay to the Buyers as
a subsidy: (i) $4,300,000 during the initial twelve month period of the term
under the Subleases; (ii) $2,900,000 during the second twelve month period of
the term under the Subleases; and (iii) $1,600,000 during the third twelve month
period of the term under the Subleases. Such payments for each such period shall
be in substantially equal monthly installments, payable on the first day of each
month during such period, commencing for the initial period on the first day of
the month immediately following the month in which the Closing occurs. Such
payments shall be made to the Buyers at c/o Meadowbrook Manor of Kansas &
Missouri, Inc., Salem Center, Yadkin Valley Road, Advance, North Carolina 27006,
or at such other place as the Buyers may specify in writing. If any Buyer is in
default in the payment of the Rent, then the Seller may reduce its monthly
subsidy payment by the aggregate amount of such Rent in default. In addition, if
any Sublease is terminated other than as a result of (i) a default caused solely
by the Seller or any affiliate of the Seller under the Lease referred to in such
Sublease, or (ii) the Buyers having entered into a replacement lease with the
lessor under such Lease, provided that on the commencement date of such
replacement lease such lessor unconditionally releases the Seller and all
affiliates of the Seller from all duties, obligations and liabilities arising
under or by reason of such Lease, or (iii) the Buyers or any other Person having
purchased the Leased Facility with respect to such Sublease, provided that upon
the consummation of such purchase the lessor of such Leased Facility
unconditionally releases the Seller and all affiliates of the Seller from all
duties, obligations and liabilities arising under or by reason of the Lease with
respect to such Leased Facility, then the Seller's monthly subsidy payment shall
be reduced by the percentage set forth in Schedule 2.11 with respect to the
Leased Facility to which such Sublease pertains.
2.12 Subsidy Reduction. The Seller and the Buyers agree that a
-----------------
portion of certain future increases in Medicaid per diem rates in the State of
Missouri shall accrue to the benefit of the Seller and reduce the monthly
subsidy to be paid by the Seller pursuant to Section 2.11.
The amount of the reduction shall be calculated as follows. For any
increase in any Missouri Medicaid per diem rate during the period February 12,
1992 through June 30, 1993, the Seller's monthly subsidy payments until the next
rate increase shall be reduced, but not below zero, by an amount equal to the
product obtained by multiplying (a) the amount by which such increased rate
exceeds 104 percent of the "base rate" for such period, times (b) the number of
-----
residents set forth in Part A of Schedule 2.12 to which such rate increase
applies, times (c) the number of days in the month during which such rate
-----
increase is effective. The base rate for such period for each Facility located
in Missouri shall be the Medicaid per diem rate for such Facility as of February
12, 1992, as set forth in Part B of Schedule 2.12 (the"Period I Base Rate"). The
number of residents set forth in
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<PAGE>
Part A of Schedule 2.12 shall be based on the census for the Facilities located
in Missouri as of February 12, 1992.
For any increase in any Missouri Medicaid per diem rate during the
period July 1, 1993 through June 30, 1994, the Seller's monthly subsidy payments
until the next rate increase shall be reduced, but not below zero, by an amount
equal to the product obtained by multiplying (a) the amount by which such
increased rate exceeds the "base rate" for such period, times (b) the number of
-----
residents set forth in Part A of Schedule 2.12 to which such rate increase
applies, times (c) the number of days in such month during which such rate
-----
increase is effective. The base rate for such period shall be the product
obtained by multiplying (a) 1.04 times the Period 1 Base Rate, times (b) the
----- -----
quotient of the Consumer Price Index - All items for All Urban Consumers for St.
Louis, Mo. (the "applicable CPI") for March 1993 divided by the applicable CPI
-------
for March 1992 (the "Period II Base Rate").
For any increase in any Missouri Medicaid per diem rate during the
period July 1, 1994 through June 30, 1995, the Seller's monthly subsidy payments
until the next rate increase shall be reduced, but not below zero, by an amount
equal to the product obtained by multiplying (a) the amount by which such
increased rate exceeds the "base rate" for such period, times (b) the number of
-----
residents set forth in Part A of Schedule 2.12 to which such rate increase
applies, times (c) the number of days in such month during which such rate
-----
increase is effective. The base rate for such period shall be the product
obtained by multiplying (a) the Period 11 Base Rate times (b) the quotient of
-----
the applicable CPI for June 1994 divided by the applicable CPI for June 1993.
If during the period February 12, 1992 through June 30, 1993, or
during the period July 1, 1993 through June 30, 1994, two or more increases in
any Missouri Medicaid per diem rate occur, then on the next July 1, the subsidy
reduction shall be recalculated as if the most recent rate increase had become
effective on such July 1.
Notwithstanding anything to the contrary set forth in this Section
2.12, any portion of any Missouri Medicaid per diem rate increase due to
governmental mandates, regulations, rules, laws or decisions (other than any
such rate increase resulting from any minimum wage increase that is not
expressly stated by the State of Missouri to have resulted in such rate
increase) that become effective after February 11, 1992 shall be excluded from
the calculation. In addition, if the State of Missouri imposes a provider-
specific tax (including license fees, donations or other similar arrangements)
on the Facilities prior to July 1, 1995 that results in a Medicaid per diem rate
increase, then the amount of such tax shall be deducted from the amount of any
subsidy reduction otherwise accruing to the benefit of the Seller. Further, if
in any month the amount of a subsidy reduction would exceed the Seller's subsidy
payment for such month but for the requirement in this Section 2.12 that subsidy
payments shall not be reduced below zero, such excess shall be carried forward
to subsequent months until used in full.
Examples of the subsidy reduction calculation are set forth in Part C
of Schedule 2.12 for illustrative purposes only.
2.13 Guaranty of Buyers' Obligations. The payment of 20% of the
-------------------------------
Buyers' aggregate obligations at any time outstanding under the Promissory
Notes, in respect of the rent under the Charlevoix Lease, the Bethesda Sublease
and the Sedgwick Sublease and in respect of the Rent shall be irrevocably,
absolutely and unconditionally guaranteed by a guaranty substantially in the
form of Exhibit D (the "Guaranty"), executed jointly and severally by the
Guarantors for the benefit of the Seller.
2.14 No Recourse. Except as provided in Section 7.06 and 10.02
-----------
notwithstanding anything in this Agreement to the contrary, the Buyers shall
have no recourse against the Seller for any default (other than any failure by
the Seller to comply with the terms of the Assumed Contracts to be
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<PAGE>
complied with by the Seller prior to the Closing) in respect of the Assumed
Contracts. Nothing in the preceding sentence shall affect the Buyers' rights in
respect of the Seller's representations, warranties and covenants contained in
this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
The Seller hereby represents and warrants to the Buyers that:
3.01 Corporate Existence and Power. The Seller is a corporation duly
-----------------------------
incorporated and validly existing under the laws of the State of Delaware. The
Seller has the corporate power and authority to carry on its business as such
business currently is being conducted. The Seller is duly qualified to do
business as a foreign corporation in the States of Kansas and Missouri.
3.02 Corporate Authorization. The execution, delivery and performance
-----------------------
by the Seller of this Agreement and the other Transaction Documents to which the
Seller is or is to be a party, and the consummation by the Seller of the
transactions contemplated by this Agreement and such other Transaction Documents
are within the Seller's corporate powers and have been, or on or before the
Closing Date will be, duly authorized by all necessary corporate action on the
part of the Seller. This Agreement constitutes, and each other Transaction
Document to which the Seller is to be a party when executed and delivered by the
Seller will constitute a valid and binding obligation of the Seller, enforceable
against the Seller in accordance with its terms.
3.03 Non-Contravention. The execution, delivery and performance by
-----------------
the Seller of this Agreement and the other Transaction Documents to which the
Seller is or is to be a party do not and will not: (a) require any consent by
the Seller's shareholders (other than the consent of the Executive Committee,
which consent has been obtained); (b) contravene or conflict with the
certificate of incorporation or the bylaws of the Seller; or (c) contravene or
conflict with or constitute a violation of any provision of any law, rule,
regulation, order, writ, judgment, injunction, decree or award that currently is
in effect and applicable to the Seller or any Facility.
3.04 Litigation. Except as set forth in Schedule 3.04 or otherwise
----------
disclosed to the Buyers in writing prior to the Closing, there is no action,
suit, legal or arbitration proceeding or, to the knowledge of the Seller,
administrative proceeding or investigation pending or, to the knowledge of the
Seller, threatened against or affecting any Facility or any of the other
Purchased Assets which reasonably would be expected to have a Material Adverse
Effect or which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the transactions contemplated by this Agreement.
3.05 Bankruptcy. No bankruptcy, insolvency or similar proceeding is
----------
pending or contemplated by or, to the knowledge of the Seller, against the
Seller.
3.06 Compliance with Laws. The Seller is not in violation of any law,
--------------------
rule, regulation or ordinance applicable to the operation of any Facility,
except for violations that have not had and would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect.
3.07 Reporting Requirements. The Seller has filed, or caused to be
----------------------
filed, all reports (including all cost reports required to be filed pursuant to
Titles XVIII and XIX of the Social Security Act) required to be filed with any
governmental or regulatory authority prior to the date of this Agreement with
respect to any Facility, the failure to file which would reasonably be expected
to have a Material Adverse Effect.
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<PAGE>
3.08 License. The Facilities are licensed and contain the number of
-------
beds in service as described in Schedule 3.08.
3.09 Personal Funds of Residents. All personal funds of residents of
---------------------------
each Facility that have been deposited with such Facility have been deposited,
managed and accounted for by the Seller in accordance with applicable laws,
rules and regulations.
3.10 Life Care Contracts. Except as set forth in Schedule 3.10, the
-------------------
Seller is not a party to any life care contract with respect to any resident of
any Facility.
3.11 Admission Agreements and Patient Rolls. To the knowledge of the
--------------------------------------
Seller, the information set forth in the admission agreements and patient rolls
pertaining to residents of each Facility is true and correct in all material
respects as of the respective dates of such admission agreements and patient
rolls.
3.12 Facility Financial Statements. The Facility Financial Statements
-----------------------------
with respect to each Facility have been prepared in accordance with applicable
requirements of law and fairly present unaudited summaries of the results of
operations of such Facility for the periods ended on the respective dates of
such Facility Financial Statements (subject to normal year-end adjustments).
Although the Facility Financial Statements have not been prepared in accordance
with generally accepted accounting principles (as a result of the omission of,
among other things, footnotes, certain corporate expense allocations, federal
income tax and certain other reserves, and intercompany account eliminations,
none of which represents an omission of material items of revenue or expense
other than federal income tax expense, interest expense, management fees,
depreciation and amortization), the Facility Financial Statements with respect
to each Facility (a) have been prepared in accordance with the accounting
principles and practices used by the Seller at such Facility for all internal
financial accounting purposes consistently applied for all relevant periods and
(b) reflect accurately in all material respects information in the books and
records of the Seller for such Facility. The books and records of each Facility
include certain corporate expense allocations of cost items, including health
insurance and workers' compensation expenses and management fees, which may not
be representative of what an independent Person may be required to expend for
such items. As set forth in Section 7.11, the Seller expressly disclaims any
representations or warranties of any kind or character whatsoever, whether
express or implied, with respect to the effect on the business, assets,
condition (financial or otherwise) or results of operations of any Facility of
any enacted, published or reported laws, rules, regulations or judicial or
administrative decisions (whether having retroactive or prospective effect)
pertaining to matters of licensure, survey, reimbursement or private pay census.
3.13 Absence of Certain Changes. Since the date of the most recent
--------------------------
Facility Financial Statement with respect to each Facility, the Seller has
operated such Facility in the ordinary course consistent with past practices,
and there has not been a change in the operation of such Facility that would
reasonably be expected to have a Material Adverse Effect.
3.14 Collective Bargaining Agreements. The Seller is not a party to
--------------------------------
any collective bargaining agreement relating to any Facility or the employees of
any Facility or to any employment agreement with any such employees, except as
included in the Assumed Contracts.
3.15 Taxes. The Seller has, or on or prior to the Closing Date will
-----
have, paid all Taxes payable by the Seller, and all interest and penalties due
thereon, for the Pre-Closing Tax Period which will have been required to be paid
on or prior to the Closing Date, the nonpayment of which would result in a Lien
on any of the Purchased Assets or the Leased Facilities or would result in the
Buyers becoming liable therefor. The Seller has established, in accordance with
generally accepted accounting principles applied on a basis consistent with that
of preceding periods, adequate reserves
-14-
<PAGE>
for the payment of all Tax liabilities, assessments, interest and penalties that
arise with respect to the Purchased Assets or the Leased Facilities or the
operation of any Facility that are payable by the Seller and that are incurred
in or attributable to the Pre-Closing Tax Period, the nonpayment of which would
result in a Lien on any of the Purchased Assets or the Leased Facilities or
would result in the Buyers becoming liable therefor.
3.16 Environmental Compliance. Except as set forth in Schedule 3.16
------------------------
or otherwise disclosed to the Buyers in writing prior to the Closing, no notice,
notification, demand, request for information, citation, summons or order has
been issued, no complaint has been filed, no penalty has been assessed and, to
the knowledge of the Seller, no investigation or review is pending or threatened
by any Person with respect to (a) any alleged violation by the Seller of any
Environmental Law in connections with the operation of any Facility, (b) any
alleged failure by the Seller to have any environmental permit, certificate,
license, approval, registration or authorization required in connection with the
operation of any Facility or (c) any use, generation, manufacture, treatment,
storage, recycling, transportation, disposal or release of any Hazardous
Substance at or from any Facility.
3.17 Finders' Fees. No investment banker, broker, finder or other
-------------
intermediary has been retained by or is authorized to act on behalf of the
Seller who might be entitled to any fee or commission from the Buyers upon
consummation of the transactions contemplated by this Agreement.
3.18 Third Party Consents. Except as set forth in Schedule 1.01A,
--------------------
there are no consents required from any party to the Assumed Contracts as a
result of the consummation of the transactions contemplated by this Agreement
that if not received by the Closing Date reasonably would be expected to have a
Material Adverse Effect.
3.19 No Default. The Seller is not in default under any Assumed
----------
Contract except for defaults that have not had and would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
3.20 Schedules. The information contained in the Schedules pertaining
---------
to the Seller is true and correct in all material respects.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYERS
Each of the Buyers represents and warrants to the Seller that:
4.01 Partnership Existence and Power. Such Buyer is a limited
-------------------------------
partnership duly formed and validly existing under the laws of the State of
North Carolina. Such Buyer has the partnership power and authority to carry on
its business as such business currently is being conducted. Such Buyer, on or
before the Closing Date, will be duly qualified to do business as a foreign
limited partnership in the States of Kansas and Missouri.
4.02 Partnership Authorization, Etc. The execution, delivery and
------------------------------
performance by such Buyer of this Agreement and the other Transaction Documents
to which such Buyer is or is to be a party, and the consummation by such Buyer
of the transactions contemplated by this Agreement and the other Transaction
Documents to which such Buyer is or is to be a party, are within such Buyer's
partnership powers and have been, or on or before the Closing Date will be, duly
authorized by all necessary partnership action on the part of such Buyer. The
execution and delivery by the General Partner of this Agreement and the other
Transaction Documents to which such Buyer is or is to be a party are within the
General Partner's corporate powers and have been, or on or before the
-15-
<PAGE>
Closing Date will be, duly authorized by all necessary corporate action on
the part of the General Partner. This Agreement constitutes, and each other
Transaction Document to which such Buyer is to be a party when executed and
delivered by such Buyer will be, a valid and binding obligation of such Buyer,
enforceable against such Buyer in accordance with its terms.
4.03 Non-Contravention. The execution, delivery and performance by
-----------------
such Buyer of this Agreement and the other Transaction Documents to which such
Buyer is or is to be a party do not and will not: (a) require any consent by any
limited partners in such Buyer (other than such consents which will be obtained
on or before the Closing Date); (b) contravene or conflict with the partnership
agreement or any other organizational documents of such Buyer; or (c) contravene
or conflict with or constitute a violation of any provision of any law, rule,
regulation, order, writ judgment, injunction, decree or award that currently is
in effect and applicable to such Buyer or the General Partner.
4.04 Litigation. Except as set forth in Schedule 4.04 or otherwise
----------
disclosed to the Seller in writing prior to the Closing, there is no action,
suit, legal or arbitration proceeding or, to the knowledge of such Buyer,
administrative proceeding or investigation pending or, to the knowledge of such
Buyer, threatened against or affecting such Buyer, the General Partner or any
limited partner in such Buyer which in any manner challenges or seeks to prevent
enjoin, alter or materially delay the transactions contemplated by this
Agreement.
4.05 Bankruptcy. No bankruptcy, insolvency or similar proceeding is
----------
pending or contemplated by or, to the knowledge of such Buyer, against such
Buyer or the General Partner.
4.06 Finders' Fees. No investment banker, broker, finder or other
-------------
intermediary has been retained by or is authorized to act on behalf of such
Buyer who might be entitled to any fee or commission from the Seller upon
consummation of the transactions contemplated by this Agreement.
4.07 Schedules. The information contained in the Schedules pertaining
---------
to such Buyer is true and correct in all material respects.
4.08 General Partner. The General Partner is the only general
---------------
partner in such Buyer.
ARTICLE V
CERTAIN COVENANTS OF SELLER
5.01 Operation of the Facilities. From the date of this Agreement
---------------------------
until the Closing Date, the Seller shall operate each Facility in the ordinary
course consistent with past practice, use reasonable, diligent efforts to
preserve intact the business organizations and relationships of each facility
with third parties add, subject to the effect of compliance with any Employment
Law in connection with the termination of employment of the Employees
contemplated by Section 7.07. keep available the services of the present
employees of each Facility. Without limiting the generality of the preceding
sentence, until the Closing Date, the Seller:
(a) Will not sell, lease, license or otherwise dispose of
any of the Purchased Assets or the Leased Facilities, except (i) pursuant to
existing contracts or commitments, the Charlevoix Lease, the Bethesda Sublease,
the Sedgwick Sublease or the Subleases, or (ii) in the ordinary course
consistent with past practice;
(b) Will maintain the Inventory at customary levels
necessary to operate each facility in the ordinary course consistent with past
practice;
-16-
<PAGE>
(c) Will not take, or agree or commit to take, any action
that would make any representation or warranty of the Seller under this
Agreement inaccurate in any respect on, or as of any time prior to, the Closing
Date; and
(d) Will not omit to take, or agree or commit to omit to
take, any action necessary to prevent any representation or warranty of the
Seller under this Agreement from being inaccurate in any respect on, or as of
any time prior to, the Closing Date.
5.02 Access to Information. Until the Closing Date, upon reasonable
---------------------
notice from the Buyers to the Vice President of Acquisitions and Development of
the Seller, the Seller (a) shall give the Buyers and their counsel, financial
advisers, auditors and other authorized representatives reasonable access during
normal business hours to the offices, properties, books and records of each
Facility and (b) shall furnish to the Buyers and their counsel, financial
advisers, auditors and other authorized representatives, such financial and
operating data, including any unaudited monthly Operations Analyses that have
been prepared by the Seller after the date of this Agreement in the ordinary
course consistent with past practice for internal financial accounting purposes,
and other information relating to each Facility as such Persons may reasonably
request; provided that any investigation pursuant to this Section 5.02 shall be
--------
conducted in such manner as not to interfere unreasonably with the operation of
any Facility.
5.03 Notices of Certain Events. The Seller promptly shall notify the
-------------------------
Buyers of:
(a) any notice or other communication from any Person
alleging that the consent of such Person is or may be required in connection,
with the transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental
or regulatory authority in connection with the transactions contemplated by this
Agreement;
(c) any action, suit legal or arbitration proceeding or, to
the knowledge of the Seller, administrative proceeding or investigation
commenced or, to the knowledge of the Seller, threatened against, relating to or
invoking or otherwise affecting the Seller or any Facility that, if pending on
the date of this Agreement, would have been required to have been disclosed
pursuant to Section 3.04 or that relates to the consummation of the transactions
contemplated by this Agreement;
(d) the occurrence of any event that results in a breach of
any of the representations and warranties of the Seller in this Agreement or any
knowledge of the Seller that any such representations or warranties were
inaccurate when made; and
(e) the sale, lease, license or other disposition of any of
the Purchased Assets or the Leased Facilities having an aggregate book valve
that exceeds $10.000.
5.04 Taxes. The Seller timely shall pay all Taxes payable by the
-----
Seller that arise from or with respect to the Purchased Assets or the operation
of any Facility and that are incurred in or attributable to any Pre-Closing Tax
Period, the nonpayment of which would result in a Lien on any of the Purchased
Assets or the Leased Facilities or would result in the Buyers becoming liable
therefor.
5.05 Reporting Requirements. The Seller shall file, or caused to be
----------------------
filed, all reports (including all cost reports required to be filed pursuant to
Titles XVIII and XIX of the Social Security Act) required to be filed with any
governmental or regulatory authority with respect to the operation of any
-17-
<PAGE>
Facility on and prior to the Closing Date, the failure to file which would
reasonably be expected to have a Material Adverse Effect.
5.06 Government Surveys, Reports and Other Information. Except as
-------------------------------------------------
otherwise provided in this Section 5.06, the Seller promptly shall furnish to
the Buyers:
(a) copies of the most recent survey reports prepared by
governmental and regulatory authorities and furnished to the Seller with respect
to each Facility, and copes of any updates with respect thereto;
(b) copies of the cost reports most recently filed by the
Seller with respect to each Facility pursuant to Titles XVIII and XIX of the
Social Security Act, and copies of any updates with respect thereto;
(c) the most recent patient census prepared by or on behalf
of the Seller with respect to each Facility and an update with respect thereto
dated not less than thirty days prior to the Closing Date;
(d) not less than 10 days prior to the Closing, a schedule
of all personal funds and properties that have been deposited with each Facility
by residents of such Facility;
(e) not less than 10 days prior to the Closing, a schedule
listing the names of all employees of each Facility and showing the title and
annual salary of each employee who is a salaried employee of such Facility and
the wage rate for each employee who is a non-salaried employee of such Facility;
(f) not less than 30 days prior to the Closing, a schedule
of accrued vacation benefits for the employees of each Facility;
(g) not less than 30 days prior to the Closing, a schedule
of accrued sick leave benefits for the employees of each Facility; and
(h) copies of the most recent ad valorem tax bills with
----------
respect to each Facility and any such bills received by the Seller prior to the
Closing.
5.07 Confidentiality. The Seller shall hold, and shall use
---------------
reasonable, diligent efforts to cause its directors, officers, employees,
accountants, counsel, consultants, advisers and agents to hold, in confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning the
Buyers or the Buyers' business furnished to the Seller pursuant to Section 6.04,
except to the extent that such information can be shown to have been (a)
previously known on a nonconfidential basis by the Seller, (b) developed
independently by the Seller, (c) in the public domain through no fault of the
Seller or (d) later lawfully acquired by the Seller from sources other than the
Buyers; provided that the Seller may disclose such information to its directors,
--------
officers, employees, accountants, counsel, consultants, advisers and agents in
connection with the transactions contemplated by this Agreement or in connection
with a determination of any matter relating to any Facility or its operations
during any period ending on or before the Closing Date or relating to the
Seller's rights and obligations under this Agreement and the other Transaction
Documents, so long as such Persons are informed by the Seller of the
confidential nature of such Information and are directed by the Seller to treat
such information confidentially. Notwithstanding anything in Section 6.04 or
elsewhere in this Agreement or any other Transaction Document to the contrary,
except following notice to and receipt of consent from the
-18-
<PAGE>
Buyers, the Seller shall not contact or communicate with any employee of the
Buyers regarding any matter relating to any Facility or its operations.
5.08 Non-Competition Agreement. Effective at the time of the Closing
-------------------------
and provided each of the Buyers is not in default under any of the Transaction
Documents to which such Buyer is a Party, the Seller, Hillhaven and their
respective subsidiaries shall refrain from owning, leasing or operating any
skilled-nursing Facility within a fifteen mile radius of any Facility for a
period of five years from the Closing Date, provided that the Seller may
--------
continue to own, lease or operate its existing facilities commonly known as the
Hearthstone Facility and the Villa Ventura facility located in Topeka, Kansas
and Kansas City, Missouri, respectively, or any existing facility that the
Seller currently subleases to another Person. The Seller acknowledges that the
Buyers would be irreparably harmed by the breach of this Section 5.08 and that
there would be no adequate remedy at law to compensate the Buyers for such
breach. If the terms of this Section 5.08 are breached, the damages to the
Buyers shall be its actual damages, but in addition to any other remedy
available to the Buyers, they shall be entitled to an injunction restraining
such breach.
5.09 Further Encumbrances. The Seller shall not enter into any first
--------------------
Lien Mortgage without prior notice thereof to the Buyers. The debt of the Seller
secured by any First Lien Mortgage as of the Closing Date shall not exceed 90
percent of the amount of the Purchase Price allocated (as set forth in Schedule
2.07) to the Purchased Assets encumbered by such First Lien Mortgage and, except
for the debt secured by the First Lien Mortgages with respect to Indian Creek
Nursing Center and Indian Meadows Nursing Centers, respectively, shall be
prepayable, without, at any time by the Seller.
5.10 Payment of Certain Senior Debt. The Seller shall pay when due
------------------------------
all debt of the Seller that is secured by any First Lien Mortgage. The Seller
shall promptly notify the Buyers if the Seller is in default with respect to the
payment of such debt, If and for so long as the Seller is in default with
respect to the payment of such debt, the Buyers may make payments under the
Promissory Note secured by the Mortgage that is junior to the First Lien
Mortgage securing such debt directly to the mortgagee of such First Lien
Mortgage, provided that such mortgagee shall have consented to such direct
--------
payment by the Buyers. The Buyers shall receive a credit for such direct
payments against their payment obligations under such Promissory Note.
5.11 Prepayments of Promissory Notes; Release Premium. As provided
------------------------------------------------
in the Promissory Notes and the Mortgages, so long as no Event of Default shall
have occurred and be continuing under any of the Promissory Notes, the Buyers
may prepay the unpaid principal amount of any Promissory Note, in whole or in
part plus accrued interest to the date of such prepayment on the principal
amount prepaid, plus any late charges then payable under such Promissory Note,
plus any costs and expenses then payable by the Buyers under such Promissory
Note; provided, that each partial prepayment shall be in a principal amount of
--------
not less than $5,000; provided, further, that upon prepayment in whole of the
-------- -------
unpaid principal amount of such Promissory Note plus such accrued interest, late
charges and costs and expenses, the Buyers shall pay to the Seller a release
premium (the "Release Premium") in respect of such Promissory Note in an amount,
determined at the date of such prepayment, equal to five percent of the
principal amount of such Promissory Note that would then have been outstanding
if such Promissory Note had been timely paid in accordance with the regularly
scheduled required installment payments paid for in such Promissory Note without
regard to any prepayments made in respect of such Promissory Note. The Release
Premium in respect of any Promissory Note shall be applied first to any costs
and expenses then payable by the Buyers under any other Promissory Notes, second
to any late charges then payable under such other Promissory Notes, and then to
the principal of such other Promissory Notes plus accrued interest thereon as
agreed to by the Seller and the Buyers, or, if the Seller and the Buyers cannot
agree, then to such principal and accrued interest determined by the Seller in
its sole discretion as to one-half of
-19-
<PAGE>
the Release Premium and to such principal and accrued interest determined by the
Buyers their sole discretion as to one-half of the Release Premium. Each partial
prepayment of any Promissory Note shall be applied first to any costs and
expenses then payable by the Buyers under such Promissory Note, second to any
late charges then payable under such Promissory Note, third to interest then
accrued on such Promissory Note, and then to the principal installments under
such Promissory Note in the inverse order of their maturities without deferral
or limitation of the intervening installments of principal or interest.
5.12 Release of Mortgages. If the entire unpaid principal amount of
--------------------
any Promissory Note shall be prepaid and all of the other amounts and the
Release Premium with respect to such Promissory Note shall be paid in accordance
with the Mortgage securing such Promissory Note, then the Seller agrees that all
rights under such Mortgage shall terminate and the property subject to such
Mortgage shall become wholly released and cleared of the lien, security
interest, conveyance and assignment evidenced by such Mortgage; provided that
--------
the Mortgage with respect to Clayton House Healthcare shall not be terminated
and the property subject to such Mortgage shall not be released and so cleared
unless all Promissory Notes and such other amounts as provided in the Mortgages
shall have been paid in full.
ARTICLE VI
CERTAIN COVENANTS OF BUYERS
6.01 Conduct. Until the Closing Date, the Buyers shall not (a) take,
-------
or agree or commit to take, any action that would make any representation or
warranty of the Buyers under this Agreement inaccurate in any respect on, or as
of any time prior to, the Closing Date or (b) on"' to take, or agree or commit
to omit to take, any action necessary to prevent any representation or warranty
of the Buyers under this Agreement from being inaccurate in any respect on, or
as of any time prior to, the Closing Date.
6.02 Notices of Certain Events. Each of the Buyers promptly shall
-------------------------
notify the Seller of:
(a) any notice or other communication from any Person
alleging that the consent of such Person is or may be required in connection
with the transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental
or regulatory authority in connection with, or otherwise affecting, the
transactions contemplated by this Agreement;
(c) any action, suit, legal or arbitration proceeding or,
to the knowledge of such Buyer, administrative proceeding or investigation
commenced or, to the knowledge of such Buyer, threatened against, relating to or
involving or otherwise affecting such Buyer, the General Partner or any limited
partner in such Buyer that, if pending on the date of this Agreement, would have
been required to have been disclosed pursuant to Section 4.04 or that relates to
the consummation of the transactions contemplated by this Agreement; and
(d) the occurrence of any event that results in a breach of
any of the representations and warranties of the Buyers in this Agreement or any
knowledge of the Buyers that any such representations or warranties were
inaccurate when made.
6.03 Confidentiality. Prior to the Closing Date and after any
---------------
termination of this Agreement, the Buyers shall, hold, and shall, use
reasonable, diligent efforts to cause the General
-20-
<PAGE>
Partner and the respective directors, or officers, employees, accountants,
counsel, consultants, advisers and agents of the Buyers and the General Partner
to hold, in confidence, unless compelled to disclose by judicial or
administrative process or by other requirements of law, all confidential
documents and information concerning any Facility or the Seller furnished to the
Buyers, the General Partner or the Buyers' other affiliates in connection with
the transactions contemplated by this Agreement, except to extent that such
information can be shown to have been (a) previously known on a nonconfidential
basis by the Buyers, (b) developed independently by the Buyers, (c) in the
public domain through no fault of the Buyers or the General Partner or (d) later
lawfully acquired by the Buyers from sources other than the Seller; provided
--------
that the Buyers may disclose such information to the General Partner and the
respective directors, officers employees, accountants, counsel, consultants,
advisers and agents of the Buyers and the General Partner in connection with the
transactions contemplated by this Agreement, and to the Buyers' lenders in
connection with obtaining financing for the transactions contemplated by this
Agreement, so long as such Persons are informed by the Buyers of the
confidential nature of such information and are directed by the Buyers to treat
such information confidentially. If this Agreement is terminated, then the
Buyers shall, and shall use reasonable, diligent efforts to cause the General
Partner and the respective directors, officers, employees, accountants, counsel,
consultants, advisers and agents of the Buyers and the General Partner to,
destroy or deliver to the Seller, upon request, all documents and other
materials, and all copies thereof, that are obtained by the Buyers or on their
behalf from the Seller in connection with this Agreement and that are subject to
such confidence. Notwithstanding anything in Section 5.02 or elsewhere in this
Agreement or any other Transaction Document to the contrary, except following
notice to and receipt of consent from the Vice President of Acquisitions and
Development of the Seller, the Buyers shall not contact or communicate with the
administrator of any Facility, the director of nursing for any Facility, any
Employee, any other employee of the Seller or any resident of any Facility
regarding the transactions contemplated by this Agreement.
6.04 Access. On and after the Closing Date, upon reasonable notice
------
from the Seller to the Buyers, the Buyers shall give the Seller and the Seller's
agents and other authorized representatives reasonable access during normal
business hours to the Buyers' properties, books, records, employees, accountants
and auditors to the extent necessary to permit the Seller to determine any
matter relating to any Facility or its operations during any period ending on or
before the Closing Date (including the verification of any amounts owing by the
Buyers to the Seller under Section 7.08) or relating to the Sellers rights and
obligations under this Agreement and the other Transaction Documents; provided
--------
that such access by the Seller shall not unreasonably interfere with the conduct
of the business of the Buyers.
6.05 Removal of Signs, Etc. As soon as possible within a period not
---------------------
to exceed sixty days after the Closing Date, the Buyers (at the Buyers' sole
cost and expense) shall remove from each Facility all signs that contain any
Seller Trade Name and shall remove or obliterate any Seller Trade Name that
otherwise appears on any of the other Purchased Assets.
6.06 Licenses Etc. The Buyers shall use reasonable, diligent efforts
------------
to obtain all licenses and permits that are required to consummate the
transactions contemplated by this Agreement.
6.07 Application of Certain Proceeds. The Buyers shall apply all
-------------------------------
proceeds from the sale or the refinancing of any Owned Facility either to prepay
the Promissory Notes or for the operations (including the payment of income
taxes) of the Facilities.
6.08 Books, Records, Etc. As soon as reasonably practicable within a
-------------------
period not to exceed sixty days after the Closing Date, the Buyers, at its sole
cost and expense, shall deliver to the Seller all books, records, files and
papers that constitute Excluded Assets and that are located in or upon any
Facility on the Closing Date.
-21-
<PAGE>
ARTICLE VII
CERTAIN COVENANT OF SELLER AND BUYERS
7.01 Diligent Efforts; Further Assurances. Subject to the terms and
------------------------------------
conditions of this Agreement, each of the Seller and the Buyers shall use realm,
diligent efforts to take, or cause to be taken, all actions and to do, or cause
to be done, all things (including all filings required under the HSR Act)
necessary or desirable under applicable laws, rules and regulations to
consummate the transactions contemplated by this Agreement. Each of the Seller
and the Buyers shall execute and deliver such other documents, certificates,
agreements and other writings and to take such other actions as may be necessary
or desirable in order to consummate or implement expeditiously the transactions
contemplated by this Agreement.
7.02 Certain Fillings. The Seller and the Buyers Shall cooperate
----------------
with each other (a) in determining whether any action by or in respect of, or
filing (including any filing required under the HSR Act) with, any governmental
or regulatory authority is required, or any actions, waivers or consents are
required to be obtained from parties to any material contracts, in connection
with the consummation of the transactions contemplated by this Agreement and (b)
in taking such actions or making any such filings, furnishing information
required in connection therewith and seeking timely to obtain any such actions,
waivers or consents. Each of the Seller and the Buyers shall pay one-half of all
filing fees required in connection with any filings under the HSR Act.
7.03 Public Announcements. The Seller and the Buyers agree to
--------------------
consult with each other before issuing any press release or making any public
statement with respect to this Agreement or the transactions contemplated by
this Agreement and, except as may be required by applicable law or any listing
agreement with any national securities exchange, neither the Seller nor the
Buyers shall issue any such press release or make any such public statement
prior to such consultation and without the prior written consent of the other
party as to the form and content of such press release or public statement.
7.04 Cooperation as to Taxes. The Seller and the Buyers agree to
-----------------------
furnish or cause to be furnished to each other, upon request, as promptly as
practicable, such information and assistance relating to the Purchased Assets
and the Leased Facilities as is reasonably necessary for the filing of all Tax
returns, and the making of any election related to Taxes, and the preparation
for any audit by any taxing authority, and the prosecution or defense of any
claim, suit or proceeding relating to any Tax return. The Seller and the Buyers
shall cooperate with each other in the conduct of any audit or other proceeding
related to Taxes involving any Facility.
7.05 Allocation of Taxes.
-------------------
(a) All real property taxes, personal property taxes and
similar ad valorem obligations levied with respect to the Purchased Assets and
-- -------
the Leased Facilities for a taxable period which includes (but does not end on)
the Closing Date shall be apportioned between the Seller and the Buyers as of
the Closing Date based on the number of days of such taxable period included in
the Pre-Closing Tax Period and the number of days of such taxable period
included in the Post-Closing Tax Period. The Seller shall be liable for, and
shall pay or reimburse the Buyers for the payment of, the proportionate amount
of such taxes that is attributable to the Pre-Closing Tax Period, and the Buyers
shall be liable for, and shall pay or reimburse the Seller for the payment of,
the proportionate amount of such taxes that is attributable to the Post-Closing
Tax Period. Any amount to be paid or reimbursed by the Seller or the Buyers
pursuant to this Section 7.05(a) may be reflected as an appropriate credit in
any closing statement at the Closing. In the event that either the Seller or the
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Buyers shall make any payment for which the Seller or the Buyers, as the case
may be, are entitled to reimbursement under this Section 7.05(a), the other
party shall make such reimbursement promptly but in no event later than thirty
day, after the presentation of a statement setting forth the amount of
reimbursement to which the presenting party is entitled together with such
supporting evidence as is reasonably necessary to calculate the amount of
reimbursement.
(b) To the extent permitted by applicable law, each of the
Seller and the Buyers timely shall pay one-half of the aggregate of (i) all
transfer, documentary, sales, use, excise and other similar Taxes assessed upon
or with respect to the sale, assignment, transfer, conveyance and delivery of
the Purchased Assets and the sublease of the Leased Facilities to the Buyers,
and (ii) all recording and filing fees with respect to any Transaction Document
and any related financing statements and otherwise with respect to the sale,
assignment, transfer, conveyance and delivery of the Purchased Assets and the
sublease of the Leased Facilities to the Buyers.
7.06 Allocation of Other Charges. Except as otherwise expressly
---------------------------
provided in this Agreement or in any other Transaction Document, all operating
income and expenses relating to the operation of the Facilities for any period
prior to the Closing Date shall be the income and expenses of the Seller, and
all operating income and expenses relating to the operation of the Facilities
for any period from and after the Closing Date shall be the income and expenses
of the Buyers. All charges, deposits and prepaid amounts for gas, oil, heat,
electricity, other fuel, light, power, water, sewer service, telephone service
and all other utilities and services used in, upon or about any Facility or
charged against any Facility for a period which includes (but does not end on)
the Closing Date shall be apportioned between the Seller and the Buyers as of
the Closing Date based on the number of days of such period which occur prior to
the Closing Date and the number of days of such period which occur on and after
the Closing Date. The apportionment of such charges, deposits and prepaid
amounts between the Seller and the Buyers shall be based upon the most recently
available statement of such charges, debts and prepaid amounts, subject to
adjustment, if necessary, within thirty days following receipt of the current
statement of such charges, deposits and prepaid amounts. The Seller shall be
liable for, and shall pay or shall reimburse the Buyers for the payment of, the
proportionate amount of such charges that is attributable to the period which
occurs prior to the Closing Date, and the Buyers shall be liable for, and shall
pay or shall reimburse the Seller for the payment of, the proportionate amount
of such charges, deposits and prepaid amounts that is attributable to the period
which occurs on and after the Closing Date. Any amount to be paid or reimbursed
by the Seller or the Buyers pursuant to this Section 7.06 may be reflected as an
appropriate credit in any closing statement at the Closing. In the event that
either the Seller or the Buyers shall make any payment for which the Seller or
the Buyers, as the case may be, are entitled to reimbursement under this Section
7.06, the other party shall make such reimbursement promptly but in no event
later than thirty days after the presentation of a statement setting Forth the
amount of reimbursement to which the presenting party is entitled together with
such supporting evidence as is reasonable necessary to calculate the amount of
reimbursement.
7.07 Employees.
---------
(a) Effective as of 11:00 p.m. on the day immediately
preceding the Closing Date, the Seller shall terminate the employment of all of
the Employees and, with respect to salaries and wages, no later than the normal
pay period and with respect to other employment benefits, within a reasonable
time after the Closing Date, shall pay to the Employees all salaries, wages and
other employment benefits due for period prior to 11:01 p.m. on the day
immediately preceding the Closing Date. The Seller timely shall pay to all
applicable governmental and regulatory authorities all employment-related Taxes
due with respect to the Employees for periods prior to 11:01 p.m. on the day
immediately preceding the Closing Date. The Buyers shall not take or omit to
take, and shall not
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permit any Operator to take or to omit to take, any action that would subject
the Seller to any Seller Loss arising from or by reason of any violation or
alleged violation of any Employment Law.
(b) After the Closing, the Seller shall retain for each
Transferred Employee (i) all liabilities and obligations arising under any group
life, accident, medical, dental or disability plan or similar arrangement
(whether or not insured) to the extent that such liability or obligation relates
to claims incurred (whether or not reported) at or prior to 11:00 p.m. on the
day immediately proceeding the Closing Date and (ii) all liabilities and
obligations arising under any workers' compensation arrangement to the extent
such liability or obligation relates to occurrences that take place at or prior
to 11:00 p.m. on the day immediately preceding the Closing Date.
(c) From and after 11:01 p.m. on the day immediately
preceding the Closing Date, the Buyers shall, or shall cause each Operator to,
continuously offer for each eligible (as determined by the insurance carrier)
Transferred Employee insurance polices or other similar arrangements
(individually, an "Employee Benefit Program" and collectively, the "Employee
Benefit Programs") offering individual or group life, accident, medical, dental
and disability insurance; provided that medical insurance may be offered through
--------
individual policies not part of any group Employee Benefit Program. The Buyers'
Employee Benefit Program or, where appropriate, any Operator's Employee Benefit
Program shall be responsible with respect to each eligible (as determined by the
insurance carrier Transferred Employee who accepts such offer for all
liabilities and obligations arising under each such Employee Benefit Program to
the extent that such liability or obligation relates to claims incurred at any
time after 11:00 p.m. on the day immediately preceding the Closing Date. In
addition, the Buyers shall be, and shall cause each Operator to be, responsible
with respect to each Transferred Employee for all liabilities and obligations
arising under any workers' compensation arrangement to the extent such liability
or obligation relates to occurrences that take place at any time after 11:00
p.m. on the day immediately preceding the Closing Date.
(d) Effective at 11:01 p.m. on the day Immediately
preceding the Closing Date, the Buyers shall, or shall cause each Operator to,
(i)offer to each eligible (as determined by the insurance carrier) Transferred
Employee the insurance coverage offered in the Employee Benefit Programs and
(ii) offer to make such coverage immediately available to each eligible (as
determined by the insurance carrier) Transferred Employee under the Employee
Benefit Programs. The Buyers shall, and shall cause each Operator to, recognize
all service of each Transferred Employee with the Seller for purposes of
eligibility to participate in the Employee Benefit Programs in which such
eligible Transferred Employee is enrolled by the Buyers or such Operator,
effective at 11:01 p.m. on the day immediately preceding the Closing Date.
7.08 Receivables. The Buyers shall assume responsibility for all
-----------
billings and the collection of all accounts in respect of the ownership, use and
operation of each Facility and the other Purchased Assets by the Buyer after the
Closing. The Seller shall retain all of its right, title and interest in and to
all accounts, notes and other receivables in respect of the ownership, use and
operation of each Facility and the other Purchased Assets prior to the Closing,
and the Seller shall retain responsibility for the collection of all such
receivables. Within 15 days after the Closing Date, the Seller shall furnish to
the Buyers a list of all accounts, notes and other receivables in respect of the
ownership, use and operation of each Facility and the other Purchased Assets
prior to the Closing. All payments that may be received by the Buyers with
respect to any of the Excluded Assets shall be received in trust for the benefit
of the Seller, shall be segregated from other funds and property of the Buyers
and shall immediately be delivered to the Seller in the same form as so
received, with any necessary endorsements. Any payment received by the Buyer
within the period of sixty days immediately following the Closing Date in
respect of the ownership, use or operation of any Facility shall be deemed to be
a payment with respect to an Excluded Asset, unless such payment is expressly
designated by the payor or obligor as a payment in respect of the ownership, use
and operation of
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such Facility after the Closing or unless no receivable to which such Payment
may relate is set forth in the list of receivables furnished by the Seller to
the Buyers pursuant to this Section 7.06. The Buyers shall maintain at each
Facility, or at such other location in Advance, North Carolina, as shall be
specified in writing to the Seller, all of the books, records and other
documents and materials pertaining to each Facility and the other Purchased
Assets.
7.09 Patient Trust Funds. As soon as practicable after the Closing,
-------------------
the Seller shall furnish to the Buyers an accounting of all personal funds of
residents of the Facilities which are held by the Seller in a custodial
capacity. Such accounting shall set forth the name of each resident for whom
such funds are held and the amount held by the Seller on behalf of such resident
and shall be certified by an officer of the Seller. As soon as practicable after
the Closing, the Seller, in accordance with all applicable laws, rules and
regulations, shall transfer all such funds to a bank account designated by the
Buyers, and the Buyers shall execute and deliver to the Seller receipt and
assumption agreements each substantially in the form of Exhibit E (the "Receipt
and Assumption Agreements"), pursuant to which the Buyers shall Acknowledge
receipt of, and shall assume the Seller's fiduciary, custodial and other
obligations and liabilities with respect to, such funds. The Seller and the
Buyers acknowledge and agree that, upon the transfer of such funds by the Seller
to the bank account designated by the Buyers, the Seller shall be relieved of
all fiduciary, custodial and other obligations and liabilities with respect to
such funds.
7.10 Preliminary Commitment for Title Insurance. Not less than
------------------------------------------
twenty days prior to the Closing, the Seller shall furnish to the Buyers a
preliminary commitment for title insurance (the "Title Report") issued by the
Title Company with respect to the Real Property and the Improvements. The Title
Report shall be accompanied by copies of all documents referred to in the Title
Report. The Buyers shall have ten days (the "Review Period") following receipt
of the Title Report within which to give notice to the Seller that the Buyers
have disapproved any exception to title (other than any Permitted Lien) shown by
the Title Report If any supplement or amendment to the Title Report is issued
and show's any additional exception to title (other than any Permitted Lien),
and if the Review Period has expired, the Buyers shall have ten days from the
date of receipt of such supplement or amendment to the Title Report (the
"Extended Review Period") within which to give to the Seller notice of
disapproval of such additional exception to title. If the Buyers fail to give
notice of disapproval to the Seller within the Review Period or the Extended
Review Period, as the case may be, then the Buyers shall conclusively be deemed
to have approved the status of title shown by the Title Report and any
supplement or amendment to the Title Report. If the Buyers give to the Seller
notice of disapproval within the Review Period or the Extended Review Period, as
the case may be, then, at the Buyers' sole option, the Buyers either (a) may
terminate this Agreement by giving written notice of termination to the Seller
and the Escrow Agent within the Review Period or the Extended Review Period, as
the case may be, whereupon all funds, documents and instruments deposited in
escrow by the Buyers shall be returned to the Buyers and all funds, documents
and instruments deposited in escrow by the Seller shall be returned to the
Seller or (b) may provisionally accept title to the Real Property and the
improvements subject to removal of any disapproved exception to title, in which
case the Seller shall use reasonable, diligent efforts to cause the removal of
the disapproved exception prior to the Closing. In the event the Seller does not
cause the removal of such disapproved exception prior to the Closing, the Buyers
either (i) may terminate this Agreement by giving written notice of termination
to the Seller or (ii) may waive its previous disapproval of the status of title,
whereupon (subject to satisfaction or waiver of the conditions set forth in
Article IX) the transaction contemplated by this Agreement shall be consummated
as scheduled and the Buyers shall take title to the Real Property and the
Improvements subject to the previously disapproved exception to title.
7.11 Condition of Purchased Assets and Leased Facilities; Disclaimer
---------------------------------------------------------------
of Warranties. The Buyers acknowledge and agree that they are sophisticated
- -------------
purchasers possessing such knowledge and experience in financial matters and the
operation of nursing centers or health care facilities
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<PAGE>
(including the retroactive and prospective effect of enacted, published or
reported laws, rules, regulations and judicial and administrative decisions
pertaining to matters of licensure, survey, reimbursement and private pay
census) that they are capable of evaluating the merits and risks of the
transactions contemplated by this Agreement and the other Transaction Documents.
The Buyers acknowledge and agree that this Agreement provides to the Buyers
sufficient opportunity to conduct their own inspection and investigation of each
Facility, the Inventory and the Personal Property, and of public records
pertaining to the Seller, each Facility and any of the other Purchased Assets.
By accepting the Deeds and the Bill of Sale, by entering into the Charlevoix
Lease, the Bethesda Sublease and the Sedgwick Sublease, and by entering into the
Subleases, the Buyers shall have approved the physical condition of each
Facility, the Inventory and the Personal Property and shall have accepted and
purchased the Owned Facilities, the Inventory and the Personal Property and
shall have accepted and leased or subleased the Bond-financed Owned Facilities
and the Leased Facilities, "AS IS, WHERE IS and WITH ALL FAULTS." The Buyers
----- ----- -- ---------------
acknowledge and agree that the Seller shall have no liability for, and that the
Buyers shall have no recourse against the Seller for, any defect or deficiency
of any kind whatsoever (whether patent or latent and whether discovered or
discoverable by the Seller or the Buyers) in any Facility, the Inventory or the
Personal Property. The Buyers further acknowledge and agree that, EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN ARTICLE III, IN THE DEEDS,
IN THE BILL OF SALE AND IN THE SUBLEASES, THE SELLER HAS NOT MADE AND DOES NOT
MAKE, AND THE SELLER HEREBY EXPRESSLY DISCLAIMS, ANY OTHER REPRESENTATIONS OR
WARRANTIES OF ANY KIND AND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED,
WITH RESPECT TO THE PURCHASED ASSETS OR THE LEASED FACILITIES, INCLUDING THE
IMPLIED WARRANTIES OF MERCHANTABILITY, HABITABILITY OR FITNESS FOR A PARTICULAR
PURPOSE AND REPRESENTATIONS OR WARRANTIES WITH RESPECT TO (A) THE EXISTENCE OR
ABSENCE OF ANY HAZARDOUS SUBSTANCE IN, ON, UNDER OR AFFECTING ANY OF THE
PURCHASED ASSETS OR THE LEASED FACILITIES, (B) THE COMPLIANCE OF ANY OF THE
PURCHASED ASSETS OR THE LEASED FACILITIES, INCLUDING THEIR USE OR OPERATION,
WITH ANY ENVIRONMENTAL LAW, (C) THE ASSIGNABILITY OR TRANSFERABILITY OF ANY OF
THE ASSUMED CONTRACTS OR THE PERMITS, AND (D)THE EFFECT ON THE BUSINESS, ASSETS,
CONDITION (FINANCIAL OR OTHERWISE) OR RESULTS OF OPERATIONS OF ANY FACILITY OF
ANY ENACTED, PUBLISHED OR REPORTED LAWS, RULES, REGULATIONS OR JUDICIAL OR
ADMINISTRATIVE DECISIONS (WHETHER HAVING RETROACTIVE OR PROSPECTIVE EFFECT)
PERTAINING TO MATTERS OF LICENSURE, SURVEY, REIMBURSEMENT OR PRIVATE PAY CENSUS.
7.12 Inspection. The Buyers shall have until May 20, 1992 (June 1,
----------
1992 with respect to environmental matters) (a) to conduct or cause to be
conducted such inspections and investigations of the Purchased Assets and the
Leased Facilities as the Buyers desire and (b) to give notice to the Seller that
the Buyers have disapproved any aspect of any physical condition of any Facility
or any of the other Purchased Assets. If the Buyers fail to give notice of
disapproval to the Seller on or before such date, as applicable, then the Buyers
shall conclusively be deemed to have approved the physical condition of the
Facilities and the other Purchased Assets. If the Buyers give to the Seller
notice of disapproval on or before such date in respect of any aspect of the
physical condition of any Facility or any of the other Purchased Assets, then,
at the Seller's sole option and without any obligation to do so, the Seller may
repair or otherwise correct to the reasonable satisfaction of the Buyers such
disapproved aspect of the physical condition of such Facility or such other
Purchased Asset, whereupon the Buyers shall conclusively be deemed to have the
condition of the Facilities and the other Purchased Assets. If the Buyers give
to the Seller notice of disapproval on or before such date in respect of any
aspect of the physical condition of such Facility or any of the other Purchased
Assets and the Seller does not elect to repair or otherwise correct such
disapproved aspect of the physical condition of such Facility or such other
Purchased Asset to the reasonable satisfaction of the Buyers, then, at the
Buyers sole option, the Buyers either (i) may terminate this Agreement by giving
written notice of termination to the Seller and the Escrow Agent on or before
May 25, 1992 (June 5, 1992 with respect to environmental matters), whereupon all
funds, documents and instruments
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<PAGE>
deposited in escrow by the Buyers shall be returned to the Buyer: and all funds
documents and instruments deposited in escrow by the Seller shall be returned to
the Seller or (ii) may waive their previous disapproval, whereupon (subject to
satisfaction or waiver of the conditions set forth in Article IX) the
transactions contemplated by this Agreement shall be consummated as scheduled
and the Buyers shall acquire the Purchased Assets and sublease the Leased
Facilities subject to the previously disapproved physical condition. Each of the
Seller and the Buyers shall pay one-half of the aggregate costs and expenses of
any environmental assessments obtained by the Buyers with respect to the
Purchased Assets and the Leased Facilities up to $100,000, and all such costs
and expenses in excess of $100,000, and all such costs and expenses of any
inspections and investigations of the Purchased Assets and the Leased
Facilities, shall be paid by the Buyer.
7.13 Destruction of or Damage to Facilities.
--------------------------------------
(a) Within five days after the destruction of or any
material damage to any Facility by fire or other casualty or any other cause
prior to the Closing Date, the Seller shall give to the Buyers notice of such
destruction or damage.
(b) If any Facility is destroyed or damaged prior to the
Closing Date and the cost to replace, repair or restore the destroyed or damaged
portion of such Facility would equal or exceed twenty-five percent of the
insurable value of such Facility, then the Buyers may:
(i) terminate this Agreement by giving written
notice of termination to the Seller within twenty days after receipt
by the Buyers from the Seller of notice of such destruction or damage,
whereupon this Agreement shall terminate; or
(ii) accept such Facility as so destroyed or
damaged plus an assignment at the Closing by the Seller to the Buyer:
of the proceeds of property and casualty insurance paid or payable in
respect of such destruction or damage, whereupon (subject to
satisfaction or waiver of the conditions set forth in Article IX) the
transactions contemplated by this Agreement shall be consummated as
scheduled and the Buyers shall accept such assignment of insurance
proceeds and shall accept and take title to or sublease such Facility,
as the case may be.
(c) If any Facility is damaged prior to the Closing Date
and the cost to replace, repair or restore the damaged portion of such Facility
would be less than twenty-five percent of the insurable value of such Facility,
then the Seller, in its discretion, may replace, repair or restore the destroyed
or damaged portion of such Facility prior to the Closing Date, whereupon
(subject to satisfaction or waiver of the conditions set forth in Article IX)
the transactions contemplated by this Agreement shall be consummated as
scheduled. If any Facility is damaged prior to the Closing Date, and the cost to
replace, repair or restore the damaged portion of such Facility would be less
than twenty-five percent of the insurable value of such Facility, and the Seller
does not replace, repair or restore the destroyed or damaged portion of such
Facility prior to the Closing Date, then the Buyers may:
(i) terminate this Agreement by giving written
notice of termination to the Seller, whereupon this Agreement shall
terminate; or
(ii) accept such Facility as so damaged plus an
assignment at the Closing by the Seller to the Buyers of the proceeds
of property and casualty insurance paid or payable in respect of such
damage, whereupon (subject to satisfaction or waiver of the conditions
set forth in Article IX) the transactions contemplated by this
Agreement shall be consummated as scheduled and the Buyers shall
accept such
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<PAGE>
assignment of insurance proceeds and shall accept and take title or
sublease such Facility, as the case may be.
(d) Notwithstanding anything to the contrary set forth in
this Section 7.13, the Seller and the Buyers acknowledge and agree that the
provisions of this Section 7.13 are Sect to the provisions of the Leases,
agreements relating to the Bond-financed Owned Facilities and other documents
that govern matters relating to the destruction of or damage to certain of the
Facilities and the application of insurance proceeds.
7.14 Consents. Each of the Seller and the Buyers shall use
--------
reasonable, diligent efforts to obtain all consents that are required for, or
that are reasonably requested by the Seller or the Buyers in connection with,
the consummation of the transactions contempLated by this Agreement. If
requested by the Buyers, the Seller shall use reasonable, diligent efforts to
obtain estoppel certificates or the equivalent from the lessor under any Lease
or from any party to any financing documents pertaining to any Facility. Each of
the Seller and the Buyers shall pay one-half of all costs and expenses,
including the reasonable Fees and disbursements of attorneys other than the
respective counsel for the Seller and the Buyers, incurred in connection with
obtaining such consents.
7.15 Inventory. Prior to the Closing, the Seller and the Buyers
---------
agree to perform, together, an inventory count of the Personal Property and the
personal property located in or upon or used exclusively in connection with the
Leased Facilities. The costs and expenses incurred in connection with such
inventory count shall be paid by the party incurring such cost or expense.
7.16 Schedules and Exhibits. If any Schedule or Exhibit is not
----------------------
attached to this Agreement at the date hereof, then the Seller or the Buyers, as
appropriate, shall prepare such Schedules and Exhibits as soon as practicable.
When the form and substance of such Schedules and exhibits have been agreed to
by the Seller and the Buyers, such Schedules and Exhibits shall be attached to
this Agreement. If such Schedules and Exhibits are not attached to this
Agreement by May 20, 1992, or such other date in respect of a particular
Schedule or Exhibit as may be mutually agreed upon in writing by the Seller and
Buyers, then the Seller or the Buyers may terminate this Agreement by giving
written notice of such termination to the other party within two business days
of such date. The Seller and the Buyers hereby agree that Schedule 2.07 may be
attached to this Agreement at any time prior to the Closing Date.
7.17 Financing. The Buyers agree to use reasonable, diligent efforts
---------
to obtain, on terms reasonably acceptable to the Buyers, financing for the
portion of the Purchase Price payable at Closing. The Buyers shall have until
April 30, 1992, to obtain from a financial institution or other lender a
commitment to provide such financing. On May 1, 1992, the Buyers shall give to
the Seller written notice stating whether the Buyers have obtained or have
failed to obtain such commitment. If the Buyers fail to give such written notice
to the Seller on May 1, 1992, or if the Buyers give to the Seller such written
notice stating that the Buyers have Failed to obtain such commitment on or
before April 30, 1992, then either the Seller or the Buyers may terminate this
Agreement by giving written notice of notice to the other party to this
Agreement not later than May 2, 1992 whereupon all funds, documents and
instruments deposited in escrow by the Buyers shall be returned to the Buyers
and an funds, documents and instruments deposited in escrow by the Seller shall
be returned to the Seller. If neither the Seller nor the Buyers gives written
notice of termination to the other party to this Agreement pursuant to this
Section 7.17 on or before May 2, 1992, then (subject to the satisfaction or
waiver of the conditions set forth in Article IX) the transactions contemplated
by this Agreement shall be consummated as scheduled.
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<PAGE>
7.18 Delivery of Certain Documents. On the date of this Agreement,
-----------------------------
the Seller and the Buyers shall deliver to the other party the following
properly executed and acknowledged documents: the Charlevoix Lease, the Bethesda
Sublease, the Sedgwick Sublease and the Subleases.
ARTICLE VIII
CLOSING
8.01 Closing. The consummation of the purchase and sale of the
-------
Purchased Assets, the lease or sublease of the Bond-financed Owned Facilities,
the assumption of the Assumed Liabilities and the sublease of the Leased
Facilities under this Agreement, the Charlevoix Lease, the Bethesda Sublease,
the Sedgwick SubLease and the Subleases (the "Closing") shall take place
simultaneously at the offices of Bogle & Gates at Seattle, Washington, or at
such other place or on such other date as the Seller and the Buyers may agree in
writing. Subject to the expiration of all notice periods applicable under the
Employment Laws in connection with the termination of the employment of the
Employees as contemplated by Section 7.07(a), the Closing shall take place on
the first day of the calendar month immediately following the calendar month in
which the Seller and the Buyers shall have received all consents of all
governmental and regulatory authorities and an other Persons required for the
execution and delivery of this Agreement and the other Transaction Documents and
the consummation of the transactions contemplated by this Agreement and the
other Transaction Documents, or on such other date as the Seller and the Buyers
may agree in writing; provided that in no event shall the Closing take place
--------
prior to June 1, 1992 or later than July 31, 1992.
8.02 Conveyance; Sublease. At the Closing, the Seller shall convey
--------------------
to the Buyers the Real Property and the Improvements by deeds substantially in
the form of Exhibit F (the "Deeds"), subject to no Liens other than the
Permitted Liens. At the Closing, the Seller shall convey to the Buyers the
Inventory, the Permits, the Personal Property and the Records by bills of sale
and general assignments each substantially in the form of Exhibit G (the "Bills
of Sale"), subject to no Liens other than the Permitted Liens. At the Closing,
the Seller shall lease or sublease to the Buyers the Bond-financed Owned
Facilities by the Charlevoix Lease, the Bethesda Sublease and the Sedgwick
Sublease. At the Closing, the Seller shall sublease to the Buyers the Leased
Facilities by the Subleases. Any Liens to be discharged by the Seller may be
paid out of the Purchase Price at the Closing.
8.03 Possession and Risk of Loss. Possession of the Purchased Assets
---------------------------
and the Leased Facilities shall pass to the Buyers at the Closing. The Seller
shall bear the risk of loss of the Purchased Assets and the Leased Facilities
prior to the Closing. The Buyers shall bear the risk of loss of the Purchased
Assets and the Leased Facilities from and after the Closing.
8.04 Seller's Delivery of Documents at Closing. At the Closing, the
-----------------------------------------
Seller shall deliver or cause to be delivered to the Buyers the following
properly executed and, where appropriate, acknowledge documents:
(a) the Assignment and Assumption Agreements;
(b) the Deeds;
(c) the Bills of Sale;
(d) a binding commitment of the Title Company to issue the
Owner's Title Policy;
(e) originals or copies of the Assumed Contracts-and the
Permits;
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<PAGE>
(f) an affidavit of nonforeign status required pursuant to
section 1445 of the Internal Revenue Code, as amended;
(g) a certificate signed by the President or a Vice
President of the Seller, dated the Closing Date, certifying that the
representations and warranties of the Seller contained in this Agreement and in
any certificate or other writing delivered by the Seller pursuant to this
Agreement are true on and as of the Closing Date, as if made on and as of the
Closing Date, with only such exceptions as would not in the aggregate reasonably
be expected to have a Material Adverse Effect;
(h) certified copies of the resolutions of the board of
directors of the Seller approving and authorizing the execution, delivery and
performance by the Seller of this Agreement and the Subleases and the
consummation of the transactions contemplated thereby;
(i) an affidavit of the Seller with respect to mechanics'
and materialmen's liens;
(j) estoppel certificates from the lessors under the
Leases, in form and substance reasonably satisfactory to the Buyers;
(k) a written opinion of General Counsel to the Seller,
dated the Closing Date, substantially in the form of Exhibit H;
(l) a pharmacy partnership agreement, dated as of the
Closing Date, substantially in the form of ExhIbit I (the "Pharmacy Partnership
Agreement");
(m) a pharmacy management agreement dated as of the Closing
Date, substantially in the form of Exhibit J (the "Pharmacy Management
Agreement;
(n) a partnership agreement relating to rehab services,
dated as of the Closing Date, substantially in the form of Exhibit K (the "Rehab
Partnership Agreement");
(o) a management agreement relating to rehab services,
dated as of the Closing Date, substantially in the form of Exhibit L (the "Rehab
Management Agreement");
(p) accounting and data processing services agreements,
dated as of the Closing Date, each substantially in the form of Exhibit M (the
"Accounting Services Agreements"); and
(q) such other documents as may be reasonably required by
the Title Company.
8.05 Buyers' Delivery of Documents and Purchase Price at Closing. At
-----------------------------------------------------------
the Closing, the Buyers shall deliver or cause to be delivered to the Seller
cash or immediately available funds in an amount equal to $3,850,000 and the
Rent due on the Closing Date, and the following properly executed and, where
appropriate, acknowledged documents:
(a) the Assignment and Assumption Agreements;
(b) the Promissory Notes;
(c) the Mortgages;
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(d) Uniform Commercial Code financing statements naming the
Buyers, as debtors, and the Seller, as secured party, in appropriate forms for
filing in all jurisdictions as shall be necessary or appropriate to perfect the
security interest created by the Mortgages;
(e) written evidence of the insurance required by the
Mortgages, the charlevoix Lease, the Bethesda Sublease, the Sedgwick Sublease
and the Subleases;
(f) a binding commitment of the Title Company to issue the
Mortgagee's Title Policy;
(g) a certificate signed by the President of the General
Partner in the Buyers, dated the Closing Date, certifying that the
representations and warranties of the Buyers contained in this Agreement and in
any certificate or other writing delivered by the Buyers pursuant to this
Agreement are true in all material respects on and as of the Closing Date, as if
made on and as of the Closing Date;
(h) a written opinion of House & Blanco, P.A. counsel to
the Buyers, dated the Closing Date, substantially in the Form of Exhibit N;
(i) the Receipt and Assumption Agreements;
(j) the Guaranty;
(k) the Pharmacy Partnership Agreement;
(l) the Pharmacy Management Agreement;
(m) the Rehab Partnership Agreement;
(n) the Rehab Management Agreement;
(o) the Accounting Services Agreements; and
(p) a Kansas Real Estate Validation Questionnaire for the
Register of Deeds.
8.06 Certain Payments and Prorations. At the Closing:
-------------------------------
(a) the Seller shall pay all then unpaid Taxes that are to
be paid by the Seller on or prior to the Closing Date pursuant to Section 5.04;
(b) the Seller shall pay one-half of all then unpaid
transfer, documentary, sales, use, excise and similar Taxes which are assessed
upon or with respect to the sale, assignment, transfer, conveyance and delivery
of the Purchased Assets and the sublease of the Leased Facilities to the Buyers
and which are to be paid to the Seller on or prior to the Closing Date pursuant
to section 7.05(b);
(c) the Seller shall pay one-half of all recording and
filing fees with respect to any Transaction Document and any related financing
statement and otherwise with respect to the sale, assignment, transfer,
conveyance and delivery of the Purchased Assets and the sublease of the Leased
Facilities to the Buyers;
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<PAGE>
(d) the Seller shall pay all then unpaid charges that are
to be paid by the Seller on or prior to the Closing Date pursuant to Section
7.06;
(e) the Seller shall pay the premium for the Owner's Title
Policy at ordinary premium rates without any requirement for additional premiums
or charges for endorsements, surveys or of otherwise;
(f) the Seller shall pay any additional premiums or charges
for any endorsements (including any comprehensive or extended coverage
endorsements) or surveys that it requests in connection with the Mortgagee's
Title Policy;
(g) the Seller shall pay one-half of the Escrow Agent's
fees;
(h) the Buyers shall pay one-half of ad then unpaid
transfer, documentary, sales, use, excise and similar Taxes which are assessed
upon or with respect to the sale, assignment transfer, conveyance and delivery
of the Purchased Assets and the sublease of the Leased Facilities to the Buyers
and which are to be paid by the Buyers on or prior to the Closing Date pursuant
to SectIon 7.05(b);
(i) the Buyers shall pay one-half of all recording and
filing fees with respect to any Transaction Document and any related financing
statements and otherwise with respect to the sale, assignment, transfer,
conveyance and delivery of the Purchased Assets and the sublease of the Leased
Facilities to the Buyers;
(j) the Buyers shall pay all then unpaid charges, and shall
reimburse the Seller for the payment of any and all deposits and prepaid
amounts, that are to be paid or reimbursed by the Buyers on or prior to the
Closing Date pursuant to Section 7.06;
(k) the Buyers shall pay the premium for the Mortgagee's
Title Policy at ordinary premium rates without any requirement for additional
premiums or charges for endorsements, surveys or otherwise;
(l) the Buyers shall pay any additional premiums or charges
for any endorsements (including any comprehensive or extended coverage
endorsements) or surveys that it requests in connection with the Owner's Title
Policy; and
(m) the Buyers shall pay one-half of the Escrow Agent's
fees.
ARTICLE IX
CONDITIONS TO CLOSING
9.01 Conditions to the Obligations of Seller and Buyers. The
--------------------------------------------------
respective obligations of the Seller and the Buyers to consummate the
transactions contemplated by this Agreement are subject to the satisfaction of
the following conditions:
(a) Any applicable waiting period under the HSR Act
relating to the transactions contemplated by this Agreement shall have expired
or early termination of such waiting period shall have been granted.
(b) No court, arbitrator or governmental or regulatory
authority shall have issued any order, and there shall not be any law, rule,
regulation or ordinance, restraining or prohibiting
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the consummation of the transactions contemplated by this Agreement and no
proceeding challenging this Agreement or the transactions contemplated by this
Agreement or seeking to prohibit, alter, prevent or materially delay the Closing
shall have been instituted by any Person before any court, arbitrator or
governmental or regulatory authority and shall be pending.
(c) The Seller and the Buyers shall have received all
consents of any governmental or regulatory authority or any other Person
required for the execution and delivery of this Agreement, the Charlevoix Lease,
the Bethesda Sublease, the Sedgwick Sublease, the Subleases, the Deeds and the
consummation of the transactions contemplated by this Agreement.
(d) Any applicable notice period under any Employment Law
relating to the termination of the employment of the Employees contemplated by
Section 7.07 shall have expired.
9.02 Additional Conditions to the Obligation of Buyers. The
-------------------------------------------------
obligation of the Buyers to consummate the transactions contemplated by this
Agreement is further subject to the satisfaction of the Following conditions;
(a) The Seller shall have performed in all material
respects all of the Seller's obligations under this Agreement required to be
performed by the Seller at or prior to the Closing.
(b) The representations and warranties of the Seller
contained in this Agreement and in any certificate or other writing delivered by
the Seller pursuant to this Agreement shall be true on and as of the Closing
Date, as if made on and as of the Closing Date, with only such exceptions as
would not in the aggregate reasonably be expected to have a Material Adverse
Effect.
(c) The Buyers shall have received the documents required
by Section 8.04.
(d) The Buyers shall have received from the lessors under
the Leases in respect of the Leased Facilities listed in Schedule 1.01D the
option to purchase such Leased Facilities, provided, that any such option to
--------
purchase shall be expressly conditioned upon the unconditional release by such
lessor of the Seller and all affiliates of the Seller from all duties,
obligations and liabilities arising under or by reason of such Lease upon the
consummation of such purchase.
9.03 Additional Conditions to the Obligation of Seller. The
-------------------------------------------------
obligation of the Seller to consummate the transactions contemplated by this
Agreement is further subject to the satisfaction of the following conditions:
(a) The Buyers shall have performed in all material
respects all of the Buyers' obligations under this Agreement required to be
performed by the Buyers at or prior to the Closing.
(b) The representations and warranties of the Buyers
contained in this Agreement and in any certificate or other writing delivered by
the Buyers pursuant to this Agreement shall be true in all material respects on
and as of the Closing Date, as if made on and as of the Closing Date.
(c) The Seller shall have received cash or immediately
available funds in an amount equal to $3,850,000 and the Rent due on the Closing
Date, and the documents required by Section 8.05.
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ARTICLE X
SURVIVAL; INDEMNIFICATION
10.01 Survival. The covenants set forth in Sections 2.01, 2.11, 2.12,
--------
2.14, 5.07, 5.09, 5.10, 5.11, 5.12, 6.03, 6.04, 6.05, 7.06, 7.08. 7.09, 7.11,
10.01, 10.02 10.03, 10.04, 10.05 and 12.11 and in the Assignment and Assumption
Agreements, the Receipt and Assumption Agreements and the Deeds shall survive
the Closing indefinitely. The covenants, representations and warranties set
forth in Sections 2.07, 3.09, 3.15, 5.04, 5.05, 7.04, 7.05 and 7.07 shall
survive the Closing until the expiration of all applicable statutory periods of
limitations (after giving effect to any waiver, mitigation or extension of any
such statutory periods of limitations). Except as otherwise provided therein,
the covenants, representations and warranties of the Buyers set forth in Section
6.07 and in the Charlevoix Lease, the Bethesda Sublease, the Sedgwick Sublease,
the Promissory Notes, the Mortgages and the Subleases shall survive the Closing
until all obligations, of the Buyers thereunder shall have been paid and
performed in full. The covenant of the Seller set forth in Section 5.08 shall
survive the Closing until the expiration of the period specified therein. All
of the other covenants, representations and warranties of the Seller and the
Buyers set forth in this Agreement or in any certificate or other writing
delivered pursuant to this Agreement or in connection with this Agreement shall
survive the Closing until the second anniversary of the Closing Date.
Notwithstanding anything to the contrary set forth in this Section 10.01 or
elsewhere in this Agreement or any other Transaction Document, any covenant,
representation or warranty in respect of which indemnity may be sought under
section 10.02 or Section 10.03 shall survive the time at which such cover
representation or warranty would otherwise terminate pursuant to the preceding
two sentences if notice of the incorrectness or breach of such covenant,
representation or warranty giving rise to such right to indemnity shall have
been given to the party against whom such indemnity may be sought prior to the
time at which such covenant, representation or warranty would otherwise
terminate pursuant to the preceding two sentences. Any such notice shall
describe the event, circumstance or state of facts giving rise to the claimed
incorrectness or breach of such covenant, representation or warranty and the
Section or Sections of this Agreement or any other Transaction Document upon
which such right to indemnity is based.
10.02 Indemnification by Seller. The Seller hereby indemnifies and
-------------------------
agrees to defend and hold harmless the Buyers, the General Partner and the
employees and agents of the Buyers, and their respective successors and assigns,
from and against any and all Buyer Losses arising from or by reason of: (a) any
incorrectness or breach of any of the representations, warranties or covenants
of the Seller set forth in this Agreement or in any certificate or other writing
delivered pursuant to this Agreement or in connection with this Agreement; or
(b) any obligation or liability relating to any Excluded Asset; or (c) the
Seller's ownership, lease, use, operation, disposition or loss of any of the
Purchased Assets or the Leased Facilities prior to the Closing Date, but
expressly excluding the condition of any of the Purchased Assets and any use,
generation, manufacture, treatment storage, recycling transportation, disposal,
spill, leak or release of any Hazardous Substance in, on or under any Facility
or any of the other Purchased Assets prior to the Closing; provided that the
--------
Seller shall not be liable under this Section 10.02 unless the aggregate amount
of the Buyer Losses with respect to all matters referred to in this Section
10.02 (determined without regard to any materially qualification contained in
any representation, warranty or covenant giving rise to the claim for indemnity
under this Agreement) exceeds $5,000 and then only to the extent of such excess.
10.03 Indemnification by Buyers. The Buyers hereby indemnify and
-------------------------
agree to defend and hold harmless the Seller and the directors, officers,
employees and agents of the Seller, and their respective successors and assigns,
from and against any and all Seller Losses arising from or by reason of: (a) any
incorrectness or breach of any of the representations, warranties or covenants
of the Buyers set forth in this Agreement or in any certificate or other writing
delivered pursuant to this Agreement or in connection with this Agreement; (b)
any Assumed Liability; or (c) the ownership,
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<PAGE>
sublease, use, operation, condition, disposition or loss of any of the Purchased
Assets or the Leased Facilities, or the conduct of the business at any Facility,
on and after the Closing Date, including the employment or performance of any
Transferred Employee and any use, generation, manufacture, treatment, storage,
recycling, transportation, disposal, split, leak or release of any Hazardous
Substance in, on or under any Facility or any of the other Purchased Assets
after the Closing; provided that the Buyers shall not be liable under this
--------
Section 10.03 unless the aggregate amount of the Seller Losses with respect to
all matters referred to in this Section 10.03 (determined without regard to any
materiality qualification contained in any representation, warranty or covenant
giving rise to the claim for indemnity under this Agreement) exceeds $5,000 and
then only to the extent of such excess.
10.04 Procedures. The party seeking indemnification under Section
----------
10.02 or Section 10.03 (the "Indemnified Party") shall give prompt notice to the
party against whom indemnity is sought (the "Indemnifying Party") of the
assertion of any claim, or the commencement of any suit, action or proceeding,
in respect of which indemnity may be sought under Section 10.02 or Section
10.03, as the case may be. Such notice shall be accompanied by copies of any
claim, process, legal pleading or other document received by the Indemnified
Party from any Person (other than the Indemnified Party's legal counsel)
relating to any such claim, suit, action or proceeding. The Indemnifying Party
may, and at the request of the Indemnified Party shall, participate in and
control the defense of any such claim, suit, action or proceeding at the
Indemnifying Party's own expense: The party controlling the defense of any such
claim, suit, action or proceeding shall be entitled to employ counsel in
connection with such defense, and any counsel so employed shall be reasonably
acceptable to the other party to this Agreement. The Indemnifying Party shall
not be liable be under Section 10.02 or Section 10.03 for any Buyer Loss or any
Seller Loss, as the case may be, in respect of which indemnity may be sought if
any claim, suit, action or proceeding in respect of which indemnity is sought
under this Agreement with respect to such Buyer Loss or Seller Loss is Settled
or Seller without the prior consent of the Indemnifying Party, which consent
shall not be unreasonably withheld.
10.05 Exclusivity. After the Closing, this ArtIcle X and the
-----------
provisions of the Charlevoix Lease, the Bethesda Sublease, the Sedgwick
Sublease, the Promissory Notes, the Mortgages, the Subleases and the Guaranty
shall provide the exclusive remedies for the incorrectness or breach of any
representation, warranty or covenant (other than those contained in Sections
5.07, 5.08 and 6.04) set forth in this Agreement or in any certificate or other
writing delivered pursuant to this Agreement or in connection with this
Agreement.
ARTICLE XI
TERMINATION
11.01 Grounds for Termination. This Agreement may be terminated at
-----------------------
any time prior to the Closing:
(a) by mutual written agreement of the Seller and the
Buyers;
(b) by the Seller or the Buyers pursuant to Section 7.16 or
if the Closing shall not have taken place on or before July 31, 1992;
(c) by the Buyers pursuant to Section 7.10, Section 7.12
Section 7.13 or Section 7.17;
(d) by the Seller or the Buyers if there shall be any
applicable law, rule, regulation or ordinance that makes the consummation of the
transactions contemplated by this Agreement illegal or otherwise prohibited or
if consummation of the transactions contemplated by this
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Agreement would violate any non-appealable final order, decree or judgment of
any court or governmental or regulatory body having competent jurisdiction; or
(e) by the Seller or the Buyers if any of the conditions to
Closing shall not have been fulfilled or waived.
The party to this Agreement desiring to terminate this Agreement pursuant to
clause (b) clause (c) clause (d) or clause (e) of this Section 11.01 shall give
notice of such termination to the other party to this Agreement.
11.02 Effect of Termination. If this Agreement is terminated as
---------------------
permitted by Section 11.01, then such termination shall be without liability of
either party to this Agreement (or the General Partner or any shareholder,
director, officer, employee, agent, consultant or representative of such party)
to the other party to this Agreement; provided that if any termination of this
--------
Agreement or any other failure to consummate the transactions contemplated by
this Agreement, shall result from the willful failure of the Seller to fulfill a
condition to the performance of the obligations of the Buyers or to perform a
covenant of this Agreement to be performed by the Seller, then, in recognition
of the difficulty or impossibility of determining the amount of actual damages
that would be suffered by the Buyers, the Seller agrees to pay to the Buyers,
and the Buyers agree to accept from the Seller, as liquidated damages, and not
as a penalty, an aggregate amount equal to $250,000, and such termination or
other failure to consummate the transactions contemplated by this Agreement,
shall be willful failure liability of the Seller (or any shareholder, director,
officer, employee, agent, consultant or representative of the Seller) to the
Buyers; provided, further, that if any termination of this Agreement, or any
-------- -------
other failure to consummate the transaction contemplated by this Agreement,
shall result from the willful failure of the Buyers to fulfill a condition to
the performance of the obligations of the Seller or to perform a covenant of
this Agreement to be performed by the Buyers, then, in recognition of the
difficulty or impossibility of determining the amount of actual damages that
would be suffered by the Seller, the Buyers agree to pay to the Seller, and the
Seller agrees to accept form the Buyers, liquidated damages, and not as a
penalty, an aggregate amount equal to $250,000, and such termination or other
failure to consummate the transactions contemplated by this Agreement shall be
without further liability of the Buyers (or the General Partner or any employee,
agent consultant or representative of the Buyers) to the Seller. Each of the
Seller and the Buyers agree that the aggregate amount of $250,000 is a
reasonable estimate as of the date of this Agreement of the amount of damages
that would be suffered by either party to this Agreement if any termination of
this Agreement, or any other failure to consummate the transactions contemplated
by this Agreement, shall result from the willful failure of the other party to
fulfill a condition to performance or to perform a covenant of such other party
to be performed by such other party. The provisions of Section 12.04 shall any
failure to consummate the transactions contemplated by this Agreement, whether
by reason of any termination of this Agreement or otherwise.
ARTICLE XII
MISCELLANEOUS
12.01 Notices. Except as otherwise provided in this Agreement all
-------
notices, consents, requests and other communications to any party under or in
connection with this Agreement or the Promissory Notes shall be in writing and
shall be sent via personal delivery, via telephone facsimile transmission, via
certified or registered mail, return receipt requested, or via express courier
or delivery service, addressed to such party at such party's address or
telephone facsimile number set forth below or at such other address or telephone
facsimile number as shall be designated by such party in a written notice given
to each other party complying as to delivery with the terms of this Section
12.01:
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<PAGE>
if to the Seller, at:
c\o The Hillhaven Corporation
The Cornerstone Building
1148 Broadway Plaza
Tacoma, Washington 96402
Attn: Vice President
Acquisitions and Development
Facsimile: (206) 756-4871
with a copy to:
The Hillhaven Corporation
The Cornerstone Building
1148 Broadway Plaza
Tacoma, Washington 96402
Attn: General Counsel
Facsimile: (206) 75-4845 or (206) 756-4743
if to the Buyers, at:
c/o Don G. Angell
P.O. Box 1670
Clemmons, North Carolina 27012
Facsimile: (919) 998-2560
c/o Daniel D. Mosca
4901 Holly Ridge Drive
Raleigh, North Carolina 27612
Facsimile: (919) 783-9981
with a copy to:
George E. Hollodick
House & Blanco. P.A.
215 Executive Park Boulevard
P.O. Drawer 25008
Winston-North Carolina 27114-5008
Facsimile: (919) 765-4830
An such notices, consents, requests and other communications shall be deemed
given (a) when given and receipted for (or upon the date of attempted delivery
when delivery is refused), if sent via personal delivery, via certified or
registered mail, return receipt requested, or via express courier or delivery
service or (b) when received, if sent via telephone facsimile transmission
(confirmation of such receipt via confirmed telephone facsimile transmission
being deemed receipt of any such notice, consent request or other communication
sent via telephone facsimile transmission).
12.02 Amendments, Etc. No amendment or waiver of any provision of
---------------
this Agreement or the Promissory Notes, nor consent to any departure by either
the Seller or the Buyers from any such provision shall in any event be effective
unless such amendment, waiver or consent is in a writing which specifically
refers to this Section 12.02 and which is signed by the Buyers and by the
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<PAGE>
Chief Executive Officer or the President of the Seller, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
12.03 No Waivers, Remedies Cumulative. No Failure by either party to
-------------------------------
this Agreement to exercise, and no delay by either party in exercising, any
right, power or privilege under this Agreement shall operate as a waiver of such
right, power or privilege, and no single or partial exercise of any such right,
power or privilege shall preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
provided in this Agreement and the other Transaction Documents shall be
cumulative and not exclusive of a,ny rights or remedies provided by law.
12.04 Expenses. Except as others provided in this Agreement, all
--------
costs and expenses incurred in connection with the negotiation, preparation,
execution and delivery of this Agreement and the other Transaction Documents
shall be paid by the party incurring such cost or expense.
12.05 Successors and Assigns. The provisions of this Agreement shall
----------------------
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that neither party may assign,
--------
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other party to this Agreement.
12.06 Joint and Several Liability. All obligations of the Buyers in
---------------------------
this Agreement shall be joint and several.
12.07 Counterparts; Effectiveness. This Agreement may be executed in
---------------------------
any number of counterparts and by different parties to this Agreement in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
Agreement Delivery of an executed counterpart of a signature page to this
Agreement via telephone facsimile transmission shall be effective as delivery of
a manually executed counterpart of this Agreement. This Agreement shall become
effective when each of the Seller and the Buyers shall have received a
counterpart of this Agreement executed by the other party to this Agreement.
12.08 Entire Agreement. This Agreement and the other Transaction
----------------
Documents constitute the entire agreement between the Seller and the Buyers with
respect to the subject matter of this Agreement and supersede all prior
agreements, understandings and negotiations, both written and oral, between the
Seller and the Buyers with respect to the subject matter of this Agreement. No
representation, inducement, promise, understanding, condition or warranty that
is not set forth in this Agreement or any other Transaction Document has been
made or relied upon by either the Seller or the Buyers. Neither this Agreement
nor any provision of this Agreement is intended to confer any rights or remedies
under this Agreement upon any Person other than the Seller, the Buyers and their
respective successors and permitted assigns.
12.09 Severability. Any provision of this Agreement that is
------------
prohibited or unenforceable in any jurisdiction shall be ineffective, as to such
jurisdiction, to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
12.10 Captions. The table of contents and the headings of the
--------
Articles, Sections, subsections, paragraphs and other divisions of this
Agreement are included for convenience of reference only, and shall not in any
way limit or affect the construction or interpretation of any provision of this
Agreement.
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<PAGE>
12.11 Arbitration. Any dispute or controversy arising out of or
-----------
relating to this Agreement, but excluding any dispute or controversy arising out
of or relating to any of the other Transaction Documents, shall be settled by
arbitration to be held in Kansas City, Missouri, in accordance with the rules of
the American Arbitration Association or its successor. The decision of the
arbitrator shall be conclusive and binding on the parties to the arbitration.
Judgment may be entered on the arbitrator's decision in any court having
jurisdiction and the Seller and the Buyers shall irrevocably consent to the
jurisdiction of the courts of the State of Washington or the federal courts of
the United States of America for the Western District of the State of Washington
for this purpose. The prevailing party in any arbitration shall be entitled to
recover from the nonprevailing party the costs and expenses of maintaining such
arbitration, including reasonable attorneys' fees and disbursements incurred
before such arbitration is commenced, during arbitration, and on appeal.
12.12 Bulk Sales Laws. The Seller and the Buyers hereby waive
---------------
compliance by the Seller with the provisions of the "bulk sales," "bulk
transfer" or similar laws of any state or other jurisdiction. The Seller agrees
to indemnify and hold the Buyers harmless against any and all claims, losses,
damages, liabilities, costs and expenses incurred by the Buyers as a result of
any failure to comply with any such "bulk sales," "bulk transfer" or similar
laws.
12.13 Governing Laws. This Agreements shall be deemed to be a
--------------
contract made under the laws of the State of Washington, and for all purposes
shall be governed by, and construed in all respects (including matters of
construction, validity and performance) in accordance with, the laws of the
State of Washington, without regard to the conflicts of law rules of such state.
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<PAGE>
IN WITNESS WHEREOF, the Seller and the Buyers have caused this
Agreement to be duly executed as of the date first above written.
FIRST HEALTHCARE CARE
By [SIGNATURE NOT LEGIBLE]
----------------------------
Title: Vice President of
Acquisitions and Development
MEADOWBROOK MANOR OF BALDWIN LIMITED
PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE NOT LEGIBLE]
___________________________
Title: President
MEADOWBROOK MANOR OF JOPLIN LIMITED
PARTNERSHIP I
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE NOT LEGIBLE]
___________________________
Title: President
MEADOWBROOK MANOR OF COUNCIL GROVE
LIMITED PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE NOT LEGIBLE]
___________________________
Title: President
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<PAGE>
MEADOWBROOK MANOR OF HAYSVlLLE LIMITED
PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE NOT LEGIBLE]
___________________________
Title: President
MEADOWBROOK MANOR OF ST. CHARLES
LIMITED PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE NOT LEGIBLE]
___________________________
Title: President
MEADOWBROOK MANOR OF OVERLAND PARK
LIMITED PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE NOT LEGIBLE]
___________________________
Title: President
MEADOWBROOK MANOR TERRACE OF
OVERLAND PARK LIMITED PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE NOT LEGIBLE]
___________________________
Title: President
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<PAGE>
MEADOWBROOK MANOR OF CHANUTE LIMITED
PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE NOT LEGIBLE]
___________________________
Title: President
MEADOWBROOK MANOR OF SPRINGFIELD
LIMITED PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE NOT LEGIBLE]
___________________________
Title: President
MEADOWBROOK MANOR OF TOPEKA LIMITED
PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE NOT LEGIBLE]
___________________________
Title: President
MEADOWBROOK MANOR OF WICHITA LIMITED
PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE NOT LEGIBLE]
___________________________
Title: President
-42-
<PAGE>
MEADOWBROOK MANOR OF COLUMBIA LIMITED
PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE NOT LEGIBLE]
___________________________
Title: President
MEADOWBROOK MANOR OF SEDGWICK LIMITED
PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE NOT LEGIBLE]
___________________________
Title: President
MEADOWBROOK MANOR COLONIAL TERRACE
OF INDEPENDENCE LIMITED PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Patter
By [SIGNATURE NOT LEGIBLE]
___________________________
Title: President
MEADOWBROOK MANOR OF LARNED LIMITED
PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE NOT LEGIBLE]
___________________________
Title: President
-43-
<PAGE>
MEADOWBROOK MANOR APARTMENTS OF
LARNED LIMITED PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE NOT LEGIBLE]
___________________________
Title: President
MEADOWBROOK MANOR OF AVA LIMITED
PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE NOT LEGIBLE]
___________________________
Title: President
MEADOWBROOK MANOR OF BUFFALO LIMITED
PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE NOT LEGIBLE]
___________________________
Title: President
MEADOWBROOK MANOR OF CLINTON LIMITED
PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE NOT LEGIBLE]
___________________________
Title: President
-44-
<PAGE>
MEADOWBROOK MANOR OF DES PERES LIMITED
PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE NOT LEGIBLE]
--------------------------------
Title: President
MEADOWBROOK MANOR OF JEFFERSON LIMITED
PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE NOT LEGIBLE]
--------------------------------
Title: President
MEADOWBROOK MANOR OF MARCELINE LIMITED
PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE NOT LEGIBLE]
--------------------------------
Title: President
MEADOWBROOK MANOR OF JOPLIN LIMITED
PARTNERSHIP II
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE NOT LEGIBLE]
--------------------------------
Title: President
-45-
<PAGE>
MEADOWBROOK MANOR OF LAMAR LIMITED
PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE NOT LEGIBLE]
___________________________
Title: President
MEADOWBROOK MANOR OF SHADY OAKS
LIMITED PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE NOT LEGIBLE]
___________________________
Title: President
MEADOWBROOK MANOR OF CRANE LIMITED
PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE NOT LEGIBLE]
___________________________
Title: President
MEADOWBROOK MANOR OF KIMBERLING CITY
LIMITED PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE NOT LEGIBLE]
___________________________
Title: President
-46-
<PAGE>
MEADOWBROOK MANOR RESIDENTIAL OF
KIMBERLING CITY LIMITED PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE NOT LEGIBLE]
___________________________
Title: President
MEADOWBROOK MANOR WORNALL OF KANSAS
CITY LIMITED PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE NOT LEGIBLE]
___________________________
Title: President
MEADOWBROOK MANOR BLUE HILLS OF KANSAS
CITY LIMITED PARTNERSHIP I
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE NOT LEGIBLE]
___________________________
Title: President
-47-
<PAGE>
MEADOWBROOK MANOR RESIDENTIAL OF
KIMBERLING CITY LIMITED PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE NOT LEGIBLE]
___________________________
Title: President
MEADOWBROOK MANOR WORNALL OF KANSAS
CITY LIMITED PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE NOT LEGIBLE]
___________________________
Title: President
MEADOWBROOK MANOR BLUE HILLS OF KANSAS
CITY LIMITED PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE NOT LEGIBLE]
___________________________
Title: President
<PAGE>
Schedule 1.01B
to
Facility Agreement
Owned Facilities and Certain Bonds
PART A
------
Owned Facilities
Facility Name and Location
- --------------------------
Clayton House Healthcare (445)
Ballwin, Missouri
Columbia House Healthcare (446)
Columbia, Missouri
Country Club Home (809)
Council Grove, Kansas
Green Meadows Nursing Center (861)
Haysville, Kansas
Hammond Holiday Home (857)
Larned, Kansas
Hammond Holiday Apartments (858)
Larned, Kansas
Hillhaven-Topeka (838)
Topeka, Kansas
Hillhaven-Wichita (844)
Wichita, Kansas
Indian Creek Nursing Center (895)
Overland Park, Kansas
Indian Meadows Nursing Center (896)
Overland Park, Kansas
Medicenter-Springfield (834)
Springfield, Missouri
Tradition House Healthcare (260)
Joplin, Missouri
-1- SCHEDULE 1.01B
<PAGE>
Schedule 1.01B
to
Facility Agreement
Owned Facilities and Certain Bonds
PART B
------
Bond-Financed Owned Facilities
Facility Name and Location Related Bonds
- -------------------------- -------------
Bethesda Nursing Center (803)* City of Chanute, Kansas Industrial
Chanute, Kansas Development Revenue Bonds (Hillhaven
Project) Series 1983
Charlevoix Nursing Center (823)* The Industrial Development Authority of
St. Charles, Missouri St. Charles County, Missouri, Industrial
Development Revenue Bonds (Hillhaven
Project) Series 1983
Sedgwick Convalescent Center (833)* City of Sedgwick, Kansas Industrial
Sedgwick, Kansas Development Revenue Bonds (Nursing Home
Facility) Series A, 1974, and City of
Sedgwick, Kansas, Industrial Development
Revenue Bonds (Sedgwick Convalescent
Center, Inc. Tenant) Series A, 1978
* Sale is subject to the payment or prepayment and redemption of the related
Bonds. See Section 2.01 of the Facility Agreement.
-2- SCHEDULE 1.01B
<PAGE>
Schedule 1.01C
to
Facility Agreement
Leased Facilities
Facility Name and Location
- --------------------------
Colonial Terrace-Independence (845)
Independence, Kansas
Colonial Lodge-Independence (846)
Independence, Kansas
Crestview Healthcare (251)
Ava, Missouri
Hickory Lane Care Center (253)
Buffalo, Missouri
Sycamore View Healthcare (254)
Clinton, Missouri
Des Peres Health Care (255)
Des Peres, Missouri
Hillside Healthcare (256)
Jefferson, Missouri
Marceline Healthcare (257)
Marceline, Missouri
Joplin House Healthcare (259)
Joplin, Missouri
Lakeview Health Care Center (261)
Lamar, Missouri
Shady Oaks Health Care Center (262)
Thayer, Missouri
Crane Health Care Center (263)
Crane, Missouri
Table Rock Health Care Center (265)
Kimberling City, Missouri
Table Rock Health Care Center Residential Project (266)
Kimberling Cit, Missouri
Wornall Health Care Center (819)
Kansas City, Missouri
-1- SCHEDULE 1.01C
<PAGE>
Facility Name and Location
- --------------------------
Blue Hills Living Center (843)
Kansas City, Missouri
Blue Hills Centre (860)
Kansas City, Missouri
-2- SCHEDULE 1.01C
<PAGE>
Schedule 1.01D
to
Facility Agreement
List of Leased Facilities
As to Which Buyers Shall Have Been Assigned
Option to Purchase
Facility Name and Location
- --------------------------
Crestview Healthcare (251)
Ava, Missouri
Hickory Lane Care Center (253)
Buffalo, Missouri
Sycamore View Healthcare (254)
Clinton, Missouri
Des Peres Health Care (255)
Des Peres, Missouri
Hillside Healthcare (256)
Jefferson, Missouri
Marceline Healthcare (257)
Marceline, Missouri
Joplin House Healthcare (259)
Joplin, Missouri
Lakeview Health Care Center (261)
Lamar, Missouri
Shady Oaks Health Care Center (262)
Thayer, Missouri
SCHEDULE 1.01D
<PAGE>
Schedule 1.01E
to
Facility Agreement
Part A
Real Property
Legal Description
for
Tradition House Healthcare (260)
(Joplin, Missouri)
Beginning at the intersection of the South line of Twenty-eighth Street and the
West line of Jackson Avenue, if extended, thence South and parallel with the
West line of Jackson Avenue, if extended, 535 feet, more or less, to a point 135
feet South of the North line of the Southeast Quarter (SE1/4) of the Southwest
Quarter (SW1/4) of Section 15, Township 27, Range 33, thence West parallel with
the North line of said Southeast Quarter of the Southwest Quarter a distance of
325 feet, thence North and parallel with the West line of Jackson Avenue, if
extended, to the South line of Twenty-eight Street, thence Easterly and on the
South line of Twenty-eighth Street to the point of beginning, the same being
part of Miscellaneous Tracts Four (4) and Five (5) in Section 15, Township 27,
Range 33, and all of Lots Numbered One (1), Two (2), Three (3) and Four (4) and
a portion of Lot Numbered Five (5) in BRIARCLIFF ADDITION, SECOND PLAT, to the
City of Joplin, Jasper County, Missouri, according to the recorded Plat thereof.
SCHEDULE 1.01E
<PAGE>
Schedule 1.01E
to
Facility Agreement
Part A
Real Property
Legal Description
for
Clayton House Healthcare (445)
(Ballwin, Missouri)
PARCEL 1: A tract of land in Section 13, Township 45 North, Range East, St.
Louis County, Missouri, and described as follows: Beginning at the point on the
North line of Clayton Road, 60 feet wide, from which point the intersection of
the west line of said Section 19 with said North line of Clayton Road bears
South 84 degrees 31 minutes west 12.07 feet: thence North 0 degrees 52 minutes
East, along a line parallel with and 12.00 feet East, measured perpendicular to
the west line of said Section 19, 941.71 feet to a point: thence south __
degrees 59 minutes west 12.00 feet to a point on the west line of said Section
19; thence North 0 degrees 51 minutes East, along the west line of said Section
19, 198.82 feet to a point; thence South 89 degrees 07 minutes 30 seconds East
475.04 feet to a point; thence South __degrees__minutes 30 second West 1191.57
east to a point on said North __ of Clayton Road: thence South 84 degrees 51
minutes West, along said North line of Clayton Road, 465.73 feet to the point of
beginning.
PARCEL 2: The East Twelve (12) feet of the following described tract: A tract
of land in Section 24, Township 45 North, Range 4 East, and Section 19, Township
45 North, Range 5 East, St. Louis County, Missouri, and described as follows:
Beginning at a point on the North line of Clayton Road, 60 feet wide, distant
North __ degrees 51 minutes East 12.07 feet from the intersection of the West
line of said Section 19 with the North line of said Clayton Road; thence South
84 degrees 51 minutes West 368.70 feet to a point; thence South 65 degrees 45
minutes 48 seconds west 141.25 feet to a point on the East line of Old Woods
Mill Road (40 feet wide); thence South 1 degree 55 minutes 57 seconds Est 35.66
feet to a point; thence North 14 degrees 33 minutes 06 seconds East, 419.59 feet
to a point; thence North 8 degrees 50 minutes 51 seconds East, 144.25 feet to a
point; thence North 14 degrees 32 minutes 50 seconds West, 350.15 feet to a
point; thence North 89 degrees 58 minutes 30 seconds East 484.16 feet to a
point; thence North 0 degrees 52 minutes East 11.56 feet to a point; thence __
89 degrees 59 minutes East 12.00 feet to a point; thence South __ degrees, 52
minutes West 941.72 feet to the point of beginning.
13991 Clayton Rd. & 13999 Clayton Rd. (Parcel 1)
930 Old Woods Mill Rd. (Parcel 2)
SECHDULE 1.0
<PAGE>
Schedule 1.01E
to
Facility Agreement
Part A
Real Property
Legal Description
for
Columbia House Healthcare (446)
Columbia, Missouri
TRACT SIX (6) OF WHITE GATE COMMUNITY AS SHOWN BY THE PLAT RECORDED IN PLAT BOOK
7, PAGE 15, RECORDS OF BOONE COUNTY, MISSOURI.
SCHEDULE 1.01E
<PAGE>
Schedule 1.01E
to
Facility Agreement
Part A
Real Property
Legal Description
for
Bethesda Nursing Center (803)
(Chanute, Kansas)
Beginning at a point on the West line of the NE 1/4 of Section 29, Township 27
South, Range 18 East of the 6th P.M., 50 feet North of the Southwest corner or
said NE 1/4; thence North, along the West line of said quarter, a distance of
623.4 feet; thence South 88 degrees 45' East, a distance of 137.2 feet to the
West side of Lafayette Avenue; thence S 01 degrees 16' West a distance of 27.63
feet to the South side of Twelfth Street; thence S 88 degrees 51' E a distance
of 187.0 feet to the Northeast corner of Lot 28 of Block 4 of Park Place Second
Addition; thence South 1 degree 16' W a distance of 604.05 feet to the North
Right of Way line of Fourteenth Street; thence N 87 degrees 15'10" W along the
North Right-of-way line, a distance of 310.54 feet to the point of beginning,
subject to any part thereof in street, road or highway, now in and a part of the
City of Chanute, Neosho County, Kansas.
SCHEDULE 1.01E
<PAGE>
Schedule 1.01E
to
Facility Agreement
Part A
Real Property
Legal Description
for
Country Club Home (809)
(Council Grove, Kansas)
Lots 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 42, 43, 44, 45, 46, 47,
48, 49 and 50, West Highland Addition to the City of Council Grove; and vacated
Kansas Street lying adjacent to its Lots 1 15, both inclusive and Lots 48, 49,
and 50, in said subdivision; and tract of land in Section 15, Township 16, Range
8, described as follows: Beginning at a point being the Southwest corner of Lot
5 West Highland Addition to the City of Council Grove, and thence proceeding in
a Westerly direction and extending the South boundary line of said Lot 50, 285.5
feet; thence in a Northerly direction parallel with the West line of said Lot 50
and Lot 1 of said West Highland Addition to the City of Council Grove, 234.81
feet; thence an Easterly direction 285.5 feet to a point designated as the
Northwest corner of Lot 1, West Highland Addition to the City of Council Grove;
thence in a Southerly direction along the West line said Lot 1 and Lot 50 of the
West Highland Addition to the City of Council Grove to the point of beginning,
all in Morris County, Kansas.***
SCHEDULE 1.03E
<PAGE>
Schedule 1.01E
to
Facility Agreement
Part A
Real Property
Legal Description
for
Charlevoix Nursing Center (823)
(St. Charles, Missouri)
A tract of land in Lot No. 34 in Block 9 of Steen and Cunningham Survey of the
St. Charles Commons, Township 46 North, Range 5 East, more particularly
described as follows: Beginning at an iron pipe at the intersection of the South
right-of-way line of Boonslick Road, 60 feet wide, with the common lot line of
Lot 31 of Boone's Survey and Lot 34, Block 9, Steen and Cunningham's Survey;
thence South 59 degrees 28' West, 203.00 feet to the place of beginning of the
tract herein described; thence South 59 degrees 28' West, along the Southern
right-of-way of Boonslick Road, 13.83 feet to an iron pipe; thence continuing
along the Southern right-of-way of Boonslick Road South 73 degrees 45' West
170.88 feet to an iron pipe; thence continuing along the Southern right-of-way
of Boonslick Road South 81 degrees 51' West, 241.19 feet to an iron pipe; thence
leaving said Southern right-of-way the following bearings and distances: South 8
degrees 07' West, 391.29 feet to an iron pipe; on the Northern right-of-way line
of Interstate Highway 70; thence South 65 degrees 35' East, along said right-of-
way line 376.36 feet to an iron pipe; thence North 13 degrees 35' 30" East,
590.03 feet to an iron pipe; thence North 11 degrees 01' 30" West, 59.57 feet to
the place of beginning of the tract herein described.
SCHEDULE 1.01E
<PAGE>
Schedule 1.01E
to
Facility Agreement
Part A
Real Property
Legal Description
for
Sedgwick Convalescent Center (833)
Sedgwick, Kansas
TRACT 1:
Lots Forty-five (45), Forty-seven (47) and Forty-nine (49) on Seventh Street in
Hurd's Addition to the City of Sedgwick, Kansas as shown by the recorded plat
thereof.
TRACT 2:
Lots Thirty-nine (39), Forty-one (41) and Forty-three (43) on Seventh Street in
Hurd's Addition to the City of Sedgwick, Kansas, as shown by the recorded plat
thereof.
TRACT 3:
All of Block "F" on Eight Street, Hurd's Addition to the City of Sedgwick,
Kansas, and Lots Fifty-one (51), Fifty-three (53), Fifty-five (55), Fifty-seven
(57), Fifty-nine (59), Sixty-one (61), Sixty-three (63), Sixty-five (65), Sixty-
seven (67) and Sixty-nine (69) on Seventh Street, in Hurd's Addition to the City
of Sedgwick, Kansas.
SCHEDULE 1.01E
<PAGE>
Schedule 1.01E
to
Facility Agreement
Part A
Real Property
Legal Description
for
Medicenter-Springfield (834)
(Springfield, Missouri)
THE EAST ONE-HALF (E 1/2) OF LOTS FIFTY-THREE (53) AND FIFTY-FOUR (54), EXCEPT
THE SOUTH SEVENTY-SIX (76) FEET OF LOT FIFTY-FOUR (54) LATOKA HEIGHTS SUB-
DIVISION, IN SPRINGFIELD, GREENE COUNTY, MISSOURI ACCORDING TO THE RECORDED PLAT
THEREOF.
SCHEDULE 1.01E
<PAGE>
Schedule 1.01E
to
Facility Agreement
Part A
Real Property
Legal Description
for
Hillhaven-Topeka (838)
Topeka, Kansas
The South 6 1/4 feet of Lot 221, all of Lots 223, 225, 227, 229, 231, 233, 235
and 237, Garfield Street, BRIGHAM'S ADDITION, and Lots 226, 228, 230, 232, 234,
236, 238, 240 and the North 6 1/4 feet of Lot 242, Mulvane Street, formerly
Morris Avenue, MARTIN PLACE ADDITION, all in the City of Topeka, Shawnee County,
Kansas, together with that part of the vacated alley lying adjacent to said
lots.
SCHEDULE 1.01E
<PAGE>
Schedule 1.01E
to
Facility Agreement
Part A
Real Property
Legal Description
for
Hillhaven-Wichita (844)
Wichita, Kansas
Parcel 1:
All of Lot 5, on Topeka Avenue, in Tuttle's Addition to the City of Wichita,
Sedgwick County, Kansas.
Parcel 2:
All of Lots 2, 4, 6, 8, 10, 12, 14, 16, 18, 20 and 22 on Topeka Avenue, in Clio
Addition to the City of Wichita, Sedgwick County, Kansas, together with the west
10 feet of the vacated alley adjacent to Lots 2, 4, 20 and 22, as vacated by
Ordinance No. 30-686 and by Ordinance No. 30-222.
SCHEDULE 1.01E
<PAGE>
Schedule 1.01E
to
Facility Agreement
Part A
Real Property
Legal Description
for
Hammond Holiday Home (857)
(Larned, Kansas)
TRACT 1: All of Blocks Seven (7) and Eight (8), of the Larned Community
Development Corporation Addition No. 3 to the City of Larned, Pawnee County,
Kansas, LESS AND EXCEPT TRACT 2 described below.
TRACT 2: A tract situate in Block Seven (7) and Eight (8), a portion of vacated
12th Street situate between said Blocks 7 and 8 and the vacated alley of Block
7, Larned Community Development Corporation Addition No. 3, to the City of
Larned, Pawnee County, Kansas, described as follows: Commencing at the Southeast
corner (SEc) of Block 6, L.C.D.C. No. 3, for a point of beginning, thence North
along the East line of Block 8, 257.00 feet to a point; thence West parallel
with the South line of Block 8, 81.00 feet to a point; thence North parallel
with the East line of Block 8, 43.00 feet to a point; thence West parallel with
the South line of Block 8, 142.00 feet to a point; thence North parallel with
the East line of Block 7, 180.00 feet to a point on the South right of way of
the alley through Block 7; thence West along the South alley right of way,
343.59 feet to a point on the East right of way of Morris Avenue; thence South
along the East right of way of Morris Avenue, 480.00 feet to a point at the
Southwest corner (SWc) of Block 8; thence East along the South boundary of Block
8, 565.51 feet to the point of beginning.
SCHEDULE 1.01E
<PAGE>
Schedule 1.01E
to
Facility Agreement
Part A
Real Property
Legal Description
for
Hammond Holiday Apartments (858)
(Larned, Kansas)
TRACT 1: All of Blocks Seven (7) and Eight (8), of the Larned Community
Development Corporation Addition No. 3 to the City of Larned, Pawnee County,
Kansas, LESS AND EXCEPT TRACT 2 described below.
TRACT 2: A tract situate in Block Seven (7) and Eight (8), a portion of vacated
12th Street situate between said Blocks 7 and 8 and the vacated alley of Block
7, Larned Community Development Corporation Addition No. 3, to the City of
Larned, Pawnee County, Kansas, described as follows: Commencing at the
Southeast corner (SEc) of Block 8, L.C.D.C. No. 3, for a point of beginning,
thence North along the East line of Block 8, 257.00 feet to a point; thence West
parallel with the South line of Block 8, 81.00 feet to a point; thence North
parallel with the East line of Block 8, 43.00 feet to a point; thence West
parallel with the South line of Block 8, 142.00 feet to a point; thence North
parallel with the East line of Block 7, 180.00 feet to a point on the South
right of way of the alley through Block 7; thence West along the South alley
right of way, 343.59 feet to a point on the East right of way of Morris Avenue;
thence South along the East right of way of Morris Avenue, 480.00 feet to a
point at the Southwest corner (SWc) of Block 8; thence East along the South
boundary of Block 8, 565.51 feet to the point of beginning.
SCHEDULE 1.01E
<PAGE>
Schedule 1.01E
to
Facility Agreement
Part A
Real Property
Legal Description
for
Green Meadows Nursing Center (861)
(Haysville, Kansas)
Lot 2, Replat of Blocks 6 and 7, Green Meadows Addition, Haysville, Sedgwick
County, Kansas.
SCHEDULE 1.01E
<PAGE>
Schedule 1.01E
to
Facility Agreement
Part A
Real Property
Legal Description
for
Indian Creek Nursing Center (895)
(Overland Park, Kansas)
All that part of Tract 4, METCALF 103, a subdivision of land now the City of
Overland Park, Johnson County, Kansas, more particularly described as follows:
Beginning at the Northwesterly corner of said Tract 4; thence North 68 degrees
31 minutes 24 seconds East, along the Northerly line of said Tract 4, a distance
of 319.37 feet; thence South 60 degrees minutes 31 seconds East, along the
Northerly line of said Tract 4 distance of 269.12 feet, to the Northeasterly
corner thereof; the South 2 degrees 07 minutes 20 seconds East, along the East
line o: said Tract 4, a distance of 558.60 feet, to a point on the Easterly
extension of the centerline of a 15 foot water line easement to Water District
No. 1 of Johnson County, Kansas, as filed in Volume 1032 Page 879 in the Office
of the Register of Deeds of Johnson County Kansas; thence South 88 degrees 58
minutes 59 seconds West, along centerline and its extension of said 15 foot
water line easement, distance of 340.43 feet, to a point on the Westerly line of
said Tract 4; thence Northwesterly, along the Westerly line of said Tract 4,
said line being on a curve to the left, having a radius of 11.56, feet, a
central angle of 3 degrees 47 minutes 22 seconds and whose initial tangent
bearing is Northwest 19 degrees 59 minutes 55 seconds West, a distance of 103.17
feet, to a point of tangency; thence N 23 decrees 47 minutes 17 seconds West,
along the Westerly line of said Tract 4, a distance of 260 feet to a point of
curvature; the: Northwesterly, along the Westerly line of said Tract 4, said
line being on a curve to the right, having a radius of 1,270 feet and central
angle of 4 degrees 19 minutes, a distance of 95.68 feet; thence North 10 degrees
11 minutes 36 seconds West, along the Westerly line of said Tract 4, a distance
of 75,82 feet; thence Northwesterly, along the Westerly line of said Tract 4,
said line being on a curve to the right, having a radius of 1,260 feet, a
central angle of 3 degrees 48 minutes 44 seconds, and whose initial tangent
bearing is North 16 degrees 04 minutes West, a distance of 83.84 feet, to the
point of beginning.
SCHEDULE 1.01E
<PAGE>
Schedule 1.01E
to
Facility Agreement
Part A
Real Property
Legal Description
for
Indian Meadows Nursing Center (896)
(Overland Park, Kansas)
TRACT I:
The South 350 feet of the West 350 feet of the Northeast 1/4 of the Northwest
1/4 of Section 8, Township 13, Range 25, in the City of Overland Park, in
Johnson County, Kansas, together with the easements described in Tract III.
TRACT II:
All that part of the West 1/2 of the Northeast 1/4 of the Northwest 1/4 of
Section 8, Township 13, Range 25, in the City of Overland Park, Johnson County,
Kansas, described as follows: Beginning at a point on the West line of said 1/4,
1/4 Section, said point being North 0 degrees 0 minutes 54 Seconds West a
distance of 400 feet from the Southwest corner of said 1/4, 1/4 Section; thence
North 0 degrees 0 minutes 54 seconds West along the West line of said 1/4, 1/4
Section a distance of 491.18 feet; thence North 89 degrees 59 minutes 06 seconds
East a distance of 36.02 feet to a point on the Westerly line of a roadway
easement granted in Miscellaneous Book 205, at Page 88 and Misc. Book 206, at
Page 414; thence Southeasterly along a curve to the right, the initial tangent
having a bearing of South 56 degrees 37 minutes 35 seconds East, having a radius
of 588.88 feet; a distance of 152.55 feet; thence along a curve to the right,
tangent
SCHEDULE 1.01E
<PAGE>
to the last mentioned curve having a radius of 856.50 feet, a distance of 131.30
feet; thence along a curve to the right, tangent to the last mentioned curve,
having a radius of 1407.50 feet, a distance of 98.26 feet; thence along a curve
to the right, tangent to the last mentioned curve, having a radius of 384.26
feet, a distance or 127.43 feet; thence South 10 degrees East a distance of 14
feet; thence along a curve to the left having the last described course as a
tangent, having a radius of 343.50 feet, a distance of 72.36 feet to a point 400
feet North of the South line of said 1/4, 1/4 Section thence South 80 degrees
(deeded) 89 degrees (measured) 53 minutes 59 seconds West and parallel to the
South line of said 1/4, 1/4 Section a distance of 346.03 feet to the point of
beginning; and also the North 50 feet of the South 400 feet of the West 350 feet
of the West 1/2 of the Northeast 1/4 of the Northwest 1/4 of Section 8, Township
13, Range 25, in the City of Overland Park, Johnson County, Kansas, together
with the easements described in Tract III.
TRACT III:
Permanent easements and right-of-way for ingress and egress and for signs
appurtenant to the aforesaid premises, as recorded in Misc. Book 204, at Page
88, as File No. 847494, over the following described property:
All that part of the Northeast 1/4 of the Northwest 1/4 of Section 8 Township
13, Range 25, now in the City of Overland Park, Johnson County, Kansas, more
particularly described as follows: Beginning a point on the North line of the
Northeast 1/4 of the Northwest 1/4 of said Section 8 and 65 feet East of the
Northwest corner thereof; thence South 0 degrees 04 minutes 08 seconds East,
along a line perpendicular to the North line of the Northeast 1/4 of said
Section 8, a distance of 40 feet to the true point of beginning of subject
tract; thence North 89 degrees 55 minutes 52 seconds East, a distance of 20
feet; thence South 0 degrees 04 minutes 08 seconds East, a distance of 25 feet;
thence Northwesterly to the true point of beginning of subject tract, and all
that part of the Northeast 1/4 of the Northwest 1/4 of Section 8, Township 13,
Range 25, now in the City of Overland Park, Johnson County, Kansas, more
particularly described as follows: Beginning at a point on the North line of the
Northeast 1/4 of the Northwest 1/4 of said Section 8 and 155 feet East of the
Northwest corner thereof; thence South 0 degrees 04 minutes 08 seconds East,
along a line perpendicular to the North line of the Northeast 1/4 of the
Northwest 1/4 of said Section 8 a distance of 40 feet, to the true point of
beginning of subject tract thence South 89 degrees 55 minutes 52 seconds West, a
distance of 20 feet; thence South 0 degrees 04 minutes 08 seconds East, a
distance of 25 feet; thence Northeasterly, to the true point of beginning of
subject tract; and permanent easements for roadway, utility services and the
right of ingress and egress, as recorded in Misc. Book 205, at Page 88, as File
No. 849273, and in Misc. Book 206, at Page 414, as File No. 852253, over the
following described property:
A strip of land 50 feet in width across a part of the Northeast quarter of the
Northwest quarter of Section 8, Township 13, Range 25
SCHEDULE 1.01E
<PAGE>
now in the City of Overland Park, Johnson County, Kansas, lying 25 feet on each
side of the following described centerline: Beginning at a point on the North
line of the Northeast quarter of the Northwest quarter of said Section 8 and 110
feet East of the Northwest corner thereof; thence South 0 degrees 04 minutes 08
seconds East, along a line perpendicular to the North line of the Northeast
quarter of the Northwest quarter of said Section 8, a distance of 110 feet to a
point of curvature; thence southerly and Southwesterly, along a curve to the
right having a radius of 818.5 feet, a distance of 316.99 feet; thence
Southeasterly, along a curve to the right having a radius of 613.88 feet and
whose initial tangent bearing is South 56 degrees 37 minutes 35 seconds East, a
distance of 159.03 feet, to a point of compound curvature; thence Southeasterly
along a curve to the right having a radius of 881.50 feet, a distance of 135.13
feet, to a point of compound curvature; thence Southeasterly along a curve to
the right having a radius of 1432.5 feet, a distance of 100.01 feet, to a point
of compound curvature; thence Southeasterly and southerly along a curve to the
right having a radius of 409.26 feet, a distance of 135.72 feet; to a point of
tangency; thence South 10 degrees 00 minutes East, a distance of 14 feet, to a
point of curvature; thence southerly and southeasterly, along a curve to the
left having a radius of 318.50 feet, a distance of 266.83 feet ... and ...
Beginning at a point on the West line of the Northeast quarter of the Northwest
quarter of said Section 8 an 375 feet North of the South line of the Northeast
quarter of the Northwest quarter of said Section 8; thence easterly, along a
line 375 feet North of and parallel to the South line of the Northeast quarter
of the Northwest quarter of said Section 8, a distance of 385.90 feet; and a
strip of land 10 feet wide adjacent to and parallel with the West line of the
entire tract of land described the above easement for roadway purposes.
SCHEDULE 1.01E
<PAGE>
Schedule 2.03(a)
to
Facility Agreement
Certain Assumed Liabilities
All obligations and liabilities for any and all services and all goods
(including, but not limited to, perishable and nonperishable food, central
supplies, linen, housekeeping and other supplies) that are ordered by or on
behalf of the Seller in the ordinary course prior to the Closing Date for
provision to, or use in connection with the operation of, any of the Facilities,
and which are provided or received at such Facilities after the Closing Date.
SCHEDULE 2.03(A)
<PAGE>
[Schedule 2.07 - Allocation Schedule]
<PAGE>
Schedule 2.08(c)
to
Facility Agreement
Promissory Note Principal Amounts
<TABLE>
<CAPTION>
Promissory Notes (as identified
by the respective Owned Facilities) Principal Amounts
----------------------------------- -----------------
<S> <C>
Bethesda Nursing Center (803) $ 922,500.00*
Chanute, Kansas
Charlevoix Nursing Center (823) 1,617,300.00**
St. Charles, Missouri
Clayton House Healthcare (445) 7,760,700.00
Ballwin, Missouri
Columbia House Healthcare (446) 2,340,000.00
Columbia, Missouri
Country Club Home (809) 2,700,000.00
Council Grove, Kansas
Green Meadows Nursing Center (861) 4,131,000.00
Haysville, Kansas
Hammond Holiday Home/Apartments (857/858) 1,597,500.00
Larned, Kansas
Hillhaven-Topeka (838) 3,591,000.00
Topeka, Kansas
Hillhaven-Wichita (844) 513,000.00
Wichita, Kansas
Indian Creek Nursing Center (895) 1,516,500.00
Overland Park, Kansas
Indian Meadows Nursing Center (896) 1,516,500.00
Overland Park, Kansas
</TABLE>
_________________________
* Initially, to be paid by the applicable Buyer as Rent pursuant to the
Bethesda Sublease. See Section 2.01 of the Facility Agreement.
** Initially, to be paid by the applicable Buyer as Rent pursuant to the
Charlevoix Lease. See Section 2.01 of the Facility Agreement.
-1- SCHEDULE 2.08(C)
<PAGE>
<TABLE>
<S> <C>
Medicenter-Springfield (834) 4,050,000.00
Springfield, Missouri
Sedgwick Convalescent Center (833) 990,000.00***
Sedgwick, Kansas
Tradition House Healthcare (260) 1,404,000.00
Joplin, Missouri
</TABLE>
_________________________
***Initially, to be paid by the applicable Buyer as Rent pursuant to the
Sedgwick Sublease. See Section 2.01 of the Facility Agreement
-2- SCHEDULE 2.08(C)
<PAGE>
Schedule 2.11
to
Facility Agreement
Subsidy Reduction Upon Certain Sublease Terminations
<TABLE>
<CAPTION>
Facility Name and Location Percentage Subsidy Reduction
-------------------------- ----------------------------
<S> <C>
Crestview Healthcare (251) 4.92 %
Ava, Missouri
Hickory Lane Care Center (253) 3.28
Buffalo, Missouri
Des Peres Health Care (255) 4.10
Des Peres, Missouri
Hillside Healthcare (256) 8.20
Jefferson, Missouri
Marceline Healthcare (257) 6.97
Marceline, Missouri
Lakeview Health Care Center (261) 4.43
Lamar, Missouri
Shady Oaks Health Care Center (262) 2.46
Thayer, Missouri
Crane Health Care Center (263) 1.64
Crane, Missouri
Table Rock Health Care Center (265) 5.75
Kimberling City, Missouri
Table Rock Health Care Center
Residential Project (266) 3.28
Kimberling City, Missouri
Wornall Health Care Center (819) 32.82
Kansas City, Missouri
Blue Hills Living Center/Centre (843/860) 22.15
Kansas City, Missouri
</TABLE>
SCHEDULE 2.11
<PAGE>
Schedule 2.12
to
Facility Agreement
Subsidy Reduction
PART A
------
Census as of 02/12/92
<TABLE>
<CAPTION>
Facility Name and Location Census
-------------------------- ------
<S> <C>
Crestview Healthcare (251) 64.0
Ava, Missouri
Hickory Lane Care Center (253) 53.0
Buffalo, Missouri
Sycamore View Healthcare (254) 80.6
Clinton, Missouri
Des Peres Health Care (255) 37.8
Des Peres, Missouri
Hillside Healthcare (256) 47.3
Jefferson, Missouri
Marceline Healthcare (257) 17.9
Marceline, Missouri
Joplin House Healthcare (259) 67.8
Joplin, Missouri
Tradition House Healthcare (260) 71.3
Joplin, Missouri
Lakeview Health Care Center (261) 56.8
Lamar, Missouri
Shady Oaks Health Care Center (262) 74.0
Thayer, Missouri
Crane Health Care Center (263) 64.0
Crane, Missouri
Table Rock Health Care Center (265) 64.3
Kimberling City, Missouri
Clayton House Healthcare (445) 97.7
Ballwin, Missouri
</TABLE>
-1- SCHEDULE 2.12
<PAGE>
<TABLE>
<CAPTION>
Facility Name and Location Census
-------------------------- ------
<S> <C>
Columbia House Healthcare (446) 101.8
Columbia, Missouri
Wornall Health Care Center (819) 49.0
Kansas City, Missouri
Charlevoix Nursing Center (823) 85.4
St. Charles, Missouri
Medicenter-Springfield (834) 71.5
Springfield, Missouri
Blue Hills Centre (860) 55.5
Kansas City, Missouri
</TABLE>
-2- SCHEDULE 2.12
<PAGE>
Schedule 2.12
to
Facility Agreement
Subsidy Reduction
PART B
------
Missouri Medicaid Per Diem Rate
<TABLE>
<CAPTION>
Facility Name and Location Medicaid Per Diem Rate
-------------------------- ----------------------
<S> <C>
Crestview Healthcare (251) $35.60
Ava, Missouri
Hickory Lane Care Center (253) 36.97
Buffalo, Missouri
Sycamore View Healthcare (254) 41.62
Clinton, Missouri
Des Peres Health Care (255) 46.04
Des Peres, Missouri
Hillside Healthcare (256) 48.60
Jefferson, Missouri
Marceline Healthcare (257) 43.62
Marceline, Missouri
Joplin House Healthcare (259) 40.45
Joplin, Missouri
Tradition House Healthcare (260) 40.72
Joplin, Missouri
Lakeview Health Care Center (261) 35.60
Lamar, Missouri
Shady Oaks Health Care Center (262) 39.14
Thayer, Missouri
Crane Health Care Center (263) 55.56
Crane, Missouri
Table Rock Health Care Center (265) 54.81
Kimberling City, Missouri
Clayton House Healthcare (445) 56.98
Ballwin, Missouri
</TABLE>
-1- SCHEDULE 2.12
<PAGE>
<TABLE>
<CAPTION>
Facility Name and Location Medicaid Per Diem Rate
-------------------------- ----------------------
<S> <C>
Columbia House Healthcare (446) $47.83
Columbia, Missouri
Wornall Health Care Center (819) 56.98
Kansas City, Missouri
Charlevoix Nursing Center (823) 56.98
St. Charles, Missouri
Medicenter-Springfield (834) 54.15
Springfield, Missouri
Blue Hills Centre (860) 56.98
Kansas City, Missouri
</TABLE>
-2- SCHEDULE 2.12
<PAGE>
Schedule 2.12 - Subsidy Reduction
PART C
------
<PAGE>
Schedule 3.04
to
Facility Agreement
Seller Litigation
1. Joplin House Healthcare (259). The facility received a letter
-----------------------------
from the lawyer of a resident alleging that the resident suffered head and
facial injuries while being transferred from an Arjo Century Tub. The lawyer
indicated an intent to make a formal demand in the matter.
2. Tradition House Healthcare (260). A lawsuit was filed in Newton
--------------------------------
County on July 20, 1990, by the children of a deceased former resident of the
facility. The children allege that the former resident's death was wrongful due
to failure of the attending physician and the Seller to provide proper care for
the former resident's diabetic condition.
3. Clayton House Healthcare (445). A lawsuit was filed in the
------------------------------
Circuit Court for St. Louis County in April of 1990 by the wife and children of
a deceased former resident who suffered from Alzheimer's disease and died as a
result of a fall. The wife and children allege that the former resident's death
was wrongful due to the negligent failure of the Seller to restrain and monitor
the former resident.
4. Columbia House Healthcare (446). A lawsuit was filed on April
-------------------------------
16,1992, by a resident of the facility who was allegedly injured while being
transported by a driver employed by the facility.
5. Sedgwick Convalescent Center (833). Pursuant to an annual survey
----------------------------------
performed in February of 1992 by the State of Kansas on behalf of the federal
government, the facility received a Level A deficiency with respect to its
ability to meet the care needs of individual residents. Upon subsequent re-
survey, the State removed the Level A deficiency.
6. Blue Hills Living Center (843). The facility received a letter
------------------------------
from the lawyer of a resident of the facility who was allegedly injured in an
automobile accident occurring while an employee of the facility was attempting
to take the resident to a medical appointment using the employee's car. The
lawyer requested the resident's medical records.
7. Hillhaven Convalescent Center - Wichita (844). A lawsuit was
---------------------------------------------
filed in Sedgwick County on January 6. 1992, by a delivery person who claims to
be suffering from health problems resulting from an incident in which he
allegedly was splashed with and inhaled potassium hydroxide while delivering
food to the facility.
8. Blue Hills Centre (860). A lawsuit was filed in Jackson County on
-----------------------
July 30, 1991, by a resident of the facility who alleges she suffered injuries
(broken hips) as a result of the Seller's negligence.
9. Blue Hills Centre (860). A lawsuit was filed in Jackson County on
-----------------------
March 4, 1991, by the general contractor who constructed the facility. The
general contractor alleges that NME Properties Corporation and Hillhaven
Properties. Ltd. acted wrongfully in claiming structural problems and making
only a partial payment.
-1- SCHEDULE 3.04
<PAGE>
10. Blue Hills Centre (860). A complaint was filed with the EEOC by a
-----------------------
former employee of the facility alleging that the former employee suffered
discrimination due to his race.
11. Green Meadows Nursing Center (861). A complaint was filed with
----------------------------- ----
the EEOC by a former employee of the facility alleging that the former employee
suffered discrimination at the facility due to her age and gender.
12. Indian Meadows Nursing Center (896). A complaint was filed with
------------------------------ ----
the EEOC by a former employee of the facility who claims she was constructively
discharged in January of 1991 as a result of being sexually harassed by another
employee at the facility. The EEOC is currently investigating the claim.
13. All Facilities. There are a total of 117 workers' compensation
--------------
claims outstanding for a total incurred of $1,657,606.
14. Certain Facilities. The following items reflect matters regarding
------------------
which the Seller has been contacted by a lawyer, but which reasonably are not
expected to have a Material Adverse Effect.
a. Hillside Healthcare (256). On or near September 1,1990, the
-------------------------
Seller received a letter from a lawyer requesting medical records of a resident
who is dissatisfied with the care the resident received at the facility.
b. Hillside Healthcare (256). On or near August 4,1991, the
-------------------------
Seller received a letter from a lawyer regarding a resident who suffered a hip
injury at the facility.
c. Hillhaven - Wichita (844). On or near April 16, 1991, the
-------------------------
Seller received a letter from a lawyer requesting medical records of a resident.
d. Green Meadows Nursing Center (861). On or near November 15,
----------------------------------
1990, the Seller received a letter from a lawyer alleging that the Seller did
not care for a now deceased former resident in a timely manner.
-2- SCHEDULE 3.04
<PAGE>
Schedule 3.08 - Licensure
<PAGE>
Schedule 3.10
to
Facility Agreement
Life Care Contracts
None.
SCHEDULE 3.10
<PAGE>
Schedule 4.04
to
Facility Agreement
Buyer Litigation
None.
SCHEDULE 4.04
<PAGE>
Exhibit A
to
Facility Agreement
ASSIGNMENT AND ASSUMPTION AGREEMENT
This ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of
[____________________], 1992 (this "Agreement"), is made between FIRST
HEALTHCARE CORPORATION, a Delaware corporation (the "Seller"), and
[______________________], a North Carolina limited partnership (the "Buyer").
RECITALS
A. The Seller and the Buyer and affiliates of the Buyer have entered
into a Facility Agreement, dated as of April 23, 1992 (the "Facility
Agreement").
B. The execution and delivery of this Agreement by the Seller and
the Buyer is a condition precedent to the respective obligations of the Seller
and the Buyer and such Affiliates to consummate the transactions contemplated by
the Facility Agreement
NOW, THEREFORE, in consideration of the premises and the covenants and
agreements set forth in this Agreement, and for other valuable consideration,
the receipt and sufficiency of which are hereby acknowledged by the Seller and
the Buyer, the Seller and the Buyer agree as follows:
1. The Seller hereby sells, assigns, transfers and conveys to the
Buyer the Seller's right, title and interest in, to and under, and hereby
delegates to the Buyer the Seller's duties and obligations under, (a) the
leases, licenses, contracts and agreements listed or otherwise described in
Schedule 1 (individually, an "Assumed Contract" and collectively, the "Assumed
Contracts") and (b) the obligations and liabilities listed or otherwise
described in Schedule 2 (all such obligations and liabilities, together with all
duties, obligations and liabilities of the Seller under the Assumed Contracts
(other than obligations or liabilities attributable to any failure by the Seller
to comply with the provisions of the Assumed Contracts prior to the date of this
Agreement), being individually an "Assumed Liability" and collectively the
"Assumed Liabilities".
2. The Buyer hereby accepts the sale, assignment, transfer and
conveyance of the Seller's right, title and interest in, to and under, and the
delegation of the Seller's duties and obligations under, the Assumed Contracts
and the Assumed Liabilities. The Buyer hereby assumes the Assumed Contracts and
the Assumed Liabilities. The Buyer hereby further agrees to pay, perform and
discharge promptly and fully when due the Assumed Liabilities and timely to
perform and observe the covenants, agreements, terms and conditions of the
Assumed Contracts on the Seller's part to be performed and observed on or after
the date of this Agreement in the same manner and with the same force and effect
as if the Buyer had originally executed the Assumed Contracts in the place and
stead of the Seller.
3. Notwithstanding anything in this Agreement to the contrary, (i)
this Agreement shall not constitute a sale, assignment, transfer, conveyance or
delegation of any Assumed Contract or any duty, obligation or liability under
any Assumed Contract, if an attempted
-1- EXHIBIT A
<PAGE>
assignment thereof, without the consent of any third party, would constitute a
breach or other contravention of such Assumed Contract or would result in the
cancellation, termination, invalidity or unenforceability of such Assumed
Contract or would in any other way adversely affect the rights and benefits of
the Seller or the Buyer under such Assumed Contract, and (ii) this Agreement
shall not affect the respective rights and obligations of the Seller and the
Buyer under Sections 10.02 and 10.03 of the Facility Agreement.
4. If any action or proceeding is commenced to enforce or interpret
this Agreement, the prevailing party shall be entitled to recover from the non-
prevailing party the costs and expenses of maintaining such action or
proceeding, including reasonable attorneys' fees and disbursements (including
reasonable charges allocated for internal corporate counsel) incurred before
such action or proceeding is commenced, before trial, at trial, after trial and
on appeal, whether the action or proceeding is at law, in equity or in a
bankruptcy case or proceeding.
5. This Agreement shall be binding upon, and shall inure to the
benefit of, the Seller, the Buyer and their respective successors and assigns.
6. This Agreement may be executed in any number of counterparts and
by different parties to this Agreement in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute but one and the same Agreement. Delivery of an
executed counterpart of a signature page to this Agreement via telephone
facsimile transmission shall be effective as delivery of a manually executed
counterpart of this Agreement.
7. The Buyer hereby irrevocably submits to the jurisdiction of any
court of the State of Washington or any federal court of the United States of
America for any district of the State of Washington, and any appellate court
from any of such courts, in any action or proceeding arising from or by reason
of, or otherwise relating to, this Agreement, and the Buyer hereby irrevocably
agrees that all claims in respect of such action or proceeding may be heard and
determined in such court of the State of Washington or in such federal court of
the United States of America for any district of the State of Washington. The
Buyer, to the fullest extent permitted by applicable law, hereby irrevocably
waives the defense of an inconvenient forum to the maintenance of such action or
proceeding. The Buyer agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this
Section 7 shall affect the right of the Seller to serve legal process in any
other manner permitted by law or shall affect the right of the Seller to bring
any action or proceeding against the Buyer or the Buyer's property in the courts
of any other jurisdictions.
8. Each of the Seller and the Buyer hereby irrevocably waives all
right to trial by jury in any action, proceeding or counterclaim (whether based
upon contract, tort or otherwise) arising from or by reason of or relating to
this Agreement or any actions of the Seller or the Buyer in the negotiation,
administration, performance or enforcement of this Agreement
9. This Agreement shall be deemed to be a contract made under the
laws of the State of Washington, and for all purposes shall be governed by, and
construed in all respects (including matters of construction, validity and
performance) in accordance with, the laws of the State of Washington, without
regard to the conflicts of law rules of such state.
-2- EXHIBIT A
<PAGE>
IN WITNESS WHEREOF, the Seller and the Buyer have caused this
Agreement to be duly executed as of the date first above written.
FIRST HEALTHCARE CORPORATION [NAME OF THE BUYER]
By MEADOWBROOK MANOR OF KANSAS
& MISSOURI, INC.,
General Partner
By____________________
Title:___________________
By ____________________
Title:_____________________
-3- EXHIBIT A
<PAGE>
Schedule 1
to
Assignment and Assumption Agreement
Assumed Contracts
-----------------
[Reserved.]
EXHIBIT A
<PAGE>
Schedule 2
to
Assignment and Assumption Agreement
Certain Assumed Liabilities
---------------------------
1. All obligations and liabilities for any and all services and all goods
(including, but not limited to, perishable and nonperishable food,
central supplies, linen, housekeeping and other supplies) that are
ordered by or on behalf of the Seller in the ordinary course prior to
the date of this Agreement for provision to, or use in connection with
the operation of, the [name of Facility] located in [__________,
____________] (the "Facility"), and which are provided or received at
the Facility after the date of this Agreement.
2. [Reserved.]
EXHIBIT A
<PAGE>
CONSENT AND RELEASE
The undersigned hereby acknowledges notice of, and hereby consents to
the terms and provisions of, the foregoing Assignment and Assumption Agreement,
dated as of [________________], 1992 (the "Assignment"), between FIRST
HEALTHCARE CORPORATION, a Delaware corporation (the "Seller"), and
[_____________________], a North Carolina limited partnership (the "Buyer"). The
undersigned hereby releases the Seller and all subsidiaries and other affiliates
of the Seller from all duties, obligations and liabilities arising under or by
reason of the Assigned Agreement (as defined below) on and after the date of the
Assignment.
For the purposes of this Consent and Release, the term "Assigned
Agreement" means that certain [_____________________], dated [as of]
[__________________], 19[____], between the Seller and the undersigned, as the
same has been supplemented, amended or otherwise modified.
DATED: [____________], 1992
[NAME OF CONSENTING PARTY]
By _____________________________
Title: ______________________
EXHIBIT A
<PAGE>
Exhibit B
to
Facility Agreement
PROMISSORY NOTE
$[______________]/1/ Tacoma, Washington
[________], 1992/2/
FOR VALUE RECEIVED, the undersigned, [________________], a North Carolina
limited partnership (the "Maker"), HEREBY PROMISES TO PAY to the order of FIRST
HEALTHCARE CORPORATION, a Delaware corporation (the "Payee"), the principal sum
of [_________________________________ and /100] Dollars
($[_________________])/3/, plus interest, on the terms set forth below.
1. Interest. The unpaid principal sum of this Promissory Note shall bear
--------
interest, from the date of this Promissory Note until such principal sum is paid
in full, at the rates of interest per annum (the "Regular Rate") equal to:
(a) Nine percent (9%) per annum from [________], 1992/4/, to
[_________] 199[__]/5/; and
(b) Eleven percent (11%) per annum from [________], 199[_____]/6/, to
[___________], 199[___]/7/;
provided that any amount of principal of this Promissory Note that is not paid
- --------
when due (whether at stated maturity, by acceleration or otherwise) shall bear
interest, from the date on which such amount is due until such amount is paid in
full, payable on demand, at a rate per annum (the "Default Rate") equal at all
times to the sum of the Regular Rate plus five percent (5%) per annum.
2. Repayment and Interest The Maker shall pay the principal of, and the
----------------------
interest on, this Promissory Note in consecutive monthly installments of
principal and interest as follows:
_______________________
/1/ Insert the appropriate principal amount from Schedule A attached hereto.
/2/ Insert the Closing Date.
/3/ Insert the appropriate principal amount from Schedule A attached hereto.
/4/ Insert the Closing Date.
/5/ Insert the first day of the 42nd month following the month in which the
Closing occurs.
/6/ Insert the first day of the 42nd month following the month in which the
Closing occurs.
/7/ Insert the first day of the 84th month following the month in which the
Closing occurs.
-1- EXHIBIT B
<PAGE>
(a) consecutive monthly installments of principal and interest in the
amount of [____________] and [____]/100] Dollars
($[__________________])/8/, payable on the first day of each calendar
month, commencing on [________________], 1992/9/, and ending on
[______________], 199[____]/10/; and
(b) consecutive monthly installments of principal and interest in the
amount of [____________] and [____]/100] Dollars
($[__________________])/11/, payable on the first day of each calendar
month, commencing on [________________], 199[____]/12/, and ending on
[_________________], 199[____]/13/;
provided that the final installment on [___________________], 199[____]/14/,
- --------
shall be in the amount necessary to pay in full the then unpaid principal amount
of this Promissory Note plus all interest then accrued on this Promissory Note.
3. Application of Payments. Except as otherwise expressly provided in
-----------------------
this Promissory Note, each payment under this Promissory Note, at the option of
the Payee, may be applied first to any costs and expenses payable by the Maker
under this Promissory Note, then to any late charges payable under this
Promissory Note, then to interest then accrued, and then to principal.
4. Prepayments: Release Premium. So long as no Event of Default shall
----------------------------
have occurred and be continuing, the Maker may prepay the unpaid principal
amount of this Promissory Note, in whole or in part, plus accrued interest to
the date of such prepayment on the principal amount prepaid, plus any late
charges then payable under this Promissory Note, plus any costs and expenses
then payable under this Promissory Note; provided that each partial prepayment
--------
shall be in a principal amount of not less than $5,000; provided, further that
-------- -------
upon prepayment in whole of the unpaid principal amount of this Promissory Note
plus such accrued interest, late charges and costs and expenses the Maker shall
pay to First Healthcare Corporation, a Delaware corporation, a release premium
(the "Release Premium") in an amount, determined at the date of such prepayment,
equal to five percent of the principal amount of this Promissory Note that would
then have been outstanding if this Promissory Note had been timely paid in
accordance with the regularly scheduled required installment payments provided
for in Section 2 without regard to any prepayments. The Release Premium shall be
applied as provided in the Mortgage (as defined below). Each partial prepayment
of this Promissory Note shall be applied first to any costs and expenses then
payable by the Maker under this Promissory Note, second to any late charges then
payable under this Promissory Note, third to interest then accrued on this
Promissory Note, and then to the principal installments under this Promissory
Note in the inverse order of their maturities without deferral or limitation of
the intervening installments of principal or interest.
_______________________
/8/ Compute on the basis of a 30-year amortization schedule.
/9/ Insert the first day of the month immediately following the month in which
the Closing occurs.
/10/ Insert the first day of the 42nd month following the month in which the
Closing occurs.
/11/ Compute on the basis of a 30-year amortization schedule.
/12/ Insert the first day of the 43rd month following the month in which the
Closing occurs.
/13/ Insert the first day of the 84th month following the month in which the
Closing occurs.
/14/ Insert the first day of the 84th month following the month in which the
Closing occurs.
-2- EXHIBIT B
<PAGE>
5. Late Charge. If any installment of principal or interest is not paid
-----------
within ten days after such installment becomes due and payable, then the Maker
shall pay a late charge, with respect to each such delinquent installment, equal
to the lesser of (a) five percent of the amount of such delinquent installment
or (b) $500.00. The Maker acknowledges that the actual damages that the Payee
would incur due to the Maker's late payment are impossible to determine
accurately and that such late charge is a reasonable estimate of such actual
damages.
6. Payments and Computations.
-------------------------
(a) All payments under this Promissory Note shall be payable in
lawful money of the United States of America, to the Payee at P.O. Box 34138,
Seattle, Washington 98124-1138, Attention: Corporate Accounting, or at such
other place as the Payee may specify in writing from time to time. Whenever any
payment to be made under this Promissory Note is stated to be due on a day when
banks are required or authorized to close in Raleigh, North Carolina, or Tacoma,
Washington, such payment may be made on the next succeeding day on which banks
are not so required or authorized to close, and such extension of time shall in
such case be included in the computation of payment of interest.
(b) All computations of interest shall be made by the Payee on the
basis of a year of 360 days, in each case for the actual number of days
(including the first day, but excluding the last day) occurring in the period
for which such interest is payable.
(c) Whenever the computation of a period of time from a specified
date to a later specified date is required by this Promissory Note, the word
"from" shall mean "from and including" and each of the words "to" and "until"
shall mean "to but excluding."
7. Security. This Promissory Note and payment of the sums evidenced
--------
by this Promissory Note are secured by a [Mortgage,] [Deed of Trust,]
Assignment, Security Agreement and Financing Statement (Fixture Filing), dated
of even date with this Promissory Note (said agreement, as it may be
supplemented, amended or otherwise modified from time to time, being the
"Mortgage"), executed and delivered by the Maker to the Payee.
8. Guaranty. Payment of twenty percent (20%) of the Makers total
--------
obligations at any time outstanding under this Promissory Note in respect of
principal, interest and any late charges, has been jointly and severally
guaranteed by Don G. Angell and Daniel D. Mosca (together, the "Guarantors"),
pursuant to a Guaranty, dated of even date with this Promissory Note, for the
benefit of the Payee.
9. Events of Default; Remedies. If any of the following events
---------------------------
("Events of Default") shall occur and be continuing:
(a) The Maker shall fail to pay any principal of, or interest
on, this Promissory Note within ten days alter the same becomes due and payable;
or
(b) The Maker shall fail to pay any other sum (whether for
premium, fees, expenses or otherwise) under this Promissory Note, the Mortgage
or the Facility Agreement (as defined below) when and as the same become due and
payable, whether on any stated due date, at maturity or upon acceleration, and
such failure shall remain unremedied for ten days after written notice of such
failure shall have been given to the Maker by the Payee; or
(c) Any representation or warranty made by the Maker (or any
general partner in the Maker or any officers of any general partner in the
Maker) or any Guarantor under or in connection
-3- EXHIBIT B
<PAGE>
with any Transaction Document (as defined in the Facility Agreement) shall prove
to have been incorrect in any material respect when made; or
(d) The Maker shall fail at any time to obtain, provide,
maintain or keep in force the insurance policies required by the Mortgage; or
(e) The Maker shall fail to perform or observe any other
provision contained in any Transaction Document on the Maker's part to be
performed or observed a such failure shall remain unremedied beyond the
applicable grace period for such provision or, if no such grace period is
applicable, if such failure shall remain unremedied for thirty days after
written notice of such failure shall have been given to the Maker by the Payee;
or
(f) The Maker shall fail to pay any principal of or premium or
interest on any indebtedness (but excluding indebtedness evidenced by this
Promissory Note) of the Maker in an aggregate principal amount of at least
$100,000 at any one time outstanding, when the same becomes due and payable
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise), and such failure shall continue after the applicable grace period,
if any, specified in any agreement or instrument relating to such indebtedness;
or any other event shall occur or condition shall exist under any agreement or
instrument relating to any such indebtedness and shall continue after the
applicable grace period, if any, specified in such agreement or instrument, if
the effect of such event or condition is to accelerate, or to permit the
acceleration of, the maturity of such indebtedness; or any such indebtedness
shall be declared to be due and payable, or required to be prepaid (other than
by a regularly scheduled required prepayment), redeemed, purchased or defeased,
or an offer to prepay, redeem, purchase or defease such indebtedness shall be
required to be made, in each case prior to the stated maturity thereof; or
(g) The Maker shall generally not pay its debts as such debts
become due, or shall admit in writing its inability to pay its debts generally,
or shall make a general assignment for the benefit of creditors; or any
proceeding shall be instituted by or against the Maker seeking to adjudicate it
a bankrupt or insolvent, or seeking liquidation, winding up, reorganization
arrangement, adjustment protection, relief or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for it or for any
substantial part of its property and, in the case of any such proceeding
instituted against it (but not instituted by it), either such proceeding shall
remain undismissed or unstayed for a period of sixty days, or any of the actions
sought in such proceeding (including, but not limited to, the entry of an order
for relief against, or the appointment of a receiver, trustee, custodian or
other similar official for, it or for any substantial part of its property)
shall occur; or the Maker shall take any action to authorize any of the actions
set forth above in this subparagraph (g); or
(h) Any judgment or order for the payment of money in excess of
$250,000 shall be rendered against the Maker and either (i) enforcement
proceedings shall have been commenced by any creditor upon such judgment or
order or (ii) them shall be any period of ten consecutive days during which a
stay of enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or
(i) Any of the events referred to in subsections (f) through (h)
above shall occur with respect to any Guarantor (and, for the purposes of this
subsection (i), each reference to the Maker in subsections (f) through (h) above
shall mean and be a reference to "any Guarantor," the reference to "$100,000" in
subsection (f) above shall mean and be a reference to "$1,000,000," and the
reference to "$250,000" in subsection (h) above shall mean and be a reference to
"$1,000,000"); or
-4- EXHIBIT B
<PAGE>
(j) Any of the events referred to in subsections (f) through (h)
above shall occur with respect to any general partner in the Maker and, for
purposes of this subsection (j), each reference to "the Maker" in subsections
(f) through (h) above shall mean and be a reference to "any general partner in
the Maker"; or
(k) Any other Transaction Document to which the Maker is a party,
alfer delivery of such other Transaction Document to the Payee, shall for any
reason cease to be valid and binding on the Maker, or the Maker shall so state
in writing; or
(l) The Mortgaged Property (as defined in the Mortgage) or any
interest in the Mortgaged Property shall be the subject of a "transfer" (as
defined in the Mortgage); or
(m) The Maker shall abandon the Mortgaged Property or shall cease to
do business or shall terminate its business for any reason whatsoever; or
(n) The Mortgaged Property shall be taken, attached or sequestered on
execution or other process of law in any action against the Maker; or
(o) Any event shall occur or condition shall exist which constitutes
a default by the Maker under any lease or sublease or agreement to lease or
sublease between the Maker, as lessee or sublessee, and the Payee or any
subsidiary or affiliate of the Payee, as lessor or sublessor, in respect of real
or personal property, and such event or condition shall continue after the
applicable grace period, if any, specified in such lease or agreement of lease;
or
(p) Any event shall occur or condition shall exist which constitutes
a default by any Buyer (as defined in the Facility Agreement) under any purchase
or sale agreement, lease or sublease or agreement to lease or sublease,
promissory note, mortgage, deed of trust or other instrument or agreement
between such Buyer and the Payee or any subsidiary or affiliate of the Payee,
and such event or condition shall continue alter the applicable grace period, if
any, specified in such instrument or document;
then, and in any such event, the Payee, by notice to the Maker, may declare the
entire unpaid balance of this Promissory Note (including the entire principal
balance of this Promissory Note and all accrued and unpaid interest on this
Promissory Note and all other sums payable under this Promissory Note) to be
immediately due and payable, and upon any such declaration the entire unpaid
balance of this Promissory Note shall become and be immediately due and payable,
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Maker. anything in this Promissory Note or
any other Transaction Document to the contrary notwithstanding; provided that in
--------
the event of an actual or deemed entry of an order for relief with respect to
the Maker or any Guarantor under the United States Bankruptcy Code, as amen, or
under any present or future law or statute of the United States of America or of
any state or other jurisdiction thereof relevant to bankruptcy. insolvency or
other relief of debtors, the entire unpaid balance of this Promissory Note
automatically shall become and be immediately due and payable, without
presentment demands protest or further notice of any kind, all of which are
hereby expressly waived by the Maker, anything in this Promissory Note or any
other Transaction Document to the contrary notwithstanding.
10. Costs and Expenses. The Maker hereby agrees to pay all costs and
------------------
expenses (whether or not any action or proceeding is instituted, and including,
but not limited to, reasonable attorneys' fees and disbursements, whether
incurred or expended before, during or after any action, proceeding or appeal is
instituted) incurred by the Payee in connection with or incidental to (a) any
Event of Default
-5- EXHIBIT B
<PAGE>
or (b) the exercise or enforcement by or on behalf of the Payee of any of its
rights or remedies or the Maker's obligations under this Promissory Note, the
Mortgage or any other Transaction Document. Reasonable attorneys' fees and
disbursements shall include reasonable charges allocated for internal corporate
counsel.
11. No Waivers; Remedies Cumulative. Acceptance by the Payee of any
-------------------------------
payment after the occurrence of an Event of Default shall not be deemed a waiver
or a cure of such Event of Default, and acceptance by the Payee of any payment
less than any amount then due shall be deemed an acceptance on account only. No
right or remedy of the Payee under this Promissory Note is intended to be
exclusive of any other right or remedy, and each and every such right or remedy
shall be cumulative and continuing, shall be in addition to every other right or
remedy provided under this Promissory Note or any other Transaction Document or
now or hereafter existing at law or in equity, and may be exercised from time to
time and as often as may be deemed expedient by the Payee. No delay by the Payee
in exercising, and no omission by the Payee to exercise, any right or remedy
under this Promissory Note or any other Transaction Document upon the occurrence
of an Event of Default shall impair such exercise or be construed to be a waiver
of, or an acquiescence in, such Event of Default or any other then existing or
thereafter occurrIng Event of Default. No single or partial exercise by the
Payee of any right or remedy under this Promissory Note or any other Transaction
Document shall preclude any other or further exercise of such right or remedy or
the exercise of any other right or remedy.
12. Limitation on Interest. Notwithstanding any other provisions of this
----------------------
Promissory Note or any other Transaction Document to the contrary, no provision
of this Promissory Note or any other Transaction Document shall require the
payment or permit the collection of interest, fees or charges in excess of the
maximum rate permitted by applicable law.
13. Construction of Certain Provisions.
----------------------------------
(a) This Promissory Note is the Promissory Note referred to in, and
is entitled to the benefits of, the Facility Agreement, dated as of April 23,
1992 (said agreement, as it may be supplemented, amended or otherwise modified
from time to time, being the "Facility Agreement"), among the Payee and the
Maker and the other Buyers, including but not limited to Section 5.10 of the
Facility Agreement.
(b) For the purposes of this Promissory Note, the term "indebtedness"
shall mean (i) indebtedness for borrowed money, (ii) obligations evidenced by
bonds, debentures, notes or other similar instruments, (iii) obligations to pay
the deferred purchase price of property or services, (iv) indebtedness created
or arising under any conditional sale or other title retention agreement with
respect to property, (v) obligations as lessee under leases which shall have
been or should be, in accordance with generally accepted accounting principles,
recorded as capital leases, (vi) obligations (contingent or otherwise) under
acceptance, letter-of-credit or similar facilities, (vii) obligations in respect
of interest rate swap agreements, currency swap agreements and other similar
agreements designed to hedge against fluctuations in interest rates or foreign
exchange rates and (viii) obligations under direct or indirect guaranties in
respect of, and obligations (contingent or otherwise) to purchase or otherwise
acquire, or otherwise to assure a creditor against loss in respect of,
indebtedness or obligations of the types referred to in any of clauses (i)
through (vii) above.
(c) For the purpose of this Promissory Note, the term "Payee" shall
mean the original payee under this Promissory Note and any subsequent holder of
this Promissory Note.
-6- EXHIBIT B
<PAGE>
14. Amendments, Etc. No amendment or waiver of any provision of this
---------------
Promissory Note, nor consent to any departure by the Maker from any such
provision, shall in any event be effective unless such amendment, waiver or
consent is in a writing which specifically refers to Section 12.02 of the
Facility Agreement and which is signed by the Maker and by the Chief Executive
Officer or the President of the Payee, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
15. Consent to Jurisdiction. The Maker hereby irrevocably submits to the
-----------------------
jurisdiction of any court of the State of Washington or any federal court of the
United States of America for any district of the State of Washington, and any
appellate court from any of such courts, in any action or proceeding arising
from or by reason of, or otherwise relating to, this Promissory Note, and the
Maker hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such court of the State of Washington
or in such federal court of the United States of America for any district of the
State of Washington. The Maker, to the fullest extent permitted by applicable
law, hereby irrevocably waives the defense of an inconvenient forum to the
maintenance of such action or proceeding. The Maker agrees that a final judgment
in any such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
law. Nothing in this Section 15 shall affect the right of the Payee to serve
legal process in any other manner permitted by law or shall affect the right of
the Payee to bring any action or proceeding against the Maker or the Maker's
property in the courts of any other jurisdictions.
16. Waiver of Jury Trial. The Maker, and the Payee by accepting this
--------------------
Promissory Note, hereby irrevocably waive all right to trial by jury in any
action, proceeding or counterclaim (whether based upon contract, tort or
otherwise) arising from or by reason of or relating to this Promissory Note or
any actions of the Payee in the negotiation, administration, performance or
enforcement of this Promissory Note.
17. Governing Law. This Promissory Note shall be governed by, and
-------------
construed in all respects (including matters of construction, validity and
performance) in accordance with, the laws of the State of Washington, without
regard to the conflicts of law rules of such state.
18. Oral Agreements Unenforceable. ORAL AGREEMENTS OR ORAL COMMITMENTS
----------------------------- -----------------------------------
TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT
- ------------------------------------------------------------------------------
ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
- ----------------------------------------
IN WITNESS WHEREOF, the Maker has executed this Promissory Note on the date
first above written.
[NAME OF THE MAKER]
By MEADOWBROOK MANOR OF KANSAS
& MISSOURI, INC.,
General Partner
By_____________________
Title:_______________
-7- EXHIBIT B
<PAGE>
Schedule A
Principal Amounts of Promissory Notes
-------------------------------------
in Respect of Each Owned Facility/*/
------------------------------------
<TABLE>
<CAPTION>
Facility Name and Location Principal Amounts
- -------------------------- -----------------
<S> <C>
Clayton House Healthcare (445) $7,760,700
Ballwin, Missouri
Tradition House Healthcare (260) 1,404,000
Joplin, Missouri
Country Club Home (809) 2,700,000
Council Grove, Kansas
Green Meadows Nursing Center (861) 4,131,000
Haysville, Kansas
Indian Creek Nursing Center (895) 1,516,500
Overland Park, Kansas
Indian Meadows Nursing Center (896) 1,516,500
Overland Park, Kansas
Medicenter-Springfield (834) 4,050,000
Springfield, Missouri
Hillhaven-Topeka (838) 3,591,000
Topeka, Kansas
Hillhaven-Wichita (844) 513,000
Wichita, Kansas
Columbia House Healthcare (446) 2,340,000
Columbia, Missouri
Hammond Holiday Home/Apartments (857/858) 1,597,500
Larned, Kansas
</TABLE>
___________________
/*/ Excluding the Bond-financed Owned Facilities.
EXHIBIT B
<PAGE>
Exhibit C-1
to
Facility Agreement
DEED OF TRUST,
ASSIGNMENT, SECURITY AGREEMENT
AND
FINANCING STATEMENT (FIXTURE FILING)
(Name of the Facility)
(Facility No.[____])
Dated as of [________ ____], 1992
By
[NAME OF GRANTOR],
as the Grantor
to
DON F. DAGENAIS,
as the Trustee
and to
FIRST HEALTHCARE CORPORATION,
as the Beneficiary
EXHIBIT C-1
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
RECITALS............................................................. 1
Land....................................................... 3
Improvements; Facility..................................... 3
Personal Property.......................................... 4
Contract Interests......................................... 4
After Acquired Property.................................... 4
Proceeds, Etc.............................................. 5
ARTICLE I - Representations and Warranties of the Grantor............ 5
1.01 Warranty of Title.......................................... 5
1.02 Non-Agricultural Use....................................... 5
1.03 Certificates and Permits................................... 5
ARTICLE II - Covenants of the Grantor................................ 5
2.01 Payment of Obligations..................................... 5
2.02 Good Standing; Etc......................................... 6
2.03 Security Agreement......................................... 6
2.04 Further Assurances......................................... 6
2.05 Protection of Lien; Defense of Action...................... 7
2.06 Repair and Maintenance..................................... 7
2.07 Compliance with Laws....................................... 7
2.08 Use........................................................ 7
2.09 Zoning; Title Matters...................................... 8
2.10 Insurance.................................................. 8
(a) Property and Casualty Insurance....................... 8
(b) Liability Insurance................................... 8
(c) Forms of Policies..................................... 9
(d) Transfer of Title..................................... 9
(e) Amounts of Coverage................................... 9
2.11 Damage and Destruction..................................... 9
2.12 Condemnation............................................... 10
2.13 Liens...................................................... 10
2.14 Taxes and Other Charges.................................... 11
2.15 Tax Deposits............................................... 11
2.16 Inspection................................................. 12
2.17 Maintenance of Records..................................... 12
2.18 Grantor's Certificates..................................... 12
2.19 Prepayments; Release Premium............................... 12
2.20 Reporting Requirements..................................... 13
ARTICLE III - Assignment of Rents and Other Sums..................... 14
3.01 Assignment................................................. 14
3.02 Right to Collect........................................... 15
3.03 Revocation of Right to Collect; Etc........................ 15
</TABLE>
-i- EXHIBIT C-1
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE IV - Additional Advances; Expenses; Indemnity................ 16
4.01 Additional Advances and Disbursements...................... 16
4.02 Other Expenses............................................. 16
4.03 Indemnity.................................................. 16
ARTICLE V - Transfer of the Mortgaged Property....................... 17
5.01 Transfer of the Mortgaged Property......................... 17
ARTICLE VI - Defaults and Remedies................................... 17
6.01 Events of Default.......................................... 17
6.02 Remedies................................................... 19
6.03 Expenses................................................... 21
6.04 Rights Pertaining to Sales................................. 22
6.05 Application of Proceeds.................................... 23
6.06 Additional Provisions as to Remedies....................... 24
6.07 Waiver of Rights and Defenses.............................. 25
ARTICLE VII - Defeasance; Provisions as to Trustee................... 25
7.01 Defeasance................................................. 25
7.02 Reconveyance............................................... 25
7.03 Trustee's Resignation...................................... 26
7.04 Exculpation................................................ 26
ARTICLE VIII - Additional Provisions................................. 27
8.01 Construction of Certain Provisions......................... 27
8.02 Limitation on Interest..................................... 28
8.03 Lease...................................................... 28
8.04 Amendments, Etc............................................ 28
8.05 Notices.................................................... 28
8.06 No Merger.................................................. 30
8.07 Severability............................................... 30
8.08 Obligations of Grantor..................................... 30
8.09 Successors and Assigns..................................... 30
8.10 No Waiver.................................................. 30
8.11 Attorneys' Fees............................................ 30
8.12 Consent to Jurisdiction.................................... 30
8.13 Waiver of Jury Trial....................................... 31
8.14 Applicable Law............................................. 31
Schedule A - Land
Schedule B - Permitted Exceptions
Schedule C - Affiliates
</TABLE>
-ii- EXHIBIT C-1
<PAGE>
DEED OF TRUST,
ASSIGNMENT, SECURITY AGREEMENT
AND
FINANCING STATEMENT (FIXTURE FILING)
([Name of the Facility])/1/
(Facility No. [____])/2/
THIS DOCUMENT SECURES FUTURE ADVANCES AND IS GOVERNED BY SECTION 443.055
OF THE REVISED STATUTES OF MISSOURI
This DEED OF TRUST, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING
STATEMENT (FIXTURE FILING), dated as of[_________ ___], 1992 (this "Deed of
Trust"), is made by [_____________________], a North Carolina limited
partnership whose address is P.O. Box 1670, Clemmons, North Carolina 27012, as
the grantor under this Deed of Trust (the "Grantor"), to DON F. DAGENAIS, a
resident of Jackson County, Missouri, as the trustee under this Deed of Trust
(the "Trustee"), and to FIRST HEALTHCARE CORPORATION, a Delaware corporation
("First Healthcare") whose address is The Cornerstone Building, 1148 Broadway
Plaza, Tacoma, Washington, 98402 as the beneficiary under this Deed of Trust
(the "Beneficiary").
RECITALS
A. The Beneficiary, as seller, and the Grantor and the Affiliates
(as defined below), jointly and severally as buyers (the "Buyers"), have entered
into a Facility Agreement, dated as of [______________ ___], 1992 (said Facility
Agreement, as it may be supplemented, amended or otherwise modified from time to
time, being the "Facility Agreement").
B. Pursuant to the terms and subject to the conditions set forth in
the Facility Agreement, the Beneficiary has agreed to permit the Grantor to
defer the payment of a portion of the purchase price for the properties (real,
personal and mixed) that constitute the Mortgaged Property (as defined below)
and that are the subject of the Facility Agreement, in a principal amount not to
exceed [________________] and [____]/100 Dollars ($[__________]).
C. Pursuant to the terms of the Facility Agreement, the Grantor has
executed and delivered to the order of the Beneficiary a Promissory Note, dated
[____________ ___], 1992,/3/ in the stated principal sum of [_______________]
and [_____]/100 Dollars ($[_______________]) (said Promissory Note, as it may be
supplemented, amended, extended, renewed or otherwise modified from time to
time, being the "Promissory Note"), evidencing the obligation of the Grantor to
pay the deferred portion of the purchase price in respect of the Mortgaged
Property.
____________________________
/1/ Insert the name of the Facility.
/2/ Insert the number assigned to the Facility.
/3/ Insert the Closing Date.
-1- EXHIBIT C-1
<PAGE>
D. The total of the indebtedness and liabilities to be secured by
this Deed of Trust equals the sum of the following (such indebtedness and
liabilities or the instruments evidencing the same, as applicable, being
collectively referred to in this Deed of Trust as the "Obligations"):
(1) the principal amount of [___________________] and
[______]/100 Dollars ($[__________])(the "Purchase Price Balance");
plus
(2) interest on the unpaid principal amount of the Purchase
Price Balance at a rate of interest per annum (the "Regular Rate")
equal to:
(a) nine percent (9%) per annum from [______________],
1992,/4/ to [_____________], 199[__];/5/ and
(b) eleven percent (11%) per annum from [_______________],
199[__],/6/ to the date on which the Purchase Price Balance is
paid in full;
and at a rate per annum (the "Default Rate") equal at all times to the
sum of the Regular Rate plus five percent (5%) per annum; plus
(3) all other amounts that are or become payable by the Grantor
and all other obligations of the Grantor under the Facility Agreement,
the Promissory Note and this Deed of Trust;
[E./7/ The lien of this Deed of Trust is junior to the lien of the
[______________],/8/ dated [as of] [______________________], 19[___] (the "First
Lien Mortgage"), made by [________________]/9/ to [_______________]/10/ securing
the payment of a Promissory Note, dated [___________], 19[___] (the "First Lien
Promissory Note"), in the stated principal amount of $[________________]. The
obligations evidenced by the First Lien Promissory Note and secured by the First
Lien Mortgage are and remain the obligations of the Beneficiary.]
____________________________
/4/ Insert the Closing Date.
/5/ Insert the last day of the forty-first calendar month immediately
following the calendar month in which the Closing occurs.
/6/ Insert the first day of the forty-second calendar month immediately
following the calendar month in which the Closing occurs.
/7/ Include this recital if this Deed of Trust is to be subordinate and
inferior to any existing mortgage or deed of trust in respect of the Mortgaged
Property.
/8/ Insert the title of the existing mortgage or deed of trust to which
this Deed of Trust is to be subordinate and inferior.
/9/ Insert the name of the mortgagor or grantor under the First Lien
Mortgage.
/10/ Insert the name of the mortgagee or beneficiary under the First Lien
Mortgage.
-2- EXHIBIT C-1
<PAGE>
[F./11/ All of the Obligations have a scheduled maturity of not later
than [____________ ____], 199[___]./12/]
G. The execution and delivery of this Deed of Trust by the Grantor
is a condition precedent to the obligation of the Beneficiary to consummate the
transactions contemplated by the Facility Agreement.
H. The rules of construction set forth in Section 8.01 shall be
applicable for all purposes of this Deed of Trust.
NOW, THEREFORE, for and in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the Grantor, and to secure the punctual payment by the Grantor
when due (whether at stated maturity, by acceleration or otherwise) of the
Obligations and the performance and observance of all other covenants,
obligations and liabilities of the Grantor under the Facility Agreement, the
Promissory Note and this Deed of Trust, the Grantor does hereby GRANT, BARGAIN,
SELL MORTGAGE, WARRANT, CONVEY, ALIEN, REMISE, RELEASE, ASSIGN, PLEDGE,
HYPOTHECATE, TRANSFER, SET OVER, DELIVER and CONFIRM unto the Trustee, IN TRUST,
WITH FULL POWER OF SALE AND RIGHT OF ENTRY AND POSSESSION, each and all of the
following described properties, rights, interests and privileges and all of the
Grantor's estate, right, title and interest in, to and under, or derived from,
the following described properties, rights, interests and privileges (all of
such properties, rights, interests and privileges being collectively referred to
in this Deed of Trust as the "Mortgaged Property"):
Land. All those certain lots, pieces and parcels of land more
----
particularly described in SCHEDULE A, and all of the reversions and
remainders in and to said land and the tenements, hereditaments,
easements, rights-of-way or use, rights (including alley, drainage,
mineral, water, oil and gas rights), privileges, royalties and
appurtenances to said land, now or hereafter belonging or in anywise
appertaining to said land, including any such right, title or interest
in, to or under any agreement or right granting, conveying or
creating, for the benefit of said land, any easement, right or license
in any way affecting other property and in, to or under any streets,
ways, alleys, vaults, gores or strips of land adjoining any portion of
said land, or in or to the air space over said land, all rights of
ingress and egress by motor vehicles to parking facilities on or
within said land, and all claims or demands of the Grantor, either at
law or in equity, in possession or expectancy, of, in or to the same
(all of the foregoing being collectively referred to in this Deed of
Trust as the "Land");
Improvements; Facility. All buildings, structures, facilities and
----------------------
other improvements now or hereafter erected on, attached to or located
in or upon the Land, and all building materials of every kind and
nature now or hereafter located on the Land or attached to, contained
in, or used in connection with, any such buildings, structures,
facilities or other improvements, and all appurtenances and additions
thereto and betterments, renewals, substitutions and replacements
thereof, owned by the Grantor or in which the Grantor has or shall
acquire an interest (all of the foregoing being collectively
_____________________________
/11/ Include this recital if required by applicable law.
/12/ Insert the first day of the eighty-fourth calendar month immediately
following the calendar month in which the Closing occurs.
-3- EXHIBIT C-1
<PAGE>
referred to in this Deed of Trust as the "Improvements," and the Land
and the Improvements being together referred to in this Deed of Trust
as the "Facility"):
Personal Property. All machinery, equipment, furniture,
-----------------
furnishings, fixtures, chattels and other items of personal property,
and all appurtenances and additions thereto and betterments, renewals,
substitutions and replacements thereof, owned by the Grantor or in
which the Grantor has or shall acquire an interest, wherever situated,
and now or hereafter located on, attached to, contained in or used in
connection with the Land, the Improvements or the Contract Interests,
or placed on any part thereof although not attached thereto (all of
the foregoing being collectively referred to in this Deed of Trust as
the "Personal Property"), including all partitions, screens, awnings,
shades, blinds, curtains, draperies, carpets, rugs, furniture and
furnishings, heating, lighting, plumbing, ventilating, air
conditioning, refrigerating, gas, steam, electrical, incinerating
and/or compacting plants, systems, fixtures and equipment, elevators,
escalators, ranges, vacuum and other cleaning systems, call systems,
switchboards, sprinkler systems and other fire prevention and
extinguishing apparatus and materials, motors, machinery, pipes,
ducts, conduits, dynamos, engines, compressors, generators, boilers,
stokers, furnaces, pumps, tanks, appliances, equipment, utensils,
tools, implements, fittings and fixtures and all permits, licenses,
franchises, certificates and other rights and privileges obtained in
connection with the Mortgaged Property;
Contract Interests. All the leases, lettings and licenses of, and
------------------
all other contracts and agreements (including all patient care
agreements, life care contracts, admission agreements and other
contracts and agreements with residents, patients and other persons
pertaining to the care of residents or patients) affecting, the Land,
the Improvements, the Personal Property and/or any other property or
rights mortgaged or otherwise conveyed or encumbered by this Deed of
Trust, or any part thereof, now or hereafter entered into, and all
supplements, amendments, modifications, additions, extensions and
renewals thereof, and all right, title and interest of the Grantor
therein and thereunder, including cash and securities deposited
thereunder or pursuant thereto, the right to receive and collect the
rents, proceeds, issues and profits due and to become due and payable
thereunder or pursuant thereto and the rights to enforce, whether at
law or in equity or by any other means, all provisions and options
thereof (all of the foregoing being collectively referred to in this
Deed of Trust as the "Contract Interests");
After Acquired Property. Any and all moneys and other every kind
-----------------------
and nature, which may from time to time be subjected to the lien of
this Deed of Trust by the Grantor, through a supplement to this Deed
of Trust or otherwise, or by any other person, or which may come into
the possession of or be subject to the control of the Trustee or the
Beneficiary, it being the intention and agreement of the Grantor that
all property hereafter acquired or constructed by the Grantor shall
forthwith upon acquisition or construction thereof by the Grantor and
without any act or deed by the Grantor be subject to the lien and
security interest of this Deed of Trust as if such property were now
owned by the Grantor and were specifically described in this Deed of
Trust and conveyed or encumbered by or pursuant to this Deed of Trust,
and the Trustee and the Beneficiary are hereby authorized to receive
any and all such property as and for additional security under this
Deed of Trust (all of the foregoing being collectively referred to in
this Deed of Trust as the "After Acquired Property"); and
-4- EXHIBIT C-1
<PAGE>
Proceeds, Etc. All unearned premiums (whether accrued, accruing
-------------
or to accrue) under insurance policies now or hereafter obtained by
the Grantor, all proceeds of the conversion (whether voluntary or
involuntary) of the Mortgaged Property into cash or other liquidated
claims (excluding proceeds of title insurance, but including proceeds
of hazard and other insurance), and all judgments, damages, awards,
settlements and compensation (including interest thereon) heretofore
or hereafter made to the present and all subsequent owners of the
Land, the Improvements, the Personal Property, the Contract Interests
and/or any other property or rights encumbered or conveyed by this
Deed of Trust for any injury thereto or decrease in the value thereof
for any reason, or by any governmental or other lawful authority for
the taking by eminent domain, condemnation or otherwise of all or any
part thereof, including awards for any change of grade of streets;
TO HAVE AND TO HOLD, subject to the matters listed or otherwise
described in SCHEDULE B (the "Permitted Exceptions"), all and singular the
Mortgaged Property, whether now owned or leased or hereafter acquired and
whether now or hereafter existing, together with all the rights, privileges and
appurtenances thereunto belonging, unto the Trustee and the Beneficiary forever,
for the uses and purposes set forth in this Deed of Trust.
AND the Grantor covenants and agrees with the Trustee and the
Beneficiary as follows:
ARTICLE I
Representations and Warranties of the Grantor
---------------------------------------------
1.01 Warranty of Title. (a) The Grantor has and will have good,
-----------------
marketable and insurable fee simple title to the Facility, free and clear of all
liens, charges and encumbrances of every kind and character, subject only to the
Permitted Exceptions; (b) the Grantor owns and will own all of the other
Mortgaged Property, free and clear of all liens, charges and encumbrances of
every kind and character, subject only to the Permitted Exceptions; (c) the
Grantor hereby warrants and will forever warrant and defend such title and the
validity, enforceability and priority of the lien and security interest of this
Deed of Trust against the claims of all persons whomsoever; (d) the Grantor has
and will have full power and lawful authority to encumber and convey the
Mortgaged Property as provided in this Deed of Trust; and (e) this Deed of Trust
is and will remain a valid and enforceable lien on, and security interest in,
the Mortgaged Property, subject only to the Permitted Exceptions.
1.02 Non-Agricultural Use. The Mortgaged Property is not used
--------------------
principally for agricultural or farming purposes.
1.03 Certificates and Permits. The Grantor has and will maintain
------------------------
in effect all necessary certificates, licenses, authorizations, registrations,
permits and/or approvals necessary for the operation of the Facility as a
[_________]-bed [[skilled] [intermediate] care] [nursing] facility and for the
conduct of the Grantor's business at the Facility.
ARTICLE 11
Covenants of the Grantor
------------------------
2.01 Payment of Obligations. The Grantor will punctually pay the
----------------------
Obligations when due, and will perform and observe all of its other obligations
under this Deed of Trust, the Promissory Note, the Facility Agreement and each
other document or instrument to which the Grantor is a party and that relates to
any of the Facility Agreement, the Promissory Note or any security for the
obligations of the Grantor under the Facility Agreement or the Promissory Note
(this Deed of Trust, the Promissory
-5- EXHIBIT C-1
<PAGE>
Note, the Facility Agreement and such other documents and instruments, in each
case as the same may be supplemented, amended or otherwise modified from time to
time, being sometimes referred to in this Deed of Trust individually as a
"Transaction Document" and collectively as the "Transaction Documents").
2.02 Good Standing; Etc. The Grantor will maintain in good standing
------------------
its partnership existence, franchises, rights and privileges under the law of
the jurisdiction of its formation and its right to transact business in the
jurisdiction in which the Facility is located. Subject to and without limitation
of Sections 2.19 and 5.01, the Grantor, without the prior consent of the
Beneficiary, will not sell, lease or otherwise dispose of (whether directly or
indirectly, or by operation of law, or in one transaction or a series of
transactions) all or substantially all of its assets. Subject to and without
limitation of Section 2.19 and 5.01, the Beneficiary may withhold its consent to
any proposed disposition of all or substantially all of the Grantor's assets for
no reason or any reason. The Grantor, without at least thirty days prior notice
to the Beneficiary and compliance with the provisions of Section 2.04, will not
change its name, identity or legal structure.
2.03 Security Agreement. The Grantor hereby further grants to the
------------------
Beneficiary a security interest in all of the Grantor's right, title and
interest in, to and under the following, whether now owned or hereafter acquired
(collectively, the "Collateral"): (a) the Personal Property; (b) the Contract
Interests; (c) the After Acquired Property; and (d) all proceeds of any and all
of the foregoing Collateral, including proceeds which constitute property of the
types included in the Personal Property, the Contract Interests and the After
Acquired Property and, to the extent not otherwise included, all cash, all
unearned premiums (whether accrued, accruing or to accrue) under insurance
policies now or hereafter obtained by the Grantor, all proceeds of the
conversion (whether voluntary or involuntary) of any of the Mortgaged Property
into cash or other liquidated claims (including proceeds of hazard and other
insurance), and all judgments, damages, awards, settlements and compensation
(including interest thereon) heretofore or hereafter made to the present and all
subsequent owners of the Land, the Improvements, the Personal Property, the
Contract Interests and/or any other property or rights encumbered or conveyed by
this Deed of Trust for any injury thereto or decrease in the value thereof for
any reason, or by any governmental or other lawful authority for the taking by
eminent domain, condemnation or otherwise of all or any part thereof, including
awards for any change of grade of streets. The Trustee and the Beneficiary shall
have, in addition to all rights and remedies provided in the Transaction
Documents, all of the rights and remedies of a "secured party" under the Uniform
Commercial Code in effect in the jurisdiction in which the Facility is located.
This Deed of Trust constitutes and shall be deemed to be a "security agreement"
for all purposes of said Uniform Commercial Code. Notwithstanding any provision
in this Section 2.03 or elsewhere in this Deed of Trust to the contrary, this
Deed of Trust shall not be construed to create a lien on or a security interest
in any patient accounts or any other accounts constituting any right of the
Grantor to payment for goods sold or leased or for services rendered which is
not evidenced by an instrument or chattel paper.
2.04 Further Assurances. Promptly upon request by the Trustee or the
------------------
Beneficiary, the Grantor will (a) correct any defect, error or omission that may
be discovered in the contents of, or in the execution, acknowledgment or
recordation of, this Deed of Trust or any other Transaction Document, and (b)
do, execute, acknowledge and deliver any and all such further acts, deeds,
conveyances, mortgages, deeds of trust, assignments, estoppel certificates,
financing statements and continuations thereof, notices of assignment,
transfers, certificates, assurances and other documents and instruments as the
Trustee or the Beneficiary may require from time to time in order to effectuate
the purposes of this Deed of Trust and to perfect and maintain the validity,
effectiveness and priority of the lien and security interest created by this
Deed of Trust.
-6- EXHIBIT C-1
<PAGE>
2.05 Protection of Lien; Defense of Action. If any action or
-------------------------------------
proceeding is instituted against the Grantor with respect to any right, title or
interest in or to the Mortgaged Property or with respect to the lien, security
interest, validity or priority of this Deed of Trust, or if any such right,
title, interest, lien, security interest, validity, effectiveness or priority is
otherwise challenged or attacked, then the Grantor promptly will notify the
Trustee and the Beneficiary of such action, proceeding, challenge or attack,
diligently will endeavor to cure any defect that may be developed or claimed,
and will take all necessary and proper steps for the defense of such action or
proceeding, including the employment of counsel, the prosecution or defense of
litigation and, subject to the prior written approval of the Beneficiary, the
compromise, release or discharge of any and all adverse claims. The Trustee and
the Beneficiary, or either of them (whether or not named as a party to such
action or proceeding), are hereby authorized and empowered (but shall not be
obligated) to take such additional steps (including the employment of counsel,
the prosecution or defense of litigation, the compromise, release or discharge
of such adverse claims, the purchase of any tax title and the removal of prior
liens and security interests) as they may deem necessary or proper for the
defense of any such action or proceeding or the protection of such right, title,
interest, lien, security interest, validity, effectiveness or priority. The
Grantor, on demand, shall pay all costs and expenses (including reasonable
attorneys' fees and disbursements) incurred by either of the Trustee or the
Beneficiary in connection with the foregoing matters. All such costs and
expenses of the Trustee and/or the Beneficiary, until paid by the Grantor, shall
be part of the Obligations and shall be secured by this Deed of Trust.
2.06 Repair and Maintenance. The Grantor will operate and maintain the
----------------------
Facility and the Personal Property in good order, repair and operating
condition, and promptly will make all repairs, renewals, replacements, additions
and improvements to the Facility and the Personal Property that are necessary to
ensure that the Facility and the Personal Property shall not in any way be
diminished or impaired as part of the security under this Deed of Trust. The
Grantor will keep the Facility fully equipped and will replace all worn-out or
obsolete Personal Property with fixtures or personal property comparable to such
Personal Property when new and, without the prior consent of the Beneficiary,
will not remove any Personal Property from the Facility unless such Personal
Property is replaced by the Grantor with fixtures or personal property of equal
suitability and value when new, owned by the Grantor free and clear of any lien
or security interest (other than the Permitted Exceptions and the lien and
security interest created by this Deed of Trust). No part of the Improvements
shall be removed, demolished or structurally or materially altered (including an
alteration which impairs the value of the Improvements), nor shall any new
building, structure, facility or other improvement be constructed on the Land
without the prior consent of the Beneficiary. The Grantor, without the prior
consent of the Beneficiary, will not cause or allow the Mortgaged Property to be
misused or wasted or to deteriorate.
2.07 Compliance with Laws. The Grantor promptly will comply with, and
--------------------
will cause the Facility to be maintained, used and operated at all times in
accordance with, any and all present and future laws, rules, regulations,
ordinances and requirements (including any and all licensing, accrediting and
insurance requirements) applicable to the Grantor or the Facility. The Grantor
promptly will notify the Beneficiary of any alleged noncompliance by the Grantor
or the Facility with any such laws, rules, regulations, ordinances or
requirements, and of any action or proceeding initiated under or with respect to
any of such laws, rules, regulations, ordinances or requirements.
2.08 Use. The Grantor will not use or occupy the Facility, or permit
---
the Facility to be used or occupied, in any manner which violates any applicable
law, rule, regulation, ordinance or order, or which constitutes a public or
private nuisance or which makes void, voidable or cancellable, or increases the
premium of, any insurance then in force with respect to the Facility. Without
limiting the generality of the preceding sentence, the Grantor will use and
occupy the Facility, or cause the Facility to be used and occupied, as and for
a[n] [[skilled] [intermediate] care] [nursing] facility and for no other
principal use unless agreed to in writing by the Beneficiary. The Grantor shall
at all times
-7- EXHIBIT C-1
<PAGE>
maintain in full force and effect all registrations, qualifications, licenses
and other authorizations and approvals required to use and occupy the Facility
as and for a [__________]-bed [[skilled] [intermediate] care] [nursing]
facility. Notwithstanding any other provision in this SECTION 2.08 or elsewhere
in this Deed of Trust or any other Transaction Document to the contrary, the
Grantor, without the prior consent of the Beneficiary, will not permit any
person other than the Grantor to operate the Facility, whether pursuant to any
lease, any management agreement or otherwise; provided that, without the
--------
prior consent of the Beneficiary, the Grantor may permit Meadowbrook Healthcare
Services Incorporated, a North Carolina corporation, or any wholly-owned
subsidiary of Meadowbrook Healthcare Services Incorporated, to operate the
Facility pursuant to a management agreement with the Grantor.
2.09 Zoning; Title Matters. The Grantor, without the prior consent
---------------------
of the Beneficiary, will not (a) initiate or support any zoning reclassification
of the Facility, seek any variance under existing zoning ordinances applicable
to the Facility or use or permit the use of the Facility in a manner which would
result in such use becoming a non-conforming use under applicable zoning
ordinances, (b) supplement, amend or otherwise modify any of the Permitted
Exceptions, (c) impose any restrictive covenants upon the Facility, (d) execute
or file any subdivision plat affecting the Facility or consent to the annexation
of the Facility to any municipality or (e) permit or suffer the Facility to be
used by the public or any person in such manner as might make possible a claim
of adverse usage or possession or of any implied dedication or easement.
2.10 Insurance.
---------
(a) Property and Casualty Insurance. The Grantor will keep the
-------------------------------
Improvements and the Personal Property insured for the benefit of the Trustee
and the Beneficiary as follows: (i) against damage or loss by fire and such
other hazards (including lightning, windstorm, hail, explosion, riot, riot
attending a strike, civil commotion, flood, earthquake, vandalism, malicious
mischief, aircraft, vehicle and smoke) as are covered by the broadest form of
"all-risk" coverage as is available from time to time in the jurisdiction in
which the Facility is located, in an amount not less than the full insurable
value (as defined below) of the Improvements and the Personal Property; (ii)
rent or business interruption or use and occupancy insurance on an actual loss
sustained basis; (iii) against damage or loss from sprinkler system leakage and
boilers, boiler tanks, heating and air conditioning equipment, pressure vessels,
auxiliary piping, mechanical and electrical equipment and such similar apparatus
as is commonly insured under a comprehensive definition of insured object, on
such basis and in such amounts as shall be reasonably required by the
Beneficiary; and (iv) during the period of any permitted construction, repair,
restoration or replacement of the Facility, against damage or loss and such
other hazards as are covered by a standard all-risk builder's risk policy with
extended coverage, including coverage against collapse, written on a completed
value basis, for an amount at least equal to the full insurable value of the
Improvements and the Personal Property. The Grantor shall ensure that any
contractor performing any permitted construction, repair, restoration or
replacement of the Facility shall procure and maintain at all times insurance
equal to that required of the Grantor and that such contractor also shall comply
with all statutory and regulatory requirements related to workers' compensation.
(b) Liability Insurance. The Grantor shall procure and maintain
-------------------
commercial public liability insurance covering the Grantor, the Trustee and the
Beneficiary against claims for bodily injury and death and property damage
occurring in, on or about or resulting from the Facility, or any street, drive,
sidewalk, curb or passageway adjacent to the Facility, in standard form and with
such insurance company or companies and in such amounts as may be acceptable to
the Beneficiary in its reasonable judgement, which insurance shall include
blanket contractual liability coverage that insures contractual liability under
any indemnification of the Trustee or the Beneficiary by the Grantor in the
Facility Agreement the Promissory Note, this Deed of Trust or any other
Transaction Document (but
-8- EXHIBIT C-1
<PAGE>
such coverage or the amount of such coverage shall in no way limit such
indemnification). In addition to the commercial public liability insurance
required by the preceding sentence, the Grantor also shall procure and maintain
employer's liability, automobile, personal injury and professional liability
coverage in amounts of $1,000,000 primary coverage and $5,000,000 excess
coverage.
(c) Forms of Policies. All insurance required under this
-----------------
Section 2.10 shall be fully paid for and nonassessable and shall contain such
provisions, endorsements and expiration dates, as the Beneficiary shall from
time to time reasonably request, and shall be in such form and amounts, and be
issued by such insurance companies, as shall be approved by the Beneficiary in
its reasonable judgment. Without limiting the generality of the preceding
sentence, all such policies shall have endorsed thereon, in form acceptable to
the Beneficiary, the New York Standard Mortgagee Clause, or the local
equivalent, without contribution, in the name of the Trustee and the
Beneficiary, and a waiver of subrogation endorsement. Each such policy shall
provide that it will not be cancelled, amended or materially altered (including
by reduction in the scope or limits of coverage) without at least thirty days
prior notice to the Beneficiary. The Grantor shall deliver, or cause to be
delivered, to the Beneficiary (i) duplicate original policies evidencing the
insurance required under this Section 2.10, (ii) receipts evidencing payment of
all premiums on such policies and (iii) at least thirty days prior to the
expiration of each such policy, a duplicate original renewal policy with
evidence satisfactory to the Beneficiary of payment of all premiums on such
policy. In lieu of the duplicate original policies required by this Section 2.10
to be delivered to the Beneficiary, the Grantor may deliver original
certificates from the issuing insurance company or companies, evidencing that
such policies are in full force and effect and containing information which, in
the Beneficiary's reasonable judgment, is sufficient to allow the Beneficiary to
determine whether such policies comply with the requirements of this Section
2.10, the Grantor shall not carry separate or additional insurance concurrent in
form or contributing in the event of loss with that required under this Section
2.10, unless endorsed in favor of the Trustee and the Beneficiary in accordance
with the requirements of this Deed of Trust and otherwise approved by the
Beneficiary in all respects.
(d) Transfer of Title. In the event of foreclosure of this
-----------------
Deed of Trust or other transfer of title or assignment of the Mortgaged Property
in extinguishment in whole or in part, of the Obligations, all right, title and
interest of the Grantor in and to all policies of insurance required under this
Section 2.10 or otherwise then in force with respect to the Mortgaged Property
and all proceeds payable thereunder and unearned premiums thereof shall
immediately vest in the purchaser or other transferee of the Mortgaged Property.
(e) Amounts of Coverage. For the purposes of this
-------------------
Section 2.10, the term "full insurable value" shall mean the cost of replacing
the improvements and the Personal Property, exclusive of the cost of
excavations, foundations, and footings, as determined from time to time (but not
less often than once every three years) by the insurance company or companies
holding such insurance or by an appraiser, engineer, architect or contractor
proposed by the Grantor and approved by said insurance company or companies and
the Beneficiary. All deductibles shall be commercially reasonable and, in any
event, subject to the prior written approval of the Beneficiary or the
Beneficiary's designee.
2.11 Damage and Destruction. In the event the Facility is damaged,
----------------------
lost or destroyed, (a) the Grantor promptly shall notify the Beneficiary of such
event (b) the Grantor, unless otherwise instructed by the Beneficiary, promptly
shall commence and diligently pursue to completion the restoration, replacement
or rebuilding of the Facility as nearly as possible to its value, condition and
character immediately prior to such damage, loss or destruction, regardless of
whether the insurance proceeds, if any, shall be sufficient for the purpose or
shall be otherwise applied by the Beneficiary as provided in this Deed of Trust,
(c) the Beneficiary may, but shall not be obligated to, make proof of loss
-9- EXHIBIT C-1
<PAGE>
if not made promptly by the Grantor and settle, adjust or compromise any claims
for damage, loss or destruction (and the Grantor hereby authorizes and empowers
the Beneficiary to make any such proof of loss, settlement, adjustment or
compromise, and the Grantor hereby authorizes and directs each insurance company
concerned to make payment for any such damage, loss or destruction directly to
the Beneficiary) and (d) the Beneficiary shall have the right to apply the
insurance proceeds, first, to reimburse the Trustee and the Beneficiary for all
reasonable costs and expenses, including attorneys fees and disbursements,
incurred in connection with the collection of such proceeds, and, second, at the
option of the Beneficiary, (i) to pay all or any part of the Obligations then
due in the order and manner determined by the Beneficiary in its sole
discretion, (ii) to cure any then current default under this Deed of Trust, or
(iii) to repair, restore or replace, in whole or in part, the portion of the
Facility so damaged, lost or destroyed. Notwithstanding anything in this Deed of
Trust or at law or in equity to the contrary, no insurance proceeds that are
paid to the Beneficiary as provided in this Deed of Trust shall be deemed trust
funds, and the Beneficiary shall be entitled to dispose of such proceeds as
provided in this Deed of Trust. The Grantor expressly assumes all risk of loss,
including a decrease in the use, enjoyment or value, of the Mortgaged Property
from any casualty whatsoever, whether or not insurable or insured against.
2.12 Condemnation. The Grantor, immediately upon obtaining knowledge
------------
of any pending or threatened proceeding for the condemnation of the Facility or
of any right of eminent domain, or of any other proceeding arising out of injury
or damage to the Facility (including a change in grade of any street), will
notify the Beneficiary of the pendency or threat of such proceeding. The
Beneficiary may participate in such proceeding, and the Grantor from time to
time will execute and deliver to the Beneficiary all instruments requested by
the Beneficiary to permit such participation. The Grantor shall diligently
prosecute such proceeding, deliver to the Beneficiary copies of all papers
served in connection with such proceeding and consult and cooperate with the
Beneficiary and the Beneficiary's attorneys and agents in the prosecution and
defense of such proceeding; provided that the Grantor shall not settle such
--------
proceeding without the prior consent of the Beneficiary. The Grantor hereby
assigns to the Beneficiary all proceeds of condemnation awards, all proceeds of
sale in lieu of condemnation, and all proceeds of all judgments, decrees and
awards for injury or damage to the Mortgaged Property. The Grantor shall execute
and deliver such further assignments of such proceeds as the Beneficiary may
request and hereby authorizes the Beneficiary to collect and receive any and all
such proceeds, to give receipts and acquittances therefor, and to appeal from
any such judgment, decree or award. The Beneficiary shall in no event be liable
or responsible for any failure to collect, or to exercise diligence in the
collection of, any of such proceeds. The Beneficiary shall have the right to
apply any such proceeds, first, to reimburse the Trustee and the Beneficiary for
all costs and expenses, including reasonable attorneys' fees and disbursements
incurred in connection with the proceeding in question or the collection of such
proceeds and, second, as provided in Section 2.11 in respect of the application
of insurance proceeds held by the Beneficiary. Notwithstanding anything in this
Deed of Trust or at law or in equity to the contrary, none of the proceeds that
are paid to the Beneficiary as provided in this Section 2.12 shall be deemed
trust funds, and the Beneficiary shall be entitled to dispose of such proceeds
as provided in this Deed of Trust. Notwithstanding any condemnation, taking or
other proceeding that causes injury to or a decrease in value of the Facility
(including a change in grade of any street), the Grantor shall continue to pay
the Obligations as provided in the Promissory Note.
2.13 Liens. The Grantor, without the prior consent of the
-----
Beneficiary, will not create, assume or suffer to exist any deed of trust,
mortgage, voluntary or involuntary lien, whether statutory, constitutional or
contractual (except for the lien for ad valorem taxes on the Mortgaged Property
-- -------
which are not yet due and payable), security interest encumbrance or charge, or
conditional sale or other title retention document against or covering the
Mortgaged Property, prior to, on a parity with or subordinate to the lien of
this Deed of Trust, other than the Permitted Exceptions and other than
-10- EXHIBIT C-1
<PAGE>
purchase money security interests in personal property (other than replacement
fixtures and personal property pursuant to Section 2.06) acquired or held by the
Grantor in the ordinary course of business to secure the purchase price of such
property so long as no such purchase money security interest shall extend to or
cover any property other than the personal property being acquired and so long
as the aggregate principal amount of the indebtedness at any one time
outstanding secured by the purchase money security interests permitted by this
SECTION 2.13 shall not otherwise be prohibited by the terms of any Transaction
Document and shall not exceed the lesser of eighty percent of the cost of such
personal property or the then fair value of such personal property. The Grantor
will pay, bond or otherwise discharge, from time to time when the same shall
become due, all lawful claims and demands of mechanics, materialmen, laborers
and others which, if unpaid, might result in, or permit the creation of, a lien
on the Mortgaged Property, or on the rents, proceeds, issues and profits due or
to become due and payable under or pursuant to any of the Mortgaged Property.
Except as otherwise provided in this Section 2.13, the Beneficiary may withhold
its consent to any proposed deed of trust, mortgage, lien, security interest,
encumbrance, charge, or conditional sale or other title retention document for
no reason or any reason.
2.14 Taxes and Other Charges. The Grantor will pay when due, and
-----------------------
before any penalty, interest or cost for nonpayment thereof may be added
thereto, all taxes, assessments, vault, water and sewer rents, rates, charges
and assessments, levies, permits, inspection and license fees and other
governmental and quasi-governmental charges, general and special, ordinary and
extraordinary, foreseen and unforeseen, heretofore or hereafter assessed, levied
or otherwise imposed against or upon, or which may become a lien upon, the
Mortgaged Property or the rents, proceeds, issues and profits due or to become
due and payable under or pursuant to the Mortgaged Property or arising in
respect of the occupancy, use or possession of the Mortgaged Property. The
Grantor will promptly pay all income, franchise and other taxes owing by the
Grantor, together with any interest or penalties thereon.
2.15. Tax Deposits. Following any failure by the Grantor to pay when
------------
due any real property tax or personal property tax required to be paid by the
Grantor under Section 2.14, and without limiting the obligations of the Grantor
under Section 2.14, if required by the Beneficiary, the Grantor, at its sole
cost and expense, shall deposit with such service or financial institution as
the Beneficiary shall designate, monthly on the first day of each calendar
month, one/twelfth of the aggregate annual amount of the real property and
personal property taxes required to be paid by the Grantor under SECTION 2.14.
In addition, if required by the Beneficiary, the Grantor also shall deposit with
such service or financial institution a sum of money which, together with the
monthly installments required under the preceding sentence, will be sufficient
to make each of the payments of such real property and personal property taxes
at least three days before such payments are due. If the amount of any such
payments is not ascertainable at the time any such deposit is required to be
made pursuant to this Section 2.15, then the deposit shall be made on the basis
of the Beneficiary estimate of such amount, and, when such amount is fixed for
the then-current year the Grantor promptly shall deposit any deficiency with
such service or financial institution. All funds deposited with such service or
financial institution pursuant to this Section 2.15, until applied as provided
below, shall Constitute additional security for the Obligations, shall be held
by such service or financial institution in a separate interest-bearing account
and, provided that no Event of Default (as defined below) shall have occurred
and be continuing, such funds and any interest earned thereon shall be applied
in payment of the amounts of such real property and personal property taxes
prior to their becoming delinquent to the extent that such service or financial
institution shall have such funds on hand; provided that neither the Beneficiary
--------
nor such service or financial Institution shall have any obligation to use such
funds to pay any installment of such real property or personal property taxes
prior to the last day on which payment thereof may be made without penalty or
interest. The Grantor shall be responsible for furnishing to the Beneficiary
bills or invoices for such real property and personal property taxes in
sufficient time to pay
-11- EXHIBIT C-1
<PAGE>
the same before any penalty or interest attaches, and neither the Beneficiary
nor such service or financial institution shall have any responsibility (for
payment of such real property or personal property taxes in the absence of such
bills or invoices. If an Event of Default shall have occurred and be continuing,
or if the Obligations shall be accelerated as provided in this Deed of Trust or
the Promissory Note, then all funds deposited with such service or financial
institution under this SECTION 2.15 and any interest earned thereon, at the
Beneficiary's option, may be applied to the Obligations in the order and manner
determined by the Beneficiary or to cure such Event of Default or otherwise as
provided in this SECTION 2.15. Upon an assignment or other transfer of this Deed
of Trust the Beneficiary shall thereupon be completely released from all
liability with respect to such deposits, and the Grantor or the owner of the
Mortgaged Property shall look solely to such service or financial institution or
the assignee or transferee with respect to such deposits. The preceding sentence
shall apply to each transfer of such deposits to a new assignee or transferee. A
permissible transfer of record title to the Facility automatically shall
transfer to the new owner the beneficial interest in any deposits made under
this SECTION 2.15. Upon full payment and satisfaction of this Deed of Trust or,
at the Beneficiary's option, at any prior time, the balance of deposited amounts
and any interest earned thereon in the possession of such service or financial
institution shall be paid over to the record owner of the Facility, and no other
person shall have any right or claim to such deposited amounts or interest in
any event.
2.16 Inspection. Upon reasonable notice from the Beneficiary or the
----------
Trustee to the Grantor, the Grantor will allow the Trustee or the Beneficiary or
its authorized representatives, at all reasonable times, to enter upon and
inspect the Mortgaged Property and the books and records with respect to the
operations of the Mortgaged Property.
2.17 Maintenance of Records. The Grantor shall keep and maintain
----------------------
complete and accurate books and records in accordance with sound accounting
principles with respect to all operations of or transactions involving the
Mortgaged Property.
2.18 Grantor's Certificates. The Grantor, within ten days after
----------------------
request by the Beneficiary, shall furnish to the Beneficiary a written
statement, duly acknowledged, certifying to the Beneficiary and/or any proposed
assignee of this Deed of Trust as to (a) the amount of the Obligations then
owing, (b) the terms of payment and maturity date of the Obligations, (c) the
date to which interest has been paid under the Promissory Note and (d) whether
any offsets or defenses exist against the Obligations and, if any are alleged to
exist, a detailed description thereof.
2.19 Prepayments; Release Premium. So long as no Event of Default
----------------------------
shall have occurred and be continuing, the Grantor may prepay the unpaid
principal amount of the Promissory Note, in whole or in part, plus accrued
interest to the date of such prepayment on the principal amount prepaid, plus
any late charges then payable under the Promissory Note, plus any costs and
expenses then payable by the Grantor under the Promissory Note; provided that
--------
each partial prepayment shall be in a principal amount of not less than Five
Thousand and No/100 Dollars ($5,000.00); provided, further that upon prepayment
-------- -------
in whole of the unpaid principal amount of the Promissory Note plus accrued
interest to the date of such prepayment plus the amount of any late charges then
payable under the Promissory Note plus any costs and expenses then payable by
the Grantor under the Promissory Note, the Grantor shall pay to First Healthcare
a release premium (the "Release Premium") in an amount determined at the date of
such prepayment equal to five percent of the amount of the Purchase Price
Balance that would then have been outstanding if the Purchase Price Balance had
ben timely paid in accordance with the regularly scheduled required installment
payments provided for in the Promissory Note without regard to any prepayments
made in respect of the Promissory Note. The Release Premium shall be applied
first to any costs and expenses then payable by the Grantor or any Affiliate
under any Related Promissory Note (as defined below), second to any late charges
then payable under any Related Promissory Note, and then to the principal of any
Related Promissory Note
-12- EXHIBIT C-1
<PAGE>
and accrued interest thereon as agreed to by the Grantor and First Healthcare,
or, if the Grantor and First Healthcare cannot agree, then to such principal and
accrued interest determined by the Grantor in its sole discretion as to fifty
percent of the Release Premium and in the order and to such principal and
accrued interest determined by First Healthcare in its sole discretion as to
fifty percent of the Release Premium. Each partial prepayment shall be applied
first to any costs and expenses then payable by the Grantor under the Promissory
Note, second to any late charges then payable under the Promissory Note, third
to interest then accrued, and then to the principal installments under the
Promissory Note in the inverse order of their maturities without deferral or
limitation of the intervening installments of principal or interest. For the
purposes of this Deed of Trust, the term "Related Promissory Note" means any of
the promissory notes made by one or more of the persons listed or otherwise
described in SCHEDULE C (the persons listed or otherwise described in SCHEDULE C
being sometimes referred to in this Deed of Trust individually as an
"Affiliate" and collectively as the "Affiliates") to the order of First
Healthcare and evidencing the obligation of such Affiliate or Affiliates to pay
a portion of the purchase price for the properties (real, personal and mixed)
that are the subject of the Facility Agreement.
2.20 Reporting Requirements. So long as the Promissory Note shall
----------------------
remain unpaid, the Grantor shall furnish to the Beneficiary:
(a) as soon as possible and in any event within five days after
the occurrence of each Event of Default and each event which, with the giving of
notice or lapse of time, or both, would constitute an Event of Default
continuing on the date of such statement, a statement of the chief financial
officer of the general partner in the Grantor setting forth details of such
Event of Default or event and the action which the Grantor has taken and
proposes to take with respect thereto;
(b) as soon as available and in any event within sixty days
alter the end of each of the first three quarters of each fiscal year of the
Grantor, a balance sheet of the Grantor as of the end of such quarter and
statements of income and expense and of cash flow of the Grantor for the period
commencing at the end of the previous fiscal year and ending with the end of
such quarter, setting forth in each case in comparative form the corresponding
figures for the corresponding period of the preceding fiscal year, all in
reasonable detail and duly certIfied (subject to year-end audit adjustments) by
the chief financial officer of the general partner in the Grantor as having been
prepared in accordance with sound accounting principles and practices
consistently applied and as fairly presenting the financial condition of the
Grantor as of the respective dates of such financial statements and the results
of the operations of the Grantor for the periods ended on such dates, together
with a certificate of said officer stating that no Event of Default, or event
which, with the giving of notice or the lapse of time, or both, would constitute
an Event of Default has occurred and is continuing or, if an Event of Default or
such an event has occurred and is continuing, a statement as to the nature
thereof and the action which the Grantor has taken and proposes to take with
respect thereto;
(c) as soon as available and in any event within sixty days
after the end of each quarter of each fiscal year of the Grantor, a balance
sheet for the Facility as of the end of such quarter and statements of income
and expense and of cash flow for the Facility for the period commencing at the
end of the previous fiscal year and ending with the end of such quarter, setting
forth in each case in comparative form the corresponding figures for the
corresponding period of the preceding fiscal year, all in reasonable detail and
duly certified (subject to year-end audit adjustments) by the chief financial
officer of the general partner in the Grantor as having been prepared in
accordance with sound accounting principles and practices consistently applied
and as fairly presenting the financial condition of the Facility as of the
respective dates of such financial statements and the results of the operations
of the Facility for the periods ended on such dates;
-13- EXHIBIT C-1
<PAGE>
(d) as soon as available and in any event within one-hundred
twenty days after the end of each fiscal year of the Grantor, a balance sheet of
the Grantor as of the end of such fiscal year and statements of income and
expense and of cash flow of the Grantor for such fiscal year, accompanied by a
report and an opinion of independent certified public accountants of recognized
standing or, if such report and opinion are not available, duly certified by the
chief financial officer of the general partner in the Grantor as having been
prepared in accordance with generally accepted accounting principles and
practices consistently applied and as fairly presenting the financial condition
of the Grantor as of the end of such fiscal year and the results of the
operations of the Grantor for such fiscal year;
(e) as soon as available and in any event within ninety days
alter the end of each fiscal year of the Grantor, a certificate of the chief
financial officer of the general partner in the Grantor stating that no Event of
Default, or event which, with the giving of notice or the lapse of time, or
both, would constitute an Event of Default, has occurred and is continuing or,
if an Event of Default or such an event has occurred and is continuing, a
statement as to the nature thereof and the action which the Grantor has taken
and proposes to take with respect thereto;
(f) as soon as available and in any event within sixty days
after the end of each quarter of each fiscal year of the Grantor, detailed
operational statistics for the Facility pertaining to occupancy rates, patient
or resident mix and patient or resident rates by type for the period commencing
at the end of the previous fiscal year and ending with the end of such quarter;
(g) promptly and in any event within thirty days after the
sending or filing thereof, copies of all cost reports (including all cost
reports filed pursuant to Titles XVIII and XIX of the Social Security Act, as
amended) and all amendments thereto required to be flied with any governmental
or regulatory authority in respect of the Facility, in each case duly certified
by an authorized officer of the general partner in the Grantor as being accurate
and complete and as having been prepared in accordance with applicable
governmental and regulatory requirements;
(h) promptly and in any event within thirty days after receipt
thereof by the Grantor, a copy of each survey prepared by any governmental or
regulatory authority with respect to the Facility, together with a copy of any
related plan of correction;
(i) promptly after the sending or filing thereof, copies of all
proxy statements, financial statements and reports which the Grantor sends to
its partners, and copies of all regular, periodic and special reports, and all
registration statements, that the Grantor files with the Securities and Exchange
Commission or any governmental authority which may be substituted therefor, or
with any national securities exchange; and
(j) such other information respecting the business, properties,
operations or condition (financial or otherwise) of the Grantor and the
Affiliates as the Beneficiary may from time to time reasonably request, in each
case certified by an appropriate officer of the general partner in the Grantor.
ARTICLE III
Assignment of Rents and Other Sums
----------------------------------
3.01 Assignment. The Grantor hereby bargains, sells, assigns,
----------
transfers and sets over to the Beneficiary, absolutely and not as additional
security for the payment of the Obligations, all rents, proceeds, issues and
profits due and to become due and payable under or pursuant to or to be derived
from the Mortgaged Property, or the use and occupation of the Mortgaged
Property, including
-14- EXHIBIT C-1
<PAGE>
all rents, royalties, revenues, rights, deposits (including security deposits)
and benefits accruing to the Grantor under all leases and all other contracts
and agreements (including all patient care agreements, life care contracts,
admission agreements and other contracts and agreements with residents, patients
and other persons pertaining to the care of residents or patients) now or
hereafter covering the Mortgaged Property, whether before or after foreclosure
or during the full period of redemption, if any, and the right to receive the
same and apply them against the Obligations or against the Grantor's other
obligations under this Deed of Trust, together with all contracts, bonds, leases
and other documents and agreements (including all patient care agreements, life
care contracts, admission agreements and other contracts and agreements with
residents, patients and other persons pertaining to the care of residents or
patients) evidencing the same now or hereafter in effect and all rights of the
Grantor thereunder. Nothing contained in the preceding sentence shall be
construed to bind the Beneficiary to the performance of any of the provisions of
any such contract, bond, lease or other document or agreement or otherwise to
impose any obligation upon the Beneficiary (including any liability under a
covenant of quiet enjoyment contained in any lease or under applicable law in
the event that any tenant shall have been joined as a party defendant in any
action to foreclose this Deed of Trust and shall have been foreclosed of all
right, title and interest and all equity of redemption in the Mortgaged
Property), except that the Beneficiary shall be accountable for any money
actually received by the Beneficiary pursuant to such assignment The assignment
of said rents, proceeds, issues and profits, and of the aforesaid rights with
respect thereto and to the contracts, bonds, leases and other documents and
agreements evidencing the same is intended to be and is an absolute present
assignment from the Grantor to the Beneficiary and not merely the passing of a
security interest. The Grantor will, as and when requested from time to time by
the Beneficiary, execute, acknowledge and deliver to the Beneficiary, in form
approved by the Beneficiary, one or more general or specific assignments of the
lessor's interest under any lease, contract or agreement (including any patient
care agreement, life care contract, admission agreement and other contract or
agreement with any resident, patient or other person pertaining to the care of
residents or patients) now or hereafter affecting the Mortgaged Property.
Notwithstanding any provision in this Section 3.01 or elsewhere in this Deed of
Trust to the contrary, this Deed of Trust shall not be construed to constitute
an assignment of any patient accounts or any other accounts constituting any
right of the Grantor to payment for goods sold or leased or for services
rendered which is not evidenced by an instrument or chattel paper.
3.02 Right to Collect. So long as there shall exist no Event of
----------------
Default, and except as otherwise expressly provided in this Deed of Trust, the
Grantor shall have the right and license to collect, as the same shall accrue,
the rents, proceeds, issues and profits due and to become due and payable under
or pursuant to or to be derived from the Mortgaged Property or the use and
occupation of the Mortgaged Property. The Grantor agrees to hold the same in
trust and to use the same in payment of the Obligations, taxes, assessments,
levies, fees, charges and insurance premiums payable under this Deed of Trust
and all other charges on or against the Mortgaged Property.
3.03 Revocation of Right to Collect; Etc. Upon the occurrence of any
-----------------------------------
Event of Default, (i) the right and license set forth in Section 3.02 may be
revoked by the Beneficiary, and thereafter the Trustee or the Beneficiary shall
have the right and authority to exercise any of the rights or remedies referred
to or set forth in Article VI and (ii) the Grantor shall promptly pay to the
Trustee or the Beneficiary (A) all prepayments and security or other deposits
paid to the Grantor pursuant to any contract, bond, lease or other document or
agreement assigned under this Deed of Trust and (B) all charges for services or
facilities or for escalation which were paid pursuant to any such contract,
bond, lease or other document or agreement to the extent allocable to any period
from and after the occurrence of such Event of Default. If the Grantor is not
required by this Deed of Trust to surrender possession of the Mortgaged Property
upon the occurrence of an Event of Default, then the Grantor shall pay monthly
in advance to the Trustee or the Beneficiary, on the entry by the Trustee or the
Beneficiary into possession pursuant to Article VI, or to any receiver appointed
to collect said rents,
-15- EXHIBIT C-1
<PAGE>
proceeds, issues and profits, the fair and reasonable rental value for the use
and occupation of the Mortgaged Property or such part thereof as may be in the
possession of the Grantor. Upon a default in any such payment, the Grantor will
vacate and surrender such possession to the Trustee, the Beneficiary or such
receiver and, upon a default in vacating and surrendering the same, may be
evicted by summary or any other available proceedings.
ARTICLE IV
Additional Advances; Expenses; Indemnity
----------------------------------------
4.01 Additional Advances and Disbursements. The Grantor agrees that,
-------------------------------------
if the Grantor fails to pay or perform any obligation of the Grantor under this
Deed of Trust (including the obligation to procure and maintain the insurance at
the limits of coverage required by Section 2.10), then the Trustee or the
Beneficiary shall have the right, but not the obligation, in the Grantor's name
or otherwise, and without notice to the Grantor, to pay or perform, or to cause
the payment or performance of, such obligation and, for such purpose, the
Grantor expressly grants to the Trustee and the Beneficiary, in addition and
without prejudice to any other rights and remedies under this Deed of Trust the
right to enter upon and take possession of the Mortgaged Property to such extent
and as often as the Trustee or the Beneficiary may deem necessary or desirable
to prevent or remedy any failure by the Grantor to pay or perform such
obligation. No such payment or performance by the Trustee or the Beneficiary
shall be deemed to have cured such default by the Grantor or any Event of
Default with respect thereto. All sums so paid, and all expenses incurred, by
the Trustee or the Beneficiary in connection with such payment or performance
shall be deemed obligations owing by the Grantor to the Trustee or the
Beneficiary and shall bear interest, from the date paid or incurred until
repaid, at the Default Rate provided for in the Promissory Note. The amount of
all such payments and expenses, and all such interest thereon, shall be part of
the Obligations and shall be secured by this Deed of Trust. This Deed of Trust
secures future advances or future obligations. This Deed of Trust is governed by
the provisions of Section 443.055 of the Revised Statutes of Missouri. The total
amount of the Obligations that may be secured by this Deed of Trust is
$[_______________].
4.02 Other Expenses. The Grantor, on demand, will pay or reimburse
--------------
the Trustee or the Beneficiary for the payment of, any costs or expenses
(including reasonable attorneys' fees and disbursements) incurred or expended in
connection with or incidental to (a) any Event of Default or (b) the exercise or
enforcement by or on behalf of the Trustee or the Beneficiary of any of its
rights or remedies or the Grantor's obligations under any Transaction Document.
4.03 Indemnity. The Grantor agrees to indemnify and hold harmless the
---------
Trustee and the Beneficiary from and against any and all claims, demands,
losses, liabilities, suits, obligations, fines, damages, judgments, penalties,
charges, costs and expenses (including reasonable attorneys' fees and
disbursements) which may be imposed on, incurred or paid by or asserted against
the Trustee or the Beneficiary by reason or on account of, or in connection
with, (a) any Event of Default, (b) the exercise by the Trustee or the
Beneficiary of any of its rights and remedies, or the performance of any of its
duties, under this Deed of Trust or (c) any accident, injury, death or damage to
any person (including any employee of the Grantor) or property occurring in, on
or about the Facility or any street, drive, sidewalk, curb or passageway
adjacent to the Facility, but excepting claims, demands, losses, liabilities,
suits, obligations, fines, damages, judgments, penalties, charges, costs and
expenses resulting from the willful misconduct or gross negligence of the
Trustee or the Beneficiary. Any amount payable to the Trustee or the Beneficiary
under this Section 4.03 shall be deemed a demand obligation, shall be part of
the Obligations and shall be secured by this Deed of Trust.
-16- EXHIBIT C-1
<PAGE>
ARTICLE V
Transfer of the Mortgaged Property
----------------------------------
5.01 Transfer of the Mortgaged Property. The Grantor acknowledges
----------------------------------
that the continuous ownership of the Mortgaged Property by the Grantor is of a
material nature to the transaction contemplated by, and the Beneficiary's
agreement to create the Obligations under, the Transaction Documents. The
Grantor agrees that, except as otherwise provided in any Transaction Document,
the Grantor will not, directly or indirectly, sell, grant, convey, assign or
otherwise transfer (collectively, a "transfer"), or permit any transfer of, the
Mortgaged Property or any legal or beneficial interest in the Mortgaged
Property, by operation of law or otherwise, without the prior consent of the
Beneficiary. For the purposes of this Deed of Trust, but without limiting the
foregoing, a transfer of the legal or beneficial ownership, directly or
indirectly, of thirty-three percent or more of the issued and outstanding stock
of any class of stock of any corporate general pate in the Grantor,
substantially all of the assets of the Grantor or thirty-three percent or more
of the capital or profits of the Grantor or of any general partner in the
Grantor, shall be deemed a transfer of the Mortgaged Property or an interest in
the Mortgaged Property; provided that a transfer of the legal or beneficial
--------
ownership of thirty-three percent or more of the issued and outstanding stock of
any class of stock of any corporate general partner in the Grantor or thirty-
three percent or more of the capital or profits of the Grantor or of any general
partner in the Grantor shall not be deemed a transfer of the Mortgaged Property
or an interest in the Mortgaged Property if such transfer is to any Affiliate,
to Don G. Angell, to Daniel D. Mosca, to any heir or devisee of Don G. Angel or
Daniel D. Mosca or to the trustee of any living trust of Don G. Angel or Daniel
D. Mosca Upon the occurrence of any transfer of the Mortgaged Property or any
legal or beneficial interest in the Mortgaged Property, by operation of law or
otherwise, without the prior consent of the Beneficiary, the Beneficiary may
elect to declare the Obligations, together with any other sums secured by this
Deed of Trust, immediately due and payable. The Beneficiary may withhold its
consent to any proposed transfer for no reason or any reason, including the
failure of the prospective transferee of the Mortgaged Property to reach an
agreement in writing with the Beneficiary increasing the interest payable on the
Obligations to such rate as the Beneficiary shall request Any transfer or
attempted transfer contrary to the provisions of this Article V shall be void.
ARTICLE VI
Defaults and Remedies
---------------------
6.01 Events of Default. The term "Event of Default" shall mean the
-----------------
occurrence of any of the following events:
(a) The Grantor shall fail to pay any principal of, or interest
on, the Promissory Note within ten days alter the same becomes due and payable;
or
(b) The Grantor shall fail to pay any of the other Obligations
(whether for principal, interest, premiums, fees, expenses or otherwise) when
and as the same become due and payable, whether on any stated due date, at
maturity or upon acceleration, and such failure shall remain unremedied for ten
days after written notice of such failure shall have been given to the Grantor
by the Beneficiary; or
(c) Any representation or warranty made by the Grantor (or any
general partner in the Grantor or any officers of any general partner in the
Grantor) under or in connection with any Transaction Document shall prove to
have been incorrect in any material respect when made; or
(d) The Grantor shall fail at any time to obtain, provide,
maintain or keep in force the insurance policies required by Section 2,10; or
-17- EXHIBIT C-1
<PAGE>
(e) The Grantor shall fail to perform or observe any other
provision contained in any Transaction Document on the Grantor's part to be
performed or observed if such failure shall remain unremedied beyond the
applicable grace period for such provision or, if no such grace period is
applicable, if such failure shall remain unremedied for thirty days after
written notice of such failure shall have been given to the Grantor by the
Beneficiary; or
(f) The Grantor shall fail to pay any principal of or premium
or interest on any indebtedness (but excluding indebtedness evidenced by the
Promissory Note) of the Grantor in an aggregate principal amount of at least
$100,000 at any one time outstanding, when the same becomes due and payable
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise), and such failure shall continue after the applicable grace period,
if any, specified in any agreement or instrument relating to such indebtedness;
or any other event shall occur or condition shall exist under any agreement or
instrument relating to any such indebtedness and shall continue after the
applicable grace period, if any, specified in such agreement or instrument, if
the effect of such event or condition is to accelerate, or to permit the
acceleration of, the maturity of such indebtedness; or any such indebtedness
shall be declared to be due and payable, or required to be prepaid (other than
by a regularly scheduled required prepayment), redeemed, purchased or defeased,
or an offer to prepay, redeem, purchase or defease such indebtedness shall be
required to be made, in each case prior to the stated maturity thereof; or
(g) The Grantor shall generally not pay its debts as such debts
become due, or shall admit in writing its inability to pay its debts generally,
or shall make a general assignment for the benefit of creditors; or any
proceeding shall be instituted by or against the Grantor seeking to adjudicate
it a bankrupt or insolvent or seeking liquidation, winding up, reorganization,
arrangement adjustment, protection, relief or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for it or for any
substantial part of its property and, in the case of any such proceeding
instituted against it (but not instituted by it), either such proceeding shall
remain undismissed or unstayed for a period of sixty days, or any of the actions
sought in such proceeding (including the entry of an order for relief against,
or the appointment of a receiver, trustee, custodian or other similar official
for, it or for any substantial part of its property) shall occur; or the Grantor
shall take any action to authorize any of the actions set forth above in this
subsection (g); or
(h) Any judgment or order for the payment of money in excess of
$250,000 shall be rendered against the Grantor and either (i) enforcement
proceedings shall have been commenced by any creditor upon such judgment or
order or (ii) there shall be any period of ten consecutive days during which a
stay of enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or
(i) Any of the events referred to in subsections (f) through
(h) of this Section 6.01 shall occur with respect to any Guarantor (such term
being used in this Deed of Trust as such term is defined in the Facility
Agreement) and, for the purposes of this subsection (i), each reference to "the
Grantor" in subsections (f) through (h) above shall mean and be a reference to
"any Guarantor", the reference to "$100,000" in subsection (f) above shall mean
and be a reference to "$1,000,000", and the reference to "$250.000" in
subsection (h) above shall mean and be a reference to "$1,000,000"; or
(j) Any of the events referred to in subsections (f) through
(h) of this Section 6.01 shall occur with respect to any general partner in the
Grantor and, for the purposes of
-18- EXHIBIT C-1
<PAGE>
this subsection (j), each reference to "the Grantor" in subsections (f) through
(h) above shall mean and be a reference to "any general partner in the Grantor";
or
(k) Any other Transaction Document to which the Grantor is a
party, after delivery of this Deed of Trust or such other Transaction Document
to the Beneficiary, shall for any reason cease to be valid and binding on the
Grantor, or the Grantor shalL so state in writing; or
(l) The Mortgaged Property or any interest in the Mortgaged
Property shall be the subject of a 'transfer,' as that term is defined in
SECTION 5.01; or
(m) The Grantor shall abandon the Mortgaged Property or shall
cease to do business or shall terminate its business for any reason whatsoever:
or
(n) The Mortgaged Property shall be taken, attached or
sequestered on execution or other process of law in any action against the
Grantor; or
(o) Any event shall occur or condition shall exist which
constitutes a default by the Grantor under any lease or agreement to lease
between the Grantor, as lessee or sublessee, and the Beneficiary or any
subsidiary or affiliate of the Beneficiary, as lessor or sublessor, in respect
of real or personal property, and such event or condition shall continue after
the applicable grace period, if any, specified in such lease or agreement to
lease; or
(p) Any event shall occur or condition shall exist which
constitutes a default by any Affiliate under any purchase or sale agreement
lease or agreement to lease, promissory note, mortgage, deed of trust or other
instrument or agreement between such Affiliate and the Beneficiary, or any
subsidiary or affiliate of the Beneficiary, and such event or condition shall
continue after the applicable grace period, if any, specified in such instrument
or agreement.
6.02 Remedies. Upon the occurrence of any one or more Events of
--------
Default, the Trustee or the Beneficiary may (but shall not be obligated to), in
addition to any rights or remedies available to it under any Transaction
Document take such action personally or by its agents or attorneys, with or
without entry, and without notice, demand, presentment or protest (each and all
of which are hereby waived by the Grantor), as the Trustee or the Beneficiary
deems necessary or advisable to protect and enforce its rights and remedies
against the Grantor and in and to the Mortgaged Property, including the
following actions, each of which may be pursued concurrently or otherwise, at
such time and in such order as the Trustee or the Beneficiary may determine, in
its sole discretion, without impairing or otherwise affecting any other rights
or remedies of the Trustee or the Beneficiary:
(a) Declare the entire balance of the Obligations (including the
entire principal balance thereof, all accrued and unpaid interest and any
premium thereon and all other such sums secured by this Deed of Trust) to be
immediately due and payable, and upon any such declaration the entire unpaid
balance of the Obligations shall become and be immediately due and payable,
without presentment demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Grantor, anything in this Deed of Trust or
any other Transaction Document to the contrary notwithstanding; provided that in
--------
the event of an actual or deemed entry of an order for relief with respect to
the Grantor or any guarantor referred to in subsection (i) of Section 6.01 or
any general partner in the Grantor under the United States Bankruptcy Code, as
amended, or under any present or future law or statute of the United States of
America or of any state or other jurisdiction thereof relevant to bankruptcy,
insolvency or other relief of debtors, the entire unpaid balance of the
Obligations automatically shall become and be immediately due and payable,
without presentment,
-19- EXHIBIT C-1
<PAGE>
demand, protest or further notice of any kind, all of which are hereby expressly
waived by the Grantor, anything in this Deed of Trust or any other Transaction
Document to the contrary notwithstanding; or
(b) Institute a proceeding or proceedings for the complete
foreclosure of this Deed of Trust under any applicable provision of law; or
(c) Institute a proceeding or proceedings for the partial
foreclosure of this Deed of Trust under any applicable provision of law for the
portion of the Obligations then due and payable, subject to the lien of this
Deed of Trust continuing unimpaired and without loss of priority so as to secure
the balance of the Obligations not then due and payable; or
(d) To the extent permitted by applicable law, sell the
Mortgaged Property, and all estate, right, title, interest, claim and demand of
the Grantor in the Mortgaged Property, and all rights of redemption of the
Mortgaged Property, at one or more sales, as an entirety or in parcels, with
such elements of real and/or personal property (and, to the extent permitted by
applicable law, may elect to deem all of the Mortgaged Property to be real
property for purposes of such sale or sales), and at such time and place and
upon such terms as the Trustee or the Beneficiary may deem expedient, or as may
be required by applicable law, and in the event of a sale, by foreclosure or
otherwise, of less than all of the Mortgaged Property, this Deed of Trust shall
continue as a lien and security interest on the remaining portion of the
Mortgaged Property; or
(e) Institute an action, suit or proceeding in equity for the
specific performance of any of the provisions contained in this Deed of Trust or
any other Transaction Document; or
(f) Sue and recover a judgment on the Obligations, as the same
become due and payable, or on account of any Event of Default; or
(g) Apply for the appointment of a receiver, custodian,
trustee, liquidator or conservator of the Mortgaged Property, to be invested
with the fullest powers permitted under applicable law, as a matter of right and
without regard to or the necessity to disprove the adequacy of the security for
the Obligations or the solvency of the Grantor or any other person liable for
the payment of the Obligations, and the Grantor and each other person so liable
waives or shall be deemed to have waived such necessity and consents or shall be
deemed to have consented to such appointment; or
(h) Enter upon the Mortgaged Property, and exclude the Grantor
and the Grantor's agents and servants wholly from the Mortgaged Property,
without liability for trespass, damages or otherwise, and take possession of all
books, records and accounts relating to the Mortgaged Property, and the Grantor
agrees to surrender possession of the Mortgaged Property and of such books,
records and accounts to the Trustee or the Beneficiary on demand after the
occurrence of any Event of Default; and the Trustee or the Beneficiary may use,
operate, manage, preserve, control and otherwise deal with the Mortgaged
Property and such books, records and accounts and may conduct the business of
the Facility, either personally or by its superintendents, managers, agents,
servants, attorneys or receivers, without interference from the Grantor; and
upon each such entry, and from time to time thereafter, the Trustee or the
Beneficiary, at the expense of the Grantor and the Mortgaged Property, without
interference by the Grantor, may (i) maintain and restore the Mortgaged Property
by purchase, repair or construction, (ii) insure or reinsure the Mortgaged
Property, (iii) make all necessary or proper repairs, renewals, replacements,
alterations, additions, betterments and improvements to and on the Mortgaged
Property, (iv) complete the construction of the improvements and, in the course
of such completion, make such changes in the contemplated or completed
-20- EXHIBIT C-1
<PAGE>
improvements as the Trustee or the Beneficiary may deem advisable and (v) in
every such case in connection with the foregoing have the right to exercise all
rights and powers of the Grantor with respect to the Mortgaged Property, either
in the Grantor's name or otherwise, including the right to make, cancel, enforce
or modify leases and subleases, obtain and evict tenants and subtenants on such
terms as the Trustee or the Beneficiary shall deem advisable; or
(i) With or without the entrance upon or taking possession of
the Mortgaged Property, collect and receive all rents, proceeds, issues and
profits due and to become due and payable under or pursuant to or derived from
the Mortgaged Property, and after deducting therefrom all costs and expenses of
every character incurred by the Trustee or the Beneficiary in collecting the
same and in using, operating, managing, preserving and controlling the Mortgaged
Property, and otherwise in exercising the rights of the Trustee or the
Beneficiary under subsection (h) of this Section 6.02, including all amounts
necessary to pay taxes, assessments, levies, fees, insurance premiums and other
charges in connection with the Mortgaged Property, as well as reasonable
compensation for the services of the Trustee, the Beneficiary and their
respective attorneys, agents and employees, apply the remainder as provided in
Section 6.05; or
(j) Release any portion of the Mortgaged Property for such
consideration as the Trustee or the Beneficiary may require without, as to the
remainder of the Mortgaged Property, in any way impairing or affecting the lien
or priority of this Deed of Trust, or improving the position of any subordinate
lienholder with respect thereto, except to the extent that the Obligations shall
have been reduced by the actual monetary consideration, if any, received by the
Trustee or the Beneficiary for such release, and may accept by assignment,
pledge or otherwise any other property in place thereof as the Trustee or the
Beneficiary may require without being accountable for so doing to any other
lienor; or
(k) Take all actions permitted under the Uniform Commercial
Code of the jurisdiction in which the Facility is located; or
(l) Take any other action, or pursue any other right or remedy,
as the Trustee or the Beneficiary may have under applicable law, and the Grantor
does hereby grant the same to the Trustee and the Beneficiary.
In the event that the Trustee or the Beneficiary shall exercise any of the
rights or remedies set forth in subsections (h) and (i) of this Section 6.02,
neither the Trustee nor the Beneficiary shall be deemed to have entered upon or
taken possession of the Mortgaged Property except upon the exercise of its
option to do so, evidenced by its demand and overt act for such purpose, nor
shall the Trustee or the Beneficiary be deemed a mortgagee in possession by
reason of such entry or taking possession. Neither the Trustee nor the
Beneficiary will be liable to account for any action taken pursuant to any such
exercise other than for rents and payments on patient accounts actually received
by the Trustee or the Beneficiary, nor liable for any loss sustained by the
Grantor resulting from any failure to let the Mortgaged Property, or from any
other act or omission of the Trustee or the Beneficiary except to the extent
such loss is caused by the willful misconduct or bad faith of the Trustee or the
Beneficiary. The Grantor hereby consents to, ratifies and confirms the exercise
by either the Trustee or the Beneficiary of said rights and remedies, and
appoints each of the Trustee and the Beneficiary as the Grantor's attorney-in-
fact, which appointment shall be deemed to be coupled with an interest and is
irrevocable, for such purposes.
6.03 Expenses. In any proceeding to foreclose this Deed of Trust or
--------
to enforce any other remedy of the Trustee or the Beneficiary under this Deed of
Trust or any other Transaction Document, there shall be allowed and included as
an addition to and a part of the Obligations in the
-21- EXHIBIT C-1
<PAGE>
decree for sale or other judgment or decree all expenditures and expenses
(including reasonable attorneys' fees and disbursements) which may be paid or
incurred in connection with the exercise by the Trustee or the Beneficiary of
any of its rights and remedies provided or referred to in SECTION 6.02 and the
same shall be secured by this Deed of Trust.
6.04 Rights Pertaining to Sales. The following provisions shall
--------------------------
apply to any sale or sales of the Mortgaged Property under or by virtue of this
ARTICLE VI:
(a) The Beneficiary or the Trustee may conduct any number of
sales from time to time. The power of sale set forth in Section 6.02(d) shall
not be exhausted by any one or more such sales as to any part of the Mortgaged
Property which shall not have been sold, nor by any sale which is not completed
or is defective in the opinion of the Trustee or the Beneficiary, until the
Obligations shall have been paid in full.
(b) Any sale may be postponed or adjourned by public
announcement at the time and place appointed for such sale or for such postponed
or adjourned sale without further notice.
(c) After each sale, the Trustee shall execute and deliver to
the purchaser or purchasers at such sale a good and sufficient instrument or
instruments granting, conveying, assigning and transferring all right, title and
interest of the Grantor in and to the property and rights sold and shall receive
the proceeds of said sale or sales and apply the same as provided in this Deed
of Trust. The Trustee is hereby appointed the true and lawful attorney-fact of
the Grantor, which appointment is irrevocable and shall be deemed to be coupled
with an interest, in the Grantor's name and stead, to make all necessary
conveyances, assignments, transfers and deliveries of the property and rights so
sold, and for that purpose the Trustee may execute all necessary instruments of
conveyance, assignment transfer and delivery, and may substitute one or more
persons with like power, the Grantor hereby ratifying and confirming all that
said attorney or such substitute or substitutes shall lawfully do by virtue
thereof. Nevertheless, the Grantor, if requested by the Trustee, shall ratify
and confirm any such sale or sales by executing and delivering to the Trustee or
such purchaser or purchasers all such instruments as may be advisable, in the
judgment of the Trustee or the Beneficiary, for the purposes designated in such
request.
(d) Any and all statements of fact or other recitals made in any
of the instruments referred to in subsection (c) of this Section 6.04 given by
the Trustee or the Beneficiary as to nonpayment of the Obligations, or as to the
occurrence of any Event of Default, or as to the Beneficiary having declared all
or any of the Obligations to be due and payable, or as to the request to sell,
or as to notice of time, place and terms of sale and of the property or rights
to be sold having been duly given, or as to the refusal, failure or inability to
act of the Trustee, or as to the appointment of any substitute or successor
Trustee, or as to any other act or thing having been duly done by the Trustee or
the Beneficiary, shall be taken as prima facie evidence of the truth of the
----- -----
facts so stated and recited. The Trustee or the Beneficiary may appoint or
delegate any one or more persons as agent to perform any act or acts necessary
or incident to any sale so held, including the posting of notices and the
conduct of sale.
(e) The receipt of the Trustee or the Beneficiary for the
purchase money paid at any such sale, or the receipt of any other person
authorized to give the same, shall be sufficient discharge therefor to any
purchaser of any property or rights sold as aforesaid, and no such purchaser, or
its representatives, grantees or assigns, after paying such purchase price and
receiving such receipt, shall be bound to see to the application of such
purchase price or any part thereof upon or for any trust or purpose of this Deed
of Trust or, in any manner whatsoever, be answerable for any loss,
-22- EXHIBIT C-1
<PAGE>
misapplication or nonapplication of any such purchase money, or part thereof, or
be bound to inquire as to the authorization, necessity, expediency or regularity
of any such sale.
(f) Any such sale or sales shall operate to divest all of the
estate, right, title, interest, claim and demand whatsoever, whether at law or
in equity, of the Grantor in and to the properties and rights so sold, and shall
be a perpetual bar both at law and in equity against the Grantor and any and all
persons claiming or who may claim the same, or any part thereof, by, through or
under the Grantor to the fullest extent permitted by applicable law.
(g) Upon any such sale or sales, the Beneficiary may bid for
and acquire the Mortgaged Property and, in lieu of paying cash therefor, may
make settlement for the purchase price by crediting against the Obligations the
amount of the bid made therefor, after deducting therefrom the expenses of the
sale, the cost of any enforcement proceeding under this Deed of Trust and any
other sums which the Trustee or the Beneficiary is authorized to deduct under
the terms of this Deed of Trust, to the extent necessary to satisfy such bid.
(h) In the event that the Grantor, or any person claiming by,
through or under the Grantor, shall transfer or refuse or fail to surrender
possession of the Mortgaged Property after any sale of the Mortgaged Property,
then the Grantor or such person shall be deemed a tenant at sufferance of the
purchaser at such sale, subject to eviction by means of forcible entry and
detainer proceedings, or subject to any other right or remedy available under
this Deed of Trust or under applicable law.
(i) Upon any such sale, the Trustee, the Beneficiary or any
public officer acting under execution or order of court shall not be required to
have present or constructively in its possession any or all of the Mortgaged
Property.
(j) In the event of any sale referred to in this SECTION 6.04,
all of the Obligations, if not previously due and payable, immediately thereupon
shall become due and payable, notwithstanding anything to the contrary contained
in this Deed of Trust or any other Transaction Document
(k) In the event a foreclosure under this Deed of Trust shall
be commenced by the Trustee, the Trustee or the Beneficiary may, at any time
before the sale of the Mortgaged Property, abandon or direct the Trustee to
abandon the sale, and may institute suit for the collection of the Obligations
and for the foreclosure of this Deed of Trust, or in the event that the Trustee
or the Beneficiary should institute a suit for collection of the Obligations,
and for the foreclosure of this Deed of Trust, the Beneficiary may at any time
before the entry of final judgment in said suit dismiss the same and require the
Trustee to sell the Mortgaged Property in accordance with the provisions of this
Deed of Trust.
6.05 Application of Proceeds. The purchase money, proceeds or avails
-----------------------
of any sale referred to in Section 6.04, together with any other sums that may
be held by the Trustee or the Beneficiary under this ARTICLE VI or any other
provision of this Deed of Trust, except as expressly provided in this Deed of
Trust or under applicable law to the contrary, shall be applied as follows:
First: To the payment of the costs and expenses of any such
-----
sale, including compensation to the Trustee, the Beneficiary and their agents
and counsel, and of any judicial proceeding in which such sale may be made, and
of all expenses (including reasonable attorneys' fees and disbursements),
liabilities and advances made or incurred by the Trustee or the Beneficiary
under this Deed of Trust, together with interest thereon as provided in this
Deed of Trust, and all taxes,
-23- EXHIBIT C-1
<PAGE>
assessments and other charges, except any taxes, assessments or other charges
subject to which the Mortgaged Property shall have been sold.
Second: To the payment in full of the Obligations (including
------
principal, interest, premium and fees in such order as the Beneficiary may
elect).
Third: To the payment of any other sums secured by this Deed
-----
of Trust or required to be paid by the Grantor pursuant to any provision of this
Deed of Trust or any other Transaction Document.
Fourth: To the extent permitted by applicable law, to be set
------
aside by the Trustee or the Beneficiary as adequate security in its judgment for
the payment of sums which would have been paid by application under clauses
First through Third above to the Trustee or the Beneficiary, arising out of an
- ----- -----
obligation or liability with respect to which the Grantor has agreed to
indemnify the Trustee or the Beneficiary, but which sums are not yet due and
payable or liquidated.
Fifth: To the payment of the surplus, if, any, to whomsoever
-----
may be lawfully entitled to receive the same.
6.06 Additional Provisions as to Remedies.
------------------------------------
(a) No right or remedy of the Trustee or the Beneficiary under
this Deed of Trust is intended to be exclusive of any other right or remedy, and
each and every such right or remedy shall be cumulative and continuing, shall be
in additIon to every other right or remedy given under this Deed of Trust or any
other Transaction Document or now or hereafter existing at law or in equity, and
may be exercised from time to time and as often as may be deemed expedient by
the Trustee or the Beneficiary.
(b) No delay or omission by the Trustee or the Beneficiary to
exercise any right or remedy under this Deed of Trust upon an Event of Default
shall impair such exercise, or be construed to be a waiver of any such Event of
Default or an acquiescence in any such Event of Default.
(c) The failure, refusal or waiver by the Trustee or the
Beneficiary of its right to assert any right or remedy under this Deed of Trust
upon any Event of Default or other occurrence shall not be construed as waiving
such right or remedy upon any other or subsequent Event of Default or other
occurrence.
(d) Neither the Trustee nor the Beneficiary shall have any
obligation to pursue any rights or remedies it may have under any other
agreement prior to pursuing its rights or remedies under this Deed of Trust or
any other Transaction Document.
(e) The Trustee and the Beneficiary may resort to any security
given by this Deed of Trust or any other security now given or hereafter
existing to secure the Obligations, in whole or in part in such portions and in
such order as the Trustee or the Beneficiary may deem advisable, and no such
action shall be construed as a waiver of any of the liens, rights or benefits
granted under this Deed of Trust.
(f) Acceptance of any payment after the occurrence of an Event
of Default shall not be deemed a waiver or a cure of such Event of Default, and
acceptance of any payment less than any amount then due shall be deemed an
acceptance on account only.
-24- EXHIBIT C-1
<PAGE>
(g) In the event that the Trustee or the Beneficiary shall have
proceeded to enforce any right or remedy under this Deed of Trust by
foreclosure, sale, entry or otherwise, and such proceeding shall be
discontinued, abandoned or determined adversely for any reason, then the
Grantor, the Trustee and the Beneficiary shall be restored to their former
positions and rights under this Deed of Trust with respect to the Mortgaged
Property, subject to the lien and security interest of this Deed of Trust.
6.07 Waiver of Rights and Defenses. To the full extent the Grantor
-----------------------------
may do so, the Grantor agrees with the Beneficiary as follows:
(a) The Grantor will not at any time insist on, plead, claim or
take the benefit or advantage of any statute or rule of law now or hereafter in
force providing for any appraisement, valuation, stay, extension, moratorium or
redemption, or of any statute of limitations, and the Grantor, for itself and
its successors and assigns, and for any and all persons ever claiming an
interest in the Mortgaged Property, hereby waives and releases all rights of
redemption, valuation, appraisement, notice of intention to mature or declare
due the whole of the Obligations, and all rights to a marshaling of the assets
of the Grantor, including the Mortgaged Property, or to a sale in inverse order
of alienation, in the event of foreclosure of the lien and security interest
created under this Deed of Trust.
(b) Regardless of consideration, and without the necessity for
any notice to or consent by the holder of any subordinate lien, encumbrance,
right, title or interest in or to the Mortgaged Property, the Beneficiary may
release any person at any time liable for the payment of the Obligations or any
portion of the Obligations or any part of the security held for the Obligations
and may extend the time of payment or otherwise modify the terms of this Deed of
Trust and/or any other Transaction Document, including a modification of the
interest rate payable on the principal balance of the Promissory Note, without
in any manner impairing or affecting this Deed of Trust or the lien and security
interest of this Deed of Trust or the priority of this Deed of Trust, as so
extended and modified, as security for the Obligations over any such subordinate
lien, encumbrance, right, title or interest. The Beneficiary may resort for the
payment of the Obligations to any other security held by the Beneficiary in such
order and manner as the Beneficiary, in its discretion, may elect. The
Beneficiary may take action to recover all or any portion of the Obligations or
to enforce any covenant in this Deed of Trust or any other Transaction Document
without prejudice to the right of the Beneficiary thereafter to foreclose this
Deed of Trust.
ARTICLE VII
Defeasance; Provisions as to Trustee
------------------------------------
7.01 Defeasance. If the Obligations shall be paid in full as they
----------
become due and payable, then and (subject to Section 7.02) in that event only
all rights under this Deed of Trust shall terminate and the Mortgaged Property
shall become wholly released and cleared of the lien, security interest,
conveyance and assignment evidenced by this Deed of Trust. In such event, the
Beneficiary, at the request and the sole cost and expense of the Grantor, shall
promptly deliver to the Grantor, in recordable form, all such documents as shall
be necessary to release the Mortgaged Property from the lien, security interest,
conveyance and assignment evidenced by this Deed of Trust; provided that nothing
--------
in this Section 7.01 shall be construed to require the Grantor to pay any
attorneys' fees or expenses incurred by the Beneficiary in connection with the
preparation and delivery of such documents.
7.02 Reconveyance. If the entire unpaid principal amount of the
------------
Promissory Note shall be prepaid and all of the other Obligations and the
Release Premium shall be paid pursuant to Section 2.19. then all rights under
this Deed of Trust shall terminate and the Mortgaged Property shall
-25- EXHIBIT C-1
<PAGE>
become wholly released and cleared of the lien, security interest, conveyance
and assignment evidenced by this Deed of Trust. In such event, the Beneficiary
and the Trustee, at the request of the Grantor, shall promptly deliver to the
Grantor, in recordable form, all such documents as shall be necessary to release
the Mortgaged Property from the lien, security interest, conveyance and
assignment evidenced by this Deed of Trust; provided that nothing in this
--------
Section 7.02 shall be construed to require the Grantor to pay any attorneys'
fees or expenses incurred by the Beneficiary or the Trustee in connection with
the preparation and delivery of such documents.
7.03 Trustee's Resignation. The Trustee may resign by an instrument
---------------------
in writing addressed to the Beneficiary, or the Trustee may be removed at any
time with or without cause by an instrument in writing executed by the
Beneficiary. In case of the death, resignation, removal or disqualification of
the Trustee or if for any reason the Beneficiary shall deem it desirable to
appoint a substitute or successor trustee to act instead of the Trustee named in
this Deed of Trust or instead of any substitute or successor Trustee, then the
Beneficiary shall have the right and is hereby authorized and empowered to
appoint a successor Trustee, or a substitute Trustee, without other formality
than appointment and designation in writing executed by the Beneficiary and
recorded in the real estate records of the county where the Mortgaged Property
is located, and the authority conferred by this Section 7.03 shall extend to the
appointment of other successor and substitute Trustees successively until the
Obligations have been paid in full or until the Mortgaged Property is sold under
this Deed of Trust. Such appointment and designation by the Beneficiary shall be
full evidence of the right and authority to make the same and of all facts
therein recited. Any such appointment executed on behalf of the Beneficiary by
an officer of the Beneficiary shall be conclusively presumed to be executed with
authority and shall be valid and sufficient without proof of any action by the
board of directors or any superior officer of the Beneficiary. Upon the making
of such appointment and designation, all of the estate and title of the Trustee
in the Mortgaged Property shall vest in the named successor or substitute
Trustee, and the named successor or substitute Trustee shall thereupon succeed
to and shall hold, possess and execute all the rights, powers, privileges,
immunities and duties conferred upon the Trustee in this Deed of Trust. Upon the
written request of the Beneficiary or of the successor or substitute Trustee,
the Trustee ceasing to act shall execute and deliver an instrument transferring
to such successor or substitute Trustee all of the estate and title in the
Mortgaged Property of the Trustee so ceasing to act, together with all the
rights, powers, privileges, immunities and duties conferred upon the Trustee in
this Deed of Trust, and shall duly assign, transfer and deliver any of the
properties and moneys held by said Trustee under this Deed of Trust to said
successor or substitute Trustee. All references in this Deed of Trust to the
Trustee shall be deemed to refer to the Trustee (including any successor or
substitute appointed and designated as provided in this Deed of Trust) from time
to time acting under this Deed of Trust The Grantor hereby ratifies and confirms
any and all acts which the Trustee or its successor or successors, substitute or
substitutes, in this trust, shall do lawfully by virtue of this Deed of Trust.
7.04 Exculpation. The Trustee shall not be liable for any error of
-----------
judgment or act done by the Trustee in good faith, or be otherwise responsible
or accountable under any circumstances whatsoever, except for the Trustee's
gross negligence or willful misconduct. The Trustee shall have the right to rely
on any instrument, document or signature authorizing or supporting any action
taken or proposed to be taken by the Trustee under this Deed of Trust, believed
by the Trustee in good faith to be genuine. All moneys received by the Trustee,
until used or applied as provided in this Deed of Trust, shall be held in trust
for the purposes for which they were received, but need not be segregated in any
manner from any other moneys (except to the extent required by law), and the
Trustee shall be under no liability for interest on any moneys received by it
under this Deed of Trust.
-26- EXHIBIT C-1
<PAGE>
ARTICLE VIII
Additional Provisions
---------------------
8.01 Construction of Certain provisions. The following rules of
----------------------------------
construction shall be applicable for all purposes of this Deed of Trust:
(a) All references in this Deed of Trust to Articles,
Sections and Schedules are references to Articles and Sections of and Schedules
attached to this Deed of Trust, unless stated otherwise in this Deed of Trust
(b) The cover page of, and all recitals set forth in, and all
Schedules to, this Deed of Trust are by this reference incorporated in this Deed
of Trust.
(c) The table of contents and the captions of the Articles,
Sections, subsections, paragraphs and other divisions of this Deed of Trust are
included for convenience of reference only, and shall not in any way limit or
affect the construction or interpretation of any provisions of this Deed of
Trust.
(d) Each of the terms "Mortgaged Property" and "Facility"
shall be construed as if followed by the phrase "or any part thereof."
(e) The term "Obligations" shall be construed as if followed
by the phrase "or any other sums secured hereby, or any part thereof."
(f) The term "indebtedness" shall mean (i) indebtedness for
borrowed money, (ii) obligations evidenced by bonds, debentures, notes or other
similar instruments, (iii) obligations to pay the deferred purchase price of
property or services (iv) indebtedness created or arising under any conditional
sale or other title retention agreement with respect to property, (v)
obligations as lessee under leases which shall have been or should be, in
accordance with generally accepted accounting principles, recorded as capital
leases, (vi) obligations (contingent or otherwise) under acceptance, letter-of-
credit or similar facilities, (vii) obligations in respect of interest rate swap
agreements, currency swap agreements and other similar agreements designed to
hedge against fluctuations in interest rates or foreign exchange rates and
(viii) obligations under direct or indirect guaranties in respect of, and
obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of the types referred to in any of clauses (i) through (vii) above.
(g) The terms "include", "including" and similar terms shall
be construed as if followed by the phrase "but not limited to."
(h) The term "provisions," when used with respect to this Deed
of Trust or any other Transaction Document shall be construed as if preceded by
the phrase "terms, covenants, agreements, requirements, conditions and/or."
(i) The term "person" shall include natural persons, firms,
partnerships, corporations and any other public and private legal entities.
(j) The term "lease" shall mean "tenancy, subtenancy, lease or
sublease" and the term "lessee" shall mean "tenant, subtenant, lessee or
sublessee."
-27- EXHIBIT C-1
<PAGE>
(k) The phrase "sound accounting principles and practices"
shall mean generally accepted accounting principles and practices consistently
applied, but permitting, with respect to the preparation of financial
statements, the omission of footnotes and federal and state income tax reserves,
none of which omissions shall represent an omission of material items of revenue
or expense other than federal and state income tax expense.
(l) Except with respect to Sections 2.02, 2.13 and 5.01, the
term "consent of the Beneficiary" shall be construed as if followed by the
phrase", which consent shall not be unreasonably withheld."
(m) The words "reasonable attorneys fees and disbursements"
shall include reasonable charges allocated for internal corporate counsel.
(n) Words of masculine, feminine or neuter gender shall mean
and include the correlative words of the other genders, and words importing the
singular number shall mean and include the plural number, and vice versa.
---- -----
(o) No inference in favor of, or against any party shall be
drawn from the fact that such party has drafted any portion of this Deed of
Trust.
8.02 Limitation on Interest. Notwithstanding any other provisions of
----------------------
this Deed of Trust or any other Transaction Document to the contrary, no
provision of this Deed of Trust or any other Transaction Document shall require
the payment or permit the collection of interest, fees or charges in excess of
the maximum rate permitted by applicable law.
8.03 Lease. The Trustee leases the Mortgaged Property to the
-----
Grantor, until either this Deed of Trust is released or the Mortgaged Property
is sold under the above provisions; on the following terms and conditions: The
Grantor and every person claiming or possessing the Mortgaged Property through
or under the Grantor shall pay rent during the term at the rate of one cent per
month, payable monthly upon demand, and shall without demand surrender peaceable
possession of the Mortgaged Property to the Trustee, successors and assigns of
the Trustee, or purchasers of the Mortgaged Property under any foreclosure sale,
within ten days after the sale date.
8.04 Amendments, Etc. No amendment or waiver of any provision of
---------------
this Deed of Trust, nor consent to any departure by the Grantor from any such
provision, shall in any event be effective unless such amendment, waiver or
consent is in a writing which specifically refers to this Section 8.04 and which
is signed by the Grantor and by the Chief Executive Officer or the President of
the Beneficiary and, to the extent required by applicable law, by the Trustee;
provided that any such waiver or consent shall be effective only in the specific
- --------
instance and for the specific purpose for which given; provided, further, that
-------- -------
the Trustee shall not sign any amendment or waiver without the consent of the
Beneficiary.
8.05 Notices. Except as otherwise provided in this Deed of Trust or
-------
required by applicable law, all notices, consents, requests and other
communications to any party under or in connection with this Deed of Trust shall
be in writing and shall be sent via personal delivery, via telephone facsimile
transmission, via certified or registered mail, return receipt requested, or via
express courier or delivery service, addressed to such party at such party's
address or telephone facsimile number set forth below or at such other address
or telephone facsimile number as shall be designated
-28- EXHIBIT C-1
<PAGE>
by such party in a written notice given to each other party complying as to
delivery with the terms of this SECTION 8.05:
if to the Grantor, at:
P.O. Box 1670
Clemmons, North Carolina 27012
Attn: Don G. Angell
Facsimile: (919)998-2560
with a copy to:
House & Blanco, P.A
215 Executive Park Boulevard
P.O. Drawer 25008
Winston-Salem, North Carolina 27114-5008
Attn: George E. Hollodick
Facsimile: (919)765-4830
if to the Beneficiary, at:
The Cornerstone Building
1148 Broadway Plaza
Tacoma, Washington 98402
Attn: Vice President -
Acquisitions and Development
Facsimile: (206)756-4871
with a copy to:
The Hillhaven Corporation
The Cornerstone Building
1148 Broadway Plaza
Tacoma, Washington 98402
Attn: General Counsel
Facsimile: (206)756-4845 or (206)756-4743
if to the Trustee, at:
Don F. Dagenais
Gage & Tucker
2345 Grand Avenue
Suite 2800
Kansas City, Missouri 64108
Facsimile: (816)292-2001.
All such notices, consents, requests and other communications shall be deemed
given (a) when given and receipted for (or upon the date of attempted delivery
when delivery is refused), if sent via personal delivery, via certified or
registered mail, return receipt requested, or via express courier or delivery
service or (b) when received, if sent via telephone facsimile transmission
(confirmation of such receipt
-29- EXHIBIT C-1
<PAGE>
via confirmed telephone facsimile transmission being deemed receipt of any such
notice, request or other communication sent via telephone facsimile
transmission).
8.06 No Merger. If both the lessor's and the lessee's interest under
---------
any lease which constitutes a part of the Mortgaged Property shall at any time
become vested in any one person, this Deed of Trust and the lien and security
interest created by this Deed of Trust shall not be destroyed or terminated by
the application of the doctrine of merger and, in such event, the Trustee and
the Beneficiary shall continue to have and enjoy all of the rights and
privileges of the Trustee and the Beneficiary under this Deed of Trust as to
each separate estate. Upon the foreclosure of the lien created by this Deed of
Trust, any leases then existing shall not be destroyed or terminated by
application of the doctrine of merger or as a matter of law or as a result of
such foreclosure unless the Trustee or the Beneficiary or any purchaser at a
foreclosure sale shall so elect by notice to the lessee in question.
8.07 Severability. Any provision of this Deed of Trust that is
------------
prohibited or unenforceable in any jurisdiction shall be ineffective, as to such
jurisdiction, to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Deed of Trust or affecting the
validity or enforceability of such provision in any other jurisdiction.
8.03 Obligations of Grantor. Time is of the essence with respect to
----------------------
all of the Grantor's covenants and agreements under this Deed of Trust and all
of such covenants and agreements shall run with the land. All obligations of the
Grantor under this Deed of Trust shall be performed and satisfied by or on
behalf of the Grantor at the Grantor's sole cost and expense.
8.09 Successors and Assigns. The provisions of this Deed of Trust
----------------------
shall be binding upon the Grantor and the successors and assigns of the Grantor,
including successors in interest of the Grantor in and to all or any part of the
Mortgaged Property, and shall inure to the benefit of the Trustee and the
Beneficiary and the respective substitutes, successors, transferees and assigns
of the Trustee and the Beneficiary. All references in this Deed of Trust to the
Grantor, the Trustee or the Beneficiary shall be construed as including all of
such other persons with respect to the person to which reference is made. Where
two or more persons have executed this Deed of Trust, the obligations of such
persons shall be joint and several except to the extent the context clearly
indicates otherwise.
8.10 No Waiver. No provision in Article I or Section 2.05 or
---------
elsewhere in this Deed of Trust shall be construed as a waiver by the Grantor of
any warranty of the Beneficiary under the deed, dated the date of the Promissory
Note, made by the Beneficiary to the Grantor with respect to the Facility, nor
shall any such provision be construed to require the Grantor to pay any costs
and expenses (including reasonable attorneys' fees and disbursements) incurred
by the Beneficiary in connection with the defense of any warranty of the
Beneficiary under such deed.
8.11 Attorneys' Fees. If any action or proceeding is commenced to
---------------
enforce or interpret this Deed of Trust the prevailing party shall be entitled
to recover from the non-prevailing party the costs and expenses of maintaining
such action or proceeding, including reasonable attorneys' fees and
disbursements incurred before such action or proceeding is commenced, before
trial, at trial, after trial and on appeal, whether the action or proceeding is
at law, in equity or in a bankruptcy case or proceeding.
8.12 Consent to Jurisdiction. The Grantor hereby irrevocably submits
-----------------------
to the jurisdictiOn of any court of the State of Washington or any federal court
of the United States of America for any district of the State of Washington, and
any appellate court from any of such courts, in any action or proceeding arising
from or by reason of, or otherwise relating to, this Deed of Trust, and the
-30- EXHIBIT C-1
<PAGE>
Grantor hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such court of the State of Washington
or in such federal court of the United States of America (for any district of
the State of Washington. The Grantor, to the fullest extent permitted by
applicable law, hereby irrevocably waives the defense of an inconvenient forum
to the maintenance of any such action or proceeding in such court of the State
of Washington or in such federal court of the United States of America (for any
district of the State of Washington. The Grantor hereby irrevocably appoints
House & Blanco, P.A. (the "Process Agent"), as the Grantor's agent to receive on
behalf of the Grantor and its property service of copies of the summons and
complaint and any other process which may be served in any such action or
proceeding. Such service may be made by mailing or delivering a copy of such
process to the Grantor in care of the Process Agent at 215 Executive Park
Boulevard, P.O. Drawer 25008, Winston-Salem, North Carolina 27114-5008, and the
Grantor hereby irrevocably authorizes and directs the Process Agent to accept
such service on the Grantor's behalf. As an alternative method of service, the
Grantor also irrevocably consents to the service of any and all process in any
such action or proceeding by the mailing of copies of such process to the
Grantor at its address specified in Section 8.05. The Grantor agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Section 8.12 shall affect the right of the
Beneficiary to serve legal process in any other manner permitted by law or shall
affect the right of the Beneficiary to bring any action or proceeding against
the Grantor or the Grantor's property in the courts of any other jurisdictions.
8.13 Waiver of Jury Trial. Each of the Grantor and the Beneficiary
--------------------
hereby irrevocably waives all right to trial by jury in any action, proceeding
or counterclaim (whether based upon contract, tort or otherwise) arising from or
by reason of or relating to this Deed of Trust or any actions of the Grantor or
the Beneficiary in the negotiation, administration, performance or enforcement
of this Deed of Trust.
8.14 Applicable Law. This Deed of Trust shall be governed by, and
--------------
construed in accordance with, the laws of the State of Missouri.
IN WITNESS WHEREOF, the Grantor has executed this Deed of Trust as of
the date first above written.
[NAME OF THE GRANTOR]
By MEADOWBROOK MANOR OF KANSAS & MISSOURI, INC.,
General Partner
By __________________________________
Title: ___________________________
-31- EXHIBIT C-1
<PAGE>
STATE OF ________________)
)SS.
COUNTY OF _______________)
On this ____ day of _____________, 1992, before me, the undersigned, a
Notary Public within and for said County and State, personally appeared
______________________, to me personally known, who being by me duly sworn, did
say that he is the [Vice] President of Meadowbrook Manor of Kansas & Missouri,
Inc., a North Carolina corporation and the general partner of
__________________'a North Carolina limited partnership, that the seal (if any)
affixed to the foregoing instrument is the corporate seal of said corporation,
that said instrument was signed and sealed on behalf of said corporation by
authority of its Board of Directors, and said __________________ acknowledged
said instrument to be the free act and deed of said limited partnership and the
free act and deed of said corporation as general partner of said limited
partnership.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal at my office in _____________________, the day and year last above
written.
_________________________________________________
Notary Public in and for
Said County and State
_________________________________________________
(Type or stamp the Notary's name below his or her
signature.)
My Commission Expires:
________________________
-32- EXHIBIT C-1
<PAGE>
Schedule A
to
Deed of Trust,
Assignment, Security Agreement
and
Financing Statement (Fixture Filing)
([Name of the Facility)/13/
(Facility No. [___])/14/
Land
----
[RESERVED.]
____________________________________
/13/ Insert the name of the Facility.
/14/ Insert the number assigned to the Facility.
-1- EXHIBIT C-1
<PAGE>
Schedule B
to
Deed of Trust.
Assignment, Security Agreement
and
Financing Statement (Fixture Filing)
([Name of the Facility)/15/
(Facility No. [____]/16/
Permitted Exceptions
--------------------
[Reserved.]
- ----------------------------------
/15/ Insert the name of the Facility.
/16/ Insert the number assigned to the Facility.
-1- EXHIBIT C-1
<PAGE>
Schedule C
to
Deed of Trust,
Assignment, Security Agreement
and
Financing Statement (Fixture Filing)
([Name of the Facility)/17/
(Facility No. [___]/18/
Affiliates/19/
----------
1. Meadowbrook Manor of Baldwin Limited Partnership, a North Carolina limited
partnership.
2. Meadowbrook Manor of Joplin Limited Partnership I, a North Carolina limited
partnership.
3. Meadowbrook Manor of Council Grove Limited Partnership, a North Carolina
limited partnership.
4. Meadowbrook Manor of Haysville Limited Partnership, a North Carolina
limited partnership.
5. Meadowbrook Manor of St Charles Limited Partnership, a North Carolina
limited partnership.
6. Meadowbrook Manor of Overland Park Limited Partnership, a North Carolina
limited partnership.
7. Meadowbrook Manor Terrace of Overland Park Limited Partnership, a North
Carolina limited partnership.
8. Meadowbrook Manor of Chanute Limited Partnership, a North Carolina limited
partnership.
9. Meadowbrook Manor of Springfield Limited Partnership, a North Carolina
limited partnership.
10. Meadowbrook Manor of Topeka Limited Partnership, a North Carolina limited
partnership.
11. Meadowbrook Manor of Wichita Limited Partnership, a North Carolina limited
partnership.
12. Meadowbrook Manor of Columbia Limited Partnership, a North Carolina limited
partnership.
13. Meadowbrook Manor of Sedgwick Limited Partnership, a North Carolina limited
partnership.
14. Meadowbrook Manor Colonial Terrace of Independence Limited Partnership, a
North Carolina limited partnership.
- ------------------------
/17/Insert the name of the Facility.
/18/Insert the number assigned to the Facility.
/19/Delete the name of the Grantor from this Schedule C and, to the extent
required, re-number the list of Affiliates.
-1- EXHIBIT C-1
<PAGE>
15. Meadowbrook Manor Colonial Lodge of Independence Limited Partnership, a
North Carolina limited partnership.
16. Meadowbrook Manor of Larned Limited Partnership, a North Carolina limited
partnership.
17. Meadowbrook Manor Apartments of Lamed Limited Partnership, a North Carolina
limited partnership.
18. Meadowbrook Manor of Ava Limited Partnership, a North Carolina limited
partnership.
19. Meadowbrook Manor of Buffalo Limited Partnership, a North Carolina limited
partnership.
20. Meadowbrook Manor of Clinton Limited Partnership, a North Carolina limited
partnership.
21. Meadowbrook Manor of Des Peres Limited Partnership, a North Carolina
limited partnership.
21 Meadowbrook Manor of Jefferson Limited Partnership, a North Carolina limited
partnership.
23. Meadowbrook Manor of Marceline Limited Partnership, a North Carolina
limited partnership.
24. Meadowbrook Manor of Joplin Limited Partnership II, a North Carolina
limited partnership.
25. Meadowbrook Manor of Lamar Limited Partnership, a North Carolina limited
partnership.
26. Meadowbrook Manor of Shady Oaks Limited Partnership, a North Carolina
limited partnership.
27. Meadowbrook Manor of Crane Limited Partnership, a North Carolina limited
partnership.
28. Meadowbrook Manor of Kimberling City Limited Partnership, a North Carolina
limited partnership.
29. Meadowbrook Manor Residential of Kimberling City Limited Partnership, a
North Carolina limited partnership.
30. Meadowbrook Manor Wornall of Kansas City Limited Partnership, a North
Carolina limited partnership.
31. Meadowbrook Manor Blue Hills of Kansas City Limited Partnership I, a North
Carolina limited partnership.
32. Meadowbrook Manor Blue Hills of Kansas City Limited Partnership II, a North
Carolina limited partnership.
-2- EXHIBIT C-1
<PAGE>
Exhibit C-2
to
Facility Agreement
MORTGAGE.
ASSIGNMENT, SECURITY AGREEMENT
AND
FINANCING STATEMENT (FIXTURE FILING)
(Name of the Facility)
(Facility No. [____])
Dated as of [________] ___]. 1992
By
[NAME OF MORTGAGOR].
as the Mortgagor
to
FIRST HEALTHCARE CORPORATION,
as the Mortgagee
EXHIBIT C-2
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
RECITALS................................................................ 1
Land...................................................... 3
Improvements; Facility.................................... 3
Personal Property......................................... 3
Contract Interests........................................ 4
After Acquired Property................................... 4
Proceeds. Etc............................................. 4
ARTICLE I - Representations and Warranties of the Mortgagor............. 5
1.01 Warranty of Title......................................... 5
1.02 Non-Agricultural Use...................................... 5
1.03 Certificates and Permits.................................. 5
ARTICLE II - Covenants of the Mortgagor................................. 5
2.01 Payment of Obligations.................................... 5
2.02 Good Standing; Etc........................................ 5
2.03 Security Agreement........................................ 6
2.04 Further Assurances........................................ 6
2.05 Protection of Lien; Defense of Action..................... 6
2.06 Repair and Maintenance.................................... 7
2.07 Compliance with Laws...................................... 7
2.08 Use....................................................... 7
2.09 Zoning; Title Matters..................................... 8
2.10 Insurance................................................. 8
(a) Property and Casualty Insurance....................... 8
(b) Liability Insurance................................... 8
(c) Forms of Policies..................................... 8
(d) Transfer of Title..................................... 9
(e) Amounts of Coverage................................... 9
2.11 Damage and Destruction.................................... 9
2.12 Condemnation.............................................. 10
2.13 Liens..................................................... 10
2.14 Taxes and Other Charges................................... 11
2.15 Tax Deposits.............................................. 11
2.16 Inspection................................................ 12
2.17 Maintenance of Records.................................... 12
2.18 Mortgagor's Certificates.................................. 12
2.19 Prepayments; Release Premium.............................. 12
2.20 Reporting Requirements.................................... 13
</TABLE>
-i- EXHIBIT C-2
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE III - Assignment of Rents and Other Sums ...................... 14
3.01 Assignment.............................................. 14
3.02 Right to Collect........................................ 15
3.03 Revocation of Right to Collect; Etc..................... 15
ARTICLE IV - Additional Advances; Expenses; Indemnity................. 15
4.01 Additional Advances and Disbursements................... 15
4.02 Other Expenses.......................................... 16
4.03 Indemnity............................................... 16
ARTICLE V - Transfer of the Mortgaged Property....................... 16
5.01 Transfer of the Mortgaged Property...................... 16
ARTICLE VI - Defaults and Remedies.................................... 17
6.01 Events of Default....................................... 17
6.02 Remedies................................................ 19
6.03 Expenses................................................ 21
6.04 Rights Pertaining to Sales.............................. 21
6.05 Application of Proceeds................................. 22
6.06 Additional Provisions as to Remedies.................... 23
6.07 Waiver of Rights and Defenses........................... 24
ARTICLE VII - Defeasance............................................... 24
7.01 Defeasance.............................................. 24
7.02 Release................................................. 25
ARTICLE VIII - Additional Provisions.................................... 25
8.01 Construction of Certain Provisions...................... 25
8.02 Limitation on Interest.................................. 26
8.03 Appointment of Mortgagee................................ 26
8.04 Amendments. Etc......................................... 26
8.05 Notices................................................. 26
8.06 No Merger............................................... 27
8.07 Severability............................................ 28
8.06 Obligation of Mortgagor................................. 28
8.09 Successors and Assigns.................................. 28
8.10 No Waiver............................................... 28
8.11 Consent to Jurisdiction................................. 28
8.12 Applicable Law.......................................... 29
</TABLE>
Schedule A - Land
Schedule B - Permitted Exceptions
Schedule C - Affiliates
ii EXHIBIT C-2
<PAGE>
MORTGAGE,
ASSIGNMENT, SECURITY AGREEMENT
AND
FINANCING STATEMENT (FIXTURE FILING)
([Name of the Facility)/1/
(Facility No. [___])/2/
This MORTGAGE, ASSIGNMENT, SECURITY AGREEMENT AND FINANCING STATEMENT
(FIXTURE FILING), dated as of [___________ ____], 1992 (this "Mortgage"), is
made by [______________], a North Carolina limited partnership whose address is
P.O. Box 1670, Clemmons, North Carolina 27011 as the mortgagor under this
Mortgage (the "Mortgagor"), to FIRST HEALTHCARE CORPORATION, a Delaware
corporation ("First Healthcare") whose address is The Cornerstone Building, 1148
Broadway Plaza, Tacoma, Washington 96402, as the mortgagee under this Mortgage
(the "Mortgagee").
RECITALS
A. The Mortgagee, as seller, and the Mortgagor and the Affiliates
(as defined below), jointly and severally as buyers (the "Buyers"), have entered
into a Facility Agreement, dated as of [_________ ____], 1992 (said Facility
Agreement, as it may be supplemented, amended or otherwise modified from time to
time, being the "Facility Agreement").
B. Pursuant to the terms and subject to the conditions set forth in
the Facility Agreement, the Mortgagee has agreed to permit the Mortgagor to
defer the payment of a portion of the purchase price for the properties (real,
personal and mixed) that constitute the Mortgaged Property (as defined below)
and that are the subject of the Facility Agreement, in a principal amount not to
exceed [____________ ] and [___]/100 Dollars ($[___________])
C. Pursuant to the terms of the Facility Agreement, the Mortgagor
has executed and delivered to the order of the Mortgagee a Promissory Note,
dated [_______________], 1992,/3/ in the stated principal sum of[___________]
and [___]/100 Dollars ($[______________]) (said Promissory Note, as it may be
supplemented, amended, extended, renewed or otherwise modified from time to
time, being the "Promissory Note"), evidencing the obligation of the Mortgagor
to pay the deferred portion of the purchase price in respect of the Mortgaged
Property.
D. The total of the indebtedness and liabilities to be secured by
this Mortgage equals the sum of the following (such indebtedness and liabilities
or the instruments evidencing the same, as applicable, being collectively
referred to in this Mortgage as the "Obligations"):
(1) the principal amount of [____________________] and [____]/100
Dollars ($[________________]) (the "Purchase Price Balance"); plus
- -----------------------------
/1/ Insert the name of the Facility.
/2/ Insert the name of the Facility.
/3/Insert the Closing Date.
-1- EXHIBIT C-2
<PAGE>
(2) interest on the unpaid principal amount of the Purchase
Price Balance at a rate of interest per annum (the "Regular Rate")
equal to;
(a) nine percent (9%) per annum from [___________
________], 1992/4/, to [_________ ___] 199__]/5/, and
(b) eleven percent (11%) per annum from [________ ___],
199[___]/6/, to the date on which the Purchase Price Balance is paid
in full;
and at a rate per annum (the "Default Rate") equal at all times to the sum
of the Regular Rate plus five percent (5%) per annum; plus
(3) all other amounts that are or become payable by the Mortgagor and
all other obligations of the Mortgagor under the Facility Agreement, the
Promissory Note and this Mortgage;
[(E./7/ The lien of this Mortgage is junior to the lien of the
[____________]/8/ dated [as of] [_____________], 19[__] (the
"First Lien Mortgage"), made by [_____________]/9/ to
[__________]/10/ securing the payment of a Promissory Note, dated [________
____], 19[__] (the "First Lien Promissory Note"), in the stated principal amount
of $[_________,___], The obligations evidenced by the First Lien Promissory Note
and secured by the First Lien Mortgage are and remain the obligations of the
Mortgagee.)
(F,/11/ All of the Obligations have a scheduled maturity of not later than
[___________], 199[__]/12/.)
- -----------------------
/4/ Insert the Closing Date.
/5/ Insert the last day of the forty-first calendar month immediately
following the calendar month in which the Closing occurs.
/6/ Insert the first day of the forty-second calendar month immediately
following the calendar month if, which the Closing occurs.
/7/ Include this recital if this Mortgage is to be subordinate and
inferior to any existing mortgage in respect of the Mortgaged Property.
/8/ Insert the title of the existing mortgage to which this Mortgage is to
be subordinate and inferior.
/9/ Insert the name of the mortgagor under the First Lien Mortgage.
/10/ Insert the name of the mortgagee under the First Lien Mortgage.
/11/ Include this recital of required by applicable law.
/12/ Insert the first day of the eighty-fourth calendar month immediately
following the calendar month in which the Closing occurs.
-2- EXHIBIT C-2
<PAGE>
G. The execution and delivery of this Mortgage by the Mortgagor is a
condition precedent to the obligation of the Mortgagee to consummate the
transactions contemplated by the Facility Agreement.
I. The rules of construction set forth in Section 8.01 shall be
applicable for all purposes of this Mortgage.
NOW, THEREFORE, for and in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the Mortgagor, and to secure the punctual payment by the
Mortgagor when due (whether at stated maturity, by acceleration or otherwise) of
the Obligations and the performance and observance of all other covenants,
obligations and liabilities of the Mortgagor under the Facility Agreement, the
Promissory Note and this Mortgage, the Mortgagor does hereby GRANT, BARGAIN,
SELL MORTGAGE, WARRANT, CONVEY, ALIEN, REMISE, RELEASE, ASSIGN, PLEDGE,
HYPOTHECATE, TRANSFER, SET OVER, DELIVER and CONFIRM unto the Mortgagee, each
and all of the following described properties, rights, interests and privileges
and all of the Mortgagor's estate, right, title and interest in, to and under,
or derived from, the following described properties, rights, interests and
privileges (all of such properties, rights, interests and privileges being
collectively referred to in this Mortgage as the "Mortgaged Property"):
Land. All those certain lots, pieces and parcels of land more
----
particularly described in Schedule A, and all of the reversions and
remainders in and to said land and the tenements, hereditaments,
easements, right-of-way or use, rights (including alley, drainage,
mineral, water, oil and gas rights), privileges, royalties and
appurtenances to said land, now or hereafter belonging or in anywise
appertaining to said land, including any such right, title or interest
in, to or under any agreement or right granting, conveying or
creating, for the benefit of said land, any easement, right or license
in any way affecting other property and in, to or under any streets,
ways, alleys, vaults, gores or strips of land adjoining any portion of
said land, or in or to the air space over said land, all rights of
ingress and egress by motor vehicles to parking facilities on or
within said land, and all claims or demands of the Mortgagor, either
at law or in equity, in possession or expectancy, of, in or to the
same (all of the foregoing being collectively referred to in this
Mortgage as the "Land");
Improvements; Facility. All buildings, structures, facilities and
----------------------
other improvements now or hereafter erected on, attached to or located
in or upon the Land, and all building materials of every kind and
nature now or hereafter located on the Land or attached to, contained
in, or used in connection with, any such buildings, structures,
facilities or other improvements, and all appurtenances and additions
thereto and betterments, renewals, substitutions and replacements
thereof, owned by the Mortgagor or in which the Mortgagor has or shall
acquire an interest (all of the foregoing being collectively referred
to in this Mortgage as the "Improvements," and the Land and the
Improvements being together referred to in this Mortgage as the
"Facility");
Personal Property. All machinery, equipment furniture,
-----------------
furnishings, fixtures, chattels and other items of personal property,
and all appurtenances and additions thereto and betterments, renewals,
substitutions and replacements thereof, owned by the Mortgagor or in
which the Mortgagor has or shall acquire an interest, wherever
situated, and now or hereafter located on, attached to, contained in
or used in connection with the Land, the Improvements or the Contract
Interests, or placed on any part thereof although not attached thereto
(all of the foregoing being collectively referred
-3- EXHIBIT C-2
<PAGE>
to in this Mortgage as the "Personal Property"), including all
partitions, screens, awnings, shades, blinds, curtains, draperies,
carpets, rugs, furniture and furnishings, heating, lighting, plumbing,
ventilating, air conditioning, refrigerating, gas, steam, electrical,
incinerating and/or compacting plants, systems, fixtures and
equipment, elevators, escalators, ranges, vacuum and other cleaning
systems, call systems, switchboards, sprinkler systems and other fire
prevention and extinguishing apparatus and materials, motors,
machinery, pipes, ducts, conduits, dynamos, engines, compressors,
generators, boilers, stokers, furnaces, pumps, tanks, appliances,
equipment, utensils, tools, implements. Writings and fixtures and all
permits, licenses, franchises, certificates and other rights and
privileges obtained in connection with the Mortgaged Property;
Contract Interests. All the leases, lettings and licenses of,
------------------
and all other contracts and agreements (including all patient care
agreements, life care contracts, admission agreements and other
contracts and agreements with residents, patients and other persons
pertaining to the care of residents or patients) affecting, the Land,
the Improvements, the Personal Property and/or any other property or
rights mortgaged or otherwise conveyed or encumbered by this Mortgage,
or any part thereof, now or hereafter entered into, and all
supplements, amendments, modifications, additions, extensions and
renewals thereof, and all right, title and interest of the Mortgagor
therein and thereunder, including cash and securities deposited
thereunder or pursuant thereto, the right to receive and collect the
rents, proceeds, issues and profits due and to become due and payable
thereunder or pursuant thereto and the rights to enforce, whether at
law or in equity or by any other means, all provisions and options
thereof (all of the foregoing being collectively referred to in this
Mortgage as the "Contract Interests");
After Acquired Property. Any and all moneys and other property,
-----------------------
of every kind and nature, which may from time to time be subjected to
the lien of this Mortgage by the Mortgagor, through a supplement to
this Mortgage or otherwise, or by any other person, or which may come
into the possession of or be subject to the control of the Mortgagee,
it being the intention and agreement of the Mortgagor that all
property hereafter acquired or constructed by the Mortgagor shall
forthwith upon acquisition or construction thereof by the Mortgagor
and without any act or deed by the Mortgagor be subject to the lien
and security interest of this Mortgage as a such property were now
owned by the Mortgagor and were specifically described in this
Mortgage and conveyed or encumbered by or pursuant to this Mortgage,
and the Mortgagee is hereby authorized to receive any and all such
property as and for additional security under this Mortgage (all of
the foregoing being collectively referred to in this Mortgage as the
"After Acquired Property"); and
Proceeds, Etc. All unearned premiums (whether accrued, accruing
or to accrue) under insurance policies now or hereafter obtained by
the Mortgagor, all proceeds of the conversion (whether voluntary or
involuntary) of the Mortgaged Property into cash or other liquidated
claims (excluding proceeds of title insurance, but including proceeds
of hazard and other insurance), and all judgments, damages, awards,
settlements and compensatIon (including interest thereon) heretofore
or hereafter made to the present and all subsequent owners of the
Land, the Improvements, the Personal Property, the Contract Interests
and/or any other property or rights encumbered or conveyed by this
Mortgage for any injury thereto or decrease in the value thereof for
any reason, or by any governmental or other lawful authority for the
taking by eminent domain,
-4- EXHIBIT C-2
<PAGE>
condemnation or otherwise of all or any part thereof, including awards
for any change of grade of streets;
TO HAVE AND TO HOLD, subject to the matters listed or otherwise
described in Schedule B (the "Permitted Exceptions"), all and singular the
Mortgaged Property, whether now owned or leased or hereafter acquired and
whether now or hereafter existing, together with all the rights, privileges and
appurtenances thereunto belonging, unto the Mortgagee forever, for the uses and
purposes set forth in this Mortgage.
AND the Mortgagor covenants and agrees with the Mortgagee as follows:
ARTICLE I
Representations and Warranties of the Mortgagor
-----------------------------------------------
1.01 Warranty of Title. (a) The Mortgagor has and will have good,
-----------------
marketable and insurable fee simple title to the Facility, free and clear of all
liens, charges and encumbrances of every kind and character, subject only to the
Permitted Exceptions; (b) the Mortgagor owns and will own all of the other
Mortgaged Property, free and clear of all liens, charges and encumbrances of
every kind and character, subject only to the Permitted Exceptions; (c) the
Mortgagor hereby warrants and will forever warrant and defend such title and the
validity, enforceability and priority of the lien and security interest of this
Mortgage against the claims of all persons whomsoever; (d) the Mortgagor has and
will have full power and lawful authority to encumber and convey the Mortgaged
Property as prided in this Mortgage; and (e) this Mortgage is and will remain a
valid and enforceable lien on, and security interest in, the Mortgaged Property,
subject only to the Permitted Exceptions.
1.02 Non-Agricultural Use. The Mortgaged Property is not used
--------------------
principally for agricultural or farming purposes.
1.03 Certificates and Permits. The Mortgagor has and will maintain
------------------------
in effect all necessary certificates, licenses, authorizations, registrations,
permits and/or approvals necessary for the operation of the Facility as a
[___________]-bed [skilled] [intermediate care] [nursing] facility and for the
conduct of the Mortgages business at the Facility.
ARTICLE II
Covenants of the Mortgagor
--------------------------
2.01 Payment of Obligations. The Mortgagor will punctually pay the
----------------------
Obligations when due, and will perform and observe all of its other obligations
under this Mortgage, the Promissory Note, the Facility Agreement and each other
document or instrument to which the Mortgagor is a party and that relates to any
of the Facility Agreement the Promissory Note or any security for the
obligations of the Mortgagor under the Facility Agreement or the Promissory Note
(this Mortgage, the Promissory Note, the Facility Agreement and such other
documents and instruments, in each case as the same may be supplemented, amended
or otherwise modified from time to time, being sometimes referred to in this
Mortgage individually as a "Transaction Document" and collectively as the
"Transaction Documents").
2.02 Good Standing; Etc. The Mortgagor will maintain in good standing
------------------
its partnership existence, franchises, rights and privileges under the law of
the jurisdiction of its formation and its right to transact business in the
jurisdiction in which the Facility is located. Subject to and without limitation
of Sections 2.19 and 5.01, the Mortgagor, without the prior consent of the
Mortgagee, will not sell, lease or otherwise dispose of (whether directly or
indirectly, or by operation of law, or in one transaction
-5- EXHIBIT C-2
<PAGE>
or a series of transactions) all or substantially all of its assets. Subject to
and without limitation of Sections 2.19 and 5.01, the Mortgagee may withhold its
consent to any proposed disposition of all or substantially all of the Mortgagee
assets for no reason or any reason. The Mortgagor, without at least thirty days
prior notice to the Mortgagee and compliance with the provisions of Section
2.04, will not change its name, identity or legal structure.
2.03 Security Agreement. The Mortgagor hereby further grants to the
------------------
Mortgagee a security interest in all of the Mortgagor's right, title and
interest in, to and under the following, whether now owned or hereafter acquired
(collectively, the "Collateral"): (a) the Personal Property; (b) the Contract
Interests; (c) the After Acquired Property; and (d) all proceeds of any and all
of the foregoing Collateral, including proceeds which constitute property of the
types included in the Personal Property, the Contract Interests and the After
Acquired Property and, to the extent not otherwise included, all cash, all
unearned premiums (whether accrued, accruing or to accrue) under insurance
policies now or hereafter obtained by the Mortgagor, all proceeds of the
conversion (whether voluntary or involuntary) of any of the Mortgaged Property
into cash or other liquidated claims (including proceeds of hazard and other
insurance), and all judgments, damages, awards, settlements and compensation
(including interest thereon) heretofore or hereafter made to the present and all
subsequent owners of the Land, the Improvements, the Personal Property, the
Contract Interests and/or any other property or rights encumbered or conveyed by
this Mortgage for any injury thereto or decrease in the value thereof for any
reason, or by any governmental or other lawful authority for the taking by
eminent domain, condemnation or otherwise of all or any part thereof, including
awards for any change of grade of streets. The Mortgagee shall have, in addition
to all rights and remedies provided in the Transaction Documents, all of the
rights and remedies of a "secured party" under the Uniform Commercial Code in
effect in the jurisdiction in which the Facility is located. This Mortgage
constitutes and shall be deemed to be a "security agreement" for all purposes of
said Uniform Commercial Code. Notwithstanding any provision in this section 2.03
or elsewhere in this Mortgage to the contrary, this Mortgage shall not be
construed to create a lien on or a security interest in any patient accounts or
any other accounts constituting any right of the Mortgagor to payment for goods
sold or leased or for services rendered which is not evidenced by an instrument
or chattel paper.
2.04 Further Assurances. Promptly upon request by the Mortgagee, the
------------------
Mortgagor will (a) correct any defect, error or omission that may be discovered
in the contents of, or in the execution, acknowledgment or recordation of, this
Mortgage or any other Transaction Document and (b) do, execute, acknowledge and
deliver any and all such further acts, deeds, conveyances, mortgages, deeds of
trust assignments, estoppel certificates, financing statements and continuations
thereof, notices of assignment, transfers, certificates, assurances and other
documents and instruments as the Mortgagee may require from time to time in
order to effectuate the purposes of this Mortgage and to perfect and maintain
the validity, effectiveness and priority of the lien and security interest
created by this Mortgage.
2.05 Protection of Lien; Defense of Action. If any action or
-------------------------------------
proceeding is instituted against the Mortgagor with respect to any right, title
or interest in or to the Mortgaged Property or with respect to the lien,
security interest, validity or priority of this Mortgage, or a any such right,
title, interest, lien, security interest validity, effectiveness or priority is
otherwise challenged or attacked, then the Mortgagor promptly will notify the
Mortgagee of such action, proceeding, challenge or attack, diligently will
endeavor to cure any defect that may be developed or claimed, and will take all
necessary and proper steps for the defense of such action or proceeding,
including the employment of counsel, the prosecution or
-6- EXHIBIT C-2
<PAGE>
defense of litigation and, subject to the prior written approval of the
Mortgagee, the compromise, release or discharge of any and all adverse claims.
The Mortgagee (whether or not named as a party to such action or proceeding), is
hereby authorized and empowered (but shall not be obligated) to take such
additional steps (including the employment of counsel, the prosecution or
defense of litigation, the compromise, release or discharge of such adverse
claims, the purchase of any tax title and the removal of prior liens and
security interests) as it may deem necessary or proper for the defense of any
such action or proceeding or the protection of such right, title, interest,
lien, security interest, validity, effectiveness or priority. The Mortgagor, on
demand, shall pay all costs and expenses incurred by the Mortgagee in connection
with the foregoing matters. All such costs and expenses of the Mortgagee, until
paid by the Mortgagor, shall be part of the Obligations and shall be secured by
this Mortgage.
2.06 Repair and Maintenance. The Mortgagor will operate and maintain
the Facility and the Personal Property in good order, repair and operating
condition, and promptly will make all repairs, renewals, replacements, additions
and improvements to the Facility and the Personal Property that are necessary to
ensure that the Facility and the Personal Property shall not in any way be
diminished or impaired as part of the security under this Mortgage. The
Mortgagor will keep the Facility fully equipped and will replace all worn-out or
obsolete Personal Property with Fixtures or personal property comparable to such
Personal Property when new and, without the prior consent of the Mortgagee, will
not remove any Personal Property from the Facility unless such Personal Property
is replaced by the Mortgagor with Fixtures or personal property of equal
suitability and value when new, owned by the Mortgagor free and clear of any
lien or security interest (other than the Permitted Exceptions and the lien and
security interest created by this Mortgage). No part of the Improvements shall
be removed, demolished or structurally or materially altered (including an
alteration which impairs the value of the Improvements), nor shall any new
building, structure, facility or other improvement be constructed on the Land
without the prior consent of the Mortgagee. The Mortgagor, without the prior
consent of the Mortgagee, will not cause or allow the Mortgaged Property to be
misused or wasted or to deteriorate.
2.07 Compliance with Laws. The Mortgagor promptly will comply with,
--------------------
and will cause the Facility to be maintained, used and operated at all times in
accordance with, any and all present and future laws, rules, regulations,
ordinances and requirements (including any and all licensing, accrediting and
insurance requirements) applicable to the Mortgagor or the Facility. The
Mortgagor promptly will notify the Mortgagee of any alleged noncompliance by the
Mortgagor or the Facility with any such laws, rules, regulations, ordinances or
requirements, and of any action or proceeding initiated under or with respect to
any of such laws, rules, regulations, ordinances or requirements.
2.08 Use. The Mortgagor will not use or occupy the Facility, or permit
---
the Facility to be used or occupied, in any manner which violates any applicable
law, rule, regulation, ordinance or order, or which constitutes a public or
private nuisance or which makes void, voidable or cancelable, or increases the
premium of, any insurance then in force with respect to the Facility. Without
limiting the generality of the preceding sentence, the Mortgagor will use and
occupy the Facility, or cause the Facility to be used and occupied, as and for
a[n] ([skilled] [intermediate] care) [nursing] facility and for no other
principal use unless agreed to in writing by the Mortgagee. The Mortgagor shall
at all times maintain in full force and effect all registrations,
qualifications, licenses and other authorizations and approvals required to use
and occupy the Facility as and for a [_________]-bed ([skilled] [intermediate]
[care] [nursing] facility. Notwithstanding any other provision in this Section
2.08 or elsewhere in this Mortgage or any other Transaction Document to the
contrary, the Mortgagor, without the prior consent of the Mortgagee, will not
permit any person other than the Mortgagor to operate the Facility, whether
pursuant to any lease, any management agreement or otherwise; provided that,
--------
without the prior consent of the Mortgagee, the Mortgagor may permit Meadowbrook
Healthcare Services Incorporated, a North Carolina corporation, or any
wholly-owned subsidiary of Meadowbrook Healthcare Services Incorporated, to
operate the Facility pursuant to a management agreement with the Mortgagor.
-7- EXHIBIT C-2
<PAGE>
2.09 Zoning; Title Matters. The Mortgagor, without the prior consent
---------------------
of the Mortgagee, will not (a) initiate or support any zoning reclassification
of the Facility, seek any variance under existing zoning ordinances applicable
to the Facility or use or permit the use of the Facility in a manner which would
result in such use becoming a non conforming use under applicable zoning
ordinances, (b) supplement, amend or otherwise modify any of the Permitted
Exceptions, (c) impose any restrictive covenants upon the Facility, (d) execute
or file any subdivision plat affecting the Facility or consent to the annexation
of the Facility to any municipality or (e) permit or suffer the Facility to be
used by the public or any person in such manner as might make possible a claim
of adverse usage or possession or of any implied dedication or easement.
2.10 Insurance.
---------
(a) Property and Casualty Insurance. The Mortgagor will keep the
-------------------------------
Improvements and the Personal Property insured for the benefit of the Mortgagee
as follows: (i) against damage or loss by fire and such other hazards (including
lightning, windstorm, hail, explosion, not, not attending a strike, civil
commotion, flood, earthquake, vandalism, malicious mischief, aircraft, vehicle
and smoke) as are covered by the broadest form of "all-risk" coverage as is
available from time to time in the jurisdiction in which the Facility is
located, in an amount not less than the full insurable value (as defined below)
of the Improvements and the Personal Property; (ii) rent or business
interruption or use and occupancy insurance on an actual loss sustained basis;
(iii) against damage or loss from sprinkler system leakage and boilers, boiler
tanks, heating and air conditioning equipment, pressure vessels, auxiliary
piping, mechanical and electrical equipment and such similar apparatus as is
commonly insured under a comprehensive definition of insured object on such
basis and in such amounts as shall be reasonably required by the Mortgagee; and
(iv) during the period of any permitted construction, repair, restoration or
replacement of the Facility, against damage or loss and such other hazards as
are covered by a standard all-risk builder's risk policy with extended coverage,
including coverage against collapse, written on a completed value basis, for an
amount at least equal to the fu11 insurable value of the Improvements and the
Personal Property. The Mortgagor shall ensure that any contractor performing any
permitted construction, repair, restoration or replacement of the Facility shall
procure and maintain at all times insurance equal to that required of the
Mortgagor and that such contractor also shall comply with all statutory and
regulatory requirements related to workers' compensation.
(b) Liability Insurance. The Mortgagor shall procure and
-------------------
maintain commercial public liability insurance covering the Mortgagor and the
Mortgagee against claims for bodily injury and death and property damage
occurring in, on or about or resulting from the Facility, or any street, drive,
sidewalk, curb or passageway adjacent to the Facility, in standard form and with
such insurance company or companies and in such amounts as may be acceptable to
the Mortgagee in its reasonable judgment, which insurance shall include blanket
contractual liability coverage that insures contractual liability under any
indemnification of the Mortgagee by the Mortgagor in the Facility Agreement, the
Promissory Note, this Mortgage or any other Transaction Document (but such
coverage or the amount of such coverage shall in no way limit such
indemnification). In addition to the commercial public liability insurance
required by the preceding sentence, the Mortgagor also shall procure and
maintain employer's liability, automobile, personal injury and professional
liability coverage in amounts of $1,000,000 primary coverage and $5,000,000
excess coverage.
(c) Forms of Policies. All insurance required under this Section
-----------------
2.10 shall be fully paid for and nonassessable and shall contain such
provisions, endorsements and expiration dates, as the Mortgagee shall from time
to time reasonably request, and shall be in such form and amounts, and be issued
by such insurance companies, as shall be approved by the Mortgagee in its
reasonable judgment Without limiting the generality of the preceding sentence,
all such policies shall have endorsed thereon, in form acceptable to the
Mortgagee, the New York Standard Mortgagee
-8- EXHIBIT C-2
<PAGE>
Clause, or the local equivalent, without contribution, in the name of the
Mortgagee, and a waiver of subrogation endorsement. Each such policy shall
provide that it will not be cancelled, amended or materially altered (including
by reduction in the scope or limits of coverage) without at least thirty days
prior notice to the Mortgagee. The Mortgagor shall deliver, or cause to be
delivered, to the Mortgagee (i) duplicate original policies evidencing the
insurance required under this section 2.10, (ii) receipts evidencing payment of
all premiums on such policies and (iii) at least thirty days prior to the
expiration of each such policy, a duplicate original renewal policy with
evidence satisfactory to the Mortgagee of payment of all premiums on such
policy. In lieu of the duplicate original policies required by this section 2.10
to be delivered to the Mortgagee. the Mortgagor may deliver original
certificates from the issuing insurance company or companies, evidencing that
such policies are in full force and effect and containing information which, in
the Mortgagee's reasonable judgment, is sufficient to allow the Mortgagee to
determine whether such policies comply with the requirements of this Section
2.10. The Mortgagor shall not carry separate or additional insurance concurrent
in form or contributing in the event of loss with that required under this
section 2.10. unless endorsed in favor of the Mortgagee in accordance with the
requirements of this Mortgage and otherwise approved by the Mortgagee in all
respects.
(d) Transfer of Title. In the event of foreclosure of this
-----------------
Mortgage or extinguishment, in whole or in part of the Obligations, all right,
title and interest of the Mortgagor in and to all policies of insurance required
under this Section 2.10 or otherwise then in force with respect to the Mortgaged
Property and all proceeds payable thereunder and unearned premiums thereon shall
immediately vest in the purchaser or other transferee of the Mortgaged Property.
(e) Amounts of Coverage. For the purposes of this section 2.10,
-------------------
the term "full insurable value" shall mean the cost of replacing the
Improvements and the Personal Property, exclusive of the cost of excavations,
foundations and footings, as determined from time to time (but not less often
than once every three years) by the insurance company or companies holding such
insurance or by an appraiser, engineer, architect or contractor proposed by the
Mortgagor and approved by said insurance company or companies and the Mortgagee.
All deductibles shall be commercially reasonable and, in any event, subject to
the prior written approval of the Mortgagee or the Mortgagee's designee.
2.11 Damage and Destruction. In the event the Facility is damaged,
lost or destroyed, (a) the Mortgagor promptly shall notify the Mortgagee of such
event, (b) the Mortgagor, unless otherwise instructed by the Mortgagee, promptly
shall commence and diligently pursue to completion the restoration, replacement
or rebuilding of the Facility as nearly as possible to its value, condition and
character immediately prior to such damage, loss or destruction, regardless of
whether the insurance proceeds, if any, shall be sufficient for the purpose or
shall be otherwise applied by the Mortgagee as provided in this Mortgage, (c)
the Mortgagee may, but shall not be obligated to, make proof of loss if not made
promptly by the Mortgagor and settle, adjust or compromise any claims for
damage, loss or destruction (and the Mortgagor hereby authorizes and empowers
the Mortgagee to make any such proof of loss, settlement, adjustment or
compromise, and the Mortgagor hereby authorizes and directs each insurance
company concerned to make payment for any such damage, loss or destruction
directly to the Mortgagee) and (d) the Mortgagee shall have the right to apply
the insurance proceeds, first, to reimburse the Mortgagee for all reasonable
costs and expenses incurred in connection with the collection of such proceeds,
and, second, at the option of the Mortgagee, (i) to pay all or any part of the
Obligations then due in the order and manner determined by the Mortgagee in its
sole discretion, (ii) to cure any then current default under this Mortgage, or
(iii) to repair, restore or replace, in whole or in part, the portion of the
Facility so damaged, lost or destroyed. Notwithstanding anything in this
Mortgage or at law or in equity to the contrary, no insurance proceeds that are
paid to the Mortgagee
-9- EXHIBIT C-2
<PAGE>
as provided in this Mortgage shall be deemed trust funds, and the Mortgagee
shall be entitled to dispose of such proceeds as provided in this Mortgage. The
Mortgagor expressly assumes all risk of loss, including a decrease in the use,
enjoyment or value, of the Mortgaged Property from any casualty whatsoever,
whether or not insurable or insured against.
2.12 Condemnation. The Mortgagor, immediately upon obtaining knowledge
------------
of any pending or threatened proceeding for the condemnation of the Facility or
of any right of eminent domain, or of any other proceeding arising out of injury
or damage to the Facility (including a change in grade of any street), will
notify the Mortgagee of the pendency or threat of such proceeding. The Mortgagee
may participate in such proceeding, and the Mortgagor from time to time will
execute and deliver to the Mortgagee all instruments requested by the Mortgagee
to permit such participation. The Mortgagor shall diligently prosecute such
proceeding, deliver to the Mortgagee copies of all papers served in connection
with such proceeding and consult and cooperate with the Mortgagee and the
Mortgagee's attorneys and agents in the prosecution and defense of such
proceeding; provided that the Mortgagor shall not settle such proceeding
--------
without the prior consent of the Mortgagee. The Mortgagor hereby assigns to the
Mortgagee all proceeds of condemnation awards, all proceeds of sale in lieu of
condemnation, and all proceeds of all judgments, decrees and awards for injury
or damage to the Mortgaged Property. The Mortgagor shall execute and deliver
such further assignments of such proceeds as the Mortgagee may request, and
hereby authorizes the Mortgagee to collect and receive any and all such
proceeds, to give receipts and acquittances therefor, and to appeal from any
such judgment, decree or award. The Mortgagee shall in no event be liable or
responsible for any failure to collect, or to exercise diligence in the
collection of, any of such proceeds. The Mortgagee shall have the right to apply
any such proceeds, first, to reimburse the Mortgagee for all costs and expenses
incurred in connection with the proceeding in question or the collection of such
proceeds and, second, as provided in section 2.11 in respect of the application
of insurance proceeds held by the Mortgagee. Notwithstanding anything in this
Mortgage or at law or in equity to the contrary, none of the proceeds that are
paid to the Mortgagee as provided in this section 2.12 shall be deemed trust
funds, and the Mortgagee shall be entitled to dispose of such proceeds as
provided in this Mortgage. Notwithstanding any condemnation, taking or other
proceeding that causes injury to or a decrease in value of the Facility
(including a change in grade of any street), the Mortgagor shall continue to pay
the Obligations as provided in the Promissory Note.
2.13 Liens. The Mortgagor, without the prior consent of the Mortgagee,
-----
will not create, assume or suffer to exist any deed of trust, mortgage,
voluntary or involuntary lien, whether statutory, constitutional or contractual
(except for the lien for ad valorem taxes on the Mortgaged Property which are
not yet due and payable), security interest, encumbrance or charge, or
conditional sale or other title retention document against or covering the
Mortgaged Property, prior to, on a parity with or subordinate to the lien of
this Mortgage, other than the Permitted Exceptions and other than purchase money
security interests in personal property (other than replacement fixtures and
personal property pursuant to Section 2.06) acquired or held by the Mortgagor in
the ordinary course of business to secure the purchase price of such property so
long as no such purchase money security interest shall extend to or cover any
property other than the personal property being acquired and so long as the
aggregate principal amount of the indebtedness at any one time outstanding
secured by the purchase money securIty interests permitted by this section 2.13
shall not otherwise be prohibited by the terms of any Transaction Document and
shall not exceed the lesser of eighty percent of the cost of such personal
property or the then fair value of such personal property. The Mortgagor will
pay, and or otherwise discharge, from time to time when the same shall become
due, all lawful claims and demands of mechanics, materialmen, laborers and
others which, a unpaid, might result in, or permit the creation of, a lien on
the Mortgaged Property, or on the rents, proceeds, issues and profits due or to
become due and payable under or pursuant to any of the Mortgaged Property.
Except as otherwise provided in this Section 2.13, the Mortgagee may withhold
its consent to any proposed deed of trust, mortgage,
-10- EXHIBIT C-2
<PAGE>
lien, security interest, encumbrance, charge, or conditional sale or other title
retention document for no reason or any reason.
2.14 Taxes and Other Charges. The Mortgagor will pay when due, and
-----------------------
before any penalty, interest or cost for nonpayment thereof may be added
thereto, all taxes, assessments, vault, water and sewer rents, rates, charges
and assessments, levies, permits, inspection and license fees and other
governmental and quasi-governmental charges, general and special, ordinary and
extraordinary, foreseen and unforeseen, heretofore or hereafter assessed, levied
or otherwise imposed against or upon, or which may become a lien upon, the
Mortgaged Property or the rents, proceeds, issues and profits due or to become
due and payable under or pursuant to the Mortgaged Property or arising in
respect of the occupancy, use or possession of the Mortgaged Property. The
Mortgagor will promptly pay all income, franchise and other taxes owing by the
Mortgagor, together with any interest or penalties thereon.
2.15. Tax Deposits. Following any failure by the Mortgagor to pay when
------------
due any real property tax or personal property tax required to be paid by the
Mortgagor under Section 2.14, and without limiting the obligations of the
Mortgagor under section 2.14, if required by the Mortgagee, the Mortgagor, at
its sole cost and expense, shall deposit with such service or financial
institution as the Mortgagee shall designate, monthly on the first day of each
calendar month, one-twelfth of the aggregate annual amount of the real property
and personal property taxes required to be paid by the Mortgagor under Section
2.14. In addition, if required by the Mortgagee, the Mortgagor also shall
deposit with such service or financial institution a sum of money which,
together with the monthly installments required under the preceding sentence,
will be sufficient to make each of the payments of such real property and
personal property taxes at least three days before such payments are due, If the
amount of any such payments is not ascertainable at the time any such deposit is
required to be made pursuant to this Section 2.15, then the deposit shall be
made on the basis of the Mortgagee's estimate of such amount, and, when such
amount is fixed for the then-current year, the Mortgagor promptly shall deposit
any deficiency with such service or financial institution. All funds deposited
with such service or financial institution pursuant to this Section 2.15, until
applied as provided below, shall constitute additional security for the
Obligations, shall be held by such service or financial institution in a
separate interest,bearing account and, provided that no Event of Default (as
defined below) shall have occurred and be continuing, such funds and any
interest earned thereon shall be applied in payment of the amounts of such real
property and personal property taxes prior to their becoming delinquent, to the
extent that such service or financial institution shall have such funds on hand;
provided that neither the Mortgagee nor such service or financial institution
- --------
shall have any obligation to use such funds to pay any installment of such real
property or personal property taxes prior to the last day on which payment
thereof may be made without penalty or interest The Mortgagor shall be
responsible for furnishing to the Mortgagee bills or invoice; for such real
property and personal property taxes in sufficient time to pay the same before
any penalty or interest attaches, and neither the Mortgagee nor such service or
financial institution shall have any responsibility for payment of such real
property or personal property taxes in the absence of such bills or invoices. If
an Event of Default shall have occurred and be continuing, or if the Obligations
shall be accelerated as provided in this Mortgage or the Promissory Note, then
all funds deposited with such soak or financial institution under this Section
2.15 and any interest earned thereon, at the Mortgagee's option, may be applied
to the Obligations in the order and manner determined by the Mortgagee or to
cure such Event of Default or otherwise as provided in this Section 2.15. Upon
an assignment or other transfer of this Mortgage, the Mortgagee shall thereupon
be completely released from all liability with respect to such deposits, and the
Mortgagor or the owner of the Mortgaged Property shall look solely to such
service or financial institution or the assignee or transferee with respect to
such deposit. The preceding sentence shall apply to each transfer of such
deposits to a new assignee or transferee. A permissible transfer of record title
to the Facility automatically shall transfer to the new owner the beneficial
interest in any
-11- EXHIBIT C-2
<PAGE>
deposits made under this section 2.15. Upon full payment and satisfaction of
this Mortgage or, at the Mortgagee'S option, at any prior time, the balance of
deposited amounts and any interest earned thereon in the possession of such
service or financial institution shall be paid over to the record owner of the
Facility, and no other person shall have any right or claim to such deposited
amounts or interest in any event.
2.16 Inspection. Upon reasonable notice from the Mortgagee to the
----------
Mortgagor, the Mortgagor will allow the Mortgagee or its authorized
representatives, at all reasonable times, to enter upon and inspect the
Mortgaged Property and the books and records with respect to the operations of
the Mortgaged Property.
2.17 Maintenance of Records. The Mortgagor shall keep and maintain
----------------------
complete and accurate books and records in accordance with sound accounting
principles with respect to all operations of or transactions involving the
Mortgaged Property.
2.18 Mortgagor's Certificates. The Mortgagor, within ten days after
------------------------
request by the Mortgagee, shall furnish to the Mortgagee a written statement,
duly acknowledged, certifying to the Mortgagee and/or any proposed assignee of
this Mortgage as to (a) the amount of the Obligations then owing, (b) the terms
of payment and maturity date of the Obligations, (c) the date to which interest
has been paid under the Promissory Note and (d) whether any offsets or defenses
exist against the Obligations and, if any are alleged to exist, a detailed
description thereof.
2.19 Prepayments; Release Premium. So long no Event of Default shall
----------------------------
have occurred and be continuing, the Mortgagor may prepay the unpaid principal
amount of the Promissory Note, in whole or in part, plus accrued interest to the
date of such prepayment on the principal amount prepaid, plus any late charges
then payable under the Promissory Note, plus any costs and expenses then payable
by the Mortgagor under the Promissory Note; provided that each partial
--------
prepayment shall be in a principal amount of not less than Five Thousand and
NO/100 Dollars ($5,000.00); provided, further, that upon prepayment in whole of
-------- -------
the unpaid principal amount of the Promissory Note plus accrued interest to the
date of such prepayment plus the amount of any late charges then payable under
the Promissory Note plus any costs and expenses then payable by the Mortgagor
under the Promissory Note, the Mortgagor shall pay to First Healthcare a release
premium (the "Release Premium") in an amount, determined at the date of such
prepayment, equal to five percent of the amount of the Purchase Price Balance
that would then have been outstanding a the Purchase Price Balance had been
timely paid in accordance with the regularly scheduled required installment
payments provided for in the Promissory Note without regard to any prepayments
made in respect of the Promissory Note. The Release Premium shall be applied
first to any costs and expenses then payable by the Mortgagor or any Affiliate
under any Related Promissory Note (as defined below), second to any late charges
then payable under any Related Promissory Note, and then to the principal of any
Related Promissory Note and accrued interest thereon as agreed to by the
Mortgagor and First Healthcare, or, if the Mortgagor and First Healthcare cannot
agree, then to such principal and accrued interest determined by the Mortgagor
in its sole discretion as to fifty percent of the Release Premium and to such
principal and accrued interest determined by First Healthcare in its sole
discretion as to fifty percent of the Release Premium. Each partial prepayment
shall be applied first to any costs and expenses then payable by the Mortgagor
under the Promissory Note, second to any late charges then payable under the
Promissory Note, third to interest then accrued, and then to the principal
installments under the Promissory Note in the inverse order of their maturities
without deferral or limitation of the intervening installments of principal or
interest For the purposes of this Mortgage, the term "Related Promissory Note"
means any of the promissory notes made by one or more of the persons listed or
otherwise described in Schedule C (the persons listed or otherwise described in
Schedule C, and their respective successors and permitted assigns, being
sometimes referred to in this Mortgage individually as an
-12- EXHIBIT C-2
<PAGE>
"Affiliate" and collectively as the "Affiliates") to the order of First
Healthcare and evidencing the obligation of such Affiliate or Affiliates to pay
a portion of the purchase price for the properties (real, personal and mixed)
that are the subject of the Facility Agreement.
2.20 Reporting Requirements. So long as the Promissory Note shall
----------------------
remain unpaid, the Mortgagor shall furnish to the Mortgagee:
(a) as soon as possible and in any event within five days after
the occurrence of each Event of Default and each event which, with the giving of
notice or lapse of time, or both, would constitute an Event of Default,
continuing on the date of such statement, a statement of the chief financial
officer of the general partner in the Mortgagor setting forth details of such
Event of Default or event and the action which the Mortgagor has taken and
proposes to take with respect thereto;
(b) as soon as available and in any event within sixty days
after the end of each of the first three quarters of each Fiscal year of the
Mortgagor, a balance sheet of the Mortgagor as of the end of such quarter and
statements of income and expense and of cash flow of the Mortgagor for the
period commencing at the end of the previous fiscal year and ending with the end
of such quarter, setting forth in each case in comparative form the
corresponding figures for the corresponding period of the preceding fiscal year,
all in reasonable detail and duly certified (subject to year-end audit
adjustments) by the chief financial officer of the general partner in the
Mortgagor as having been prepared in accordance with sound accounting principles
and practices consistently applied and as fairly presenting the financial
condition of the Mortgagor as of the respective dates of such financial
statements and the results of the operations of the Mortgagor for the periods
ended on such dates, together with a certificate of said officer stating that no
Event of Default, or event which, with the giving of notice or the lapse of
time, or both, would constitute an Event of Default, has occurred and is
continuing or, if an Event of Default or such an event has occurred and is
continuing, a statement as to the nature thereof and the action which the
Mortgagor has taken and proposes to take with respect thereto;
(c) as soon as available and in any event within sixty days
after the end of each quarter of each fiscal year of the Mortgagor, a balance
sheet for the Facility as of the end of such quarter and statements of income
and expense and of cash flow for the Facility for the period commencing at the
end of the previous fiscal year and ending with the end of such quarter, Setting
forth in each case in comparative form the corresponding figures for the
corresponding period of the preceding fiscal yew, all in reasonable detail and
duly certified (subject to year-end audit adjustments) by the chief financial
officer of the general partner in the Mortgagor as having been prepared in
accordance with sound accounting principles and practices consistently applied
and as fairly presenting the financial conditIon of the Facility as of the
respective dates of such financial statements and the results of the operations
of the Facility for the periods ended on such dates;
(d) as soon as available and in any event within one-hundred
twenty days after the end of each fiscal year of the Mortgagor, a balance sheet
of the Mortgagor as of the end of such fiscal year and statements of income and
expense and of cash flow of the Mortgagor for such fiscal year, accompanied by a
report and an opinion of independent certified public accountants of recognized
standing or, a such report and opinion are not available, duly certified by the
chief financial officer of the general partner in the Mortgagor as having been
prepared in accordance with generally accepted accounting principles and
practices consistently applied and as fairly presenting the financial condition
of the Mortgagor as of the end of such fiscal year and the results of the
operations of the Mortgagor for such fiscal year;
-13- EXHIBIT C-2
<PAGE>
(e) as soon as available and in any event within ninety days
after the end of each fiscal year of the Mortgagor, a certificate of the chief
financial officer of the general partner in the Mortgagor stating that no Event
of Default, or event which, with the giving of notice or the lapse of time, or
both, would constitute an Event of Default, has occurred and is continuing or,
if an Event of Default or such an event has occurred and is continuing, a
statement as to the nature thereof and the action which the Mortgagor has taken
and proposes to take with respect thereto;
(f) as soon as available and in any event within sixty days
after the end of each quarter of each fiscal year of the Mortgagor, detailed
operational statistics for the Facility pertaining to occupancy rates, patient
or resident mix and patient or resident rates by type for the period commencing
at the end of the previous fiscal year and ending with the end of such quarter;
(g) promptly and in any event within thirty days after the
sending or filing thereof, copies of all cost reports (including all cost
reports filed pursuant to Titles XVIII and XIX of the Social Security Act, as
amended) and all amendments thereto required to be filed with any governmental
or regulatory authority in respect of the Facility, in each case duly certified
by an authorized officer of the general partner in the Mortgagor as being
accurate and complete and as having been prepared in accordance with applicable
governmental and regulatory requirements;
(h) promptly and in any event within thirty days after receipt
thereof by the Mortgagor, a copy of each survey prepared by any governmental or
regulatory authority with respect to the Facility, together with a copy of any
related plan of correction;
(i) promptly after the sending or filing thereof, copies of all
proxy statements, financial statements and reports which the Mortgagor sends to
its partners, and copies of all regular, periodic and special reports, and all
registration statements, that the Mortgagor files with the Securities and
Exchange Commission or any governmental authority which may be substituted
therefor, or with any national securities exchange; and
(j) such other information respecting the business, properties,
operations or condition (financial or otherwise) of the Mortgagor and the
Affiliates as the Mortgagee may from time to time reasonably request, in each
case certified by an appropriate officer of the general partner in the
Mortgagor.
ARTICLE III
Assignment of Rents and Other Sums
----------------------------------
3.01 Assignment. The Mortgagor hereby bargains, sells, assigns,
----------
transfers and sets over to the Mortgagee, absolutely and not as additional
security for the payment of the Obligations, all rents, proceeds issues and
profits due and to become due and payable under or pursuant to or to be derived
from the Mortgaged Property, or the use and occupation of the Mortgaged
Property, including all rents, royalties, revenues, rights, deposits (including
security deposits) and benefits accruing to the Mortgagor under all leases and
all other contracts and agreements (including all patient care agreements, life
care contracts, admission agreements and other contracts and agreements with
residents, patients and other persons pertaining to the care of residents or
patients) now or hereafter covering the Mortgaged Property, whether before or
after foreclosure or during the full period of redemption, if any, and the right
to receive the same and apply them against the Obligations or against the
Mortgagor's other obligations under this Mortgage, together with all contracts,
bonds, leases and other documents and agreements (including all patient care
agreements, life care contracts, admission agreements and other contracts and
agreements with residents, patients and other persons pertaining to the care of
residents or patients) evidencing the same now or hereafter in effect and all
rights of the
-14- EXHIBIT C-2
<PAGE>
Mortgagor thereunder. Nothing contained in the preceding sentence shall be
construed to bind the Mortgagee to the performance of any of the provisions of
any such contract, bond, lease or other document or agreement or otherwise to
impose any obligation upon the Mortgagee (including any liability under a
covenant of quiet enjoyment contained in any lease or under applicable law in
the event that any tenant shall have been joined as a party defendant in any
action to foreclose this Mortgage and shall have been foreclosed of all right,
title and interest and all equity of redemption in the Mortgaged Property),
except that the Mortgagee shall be accountable for any money actually received
by the Mortgagee pursuant to such assignment. The assignment of said rents,
proceeds, issues and profits, and of the aforesaid rights with respect thereto
and to the contracts, bonds, leases and other documents and agreements
evidencing the same is intended to be and is an absolute present assignment from
the Mortgagor to the Mortgagee and not merely the passing of a security
interest. The Mortgagor will, as and when requested from time to time by the
Mortgagee, execute, acknowledge and deliver to the Mortgagee, in form approved
by the Mortgagee, one or more general or specific assignments of the lessor's
interest under any lease, contract or agreement (including any patient care
agreement, life care contract, admission agreement and other contract or
agreement with any resident, patient or other person pertaining to the cue of
residents or patients) now or hereafter affecting the Mortgaged Property.
Notwithstanding any provision in this section 3.01 or elsewhere in this Mortgage
to the contrary, this Mortgage shall not be construed to constitute an
assignment of any patient accounts or any other accounts constituting any right
of the Mortgagor to payment for goods sold or leased or for services rendered
which is not evidenced by an instrument or chattel paper.
3.02 Right to Collect. So long as there shall exist no Event of
----------------
Default, and except as otherwise expressly provided in this Mortgage, the
Mortgagor shall have the right and license to collect, as the same shall accrue,
the rents, proceeds, issues and profits due and to become due and payable under
or pursuant to or to be derived from the Mortgaged Property or the use and
occupation of the Mortgaged Property. The Mortgagor agrees to hold the same in
trust and to use the same in payment of the Obligations, taxes, assessments,
levies, fees, charges and insurance premiums payable under this Mortgage and all
other charges on or against the Mortgaged Property.
3.03 Revocation of Right to Collect; Etc. Upon the occurrence of any
-----------------------------------
Event of Default, (i) the right and license set forth in Section 3.02 may be
revoked by the Mortgagee, and thereafter the Mortgagee shall have the right and
authority to exercise any of the rights or remedies referred to or set forth in
ArtIcle VI and (ii) the Mortgagor shall promptly pay to the Mortgagee (A) all
prepayments and security or other deposits paid to the Mortgagor pursuant to any
contract, bond, lease or other document or agreement assigned under this
Mortgage and (B) all charges for services or facilities or for escalation which
were paid pursuant to any such contract, bond, lease or other document or
agreement to the extent allocable to any period from and after the occurrence of
such Event of Default if the Mortgagor is not required by this Mortgage to
surrender possession of the Mortgaged Property upon the occurrence of an Event
of Default, then the Mortgagor shall pay monthly in advance to the Mortgagee, on
the entry by the Mortgagee into possession pursuant to Article VI, or to any
receiver appointed to collect said rents, proceeds, issues and profits, the fair
and reasonable rental value for the use and occupation of the Mortgaged Property
or such part thereof as may be in the possession of the Mortgagor. Upon a
default in any such payment, the Mortgagor will vacate and surrender such
possession to the Mortgagee or such receiver and, upon a default in vacating and
surrendering the same, may be evicted by summary or any other available
proceedings.
ARTICLE IV
Additional Advances; Expenses: Indemnity
----------------------------------------
4.01 Additional Advances and Disbursements. The Mortgagor agrees that,
if the Mortgagor fails to pay or perform any obligation of the Mortgagor under
this Mortgage (including the
-15- EXHIBIT C-2
<PAGE>
obligation to procure and maintain the insurance at the limits of coverage
required by Section 2.10), then the Mortgagee shall have the right, but not the
obligation, in the Mortgagor's name or otherwise, and without notice to the
Mortgagor, to pay or perform, or to cause the payment or performance of, such
obligation and, for such purpose, the Mortgagor expressly grants to the
Mortgagee, in addition and without prejudice to any other rights and remedies
under this Mortgage, the right to enter upon and take possession of the
Mortgaged Property to such extent and as often as the Mortgagee may deem
necessary or desirable to prevent or remedy any failure by the Mortgagor to pay
or perform such obligation. No such payment or performance by the Mortgagee
shall be deemed to have cured such default by the Mortgagor or any Event of
Default with respect thereto, All sums so paid, and all expenses incurred, by
the Mortgagee in connection with such payment or performance shall be deemed
obligations owing by the Mortgagor to the Mortgagee and shall bear interest,
from the date paid or incurred until repaid, at the Default Rate provided for in
the Promissory Note. The amount of all such payments and expenses, and all such
interest thereon, shall be part of the Obligations and shall be secured by this
Mortgage.
4.02 Other Expenses. The Mortgagor, on demand, will pay or reimburse
--------------
the Mortgagee for the payment of, any costs or expenses incurred or expended in
connection with or incidental to (a) any Event of Default or (b) the exercise or
enforcement by or on behalf of the Mortgagee of any of its rights or remedies or
the Mortgages obligations under any Transaction Document.
4.03 Indemnity. The Mortgagor agrees to indemnify and hold harmless
---------
the Mortgagee from and against any and all claims, demands, losses, liabilities,
suits, obligations, fines, damages, judgments, penalties, charges, costs and
expenses which may be imposed on, incurred or paid by or asserted against the
Mortgagee by reason or on account of, or in connection with, (a) any Event of
Default, (b) the exercise by the Mortgagee of any of its rights and remedies, or
the performance of any of its duties, under this Mortgage or (c) any accident,
injury, death or damage to any person (including any employee of the Mortgagor)
or property occurring in, on or about the Facility or any street, drive,
sidewalk, curt or passageway adjacent to the Facility, but excepting claims,
demands, losses, liabilities, suits, obligations, fines, damages, judgments,
penalties, charges, costs and expenses resulting from the willful misconduct or
gross negligence of the Mortgagee. Any amount payable to the Mortgagee under
this section 4.03 shall be deemed a demand obligation, shall be part of the
Obligations and shall be secured by this Mortgage.
ARTICLE V
Transfer of the Mortgaged Property
----------------------------------
5.01 Transfer of the Mortgaged Property. The Mortgagor acknowledges
----------------------------------
that the continuous ownership of the Mortgaged Property by the Mortgagor is of a
material nature to the transaction contemplated by, and the Mortgagee's
agreement to create the Obligations under, the Transaction Documents. The
Mortgagor agrees that, except as otherwise provided in any Transaction Document,
the Mortgagor will not, directly or indirectly, sell, grant, convey, assign or
otherwise transfer (collectively, a "transfer"), or permit any transfer of, the
Mortgaged Property or any legal or beneficial interest in the Mortgaged
Property, by operation of law or otherwise, without the poor consent of the
Mortgagee. For the purposes of this Mortgage, but without limiting the
foregoing, a transfer of the legal or beneficial ownership, directly or
indirectly, of thirty-three percent or more of the issued and outstanding stock
of any class of stock of
-16 EXHIBIT C-2
<PAGE>
any corporate general partner in the Mortgagor, substantially all of the assets
of the Mortgagor or thirty-three percent or more of the capital or profits of
the Mortgagor or of any general partner in the Mortgagor, shall not be deemed a
transfer of the Mortgaged Property or an interest in the Mortgaged Property; if
such transfer is to any Affiliate, to Don G. Angell, to Daniel D. Mosca, to any
heir or devisee of Don G. Angell or Daniel D. Mosca or to the trustee of any
living trust of Don G. Angell or Daniel D. Mosca. Upon the occurrence of any
transfer of the Mortgaged Property or any legal or beneficial interest in the
Mortgaged Property, by operation of law or otherwise, without the prior consent
of the Mortgagee, the Mortgagee may elect to declare the ObligationS, together
with any other sums secured by this Mortgage, immediately due and payable. The
Mortgagee may withhold its consent to any proposed transfer for no reason or any
reason, including the failure of the prospective transferee of the Mortgaged
Property to reach an agreement in writing with the Mortgagee increasing the
interest payable on the Obligations to such rate as the Mortgagee shall request.
Any transfer or attempted transfer contrary to the provisions of this ArtIcle V
shall be void.
ARTICLE VI
Defaults and Remedies
---------------------
6.01 Events of Default. The term "Event of Default" shall mean the
-----------------
occurrence of any of the following events:
(a) The Mortgagor shall fail to pay any principal of, or
interest on, the Promissory Note within ten days after the same becomes due and
payable; or
(b) The Mortgagor shall fail to pay any of the other Obligations
(whether for premium, fees, expenses or otherwise) when and as the same become
due and payable, whether on any stated due date, at maturity or upon
acceleration, and such failure shall remain unremedied for ten days alter
written notice of such failure shall have been given to the Mortgagor by the
Mortgagee; or
(c) Any representation or warranty made by the Mortgagor (or any
general partner in the Mortgagor or any officers of any general partner in the
Mortgagor) under or in connection with any Transaction Document shall prove to
have been incorrect in any material respect when made; or
(d) The Mortgagor shall fail at any time to obtain, provide,
maintain or keep in force the insurance policies required by Section 2.10; or
(e) The Mortgagor shall fail to perform or observe any other
provision contained in any Transaction Document on the Mortgagor's part to be
performed or observed if such failure shall remain unremedied beyond the
applicable grace period for such provision or, if no such grace period is
applicable, a such failure shall remain unremedied for thirty days after written
notice of such failure shall have been given to the Mortgagor by the Mortgagee;
or
(f) The Mortgagor shall fail to pay any principal of or premium
or interest on any indebtedness (but excluding indebtedness evidenced by the
Promissory Note) of the Mortgagor in an aggregate principal amount of at least
$100,000 at any one time outstanding, when the same becomes due and payable
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise), and such failure shall continue after the applicable grace period, a
any, specified in any agreement or instrument relating to such indebtedness; or
any other event shall occur or condition shall exist under any agreement or
instrument relating to any such indebtedness and shall continue after the
applicable grace period, a any, specified in such agreement or instrument, a the
effect of such event or condition is to accelerate, or to permit the
acceleration of, the maturity of such indebtedness or any
-17- EXHIBIT C-2
<PAGE>
such indebtedness shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required prepayment), redeemed,
purchased or defeased, or an offer to prepay, redeem, purchase or defease such
indebtedness shall be required to be made, in each case prior to the stated
maturity thereof; or
(g) The Mortgagor shall generally not pay its debts as such
debts become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of creditors; or
any proceeding shall be instituted by or against the Mortgagor seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or composition of it
or its debts under any law relating to bankruptcy, insolvency or reorganization
or relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, custodian or other similar official for it
or for any substantial part of its property and, in the case of any such
proceeding instituted against it (but not instituted by it), either such
proceeding shall remain undismissed or unstayed for a period of sixty days, or
any of the actions sought in such proceeding (including the entry of an order
for relief against, or the appointment of a receiver, trustee, custodian or
other similar official for, it or for any substantial part of its property)
shall occur; or the Mortgagor shall take any action to authorize any of the
actions set forth above in this subsection (g); or
(h) Any judgment or order for the payment of money in excess of
$250,000 shall be rendered against the Mortgagor and either (i) enforcement
proceedings shall have been commenced by any creditor upon such judgment or
order or (ii) there shall be any period of ten consecutive days during which a
stay of enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or
(i) Any of the events referred to in subsections (f) through (h)
of this Section 6.01 shall occur with respect to any Guarantor (such term being
used in this Mortgage as such term is defined in the Facility Agreement) and,
for the purposes of this subsection (i), each reference to the Mortgagor in
subsections (f) through (h) above shall mean and be a reference to "any
Guarantor", the reference to "$100.000" in subsection (f) above shall mean and
be a reference to "$1,000,000", and the reference to "$250.000" in subsection
(h) above shall mean and be a reference to "$1,000,000"; or
(j) Any of the events referred to in subsections (f) through (h)
of this section 6.01 shall occur with respect to any general partner in the
Mortgagor and, for the purposes of this subsection (j) each reference to "the
Mortgagor" in subsections (f) through (h) above shall mean and be a reference to
"any general partner in the Mortgagor"; or
(k) Any other Transaction Document to which the Mortgagor is a
party, after delivery of this Mortgage or such other Transaction Document to the
Mortgagee, shall for any reason cease to be valid and binding on the Mortgagor,
or the Mortgagor shall so state in writing; or
(l) The Mortgaged Property or any interest in the Mortgaged
Property shall be the subject of a "transfer," as that term is defined in
section 5.01; or
(m) The Mortgagor shall abandon the Mortgaged Property or shall
cease to do business or shall terminate its business for any reason whatsoever;
or
(n) The Mortgaged Property shall be taken, attached or
sequestered on execution or other process of law in any action against the
Mortgagor; or
-18- EXHIBIT C-2
<PAGE>
(o) Any event shall occur or condition shall exist which
constitutes a default by the Mortgagor under any lease or agreement to lease
between the Mortgagor, as lessee or sublessee, and the Mortgagee or any
subsidiary or affiliate of the Mortgagee, as lessor or sublessor, in respect of
real or personal property, and such event or condition shall continue after the
applicable grace period, if any specified in such lease or agreement to lease;
or
(p) Any event shall occur or condition shall exist which
constitutes a default by any Affiliate under any purchase or sale agreement,
lease or agreement to lease, promissory note, mortgage, deed of trust or other
instrument or agreement between such Affiliate and the Mortgagee or any
subsidiary or affiliate of the Mortgagee, and such event or condition shall
continue after the applicable grace period, if any, specified in such instrument
or agreement.
6.02 Remedies. Upon the occurrence of any one or more Events of
--------
Default, the Mortgagee may (but shall not be obligated to), in addition to any
rights or remedies available to it under any Transaction Document, take such
action personally or by its agents or attorneys, with or without entry, and
without notice, demand, presentment or protest (each and all of which are hereby
waived by the Mortgagor), as the Mortgagee deems necessary or advisable to
protect and enforce its rights and remedies against the Mortgagor and in and to
the Mortgaged Property, including the following actions, each of which may be
pursued concurrently or otherwise, at such time and in such order as the
Mortgagee may determine, in its sole discretion, without impairing or otherwise
affecting any other rights or remedies of the Mortgagee:
(a) Declare the entire balance of the Obligations (including the
entire principal balance thereof, all accrued and unpaid interest and any
premium thereon and all other such sums secured by this Mortgage) to be
immediately due and payable, and upon any such declaration the entire unpaid
balance of the Obligations shall become and be immediately due and payable,
without presentment demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Mortgagor, anything in this Mortgage or any
other Transaction Document to the contrary notwithstanding; provided that in the
--------
event of an actual or deemed entry of an order for relief with respect to the
Mortgagor or any guarantor referred to in subsection (i) of Section 6.01 or any
general partner in the Mortgagor under the United States Bankruptcy Code, as
amended, or under any present or future law or statute of the United States of
America or of any state or other jurisdiction thereof relevant to bankruptcy,
insolvency or other relief of debtor's, the entire unpaid balance of the
Obligations automatically shall become and be immediately due and payable,
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Mortgagor, anything in this Mortgage or any
other Transaction Document to the contrary notwithstanding; or
(b) Institute a proceeding or proceedings for the complete
foreclosure of this Mortgage under any applicable provision of law; or
(c) Institute a proceeding or proceedings for the partial
foreclosure of this Mortgage under any applicable provision of law for the
portion of the Obligations then due and payable, subject to the lien of this
Mortgage continuing unimpaired and without loss of priority so as to secure the
balance of the Obligations not then due and payable; or
(d) Institute an action, suit or proceeding in equity for the
Specific performance of any of the provisions contained in this Mortgage or any
other Transaction Document; or
(e) Sue and recover a judgment on the Obligations, as the same
become due and payable, or on account of any Event of Default; or
-19- EXHIBIT C-2
<PAGE>
(f) Apply for the appointment of a receiver, custodian, trustee,
liquidator or conservator of the Mortgaged Property, to be invested with the
fullest powers permitted under applicable law, as a mater of right and without
regard to or the necessity to disprove the adequacy of the security for the
Obligations or the solvency of the Mortgagor or any other person liable for the
payment of the Obligations, and the Mortgagor and each other person so liable
waives or shall be deemed to have waived such necessity and consents or shall be
deemed to have consented to such appointment; or
(g) Enter upon the Mortgaged Property, and exclude the Mortgagor
and the Mortgagors' agents and servants wholly from the Mortgaged Property,
without liability for trespass, damages or otherwise, and take possession of all
books, records and accounts relating to the Mortgaged Property, and the
Mortgagor agrees to surrender possession of the Mortgaged Property and of such
books, records and accounts to the Mortgagee on demand after the occurrence of
any Event of Default; and the Mortgagee may use, operate, manage, preserve,
control and otherwise deal with the Mortgaged Property and such books, records
and accounts and may conduct the business of the Facility, either personally or
by its superintendents, managers, agents, servants, attorneys or receivers,
without interference from the Mortgagor; and upon each such entry, and from time
to time thereafter, the Mortgagee, at the expense of the Mortgagor and the
Mortgaged Property, without interference by the Mortgagor, may (i) maintain and
restore the Mortgaged Property by purchase, repair or construction, (ii) insure
or reinsure the Mortgaged Property, (iii) make all necessary or proper repairs,
renewals, replacements, alterations, additions, betterments and improvements to
and on the Mortgaged Property, (iv) complete the construction of the
Improvements and, in the course of such completion, make such changes in the
contemplated or completed Improvements as the Mortgagee may deem advisable and
(v) in every such case in connection with the foregoing have the right to
exercise all rights and powers of the Mortgagor with respect to the Mortgaged
Property, either in the Mortgagor's name or otherwise, including the right to
make, cancel, enforce or modify leases and subleases, obtain and evict tenants
and subtenants on such terms as the Mortgagee shall deem advisable; or
(h) With or without the entrance upon or taking possession of
the Mortgaged Property, collect and receive all rents, proceeds, issues and
profits due and to become due and payable under or pursuant to or derived from
the Mortgaged Property, and after deducting therefrom all costs and expenses of
every character incurred by the Mortgagee in collecting the same and in using,
operating, managing, preserving and controlling the Mortgaged Property, and
otherwise in exercising the rights of the Mortgagee under subsection (g) of this
Section 6.02, including all amounts necessary to pay taxes, assessments, levies,
fees, insurance premiums and other charges in connection with the Mortgaged
Property, as well as reasonable compensation for the services of the Mortgagee
and its agents and employees, apply the remainder as provided in Section 6.05;
or
(i) Release any portion of the Mortgaged Property for such
consideration as the Mortgagee may require without, as to the remainder of the
Mortgaged Property, in any way impairing or affecting the lien or priority of
this Mortgage, or improving the position of any subordinate lienholder with
respect thereto, except to the extent that the Obligations shall have been
reduced by the actual monetary consideration, if any, received by the Mortgagee
for such release, and may accept by assignment, pledge or otherwise any other
property in place thereof as the Mortgagee may require without being accountable
for so doing to any other lienor; or
(j) Take all actions permitted under the Uniform Commercial Code
of the jurisdiction in which the Facility is located; or
-20- EXHIBIT C-2
<PAGE>
(k) Take any other action, or pursue any other right or remedy,
as the Mortgagee may have under applicable law, and the Mortgagor does hereby
grant the same to the Mortgagee.
In the event that the Mortgagee shall exercise any of the rights or remedies set
forth in subsections (g) and (h) of this Section 6.02, the Mortgagee shall not
be deemed to have entered upon or taken possession of the Mortgaged Property
except upon the exercise of its option to do so, evidenced by its demand and
overt act for such purpose, nor shall the Mortgagee be deemed a mortgagee in
possession by reason of such entry or taking possession. The Mortgagee will not
be liable to account for any action taken pursuant to any such exercise other
than for rents and payments on patient accountS actually received by the
Mortgagee, nor liable for any loss sustained by the Mortgagor resulting from any
failure to let the Mortgaged Property, or from any other act or omission of the
Mortgagee except to the extent such loss is caused by the wilful misconduct or
bad faith of the Mortgagee. The Mortgagor hereby consents to, ratifies and
confirms the exercise by the Mortgagee of said rights and remedies, and appoints
the Mortgagee as the Mortgagor's attorney, in fact, which appointment shall be
deemed to be coupled with an interest and is irrevocable, for such purposes.
6.03 Expenses. In any suit to foreclose this Mortgage or to enforce
--------
any other remedy of the Mortgagee under this Mortgage or any other Transaction
Document, there shall be allowed and included as an addition to and a part of
the Obligations in the decree for sale or other judgment or decree all
expenditures and expenses which may be paid or incurred in connection with the
exercise by the Mortgagee of any of its rights and remedies prided or referred
to in section 6.02, and the same shall be secured by this Mortgage.
6.04 Rights Pertaining to Sales. The following provisions shall apply
--------------------------
to any sale or sales of the Mortgaged Property under or by virtue of this
Article VI, whether made under the power of sale granted in this Mortgage or by
virtue of judicial proceedings or of a judgment or decree of foreclosure and
sale:
(a) Any number of sales may be conducted from time to time.
(b) Any sale may be postponed or adjourned by public
announcement at the time and place appointed for such sale or for such postponed
or adjourned sale without further notice.
(c) After each sale, an officer of any court empowered to do so
shall execute and deliver to the purchaser or purchasers at such sale a good and
sufficient instrument or instruments granting, conveying, assigning and
transferring all right, title and interest of the Mortgagor in and to the
property and rights sold and shall receive the proceeds of said sale or sales
and apply the same as provided in this Mortgage. The Mortgagee is hereby
appointed the true and lawful attorney,in-fact of the Mortgagor, which
appointment is irrevocable and shall be deemed to be coupled with an interest,
in the Mortgagor's name and stead, to make all necessary conveyances,
assignments, transfers and deliveries of the property and rights so sold, and
for that purpose the Mortgagee may execute all necessary instruments of
conveyance, assignment, transfer and delivery, and may substitute one or more
persons with like power, the Mortgagor hereby ratifying and confirming all that
said attorney or such substitute or substitutes shall lawfully do by virtue
thereof. Nevertheless, the Mortgagor, a requested by the Mortgagee, shall ratify
and confirm any such sale or sales by executing and delivering to such purchaser
or purchasers all such instruments as may be advisable, in the judgment of the
Mortgagee, for the purposes designated in such request
-21- EXHIBIT C-2
<PAGE>
(d) Any and all statements of fact or other recitals made in any
of the instruments referred to in subsection (c) of this section 6.04 given as
to nonpayment of the Obligations, or as to the occurrence of any Event of
Default, or as to the Mortgagee having declared all or any of the Obligations to
be due and payable, or as to the request to sell, or as to notice of time, place
and terms of sale and of the property or rights to be sold having been duly
given, or as to any other act or thing having been duly done, shall be taken as
prima facie evidence of the truth of the facts so stated and recited. The
- ----- -----
Mortgagee may appoint or delegate any one or more persons as agent to perform
any act or acts necessary or incident to any sale so held, including the posting
of notices and the conduct of sale.
(e) The receipt for the purchase money paid at any such sale
shall be sufficient discharge therefor to any purchaser of any property or
rights sold as aforesaid, and no such purchaser, or its representatives,
grantees or assigns, after paying such purchase price and receiving such
receipt, shall be bound to see to the application of such purchase price or any
part thereof upon or for any trust or purpose of this Mortgage or, in any manner
whatsoever, be answerable for any loss, misapplication or nonapplication of any
such purchase money, or part thereof, or be bound to inquire as to the
authorization, necessity, expediency or regularity of any such sale.
(f) Any such sale or sales shall operate to divest all of the
estate, right, title, interest, claim and demand whatsoever, whether at law or
in equity, of the Mortgagor in and to the properties and rights so sold, and
shall be a perpetual bar both at law and in equity against the Mortgagor and any
and all persons claiming or who may claim the same, or any part thereof, by,
through or under the Mortgagor to the fullest extent permitted by applicable
law.
(g) Upon any such sale or sales, the, Mortgagee may bid for and
acquire the Mortgaged Property and, in lieu of paying cash therefor, may make
settlement for the purchase price by crediting against the Obligations the
amount of the bid made therefor, after deducting therefrom the expenses of the
sale, the cost of any enforcement proceeding under this Mortgage and any other
sums which the Mortgagee is authorized to deduct under the terms of this
Mortgage, to the extent necessary to satisfy such bid.
(h) In the event that the Mortgagor, or any person claiming by,
through or under the Mortgagor, shall transfer or refuse or fail to surrender
possession of the Mortgaged Property after any sale of the Mortgaged Property,
then the Mortgagor or such person shall be deemed a tenant at sufferance of the
purchaser at such sale, subject to eviction by means of forcible entry and
detainer proceedings, or subject to any other right or remedy available under
this Mortgage or under applicable law.
(i) Upon any such sale, the Mortgagee or any public officer
acting under execution or order of court shall not be required to have present
or constructively in its possession any or all of the Mortgaged Property.
(j) In the event of any sale referred to in this section 6.04,
all of the Obligations a not previously due and payable, immediately thereupon
shall become due and payable, notwithstanding anything to the contrary contained
in this Mortgage or any other Transaction Document.
6.05 Application of Proceeds. The purchase money, proceeds or avails
-----------------------
of any sale referred to in Section 6.04, together with any other sums that may
be held by the Mortgagee under this Article VI or any other provision of this
Mortgage, except as expressly provided in this Mortgage or under applicable law
to the contrary, shall be applied as follows:
-22- EXHIBIT C-2
<PAGE>
First: To the payment of the costs and expenses of any such
-----
sale, including compensation to the Mortgagee and its agents, and of any
judicial proceeding in which such sale may be made, and of all expenses,
liabilities and advances made or incurred by the Mortgagee under this Mortgage,
together with interest thereon as provided in this Mortgage, and all taxes,
assessments and other charges, except any taxes, assessments or other charges
subject to which the Mortgaged Property shall have been sold.
Second: To the payment in full of the Obligations (including
------
principal, interest, premium and fees in such order as the Mortgagee may elect).
Third: To the payment of any other sums secured by this Mortgage
-----
or required to be paid by the Mortgagor pursuant to any provision of this
Mortgage or any other Transaction Document.
Fourth: To the extent permitted by applicable law, to be set
------
aside by the Mortgagee as adequate security in its judgment for the payment of
sums which would have been paid by application under clauses First through Third
----- -----
above to the Mortgagee, arising out of an obligation or liability with respect
to which the Mortgagor has agreed to indemnify the Mortgagee, but which sums are
not yet due and payable or liquidated.
Fifth: To the payment of the surplus, if any, to whomsoever may
-----
be lawfully entitled to receive the same.
6.06 Additional Provisions as to Remedies.
------------------------------------
(a) No right or remedy of the Mortgagee under this Mortgage is
intended to be exclusive of any other right or remedy, and each and every such
right or remedy shall be cumulative and continuing, shall be in addition to
every other right or remedy given under this Mortgage or any other Transaction
Document or now or hereafter existing at law or in equity, and may be exercised
from time to time and as often as may be deemed expedient by the Mortgagee.
(b) No delay or omission by the Mortgagee to exercise any right
or remedy under this Mortgage upon an Event of Default shall impair such
exercise, or be construed to be a waiver of any such Event of Default or an
acquiescence in any such Event of Default.
(c) The failure, refusal or waiver by the Mortgagee of its right
to assert any right or remedy under this Mortgage upon any Event of Default or
other occurrence shall not be construed as waiving such right or remedy upon any
other or subsequent Event of Default or other occurrence.
(d) The Mortgagee shall not have any obligation to pursue any
rights or remedies it may have under any other agreement prior to pursuing its
rights or remedies under this Mortgage or any other Transaction Document.
(e) The Mortgagee may resort to any security given by this
Mortgage or any other security now given or hereafter existing to secure the
Obligations, in whole or in part in such portions and in such order as the
Mortgagee may deem advisable, and no such action shall be construed as a waiver
of any of the liens, rights or benefits granted under this Mortgage.
-23- EXHIBIT C-2
<PAGE>
(f) Acceptance of any payment after the occurrence of an Event
of Default shall not be deemed a waiver or a cure of such Event of Default, and
acceptance of any payment less than any amount then due shall be deemed an
acceptance on account only.
(g) In the event that the Mortgagee shall have proceeded to
enforce any right or remedy under this Mortgage by foreclosure, sale, entry or
otherwise, and such proceeding shall be discontinued, abandoned or determined
adversely for any reason, then the Mortgagor and the Mortgagee shall be restored
to their former positions and rights under this Mortgage with respect to the
Mortgaged Property, subject to the lien and security interest of this Mortgage.
6.07 Waiver of Rights and Defenses. To the full extent the Mortgagor
-----------------------------
may do so, the Mortgagor agrees with the Mortgagee as follows:
(a) The Mortgagor will not at any time insist on, plead, claim
or take the benefit or advantage of any statute or rule of law now or hereafter
in force providing for any appraisement, valuation, stay, extension, moratorium
or redemption, or of any statute of limitations, and the Mortgagor, for itself
and its successors and assigns, and for any and all persons ever claiming an
interest in the Mortgaged Property, hereby waives and releases all rights of
redemption, valuation, appraisement, notice of intention to mature or declare
due the whole of the Obligations, and all rights to a marshaling of the assets
of the Mortgagor, including the Mortgaged Property, or to a sale in inverse
order of alienation, in the event of foreclosure of the lien and security
interest created under this Mortgage.
(b) Regardless of consideration, and without the necessity for
any notice to or consent by the holder of any subordinate lien, encumbrance,
right, title or interest in or to the Mortgaged Property, the Mortgagee may
release any person at any time liable for the payment of the Obligations or any
portion of the Obligations or any part of the security held for the Obligations
and may extend the time of payment or otherwise modify the terms of this
Mortgage and/or any other Transaction Document, including a modification of the
interest rate payable on the principal balance of the Promissory Note, without
in any manner impairing or affecting this Mortgage or the lien and security
interest of this Mortgage or the priority of this Mortgage, as so extended and
modified, as security for the Obligations over any such subordinate lien,
encumbrance, right, title or interest The Mortgagee may resort for the payment
of the Obligations to any other security held by the Mortgagee in such order and
manner as the Mortgagee, in its discretion, may elect. The Mortgagee may take
action to recover all or any portion of the Obligations or to enforce any
covenant in this Mortgage or any other Transaction Document without prejudice to
the right of the Mortgagee thereafter to foreclose this Mortgage.
ARTICLE VII
Defeasance
----------
7.01 Defeasance. If the Obligations shall be paid in full as they
----------
become due and payable, then and (subject to Section 7.02) in that event only
all rights under this Mortgage shall terminate and the Mortgaged Property shall
become wholly released and cleared of the lien, security interest, conveyance
and assignment evidenced by this Mortgage. In such event, the Mortgagee, at the
request of the Mortgagor, shall promptly deliver to the Mortgagor, in recordable
form, all such documents as shall be necessary to release the Mortgaged Property
from the lien, security interest, conveyance and assignment evidenced by this
Mortgage; provided that nothing in this Section 7.01 shall be construed to
--------
require the Mortgagor to pay any attorneys' fees or expenses incurred by the
Mortgagee in connection with the preparation and delivery of such documents.
-24- EXHIBIT C-2
<PAGE>
7.02 Release. If the entire unpaid principal amount of the Promissory
-------
Note shall be prepaid and all of the other Obligations and the Release Premium
shall be paid pursuant to section 2.19, then all rights under this Mortgage
shall terminate and the Mortgaged Property shall become wholly released and
cleared of the lien, security interest, conveyance and assignment evidenced by
this Mortgage. In such event, the Mortgagee, at the request of the Mortgagor,
shall promptly deliver to the Mortgagor, in recordable form, all such documents
as shall be necessary to release the Mortgaged Property from the lien, security
interest, conveyance and assignment evidenced by this Mortgage; provided that
--------
nothing in this Section 7.02 shall be construed to require the Mortgagor to pay
any attorneys' fees or expenses incurred by the Mortgagee in connection with the
preparation and delivery of such documents.
ARTICLE VIII
Additional Provisions
---------------------
8.01 Construction of Certain Provisions. The following rules of
----------------------------------
construction shall be applicable for all purposes of this Mortgage:
(a) All references in this Mortgage to Articles, Sections and
Schedules are references to Articles and Sections of and Schedules attached to
this Mortgage, unless stated otherwise in this Mortgage.
(b) The cover page of, and all recitals set forth in, and all
Schedules to, this Mortgage are by this reference incorporated in this Mortgage.
(c) The table of contents and the captions of the Articles,
Sections, subsections, paragraphs and other divisions of this Mortgage are
included for convenience of reference only, and shall not in any way limit or
affect the construction or interpretation of any provisions of this Mortgage.
(d) Each of the terms "Mortgaged Property" and "Facility" shall
be construed as if followed by the phrase "or any part thereof."
(e) The term "Obligations" shall be construed as if followed by
the phrase "or any other sums secured hereby, or any part thereof."
(f) The term "indebtedness" shall mean (i) indebtedness for
borrowed money, (ii) obligations evidenced by bonds, debentures, notes or other
similar instruments, (iii) obligations to pay the deferred purchase price of
property or services, (iv) indebtedness created or arising under any conditional
sale or other title retention agreement with respect to property, (v)
obligations as lessee under leases which shall have been or should be, in
accordance with generally accepted accounting principles, recorded as capital
leases, (vi) obligations (contingent or otherwise) under acceptance, letter-of-
credit or similar facilities, (vii) obligations in respect of interest rate swap
agreements, currency swap agreements and other similar agreements designed to
hedge against fluctuations in interest rates or foreign exchange rates and
(viii) obligations under direct or indirect guaranties in respect of, and
obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of the types referred to in any of clauses (i) through (vii) above.
(g) The terms "include", "including" and similar terms shall be
construed as if followed by the phrase "but not limited to."
-25- EXHIBIT C-2
<PAGE>
(h) The term "provisions," when used with respect to this
Mortgage or any other Transaction Document, shall be construed as if preceded by
the phrase "terms, covenants, agreements, requirements, conditions and/or."
(i) The term "person" shall include natural persons, firms,
partnerships, corporations and any other public and private legal entities.
(j) The term "lease" shall mean "tenancy, subtenancy, lease or
sublease" and the term "lessee" shall mean "tenant, subtenant, lessee or
sublease."
(k) The phrase "sound accounting principles and practices" shall
mean, generally accepted accounting principles and practices consistently
applied, but permitting, with respect to the preparation of financial
statements, the omission of footnotes and federal and state income tax reserves,
none of which omissions shall represent an omission of material items of revenue
or expense other than federal and state income tax expense.
(l) Except with respect to Section, 2.02. 2.13 and 5.01, the
term "consent of the Mortgagee" shall be construed as if followed by the phrase
", which consent shall not be unreasonably withheld."
(m) Words of masculine, feminine or neuter gender shall mean and
include the correlative words of the other genders, and words importing the
singular number shall mean and include the plural number, and vice versa.
----------
(n) No inference in favor of, or against, any party shall be
drawn from the fact that such party has drafted any portion of this Mortgage.
8.02 Limitation on Interest. Notwithstanding any other provisions of
----------------------
this Mortgage or any other Transaction Document to the contrary, no provision of
this Mortgage or any other Transaction Document shall require the payment or
permit the collection of interest, fees or charges in excess of the maximum rate
permitted by applicable law.
8.03 Appointment of Mortgagee. The Mortgagor hereby appoints the
------------------------
Mortgagee its attorney, in-fact, which appointment is irrevocable and shall be
deemed to be coupled with an interest, to execute, acknowledge, deliver and file
or record for and in the name of the Mortgagor any of the documents or
instruments referred to in Section 2.04 or in Section 6.04(c).
8.04 Amendments, Etc. No amendment or waiver of any provision of this
---------------
Mortgage, nor consent to any departure by the Mortgagor from any such provision,
shall in any event be effective unless such amendment, waiver or consent is in a
writing which specifically refers to this Section 8.04 and which is signed by
the Mortgagor and by the Chief Executive Officer or the President of the
Mortgagee; provided that any such waiver or consent stall be effective only in
--------
the specific instance and for the specific purpose for which given.
8.05 Notices. Except as otherwise provided in this Mortgage or
-------
required by applicable law, all notices, consents, requests and other
communications to any party under or in connection with this Mortgage shall be
in writing and shall be sent via personal delivery, via telephone facsimile
transmission, via certified or registered mail, return receipt requested, or via
express courier or delivery service, addressed to such party at such party's
address or telephone facsimile number set forth below
-26- EXHIBIT C-2
<PAGE>
or at such other address or telephone facsimile number as shall be designated by
such party in a written notice given to each other party complying as to
delivery with the terms of this Section 8.05.
if to the Mortgagor, at:
P.O. Box 1670
Clemmons, North Carolina 27012
Attn: Don G. Angell
Facsimile: (919)998-2560
with a copy to:
House & Blanco. P.A
215 Executive Park Boulevard
P.O. Drawer 25008
Winston-Salem, North Carolina 27114-5008
Attn: George E. Hollodick
Facsimile: (919)765-4830
if to the Mortgagee, at:
The Cornerstone Building
1148 Broadway Plaza
Tacoma, Washington 98402
Attn: Vice President
Acquisitions and Development
Facsimile: (206)758-4371
with a copy to:
The Hillhaven Corporation
The Cornerstone Building
1148 Broadway Plaza
Tacoma, Washington 98402
Attn: General Counsel
Facsimile: (206)756-4845 or (206)756-4743.
All such notices, consents, requests and other communications shall be deemed
given (a) when given and receipted for (or upon the date of attempted delivery
when delivery is refused), a sent via personal delivery, via certified or
registered mall, return receipt requested, or via express courier or delivery
service or (b) when received, a sent via telephone facsimile transmission
(confirmation of such receipt via confirmed telephone facsimile transmission
being deemed receipt of any such notice, request or other communication sent via
telephone facsimile transmission).
8.06 No Merger. If both the lessor's and the lessee's interest under
---------
any lease which constitutes a part of the Mortgaged Property shall at any time
become vested in any one person, this Mortgage and the lien and security
interest created by this Mortgage shall not be destroyed or terminated by the
application of the doctrine of merger and, in such event, the Mortgagee shall
continue to have and enjoy all of the rights and privileges of the Mortgagee
under this Mortgage as to each separate estate. Upon the foreclosure of the lien
created by this Mortgage, any leases then existing shall not be destroyed or
terminated by application of the doctrine of merger or as a matter of law or
-27- EXHIBIT C-2
<PAGE>
as a result of such foreclosure unless the Mortgagee or any purchaser at a
foreclosure sale shall so elect by notice to the lessee in question.
8.07 Severability. Any provision of this Mortgage that is prohibited
------------
or unenforceable in any jurisdiction shall be ineffective, as to such
jurisdiction, to the extent of Such prohibition or unenforceability without
invalidating the remaining provisions of this Mortgage or affecting the validity
or enforceability of such provision in any other jurisdiction.
8.08 Obligations of Mortgagor. Time is of the essence with respect to
------------------------
all of the Mortgagor's covenants and agreements under this Mortgage, and all of
Such covenants and agreements shall run with the land. All obligations of the
Mortgagor under this Mortgage shall be performed and satisfied by or on behalf
of the Mortgagor at the Mortgagor's sole cost and expense.
8.09 Successors and Assigns. The provisions of this Mortgage shall be
----------------------
binding upon the Mortgagor and the successors and assigns of the Mortgagor,
including successors in interest of the Mortgagor in and to all or any part of
the Mortgaged Property, and shall inure to the benefit of the Mortgagee and the
substitutes, successors, transferees and assigns of the Mortgagee. All
references in this Mortgage to the Mortgagor or the Mortgagee shall be construed
as including all of such other persons with respect to the person to which
reference is made. Where two or more persons have executed this Mortgage, the
obligations of such persons shall be joint and several except to the extent the
context clearly indicates otherwise.
8.10 No Waiver. No provision in Article I or Section 2.05 or elsewhere
---------
in this Mortgage shall be construed as a waiver by the Mortgagor of any warranty
of the Mortgagee under the deed, dated the date of the Promissory Note, made by
the Mortgagee to the Mortgagor with respect to the Facility, nor shall any such
provision be construed to require the Mortgagor to pay any costs and expenses
incurred by the Mortgagee in connection with the defense of any warranty of the
Mortgagee under such deed.
8.11 Consent to Jurisdiction. The Mortgagor hereby irrevocably submits
-----------------------
to the jurisdiction of any court of the State of Washington or any federal court
of the United States of America for any district of the State of Washington, and
any appellate court from any of such courts, in any action or proceeding arising
from or by reason of, or otherwise relating to, this Mortgage, and the Mortgagor
hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such court of the State of Washington
or in such federal court of the United States of America for any district of the
State of Washington. The Mortgagor, to the fullest extent permitted by
applicable law, hereby irrevocably waives the defense of an inconvenient forum
to the maintenance of any such action or proceeding in such court of the State
of Washington or in such federal court of the United States of America for any
district of the State of Washington. The Mortgagor hereby irrevocably appoints
House & Blanco, P.A (the "Process Agent"), as the Mortgagor's agent to receive
on behalf of the Mortgagor and its property service of copies of the summons and
complaint and any other process which may be served in any such action or
proceeding. Such service may be made by mailing or delivering a copy of such
process to the Mortgagor in care of the Process Agent at 215 Executive Park
Boulevard, P.O. Drawer 25008, Winston-Salem, North Carolina 27114-5008, and the
Mortgagor hereby irrevocably authorizes and directs the Process Agent to accept
such service on the Mortgagor's behalf. As an alternative method of service, the
Mortgagor also irrevocably consents to the service of any and all process in any
such action or proceeding by the mailing of copies of such process to the
Mortgagor at its address specified in Section 8.05. The Mortgagor agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Section 8.11 shall affect the right of the
Mortgagee to serve legal process in any other manner
-28- EXHIBIT C-2
<PAGE>
permitted by law or shall affect the right of the Mortgagee to bring any action
or proceeding against the Mortgagor or the Mortgagor's property in the courts of
any other jurisdictions.
8.12 Applicable Law. This Mortgage shall be governed by, and construed
--------------
in accordance with, the laws of the State of Kansas.
IN WITNESS WHEREOF, the Mortgagor has executed this Mortgage as of the
date first above written.
[NAME OF THE MORTGAGOR]
By MEADOWBROOK MANOR OF KANSAS & MISSOURI, INC.,
General Partner
By________________________________
Title:____________________________
STATE OF _______________ )
)ss.
COUNTY OF ______________ )
BE IT REMEMBERED, that on this ________ day of _________, 1992, before
me the undersigned, a Notary Public in and for said County and State aforesaid,
came ________________________ [vice] President of Meadowbrook Manor of Kansas &
Missouri, Inc., a corporation duly organized, incorporated and existing under
and by virtue of the laws of North Carolina, and the general partner of
_____________, a North Carolina limited partnership, who is personally known to
me to be such officer of such general partner, and who is personally known to me
to be the same person who executed, as such officer of such general partner, the
within instrument on behalf of said corporation and said limited partnership,
and such person duly acknowledged the execution of the same to be the act and
deed of sad corporation and of said limited partnership.
IN WITNESS WHEREOF, l have hereunto set my hand and affixed my
official seal at my office in ___________________,the day and year last above
written.
------------------------------------------
Notary Public in and for
Said County and State
------------------------------------------
(Type or stamp the Notary's name below his
or her signature.)
My Commission Expires:
- --------------------------
-29- EXHIBIT C-2
<PAGE>
Schedule A
to
Mortgage,
Assignment, Security Agreement
and
Financing Statement (Fixture Filing)
([Name of the Facility)/13/
(Facility No. [____])/14/
Land
----
[Reserved.]
- ---------------------------
/13/ Insert the name of the Facility.
/14/ Insert the number assigned to the Facility.
-1- EXHIBIT C-2
<PAGE>
Schedule B
to
Mortgage.
Assignment, Security Agreement
and
Financing Statement (Fixture Filing)
([Name of the Facility)/15/
(Facility No. [___])16
Permitted Exceptions
--------------------
[Reserved.]
- ------------------------------
/15/ Insert the name of the Facility.
/16/ Insert the number assigned to the Facility.
-1- EXHIBIT C-2
<PAGE>
Schedule C
to
Mortgage,
Assignment, Security Agreement
and
Financing Statement (Fixture Filing)
([Name of the Facility)/17/
(Facility No. [___])/18/
Affiliates/19/
----------
1. Meadowbrook Manor of Baldwin Limited Partnership, a North Carolina limited
partnership.
2. Meadowbrook Manor of Joplin Limited Partnership I, a North Carolina limited
partnership.
3. Meadowbrook Manor of Council Grove Limited Partnership, a North Carolina
limited partnership.
4. Meadowbrook Manor of Haysville Limited Partnership, a North Carolina
limited partnership.
5. Meadowbrook Manor of St. Charles Limited Partnership, a North Carolina
limited partnership.
6. Meadowbrook Manor of Overland Park Limited Partnership, a North Carolina
limited partnership.
7. Meadowbrook Manor Terrace of Overland Park Limited Partnership, a North
Carolina limited partnership.
8. Meadowbrook Manor of Chanute Limited Partnership, a North Carolina limited
partnership.
9. Meadowbrook Manor of Springfield Limited Partnership, a North Carolina
limited partnership.
10. Meadowbrook Manor of Topeka Limited Partnership, a North Carolina limited
partnership.
11. Meadowbrook Manor of Wichita Limited Partnership, a North Carolina limited
partnership.
12. Meadowbrook Manor of Columbia Limited Partnership, a North Carolina limited
partnership.
13. Meadowbrook Manor of Sedgwick Limited Partnership, a North Carolina limited
partnership.
14. Meadowbrook Manor Colonial Terrace of Independence Limited Partnership, a
North Carolina limited partnership.
- -----------------------------
/17/ Insert the name of the Facility.
/18/ Insert the number assigned to the Facility.
/19/ Delete the name of the Mortgagor from this Schedule C and, to the
extent required, renumber the list of Affiliates.
-1- EXHIBIT C-2
<PAGE>
15. Meadowbrook Manor Colonial Lodge of Independence Limited Partnership, a
North Carolina limited partnership.
16. Meadowbrook Manor of Lamed Limited Partnership, a North Carolina limited
Partnership.
17. Meadowbrook Manor Apartments of Larned Limited Partnership, a North
Carolina limited partnership.
18. Meadowbrook Manor of Ava Limited Partnership, a North Carolina limited
partnership.
19. Meadowbrook Manor of Buffalo Limited Partnership, a North Carolina limited
partnership.
20. Meadowbrook Manor of Clinton Limited Partnership, a North Carolina limited
Partnership.
21. Meadowbrook Manor of Des Peres Limited Partnership, a North Carolina
limited partnership.
22. Meadowbrook Manor of Jefferson Limited Partnership, a Noah Carolina limited
Partnership.
23. Meadowbrook Manor of Marceline Limited Partnership, a North Carolina
limited Partnership.
24. Meadowbrook Manor of Joplin Limited Partnership Il, a North Carolina
limited Partnership.
25. Meadowbrook Manor of Lamar Limited Partnership, a North Carolina limited
Partnership.
26. Meadowbrook Manor of Shady Oaks Limited Partnership, a North Carolina
limited Partnership.
27. Meadowbrook Manor of Crane Limited Partnership, a North Carolina limited
Partnership.
28. Meadowbrook Manor of Kimberling City Limited Partnership, a North Carolina
limited partnership.
29. Meadowbrook Manor Residential of Kimberling City Limited Partnership, a
North Carolina limited partnership.
30. Meadowbrook Manor Wornall of Kansas City Limited Partnership, a North
Carolina limited partnership.
31. Meadowbrook Manor Blue Hills of Kansas City Limited Partnership I, a North
Carolina limited partnership.
32. Meadowbrook Manor Blue Hills of Kansas City Limited Partnership II, a North
Carolina limited partnership.
-2- EXHIBIT C-2
<PAGE>
Exhibit D
to
Facility Agreement
GUARANTY
This GUARANTY (this "Guaranty"), dated [___________],1992, made
jointly and severally by Don G. Angell and Daniel D. Mosca individually, a
"Guarantor" and collectively, the "Guarantors"), in favor of FIRST HEALTHCARE
CORPORATION, a Delaware corporation ("FHC").
PRELIMINARY STATEMENTS:
(1) FHC has entered into a Facility Agreement dated as of April 23,
1992 (said Agreement, as it may be amended or otherwise modified, being the
"Facility Agreement" the terms defined therein and not otherwise defined herein
being used herein as therein defined) with the limited partnerships listed in
schedule A attached hereto (individually, a "Buyer" and collectively, the
"Buyers").
(2) Pursuant to the Facility Agreement certain Buyers have executed
and delivered to FHC Promissory Notes aggregating $[___________] in principal
amount, and certain Buyers will execute and deliver to FHC Promissory Notes
aggregating the Purchase Price then due in respect of the Bond-financed Owned
Facilities (said Promissory Notes, as they may be supplemented amended,
extended, renewed or otherwise modified, being the "Promissory Notes").
(3) Pursuant to the Facility Agreement, certain Buyers have entered
into the Charlevoix Lease, the Bethesda Sublease and the Sedgwick Sublease with
FHC.
(4) Pursuant to the Facility Agreement certain Buyers, as subleases,
have entered into subleases with FHC, as sublessor, (said subleases, as they may
be supplemented, amended or otherwise modified, being the "Subleases").
(5) The Guarantors collectively own, directly or indirectly, 100% of
the issued and outstanding stock of the General Partner and own, directly or
indirectly, a 100% interest in each Buyer. The Guarantors are financially
interested in the well-being of the Buyers and will receive an economic benefit
from FHC's willingness to accept the Promissory Notes and to enter into the
Charlevoix Lease, the Bethesda Sublease, the Sedgwick Sublease and the
Subleases.
(6) It is a condition precedent to the obligation of FHC to
consummate the transactions contemplated by the Facility Agreement, the
Charlevoix Lease, the Bethesda Sublease, the Sedgwick Sublease and the Subleases
that the Guarantors shall have executed and delivered this Guaranty.
NOW, THEREFORE, in consideration of the premises and for other, good
and valuable consideration the receipt and sufficiency of which are hereby
acknowledged by the Guarantors, the Guarantors hereby jointly and severally
agree as follows:
SECTION 1. Guaranty. The Guarantors hereby irrevocably and
--------
unconditionally guarantee the punctual payment when due, whether at stated
maturity, by acceleration or otherwise, of twenty percent (20%) of all of the
Buyers' aggregate obligations at any
-1- EXHIBIT D
<PAGE>
time outstanding (a) under the Promissory Notes in respect of principal,
interest and any late charges, (b) under the Charlevoix Lease, the Bethesda
Sublease and the Sedgwick Sublease in respect of the rent thereunder, and (c)
under the Subleases in respect of the Rent (said twenty percent (20%) of said
obligations being the "Obligations"), and agree to pay all expresses (including
counsel fees and expenses, including reasonable charges allocated for internal
corporate counsel incurred by FHC in enforcing any rights under this Guaranty,
Without limiting the generality of the foregoing, the Guarantors' liability
shall extend to all amounts which constitute part of the Obligations and would
be owed by any Buyer under the Promissory Notes, the Charlevoix Lease, the
Bethesda Sublease, the Sedgwick Sublease or the Subleases but for the fact that
they are unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving such Buyer.
SECTION 2. Guaranty Absolute. The Guarantors guarantee that the
-----------------
Obligations will be paid strictly in accordance with the terms of the Promissory
Notes, the Charlevoix Lease, the Bethesda Sublease, the Sedgwick Sublease and
the Subleases, respectively, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of FHC with respect thereto. The obligations of the Guarantors under this
Guaranty are independent of the Obligations, and a separate action or actions
may be brought and prosecuted against the Guarantors to enforce this Guaranty,
irrespective of whether any action is brought against any Buyer or whether any
Buyer is joined in any such action or actions. The liability of the Guarantors
under this Guaranty shall be absolute and unconditional irrespective of:
(i) any lack of validity or enforceability of the Facility
Agreement, the Promissory Notes or any other agreement or instrument relating
thereto;
(ii) any change in the time, manner or place of payment of, or in
any other term of, any of the Obligations, or any other amendment or waiver of
or any consent to departure from the Facility Agreement, the Promissory Notes,
the Charlevoix Lease, the Bethesda Sublease, the Sedgwick Sublease or the
Subleases;
(iii) any taking, exchange, release or non-perfection of any
collateral, or any taking, release or amendment or waiver of or consent to
departure from any other guaranty, for any of the Obligations;
(iv) any manner of application of collateral, or proceeds thereof,
to any of the Obligations, or any manner of sale or other disposition of any
collateral for any of the Obligations or any other assets of any Buyer:
(v) any change, restructuring or termination of the partnership
structure or existence of any Buyer: or
(vi) any other circumstance which might otherwise constitute a
defense (other than payment) available to, or a discharge of, any Buyer or any
guarantor.
This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Obligations is rescinded or must
otherwise be returned by FHC upon the insolvency, bankruptcy or reorganization
of any Buyer or otherwise, all as though such payment had not been made.
SECTION 3. Waiver. Each Guarantor hereby waives promptness,
------
diligence, notice of acceptance and any other notice with respect to any of the
Obligations and this Guaranty and
-2- EXHIBIT D
<PAGE>
any requirement that FHC protect, secure, perfect or insure any security
interest or lien or any property subject thereto or exhaust any right or take
any action against any Buyer or any other person or entity or any collateral.
Without limiting the foregoing, it shall not be necessary for FHC (and each
Guarantor hereby waives any rights such Guarantor may have to require FHC), in
order to enforce payment by the Guaranty under this Guaranty, first to enforce
its rights against any, security that shall ever have been given to secure the
Obligations, including, but not limited to, its rights under the Mortgages.
SECTION 4. Waiver of Subrogation Rights. Each Guarantor hereby waives
----------------------------
all rights and claims that such Guarantor has or hereafter may have or acquire
(whether arising directly or indirectly, by operation of law, by contract or
otherwise) against any Buyer by reason of any payment to FHC pursuant to this
Guaranty, including, but not limited to, rights of exoneration, indemnity,
contribution reimbursement and subrogation.
SECTION 5. Consent to Jurisdiction. Each Guarantor hereby irrevocably
-----------------------
submits to the jurisdiction of any court of the State of Washington or any
federal court of the United States of America (or any district of the state of
Washington, and any appellate court from any of such courts, in any action or
proceeding arising out of or relating to this Guaranty, and each Guarantor
hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such court of the State of Washington
or in such federal court of the United states of America for any district of the
state of Washington. Each Guarantor, to fullest extent permitted by applicable
law, hereby irrevocably waives the defense of an inconvenient forum to the
maintenance of such action or proceeding. Each Guarantor hereby irrevocably
appoints Don R. House (the "Process Agent") as his agent to receive on behalf of
such Guarantor and his property service of copies of the summons and complaint
and any other process which may be served in any such action or proceeding. Such
service may be made by mailing or delivering a copy of such process to such
Guarantor in care of the Process Agent at 215 Executive Park Boulevard, Winston-
Salem, North Carolina 27103-1594, and each Guarantor hereby irrevocably
authorizes and directs the Process Agent to accept such service on his behalf.
As an alternative of service, each Guarantor also irrevocably consents to the
service of any and all process in any such action or proceeding by the mailing
of copies of such process to such Guarantor at his address specified in Section
10 hereof. Each Guarantor agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this
Section 5 shall affect the right of FHC to serve legal process in any other
manner permitted by law or affect the right of FHC to bring any action or
proceeding against the Guarantors or their respective property in the courts of
any other jurisdictions.
SECTION 6. Representations and Warranties. Each Guarantor hereby
------------------------------
represents and warrants as follows:
(a) The execution, delivery and performance by such Guarantor
of this Guaranty do not contravene any law or contractual restriction binding on
or affecting such Guarantor or such Guarantor's property.
(b) No authorization, consent, approval or other action by,
and no notice to or filing, recording or registration with, any governmental
authority or regulatory body is required for the due execution, delivery and
performance by such Guarantor of this Guaranty.
-3- EXHIBIT D
<PAGE>
(c) This Guaranty has been duly executed by such Guarantor and
is a valid and binding obligation of such Guarantor, enforceable against such
Guarantor in accordance with its terms.
(d) There is no pending or, to the knowledge of such
Guarantor, threatened action or proceeding before any court governmental agency
or arbitrator against or affecting such Guarantor which purports to affect the
validity or enforceability of this Guaranty.
(e) Except as set forth in Schedule 6(e) attached hereto,
there is no pending or, to the knowledge of such Guarantor, threatened action or
proceeding before any court, governmental agency or arbitrator against or
affecting such Guarantor which, if determined adversely to such Guarantor, would
materially and adversely affect the financial condition of such Guarantor.
(f) The balance sheets of such Guarantor as of the end of the
two most recently completed calendar years, which have been furnished to FHC by
such Guarantor, fairly present the financial condition of such Guarantor as of
the respective dates of such balance sheets, and there are no liabilities,
direct or indirect, fixed or contingent, of such Guarantor as of the respective
dates of such balance sheets that are not reflected therein. Since the latest
date of such balance sheets, there have been no material adverse changes in the
financial condition of such Guarantor.
(g) There are no conditions precedent to the effectiveness of
this Guaranty that have not been sated or waived.
(h) Such Guarantor has, independently and without reliance
upon FHC and based on documents and information as he has deemed appropriate,
made his own credit analysis and decision to enter into this Guaranty.
SECTION 7. Affirmative Covenants. Each Guarantor covenants and agrees
---------------------
that, so long as any part of the Obligations shall remain unpaid, such Guarantor
will, unless FHC shall otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply in all material respects
--------------------------
with all applicable laws, rules, regulations and orders, such compliance to
include, without limitation, paying before the same become delinquent all taxes,
assessments and governmental charges imposed upon such Guarantor or upon such
Guarantor's property, except to the extent contested in good faith.
(b) Reporting Requirements. Furnish to FHC (i) a: soon a
----------------------
available, and in any event within one-hundred twenty days after the end of each
calendar year, a balance sheet of such Guarantor as of the end of such calendar
year, certified by such Guarantor as fairly presenting the financial condition
of such Guarantor at the date of such balance sheet and a reflecting all
liabilities, direct or indirect, fixed or contingent, of such Guarantor at the
date of such balance sheet, and (ii) such other information respecting the
business, properties or financial condition of such Guarantor, in form and
substance satisfactory to FHC, as FHC may reasonably request.
(c) Net Worth. Together with the other Guarantor, maintain an
---------
excess of total assets over total liabilities of not less than $10,000,000.
-4- EXHIBIT D
<PAGE>
(d) Equity Interest. Together with the other Guarantor or any
---------------
heir, devisee or trustee of any living trust of any Guarantor, own, directly or
indirectly, not less than sixty-seven percent of the issued and outstanding
stock having voting power of each corporate general partner in each Buyer and
maintain, directly or indirectly, a sixty-seven percent interest in the capital
or profits of each Buyer.
SECTION 8. Negative Covenants. Each Guarantor covenants and agrees
------------------
that, so long as any part of the Obligations shall remain unpaid, such Guarantor
will not, without the prior written consent of FHC, sell, assign, pledge,
transfer, convey or otherwise dispose of, or permit any Person in which such
Guarantor has an interest to sell, assign, pledge, transfer, convey or otherwise
dispose of, any shares of the stock of any general partner in any Buyer or of
any interest in any Buyer, except to the other Guarantor or to any Buyer or to
any heir, devisee or trustee of any living trust of any Guarantor.
SECTION 9. Amendments, Etc. No amendment or waiver of any provision
---------------
of this Guaranty, and no consent to any departure by any Guarantor from this
Guaranty, shall in any event be effective unless the same shall be in writing
and signed by the Chief Executive Officer or the President of FHC, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
SECTION 10. Notices. All notices, consents, requests and other
-------
communications under or in connection with this Guaranty shall be in writing and
shall be sent via personal delivery, via telephone facsimile transmission, via
certified or registered mail, return receipt requested, or via express courier
or delivery service, addressed as set forth below or at such other address or
telephone facsimile number as shall be designated by a party in a written notice
given to each other party complying as to delivery with the terms of this
Section 10.
If to FHC, at:
c\o The Hillhaven Corporation
The Cornerstone Building
1148 Broadway Plaza
Tacoma, Washington 98402
Attn: Vice President - Acquisitions and Development
Facsimile: (206)7564871
with a copy to:
The Hillhaven Corporation
The Cornerstone Building
1146 Broadway Plaza
Tacoma, Washington 98402
Attn: General Counsel
Facsimile: (206)756-4845 or (206)756-4743
-5- EXHIBIT D
<PAGE>
if to the Guarantors, at:
Don G. Angell
P.O. Box 1670
Clemmons, North Carolina 27012
Facsimile: (919) 998-2560
Daniel D. Mosca
4901 Holly Ridge Drive
Raleigh, North Carolina 27612
with a copy to:
George E. Hollodick
House & Blanco, P.A.
215 Executive Park Boulevard
Winston-Salem, North Carolina 27103
Facsimile: (919)765-4830
All such notices, consents, requests and other communications shall be deemed
given (a) when given and receipted for (or upon the date of attempted delivery
when delivery is refused), if sent via personal delivery, via certified or
registered mail, return receipt requested, or via express courier or delivery
service or (b) when received, if sent via telephone facsimile transmission
(confirmation of such receipt via confirmed telephone facsimile transmission
being deemed receipt of any such notice, consent, request or other communication
sent via telephone facsimile transmission).
SECTION 11. No Waiver; Remedies. No failure on the part of FHC to
-------------------
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
SECTION 12. Continuing Guaranty: Assignment. This Guaranty is a
-------------------------------
continuing guaranty and shall (i) remain in full force and effect until payment
in full of (a) all obligations of the Buyers now or hereafter existing under the
Promissory Notes in respect of principal, interest and any late charges, (b) all
rent that the Buyers are now or hereafter obligated to pay under the Charlevoix
Lease, the Bethesda Sublease and the Sedgwick Sublease, (c) all the Rent that
the Buyers are now or hereafter obligated to Pay under the Subleases and (d) all
other amounts payable under the Guaranty, (ii) be binding upon each Guarantor
and such Guarantor's heirs, personal representatives, successors and assigns,
and (iii) inure to the benefit of, and be enforceable by, FHC and its
successors, transferees and assigns. Without limiting the generality of the
forgoing clause, (iii), FHC may assign or otherwise transfer all or any portion
of its rights under this Guaranty, the Promissory Notes, the Charlevoix Lease,
the Bethesda Sublease, the Sedgwick Sublease and the Subleases to any other
person or entity, and such other person or entity shall thereupon become vested
with all the benefits in respect thereof granted to FHC herein or otherwise.
SECTION 13. Waiver of Jury Trial. Each Guarantor, and FHC by accepting
--------------------
this Guaranty, hereby irrevocably waive all right to trial by jury in any
action, proceeding or counterclaim (whether based upon contract, tort or
otherwise) arising from or by reason of or relating to this Guaranty, or any
actions of FHC in the negotiation, performance or enforcement of this Guaranty.
-6- EXHIBIT D
<PAGE>
SECTION 14. Applicable Law. This Guaranty shall be governed by, and
--------------
construed in all respects (including matters of construction, validity and
performance) in accordance with, the laws of the State of Washington, without
regard to the conflicts of law rules of such state.
SECTION 15. Oral Agreements Unenforceable. ORAL AGREEMENTS OR ORAL
----------------------------- -----------------------
COMMITMENTS TO LOAN MONEY EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT
- -------------------------------------------------------------------------------
OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
- --------------------------------------------------
IN WITNESS WHEREOF, the Guarantors have duly executed and delivered
this Guaranty as of the date first above written.
------------------------------
Don G. Angell, individually
------------------------------
Daniel D. Mosca, individually
-7- EXHIBIT D
<PAGE>
Exhibit E
to
Facility Agreement
RECEIPT AND ASSUMPTION AGREEMENT
This RECEIPT AND ASSUMPTION AGREEMENT is made by [____________], a
North Carolina limited partnership (the "Buyer") to FIRST HEALTHCARE
CORPORATION, a Delaware corporation (the "Seller"), pursuant to, and as a
condition precedent to the obligation of the Seller to consummate the
transactions contemplated by, the Facility Agreement, dated as of April 23, 1992
(the "Facility Agreement"), among the Seller and the Buyer and affiliates of the
Buyer.
The Buyer hereby acknowledges receipt from the Seller of personal
funds of residents of the [name of Facility] located in [_________________,
_____________] (the "Facility"), in the aggregate amount of $[__________] (the
"Funds").
The Buyer hereby further acknowledges that the Funds have been
transferred to and deposited in Account No. [___________], in the name of
"[____________,]" with [Name of Bank] at its office at [ __________,
------------
__________], all in accordance with all laws, rules and regulations applicable
to the management and protection of personal funds of residents of the Facility.
In order to induce the Seller to consummate the transactions
contemplated by the Facility Agreement, the Buyer hereby assumes all of the
Seller's fiduciary, custodial and other obligations and liabilities with respect
to the Funds.
This Receipt and Assumption Agreement shall be binding upon the Buyer
and its successors and assigns, shall inure to the benefit of and be enforceable
by the Seller and its successors and assigns, and shall be governed by, and
construed in all respects in accordance with, the laws of the State of
Washington, without regard to the conflicts of law rules of such state.
IN WITNESS WHEREOF, the Buyer has executed this Receipt and Assumption
Agreement on [__________ ___], 1992.
[BUYER]
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By______________________________
Title:________________________
EXHIBIT E
<PAGE>
Exhibit G
to
Facility Agreement
BILL OF SALE AND GENERAL ASSIGNMENT
FIRST HEALTHCARE CORPORATION, a Delaware corporation (the "Seller")
having an address at The Cornerstone Building, 1148 Broadway Plaza, Tacoma,
County of Pierce, State of Washington 98402, for good and valuable consideration
to it paid, the receipt and sufficiency of which are hereby acknowledged, and
pursuant to the Facility Agreement dated as of April 23, 1992 (the "Facility
Agreement," the terms defined therein and not otherwise defined herein being
used herein as therein defined), among the Seller and _____________ a North
Carolina limited partnership (the "Buyer"), having an address at
[_____________], [_______], County of [_________], State of [____________]
[_____________], and affiliates of the Buyer. has sold, assigned, transferred
and conveyed, and does by these presents sell, assign, transfer and convey, unto
the Buyer, as of the date set forth below (the "Closing Date"). the Seller's
right, title and interest in, to and under the following assets (collectively,
the "Purchased Assets"), "AS IS , WHERE IS and WITH ALL FAULTS", subject to the
----- -------- ---------------
Permitted Liens:
(a) all Inventory used exclusively in the operation of [name of
Facility] located in [_______, _____________] (the "Facility");
(b) all Permits relating to or affecting the Facility;
(c) all Personal Property located in or upon or used exclusively
in connection with the Facility; and
(d) all Records exclusively relating to or affecting the
Facility;
TO HAVE AND TO HOLD the Purchased Assets unto the Buyer and its successors and
assigns to and for its use forever. The Seller hereby warrants to the Buyer that
the Seller is the lawful owner of the Purchased Assets. that the Purchased
Assets are free and clear of all Liens other than the Permitted Liens, and that
the Seller has the right to sell the Purchased Assets subject to the terms and
conditions of the Facility Agreement.
This Bill of Sale and General Assignment is delivered pursuant to the
Facility Agreement and shall be construed consistently with the Facility
Agreement. Without limiting the generality of the preceding sentence, the Seller
has not sold, assigned. transferred or conveyed, and does not sell, assign,
transfer or convey, unto the Buyer or its successors and assigns any of the
Sellers right, title or interest in, to or under any of the Excluded Assets.
EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN
ARTICLE III OF THE FACILITY AGREEMENT AND IN THIS BILL OF SALE AND GENERAL
ASSIGNMENT, THE SELLER HAS NOT MADE AND DOES NOT MAKE, AND THE SELLER HEREBY
EXPRESSLY DISCLAIMS, ANY OTHER REPRESENTATIONS OR WARRANTIES OF ANY KIND OR
CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, WITH RESPECT TO ANY OF THE
PURCHASED ASSETS, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY,
HABITABILITY, TENANT ABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND
REPRESENTATIONS OR WARRANTIES WITH RESPECT TO (A) THE EXISTENCE OR ABSENCE OF
ANY HAZARDOUS
-1- EXHIBIT G
<PAGE>
SUBSTANCE IN, ON, UNDER OR AFFECTING ANY OF THE PURCHASED ASSETS, (B) THE
COMPLIANCE OF ANY OF THE PURCHASED ASSETS, INCLUDING ITS OR THEIR USE OR
OPERATION, WITH ANY ENVIRONMENTAL LAW. (C) THE ASSIGNABILITY OR TRANSFERABILITY
OF ANY OF THE PERMITS, AND (D) THE EFFECT ON THE BUSINESS, ASSETS, CONDITION
(FINANCIAL OR OTHERWISE) OR RESULTS OF OPERATIONS OF THE FACILITY OF ANY
ENACTED, PUBLISHED OR REPORTED LAWS, RULES, REGULATIONS OR JUDICIAL OR
ADMINISTRATIVE DECISIONS (WHETHER HAVING RETROACTIVE OR PROSPECTIVE EFFECT)
PERTAINING TO MATTERS OF LICENSURE, SURVEY, REIMBURSEMENT OR PRIVATE PAY CENSUS.
This Bill of Sale and General Assignment shall be governed by, and
construed in accordance with, the laws of the State of Washington, without
regard to the conflicts of law rules of such state.
IN WITNESS WHEREOF, the Seller has caused this Bill of Sale and
General Assignment to be executed and delivered by its duly authorized officer
on [____________ _____], 1992
FIRST HEALTHCARE CORPORATION
By_____________________________
Title:_______________________
[ADD ALL REQUIRED PROVISIONS FOR ATTESTATIONS,
SIGNATURES OF WITNESSES AND ACKNOWLEDGEMENTS]
-2- EXHIBIT G
<PAGE>
Exhibit H
to
Facility Agreement
[Form of Opinion of General Counsel to the Seller]
[__________ ___],1992
The Limited Partnerships listed
in Schedule A attached hereto
P.O. Box 1670
Clemmons, North Carolina 27012
Ladies and Gentlemen:
I am the General Counsel of First Healthcare Corporation, a Delaware
corporation (the "Seller"), in connection with the preparation, execution and
delivery of the Facility Agreement, dated as of April 23. 1992 (the
"Agreement"), among the Sellers and the limited partnerships listed in Schedule
A attached hereto (collectively. the "Buyers"). All capitalized terms that are
used in this letter without definition shall have the respective meanings
assigned to those terms in the Agreement.
In the course of my legal review relating to this letter. I have
examined or caused to be examined:
(a) the Agreement;
(b) the Assignment and Assumption Agreements listed in Schedule
B attached hereto;
(c) the Deeds listed in Schedule C attached hereto;
(d) the Bills of Sale listed in Schedule D attached hereto;
(e) the Charlevoix Lease, the Bethesda Sublease and the Sedgwick
Sublease listed in Schedule E attached hereto; the Subleases listed in Schedule
F attached hereto;
(g) the certificate of incorporation of the Seller, and all
amendments thereto;
(h) the bylaws of the Seller, and all amendments thereto;
(i) certificate of authorization, or the equivalent, dated
[_________ __], 1992, issued with respect to the Seller by the Secretary of
State of the State of Kansas; and
(j) certificate of authorization, or the equivalent, dated
[_________ __], 1992, issued with respect to the Seller by the Secretary of
State of the State of Missouri.
EXHIBIT H
<PAGE>
[______________]
________ ___, 1992
Page 2
In addition, I have examined or caused to be examined, the originals
or copies, certified or otherwise identified to my satisfaction, of resolutions
of the Board of Directors of the Seller and of such other documents, corporate
records, certificates of public authorities and other documents and instruments
as I have deemed necessary or advisable for the purpose of rendering the
opinions expressed in this letter, for the purposes of this letter, the
documents and instruments referred to in clauses (a) through (f) abode are
sometimes referred to in this letter individually as a "Transaction Document"
and collectively as the "Transaction Documents."
I have assumed without independent verification:
(a) the genuineness of all signatures, the legal capacity of natural
persons, the authenticity of all documents, instruments and certificates
submitted to me as originals, and the exact conformity with the executed
originals of all documents, instruments and certificates submitted to me as
copies;
(b) that the execution, delivery and performance of each document,
instrument and certificate submitted to me has been duly authorized by all
necessary action (corporate, partnership and otherwise) on the part of all
persons and entities (other than the Seller) that are signatories thereto;
(c) that each document, instrument and certificate submitted to me
has been duly executed and delivered, pursuant to all requisite power and
authority (corporate and otherwise"). by or on behalf of all persons and
entities (other than the Seller) that are signatories thereto; and
(d) that each Transaction Document to which any Buyer is a party
constitutes a legal, valid and binding obligation of such Buyer, enforceable
against such Buyer in accordance with its terms.
As to questions of fact material to my opinions, I have relied without
independent verification solely upon the documents, instruments and certificates
submitted to me. Whenever my opinion relates to my "knowledge," by the use of
terms such as "to my knowledge," my opinion is based solely upon the Transaction
Documents and information obtained by making inquiries of officers of the Seller
who are actively involved in the management and operation of the facilities.
I am qualified to practice law in the State of California and do not
express any opinions in this letter concerning any laws other than the laws of
the State of California, the general corporation laws of the state of Delaware,
and the federal laws of the United States of America.
Based upon and subject to the foregoing, and further subject to the
qualifications set forth below, I am of the opinion that:
1. The Seller is a corporation, duty incorporated and validly
existing under the laws of the State of Delaware. The Seller has the corporate
power and authority to execute and deliver, and to perform its obligations
under, each of the Transaction Documents. The Seller is duly licensed or
qualified to transact business as a foreign corporation in the States of Kansas
and Missouri.
EXHIBIT H
<PAGE>
[______________]
________ ___, 1992
Page 3
2. The execution and delivery by the Seller of, and the performance
by the Seller of its obligations under, each Transaction Document have been duly
authorized by all necessary corporate action on the part of the Seller. Each
TransactIon Document has been duly executed and delivered on behalf of the
Seller by an authorized officer of the Seller. Each Transaction Document
constitutes a valid and binding obligation of the Seller, enforceable against
the Seller in accordance with its terms.
3. Neither the execution and delivery by the Seller of. nor the
performance by the Seller of its obligations under, the Transaction Documents
conflicts with, or results in the breach of, or constitutes a default under any
provisions of the certificate of incorporation of the Seller, the bylaws of the
Seller or, to my knowledge, any agreement, instrument, judgment, order, award or
decree to which the Seller is a party or by which the Seller is bound.
4. Except for [________________], all of which have been obtained or
made, no authorization, consent or approval by, and no filing, registration or
qualification with, any governmental authority or other person or entity is
necessary for the due execution and delivery by the Seller of the Transaction
Documents.
5. To my knowledge, except as set forth in Schedule 3.04 of the
Agreement, there is no action, suit, legal proceeding. arbitration proceeding,
administrative proceeding or investigation pending or threatened against or
affecting any facility or any of the other Purchased Assets before any court,
any arbitrator or any governmental body, agency or official which, if determined
or resolved adversely to the Seller, would reasonably be expected to have a
Material Adverse Effect or which in any manner challenges or seeks to prevent,
enjoin, alter or materially delay the transactions contemplated by the
Agreement.
6. To my knowledge, no bankruptcy, insolvency or similar proceeding
is pending against or contemplated by the Seller.
The opinions expressed ate are subject to the following
qualifications:
A. The enforceability of obligations and the availability of
remedies are subject to and may be limited by (i) bankruptcy. insolvency,
reorganization, arrangement, fraudulent transfer, moratorium and similar laws
affecting creditors' rights generally and (ii) general principles of equity
(including, but not limited to, concepts of materiality, reasonableness, good
faith and fair dealing and principles that may limit the availability of
specific performance or injunctive or other equitable relief) whether such
enforceability of obligations or availability of remedies is considered in a
proceeding in equity or at law.
B. I express no opinion as to:
(1) whether the Seller has, or at any time had, any right, title
or interest in or to all or any portion of the Purchased Assets or the Leased
Facilities;
(2) any provisions in the Transaction Documents insofar as they
purport to provide that any party (A) may have rights to indemnification, (B)
may have rights to the payment or reimbursement of attorneys' fees except to the
extent that a court determines that such fees are
EXHIBIT H
<PAGE>
[______________]
________ ___, 1992
Page 4
reasonable, (C) may have rights to the payment of any sum as liquidated damages,
(D) may exercise sets or similar rights or (E) waives any right or defense;
(3) any provisions of the "bulk sales," "bulk transfer" or
similar laws of any state or other jurisdiction; and
(4) Section 5.08 of the Agreement.
This letter is furnished to you at the request of the Seller pursuant
to Section 8.04(k) of the Agreement and is solely for your benefit and for the
purpose of the consummation of the transactions contemplated by the Agreement.
This letter may not be relied upon or used by, and no copy of this letter may be
furnished to, any other person or entity or for any other purpose without my
express, prior written consent. I disclaim any obligation to update this letter
or otherwise to advise you of any matters (including, but not limited to, any
subsequently enacted, published or reported laws, rules, regulations or judicial
decisions having retroactive effect) which may come to my attention after the
date of this letter and which affect any of the opinions expressed in this
letter.
Very truly yours,
Richard P. Adcock,
General Counsel
First Healthcare Corporation
EXHIBIT H
<PAGE>
Exhibit M
to
Facility Agreement
ACCOUNTING SERVICES AGREEMENT
This ACCOUNTING SERVICES AGREEMENT (the "Agreement") dated as of
_________, 1992, between First Healthcare Corporation, a Delaware corporation
("Vendor"), and _____________, a North Carolina limited partnership ("Owner").
WITNESSETH:
-----------
WHEREAS, pursuant to that certain Facility Agreement dated as of April
__, 1992 (the "Facility Agreement"), amoung Vendor, as Seller, and the parties
referenced therein, including Owner, as Buyers, Seller has agreed, inter alia to
----- ----
[sell/sublease/lease] to Owner that certain [skilled nursing/retirement]
facility known as ____________ (the "Facility"); and
WHEREAS, Vendor has accounting systems and procedures in place to
provide certain accounting services with respect to the Facility; and
WHEREAS, Owner desires to engage Vendor to provide certain accounting
services with respect to the Facility pursuant to the terms and conditions set
forth herein.
NOW THEREFORE, for and in consideration of the premises and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Retention of Vendor. Owner hereby retains Vendor to provide
-------------------
certain accounting services in connection with the Facility under the terms and
conditions set forth herein.
2. Responsibilities of Vendor. During the Term, as defined below,
--------------------------
Vendor shall provide the following accounting services to Owner in connection
with the operation of the Facility:
A. Accounts Payable. Vendor shall provide accounts payable
----------------
processing services with respect in accounts payable generated from operations
of the Facility. Such accounts payable accounting services shall include
processing accounts payable batch terminal input, maintaining history files and
accounts payable distribution reports and vendor reports and distributing annual
1099's (where applicable) and checks. Vendor shall provide Owner with (i)
printouts showing distribution of expenses to Vendor's standard chart of
accounts, and (ii) all computer printouts it generates with respect to the
Facility. Vendor shall not be responsible for reconciling bank accounts.
B. Payroll. Vendor shall provide payroll processing services
-------
with respect to employees of the Facility. Such payroll processing services
shall include processing payroll input, maintaining payroll history files,
distributing payroll registers and payroll checks and providing information for
Owner to prepare quarterly tax reports and annual W-2's.
C. Accounts Receivable. Vendor shall establish an electronic
-------------------
billing service (but not with respect to Medicaid agency billings) which shall
provide accounts receivable processing services with respect to the Facility.
Such accounts receivable accounting services shall include processing accounts
receivable input, maintaining files, preparing accounts receivable aging and
-1- EXHIBIT M
<PAGE>
distributing reports. It is expressly understood that Vendor is not responsible
for collecting accounts receivable.
3. Term. The term of this Agreement (the "Term") shall commence on
----
the date [Vendor transfers title to the facility to Owner/the sublease between
Vendor and Owner with respect to the Facility commences] and shall continue for
a period of six months, unless earlier terminated as herein provided.
Notwithstanding anything to the contrary contained herein: (A) Vendor shall be
entitled to terminate this Agreement at any time upon 30 days' prior written
notice to Owner; and (B) Owner shall be entitled to terminate this Agreement at
any time upon 30 days' prior written notice to Owner.
4. Fees. For services performed hereunder, Owner shall pay to
----
Vendor the following:
A. Start-Up Fee. Owner shall pay to Vendor a one-time start-up
------------
fee in the amount of $1,000.
B. Monthly Fee. Owner shall pay to Vendor a monthly fee equal
-----------
to [$1,000/$750]. Upon 30 days' prior written notice as set forth in Section
3(B), Owner shall be entitled to terminate services provided pursuant to this
Agreement, and upon the effectiveness of any such termination, Owner's
obligation to pay the monthly fee with respect to the Facility shall also
terminate. If the services of Vendor hereunder commence or terminate other than
on the first day of a month, compensation set forth in this Section 4(B) shall
be prorated for the number of days for which services are actually rendered with
respect to the Facility.
C. Expense Reimbursement. Owner shall reimburse Vendor for the
---------------------
following items:
(i) Overnight or other expedited mailing or delivery
service costs in excess of first class regular mail; and
(ii) Cost of check stock, if any.
D. Late Charges. Owner shall pay to Vendor, to the extent
------------
permitted by applicable law, interest on any amount owing to Vendor under this
Agreement which is not paid when due, for any period for which any of the same
is overdue (without regard to any grace period), at a rate equal to the lesser
of (i) four percent in excess of the rate announced from time to time by Chase
Manhattan Bank, N.A. as its prime or reference rate, as such rate may change
from time to time, and (ii) the maximum rate of the interest permitted by
applicable law.
E. Method of Payment. Owner shall pay the amount set forth in
-----------------
Section 4(a) concurrently with the execution of this Agreement. Owner shall pay
the amounts set forth in Sections 4(B) and (C) monthly, in arrears, no later
than the tenth day of the month following the month during which such amounts
were earned or expenses incurred. Owner shall pay any amounts owing pursuant to
Section 4(D) upon Vendor's demand.
5. Proprietary Interest. The systems, methods, procedures and
--------------------
controls employed by Vendor, including, without limitation, any operating
manuals and computer software developed by Vendor, and any written materials or
brochures developed by Vendor to document the same, are to remain the property
of Vendor, and Owner shall not, at any time, utilize, distribute, copy or
otherwise employ or acquire any such materials or brochures without Vendor's
prior written consent, which Vendor may withhold in its sole discretion.
-2- EXHIBIT M
<PAGE>
6. No Guaranty of Profitability. Owner acknowledges that Vendor
----------------------------
does not guarantee that the Facility will be profitable.
7. Default. Either party may terminate this Agreement in the event
-------
of any of the following events ("Events of Default") by or with respect to the
party:
(A) By Vendor. With respect to Vendor, the following shall
---------
constitute Events of Default hereunder:
(i) Vendor shall fail to keep, observe or perform any
material agreement, term or provision of this Agreement, and such failure shall
continue for a period of seven days after notice thereof shall have been given
to Vendor by Owner, which notice shall specify the event or events constituting
the failure; provided, however, that Vendor shall not be deemed to be in
-------- -------
violation of this Agreement, and no Event of Default shall have occurred, if
Vendor is prevented from performing any of its obligations hereunder for any
reason beyond its control, including, without limitation, strikes, shortages,
war, acts of God, lack of Owner's financial resources, or any statute,
regulation or rule of federal, state or local government or agency thereof; or
(ii) Vendor shall apply for or consent to the appointment
of a receiver, trustee or liquidator of Vendor or of all or a substantial part
of its assets, file a voluntary petition in bankruptcy, or admit in writing its
inability to pay its debts as they become due, make a general assignment for the
benefit of creditors, file a petition or an answer seeking reorganization or
arrangement with creditors or taking advantage of any insolvency law; or an
order, judgment or decree shall be entered by a court of competent jurisdiction,
on the application of a creditor, adjudicating Vendor a bankrupt or insolvent or
approving a petition seeking reorganization of Vendor, or appointing a receiver,
trustee or liquidator of Vendor or of all or a substantial part of its assets,
and such order shall remain undismissed, undischarged or unbonded for a period
of 60 days.
(B) By Owner. With respect to Owner, the following shall
--------
constitute Events of Default hereunder:
(i) Owner shall fail to make or cause to be made any
payment to Vendor required to be made hereunder, and such failure shall continue
for a period of ten days after notice thereof shall have been given to Owner;
(ii) Owner shall fail to keep, observe or perform any
other agreement, term or provision of this Agreement and such default shall
continue for a period of 30 days after notice thereof shall have been given to
Owner by Vendor, which notice shall specify the event or events constituting the
default; or
(iii) Owner shall default under any provision set forth in
any Transaction Documents, as that term is defined in the Facility Agreement.
(iv) Owner shall be dissolved or shall apply for a consent
to the appointment of a receiver, trustee or liquidator of Owner or of all or a
substantial part of its assets, file a voluntary petition in bankruptcy, or
admit in writing its inability to pay its debts as they become due, make a
general assignment for the benefit of creditors, file, or have filed against it,
a petition or an answer seeking reorganization or arrangement with creditors or
taking advantage of any insolvency law; or an order, judgment or decree shall be
entered by a court of competent jurisdiction, on the application of a creditor,
adjudicating Owner a bankrupt or insolvent or approving a petition seeking
reorganization of Owner, or appointing a receiver, trustee or liquidator of
Owner or of all or a substantial
-3- EXHIBIT M
<PAGE>
part of its assets and such order shall remain undismissed undischarged or
unbonded for a period of 60 days.
8. Remedies Upon Default.
---------------------
A. Remedies of Vendor. Upon the occurrence of an Event of
------------------
Default by Owner and at any time thereafter, Vendor may, in its discretion, do
any one or more of the following: (i) terminate this Agreement, remove its
hardware, software, manuals and other items owned by Vendor from the Facility
and declare all sums earned but unpaid to the date of termination to be
immediately due and payable; or (ii) exercise any other right or remedy
available to its under applicable law, including without limitation the right to
recover damages for the breach hereof.
B. Remedies of Owner. Upon the occurrence of any Event of
-----------------
Default by Vendor and at any time thereafter, Owner may, in its discretion, do
any one or more of the following: (i) terminate this Agreement, whereupon Vendor
shall remove its hardware, software, manuals and other items owned by Vendor
from the Facility, and neither party shall have any further obligation
whatsoever under this Agreement; or (ii) exercise any other right or remedy
available to it under applicable law, including without limitation the right to
recover damages for the breach hereof; provided, however, that Owner shall
-------- -------
immediately pay to Vendor all amounts due and owing to Vendor through the date
of termination.
C. Rights Cumulative; No Waiver, Limitation. No right or
----------------------------------------
remedy herein conferred upon or reserved to either of the parties hereto is
intended to be exclusive of any other right or remedy, and each and every right
and remedy shall be cumulative and in addition to any other right or remedy
given hereunder, or now or hereafter legally existing. The failure of either
party hereto to insist at any time upon the strict observance or performance of
any of the provisions of this Agreement or to exercise any right or remedy as
provided in this Agreement shall not impair any such right or remedy or be
constructed as a waiver or relinquishment thereof with respect to subsequent
defaults. Every right and remedy given by this Agreement to the parties hereof
may be exercised from time to time and as often as may be deemed expedient by
the parties hereto, as the case may be. Notwithstanding anything to the contrary
contained in this Agreement, in no event shall either party be liable to the
other for any incidental or consequential damages, loss of profits or any
exemplary or punitive damages regardless of the circumstances from which such
damages arise arising out of any breach of this Agreement.
9. Miscellaneous.
-------------
A. Disclaimer of Employment of Facility Employees. No person
----------------------------------------------
employed by the Owner will be an employee of Vendor, and Vendor shall have no
liability for payment of their wages, payroll taxes and other expenses of
employment. All such persons shall be employees of the Owner.
B. Relationship of the Parties; Disclaimer of Liability;
-----------------------------------------------------
Indemnification. The relationship of Vendor to Owner shall be that of an
- ---------------
independent contractor, and all acts performed by Vendor pursuant to this
Agreement during the Term shall be deemed to be performed in its capacity as an
independent contractor. Vendor shall not be liable for any loss, expense, cost
or liability incurred by or asserted against Owner, unless such loss, expense,
cost or liability results from the gross negligence or willful misconduct of
Vendor. Owner shall indemnify and hold Vendor harmless from and against any and
all loss, expense, cost or liability arising from or related to the Facility;
provided, however, that Owner shall not be obligated to indemnify Vendor for any
- -------- -------
loss, expense, cost or liability which results from Vendor's gross negligence or
willful misconduct.
-4- EXHIBIT M
<PAGE>
C. Employee Non-solicitation. Recognizing the unique services
-------------------------
provided by employees of Vendor, during the Term and for a period of two years
after termination of the Agreement, Owner shall not directly or indirectly
solicit or employ any accounting or finance employees of Vendor based in Tacoma,
Washington to become employees of Owner without Vendor's prior written consent
which Vendor may withhold in its sole discretion.
D. Assignment; Binding Effect. This Agreement shall not be
--------------------------
assigned by either party. Notwithstanding the foregoing, either party may assign
its rights and obligations hereunder to an entity controlling, controlled by or
under common control with such party. This Agreement shall be binding upon and
inure to the benefit of the permitted successors and assigns of the parties.
E. Notices. All notices required or permitted hereunder shall
-------
be given in writing and shall be personally delivered or be sent by registered
or certified mail, postage prepaid, to the following addresses or at such other
places as either party shall designate in writing:
If to Vendor: FIRST HEALTHCARE CORPORATION
c/o The Hillhaven Corporation
1148 Broadway Plaza
Tacoma, Washington 98402
Attention: Senior Vice President and
Chief Financial Officer
With copies to: THE HILLHAVEN CORPORATION
1148 Broadway Plaza
Tacoma, Washington 98402
Attention: General Counsel
If to Owner: __________________________
P.O. Box 1670
Clemmons, North Carolina 27012
Attention: W. Stewart Swain
With copies to: George E. Hollodick
P.O. Drawer 25008
Winston-Salem, North Carolina 27114-5006
Notices shall be deemed effective upon receipt.
F. Entire Agreement. This Agreement contains the entire
----------------
agreement between the parties with respect to the subject matter hereof and
shall supersede all prior understandings, agreements, or arrangements, oral or
written, between the parties.
G. Amendment. This Agreement shall not be modified or amended
---------
except by written instrument signed by both of the parties.
H. Captions. The captions and headings used herein are for
--------
convenience of reference only and shall not be construed in any manner to limit
or modify any of the terms hereof.
I. Attorney's Fees. In the event either party brings an action
---------------
to enforce this Agreement, the prevailing party in such action shall be entitled
to recover from the other all costs incurred in connection therewith, including
reasonable attorney's fees. Reasonable attorney's fees shall include reasonable
charges allocated for internal counsel.
-5- EXHIBIT M
<PAGE>
J. Severability. In the event one or more of the provisions of
------------
this Agreement is deemed to be invalid, illegal or unenforceable in any respect
under applicable law, the validity, legality and enforceability of the remaining
provisions hereof shall not in any way be impaired thereby.
K. Authorization for Agreement. Each of its parties represents
---------------------------
and warrants to the other as follows:
(i) The execution, delivery and performance of this
Agreement (a) are within the corporate or partnership powers of the respective
parties, (b) have been duly authorized by all necessary corporate or partnership
action, and (c) do not and will not (1) require any consent or approval by
stockholders or partners or (2) violate any provision of any law, rule,
regulation, order, writ, judgment, decree or award presently in effect having
applicability to the parties or the articles of incorporation, bylaws or
partnership agreement of the parties.
(ii) This Agreement constitutes the valid and binding
obligations of Owner and Vendor, enforceable in accordance with its terms.
L. Counterparts. This Agreement may be executed in
------------
counterparts, each of which shall be an original, but all of which together
shall constitute but one and the same instrument.
M. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Washington.
N. Quality of Service. Notwithstanding anything herein to the
------------------
contrary, Vendor represents and warrants that the quality of the services it is
obligated to provide hereunder shall at all times be equal to the quality of the
services that it provides with respect to other facilities which it operates.
IN WITNESS WHEREOF, the parties have each caused this Agreement to be
duly executed by its duly authorized officer, as of the date first above
written.
OWNER: ___________________________________________
By: Meadowbrook Manor of Kansas &
Missouri, Inc., Its general partner
By:________________________________
Its:____________________________
VENDOR: FIRST HEALTHCARE CORPORATION
By:________________________________________
Its:____________________________________
-6- EXHIBIT M
<PAGE>
Exhibit N
to
Facility Agreement
[Form of Opinion of House & Blanco, P.A.]
[_________], 1992
First Healthcare Corporation
c/o The Hillhaven Corporation
The Cornerstone Building
1148 Broadway Plaza
Tacoma, Washington 98402
Attention: Vice President of Acquisitions
and Development
Ladies and Gentlemen:
We have acted as counsel to the limited partnerships listed in
Schedule A attached hereto (collectively, the "Buyers") and to Don G. Angell and
Daniel D. Mosca (collectively, the "Guarantors"), in connection with the
preparation, execution and delivery of the Facility Agreement dated as of April
23, 1992 (the "Agreement"), among First Healthcare Corporation, a Delaware
corporation (the "Seller"), and the Buyers. All capitalized terms that are used
in this letter without definition shall have the respective meanings assigned to
those terms in the Agreement.
In the course of our legal review relating to this letter, we
have examined:
(a) the Agreement;
(b) the Assignment and Assumption Agreements listed in Schedule
B attached hereto;
(c) the Promissory Notes listed in Schedule C attached hereto;
(d) the Mortgages listed in Schedule D attached hereto;
(e) the Charlevoix Lease, the Bethesda Sublease and the Sedgwick
Sublease listed in Schedule E attached hereto;
(f) the Subleases listed in Schedule F attached hereto;
(g) the Guaranty, dated [_____________ ____], 1992, made by the
Guarantors in favor of the Seller;
EXHIBIT N
<PAGE>
First Healthcare Corporation
[______________], 1992
Page 2
(h) the Form UCC-1 financing statements listed in Schedule G
attached hereto (collectively, the "Financing Statements");
(i) the partnership agreement and the other organizational
documents of each Buyer, and all amendments thereto;
(j) a certificate of existence, or the equivalent, dated
[_____________ ____], 1992, issued with respect to each Buyer by the Secretary
of State of the State of North Carolina;
(k) a certificate of authorization, or the equivalent, dated
[____________________ ____], 1992, issued with respect to each Buyer by the
Secretary of State of the State of Kansas; and
(l) a certificate of authorization, or the equivalent, dated
[_____________________ ____], 1992, issued with respect to each Buyer by the
Secretary of State of the State of Missouri.
In addition, we have examined the originals or copies, certified
or otherwise identified to our satisfaction, of resolutions of the Board of
Directors of the General Partner in each Buyer, of partnership resolutions of
each Buyer, and of such other documents, records, certificates of public
authorities and other documents and instruments as we have deemed necessary or
advisable for the purpose of rendering the opinions expressed in this letter.
For the purposes of this letter, the documents and instruments referred to in
clauses (a) through (g) above are sometimes referred to in this letter
individually as a "Transaction Document" and collectively as the "Transaction
Documents."
We have assumed without independent verification:
(a) the genuineness of all signatures, the legal capacity of
natural persons, the authenticity of all documents, instruments and certificates
submitted to us as originals, and the exact conformity with the executed
originals of all documents, instruments and certificates submitted to us as
copies;
(b) that the execution, delivery and performance of each
document, instrument and certificate submitted to us has been duly authorized by
all necessary action (corporate, partnership and otherwise) on the part of all
persons and entities (other than the General Partner and the Buyers) that are
signatories thereto;
(c) that each document, instrument and certificate submitted to
us has been duly executed and delivered, pursuant to all requisite power and
authority (Corporate, Partnership and otherwise), by or on behalf of all persons
and entities (other than the General Partner and the Buyers) that are
signatories thereto; and
(d) that each Transaction Document to which the Seller is a
party constitutes a legal, valid and binding obligation of the Seller,
enforceable against the Seller in accordance with its terms.
As to questions of fact material to our opinions, we have relied
without independent verification solely upon the documents, instruments and
certificates submitted to us. Whenever our opinion relates to our "knowledge,"
by the use of terms such as "to our knowledge," our opinion is
EXHIBIT N
<PAGE>
First Healthcare Corporation
[______________], 1992
Page 3
based solely upon the Transaction Documents and information obtained by making
inquiries of officers of the General Partner in the Buyers, and of attorneys in
this firm who are actively involved in the legal representation of the Buyers.
We are qualified to practice law in the State of North Carolina
and do not express any opinions in this letter concerning any laws other than
the laws of the State of North Carolina and the federal laws of the United
States of America.
Based upon and subject to the foregoing, and further subject to
the qualifications set forth below, we are of the opinion that:
1. Each of the Buyers is a limited partnership, duly formed and
validly existing under the laws of the State of North Carolina. Each of the
Buyers has the power and authority to execute and deliver, and to perform its
obligations under, each of the Transaction Documents to which it is a party.
Based solely upon the certificates of authorization, or the equivalent, issued
by the Secretary of State of the States of Kansas and Missouri, respectively,
each of the Buyers is duly licensed or qualified to transact business as a
foreign limited partnership in the State of Kansas or Missouri, as appropriate.
2. The execution and delivery by each of the Buyers of, and the
performance by each of the Buyers of its obligations under, each of the
Transaction Documents to which it is a party have been duly authorized by all
necessary action on the part of such Buyer. Each of such Transaction Documents
has been duly executed and delivered by such Buyer. If each of such Transaction
Documents were governed by the local law's of the State of North Carolina, then
each such Transaction Document would constitute a valid and binding obligation
of such Buyer, enforceable against such Buyer in accordance with its terms.
3. The Guaranty has been duly executed and delivered by the
Guarantors. If the Guaranty were governed by the local laws of the State of
North Carolina, then the Guaranty would constitute a valid and binding
obligation of the Guarantors, enforceable against the Guarantors in accordance
with its terms.
4. Neither the execution and delivery by each of the buyers of,
nor the performance by such Buyer of its obligations under, any of the
Transaction Documents to which it is a party conflicts with, or results in the
breach of, or constitutes a default under, any provisions of the partnership
agreement of such Buyer or, to our knowledge, any agreement, instrument,
judgement, order, award or decree to which such Buyer is a party or by which
such Buyer or the General Partner is bound.
5. To our knowledge, neither the execution and delivery by the
Guarantors of, nor the performance by the Guarantors of their respective
obligations under, the Guaranty conflicts with, or results in the breach of, or
constitutes a default under, any agreement, instrument, judgement, order, award
or decree to which either of the Guarantors is a party or by which either of the
Guarantors is bound.
6. Except for the recording of the Mortgages and the filing of
the Financing Statements, and except for [___________], all of which have been
obtained or made, no authorization, consent or approval by, and no filing,
registration or qualification with, any governmental authority or
EXHIBIT N
<PAGE>
First Healthcare Corporation
[______________], 1992
Page 4
other person or entity (including, but not limited to, any limited partner in
any Buyer) is necessary for the due execution and delivery by the Buyers or the
Guarantors of any of the Transaction Documents.
7. To our knowledge, except as set forth in Schedule 4.04 to
the Agreement or in Schedule 6(e) to the Guaranty, there is no action, suit,
legal proceeding, arbitration proceeding, administrative proceeding or
investigation pending or threatened against or affecting any Buyer, the General
Partner, any limited partner in any Buyer, or any Guarantor before any court,
any arbitrator or any governmental body, agency or official which in any manner
challenges or seeks to prevent, enjoin, after or materially delay the
transactions contemplated by the Agreement.
8. To our knowledge, no bankruptcy, insolvency or similar
proceeding is pending against or contemplated by the Buyers or the General
Partner.
9. Meadowbrook Manor of Kansas & Missouri, Inc., a North
Carolina corporation, is the only general partner in the Buyers.
The opinions expressed above are subject to the following
qualifications:
A. The enforceability of obligations and the availability of
remedies are subject to and may be limited by (i) bankruptcy, insolvency,
reorganization, arrangements, fraudulent transfer, moratorium and similar laws
affecting creditors' rights generally and (ii) general principles of equity
(including, but not limited to, concepts of materiality, reasonableness, good
faith and fair dealing and principles that may limit the availability of
specific performance or injunctive or other equitable relief) whether such
enforceability of obligations or availability of remedies is considered in a
proceeding in equity or at law.
B. The enforceability of obligations and the availability of
remedies under the Transaction Documents further may be limited by other laws
with respect to or affecting remedial or procedural provisions contained in the
Transaction Documents; provided that such other laws do not make the remedies or
--------
procedures afforded by the Transaction Documents inadequate for the practical
realization of the principal benefits intended to be provided by the Transaction
Documents.
C. We express no opinion as to:
(1) whether any Buyer has any right, title or interest in
or to the Mortgaged Property (as defined in the Mortgages);
(2) the priority of any liens, security interests or other
encumbrances or charges against or affecting the Mortgaged Property;
(3) any provisions in the Transaction Documents insofar as
they purport to provide that any party (A) may have rights to indemnification,
(B) may have rights to the payment or reimbursement of attorneys' fees except to
the extent that a court determines that such fees are reasonable, (C) may have
rights to the payment of any sum as liquidated damages, (D) may exercise sets or
similar rights or (E) waives any right or defense; and
EXHIBIT N
<PAGE>
First Healthcare Corporation
[______________], 1992
Page 5
(4) any provisions of the "bulk sales," "bulk transfer" or
similar laws of any state or other jurisdiction.
This letter is furnished to you at the request of the Buyers
pursuant to Section 8.05(h) of the Agreement and is solely for your benefit and
for the purpose of the consummation of the transactions contemplated by the
Agreement. This letter may not be relied upon or used by, and no copy of this
letter may be furnished to, any other person or entity or for any other purpose
without our express, prior written consent. We disclaim any obligation to update
this letter or otherwise to advise you of any matters (including, but not
limited to, any subsequently enacted, published or reported laws, rules,
regulations or judicial decisions having retroactive effect) which may come to
our attention after the date of this letter and which affect any of the opinions
expressed in this letter.
Very truly yours,
EXHIBIT N
<PAGE>
EXHIBIT 10.51
FIRST AMENDMENT
TO
FACILITY AGREEMENT
This FIRST AMENDMENT TO FACILITY AGREEMENT, dated as of July 31, 1992,
is made among First Healthcare Corporation, a Delaware corporation (the
"Seller"), and the limited partnerships listed on the signature pages hereto
(collectively, the "Buyers").
RECITALS
A. The Seller and the Buyers have entered into a Facility Agreement,
dated as of April 23, 1992 (the "Agreement," the terms defined therein being
used herein as therein defined unless otherwise defined herein).
B. The Seller and the Buyers now wish to amend the Agreement.
NOW, THEREFORE, in consideration of the foregoing and for other
valuable consideration, the parties agree as follows:
1. Deletion of Certain Buyers. Meadowbrook Manor Terrace of Overland
--------------------------
Park: Limited Partnership and Meadowbrook Manor Apartments of Larned Limited
Partnership are hereby deleted as parties to the Agreement, and all references
to the Buyers in the Agreement shall be deemed to exclude such limited
partnerships.
2. Closing and Closing Date. All references in the Agreement to the
------------------------
Closing and the Closing Date shall mean and be deemed a reference to August
1,1992, provided that the delivery of documents and the payment of the Purchase
Price, the Rent and other payments pursuant to Sections 8.04, 8.05 and 8.06 of
the Agreement shall occur on July 31, 1992.
3. Deletion of References to Certain Agreements. All references in
--------------------------------------------
the Agreement to the Pharmacy Partnership Agreement, the Pharmacy Management
Agreement, the Rehab Partnership Agreement, the Rehab Management Agreement and
the Accounting Services Agreement are hereby deleted.
4. Amendment to Definitions. (a) The definition of "Excluded Assets"
------------------------
in Section 1.01 of the Agreement is hereby amended by adding at the end thereof
a new clause (1) to read as follows:
"(i) all vehicles."
(b) The definition of "Transaction Document" in Section 1.01 of
the Agreement is hereby amended in full to read as follows:
"Transaction Document" means any of this Agreement, the
Charlevoix Lease, the Bethesda Sublease, the Sedgwick Sublease, the
Assignment and Assumption Agreements, the Promissory Notes, the
Mortgages, the Subleases, the Management Agreements, the Guaranty, the
Receipt and Assumption Agreements, the Deeds and the Bills of Sale.
-1-
<PAGE>
5. New Definition. The following new defined term is hereby added to
--------------
Section 1.01 of the Agreement, to be placed in the proper alphabetical order:
"Management Agreements" has the meaning assigned to that term in
Section 2.15."
6. Rent Subsidy Payments. The Seller shall make the rent subsidy
---------------------
payments required by Section 2.11 of the Agreement directly to the General
Partner at the address specified in Said Section 2.11.
7. Subsidy Reduction: Amendment. (a) Reference is hereby made to
----------------------------
Section 2.12 of the Agreement. As a result of an increase in the Missouri
Medicaid per diem rate that was effective on July 1, 1992, the Seller and the
Buyer hereby agree that the Seller's monthly subsidy payments during the initial
twelve month period of the term under the Subleases, commencing on August 1,
1992, until the next rate increase shall be reduced by $98,668.79.
(b) The second sentence of the fourth paragraph of Section 2.12
of the Agreement is hereby amended by deleting the references to "June 1994" and
"June 1993" therein and substituting therefor "March 1994" and "March 1993,"
respectively.
8. Management Agreements. Article II of the Facility Agreement is
---------------------
hereby amended by adding thereto a new Section 2. 15, to read as follows:
"Section 2.15 Management Agreements. Notwithstanding anything to
---------------------
the contrary set forth in this Agreement or in the Subleases with
respect to Crane Health Care Center, Table Rock Health Care Center
Table Rock Health Care Center Residential Project, Crestview
Healthcare, Hickory Lane Care Center, Sycamore View Healthcare, Des
Peres Health Care, Hillside Healthcare, Marceline Healthcare, Joplin
House Healthcare, Lakeview Health Care Center and Shady Oaks Health
Care Center, the Seller and the respective Buyers that are a party
thereto agree to enter into management agreements with respect to such
Leased Facilities (collectively, the "Management Agreements"), pending
the sublease of such Leased Facilities pursuant to such Subleases. The
consummation of the sublease of such Leased Facilities pursuant to
such Subleases shall occur as soon as reasonably practicable after
receipt by the Seller of all consents required for such sublease. The
Seller and the Buyers, as appropriate, agree to use reasonable,
diligent efforts to obtain such consents. If any Buyer is in default
in the payment of the Operator's Return (as defined in the respective
Management Agreements), then the Seller may reduce its monthly subsidy
payment pursuant to Section 2.11 by the aggregate amount of such
Operator's Return in default In addition, if any Management Agreement
is terminated other than as a result of (i) a default caused solely by
the Seller under such Management Agreement or (ii) such consummation
of the sublease of the Leased Facility to which such Management
Agreement pertains, then the Seller's monthly subsidy payment shall be
reduced by the percentage set forth in Schedule 2.11 with respect to
the Leased Facility to which such Management Agreement pertains. In
addition, the Guaranty shall also cover 20%
-2-
<PAGE>
of the Buyers' aggregate obligations at any time outstanding in
respect of such Operator's Return."
9. Certain Employee Benefit Program. Section 7.07(c) of the
--------------------------------
Agreement is hereby amended by adding to the end thereof a new sentence, to read
as follows:
"Notwithstanding anything to the contrary set forth in this Section
7.07(c), for any Transferred Employee at Indian Creek Nursing Center
and Indian Meadows Nursing Center only, Horizon Healthcare
Corporation, as the Operator of such Facilities, shall not be required
to offer disability insurance but shall be required to offer all other
Employee Benefit Programs."
10. Certain Inspection Dates. Section 7.12 of the Agreement is hereby
------------------------
amended by replacing the dates "June 1, 1992" and "June 5, 1992," respectively,
with respect to environmental matters, with the dates "July 29,1992" and "July
30, 1992," respectively.
11. Certain Schedules and Exhibits. Reference is hereby made to
------------------------------
Section 7.16 of the Agreement. The Seller and the Buyers hereby agree that
Schedule 1.01A, Part B of Schedule 1.01E, Part C of Schedule 2.12, Schedule 3.08
and Exhibit F shall be attached to the Agreement not later than July 29, 1992.
12. Survival. Section 10.01 of the Agreement is hereby amended by
--------
adding a reference to "Section 2.15" to the first sentence thereof.
13. Waiver. (a) The Seller and the Buyers hereby waive the condition
------
of Section 9.01(c) of the Agreement to the extent, and only to the extent, that
it requires that the Seller and the Buyers shall have received the consents of
Health Care Investors I, A.L. Schluter, Boatmen's Trust Company of St. Louis, as
trustee, and Mercantile Bank of Joplin, N.A, as trustee.
(b) The Buyers hereby waive the condition of Section 9.02(c) of
the Agreement that the Buyers shall have received the estoppel certificates from
the Lessors pursuant to Section 8.04(j) of the Agreement.
(c) The Seller hereby waives the condition of Section 9.03(c) of
the Agreement that the Seller shall have received the Receipt and Assumption
Agreements pursuant to Section 8.05(i) of the Agreement.
14. No Representation or Warranty. Notwithstanding anything to the
-----------------------------
contrary set forth in the Agreement, neither the Seller nor the Buyers make any
representations or warranties under the Agreement with respect to the Management
Agreements.
15. Cost Reports. The Seller hereby agrees to file by October
------------
31,1992, final cost reports with respect to each Facility located in the State
of Missouri other than any such Facility subject to a Management Agreement.
16. Cooperation. Upon the reasonable request of the Buyers, the
-----------
Seller hereby agrees to provide to the Buyers (i) historical cost information
with respect to the Facilities to the extent necessary for reimbursement
purposes and (ii) written confirmation to other Persons of the rights of the
Buyers set forth in Section 7 of the Management Agreements.
-3-
<PAGE>
17. Senior Debt. The Seller hereby agrees that the debt Secured by
-----------
any First Lien Mortgage shall not exceed at any time the debt secured by the
Mortgage that is junior to such First Lien Mortgage.
18. Tax Savings. The Buyers hereby agree to pay on demand their
-----------
proportionate share (based on tax savings) of any consultant fees that may be
billed as a result of a reduction in 1992 assessed value of the Facilities.
19. Amendment. Reference is hereby made to Section 12.02 of the
---------
Agreement This First Amendment is intended to be an amendment to the Agreement
and, except as amended hereby, the Agreement shall remain in full force and
effect in accordance with its terms. Any reference to the Agreement contained in
any notice, request, certificate or other document shall be deemed to include
this First Amendment.
21. Counterparts: Effectiveness. This First Amendment may be execute
---------------------------
in any number of counterparts and by different parties to this First Amendment
in separate counterparts, each of which when so executed shall be deemed to be
an original and all of which taken together shall constitute one and the same
amendment Delivery of an executed counterpart of a signature page to this First
Amendment via telephone facsimile transmission shall be effective as delivery of
a manually executed counterpart of this First Amendment. This First Amendment
shall become effective when each of the Seller and the Buyers shall have
received a counterpart of this First Amendment executed by the other party to
this First Amendment.
15. Governing Law. This First Amendment shall be deemed to be a
-------------
contract made under the laws of the State of Washington, and for all purposes
shall be governed by, and construed in all respects (including matters of
construction, validity and performance) in accordance with, the laws of the
State of Washington, without regard to the conflicts of law rules of such state.
-4-
<PAGE>
IN WITNESS WHEREOF, the Seller and the Buyers have caused this First
Amendment to be duly executed as of the date first above written.
FIRST HEALTHCARE CARE
By [SIGNATURE ILLEGIBLE]
---------------------------
Title _____________________
MEADOWBROOK MANOR OF BALDWIN LIMITED
PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE ILLEGIBLE]
---------------------------
Title: President
MEADOWBROOK MANOR OF JOPLIN LIMITED
PARTNERSHIP I
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE ILLEGIBLE]
---------------------------
Title: President
MEADOWBROOK MANOR OF COUNCIL GROVE
LIMITED PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE ILLEGIBLE]
---------------------------
Title: President
<PAGE>
MEADOWBROOK MANOR OF HAYSVILLE LIMITED
PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE ILLEGIBLE]
---------------------------
Title: President
MEADOWBROOK MANOR OF ST. CHARLES
LIMITED PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE ILLEGIBLE]
---------------------------
Title: President
MEADOWBROOK MANOR OF OVERLAND PARK
LIMITED PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE ILLEGIBLE]
---------------------------
Title: President
MEADOWBROOK MANOR OF CHANUTE LIMITED
PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE ILLEGIBLE]
---------------------------
Title: President
<PAGE>
MEADOWBROOK MANOR OF SPRINGFIELD
LIMITED PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE ILLEGIBLE]
---------------------------
Title: President
MEADOWBROOK MANOR OF TOPEKA LIMITED
PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE ILLEGIBLE]
---------------------------
Title: President
MEADOWBROOK MANOR OF WICHITA LIMITED
PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE ILLEGIBLE]
---------------------------
Title: President
MEADOWBROOK MANOR OF COLUMBIA LIMITED
PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE ILLEGIBLE]
---------------------------
Title: President
<PAGE>
MEADOWBROOK MANOR OF SEDGWICK LIMITED
PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE ILLEGIBLE]
---------------------------
Title: President
MEADOWBROOK MANOR COLONIAL TERRACE
OF INDEPENDENCE LIMITED PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE ILLEGIBLE]
---------------------------
Title: President
MEADOWBROOK MANOR OF LARNED LIMITED
PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE ILLEGIBLE]
---------------------------
Title: President
MEADOWBROOK MANOR OF AVA LIMITED
PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE ILLEGIBLE]
---------------------------
Title: President
<PAGE>
MEADOWBROOK MANOR OF BUFFALO LIMITED
PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE ILLEGIBLE]
---------------------------
Title: President
MEADOWBROOK MANOR OF CLINTON LIMITED
PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE ILLEGIBLE]
---------------------------
Title: President
MEADOWBROOK MANOR OF DES PERES
LIMITED PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE ILLEGIBLE]
---------------------------
Title: President
MEADOWBROOK MANOR OF JEFFERSON
LIMITED PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE ILLEGIBLE]
---------------------------
Title: President
<PAGE>
MEADOWBROOK MANOR OF MARCELINE
LIMITED PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE ILLEGIBLE]
---------------------------
Title: President
MEADOWBROOK MANOR OF JOPLIN LIMITED
PARTNERSHIP II
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE ILLEGIBLE]
---------------------------
Title: President
MEADOWBROOK MANOR OF LAMAR LIMITED
PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE ILLEGIBLE]
---------------------------
Title: President
MEADOWBROOK MANOR OF SHADY OAKS
LIMITED PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE ILLEGIBLE]
---------------------------
Title: President
<PAGE>
MEADOWBROOK MANOR OF CRANE LIMITED
PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE ILLEGIBLE]
---------------------------
Title: President
MEADOWBROOK MANOR OF KIMBERLING CITY
LIMITED PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE ILLEGIBLE]
---------------------------
Title: President
MEADOWBROOK MANOR RESIDENTIAL OF
KIMBERLING CITY LIMITED PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE ILLEGIBLE]
---------------------------
Title: President
MEADOWBROOK MANOR WORNALL OF KANSAS
CITY LIMITED PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE ILLEGIBLE]
---------------------------
Title: President
<PAGE>
MEADOWBROOK MANOR BLUE HILLS OF
KANSAS CITY LIMITED PARTNERSHIP I
By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC.,
General Partner
By [SIGNATURE ILLEGIBLE]
---------------------------
Title: President
<PAGE>
EXHIBIT 10.52
FORBEARANCE AGREEMENT
dated as of August 25, 1995
among
MEADOWBROOK MANOR OF AVA LIMITED PARTNERSHIP,
MEADOWBROOK MANOR OF BALLWIN LIMITED PARTNERSHIP
(formerly known as
Meadowbrook Manor of Baldwin Limited Partnership),
MEADOWBROOK MANOR BLUE HILLS OF KANSAS CITY
LIMITED PARTNERSHIP I,
MEADOWBROOK MANOR OF BUFFALO LIMITED PARTNERSHIP,
MEADOWBROOK MANOR OF CHANUTE LIMITED PARTNERSHIP,
MEADOWBROOK MANOR OF CLINTON LIMITED PARTNERSHIP,
MEADOWBROOK MANOR COLONIAL TERRACE OF INDEPENDENCE
LIMITED PARTNERSHIP,
MEADOWBROOK MANOR OF COLUMBIA LIMITED PARTNERSHIP,
MEADOWBROOK MANOR OF COUNCIL GROVE LIMITED PARTNERSHIP,
MEADOWBROOK MANOR OF CRANE LIMITED PARTNERSHIP,
MEADOWBROOK MANOR OF DES PERES LIMITED PARTNERSHIP,
MEADOWBROOK MANOR OF HAYSVILLE LIMITED PARTNERSHIP,
MEADOWBROOK MANOR OF JEFFERSON LIMITED PARTNERSHIP,
MEADOWBROOK MANOR OF JOPLIN LIMITED PARTNERSHIP I,
MEADOWBROOK MANOR OF JOPLIN LIMITED PARTNERSHIP II,
MEADOWBROOK MANOR OF KIMBERLING CITY LIMITED PARTNERSHIP,
MEADOWBROOK MANOR RESIDENTIAL OF KIMBERLING CITY
LIMITED PARTNERSHIP,
MEADOWBROOK MANOR OF LAMAR LIMITED PARTNERSHIP,
MEADOWBROOK MANOR OF LARNED LIMITED PARTNERSHIP,
MEADOWBROOK MANOR OF MARCELINE LIMITED PARTNERSHIP,
MEADOWBROOK MANOR OF SEDGWICK LIMITED PARTNERSHIP,
MEADOWBROOK MANOR OF SHADY OAKS LIMITED PARTNERSHIP,
MEADOWBROOK MANOR OF SPRINGFIELD LIMITED PARTNERSHIP,
MEADOWBROOK MANOR OF ST. CHARLES LIMITED PARTNERSHIP,
MEADOWBROOK MANOR OF TOPEKA LIMITED PARTNERSHIP,
MEADOWBROOK MANOR WORNALL OF KANSAS CITY
LIMITED PARTNERSHIP,
DON G. ANGELL,
DANIEL D. MOSCA,
MEADOWBROOK MANOR OF KANSAS & MISSOURI, INC.,
MIDAMERICA PHARMACIES LIMITED PARTNERSHIP,
FIRST HEALTHCARE CORPORATION
and
MEDISAVE PHARMACIES, INC.
<PAGE>
TABLE OF CONTENTS
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RECITALS.................................................................. 2
ARTICLE I - CERTAIN DEFINITIONS AND RULES OF CONSTRUCTION................. 8
1.01 Certain Defined Terms.......................................... 8
1.02 Accounting Terms............................................... 9
1.03 Recitals, Articles, Sections, Etc.............................. 9
1.04 Recitals....................................................... 9
1.05 No Construction against Drafter................................ 9
1.06 Reasonable Fees and Disbursements of Attorneys................. 9
ARTICLE II - WAIVERS OF DEFENSES AND RIGHTS; RELEASES..................... 9
2.01 WAIVER OF DEFENSES AND RIGHTS BY EACH FORBEARANCE
-------------------------------------------------
PARTY.......................................................... 9
-----
2.02 WAIVER OF DEFENSES AND RIGHTS BY EACH MIDAMERICA
------------------------------------------------
PARTY.......................................................... 10
-----
2.03 RELEASE BY EACH FORBEARANCE PARTY.............................. 10
---------------------------------
2.04 RELEASE BY EACH MIDAMERICA PARTY............................... 11
--------------------------------
2.05 Consultation with Legal Counsel, Etc........................... 12
ARTICLE III - FORBEARANCE AND FORBEARANCE PERIOD.......................... 13
3.01 Forbearance.................................................... 13
3.02 Interest on the Notes.......................................... 13
3.03 Installment Payment Dates under the Notes...................... 13
3.04 Rent Payment Dates under the Subleases......................... 14
3.05 Operator's Return Payment Dates under the
Management Agreements.......................................... 14
3.06 Payment of the Arrearages...................................... 14
3.07 Interest on the Arrearages..................................... 15
3.08 Application of Payments........................................ 15
3.09 Certain Payments and Computations.............................. 16
3.10 Tax Deposits................................................... 16
(a) Certain Tax Deposits....................................... 16
(b) Certain Other Tax Deposits................................. 16
(c) Additional Tax Deposits.................................... 17
(d) Use of Deposited Funds; Grant of
Security Interest.......................................... 17
(e) Transfer of Transaction Documents
or Forbearance Documents................................... 17
3.11 Waiver of Certain Designated Defaults, Etc..................... 18
3.12 Reporting Requirements......................................... 18
3.13 Title Search Reports........................................... 21
3.14 Certain Required Documents..................................... 21
3.15 Certain Other Required Documents............................... 24
</TABLE>
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3.16 Escrowed Documents............................................. 25
3.17 Certain Other Documents Required by MediSave................... 27
3.18 Further Assurances............................................. 28
3.19 Consents....................................................... 29
3.20 Certain Junior Liens........................................... 29
3.21 Marceline Facility............................................. 31
3.22 Chastain's Facilities.......................................... 31
3.23 Optional Prepayments; Refinancing.............................. 32
(a) Optional Prepayments of the Arrearages..................... 32
(b) No Prepayments of the Notes................................ 32
(c) Refinancing................................................ 33
3.24 Transferees of First Healthcare................................ 34
3.25 Acceptance of Escrowed Documents............................... 35
(a) Confessions of Judgment.................................... 35
(b) Sublease Termination Agreements............................ 35
(c) Kansas Deeds in Lieu of Foreclosure........................ 35
(d) Missouri Deeds in Lieu of Foreclosure...................... 36
(e) Other Escrowed Documents................................... 36
3.26 Completion of Escrowed Documents............................... 36
3.27 Return of Escrowed Documents................................... 37
3.28 Limitation on Interest......................................... 37
3.29 Consent of Guarantors.......................................... 37
ARTICLE IV - CONDITIONS PRECEDENT......................................... 37
4.01 Conditions Precedent........................................... 37
ARTICLE V - REPRESENTATIONS AND WARRANTIES................................ 40
5.01 Certain Representations and Warranties of the Forbearance
Parties........................................................ 40
(a) Validity, Enforceability, Etc.............................. 40
(b) Consents, Etc.............................................. 40
(c) Legal Proceedings.......................................... 40
(d) Disclosures................................................ 41
(e) Forbearance Defaults; Etc.................................. 41
(f) Purpose of Obligations..................................... 41
(g) No Claims.................................................. 41
5.02 Additional Representations and Warranties of the
Partnerships................................................... 41
(a) Partnership Existence and Power............................ 41
(b) Partnership Authorization.................................. 42
(c) Non-Contravention.......................................... 42
</TABLE>
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(d) Unconditional Obligation; No Defenses, Etc................. 42
(e) Partners................................................... 42
(f) Address.................................................... 42
5.03 Certain Representations and Warranties of the MidAmerica
Parties........................................................ 43
(a) Validity, Enforceability, Etc.............................. 43
(b) Consents, Etc.............................................. 43
(c) Legal Proceedings.......................................... 43
(d) Disclosures................................................ 43
(e) Forbearance Defaults; Etc.................................. 44
(f) Purpose of Obligations..................................... 44
5.04 Additional Representations and Warranties of MidAmerica........ 44
(a) Partnership Existence and Power............................ 44
(b) Partnership Authorization.................................. 44
(c) Non-Contravention.......................................... 44
(d) Unconditional Obligation; No Defenses, Etc................. 45
(e) Partners................................................... 45
(f) Address.................................................... 45
5.05 Additional Representations and Warranties of the
Guarantors..................................................... 45
(a) Capacity................................................... 45
(b) Non-Contravention.......................................... 45
(c) No Defenses, Etc........................................... 46
5.06 Additional Representations and Warranties of the
General Partner................................................ 46
(a) Corporate Existence and Power.............................. 46
(b) Corporate Authorization.................................... 46
(c) Non-Contravention.......................................... 46
(d) No Defenses, Etc........................................... 47
5.07 Representations and Warranties of First Healthcare............. 47
(a) Notes...................................................... 47
(b) Subleases.................................................. 47
(c) Corporate Authorization.................................... 47
5.08 Representations and Warranties of MediSave..................... 47
(a) MediSave Note.............................................. 47
(b) Corporate Authorization.................................... 48
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
ARTICLE VI - FORBEARANCE DEFAULTS......................................... 48
6.01 Forbearance Defaults........................................... 48
6.02 Remedies....................................................... 50
6.03 No Mortgagee in Possession, Etc................................ 55
6.04 Marketing of Facilities........................................ 55
6.05 Order of Acceptance of Escrowed Documents...................... 56
6.06 Deeds in Lieu of Foreclosure; Other Escrowed
Documents...................................................... 57
(a) Absolute Conveyance; Termination of Right
of Redemption; Etc......................................... 57
(b) No Merger.................................................. 57
(c) No Satisfaction of Obligations............................. 58
(d) Forbearance Parties Remain Liable.......................... 58
6.07 Guarantor Confessions of Judgment.............................. 59
ARTICLE VII - MISCELLANEOUS............................................... 66
7.01 Amendments, Etc................................................ 66
7.02 Notices........................................................ 67
7.03 Entire Agreement............................................... 70
7.04 No Waiver; Remedies Cumulative................................. 70
7.05 Costs and Expenses............................................. 71
7.06 Consent to Jurisdiction........................................ 72
7.07 Binding Effect................................................. 73
7.08 Severability................................................... 74
7.09 Captions....................................................... 74
7.10 Survival....................................................... 74
7.11 Execution in Counterparts...................................... 74
7.12 Governing Law.................................................. 74
7.13 Waiver of Jury Trial........................................... 74
7.14 Oral Agreements Unenforceable.................................. 75
</TABLE>
Schedule A - Facilities
Schedule B - Notes
Schedule F - Mortgages
Schedule G - Deeds of Trust
Schedule J(1) - Delinquent Indebtedness
Schedule J(2) - Delinquent Rent
Schedule J(3) - Delinquent Management Obligations
Schedule J(4) - Delinquent Taxes
Schedule K - Cost Report Remittance
Schedule Q - Tax Arrearage
Schedule 1.01 - Certain Defined Terms
Schedule 3.04 - Additional Rent
Schedule 3.05 - Additional Operator's Return
Schedule 3.06 - Shares
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<PAGE>
Exhibit 3.14(a) - Form of Partnership Security Agreement
Exhibit 3.14(b) - Form of Partnership Guaranty
Exhibit 3.14(c) - Form of Restated First Healthcare Guaranty
Exhibit 3.14(e) - Form of Escrow Agreement
Exhibit 3.14(h) - Form of Stipulation for Relief
Exhibit 3.14(i) - Form of Stipulation for Appointment of Receiver
Exhibit 3.15(a) - Form of Agency Agreement
Exhibit 3.15(b) - Form of Partnership Guaranty Mortgage
Exhibit 3.15(c) - Form of Partnership Guaranty Deed of Trust
Exhibit 3.15(d) - Form of Partnership Guaranty Security Agreement
Exhibit 3.16(a) - Form of Guarantor Confession of Judgment
Exhibit 3.16(b) - Form of Purchaser Confession of Judgment
Exhibit 3.16(c) - Form of Sublessee Confession of Judgment
Exhibit 3.16(d) - Form of Manager Confession of Judgment
Exhibit 3.16(e) - Form of Sublease Termination Agreement
Exhibit 3.16(f) - Form of Management Termination Agreement
Exhibit 3.16(g) - Form of Escrowed Management Agreement
Exhibit 3.16(h) - Form of Kansas Deed in Lieu of Foreclosure
Exhibit 3.16(i) - Form of Missouri Deed in Lieu of Foreclosure
Exhibit 3.16(j) - Form of Estoppel Affidavit
Exhibit 3.16(k) - Form of Certificate of Non-Foreign Status
Exhibit 3.16(l) - Form of Bill of Sale in Lieu of Foreclosure
Exhibit 3.17(a) - Form of MediSave Note Modification Agreement
Exhibit 3.17(b) - Form of Restated MediSave Guaranty
Exhibit 3.17(c) - Form of MediSave Partnership Guaranty
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FORBEARANCE AGREEMENT
This FORBEARANCE AGREEMENT, dated as of August 25, 1995 (this "Agreement"),
is made by and among MEADOWBROOK MANOR OF AVA LIMITED PARTNERSHIP ("Ava"),
MEADOWBROOK MANOR OF BALLWIN LIMITED PARTNERSHIP (formerly known as Meadowbrook
Manor of Baldwin Limited Partnership) ("Ballwin"), MEADOWBROOK MANOR BLUE HILLS
OF KANSAS CITY LIMITED PARTNERSHIP I ("Blue Hills"), MEADOWBROOK MANOR OF
BUFFALO LIMITED PARTNERSHIP ("Buffalo"), MEADOWBROOK MANOR OF CHANUTE LIMITED
PARTNERSHIP ("Chanute"), MEADOWBROOK MANOR OF CLINTON LIMITED PARTNERSHIP
("Clinton"), MEADOWBROOK MANOR COLONIAL TERRACE OF INDEPENDENCE LIMITED
PARTNERSHIP ("Colonial Terrace"), MEADOWBROOK MANOR OF COLUMBIA LIMITED
PARTNERSHIP ("Columbia"), MEADOWBROOK MANOR OF COUNCIL GROVE LIMITED PARTNERSHIP
("Council Grove"), MEADOWBROOK MANOR OF CRANE LIMITED PARTNERSHIP ("Crane"),
MEADOWBROOK MANOR OF DES PERES LIMITED PARTNERSHIP ("Des Peres"), MEADOWBROOK
MANOR OF HAYSVILLE LIMITED PARTNERSHIP ("Haysville"), MEADOWBROOK MANOR OF
JEFFERSON LIMITED PARTNERSHIP ("Jefferson"), MEADOWBROOK MANOR OF JOPLIN LIMITED
PARTNERSHIP I ("Joplin I"), MEADOWBROOK MANOR OF JOPLIN LIMITED PARTNERSHIP II
("Joplin II"), MEADOWBROOK MANOR OF KIMBERLING CITY LIMITED PARTNERSHIP
("Kimberling City Manor"), MEADOWBROOK MANOR RESIDENTIAL OF KIMBERLING CITY
LIMITED PARTNERSHIP ("Kimberling City Residential"), MEADOWBROOK MANOR OF LAMAR
LIMITED PARTNERSHIP ("Lamar"), MEADOWBROOK MANOR OF LARNED LIMITED PARTNERSHIP
("Larned"), MEADOWBROOK MANOR OF MARCELINE LIMITED PARTNERSHIP ("Marceline"),
MEADOWBROOK MANOR OF SEDGWICK LIMITED PARTNERSHIP ("Sedgwick"), MEADOWBROOK
MANOR OF SHADY OAKS LIMITED PARTNERSHIP ("Shady Oaks"), MEADOWBROOK MANOR OF
SPRINGFIELD LIMITED PARTNERSHIP ("Springfield"), MEADOWBROOK MANOR OF ST.
CHARLES LIMITED PARTNERSHIP ("St. Charles"), MEADOWBROOK MANOR OF TOPEKA LIMITED
PARTNERSHIP ("Topeka"), MEADOWBROOK MANOR WORNALL OF KANSAS CITY LIMITED
PARTNERSHIP ("Wornall"), each a North Carolina limited partnership (Ava,
Ballwin, Blue Hills, Buffalo, Chanute, Clinton, Colonial Terrace, Columbia,
Council Grove, Crane, Des Peres, Haysville, Jefferson, Joplin I, Joplin II,
Kimberling City Manor, Kimberling City Residential, Lamar, Larned, Marceline,
Sedgwick, Shady Oaks, Springfield, St. Charles, Topeka and Wornall being
sometimes referred to in this Agreement individually as a "Partnership" and
collectively as the "Partnerships"), DON G. ANGELL, an individual ("Angell"),
DANIEL D. MOSCA, an individual ("Mosca") (Angell and Mosca being sometimes
referred to in this Agreement individually as a "Guarantor" and together as the
"Guarantors"), MEADOWBROOK MANOR OF KANSAS & MISSOURI, INC., a North Carolina
corporation (the "General Partner"), MIDAMERICA PHARMACIES LIMITED PARTNERSHIP,
a North Carolina limited partnership ("MidAmerica"), FIRST HEALTHCARE
CORPORATION, a Delaware corporation ("First Healthcare"), and MEDISAVE
PHARMACIES, INC., a Delaware corporation ("MediSave").
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RECITALS
A. First Healthcare, the Partnerships, Meadowbrook Manor of Overland Park
Limited Partnership, a North Carolina limited partnership ("Overland Park"),
Meadowbrook Manor Terrace of Overland Park Limited Partnership, a North Carolina
limited partnership, Meadowbrook Manor Apartments of Larned Limited Partnership,
a North Carolina limited partnership, and Meadowbrook Manor of Wichita Limited
Partnership, a North Carolina limited partnership ("Wichita"), have entered into
a Facility Agreement, dated as of April 23, 1992, as amended and otherwise
modified by a First Amendment to Facility Agreement, dated as of July 31, 1992,
among First Healthcare, the Partnerships, Overland Park and Wichita (said
Facility Agreement, as so amended and otherwise modified and as it may be
further amended or otherwise modified from time to time, being the "Facility
Agreement"), pursuant to which, among other things, (i) Ballwin, Chanute,
Columbia, Council Grove, Haysville, Joplin I, Larned, Sedgwick, Springfield, St.
Charles and Topeka (Ballwin, Chanute, Columbia, Council Grove, Haysville, Joplin
I, Larned, Sedgwick, Springfield, St. Charles and Topeka being sometimes
referred to in this Agreement individually as a "Purchaser" and collectively as
the "Purchasers") have purchased from First Healthcare the respective health
care facilities (individually, a "Purchased Facility" and collectively, the
"Purchased Facilities") listed opposite the names of the Purchasers in Part A of
Schedule A, (ii) Ava, Blue Hills, Buffalo, Clinton, Colonial Terrace, Des Peres,
Jefferson, Joplin II, Lamar, Marceline, Shady Oaks and Wornall (Ava, Blue Hills,
Buffalo, Clinton, Colonial Terrace, Des Peres, Jefferson, Joplin II, Lamar,
Marceline, Shady Oaks and Wornall being sometimes referred to in this Agreement
individually as a "Sublessee" and collectively as the "Sublessees") have
subleased from First Healthcare the respective health care facilities
(individually, a "Subleased Facility" and collectively, the "Subleased
Facilities") listed opposite the names of the Sublessees in Part B of Schedule
A, and (iii) Crane, Kimberling City Manor and Kimberling City Residential
(Crane, Kimberling City Manor and Kimberling City Residential being sometimes
referred to in this Agreement individually as a "Manager" and collectively as
the "Managers") have agreed to manage for First Healthcare the respective health
care facilities (individually, a "Managed Facility" and collectively, the
"Managed Facilities") listed opposite the names of the Managers in Part C of
Schedule A (the Purchased Facilities, the Subleased Facilities and the Managed
Facilities being sometimes referred to in this Agreement individually as a
"Facility" and collectively as the "Facilities").
B. Pursuant to the Facility Agreement, the Purchasers have executed and
delivered to First Healthcare the respective
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<PAGE>
promissory notes (such promissory notes, as they may be extended, renewed or
otherwise modified from time to time, being individually a "Note" and
collectively the "Notes") listed or otherwise described in Schedule B. The
Notes evidence the indebtedness of the Purchasers for the respective amounts of
the deferred portions of the purchase prices payable by the Purchasers to First
Healthcare for the Purchased Facilities.
C. The Purchasers are indebted to First Healthcare for unpaid principal
plus accrued and unpaid interest under and pursuant to the provisions of the
respective Notes.
D. Pursuant to the Facility Agreement, First Healthcare and the
respective Sublessees have entered into separate subleases, each dated as of
April 23, 1992 (such subleases, as they may be amended or otherwise modified
from time to time, being individually a "Sublease" and collectively the
"Subleases"), with respect to the respective Subleased Facilities.
E. Pursuant to the Facility Agreement, First Healthcare and the
respective Managers have entered into separate management agreements, each dated
as of July 31, 1992 (such management agreements, as they may be amended or
otherwise modified from time to time, being individually a "Management
Agreement" and collectively the "Management Agreements"), with respect to the
respective Managed Facilities.
F. The payment and performance of the respective obligations of Chanute,
Council Grove, Haysville, Larned, Sedgwick and Topeka under the Facility
Agreement and their respective Notes are secured by, among other things, valid
and subsisting liens on and valid and perfected security interests in the real
and personal properties and fixtures described in the respective mortgages (such
mortgages, as they may be amended or otherwise modified from time to time, being
individually a "Mortgage" and collectively the "Mortgages") listed or otherwise
described in Schedule F.
G. The payment and performance of the respective obligations of Ballwin,
Columbia, Joplin I, Springfield and St. Charles under the Facility Agreement and
their respective Notes are secured by, among other things, valid and subsisting
liens on and valid and perfected security interests in the real and personal
properties and fixtures described in the respective deeds of trust (such deeds
of trust, as they may be amended or otherwise modified from time to time, being
individually a "Deed of Trust" and collectively the "Deeds of Trust") listed or
otherwise described in Schedule G.
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<PAGE>
H. The payment and performance of the respective obligations of the
Sublessees under their respective Subleases are secured by, among other things,
valid and perfected security interests in the personal properties described in
the respective Subleases.
I. The Guarantors have executed and delivered to and in favor of First
Healthcare a Guaranty, dated July 31, 1992 (the "Guaranty"), pursuant to which,
among other things, the Guarantors, jointly and severally, have guaranteed the
punctual payment when due of certain obligations of the Partnerships under the
Notes, the Subleases and the Management Agreements.
J. The Partnerships are in default under the Notes, the Subleases, the
Management Agreements, the Mortgages and the Deeds of Trust in the following
respects (the following specified defaults being individually a "Designated
Default" and collectively the "Designated Defaults"):
(1) The Purchasers are in default under their respective Notes
because the Purchasers have failed on and before June 30, 1995, to pay,
within ten days after the same became due, two monthly installments of
principal plus accrued and unpaid interest on the Notes (exclusive of late
charges and interest at the post-default or post-maturity rate or rates
provided for in the Notes) as of June 30, 1995, in an aggregate amount
equal to $506,144.84 (the "Delinquent Indebtedness"), consisting of the
respective amounts set forth opposite the names of the Purchasers in
Schedule J(1);
(2) The Sublessees are in default under their respective Subleases,
because the Sublessees have failed on and before June 30, 1995, to pay,
within ten days after the same became due, the Rent under the respective
Subleases (exclusive of additional Rent attributable to any failure to pay
Rent when due under the respective Subleases) in an aggregate amount equal
to $1,087,249.73 (the "Delinquent Rent") as of June 30, 1995, consisting of
the respective amounts set forth opposite the names of the Sublessees in
Schedule J(2);
(3) The Managers are in default under their respective Management
Agreements, because the Managers have failed on and before June 30, 1995,
to pay, within the applicable grace periods under the respective Management
Agreements, operating costs and expenses of the respective Managed
Facilities and the Operator's Return under the respective Management
Agreements in an aggregate amount equal to $247,673.49 (the "Delinquent
Management Obligations") as of
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<PAGE>
June 30, 1995, consisting of the respective amounts set forth opposite the
names of the Managers in Schedule J(3);
(4) The Partnerships also are in default under the Notes, the
Subleases, the Management Agreements, the Mortgages and the Deeds of Trust,
because the Partnerships have failed on and before June 30, 1995, to pay
when due (whether upon demand, at stated maturity or otherwise) (a) real
property taxes and personal property taxes payable pursuant to the
Subleases, the Management Agreements, the Mortgages and the Deeds of Trust
in an aggregate amount of approximately $1,299,945.35 (the "Delinquent
Taxes") as of June 30, 1995, consisting of the respective amounts set forth
opposite the names of the Partnerships in Schedule J(4), and (b) late
charges, interest at the post-default or post-maturity rate or rates
provided for in the Notes and additional Rent attributable to any failure
to pay Rent when due under the respective Subleases, all in an aggregate
amount of approximately $135,000.00 as of June 30, 1995, other costs and
expenses (including, but not limited to, reasonable fees and disbursements
of attorneys) and certain other obligations of the Partnerships payable on
or before June 30, 1995 (all such late charges, interest, additional Rent,
costs, expenses and obligations being collectively the "Other Delinquent
Obligations"), pursuant to the Notes, the Subleases, the Management
Agreements, the Mortgages and the Deeds of Trust;
(5) The Partnerships also are in default under the Notes, the
Subleases, the Management Agreements, the Mortgages and the Deeds of Trust,
because the Partnerships have failed on and before June 30, 1995, to
furnish to First Healthcare when due interim and annual financial
statements and other reports required pursuant to the provisions of the
Subleases, the Management Agreements, the Mortgages and the Deeds of Trust;
(6) The Partnerships also are in default under the Notes, the
Subleases, the Management Agreements, the Mortgages and the Deeds of Trust,
because certain of the Partnerships have failed on and before June 30,
1995, to pay certain obligations to the State of Kansas, Department of
Human Resources, and the State of Missouri, Division of Employment
Security, resulting in the filing or recording of liens, notices of lien
and transcripts of judgment in respect of certain of the Facilities;
(7) The Partnerships also are in default under the Notes, the
Subleases, the Management Agreements, the Mortgages and the Deeds of Trust,
because certain of the Partnerships have failed on and before June 30,
1995, to pay
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<PAGE>
when due principal of or premium or interest on indebtedness of each of
such Partnerships (excluding indebtedness evidenced by the Notes) in an
aggregate principal amount of at least $100,000.00 at any one time
outstanding on or before June 30, 1995; and
(8) The Partnerships also are in default under the Notes, the
Subleases, the Management Agreements, the Mortgages and the Deeds of Trust,
because Sedgwick and Topeka, respectively, have failed to maintain in full
force and effect all registrations, qualifications, licenses and other
authorizations and approvals required to use and occupy the Purchased
Facility purchased by Sedgwick as and for a 95-bed intermediate care
facility and to use and occupy the Purchased Facility purchased by Topeka
as and for a 116-bed intermediate care and 58-bed skilled nursing facility
(said respective failures by Sedgwick and Topeka to maintain in full force
and effect such registrations, qualifications, licenses and other
authorizations and approvals being collectively the "Licensure Default").
K. As of the date of this Agreement, certain of the Partnerships are
liable pursuant to the Facility Agreement for the remittance to First Healthcare
of the net aggregate amount of $152,742.00 (the "Cost Report Remittance")
received by the Partnerships from governmental and regulatory authorities in
respect of cost reports filed with respect to the Facilities for certain cost
reporting periods, consisting of the respective amounts set forth opposite the
names of those Partnerships in Schedule K.
L. Pursuant to the provisions of the respective Notes, the Purchasers
have agreed, among other things, to pay all costs and expenses (including, but
not limited to, reasonable fees and disbursements of attorneys) incurred by
First Healthcare in connection with or incidental to any Event of Default under
and as defined, respectively, in the Notes or otherwise in connection with or
incidental to the enforcement of the Notes and other Transaction Documents (such
term being used in this Agreement as defined in Schedule 1.01).
M. Pursuant to the provisions of the respective Subleases, the Sublessees
have agreed, among other things, to indemnify First Healthcare against all costs
and expenses (including, but not limited to, reasonable fees and disbursements
of attorneys) incurred by First Healthcare by reason of any failure by the
Sublessees to perform or comply with any provisions of their respective
Subleases.
N. Pursuant to the provisions of the respective Management Agreements,
the Managers have agreed, among other things, to
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<PAGE>
indemnify First Healthcare against all costs and expenses (including, but not
limited to, reasonable fees and disbursements of attorneys) incurred by First
Healthcare by reason of any failure by the Managers to perform or comply with
any provisions of their respective Management Agreements.
O. As of the date of this Agreement, First Healthcare has incurred costs
and expenses (including, but not limited to, reasonable fees and disbursements
of attorneys) in an aggregate amount exceeding $160,000.00 by reason of or in
connection with or incidental to the Designated Defaults. A portion of such
costs and expenses in the aggregate amount of $160,000.00 are sometimes referred
to in this Agreement as the "Default Costs and Expenses." The Default Costs and
Expenses, as well as all other costs and expenses (including, but not limited
to, reasonable fees and disbursements of attorneys) incurred by First Healthcare
by reason of or in connection with or incidental to the Designated Defaults, are
payable by the Partnerships under and pursuant to the respective Transaction
Documents.
P. Because of the occurrence of the Designated Defaults and other events
and conditions which constitute breaches of or defaults under the Transaction
Documents, First Healthcare has the current right to exercise and enforce any
and all rights and remedies of First Healthcare provided for in the Transaction
Documents and otherwise available to First Healthcare by agreement, at law or in
equity, including, but not limited to, the right to charge and collect interest
at the post-default or post-maturity rate or rates provided for in the Notes and
the other Transaction Documents, to terminate the Subleases and the Management
Agreements, to take immediate possession of the Facilities and all of the other
Collateral (such term being used in this Agreement as defined in Schedule 1.01),
to foreclose, realize upon and otherwise proceed against any and all of the
Collateral, and to enforce the Guaranty against any one or both of the
Guarantors.
Q. First Healthcare has paid to the appropriate taxation authorities a
portion of the Delinquent Taxes in the aggregate amount of $253,928.87 (the "Tax
Arrearage"), consisting of the respective amounts of taxes paid by First
Healthcare and set forth opposite the names of the Partnerships listed in
Schedule Q.
R. MediSave and MidAmerica have entered into an Asset Purchase Agreement,
dated as of July 31, 1992 (said Asset Purchase Agreement, as it has been or
hereafter from time to time may be amended or otherwise modified, being the
"MediSave Purchase Agreement").
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<PAGE>
S. Pursuant to the MediSave Purchase Agreement, MidAmerica has executed
and delivered to MediSave a Promissory Note, dated July 31, 1992 (the "MediSave
Note"), made by MidAmerica payable to the order of MediSave in the stated
principal sum of $320,397.00. MidAmerica is indebted to MediSave for unpaid
principal plus accrued and unpaid interest under and pursuant to the provisions
of the MediSave Note.
T. The Guarantors have executed and delivered to and in favor of MediSave
a Guaranty, dated July 31, 1992 (said Guaranty, as it has been or hereafter from
time to time may be amended or otherwise modified, being the "MediSave
Guaranty"), pursuant to which, among other things, the Guarantors, jointly and
severally, have guaranteed the punctual payment when due of certain obligations
of MidAmerica under the MediSave Note.
U. The Partnerships, the General Partner and the Guarantors have
requested that First Healthcare forbear from exercising First Healthcare's
rights and remedies under the Transaction Documents and, although First
Healthcare is under no obligation to do so, First Healthcare is willing, on
terms and subject to conditions set forth below in this Agreement, and only
during the specific forbearance period set forth below in this Agreement, to
forbear from exercising First Healthcare's rights and remedies under the
Transaction Documents.
V. MidAmerica, the General Partner and the Guarantors have requested that
MediSave agree to extend the scheduled maturity date of the MediSave Note and
otherwise to modify the payment terms under the MediSave Note and, although
MediSave is under no obligation to do so, MediSave is willing, on terms and
subject to conditions set forth or provided for below in this Agreement, to
agree to extend the scheduled maturity date of the MediSave Note and otherwise
to modify the payment terms under the MediSave Note.
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements set forth in this Agreement, and for other
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Partnerships, the Guarantors, the General Partner, MidAmerica,
First Healthcare and MediSave hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS AND RULES OF CONSTRUCTION
1.01 Certain Defined Terms. As used in this Agreement, the terms set
---------------------
forth in Schedule 1.01 shall have the respective meanings assigned to those
terms in Schedule 1.01 (such meanings to be equally applicable to both the
singular and plural forms of the terms defined).
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1.02 Accounting Terms. All accounting terms that are not specifically
----------------
defined in this Agreement shall be construed in accordance with sound accounting
principles and practices consistent with those applied in the preparation of the
financial statements referred to in Section 3.12. The term "sound accounting
principles and practices" means generally accepted accounting principles and
practices consistently applied, but permitting, with respect to the preparation
of financial statements, the omission of footnotes and federal and state income
tax reserves, none of which omissions shall represent an omission of material
items of revenue or expense other than federal and state income tax expense.
1.03 Recitals, Articles, Sections, Etc. Unless stated otherwise in this
---------------------------------
Agreement, references in this Agreement to Recitals, Articles, Sections,
Schedules and Exhibits are references to Recitals, Articles and Sections of, and
Schedules and Exhibits attached to, this Agreement. Each Schedule to this
Agreement is by this reference incorporated in this Agreement.
1.04 Recitals. All Recitals set forth in this Agreement are by this
--------
reference incorporated in this Agreement. This Agreement is made in reliance on
the accuracy of the Recitals set forth in this Agreement, which Recitals are
acknowledged by the Forbearance Parties, the MidAmerica Parties, First
Healthcare and MediSave to be true and accurate as of the date of this
Agreement.
1.05 No Construction against Drafter. No inference in favor of, or
-------------------------------
against, any party to this Agreement shall be drawn from the fact that such
party has drafted any portion of this Agreement, any other Forbearance Document,
any other MediSave Forbearance Document, any Escrowed Document, any Transaction
Document or any MediSave Transaction Document.
1.06 Reasonable Fees and Disbursements of Attorneys. For the purposes of
----------------------------------------------
this Agreement, references to reasonable fees and disbursements of attorneys
shall include, but shall not be limited to, reasonable fees and disbursements
allocated for internal corporate counsel.
ARTICLE II
WAIVERS OF DEFENSES AND RIGHTS; RELEASES
2.01 WAIVER OF DEFENSES AND RIGHTS BY EACH FORBEARANCE PARTY. Each
-------------------------------------------------------
Forbearance Party, for such Forbearance Party and the heirs, executors,
administrators, personal representatives, legal representatives, successors and
assigns of such Forbearance Party, HEREBY WAIVES AND RELINQUISHES any and all
defenses and any and all rights to set-off or recoupment, of any kind
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<PAGE>
whatsoever, that such Forbearance Party or any Person claiming by or through
such Forbearance Party may now have or may claim to have in respect of payment
of any or all of the Obligations of such Forbearance Party under any Transaction
Document and/or enforcement of any or all of the Transaction Documents.
2.02 WAIVER OF DEFENSES AND RIGHTS BY EACH MIDAMERICA PARTY. Each
------------------------------------------------------
MidAmerica Party, for such MidAmerica Party and the heirs, executors,
administrators, personal representatives, legal representatives, successors and
assigns of such MidAmerica Party, HEREBY WAIVES AND RELINQUISHES any and all
defenses and any and all rights to set-off or recoupment, of any kind
whatsoever, that such MidAmerica Party or any Person claiming by or through such
MidAmerica Party may now have or may claim to have in respect of payment of any
or all of the MidAmerica Obligations of such MidAmerica Party under any MediSave
Transaction Document and/or enforcement of any or all of the MediSave
Transaction Documents.
2.03 RELEASE BY EACH FORBEARANCE PARTY. Each Forbearance Party, for such
---------------------------------
Forbearance Party and the heirs, executors, administrators, personal
representatives, legal representatives, successors and assigns of such
Forbearance Party, HEREBY RELEASES, ACQUITS AND FOREVER DISCHARGES First
Healthcare, Hillhaven, MediSave, First Rehab, the respective subsidiaries and
affiliates of First Healthcare, Hillhaven, MediSave and First Rehab, the
respective directors, officers, employees, insurers, agents and representatives
of First Healthcare, Hillhaven, MediSave, First Rehab and the respective
subsidiaries and affiliates of First Healthcare, Hillhaven, MediSave and First
Rehab, all other Persons who are acting or at any time or times have acted for
or on behalf of any of First Healthcare, Hillhaven, MediSave, First Rehab and
the respective subsidiaries and affiliates of First Healthcare, Hillhaven,
MediSave and First Rehab, and all of their respective heirs, executors,
administrators, personal representatives, legal representatives, successors and
assigns, from all claims, demands, actions, causes of action, losses,
liabilities, damages, costs, expenses and disbursements (including, but not
limited to, fees and disbursements of accountants, attorneys, engineers and
other professionals, experts and agents) of any kind whatsoever, both known and
unknown, both foreseen and unforeseen, whether now or hereafter existing,
whether matured or unmatured, liquidated or unliquidated or choate or inchoate,
whether based upon tort, contract, breach of contract or otherwise, and whether
or not asserted, which such Forbearance Party or any Person claiming by or
through such Forbearance Party may now or hereafter have or incur or may now or
hereafter claim to have or to have incurred, arising or to arise, directly or
indirectly, from or by reason of, or in any manner related to or connected with,
(a) the negotiation, preparation, execution and/or delivery of this Agreement,
any other Forbearance Document, any other MediSave
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<PAGE>
Forbearance Document, any Escrowed Document, any Transaction Document and/or any
MediSave Transaction Document and/or (b) any failure of title to be vested in
Ballwin with respect to the estate or interest in the portion of the lots,
tracts or parcels described as Parcel 2 in Exhibit A to the Ballwin Deed and/or
(c) any other fact, event, transaction, condition, act or omission to act
occurring on or prior to the date of this Agreement under or in any manner
related to or connected with the Facility Agreement, any other Transaction
Document, any MediSave Transaction Document, any Forbearance Document, any
MediSave Forbearance Document, any Facility, any of the Collateral, any of the
Obligations and/or any of the MidAmerica Obligations, regardless of when the
cause of action with respect to any such fact, event, transaction, condition,
act or omission to act shall be deemed to arise; provided that no provision of
--------
this Section shall in any way limit, diminish, terminate or otherwise affect (i)
any warranty of title set forth in any Deed other than as set forth in clause
(b) of this Section with respect to the Ballwin Deed, (ii) any of the covenants
of First Healthcare set forth in any of Sections 3.15, 5.04, 5.05, 7.06 and 7.07
of the Facility Agreement, (iii) any of the covenants of First Healthcare set
forth in this Agreement or any other Forbearance Document, (iv) any of the
covenants of MediSave set forth in this Agreement or any other MediSave
Forbearance Document, (v) the enforceability against First Healthcare of any of
the covenants of First Healthcare set forth in any of Sections 3.15, 5.04, 5.05,
7.06 and 7.07 of the Facility Agreement, (vi) the enforceability against First
Healthcare of any of the covenants of First Healthcare set forth in this
Agreement or any other Forbearance Document or (vii) the enforceability against
MediSave of any of the covenants of MediSave set forth in this Agreement or any
other MediSave Forbearance Document.
2.04 RELEASE BY EACH MIDAMERICA PARTY. Each MidAmerica Party, for such
--------------------------------
MidAmerica Party and the heirs, executors, administrators, personal
representatives, legal representatives, successors and assigns of such
MidAmerica Party, HEREBY RELEASES, ACQUITS AND FOREVER DISCHARGES First
Healthcare, Hillhaven, MediSave, First Rehab, the respective subsidiaries and
affiliates of First Healthcare, Hillhaven, MediSave and First Rehab, the
respective directors, officers, employees, insurers, agents and representatives
of First Healthcare, Hillhaven, MediSave, First Rehab and the respective
subsidiaries and affiliates of First Healthcare, Hillhaven, MediSave and First
Rehab, all other Persons who are acting or at any time or times have acted for
or on behalf of any of First Healthcare, Hillhaven, MediSave, First Rehab and
the respective subsidiaries and affiliates of First Healthcare, Hillhaven,
MediSave and First Rehab, and all of their respective heirs, executors,
administrators, personal representatives, legal representatives, successors and
assigns, from all claims, demands, actions, causes of action, losses,
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liabilities, damages, costs, expenses and disbursements (including, but not
limited to, fees and disbursements of accountants, attorneys, engineers and
other professionals, experts and agents) of any kind whatsoever, both known and
unknown, both foreseen and unforeseen, whether now or hereafter existing,
whether matured or unmatured, liquidated or unliquidated or choate or inchoate,
whether based upon tort, contract, breach of contract or otherwise, and whether
or not asserted, which such MidAmerica Party or any Person claiming by or
through such MidAmerica Party may now or hereafter have or incur or may now or
hereafter claim to have or to have incurred, arising or to arise, directly or
indirectly, from or by reason of, or in any manner related to or connected with,
(a) the negotiation, preparation, execution and/or delivery of this Agreement,
any other Forbearance Document, any other MediSave Forbearance Document, any
Escrowed Document, any Transaction Document and/or any MediSave Transaction
Document and/or (b) any fact, event, transaction, condition, act or omission to
act occurring on or prior to the date of this Agreement (including, but not
limited to, any such fact, event, transaction, condition, act or omission to act
under or in any manner related to or connected with the Facility Agreement, any
other Transaction Document, any MediSave Transaction Document, any of the
Obligations and/or any of the MidAmerica Obligations), regardless of when the
cause of action with respect to any such fact, event, transaction, condition,
act or omission to act shall be deemed to arise; provided that no provision of
--------
this Section shall in any way limit, diminish, terminate or otherwise affect (i)
any of the covenants of First Healthcare set forth in this Agreement or any
other Forbearance Document, (ii) any of the covenants of MediSave set forth in
this Agreement or any other MediSave Forbearance Document, (iii) the
enforceability against First Healthcare of any of the covenants of First
Healthcare set forth in this Agreement or any other Forbearance Document or (iv)
the enforceability against MediSave of any of the covenants of MediSave set
forth in this Agreement or any other MediSave Forbearance Document.
2.05 Consultation with Legal Counsel, Etc. Each Forbearance Party
------------------------------------
acknowledges and agrees that (a) the waiver, relinquishment, release,
acquittance and discharge set forth in Sections 2.01 and 2.03 have been
specifically negotiated and are essential and material terms of this Agreement
and a material part of the consideration for the execution and delivery of this
Agreement by First Healthcare and MediSave, (b) such Forbearance Party has
consulted with legal counsel of such Forbearance Party's own choosing prior to
signing this Agreement and accepting and agreeing to the provisions of this
Agreement, including, but not limited to, the waiver, relinquishment, release,
acquittance and discharge set forth in Sections 2.01 and 2.03, and (c) such
Forbearance Party voluntarily and knowingly
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<PAGE>
has signed this Agreement and accepted and agreed to the provisions of this
Agreement, including, but not limited to, the waiver, relinquishment, release,
acquittance and discharge set forth in Sections 2.01 and 2.03. Each MidAmerica
Party acknowledges and agrees that (i) the waiver, relinquishment, release,
acquittance and discharge set forth in Sections 2.02 and 2.04 have been
specifically negotiated and are essential and material terms of this Agreement
and a material part of the consideration for the execution and delivery of this
Agreement by First Healthcare and MediSave, (ii) such MidAmerica Party has
consulted with legal counsel of such MidAmerica Party's own choosing prior to
signing this Agreement and accepting and agreeing to the provisions of this
Agreement, including, but not limited to, the waiver, relinquishment, release,
acquittance and discharge set forth in Sections 2.02 and 2.04, and (iii) such
MidAmerica Party voluntarily and knowingly has signed this Agreement and
accepted and agreed to the provisions of this Agreement, including, but not
limited to, the waiver, relinquishment, release, acquittance and discharge set
forth in Sections 2.02 and 2.04.
ARTICLE III
FORBEARANCE AND FORBEARANCE PERIOD
3.01 Forbearance. Subject to Article IV, during the period (the
-----------
"Forbearance Period") from June 30, 1995, until the earlier of the occurrence of
any Forbearance Default or December 25, 1997, First Healthcare will forbear from
(a) making any demand or commencing any collection action with respect to any of
the Delinquent Obligations, (b) terminating the Subleases and the Management
Agreements, (c) taking any action, judicial or nonjudicial, to foreclose,
realize upon or otherwise proceed against any or all of the Collateral and (d)
making any demand under or commencing any action to enforce the Guaranty against
any one or both of the Guarantors.
3.02 Interest on the Notes. Each Note shall bear interest during the
---------------------
Forbearance Period at the Regular Rate under and as defined in such Note;
provided that if, on or before February 1, 1996, no Forbearance Default shall
- --------
have occurred, then the date on which the Regular Rate under and as defined in
the respective Notes is scheduled to increase from nine percent (9%) per annum
to eleven percent (11%) per annum shall be deferred, without further writing or
other action by First Healthcare or any Forbearance Party, from February 1,
1996, to February 1, 1997.
3.03 Installment Payment Dates under the Notes. During the Forbearance
-----------------------------------------
Period, each installment of principal and interest under any Note that is stated
to be due on the first day of a calendar month may be made on or before, but not
later than, the twenty-fifth day of such calendar month, and such extension
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of time shall in such case be included in the computation of interest; provided
--------
that in no event shall the final installment of principal and interest under any
Note be extended beyond the stated maturity date of August 1, 1999.
3.04 Rent Payment Dates under the Subleases. During the Forbearance
--------------------------------------
Period, each payment of Rent under a Sublease that is stated to be due on the
first day of a calendar month may be made on or before, but not later than, the
twenty-fifth day of such calendar month if, but only if, on the date any such
payment of Rent is made other than on the first day of the calendar month in
which such payment is stated to be due, the Sublessee under such Sublease also
pays to First Healthcare, as additional Rent under such Sublease, a per diem
amount equal to the amount set forth opposite the name of such Sublessee in
Schedule 3.04 for each day (including the first day, but excluding the last day)
occurring during the period from the first day of such calendar month until the
day on which such payment of Rent is received by First Healthcare.
3.05 Operator's Return Payment Dates under the Management Agreements.
---------------------------------------------------------------
During the Forbearance Period, each payment of Operator's Return under a
Management Agreement that is stated to be due on the first day of a calendar
month may be made on or before, but not later than, the twenty-fifth day of such
calendar month if, but only if, on the date any such payment of Operator's
Return is made other than on the first day of the calendar month in which such
payment is stated to be due, the Manager under such Management Agreement also
pays to First Healthcare, as additional Operator's Return under such Management
Agreement, a per diem amount equal to the amount set forth opposite the name of
such Manager in Schedule 3.05 for each day (including the first day, but
excluding the last day) occurring during the period from the first day of such
calendar month until the day on which such payment of Operator's Return is
received by First Healthcare.
3.06 Payment of the Arrearages. Each Partnership shall pay such
-------------------------
Partnership's Share of the Arrearages to First Healthcare in installments as
follows:
(a) One installment in an amount equal to such Partnership's Share of
$252,000.00, payable on December 31, 1995;
(b) Five equal, consecutive monthly installments, each in an amount
equal to such Partnership's Share of $80,000.00, payable on the twenty-
fifth day of each calendar month, commencing on January 25, 1996, and
continuing to and including May 25, 1996;
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<PAGE>
(c) Eighteen equal, consecutive monthly installments, each in an
amount equal to such Partnership's Share of $105,000.00, payable on the
twenty-fifth day of each calendar month, commencing on June 25, 1996, and
continuing to and including November 25, 1997; and
(d) One final installment on December 25, 1997, in an amount equal to
such Partnership's Share of the amount necessary to pay in full the then
unpaid balance of the Arrearages plus all interest then accrued on the
Arrearages.
For the purposes of this Agreement, the term "Share" means, for each
Partnership, the percentage set forth opposite such Partnership's name in
Schedule 3.06.
3.07 Interest on the Arrearages. Each Partnership shall pay interest on
--------------------------
the unpaid amount of such Partnership's Share of the Arrearages outstanding from
time to time, from the respective dates on which interest begins to accrue as
set forth below in this Section until such unpaid amount is paid in full, at
the rate of nine percent per annum, payable monthly, commencing on December 31,
1995, and continuing on the twenty-fifth day of each consecutive calendar month
thereafter, and on the date the unpaid balance of such Partnership's Share of
the Arrearages is paid in full; provided that, to the extent permitted by
--------
applicable law, each Partnership shall pay interest on any unpaid amount of such
Partnership's Share of the Arrearages that is not paid when due, and on the
unpaid amount of all interest, fees and other amounts payable by such
Partnership under this Agreement that is not paid when due, in each case from
the date on which such amount is due (whether at stated maturity, by
acceleration or otherwise) until such amount is paid in full, payable on demand,
at a rate per annum equal to fourteen percent (14%) per annum. The Delinquent
Indebtedness shall bear interest from July 1, 1995, the Delinquent Rent shall
bear interest from July 1, 1995, the Delinquent Management Obligations shall
bear interest from July 1, 1995, the Tax Arrearage shall bear interest from July
1, 1995, the Cost Report Remittance shall bear interest from August 11, 1995,
and the respective amounts constituting the Default Costs and Expenses shall
bear interest from the respective dates on which such amounts are paid by First
Healthcare.
3.08 Application of Payments. Each payment by a Partnership under
-----------------------
Sections 3.06 and 3.07, at the option of First Healthcare, may be applied first
to any costs and expenses (including, but not limited to, reasonable fees and
disbursements of attorneys) then payable by such Partnership under this
Agreement, then to interest then accrued on the unpaid amount of such
Partnership's Share of the Arrearages, and then to the unpaid amount of such
Partnership's Share of the Arrearages in
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such order and in such manner as First Healthcare shall determine in its sole
discretion.
3.09 Certain Payments and Computations. Each Partnership shall make each
---------------------------------
payment under Sections 3.06 and 3.07, and each deposit under Section 3.10, on
the day when due to First Healthcare at 1148 Broadway Plaza, Tacoma, Washington
98402, attention of Credit Portfolio Manager, or at such other place as First
Healthcare may specify from time to time. All computations of interest under
this Agreement shall be made by First Healthcare on the basis of a year of 360
days, in each case for the actual number of days (including the first day, but
excluding the last day) occurring in the period for which such interest is
payable. Whenever any payment under this Agreement or any other Forbearance
Document shall be stated to be due on a day other than a Business Day, such
payment shall be made on the preceding Business Day.
3.10 Tax Deposits.
------------
(a) Certain Tax Deposits. The Partnerships shall deposit with First
--------------------
Healthcare amounts required to pay the Delinquent Tax Balance and the
Taxes, which deposits shall be made monthly, as follows:
(i) One deposit of $450,000.00 on or before August 15, 1995,
the receipt of which deposit in the amount of $450,000.00 is hereby
acknowledged by First Healthcare; and
(ii) Equal, consecutive monthly deposits of $150,000.00 each,
payable on the twenty-fifth day of each consecutive calendar month,
commencing on September 25, 1995, and continuing on the twenty-fifth
day of each calendar month thereafter until the Tax Delinquency
Payment Date.
(b) Certain Other Tax Deposits. So long as the Facility purchased,
--------------------------
subleased or managed by a Partnership remains subject to any Mortgage, any
Deed of Trust, any Sublease, any Management Agreement, any Partnership
Guaranty Mortgage or any Partnership Guaranty Deed of Trust, such
Partnership shall deposit with First Healthcare amounts required to pay the
Taxes with respect to the Facility purchased, subleased or managed by such
Partnership, which amounts shall be deposited in an amount equal to one-
twelfth of the aggregate annual amount of the Taxes then required to be
paid by such Partnership under the Transaction Documents and the
Forbearance Documents, on the twenty-fifth day of each consecutive calendar
month, commencing on the twenty-fifth day of the calendar month immediately
following the
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<PAGE>
calendar month in which the Tax Delinquency Payment Date occurs, and
continuing on the twenty-fifth day of each calendar month thereafter until
all of the Obligations shall have been paid and performed in full.
(c) Additional Tax Deposits. If the amount of any Tax is not
-----------------------
ascertainable at the time any deposit is required to be made pursuant to
Section 3.10(a) or Section 3.10(b), then such deposit shall be made on the
basis of First Healthcare's estimate of the amount of such Tax, and, when
such amount is fixed for the then-current year, the Partnerships or the
appropriate Partnership, as the case may be, promptly shall deposit the
amount of any deficiency with First Healthcare.
(d) Use of Deposited Funds; Grant of Security Interest.
--------------------------------------------------
Notwithstanding any provision to the contrary in any Transaction Document,
all funds deposited with First Healthcare pursuant to this Section 3.10,
until applied as provided below, (i) shall constitute additional security
for the payment and performance of the Obligations, (ii) shall be held by
First Healthcare in a separate account, without interest, (iii) prior to
the occurrence of a Forbearance Default, shall be applied by First
Healthcare in payment of the Delinquent Tax Balance and the Taxes in such
order and in such manner as First Healthcare shall determine in its sole
discretion, and (iv) upon the occurrence of a Forbearance Default, at the
option of First Healthcare, may be applied to the Obligations in such order
and such manner as First Healthcare shall determine in its sole discretion
or to cure such Forbearance Default or as provided in this Section 3.10.
The Partnerships shall be responsible for furnishing to First Healthcare
bills or invoices for the Taxes, and First Healthcare shall have no
responsibility for payment of such Taxes in the absence of such bills or
invoices. Each Partnership hereby pledges and assigns to First Healthcare,
and hereby grants to First Healthcare a security interest in all of such
Partnership's right, title and interest in, to and under, all funds at any
time deposited with First Healthcare pursuant to this Section 3.10.
(e) Transfer of Transaction Documents or Forbearance Documents. Upon
----------------------------------------------------------
an assignment or other transfer by First Healthcare of any Transaction
Document or any Forbearance Document with respect to any Facility, First
Healthcare shall have the right to pay over to the assignee or transferee
the balance of the deposits then in the possession of First Healthcare with
respect to such Facility and, upon the payment of such balance of the
deposits over to such assignee or transferee and the assumption by such
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<PAGE>
assignee or transferee of First Healthcare's duties in respect of such
balance of the deposits, First Healthcare, the Collateral Agent and the
trustee under any Deed of Trust or any Partnership Guaranty Deed of Trust
pertaining to such Facility shall be completely released from all liability
with respect to such deposits, and the Partnerships or the owner of such
Facility shall look solely to the assignee or transferee with respect to
such deposits. The provisions of this Section 3.10(e) shall apply to every
assignment or other transfer of such deposits to a new assignee or
transferee.
3.11 Waiver of Certain Designated Defaults; Etc. If each of the
------------------------------------------
conditions precedent set forth in Article IV either shall have been satisfied or
shall have been waived in writing in whole or in part by First Healthcare in its
sole discretion, and if all of the Arrearages plus all interest accrued on the
Arrearages shall have been paid in full pursuant to and in accordance with
Sections 3.06 and 3.07, and if the Tax Delinquency Payment Date shall have
occurred, and if no Forbearance Default shall have occurred, then the Designated
Defaults other than the Licensure Default shall be waived by First Healthcare
without further writing or other action by First Healthcare and without
prejudice to or limitation of any rights or remedies (including, but not limited
to, rights of set-off) exercised by First Healthcare prior to the date of this
Agreement. First Healthcare hereby waives any breach by Ballwin of the warranty
of title set forth in the Deed of Trust executed and delivered by Ballwin
arising by reason of any failure of title to be vested in Ballwin with respect
to the estate or interest in the portion of the lots, tracts or parcels
described as Parcel 2 in Exhibit A to the Ballwin Deed.
3.12 Reporting Requirements. Notwithstanding any provision to the
----------------------
contrary in any Transaction Document, from the date of this Agreement until all
of the Obligations shall have been paid and performed in full:
(a) Each Partnership shall furnish to First Healthcare:
(i) as soon as available and in any event within forty days
after the last day of each calendar month during each fiscal year of
such Partnership, with respect to the Facility purchased, subleased or
managed by such Partnership, as the case may be, a balance sheet of
such Facility as of the end of such calendar month and statements of
income and expense of such Facility for the period commencing at the
end of the immediately preceding fiscal year of such Partnership and
ending with the end of such calendar month, all in
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<PAGE>
reasonable detail and duly certified (subject to year-end audit
adjustments) by the chief executive officer or the chief financial
officer of the General Partner or by the chief executive officer or
the chief financial officer of Premiere as having been prepared in
accordance with sound accounting principles and practices consistently
applied and as fairly presenting the financial condition of such
Facility as of the respective dates of such financial statements and
the results of the operations of such Facility for the periods ended
on such dates;
(ii) if different than the financial statements furnished
pursuant to Section 3.12(a)(i) with respect to the Facility purchased,
subleased or managed by such Partnership, as the case may be, then as
soon as available and in any event within forty days after the last
day of each calendar month during each fiscal year of such
Partnership, a balance sheet of such Partnership as of the end of such
calendar month and statements of income and expense of such
Partnership for the period commencing at the end of the immediately
preceding fiscal year of such Partnership and ending with the end of
such calendar month, all in reasonable detail and duly certified
(subject to year-end audit adjustments) by the chief executive officer
or the chief financial officer of the General Partner or by the chief
executive officer or the chief financial officer of Premiere as having
been prepared in accordance with sound accounting principles and
practices consistently applied and as fairly presenting the financial
condition of such Partnership as of the respective dates of such
financial statements and the results of the operations of such
Partnership for the periods ended on such dates;
(iii) within forty days after the last day of each calendar
month during each fiscal year of such Partnership, a certificate of
the chief executive officer or the chief financial officer of the
General Partner or a certificate of the chief executive officer or the
chief financial officer of Premiere stating that no Forbearance
Default, and no event which, with the giving of notice or the lapse of
time or both, would constitute a Forbearance Default, has occurred or
is continuing or, if a Forbearance Default or other such event has
occurred and is continuing, a statement as to the nature thereof and
the action which such Partnership has taken and proposes to take with
respect thereto; and
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<PAGE>
(iv) as soon as available and in any event within ten days
after the last day of each calendar month during each fiscal year of
such Partnership, with respect to the Facility purchased, subleased or
managed by such Partnership, as the case may be, detailed operational
statistics for such Facility pertaining to occupancy rates, patient or
resident mix and patient or resident rates by type for the period
commencing at the end of the immediately preceding fiscal year of such
Partnership and ending with the end of such calendar month.
(b) The Partnerships shall furnish, or cause to be furnished, to First
Healthcare with respect to the Facilities, as soon as available and in any
event within twenty days after the last day of each calendar month, a
consolidated statement of cash receipts and cash utilization and
reconciliation of the Facilities for such calendar month, all in reasonable
detail and duly certified (subject to year-end audit adjustments) by the
cash manager of Premiere.
(c) The Partnerships shall furnish, or cause to be furnished, to First
Healthcare with respect to the Facilities, as soon as available and in any
event within forty days after the last day of each calendar month,
consolidated and consolidating accounts receivable aging reports for the
Facilities as of the last day of such calendar month, consolidated and
consolidating accounts payable aging reports for the Facilities as of the
last day of such calendar month, and consolidated and consolidating monthly
census report summaries for the Facilities as of the last day of such
calendar month, all in reasonable detail.
(d) Each Guarantor shall furnish to First Healthcare:
(i) on or before September 6, 1995, a balance sheet of such
Guarantor as of December 31, 1994, certified by such Guarantor as
fairly presenting the financial condition of such Guarantor at
December 31, 1994, and reflecting all liabilities, direct or indirect,
fixed or contingent, of such Guarantor at December 31, 1994, and
accompanied by a schedule listing all land and other real property
owned by such Guarantor on December 31, 1994, whether alone or
concurrently with one or more other Persons as joint tenants, as
tenants by the entireties or otherwise (but excluding land and other
real property in which any ownership interest of such Guarantor is
solely an indirect interest as a shareholder, partner or member in a
corporation, partnership or limited liability
-20-
<PAGE>
company that owns such land or other real property) and specifying for
each lot, tract, parcel or other division of such land and other real
property the form of such ownership;
(ii) on or before September 6, 1995, a complete copy of such
Guarantor's federal income tax return, with all supporting schedules,
filed with the Internal Revenue Service for 1993; and
(iii) promptly and in any event within ten days after the
filing thereof with the Internal Revenue Service, (A) copies of any
and all requests for an extension of time for the filing of such
Guarantor's income tax returns for any year subsequent to 1993, and
(B) complete copies of such Guarantor's federal income tax returns,
with all supporting schedules, for all years subsequent to 1993.
(d) Except as expressly provided to the contrary in this Section 3.12,
each Forbearance Party shall furnish to First Healthcare all other cost
reports, surveys, financial statements and other reports, statements,
certificates, materials and information to be furnished by such Forbearance
Party to First Healthcare from time to time under the Transaction
Documents, all in the forms and at the times provided in the Transaction
Documents.
3.13 Title Search Reports. On or before the date of this Agreement, the
--------------------
Forbearance Parties shall deliver or cause to be delivered to First Healthcare,
in each case in form and detail satisfactory to First Healthcare, a preliminary
commitment for title insurance or other title search report issued by the Title
Company to First Healthcare with respect to the real property and improvements
constituting each Facility, together with copies of all documents referred to in
each such preliminary commitment or other title search report.
3.14 Certain Required Documents. On or before September 6, 1995, the
--------------------------
Forbearance Parties and the MidAmerica Parties shall deliver or cause to be
delivered to First Healthcare each of the following duly and properly executed
and, where appropriate, acknowledged, attested or verified documents, in each
case in form and substance satisfactory to First Healthcare:
(a) A separate security agreement, duly executed by each Partnership
in substantially the form of Exhibit 3.14(a) (individually, a "Partnership
Security Agreement" and collectively, the "Partnership Security
Agreements"), with respect to all accounts and general
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<PAGE>
intangibles (as those terms are defined in the Uniform Commercial Code in
effect in the states of Kansas and Missouri) of such Partnership;
(b) A separate guaranty, duly executed by each Partnership in
substantially the form of Exhibit 3.14(b) (individually, a "Partnership
Guaranty" and collectively, the "Partnership Guaranties"), with respect to
all of the Obligations of the other Partnerships under the Transaction
Documents;
(c) A modified and restated guaranty, duly executed jointly and
severally by the Guarantors in substantially the form of Exhibit 3.14(c)
(the "Restated First Healthcare Guaranty");
(d) Financing statements, fixture filings and statements of amendment
(individually, a "Financing Statement" and collectively, the "Financing
Statements"), duly executed by each Partnership, in appropriate forms for
filing or recording under the Uniform Commercial Code of all jurisdictions
that First Healthcare may deem necessary or desirable in order to perfect
and protect the security interests, and the priority of the security
interests, created by the Transaction Documents and the Forbearance
Documents;
(e) An escrow agreement, duly executed by each Forbearance Party,
First Healthcare and the Escrow Agent in substantially the form of Exhibit
3.14(e) (the "Escrow Agreement"), with respect to the Escrowed Documents;
(f) A favorable, written opinion of Blanco Tackabery Combs &
Matamoros, P.A., counsel to the Forbearance Parties and the MidAmerica
Parties;
(g) A favorable, written opinion of McAnany, Van Cleave & Phillips,
P.A., special Kansas and Missouri counsel to the Forbearance Parties and
the MidAmerica Parties;
(h) A separate stipulation for immediate modification of or relief
from any automatic or other stay, injunction or order imposed by the
Bankruptcy Code or other law or by any court, duly executed by each
Forbearance Party as well as by the General Partner in substantially the
form of Exhibit 3.14(h) (individually, a "Stipulation for Relief" and
collectively, the "Stipulations for Relief");
(i) A separate stipulation for immediate appointment of a receiver,
custodian, trustee, liquidator or conservator
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for the Facilities and the Collateral upon the occurrence of any
Forbearance Default, duly executed by each Forbearance Party as well as by
the General Partner in substantially the form of Exhibit 3.14(i)
(individually, a "Stipulation for Appointment of Receiver" and
collectively, the "Stipulations for Appointment of Receiver");
(j) Certified copies of resolutions of all of the partners, general
and limited, in each Partnership authorizing, approving, ratifying and
confirming the execution, delivery and performance by such Partnership of,
and the consummation of the transactions contemplated by, each Transaction
Document, each Forbearance Document and each Escrowed Document to which
such Partnership is or is to be a party;
(k) Certified copies of resolutions of all of the partners, general
and limited, in MidAmerica authorizing, approving, ratifying and confirming
the execution, delivery and performance by MidAmerica of, and the
consummation of the transactions contemplated by, this Agreement;
(l) Certified copies of resolutions of the board of directors of the
General Partner authorizing, approving, ratifying and confirming the
execution, delivery and performance by the General Partner of, and the
consummation of the transactions contemplated by, each Transaction
Document, each Forbearance Document and each Escrowed Document to which the
General Partner is or is to be a party or a signatory for and on behalf of
itself and as the general partner in MidAmerica or any one or more of the
Partnerships;
(m) Certified copies of all other documents evidencing any and all
consents, authorizations and approvals required from any Person with
respect to the execution, delivery and performance by any Forbearance Party
of, and the consummation of the transactions contemplated by, this
Agreement, any other Forbearance Document or any Escrowed Document; and
(n) The binding written commitment of the Title Company to issue in
favor of First Healthcare, as the assured, such supplemental endorsements
(including, but not limited to, an update endorsement) to the Title
Policies as First Healthcare may deem necessary or desirable to insure the
respective liens created by the Mortgages and the Deeds of Trust as valid
and enforceable liens, subject to no title defects or exceptions other than
the permitted exceptions, if any, to which the Mortgages and Deeds of Trust
by their respective terms are specifically subject, notwithstanding
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any of the transactions contemplated by this Agreement and the other
Forbearance Documents.
3.15 Certain Other Required Documents. On or before September 6, 1995,
--------------------------------
the Forbearance Parties and the MidAmerica Parties shall deliver or cause to be
delivered to the Collateral Agent, for the benefit of First Healthcare and
MediSave, each of the following duly and properly executed and, where
appropriate, acknowledged, attested or verified documents, in each case in form
and substance satisfactory to each of First Healthcare and MediSave:
(a) An agency and intercreditor agreement, duly executed by each
Forbearance Party, each MidAmerica Party, First Healthcare, MediSave and
the Collateral Agent in substantially the form of Exhibit 3.15(a) (the
"Agency Agreement");
(b) A separate mortgage, assignment, security agreement and financing
statement (fixture filing), duly executed by, and acknowledged with respect
to, each of Chanute, Council Grove, Haysville, Larned, Sedgwick and Topeka
in substantially the form of Exhibit 3.15(b) (individually, a "Partnership
Guaranty Mortgage" and collectively, the "Partnership Guaranty Mortgages"),
with respect to all real properties, all fixtures and all tangible and
intangible personal properties of each such Partnership;
(c) A separate deed of trust, assignment, security agreement and
financing statement (fixture filing), duly executed by, and acknowledged
with respect to, each of Ballwin, Columbia, Joplin I, Springfield and St.
Charles in substantially the form of Exhibit 3.15(c) (individually, a
"Partnership Guaranty Deed of Trust" and collectively, the "Partnership
Guaranty Deeds of Trust"), with respect to all real properties, all
fixtures and all tangible and intangible personal properties of each such
Partnership;
(d) A separate security agreement, duly executed by each Partnership
in substantially the form of Exhibit 3.15(d) (individually, a "Partnership
Guaranty Security Agreement" and collectively, the "Partnership Guaranty
Security Agreements"), with respect to all fixtures and all tangible and
intangible personal properties of each such Partnership; and
(e) Financing statements, fixture filings and statements of amendment
(individually, an "Agency Financing Statement" and collectively, the
"Agency Financing Statements"), duly executed by each Partnership, in
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appropriate forms for filing or recording under the Uniform Commercial Code
of all jurisdictions that First Healthcare may deem necessary or desirable
in order to perfect and protect the security interests, and the priority of
the security interests, created by the Partnership Guaranty Mortgages, the
Partnership Guaranty Deeds of Trust and the Partnership Guaranty Security
Agreements.
3.16 Escrowed Documents. On or before September 6, 1995, the Forbearance
------------------
Parties shall deliver or cause to be delivered to, and held in escrow by, the
Escrow Agent each of the following duly and properly executed and, where
appropriate, acknowledged, attested or verified documents, in each case in form
and substance satisfactory to First Healthcare:
(a) A separate confession of judgment, duly executed by each Guarantor
in substantially the form of Exhibit 3.16(a) (individually, a "Guarantor
Confession of Judgment" and together, the "Guarantor Confessions of
Judgment"), with respect to all Obligations of such Guarantor under the
Restated First Healthcare Guaranty;
(b) A separate confession of judgment for possession, duly executed
by, and verified with respect to, the General Partner for itself and each
of Ballwin, Columbia, Joplin I, Springfield and St. Charles in
substantially the form of Exhibit 3.16(b) (individually, a "Purchaser
Confession of Judgment" and collectively, the "Purchaser Confessions of
Judgment"), with respect to the Purchased Facility purchased by each such
Purchaser;
(c) A separate confession of judgment for rent and possession, duly
executed by, and verified with respect to, the General Partner for itself
and each of Ava, Blue Hills, Buffalo, Clinton, Des Peres, Jefferson, Joplin
II, Lamar, Marceline, Shady Oaks and Wornall in substantially the form of
Exhibit 3.16(c) (individually, a "Sublessee Confession of Judgment" and
collectively, the "Sublessee Confessions of Judgment"), with respect to the
Subleased Facility subleased by each such Sublessee;
(d) A separate confession of judgment for money due and possession,
duly executed by, and verified with respect to, the General Partner for
itself and each Manager in substantially the form of Exhibit 3.16(d)
(individually, a "Manager Confession of Judgment" and collectively, the
"Manager Confessions of Judgment"), with respect to the Managed Facility
managed by each such Manager;
(e) A separate termination agreement, duly executed by, and
acknowledged with respect to, each Sublessee in
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substantially the form of Exhibit 3.16(e) (individually, a "Sublease
Termination Agreement" and collectively, the "Sublease Termination
Agreements"), with respect to the respective Subleases;
(f) A separate termination agreement, duly executed by each Manager in
substantially the form of Exhibit 3.16(f) (individually, a "Management
Termination Agreement" and collectively, the "Management Termination
Agreements"), with respect to the respective Management Agreements;
(g) A separate management agreement, duly executed by each of Ava,
Ballwin, Blue Hills, Buffalo, Chanute, Clinton, Colonial Terrace, Columbia,
Council Grove, Des Peres, Haysville, Jefferson, Joplin I, Joplin II, Lamar,
Larned, Marceline, Sedgwick, Shady Oaks, Springfield, St. Charles, Topeka
and Wornall in substantially the form of Exhibit 3.16(g) (individually, an
"Escrowed Management Agreement" and collectively, the "Escrowed Management
Agreements"), with respect to the Facility purchased or subleased by each
such Partnership;
(h) A separate non-merger warranty deed in lieu of foreclosure, duly
executed by, and attested and acknowledged with respect to, each of
Chanute, Council Grove, Haysville, Larned, Sedgwick and Topeka in
substantially the form of Exhibit 3.16(h) (individually, a "Kansas Deed in
Lieu of Foreclosure" and collectively, the "Kansas Deeds in Lieu of
Foreclosure"), with respect to all estate, right, title, interest, claim
and demand of each such Partnership (including, but not limited to, all
right of redemption) in and to all real and personal property constituting
collateral or other security for any or all of the Obligations of such
Partnership under the Transaction Documents;
(i) A separate non-merger warranty deed in lieu of foreclosure, duly
executed by, and attested and acknowledged with respect to, each of
Ballwin, Columbia, Joplin I, Springfield and St. Charles in substantially
the form of Exhibit 3.16(i) (individually, a "Missouri Deed in Lieu of
Foreclosure" and collectively, the "Missouri Deeds in Lieu of
Foreclosure"), with respect to all estate, right, title, interest, claim
and demand of each such Partnership (including, but not limited to, all
right of redemption) in and to all real and personal property constituting
collateral or other security for any or all of the Obligations of such
Partnership under the Transaction Documents;
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(j) A separate estoppel affidavit, duly executed by, and attested and
verified with respect to, each Purchaser in substantially the form of
Exhibit 3.16(j) (individually, an "Estoppel Affidavit" and collectively,
the "Estoppel Affidavits"), with respect to the Deed in Lieu of Foreclosure
executed and delivered by such Purchaser;
(k) A separate certificate of non-foreign status, duly executed with
all blanks appropriately completed by, and acknowledged with respect to,
each Partnership in substantially the form of Exhibit 3.16(k)
(individually, a "Certificate of Non-Foreign Status" and collectively, the
"Certificates of Non-Foreign Status"), as described in section 1445 of the
Internal Revenue Code, as amended, and the regulations promulgated
thereunder; and
(l) A separate non-merger bill of sale in lieu of foreclosure, duly
executed by, and attested and acknowledged with respect to, each Sublessee
and each Manager in substantially the form of Exhibit 3.16(l)
(individually, a "Bill of Sale in Lieu of Foreclosure" and collectively,
the "Bills of Sale in Lieu of Foreclosure"), with respect to all right,
title and interest of each such Partner in and to all personal property
constituting collateral or other security for any or all of the Obligations
of such Partnership under the Transaction Documents.
3.17 Certain Other Documents Required by MediSave. On or before
--------------------------------------------
September 6, 1995, the MidAmerica Parties shall deliver or cause to be delivered
to MediSave each of the following duly and properly executed and, where
appropriate, acknowledged, attested or verified documents, in each case in form
and substance satisfactory to MediSave:
(a) An allonge and note modification agreement, duly executed by
MidAmerica and MediSave in substantially the form of Exhibit 3.17(a) (the
"MediSave Note Modification Agreement"), with respect to the MediSave Note;
(b) A modified and restated guaranty, duly executed jointly and
severally by the Guarantors in substantially the form of Exhibit 3.17(b)
(the "Restated MediSave Guaranty");
(c) A separate guaranty, duly executed by each Partnership in
substantially the form of Exhibit 3.17(c) (individually, a "MediSave
Partnership Guaranty" and collectively, the "MediSave Partnership
Guaranties"), with respect to all of the MidAmerica Obligations of
MidAmerica;
(d) Each of the favorable, written opinions required by Sections
3.14(f) and 3.14(g);
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(e) Certified copies of resolutions of all of the partners, general
and limited, in MidAmerica authorizing, approving, ratifying and confirming
the execution, delivery and performance by MidAmerica of, and the
consummation of the transactions contemplated by, each MediSave Transaction
Document and each MediSave Forbearance Document to which MidAmerica is or
is to be a party;
(f) Certified copies of resolutions of all of the partners, general
and limited, in each Partnership authorizing, approving, ratifying and
confirming the execution, delivery and performance by such Partnership of,
and the consummation of the transactions contemplated by, each MediSave
Forbearance Document to which such Partnership is or is to be a party;
(g) Certified copies of resolutions of the board of directors of the
General Partner authorizing, approving, ratifying and confirming the
execution, delivery and performance by the General Partner of, and the
consummation of the transactions contemplated by, each MediSave Transaction
Document and each MediSave Forbearance Document to which the General
Partner is or is to be a party or a signatory for and on behalf of itself
and as the general partner in MidAmerica or any one or more of the
Partnerships; and
(h) Certified copies of all other documents evidencing any and all
consents, authorizations and approvals required from any Person with
respect to the execution, delivery and performance by any MidAmerica Party
of, and the consummation of the transactions contemplated by, this
Agreement or any other MediSave Forbearance Document.
3.18 Further Assurances. Each Forbearance Party, promptly upon the
------------------
request of First Healthcare and in any event within five days after such
request, and at the sole cost and expense of such Forbearance Party, shall
execute and deliver all such additional deeds, conveyances, stipulations,
confessions of judgment, mortgages, deeds of trust, security agreements,
assignments, financing statements, statements of amendment, continuation
statements, estoppel certificates, applications, notices, certificates,
affidavits, powers of attorney, assurances and other documents and instruments
(including, but not limited to, documents relating to transfers of licenses and
certificates of need with respect to the Facilities), and shall take such other
action, as First Healthcare may require from time to time in order (a) to
correct any defect, error or omission that may be discovered in the contents of
any Transaction Document, any Forbearance Document or any Escrowed Document, or
in the
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<PAGE>
execution, acknowledgment, filing or recordation of any Transaction Document,
any Forbearance Document or any Escrowed Document, (b) to effectuate the
purposes of the Transaction Documents, the Forbearance Documents and the
Escrowed Documents, (c) to subject to the liens and security interests created
by the Transaction Documents and the Forbearance Documents any of such
Forbearance Party's properties, rights and interests covered or intended to be
covered by any such liens and security interests, (d) to effect, perfect,
protect and maintain the liens and security interests created by the Transaction
Documents and the Forbearance Documents, or (e) to enable First Healthcare,
readily and without procedural or other delays, to exercise and enforce its
rights and remedies under the Transaction Documents and the Forbearance
Documents with respect to any of the Collateral or otherwise. Each Forbearance
Party acknowledges and agrees that the provisions of this Section have been
specifically negotiated and are essential and material terms of this Agreement
and constitute a material part of the consideration for the execution and
delivery of this Agreement by First Healthcare.
3.19 Consents. First Healthcare, at its sole cost and expense, shall be
--------
solely responsible for obtaining, and shall use reasonable, diligent efforts to
obtain, any and all consents, authorizations and approvals by Hillhaven,
MediSave, First Rehab, Tenet and the board of directors of First Healthcare that
are required to authorize, approve and consummate the transactions contemplated
by the Forbearance Documents and the Escrowed Documents. The Forbearance
Parties, at their sole cost and expense, shall be and remain solely responsible
for obtaining, and shall use their respective reasonable, diligent efforts to
obtain, any and all consents, authorizations and approvals of any other Persons
(including, but not limited to, the REIT, Capital Bank of Sikeston and NPF-PW)
that are required to authorize, approve and consummate the transactions
contemplated by the Forbearance Documents, the MediSave Forbearance Documents
and the Escrowed Documents. First Healthcare, at the sole cost and expense of
the Forbearance Parties, shall execute and deliver such documents as Capital
Bank of Sikeston and NPF-PW reasonably may request to evidence that any security
interest created by the Forbearance Documents in accounts (as that term is
defined in the Uniform Commercial Code in effect in the states of Kansas and
Missouri) of any Partnership is junior in order of priority to any security
interest in such accounts previously granted by such Partnership to, and
perfected in favor of, Capital Bank of Sikeston or NPF-PW, as the case may be.
3.20 Certain Junior Liens. Ballwin or Haysville may grant to a financial
--------------------
institution or other lender a lien on and a security interest in all or any
portion of the Collateral covered by the Ballwin Deed of Trust or the Haysville
Mortgage, as the case may be, and First Healthcare and MediSave shall, and shall
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cause the Collateral Agent to, execute and deliver such documents as such
financial institution or other lender reasonably may request to subordinate the
liens and security interests created by the Ballwin Partnership Guaranty Deed of
Trust or the Haysville Partnership Guaranty Mortgage, as the case may be, to the
lien and security interest granted to such financial institution or other lender
if (a) such lien and such security interest granted to such financial
institution or other lender secure only the repayment by Ballwin or Haysville,
as the case may be, of indebtedness for funds borrowed by Ballwin or Haysville,
as the case may be, in an aggregate amount not to exceed $1,550,000.00 and
(except as expressly provided below in this Section) for the sole purpose of
paying to First Healthcare a portion of the Obligations, (b) all proceeds of
such borrowed funds (except as expressly provided below in this Section) are, in
fact, paid by Ballwin or Haysville, as the case may be, to First Healthcare for
application against the Obligations as provided below in this Section and (c)
the documents creating or purporting to create such lien and such security
interest provide by their respective terms, in form and substance satisfactory
to First Healthcare, that, and Ballwin or Haysville furnishes or causes to be
furnished to First Healthcare such endorsements to title insurance policies and
such other documents as First Healthcare reasonably may request to insure or
otherwise evidence that, such lien and such security interest are junior and
subordinate to the liens and security interests created or purported to be
created by the Transaction Documents; provided that if the proceeds of the funds
--------
borrowed by Ballwin or Haysville, as the case may be, exceed an aggregate amount
of $1,500,000.00, then Ballwin or Haysville, as the case may be, may use the
proceeds of such borrowed funds in excess of $1,500,000.00 to pay reasonable
closing costs associated with the consummation of such borrowing by Ballwin or
Haysville, as the case may be, and to pay reasonable fees and disbursements of
attorneys incurred by the Forbearance Parties in connection with the
preparation, execution and delivery of the Forbearance Documents, the Escrowed
Documents and the MediSave Forbearance Documents. The proceeds of funds
borrowed by Ballwin or Haysville and paid to First Healthcare pursuant to this
Section for application against the Obligations shall be applied by First
Healthcare as follows: (i) if the installments in the aggregate amount of
$252,000.00 have not then been made pursuant to and in accordance with Section
3.06(a), then first against the Arrearages, if any, in an amount up to the
lesser of the then unpaid amount of the Arrearages or $252,000.00; (ii) then
against the Delinquent Tax Balance, if any, by deposit with First Healthcare of
an amount up to the lesser of the then unpaid amount of the Delinquent Tax
Balance or one-half of the balance of the borrowed funds remaining after
application (if any) of the amount provided in clause (i) of this Section for
application first against the Delinquent Taxes payable with respect to the
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<PAGE>
Collateral covered by the Ballwin Deed of Trust or the Haysville Mortgage, as
the case may be, and then as provided in Section 3.10(d); (iii) then against the
Arrearages, if any, in an amount up to the lesser of the then unpaid amount of
the Arrearages or one-half of the balance of the borrowed funds remaining after
application (if any) of the amount provided in clause (i) of this Section; and
(iv) then, the balance (if any) of the borrowed funds remaining after
application of the amounts provided in clauses (i), (ii) and (iii) of this
Section, against the Obligations in such order and in such manner as First
Healthcare shall determine in its sole discretion.
3.21 Marceline Facility. Marceline shall use reasonable, diligent
------------------
efforts to negotiate an agreement with the REIT, on terms mutually satisfactory
to Marceline and First Healthcare, providing for (a) the termination of the
Marceline Lease and (b) the unconditional release of First Healthcare, Hillhaven
and Tenet, and their respective subsidiaries, affiliates, directors, officers,
employees, insurers, agents, representatives, successors and assigns, from any
continuing liabilities and other obligations under the Marceline Lease.
Marceline and each other Forbearance Party acknowledges and agrees that
Marceline is and remains responsible and liable for the punctual payment and
performance of all obligations of Marceline under the Marceline Sublease and
that no provision of this Section shall in any way limit, diminish, terminate or
otherwise affect any of such obligations.
3.22 Chastain's Facilities. If the Chastain's Facility Partnerships
---------------------
prepay in full to First Healthcare on or before December 30, 1995, the entire
portion of the Cost Report Remittance in the aggregate net amount set forth
opposite the names of the Chastain's Facility Partnerships in Schedule K, and if
each Chastain's Facility Partnership prepays in full to First Healthcare on or
before December 30, 1995, the entire portion of the Delinquent Rent in the
amount set forth opposite the name of such Chastain's Facility Partnership in
Schedule J(2), plus the entire portion of the Tax Arrearage in the amount set
forth opposite the name of such Chastain's Facility Partnership in Schedule Q,
plus the entire amount of such Chastain's Facility Partnership's Share of the
Default Costs and Expenses, plus all accrued interest to the date of each such
prepayment on the amount of the Arrearages so prepaid by such Chastain's
Facility Partnership, and if the Chastain's Facility Partnerships in fact, on or
before December 30, 1995, obtain from the REIT a written agreement providing,
among other things, for (a) the termination of all of the Chastain's Facility
Leases and (b) the unconditional release of First Healthcare, Hillhaven and
Tenet, and their respective subsidiaries, affiliates, directors, officers,
employees, insurers, agents, representatives, successors and assigns, from any
continuing liabilities and other
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obligations under the Chastain's Facility Leases, and if no Forbearance Default
shall have occurred, then (i) First Healthcare and MediSave shall cause the
Collateral Agent (at the sole cost and expense of the Chastain's Facility
Partnerships) to execute and deliver such Uniform Commercial Code statements of
release as may reasonably be requested by the Chastain's Facility Partnerships
to release the security interests created by the respective Partnership Guaranty
Security Agreements executed and delivered by the Chastain's Facility
Partnerships pursuant to this Agreement and (ii) if the release or termination
of any Partnership Guaranty or any MediSave Partnership Guaranty executed and
delivered by any Chastain's Facility Partnership is expressly required, as a
condition to financing, by any financial institution or other lender providing
financing for the purchase of any Chastain's Facility from the REIT, then First
Healthcare or MediSave, as the case may be, shall release or terminate such
Partnership Guaranty or such MediSave Partnership Guaranty; provided that
--------
neither First Healthcare nor MediSave otherwise shall have any obligation to
release or to consent to the termination of any Partnership Guaranty or any
MediSave Partnership Guaranty executed and delivered by any Chastain's Facility
Partnership except pursuant to the provisions of such Partnership Guaranty or
such MediSave Partnership Guaranty, as the case may be. The Chastain's Facility
Partnerships and the other Forbearance Parties acknowledge and agree that each
Chastain's Facility Partnership is and remains responsible and liable for the
punctual payment and performance of all obligations of such Chastain's Facility
Partnership under the Chastain's Facility Sublease executed and delivered by
such Chastain's Facility Partnership and that no provision of this Section shall
in any way limit, diminish, terminate or otherwise affect any of such
obligations.
3.23 Optional Prepayments; Refinancing.
---------------------------------
(a) Optional Prepayments of the Arrearages. Any Partnership, at any
--------------------------------------
time and from time to time, may prepay such Partnership's Share of the
Arrearages, in whole or in part, plus accrued interest to the date of such
prepayment on the amount of the Arrearages prepaid. Each partial
prepayment of any Partnership's Share of the Arrearages may be applied, in
the sole discretion of First Healthcare, to the installments of the
Arrearages under Section 3.06 in the inverse order of their maturities,
without deferral or limitation of the intervening installments of the
Arrearages and interest on the Arrearages.
(b) No Prepayments of the Notes. Each Forbearance Party acknowledges
---------------------------
and agrees that, under the provisions of the Notes, the Purchasers do not
have the right to prepay any principal amount evidenced by the Notes, that
the
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consent of First Healthcare is required for any requested prepayment,
whether in whole or in part, of any principal amount evidenced by the
Notes, that First Healthcare, in its sole discretion, may grant or withhold
such consent for no reason or for any reason and that, in the event First
Healthcare determines to consent to any requested prepayment of any
principal amount evidenced by the Notes, First Healthcare may condition its
consent on such terms as First Healthcare deems appropriate. Subject to
the conditions to effectiveness of the Note Modification Agreement set
forth in the Note Modification Agreement, MidAmerica may prepay the unpaid
principal amount of the Modified MediSave Note pursuant to and in
accordance with the provisions of the Modified MediSave Note.
(c) Refinancing. If the Partnerships obtain sufficient financing to
-----------
prepay (whether in one transaction or in a series of transactions) on or
before June 30, 1996, all of the unpaid Arrearages plus all of the
Delinquent Tax Balance plus the aggregate unpaid principal amounts
evidenced by the Notes plus all interest accrued on the Arrearages plus all
interest accrued on the principal amounts evidenced by the Notes, and if
First Healthcare determines in its sole discretion to consent to prepayment
of all such amounts on or before June 30, 1996, and if the Partnerships in
fact, on or before June 30, 1996, and on such terms and subject to such
conditions as First Healthcare may deem appropriate in its sole discretion,
prepay in full to First Healthcare all of the unpaid Arrearages plus all of
the Delinquent Tax Balance plus the aggregate unpaid principal amounts
evidenced by the Notes plus all interest accrued on the Arrearages plus all
interest accrued on the principal amounts evidenced by the Notes, and if
all of the conditions to the release pursuant to Section 3.22 of the
security interests created by the respective Partnership Guaranty Security
Agreements executed and delivered by the Chastain's Facility Partnerships
pursuant to this Agreement shall have been satisfied, and if no Forbearance
Default shall have occurred, then an amount (the "Discount Amount") equal
to ten percent of the sum of the principal amounts that are so prepaid
under the Notes from time to time on or prior to June 30, 1996 (excluding
any amount of the Arrearages and the amount of any regularly scheduled
principal payments under the Notes), in the sole discretion of First
Healthcare, either shall be remitted by First Healthcare to the General
Partner for and on behalf of the Partnerships to be allocated among the
Partnerships as they determine in their discretion or shall be held by
First Healthcare as collateral for, and each Partnership hereby assigns and
pledges to First Healthcare, and hereby grants to First Healthcare a
security interest in, such amount as
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security for the punctual payment and performance of, all of the
Obligations; provided that if each of Blue Hills and Wornall prepays in
--------
full to First Healthcare the entire portion of the Delinquent Rent in the
amount set forth opposite the name of such Partnership in Schedule J(2),
plus the entire portion of the Delinquent Taxes in the amount set forth
opposite the name of such Partnership in Schedule J(4), plus the entire
amount of such Partnership's Share of the Default Costs and Expenses, plus
all accrued interest to the date of each such prepayment on the amount of
the Arrearages so prepaid by such Partnership, and if the respective Leases
pertaining to the respective Subleased Facilities subleased by Blue Hills
and Wornall are terminated on terms providing, among other things, for the
unconditional release of First Healthcare, Hillhaven and Tenet, and their
respective subsidiaries, affiliates, directors, officers, employees,
insurers, agents, representatives, successors and assigns, from any
continuing liabilities and other obligations under such Leases, and if no
Forbearance Default shall have occurred, then the Discount Amount that
First Healthcare shall be entitled to hold as security for the punctual
payment and performance of all of the Obligations pursuant to this Section
shall be an amount equal to the lesser of (i) $750,000.00 or (ii) two and
one-half percent, rather than ten percent, of the sum of the principal
amounts that are prepaid under the Notes from time to time on or prior to
June 30, 1996, as provided above in this Section (excluding any amount of
the Arrearages and the amount of any regularly scheduled principal payments
under the Notes) or (iii) an amount equal to the sum of (A) the product
obtained by multiplying seven times the maximum amount of monthly Rent
payable during the then remaining term of the Sublease executed and
delivered by Colonial Terrace plus (B) the product obtained by multiplying
seven times the maximum aggregate amount of monthly Operator's Return
payable under the Management Agreements during the then remaining term of
the Management Agreements. First Healthcare shall remit to the General
Partner for and on behalf of the Partnerships, within ten days after
receipt by First Healthcare from the General Partner of a written request
for such remittance, any portion of the Discount Amount then held by First
Healthcare which exceeds the Discount Amount that First Healthcare shall
then be entitled to hold as security pursuant to this Section.
3.24 Transferees of First Healthcare. Without limiting the generality of
-------------------------------
the first sentence of Section 7.07, First Healthcare may assign or otherwise
transfer all or any portion of its rights and obligations under this Agreement,
the other Forbearance Documents and the Transaction Documents (including,
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but not limited to, any Note, any Mortgage and any Deed of Trust) to any other
Person, and such other Person, upon such assignment or transfer, shall become
vested with all of the benefits that are granted to First Healthcare in this
Agreement or otherwise in respect of the rights and obligations that are
assigned or otherwise transferred.
3.25 Acceptance of Escrowed Documents. Notwithstanding any provision to
--------------------------------
the contrary in this Agreement or any other Forbearance Document:
(a) Confessions of Judgment. Acceptance by First Healthcare or its
-----------------------
assignee or transferee of any Confession of Judgment shall occur when and
only when, following the occurrence of a Forbearance Default, (i) First
Healthcare shall have requested and received such Confession of Judgment
from the Escrow Agent and (ii) First Healthcare or its assignee or
transferee shall have presented such Confession of Judgment to a court of
competent jurisdiction for entry by such court. If any Guarantor
Confession of Judgment is accepted by First Healthcare or its assignee or
transferee pursuant to this Section and if any Deed in Lieu of Foreclosure
is accepted by First Healthcare or its assignee or transferee pursuant to
Section 3.25(c) or Section 3.25(d), then the amount of the judgment under
such Guarantor Confession of Judgment shall be credited with an amount
equal to the amount of the Obligations under the Transaction Documents that
are secured by the Mortgage or the Deed of Trust described in such Deed in
Lieu of Foreclosure.
(b) Sublease Termination Agreements. Acceptance by First Healthcare
-------------------------------
or its assignee or transferee, with respect to any Sublease, of the
Sublease Termination Agreement relating to such Sublease shall occur when
and only when, following the occurrence of any Forbearance Default, (i)
First Healthcare shall have requested and received such Sublease
Termination Agreement from the Escrow Agent and (ii) First Healthcare or
its assignee or transferee shall have recorded such Sublease Termination
Agreement in the records of the county in the state of Kansas or the state
of Missouri, as the case may be, in which the Subleased Facility covered by
such Sublease is located.
(c) Kansas Deeds in Lieu of Foreclosure. Acceptance by First
-----------------------------------
Healthcare or its assignee or transferee of any Kansas Deed in Lieu of
Foreclosure shall occur when and only when, following the occurrence of any
Forbearance Default, (i) First Healthcare shall have requested and received
such Kansas Deed in Lieu of Foreclosure from the Escrow Agent and (ii)
First Healthcare or its assignee or transferee shall
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have recorded such Kansas Deed in Lieu of Foreclosure in the records of the
county in the state of Kansas in which the real property covered by such
Kansas Deed in Lieu of Foreclosure is located.
(d) Missouri Deeds in Lieu of Foreclosure. Acceptance by First
-------------------------------------
Healthcare or its assignee or transferee of any Missouri Deed in Lieu of
Foreclosure shall occur when and only when, following the occurrence of any
Forbearance Default, (i) First Healthcare shall have requested and received
such Missouri Deed in Lieu of Foreclosure from the Escrow Agent and (ii)
First Healthcare or its assignee or transferee shall have recorded such
Missouri Deed in Lieu of Foreclosure in the records of the county in the
state of Missouri in which the real property covered by such Missouri Deed
in Lieu of Foreclosure is located.
(e) Other Escrowed Documents. Acceptance by First Healthcare or its
------------------------
assignee or transferee of any Management Termination Agreement, any
Escrowed Management Agreement, any Estoppel Affidavit, any Certificate of
Non-Foreign Status and any Bill of Sale in Lieu of Foreclosure shall occur
when and only when, following the occurrence of any Forbearance Default,
(i) First Healthcare shall have requested and received from the Escrow
Agent such Management Termination Agreement, such Escrowed Management
Agreement, such Estoppel Affidavit, such Certificate of Non-Foreign Status
or such Bill of Sale in Lieu of Foreclosure, as the case may be, and (ii)
First Healthcare or its assignee or transferee shall have requested and
shall have obtained any consent, authorization or approval required from
any federal, state or local governmental or regulatory authority or other
Person for the assignment, conveyance or other transfer or other
transaction contemplated by such Escrowed Document.
3.26 Completion of Escrowed Documents. Each Forbearance Party hereby
--------------------------------
irrevocably authorizes First Healthcare, upon the occurrence of any Forbearance
Default and receipt by First Healthcare of any Escrowed Document from the Escrow
Agent, to attach to such Escrowed Document any cover page necessary to comply
with applicable legal or procedural requirements, to complete any date or dates
required to be completed in such Escrowed Document and to complete any blanks
required to be completed in such Escrowed Document in order to enable First
Healthcare, readily and without procedural or other delays, to exercise and
enforce its rights and remedies under the Transaction Documents and the
Forbearance Documents with respect to any of the Collateral, any of the
Facilities, any of the Forbearance Parties or otherwise, including, but not
limited to, the completion of blanks for the purpose of (a) stating the name
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of any assignee or transferee of First Healthcare and any other identifying
information necessary or appropriate with respect to such assignee or transferee
and (b) stating the factual basis on which First Healthcare or any assignee or
transferee of First Healthcare is entitled to the judgment, conveyance or other
right or remedy provided for in such Escrowed Document. Each Forbearance Party
agrees that such Forbearance Party shall not object to or otherwise oppose, or
cause or encourage any other Person to object to or otherwise oppose, the
completion of any Escrowed Document by First Healthcare pursuant to the
authorization granted in this Section.
3.27 Return of Escrowed Documents. Upon request made to First Healthcare
----------------------------
by any Forbearance Party following the occurrence of each and all of the Tax
Delinquency Payment Date, the payment in full of the Arrearages and all interest
accrued on the Arrearages, and the payment in full of the entire, aggregate
principal amount of, and all interest accrued on, the Notes, and if no
Forbearance Default shall then have occurred, First Healthcare shall instruct
the Escrow Agent to return the Escrowed Documents to the General Partner for and
on behalf of the Forbearance Parties.
3.28 Limitation on Interest. Notwithstanding any provision to the
----------------------
contrary in any Transaction Document, any MediSave Transaction Document, any
Forbearance Document, any MediSave Forbearance Document or any Escrowed
Document, no provision of this Agreement, any other Forbearance Document, any
other MediSave Forbearance Document, any Transaction Document, any MediSave
Transaction Document or any Escrowed Document shall require the payment or
permit the collection of interest, fees or charges in excess of the maximum rate
permitted by applicable law.
3.29 Consent of Guarantors. Each Guarantor hereby consents to this
---------------------
Agreement, the other Forbearance Documents, the other MediSave Forbearance
Documents, the Escrowed Documents and the transactions contemplated by this
Agreement, the other Forbearance Documents, the other MediSave Forbearance
Documents and the Escrowed Documents, and hereby confirms and agrees that each
of the Guaranty and the MediSave Guaranty is, and shall continue to be, in full
force and effect and is hereby ratified and confirmed in all respects.
ARTICLE IV
CONDITIONS PRECEDENT
4.01 Conditions Precedent. This Agreement shall not be effective, and
--------------------
First Healthcare shall have no obligation to forbear from exercising any of
First Healthcare's rights and remedies under the Transaction Documents, unless
and until, on or
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before September 6, 1995, each of the following conditions precedent either
shall have been satisfied or shall have been waived in writing in whole or in
part by First Healthcare in its sole discretion:
(a) First Healthcare shall have received this Agreement duly executed
by all of the Forbearance Parties;
(b) Each Forbearance Party shall have performed all obligations of
such Forbearance Party under this Agreement that are required to be
performed by such Forbearance Party on or prior to September 6, 1995;
(c) Each MidAmerica Party shall have performed all obligations of such
MidAmerica Party under this Agreement that are required to be performed by
such MidAmerica Party on or prior to September 6, 1995;
(d) First Healthcare shall have received a deposit in the amount of at
least $450,000.00 (which deposit in the amount of $450,000.00 has been
received by First Healthcare as of the date of this Agreement) as required
by Section 3.10(a)(i);
(e) The representations and warranties of each Forbearance Party
contained in this Agreement, the other Forbearance Documents, the Escrowed
Documents and any certificate or other writing delivered by such
Forbearance Party pursuant to this Agreement shall be true on and as of
September 6, 1995, as if made on and as of September 6, 1995, and First
Healthcare shall have received a certificate to that effect duly executed
by each Guarantor with respect to the representations and warranties of
such Guarantor and by the chief executive officer and the chief financial
officer of the General Partner with respect to the respective
representations and warranties of the Partnerships and the General Partner;
(f) The representations and warranties of each MidAmerica Party
contained in this Agreement, the other MediSave Forbearance Documents and
any certificate or other writing delivered by such MidAmerica Party
pursuant to this Agreement shall be true on and as of September 6, 1995, as
if made on and as of September 6, 1995, and MediSave and First Healthcare
shall have received a certificate to that effect duly executed by each
Guarantor with respect to the representations and warranties of such
Guarantor and by the chief executive officer and the chief financial
officer of the General Partner with respect to the respective
representations and warranties of the Partnerships, MidAmerica and the
General Partner;
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(g) First Healthcare shall have received each preliminary commitment
for title insurance or other title search report required by Section 3.13;
(h) First Healthcare shall have received each of the duly executed
and, where appropriate, acknowledged, attested or verified documents
required by Section 3.14;
(i) First Healthcare shall have received evidence satisfactory to
First Healthcare that the Collateral Agent has received each of the duly
executed and, where appropriate, acknowledged, attested or verified
documents required by Section 3.15;
(j) First Healthcare shall have received evidence satisfactory to
First Healthcare that the Escrow Agent has received each of the duly
executed and, where appropriate, acknowledged, attested or verified
documents required by Section 3.16;
(k) First Healthcare shall have received evidence satisfactory to
First Healthcare that MediSave has received each of the duly executed and,
where appropriate, acknowledged, attested or verified documents required by
Section 3.17;
(l) First Healthcare shall have received evidence of the completion of
all recordings and filings of the Financing Statements, the Partnership
Guaranty Mortgages, the Partnership Guaranty Deeds of Trust and the Agency
Financing Statements as First Healthcare may deem necessary or desirable to
establish and perfect, or to give constructive notice of, the liens and
security interests created or purported to be created by the Forbearance
Documents; and
(m) First Healthcare shall have received all cost reports, surveys,
financial statements and other reports, statements, certificates, materials
and information required to be furnished to First Healthcare by any
Forbearance Party on or before September 6, 1995, pursuant to this
Agreement or any Transaction Document.
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<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01 Certain Representations and Warranties of the Forbearance Parties.
-----------------------------------------------------------------
Each Forbearance Party represents and warrants to First Healthcare and MediSave
as follows:
(a) Validity, Enforceability, Etc. This Agreement has been duly
-----------------------------
executed by such Forbearance Party. This Agreement and each Transaction
Document to which such Forbearance Party is a party is, and each other
Forbearance Document and each Escrowed Document to which such Forbearance
Party is to be a party when executed and delivered by such Forbearance
Party will be, a legal, valid and binding obligation of such Forbearance
Party, enforceable against such Forbearance Party in accordance with its
terms.
(b) Consents, Etc. Except for the respective consents of Capital Bank
-------------
of Sikeston and NPF-PW which will be obtained on or before September 6,
1995, and except for any other consents, authorizations, approvals,
licenses, permits, waivers, exemptions, filings, recordings and
registrations which have been obtained or made, no consent, authorization,
approval, license, permit, waiver or exemption from, and no filing,
recording or registration with, any court or any governmental or regulatory
authority or any other Person (including, but not limited to, any limited
partner in any Partnership) is required for the due execution, delivery and
performance by such Forbearance Party of any Transaction Document, any
Forbearance Document or any Escrowed Document to which such Forbearance
Party is or is to be a party.
(c) Legal Proceedings. There is no pending or threatened action, suit
-----------------
or proceeding affecting such Forbearance Party or any of such Forbearance
Party's properties before any court, arbitrator, mediator or governmental
or regulatory authority which purports to affect the legality, validity or
enforceability of this Agreement, any Transaction Document, any other
Forbearance Document or any Escrowed Document and, except as disclosed in
writing by such Forbearance Party to First Healthcare and MediSave prior to
the date of this Agreement, there is no pending or threatened action, suit
or proceeding affecting such Forbearance Party or any of such Forbearance
Party's properties before any court, arbitrator, mediator or governmental
or regulatory authority which may materially adversely affect the financial
condition or operations of such Forbearance Party.
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(d) Disclosures. No certificate, schedule, financial statement,
-----------
report or other information furnished to First Healthcare by or on behalf
of such Forbearance Party in connection with the negotiation or preparation
of, or pursuant to the provisions of, this Agreement, any Transaction
Document, any other Forbearance Document or any Escrowed Document contains
any material misstatement of fact or omits to state a material fact or any
fact necessary to make the statements contained in such certificate,
schedule, financial statement, report or other information not misleading.
(e) Forbearance Defaults; Etc. No Forbearance Default or other event
-------------------------
or condition which, with the giving of notice or the lapse of time or both,
would constitute a Forbearance Default has occurred and is continuing.
(f) Purpose of Obligations. None of the Obligations represents a loan
----------------------
for personal, family, household or agricultural purposes, and any loans
constituting any portion of the Obligations are each more than $5,000.00 in
amount.
(g) No Claims. Such Forbearance Party is not aware of, and has not
---------
received notice of, any fact, event, transaction, condition, act or
omission to act occurring on or prior to the date of this Agreement that
may constitute a failure by First Healthcare to perform any of the
covenants of First Healthcare set forth in any of Sections 3.15, 5.04,
5.05, 7.06 and 7.07 of the Facility Agreement.
5.02 Additional Representations and Warranties of the Partnerships. Each
-------------------------------------------------------------
Partnership represents and warrants to First Healthcare and MediSave as follows:
(a) Partnership Existence and Power. Such Partnership is a limited
-------------------------------
partnership duly formed, validly existing and in good standing under the
laws of the state of North Carolina. Such Partnership is duly qualified
and in good standing as a foreign limited partnership authorized to do
business in each jurisdiction (other than the jurisdiction of its
formation) in which the nature of its activities or the character of the
properties it owns or leases makes such qualification necessary and in
which the failure so to qualify would have a materially adverse effect on
such Partnership. Such Partnership has all requisite power and authority,
partnership and otherwise, to own its properties and to conduct its
business as such business currently is being conducted.
-41-
<PAGE>
(b) Partnership Authorization. The execution, delivery and
-------------------------
performance by such Partnership of this Agreement and the Transaction
Documents, the other Forbearance Documents and the Escrowed Documents to
which such Partnership is or is to be a party are within such Partnership's
partnership powers and have been duly authorized by all necessary
partnership action on the part of such Partnership.
(c) Non-Contravention. The execution, delivery and performance by
-----------------
such Partnership of this Agreement and the Transaction Documents, the other
Forbearance Documents and the Escrowed Documents to which such Partnership
is or is to be a party do not and will not: (i) require any consent by any
of the limited partners in such Partnership other than any consent that has
been obtained; (ii) contravene or conflict with the partnership agreement,
the certificate of limited partnership or any other organizational
documents of such Partnership; (iii) violate any provision of any law,
rule, regulation, order, writ, judgment, injunction, decree or award that
currently is in effect and applicable to such Partnership or any of its
properties; or (iv) contravene or constitute a breach of or a default under
any contractual restriction that is binding on or that affects such
Partnership or any of its properties.
(d) Unconditional Obligation; No Defenses, Etc. The Note, if any, to
------------------------------------------
which such Partnership is a party is not subject to any claim, defense or
right of set-off or recoupment of any kind whatsoever. Such Partnership
has no claims, counterclaims or defenses against First Healthcare, MediSave
or any other Person that would or might affect (i) the validity,
enforceability or binding nature of any provision of any Transaction
Document, any Forbearance Document or any Escrowed Document or (ii) the
collectibility of any of the Obligations of such Partnership.
(e) Partners. The General Partner is the only general partner in such
--------
Partnership. The Don G. Angell Irrevocable Trust and AdvoCare Services,
Inc., a North Carolina corporation, are all of the limited partners in such
Partnership.
(f) Address. A mailing address for such Partnership is P.O. Box 1670,
-------
Clemmons, North Carolina 27012.
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<PAGE>
5.03 Certain Representations and Warranties of the MidAmerica Parties.
----------------------------------------------------------------
Each MidAmerica Party represents and warrants to First Healthcare and MediSave
as follows:
(a) Validity, Enforceability, Etc. This Agreement has been duly
-----------------------------
executed by such MidAmerica Party. This Agreement and each MediSave
Transaction Document to which such MidAmerica Party is a party is, and each
other MediSave Forbearance Document to which such MidAmerica Party is to be
a party when executed and delivered by such MidAmerica Party will be, a
legal, valid and binding obligation of such MidAmerica Party, enforceable
against such MidAmerica Party in accordance with its terms.
(b) Consents, Etc. Except for the respective consents of Capital Bank
-------------
of Sikeston and NPF-PW, Inc. which will be obtained on or before September
6, 1995, and except for any other consents, authorizations, approvals,
licenses, permits, waivers, exemptions, filings, recordings and
registrations which have been obtained or made, no consent, authorization,
approval, license, permit, waiver or exemption from, and no filing,
recording or registration with, any court or any governmental or regulatory
authority or any other Person (including, but not limited to, any limited
partner in MidAmerica) is required for the due execution, delivery and
performance by such MidAmerica Party of any MediSave Transaction Document
or any MediSave Forbearance Document to which such MidAmerica Party is or
is to be a party.
(c) Legal Proceedings. There is no pending or threatened action, suit
-----------------
or proceeding affecting such MidAmerica Party or any of such MidAmerica
Party's properties before any court, arbitrator, mediator or governmental
or regulatory authority which purports to affect the legality, validity or
enforceability of this Agreement, any MediSave Transaction Document or any
other MediSave Forbearance Document and, except as disclosed in writing by
such MidAmerica Party to First Healthcare and MediSave prior to the date of
this Agreement, there is no pending or threatened action, suit or
proceeding affecting such MidAmerica Party or any of such MidAmerica
Party's properties before any court, arbitrator, mediator or governmental
or regulatory authority which may materially adversely affect the financial
condition or operations of such MidAmerica Party.
(d) Disclosures. No certificate, schedule, financial statement,
-----------
report or other information furnished to MediSave by or on behalf of such
MidAmerica Party in connection with the negotiation or preparation of, or
pursuant to the
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<PAGE>
provisions of, this Agreement, any MediSave Transaction Document or any
other MediSave Forbearance Document contains any material misstatement of
fact or omits to state a material fact or any fact necessary to make the
statements contained in such certificate, schedule, financial statement,
report or other information not misleading.
(e) Forbearance Defaults; Etc. No Forbearance Default or other event
-------------------------
or condition which, with the giving of notice or the lapse of time or both,
would constitute a Forbearance Default has occurred and is continuing.
(f) Purpose of Obligations. None of the MediSave Obligations
----------------------
represents a loan for personal, family, household or agricultural purposes,
and any loans constituting any portion of the MediSave Obligations are each
more than $5,000.00 in amount.
5.04 Additional Representations and Warranties of MidAmerica. MidAmerica
-------------------------------------------------------
represents and warrants to First Healthcare and MediSave as follows:
(a) Partnership Existence and Power. MidAmerica is a limited
-------------------------------
partnership duly formed, validly existing and in good standing under the
laws of the state of North Carolina. MidAmerica is duly qualified and in
good standing as a foreign limited partnership authorized to do business in
each jurisdiction (other than the jurisdiction of its formation) in which
the nature of its activities or the character of the properties it owns or
leases makes such qualification necessary and in which the failure so to
qualify would have a materially adverse effect on MidAmerica. MidAmerica
has all requisite power and authority, partnership and otherwise, to own
its properties and to conduct its business as such business currently is
being conducted.
(b) Partnership Authorization. The execution, delivery and
-------------------------
performance by MidAmerica of this Agreement and the MediSave Transaction
Documents and the other MediSave Forbearance Documents to which MidAmerica
is or is to be a party are within MidAmerica's partnership powers and have
been duly authorized by all necessary partnership action on the part of
MidAmerica.
(c) Non-Contravention. The execution, delivery and performance by
-----------------
MidAmerica of this Agreement and the MediSave Transaction Documents and the
other MediSave Forbearance Documents to which MidAmerica is or is to be a
party do not and will not: (i) require any consent by any of the limited
partners in MidAmerica other than any consent that has been
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obtained; (ii) contravene or conflict with the partnership agreement, the
certificate of limited partnership or any other organizational documents of
MidAmerica; (iii) violate any provision of any law, rule, regulation,
order, writ, judgment, injunction, decree or award that currently is in
effect and applicable to MidAmerica or any of its properties; or (iv)
contravene or constitute a breach of or a default under any contractual
restriction that is binding on or that affects MidAmerica or any of its
properties.
(d) Unconditional Obligation; No Defenses, Etc. The MediSave Note is
------------------------------------------
not subject to any claim, defense or right of set-off or recoupment of any
kind whatsoever. MidAmerica has no claims, counterclaims or defenses
against First Healthcare, MediSave or any other Person that would or might
affect (i) the validity, enforceability or binding nature of any provision
of any MediSave Transaction Document or any MediSave Forbearance Document
or (ii) the collectibility of any of the MidAmerica Obligations of
MidAmerica.
(e) Partners. The General Partner is the only general partner in
--------
MidAmerica. Manatee Medical Products & Services, Inc., a North Carolina
corporation, and AdvoCare Services, Inc., a North Carolina corporation, are
all of the limited partners in MidAmerica.
(f) Address. A mailing address for MidAmerica is P.O. Box 1670,
-------
Clemmons, North Carolina 27012.
5.05 Additional Representations and Warranties of the Guarantors. Each
-----------------------------------------------------------
Guarantor represents and warrants to First Healthcare and MediSave as follows:
(a) Capacity. Such Guarantor has the legal capacity to execute,
--------
deliver and perform this Agreement and the other Forbearance Documents, the
other MediSave Forbearance Documents and the Escrowed Documents to which
such Guarantor is or is to be a party.
(b) Non-Contravention. The execution, delivery and performance by
-----------------
such Guarantor of this Agreement and the other Forbearance Documents, the
other MediSave Forbearance Documents and the Escrowed Documents to which
such Guarantor is or is to be a party do not and will not: (i) require any
consent that has not been obtained; (ii) violate any provision of any law,
rule, regulation, order, writ, judgment, injunction, decree or award that
currently is in effect and applicable to such Guarantor or any of such
Guarantor's properties; or (iii) contravene or constitute a breach of or a
default under any contractual restriction
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<PAGE>
that is binding on or that affects such Guarantor or any of such
Guarantor's properties.
(c) No Defenses, Etc. Neither the Guaranty nor the MediSave Guaranty
----------------
is subject to any claim, defense or right of set-off or recoupment of any
kind whatsoever. Such Guarantor has no claims, counterclaims or defenses
against First Healthcare, MediSave or any other Person that would or might
affect (i) the validity, enforceability or binding nature of any provision
of any Transaction Document, any MediSave Transaction Document, any
Forbearance Document, any MediSave Forbearance Document or any Escrowed
Document or (ii) the collectibility of any of the Obligations of such
Guarantor or any of the MidAmerica Obligations of such Guarantor.
5.06 Additional Representations and Warranties of the General Partner.
----------------------------------------------------------------
The General Partner represents and warrants to First Healthcare and MediSave as
follows:
(a) Corporate Existence and Power. The General partner is a
-----------------------------
corporation duly incorporated, validly existing and in good standing under
the laws of the state of North Carolina. The General partner is duly
qualified and in good standing as a foreign corporation authorized to do
business in each jurisdiction (other than the jurisdiction of its
incorporation) in which the nature of its activities or the character of
the properties it owns or leases makes such qualification necessary and in
which the failure so to qualify would have a materially adverse effect on
the General Partner, MidAmerica or any Partnership. The General Partner
has all requisite power and authority, corporate and otherwise, to own its
properties and to conduct its business as such business currently is being
conducted.
(b) Corporate Authorization. The execution, delivery and performance
-----------------------
by the General Partner of this Agreement and the Transaction Documents, the
MediSave Transaction Documents, the other Forbearance Documents, the other
MediSave Forbearance Documents and the Escrowed Documents to which the
General Partner is or is to be a party or a signatory for and on behalf of
itself or any Partnership or MidAmerica are within the General Partner's
corporate powers and have been duly authorized by all necessary corporate
action on the part of the General Partner.
(c) Non-Contravention. The execution, delivery and performance by the
-----------------
General partner of this Agreement and the Transaction Documents, the
MediSave Transaction Documents, the other Forbearance Documents, the other
MediSave Forbearance Documents and the Escrowed Documents to which
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the General Partner is or is to be a party or a signatory for and on behalf
of itself or any Partnership or MidAmerica do not and will not: (i) require
any consent by any of the General Partner's shareholders; (ii) contravene
or conflict with the articles of incorporation or bylaws of the General
Partner; (iii) violate any provision of any law, rule, regulation, order,
writ, judgment, injunction, decree or award that currently is in effect and
applicable to the General Partner, any Partnership or MidAmerica or any of
their respective properties; or (iv) contravene or constitute a breach of
or a default under any contractual restriction that is binding on or that
affects the General Partner, any Partnership or MidAmerica or any of their
respective properties.
(d) No Defenses, Etc. The General Partner has no claims,
----------------
counterclaims or defenses against First Healthcare, MediSave or any other
Person that would or might affect (i) the validity, enforceability or
binding nature of any provision of any Transaction Document, any MediSave
Transaction Document, any Forbearance Document, any MediSave Forbearance
Document or any Escrowed Document, (ii) the collectibility of any of the
Obligations of the General Partner or any Partnership or (iii) the
collectibility of any of the MidAmerica Obligations of the General Partner
or MidAmerica.
5.07 Representations and Warranties of First Healthcare. First
--------------------------------------------------
Healthcare represents and warrants to the Forbearance Parties as follows:
(a) Notes. First Healthcare is the legal and beneficial owner of each
-----
Note, and has not assigned any Note to any other Person.
(b) Subleases. First Healthcare has not assigned its rights under any
---------
Sublease to any other Person.
(c) Corporate Authorization. The execution, delivery and performance
-----------------------
by First Healthcare of this Agreement and the other Forbearance Documents
to which First Healthcare is or is to be a party are within First
Healthcare's corporate powers and have been duly authorized by all
necessary corporate action on the part of First Healthcare.
5.08 Representations and Warranties of MediSave. MediSave represents and
------------------------------------------
warrants to the Forbearance Parties as follows:
(a) MediSave Note. MediSave is the legal and beneficial owner of the
-------------
MediSave Note, and has not assigned the MediSave Note to any other Person.
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(b) Corporate Authorization. The execution, delivery and performance
-----------------------
by MediSave of this Agreement and the other MediSave Forbearance Documents
to which MediSave is or is to be a party are within MediSave's corporate
powers and have been duly authorized by all necessary corporate action on
the part of MediSave.
ARTICLE VI
FORBEARANCE DEFAULTS
6.01 Forbearance Defaults. Any one or more of the following events or
--------------------
conditions shall constitute, individually, a "Forbearance Default" and,
collectively, the "Forbearance Defaults":
(a) Any Purchaser shall fail during the Forbearance Period to pay on
or before the twenty-fifth day of any calendar month all or any portion of
any installment of principal and interest that is stated in the Note
executed and delivered by such Purchaser to be due on the first day of such
calendar month;
(b) Any Sublessee shall fail during the Forbearance Period to pay on
or before the twenty-fifth day of any calendar month (i) all or any portion
of the Rent under the Sublease executed and delivered by such Sublessee
that is stated in such Sublease to be due on the first day of such calendar
month or (ii) all or any portion of the additional Rent required under
Section 3.04;
(c) Any Manager shall fail during the Forbearance Period to pay on or
before the twenty-fifth day of any calendar month (i) all or any portion of
the Operator's Return under the Management Agreement executed and delivered
by such Manager that is stated in such Management Agreement to be due on
the first day of such calendar month or (ii) all or any portion of the
additional Operator's Return required under Section 3.05;
(d) Any Partnership shall fail to pay any of such Partnership's Share
of the Arrearages, or any interest on the unpaid amount of such
Partnership's Share of the Arrearages, when the same becomes due and
payable under this Agreement;
(e) The Partnerships shall fail to deposit any amount with First
Healthcare when the deposit of such amount is due under Section 3.10(a) of
this Agreement;
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(f) Any Partnership shall fail to deposit any amount with First
Healthcare when the deposit of such amount is due under Section 3.10(b) of
this Agreement;
(g) Any Forbearance Party shall fail to pay to First Healthcare any
other amount required to be paid by such Forbearance Party to First
Healthcare under this Agreement or any other Forbearance Document when the
same becomes due and payable or, in the case of any such amount that is
payable on demand, when demand is made, and such failure shall remain
unremedied for ten days after written notice of such failure shall have
been given to such Forbearance Party by First Healthcare;
(h) Any MidAmerica Party, prior to the payment in full of the entire
unpaid principal amount evidenced by the Modified MediSave Note plus all
accrued and unpaid interest on the Modified MediSave Note plus all other
amounts payable under the Modified MediSave Note, shall fail to pay to
MediSave any amount required to be paid by such MidAmerica Party to
MediSave under this Agreement or any other MediSave Forbearance Document
when the same becomes due and payable or, in the case of any such amount
that is payable on demand, when demand is made, and such failure shall
remain unremedied for ten days after written notice of such failure shall
have been given to such MidAmerica Party by MediSave;
(i) Any representation or warranty made by any Forbearance Party or
any MidAmerica Party under or in connection with this Agreement, any other
Forbearance Document, any other MediSave Forbearance Document or any
Escrowed Document shall prove to have been incorrect in any material
respect when made;
(j) Any Forbearance Party shall fail to pay when due any indebtedness,
liability or other obligation of such Forbearance Party to the State of
Kansas, Department of Human Resources, or the State of Missouri, Division
of Employment Security;
(k) Any Forbearance Party shall fail to perform or observe any other
term, covenant or agreement contained in this Agreement or any other
Forbearance Document to be performed or observed by such Forbearance Party
and, if such failure reasonably may be remedied by such Forbearance Party,
such failure shall remain unremedied for ten days after written notice of
such failure shall have been given to such Forbearance Party by First
Healthcare;
(l) Any MidAmerica Party, prior to the payment in full of the entire
unpaid principal amount evidenced by the
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Modified MediSave Note plus all accrued and unpaid interest on the Modified
MediSave Note plus all other amounts payable under the Modified MediSave
Note, shall fail to perform or observe any other term, covenant or
agreement contained in this Agreement or any other MediSave Forbearance
Document to be performed or observed by such MidAmerica Party and, if such
failure reasonably may be remedied by such Forbearance Party, such failure
shall remain unremedied for ten days after written notice of such failure
shall have been given to such MidAmerica Party by MediSave;
(m) Any other event or condition (other than a Designated Default)
which constitutes an Event of Default under and as that term is defined in
any Transaction Document, or which constitutes a breach of or a default
under any Transaction Document, shall have occurred; or
(n) Any other event or condition which constitutes an Event of Default
under and as that term is defined in any MediSave Transaction Document, or
which constitutes a breach of or a default under any MediSave Transaction
Document, shall have occurred prior to the payment in full of the entire
unpaid principal amount evidenced by the Modified MediSave Note plus all
accrued and unpaid interest on the Modified MediSave Note plus all other
amounts payable under the Modified MediSave Note.
6.02 Remedies. Upon the occurrence of any Forbearance Default, and at
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any and all times thereafter, First Healthcare and/or the Collateral Agent, in
addition to any rights and remedies available to it under any Transaction
Document, any Forbearance Document or any Escrowed Document, may (but shall not
be obligated to) take such action personally or by its agents or attorneys, with
or without entry, and without presentment, demand, protest, notice of
nonpayment, notice of dishonor or any other notice of any kind, all of which are
hereby waived by each Forbearance Party and each MidAmerica Party, as First
Healthcare and/or the Collateral Agent deems necessary or advisable to protect
and enforce its rights and remedies against the Forbearance Parties and the
MidAmerica Parties and in and to the Collateral, including, but not limited to,
the following actions, each of which may be pursued concurrently or otherwise,
at such time and in such order as First Healthcare and/or the Collateral Agent
may determine, in its sole discretion, without impairing or otherwise affecting
any other rights or remedies of First Healthcare and/or the Collateral Agent:
(a) Deem the entire unpaid amount of the Arrearages, the entire,
aggregate unpaid principal balances evidenced by the Notes, all accrued and
unpaid interest on the Arrearages and under the Notes, and all other
amounts payable under
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this Agreement, the Notes, the other Transaction Documents and the other
Forbearance Documents, to be immediately due and payable, whereupon the
entire unpaid amount of the Arrearages, the entire, aggregate unpaid
principal balances evidenced by the Notes, all accrued and unpaid interest
on the Arrearages and under the Notes, and all other amounts payable under
this Agreement, the Notes, the other Transaction Documents and the other
Forbearance Documents shall become and be immediately due and payable;
provided that in the event of an actual or deemed entry of an order for
--------
relief with respect to any Forbearance Party or any MidAmerica Party under
the Bankruptcy Code, or under any present or future law or statute of the
United States of America or of any state or other jurisdiction thereof
relevant to bankruptcy, insolvency or other relief of debtors, the entire
unpaid amount of the Arrearages, the entire, aggregate unpaid principal
balances evidenced by the Notes, all accrued and unpaid interest on the
Arrearages and under the Notes, and all other amounts payable under this
Agreement, the Notes, the other Transaction Documents and the other
Forbearance Documents automatically shall become and be due and payable,
without presentment, demand, protest, notice of nonpayment, notice of
dishonor or any notice of any kind, all of which are hereby expressly
waived by each Forbearance Party and each MidAmerica Party, anything in
this Agreement, any other Forbearance Document, any Escrowed Document or
any Transaction Document to the contrary notwithstanding;
(b) Institute a proceeding or proceedings for the complete foreclosure
of any or all of the Mortgages, the Deeds of Trust, the Partnership
Guaranty Mortgages and the Partnership Guaranty Deeds of Trust under any
applicable provision of law;
(c) Institute a proceeding or proceedings for the partial foreclosure
of any or all of the Mortgages, the Deeds of Trust, the Partnership
Guaranty Mortgages and the Partnership Guaranty Deeds of Trust under any
applicable provision of law for the portion of the Obligations then due and
payable, subject to the liens of the Mortgages, the Deeds of Trust, the
Partnership Guaranty Mortgages and the Partnership Guaranty Deeds of Trust
continuing unimpaired and without loss of priority so as to secure the
balance of the Obligations not then due and payable;
(d) To the extent permitted by applicable law, sell the Collateral,
and all estate, right, title, interest, claim and demand of the Forbearance
Parties in the Collateral, and all rights of redemption of the Collateral,
at one or more sales, as an entirety or in parcels, with
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such elements of real and/or personal property (and, to the extent
permitted by applicable law, may elect to deem all of the Collateral to be
real property for purposes of such sale or sales), and at such time and
place and upon such terms as First Healthcare and/or the Collateral Agent
may deem expedient, or as may be required by applicable law, and in the
event of a sale, by foreclosure or otherwise, of less than all of the
Collateral, the Mortgages, the Deeds of Trust, the Partnership Guaranty
Mortgages and the Partnership Guaranty Deeds of Trust shall continue as a
lien and security interest on the remaining portion of the Mortgaged
Property;
(e) Institute an action, suit or proceeding in equity for the specific
performance of any of the provisions contained in any Transaction Document
or any Forbearance Document;
(f) Sue and recover a judgment on the Obligations, as the same become
due and payable, or on account of any Forbearance Default;
(g) Apply for the appointment of a receiver, custodian, trustee,
liquidator or conservator of the Collateral, to be invested with the
fullest powers permitted under applicable law, as a matter of right and
without regard to or the necessity to disprove the adequacy of the security
for the Obligations or the solvency of any Forbearance Party or any other
Person liable for the payment of any of the Obligations or to prove or
establish mismanagement, waste or similar malfeasance, and each Forbearance
Party and each other Person so liable hereby waives or shall be deemed to
have waived such necessity and hereby consents or shall be deemed to have
consented to such appointment;
(h) Enter upon the Facilities and the other Collateral, and exclude
the Forbearance Parties and the agents, servants and representatives of the
Forbearance Parties wholly from the Facilities and the other Collateral,
without liability for trespass, damages or otherwise, and take possession
of all books, records and accounts relating to the Facilities and the other
Collateral (and each Forbearance Party agrees to surrender possession of
the Facilities and the other Collateral and of such books, records and
accounts to First Healthcare and/or the Collateral Agent on demand after
the occurrence of any Forbearance Default), and upon each such entry, and
from time to time thereafter, at the expense of the Forbearance Parties,
without interference by any Forbearance Party, (i) maintain and restore the
Facilities and the other
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Collateral by purchase, repair or construction, (ii) insure or reinsure the
Facilities and the other Collateral, (iii) make all necessary or proper
repairs, renewals, replacements, alterations, additions, betterments and
improvements to and on the Facilities and the other Collateral and (iv) in
every such case in connection with the foregoing have the right to exercise
all rights and powers of the Forbearance Parties with respect to the
Facilities, either in the name of any one or more of the Forbearance
Parties or otherwise, including the right to make, cancel, enforce or
modify leases and subleases, obtain and evict tenants and subtenants on
such terms as First Healthcare and/or the Collateral Agent shall deem
advisable;
(i) Use, operate, manage, preserve, control and otherwise deal with
the Facilities and the other Collateral and the books, records and accounts
relating to the Facilities and the other Collateral, and conduct the
business of the Facilities, either personally or by superintendents,
managers, agents, servants, attorneys or receivers, without interference
from any Forbearance Party;
(j) With or without the entrance upon or taking possession of any
Facility or any of the Collateral, to the extent not prohibited by
applicable law, collect and receive all rents, income, proceeds, issues,
profits, revenues, accounts, cash and other moneys and sums due and to
become due and payable under or pursuant to or derived from the Facilities
and the Collateral, and after deducting therefrom all costs and expenses of
every character incurred by First Healthcare and/or the Collateral Agent in
collecting the same and in using, operating, managing, preserving and
controlling the Facilities and the Collateral, and otherwise in exercising
the rights of First Healthcare and/or the Collateral Agent under the
Transaction Documents and the Forbearance Documents (including, but not
limited to, all amounts necessary to pay taxes, assessments, levies, fees,
insurance premiums and other charges in connection with the Facilities and
the Collateral), as well as reasonable compensation for the services of
First Healthcare and/or the Collateral Agent and their respective
attorneys, agents and employees, apply the remainder (if any) in such order
and in such manner as First Healthcare shall determine in its sole
discretion;
(k) Release any portion of the Collateral for such consideration as
First Healthcare may require without, as to the remainder of the
Collateral, in any way impairing or affecting any lien or security
interest, or the priority of any lien or security interest, created by any
Transaction Document or any Forbearance Document or improving the
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position of any subordinate holder of any lien or security interest with
respect to any portion of the Collateral, except to the extent that the
Obligations shall have been reduced by the actual monetary consideration,
if any, received by First Healthcare for such release, and may accept by
assignment, pledge or otherwise any other property in place of such portion
of the Collateral as First Healthcare may require without being accountable
for so doing to any other holder of any lien or security interest;
(l) Take all actions permitted under the Uniform Commercial Code of
the jurisdiction in which any portion of the Collateral is located;
(m) Exercise in respect of the Collateral all other rights and
remedies available to a mortgagee, a deed-of-trust beneficiary or a secured
creditor under applicable law;
(n) To the extent permitted by law and not included in the foregoing
provisions, require the Sublessees and the Managers to quit and surrender
the Subleased Facilities and the Managed Facilities to First Healthcare,
and enter upon and repossess the Subleased Facilities and the Managed
Facilities by reasonable force, summary proceedings, ejectment or
otherwise, and remove the Sublessees and the Managers and all other Persons
and any and all personal property from the Subleased Facilities and the
Managed Facilities subject to rights of any residents or patients and to
any applicable requirements of law;
(o) Instruct the Escrow Agent to deliver to First Healthcare or any
assignee or transferee of First Healthcare any one or more of the Escrowed
Documents, and request, accept, present, file, record or register any one
or more of the Escrowed Documents, in such order and in such manner as
First Healthcare shall determine in its sole discretion;
(p) Market any or all of the Facilities for sale, lease or other
disposition to potential purchasers, lessees or transferees, whether
directly or through brokers, finders and other agents and representatives,
on such terms (including, but not limited to, price) as First Healthcare
may deem acceptable in its sole discretion;
(q) Exercise all other rights and remedies available to First
Healthcare and/or the Collateral Agent under this Agreement, the other
Forbearance Documents and the Transaction Documents; and
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(r) Exercise all other rights and remedies available to First
Healthcare and/or the Collateral Agent by agreement, at law, in equity or
otherwise.
6.03 No Mortgagee in Possession, Etc. In the event that First Healthcare
-------------------------------
or the Collateral Agent shall exercise any of the rights or remedies referred to
in Section 6.02 or in any Transaction Document or any other Forbearance
Document, neither First Healthcare nor the Collateral Agent shall be deemed to
have entered upon or taken possession of the Facilities or the Collateral except
upon the exercise of its option to do so, evidenced by its demand and overt act
for such purpose, nor shall First Healthcare or the Collateral Agent be deemed a
mortgagee in possession by reason of such entry or taking possession. Neither
First Healthcare nor the Collateral Agent shall be liable to account for any
action taken pursuant to any exercise of any of the rights or remedies set forth
in Section 6.02 or in any Transaction Document or any other Forbearance
Document, other than for rents actually received by First Healthcare or the
Collateral Agent, as the case may be, and neither First Healthcare nor the
Collateral Agent shall be liable for any loss sustained by any Forbearance Party
resulting from any failure to let any Facility or any of the Collateral, or from
any other act or omission of First Healthcare or the Collateral Agent, as the
case may be, except to the extent such loss is caused by the willful misconduct
or bad faith of First Healthcare or the Collateral Agent, as the case may be.
Each Forbearance Party hereby consents to, ratifies and confirms the exercise by
First Healthcare and/or the Collateral Agent of the rights and remedies referred
to in Section 6.02 and in the Transaction Documents, the other Forbearance
Documents and the Escrowed Documents, and each Forbearance Party hereby appoints
each of First Healthcare and the Collateral Agent as such Forbearance Party's
attorney-in-fact for such purposes, which appointment shall be deemed to be
coupled with an interest and is irrevocable.
6.04 Marketing of Facilities. Without limiting the generality of the
-----------------------
provisions in Section 6.02, each Forbearance Party hereby irrevocably authorizes
First Healthcare, upon the occurrence of any Forbearance Default, (a) to market
any or all of the Facilities, or any one or more combinations of the Facilities,
for sale, lease or other disposition to potential purchasers, lessees or
transferees on such terms (including, but not limited to, price) as First
Healthcare may deem acceptable in its sole discretion and (b) if First
Healthcare so desires, to retain or appoint one or more brokers, finders and
other agents and representatives to perform any act or acts necessary or
incident to any marketing of the Facilities by First Healthcare pursuant to the
authority granted in this Section. Each Forbearance Party acknowledges and
agrees that (i) the grant of authority set forth in this Section has been
specifically
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negotiated and (ii) the authority granted to First Healthcare in this Section is
solely to protect First Healthcare's interest in the Facilities and the
Collateral and shall not impose any duty upon First Healthcare to exercise any
such authority. Each Forbearance Party further acknowledges and agrees that the
grant of authority set forth in this Section has been made voluntarily and
knowingly by such Forbearance Party notwithstanding the fact that the selection
by First Healthcare of the Facility or Facilities to be marketed pursuant to the
authority granted in this Section, and the time, method and other terms
(including, but not limited to, price) of marketing, sale, lease or other
disposition (whether for cash or on credit) deemed by First Healthcare to be
acceptable in its sole discretion, may not be deemed desirable or acceptable to
such Forbearance Party. First Healthcare shall have no obligation to provide
any financing or credit support of any kind in connection with any sale, lease
or other disposition of any or all of the Facilities pursuant to the authority
granted in this Section or otherwise.
6.05 Order of Acceptance of Escrowed Documents. Without limiting the
-----------------------------------------
generality of the provisions in Section 6.02, upon the occurrence of any
Forbearance Default, First Healthcare or its assignee or transferee may (but
shall not be obligated to) take any one or more of the following actions, each
of which may be pursued concurrently or otherwise, at such time or times and in
such order as First Healthcare may determine in its sole discretion, without
impairing or otherwise affecting any other rights or remedies of First
Healthcare and without presentment, demand, protest or any other notice, all of
which are hereby expressly waived by each Forbearance Party and each MidAmerica
Party:
(a) Subject to Section 6.07, accept any Confession of Judgment by
requesting and receiving such Confession of Judgment from the Escrow Agent
and presenting such Confession of Judgment to a court of competent
jurisdiction for entry by such court pursuant to Section 3.25(a);
(b) Accept, with respect to any Sublease, the Sublease Termination
Agreement relating to such Sublease by requesting and receiving such
Sublease Termination Agreement from the Escrow Agent and recording such
Sublease Termination Agreement pursuant to Section 3.25(b) in the records
of the county in the state of Kansas or the state of Missouri, as the case
may be, in which the Subleased Facility covered by such Sublease is
located;
(c) Accept any Kansas Deed in Lieu of Foreclosure by requesting and
receiving such Kansas Deed in Lieu of Foreclosure from the Escrow Agent and
recording such Kansas Deed in Lieu of Foreclosure pursuant to Section
3.25(c) in
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the records of the county in the state of Kansas in which the real property
covered by such Kansas Deed in Lieu of Foreclosure is located;
(d) Accept any Missouri Deed in Lieu of Foreclosure by requesting and
receiving such Missouri Deed in Lieu of Foreclosure from the Escrow Agent
and recording such Missouri Deed in Lieu of Foreclosure pursuant to Section
3.25(d) in the records of the county in the state of Missouri in which the
real property covered by such Missouri Deed in Lieu of Foreclosure is
located; and
(e) Accept, present, file, record or register any or all of the other
Escrowed Documents pursuant to Section 3.25(e).
6.06 Deeds in Lieu of Foreclosure; Other Escrowed Documents.
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(a) Absolute Conveyance; Termination of Right of Redemption; Etc.
------------------------------------------------------------
Each Forbearance Party acknowledges and agrees that: (i) upon acceptance
and recordation by First Healthcare or its assignee or transferee of any
Deed in Lieu of Foreclosure, such Deed in Lieu of Foreclosure shall be
effective to convey absolutely to First Healthcare or its assignee or
transferee all estate, right, title, interest, claim and demand of such
Forbearance Party (including, but not limited to, all right of redemption)
in and to the Collateral described in such Deed in Lieu of Foreclosure;
(ii) the acceptance and recordation by First Healthcare or its assignee or
transferee of any Deed in Lieu of Foreclosure shall terminate all estate,
right, title, interest, claim and demand of such Forbearance Party
(including, but not limited to, all right of redemption) in and to the
Collateral described in such Deed in Lieu of Foreclosure and any and all
rents, income, proceeds, issues, profits, revenues, accounts and other sums
that are or may become due from or in respect of all or any part of such
Collateral; and (iii) none of this Agreement, any other Forbearance
Document, any Deed in Lieu of Foreclosure or any other Escrowed Document
(whether considered individually or in conjunction with any Transaction
Document, any other Forbearance Document, any other Escrowed Document or
any other document or agreement) is intended as a mortgage, deed of trust,
trust conveyance or other security agreement of any kind.
(b) No Merger. The execution and delivery of any Deed in Lieu of
---------
Foreclosure by any Forbearance Party, and any acceptance and recordation of
such Deed in Lieu of Foreclosure by First Healthcare or its assignee or
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transferee, is not intended to merge, and shall not constitute a merger of,
the estate, right, title, interest, claim and demand conveyed by such Deed
in Lieu of Foreclosure with any interest of First Healthcare now or in the
future existing in all or any part of the Collateral described in such Deed
in Lieu of Foreclosure, including, but not limited to, the liens and
security interests created by any one or more of the Mortgages and the
Deeds of Trust. Without limiting the generality of the preceding sentence,
each Forbearance Party intends, acknowledges and agrees that, from and
after the recordation by First Healthcare or its assignee or transferee of
any Deed in Lieu of Foreclosure, the Collateral described in such Deed in
Lieu of Foreclosure shall be and remain at all times subject to the liens
and security interests created by the Mortgage or the Deed of Trust to
which such Collateral is now subject. Notwithstanding the recordation by
First Healthcare or its assignee or transferee of any Deed in Lieu of
Foreclosure, First Healthcare shall have the right, but not the obligation,
to foreclose any and all of its liens on and security interests in the
Collateral for any reason, including, but not limited to, (i) the
protection of the interests of First Healthcare in the Collateral from any
Person claiming a subordinate lien on or interest in all or any part of the
Collateral and (ii) the extinguishment of record any right of redemption of
any Forbearance Party with respect to all or any part of the Collateral.
(c) No Satisfaction of Obligations. Each Forbearance Party
------------------------------
acknowledges and agrees that neither the recordation by First Healthcare or
its assignee or transferee of any Deed in Lieu of Foreclosure, nor the
acceptance by First Healthcare or its assignee or transferee of any other
Escrowed Document, is intended to be, or shall constitute, payment or
satisfaction of any or all of the Obligations.
(d) Forbearance Parties Remain Liable. Notwithstanding any provision
---------------------------------
to the contrary in this Agreement, any other Forbearance Document, any
Transaction Document, any Deed in Lieu of Foreclosure or any other Escrowed
Document, the Forbearance Parties shall be and remain liable in respect of
all contracts, agreements, claims and demands pertaining to all or any part
of the Collateral, and in no event shall First Healthcare or any assignee
or transferee of First Healthcare have any obligation or liability in
respect of all or any part of the Collateral unless First Healthcare or
such assignee or transferee expressly assumes such obligation or liability
in writing. The Forbearance Parties, jointly and severally, shall
indemnify, defend and hold harmless First Healthcare and the assignees and
transferees of First Healthcare from
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and against any and all claims, demands, actions, causes of action, losses,
liabilities, damages, costs, expenses and disbursements (including, but not
limited to, reasonable fees and disbursements of accountants, attorneys,
engineers and other professionals, experts and agents), which accrue to or
are made against or incurred or suffered by First Healthcare or any
assignee or transferee of First Healthcare prior to, on or after any
transfer of the Collateral, whether pursuant to foreclosure proceedings or
in lieu of foreclosure proceedings, and which arise, directly or
indirectly, from or by reason of, or in any manner related to or connected
with, (i) any incorrectness or breach of any of the representations,
warranties or covenants of any Forbearance Party set forth in this
Agreement, any other Forbearance Document or any Escrowed Document or (ii)
any ownership, lease, sublease, management, use, operation, possession or
control of, or any activities on or about, any or all of the Collateral
prior to the transfer of such Collateral to First Healthcare or any
assignee or transferee of First Healthcare, whether pursuant to foreclosure
proceedings or in lieu of foreclosure proceedings; provided that no
--------
Forbearance Party shall be liable for any portion of such claims, demands,
actions, causes of action, losses, liabilities, damages, costs, expenses or
disbursements resulting from the gross negligence or willful misconduct of
First Healthcare or any assignee or transferee of First Healthcare.
6.07 Guarantor Confessions of Judgment.
---------------------------------
(a) Subject to Section 6.07(b):
(i) First Healthcare or its assignee or transferee shall
forbear from presenting any Guarantor Confession of Judgment to any
court for entry by such court during the period of ninety days
following the occurrence of the first Forbearance Default (if any) to
occur;
(ii) First Healthcare or its assignee or transferee shall
further forbear from presenting any Guarantor Confession of Judgment
to any court for entry by such court during the period of one hundred
eighty days following the occurrence of the first Forbearance Default
(if any) to occur if, but only if, during the period of ninety days
following the occurrence of the first Forbearance Default (if any) to
occur, the Guarantors (A) pledge, assign and deliver to First
Healthcare cash for deposit in the Collateral Account and/or cause to
be delivered to First Healthcare one or more clean, irrevocable
letters of credit, in form and
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substance satisfactory to First Healthcare, issued by one or more
national banking associations acceptable to First Healthcare, for the
account of either or both of the Guarantors in favor of First
Healthcare and having an expiry date not earlier than one year after
the date of issuance of each such letter of credit, in the aggregate
amount of such cash and/or letters of credit equal to $2,400,000.00,
all as security and/or support for the payment of all indebtedness,
liabilities and other obligations of the Guarantors now or hereafter
existing under the Restated First Healthcare Guaranty, whether
absolute or contingent and whether for or relating to principal,
interest, Rent, Operator's Return, indemnities, fees, costs, expenses
or otherwise, (B) duly execute and deliver to First Healthcare such
pledge and security agreements, as specified by and in form and
substance satisfactory to First Healthcare, securing the payment of
all indebtedness, liabilities and other obligations of the Guarantors
now or hereafter existing under the Restated First Healthcare
Guaranty, whether absolute or contingent and whether for or relating
to principal, interest, Rent, Operator's Return, indemnities, fees,
costs, expenses or otherwise, and constituting pledges and assignments
of and security interests in the Collateral Account, such cash as
shall be pledged and delivered by the Guarantors to First Healthcare
for deposit in the Collateral Account, all certificates and
instruments evidencing the Collateral Account and all proceeds of such
property, (C) take such action (including, but not limited to, the
delivery to First Healthcare of original instruments and certificates,
the filing of Uniform Commercial Code financing statements and
amendments to financing statements and the giving of notices and
endorsements) as may be necessary or advisable in the opinion of First
Healthcare to vest in First Healthcare valid and perfected security
interests in the properties purported to be subject to the pledge and
security agreements delivered pursuant to this Section 6.07(a)(ii),
enforceable against all third parties in accordance with their
respective terms, (D) deliver to First Healthcare a signed favorable
opinion, addressed to First Healthcare, of counsel for the Guarantors
acceptable to First Healthcare as to such pledge and security
agreements being legal, valid and binding obligations of the
Guarantors, enforceable against the Guarantors in accordance with
their respective terms and as to such other matters as First
Healthcare may reasonably request, and (E) execute and deliver to
First Healthcare any and all further
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certificates, instruments and documents and take all such other action
as First Healthcare may deem desirable in obtaining the full benefits
of, or in preserving the security interests of, such pledge and
security agreements;
(iii) First Healthcare or its assignee or transferee shall
further forbear from presenting any Guarantor Confession of Judgment
to any court for entry by such court during the period of two hundred
seventy days following the occurrence of the first Forbearance Default
(if any) to occur if, but only if, during the period of one hundred
eighty days following the occurrence of the first Forbearance Default
(if any) to occur, the Guarantors (A) pledge, assign and deliver to
First Healthcare cash for deposit in the Collateral Account and/or
cause to be delivered to First Healthcare one or more clean,
irrevocable letters of credit, in form and substance satisfactory to
First Healthcare, issued by one or more national banking associations
acceptable to First Healthcare, for the account of either or both of
the Guarantors in favor of First Healthcare and having an expiry date
not earlier than one year after the date of issuance of each such
letter of credit, in the aggregate amount of such cash and/or letters
of credit delivered pursuant to Section 6.07(a)(ii) and this Section
6.07(a)(iii) equal to $4,600,000.00, all as security and/or support
for the payment of all indebtedness, liabilities and other obligations
of the Guarantors now or hereafter existing under the Restated First
Healthcare Guaranty, whether absolute or contingent and whether for or
relating to principal, interest, Rent, Operator's Return, indemnities,
fees, costs, expenses or otherwise, (B) duly execute and deliver to
First Healthcare such pledge and security agreements, as specified by
and in form and substance satisfactory to First Healthcare, securing
the payment of all indebtedness, liabilities and other obligations of
the Guarantors now or hereafter existing under the Restated First
Healthcare Guaranty, whether absolute or contingent and whether for or
relating to principal, interest, Rent, Operator's Return, indemnities,
fees, costs, expenses or otherwise, and constituting pledges and
assignments of and security interests in the Collateral Account, such
cash as shall be pledged and delivered by the Guarantors to First
Healthcare for deposit in the Collateral Account, all certificates and
instruments evidencing the Collateral Account and all proceeds of such
property, (C) take such action (including, but not limited to, the
delivery to First Healthcare of
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original instruments and certificates, the filing of Uniform
Commercial Code financing statements and amendments to financing
statements and the giving of notices and endorsements) as may be
necessary or advisable in the opinion of First Healthcare to vest in
First Healthcare valid and perfected security interests in the
properties purported to be subject to the pledge and security
agreements delivered pursuant to Section 6.07(a)(ii) and this Section
6.07(a)(iii), enforceable against all third parties in accordance with
their respective terms, (D) deliver to First Healthcare a signed
favorable opinion, addressed to First Healthcare, of counsel for the
Guarantors acceptable to First Healthcare as to such pledge and
security agreements being legal, valid and binding obligations of the
Guarantors, enforceable against the Guarantors in accordance with
their respective terms and as to such other matters as First
Healthcare may reasonably request, and (E) execute and deliver to
First Healthcare any and all further certificates, instruments and
documents and take all such other action as First Healthcare may deem
desirable in obtaining the full benefits of, or in preserving the
security interests of, such pledge and security agreements; and
(iv) First Healthcare or its assignee or transferee shall
further forbear from presenting any Guarantor Confession of Judgment
to any court for entry by such court during the period of three
hundred sixty days following the occurrence of the first Forbearance
Default (if any) to occur if, but only if, during the period of two
hundred seventy days following the occurrence of the first Forbearance
Default (if any) to occur, the Guarantors (A) pledge, assign and
deliver to First Healthcare cash for deposit in the Collateral Account
and/or cause to be delivered to First Healthcare one or more clean,
irrevocable letters of credit, in form and substance satisfactory to
First Healthcare, issued by one or more national banking associations
acceptable to First Healthcare, for the account of either or both of
the Guarantors in favor of First Healthcare and having an expiry date
not earlier than one year after the date of issuance of each such
letter of credit, in the aggregate amount of such cash and/or letters
of credit delivered pursuant to Section 6.07(a)(ii), Section
6.07(a)(iii) and this Section 6.07(a)(iv) equal to $6,600,000.00, all
as security and/or support for the payment of all indebtedness,
liabilities and other obligations of the Guarantors now or hereafter
existing under the Restated
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First Healthcare Guaranty, whether absolute or contingent and whether
for or relating to principal, interest, Rent, Operator's Return,
indemnities, fees, costs, expenses or otherwise, (B) duly execute and
deliver to First Healthcare such pledge and security agreements, as
specified by and in form and substance satisfactory to First
Healthcare, securing the payment of all indebtedness, liabilities and
other obligations of the Guarantors now or hereafter existing under
the Restated First Healthcare Guaranty, whether absolute or contingent
and whether for or relating to principal, interest, Rent, Operator's
Return, indemnities, fees, costs, expenses or otherwise, and
constituting pledges and assignments of and security interests in the
Collateral Account, such cash as shall be pledged and delivered by the
Guarantors to First Healthcare for deposit in the Collateral Account,
all certificates and instruments evidencing the Collateral Account and
all proceeds of such property, (C) take such action (including, but
not limited to, the delivery to First Healthcare of original
instruments and certificates, the filing of Uniform Commercial Code
financing statements and amendments to financing statements and the
giving of notices and endorsements) as may be necessary or advisable
in the opinion of First Healthcare to vest in First Healthcare valid
and perfected security interests in the properties purported to be
subject to the pledge and security agreements delivered pursuant to
Section 6.07(a)(ii), Section 6.07(a)(iii) and this Section
6.07(a)(iv), enforceable against all third parties in accordance with
their respective terms, (D) deliver to First Healthcare a signed
favorable opinion, addressed to First Healthcare, of counsel for the
Guarantors acceptable to First Healthcare as to such pledge and
security agreements being legal, valid and binding obligations of the
Guarantors, enforceable against the Guarantors in accordance with
their respective terms and as to such other matters as First
Healthcare may reasonably request, and (E) execute and deliver to
First Healthcare any and all further certificates, instruments and
documents and take all such other action as First Healthcare may deem
desirable in obtaining the full benefits of, or in preserving the
security interests of, such pledge and security agreements.
(b) Notwithstanding any provision to the contrary in this Section 6.07
or elsewhere in this Agreement or any other Forbearance Document, (i) First
Healthcare or its assignee or transferee may present any Guarantor
Confession
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of Judgment to a court of competent jurisdiction for entry by such court at
any time after the expiration of the period of three hundred sixty days
following the occurrence of the first Forbearance Default (if any) to occur
and (ii) First Healthcare or its assignee or transferee may present any
Guarantor Confession of Judgment to a court of competent jurisdiction for
entry by such court at any time following the occurrence of any Forbearance
Default, and shall have no obligation under this Section 6.07 from so
presenting such Guarantor Confession of Judgment, if at any time following
the occurrence of any Forbearance Default the exercise or enforcement of
any right or remedy of First Healthcare and/or the Collateral Agent
provided for in any Transaction Document, any Forbearance Document, any
Escrowed Document or any other deed, conveyance, bill of sale, mortgage,
deed of trust, security agreement, pledge agreement, assignment,
stipulation or other document or instrument executed by any Partnership,
the General Partner or any Guarantor under or in connection with any
Transaction Document or any Forbearance Document, or otherwise available to
First Healthcare and/or the Collateral Agent by agreement, at law or in
equity, shall be delayed (other than by reason of any delay resulting
solely from any action or omission to act by First Healthcare, the
Collateral Agent or any agent or attorney of First Healthcare or the
Collateral Agent), barred, prohibited, enjoined, stayed or otherwise
limited or impaired (A) by reason of the institution of any involuntary
proceeding against any Partnership under the Bankruptcy Code which remains
undismissed for a period of sixty days or (B) for any other reason, whether
intentional or negligent or by operation of law or otherwise (including,
but not limited to, any other involuntary bankruptcy proceeding or any
voluntary bankruptcy, assignment for the benefit of creditors,
reorganization or similar proceeding affecting any Partnership, the General
Partner, any Guarantor or any properties of any Partnership, the General
Partner or any Guarantor, or the failure by any Partnership, the General
Partner or any Guarantor to execute and deliver any affidavit, certificate
or other document now or hereafter required or requested pursuant to this
Agreement).
(c) At any time following the occurrence of a Forbearance Default, in
addition to any other rights and remedies provided for in this Agreement,
any other Forbearance Document, any Escrowed Document and any Transaction
Document and otherwise available to First Healthcare by agreement, at law,
in equity or otherwise, First Healthcare may (but shall not be obligated
to) draw against any and all letters of credit delivered pursuant to this
Section 6.07 upon the occurrence of any one or more of
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the additional following events and at any and all times thereafter:
(i) The period of ninety days following the occurrence of the
first Forbearance Default (if any) to occur shall expire and the
Guarantors shall have failed within such period of ninety days to
deliver or cause to be delivered to First Healthcare any of the cash
collateral, letters of credit, pledge and security agreements,
opinions and other certificates, instruments and documents, or to have
taken any of the other action, required to be delivered or taken
pursuant to Section 6.07(a)(ii);
(ii) The period of one hundred eighty days following the
occurrence of the first Forbearance Default (if any) to occur shall
expire and the Guarantors shall have failed within such period of one
hundred eighty days to deliver or cause to be delivered to First
Healthcare any of the cash collateral, letters of credit, pledge and
security agreements, opinions and other certificates, instruments and
documents, or to have taken any of the other action, required to be
delivered or taken pursuant to Section 6.07(a)(iii);
(iii) The period of two hundred seventy days following the
occurrence of the first Forbearance Default (if any) to occur shall
expire and the Guarantors shall have failed within such period of two
hundred seventy days to deliver or cause to be delivered to First
Healthcare any of the cash collateral, letters of credit, pledge and
security agreements, opinions and other certificates, instruments and
documents, or to have taken any of the other action, required to be
delivered or taken pursuant to Section 6.07(a)(iv);
(iv) The period of three hundred sixty days following the
occurrence of the first Forbearance Default (if any) to occur shall
expire;
(v) The exercise or enforcement of any right or remedy of
First Healthcare and/or the Collateral Agent provided for in any
Transaction Document, any Forbearance Document, any Escrowed Document
or any other deed, conveyance, bill of sale, mortgage, deed of trust,
security agreement, pledge agreement, assignment, stipulation or other
document or instrument executed by any Partnership, the General
Partner or any Guarantor under or in connection with any Transaction
Document or any Forbearance Document, or otherwise
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available to First Healthcare and/or the Collateral Agent by
agreement, at law or in equity, shall be delayed (other than by reason
of any delay resulting solely from any action or omission to act by
First Healthcare, the Collateral Agent or any agent or attorney of
First Healthcare or the Collateral Agent), barred, prohibited,
enjoined, stayed or otherwise limited or impaired (A) by reason of the
institution of any involuntary proceeding against any Partnership
under the Bankruptcy Code which remains undismissed for a period of
sixty days or (B) for any other reason, whether intentional or
negligent or by operation of law or otherwise (including, but not
limited to, any other involuntary bankruptcy proceeding or any
voluntary bankruptcy, assignment for the benefit of creditors,
reorganization or similar proceeding affecting any Partnership, the
General Partner, any Guarantor or any properties of any Partnership,
the General Partner or any Guarantor, or the failure by any
Partnership, the General Partner or any Guarantor to execute and
deliver any affidavit, certificate or other document now or hereafter
required or requested pursuant to this Agreement); or
(vi) The Guarantors, with respect to any letter of credit
delivered to First Healthcare pursuant to this Section 6.07, shall
fail to deliver or cause to be delivered to First Healthcare, at least
twenty days prior to the expiry date of such letter of credit, a
clean, irrevocable replacement letter of credit, in form and substance
satisfactory to First Healthcare in its sole discretion, issued by a
national banking association acceptable to First Healthcare, for the
account of either or both of the Guarantors in favor of First
Healthcare and having an expiry date not earlier than one year after
the date of issuance of such letter of credit.
ARTICLE VII
MISCELLANEOUS
7.01 Amendments, Etc. No waiver, termination, amendment or other
----------------
modification of any provision of this Agreement or any other Forbearance
Document, and no consent to any departure by any Forbearance Party from any
provision of this Agreement or any other Forbearance Document, shall in any
event be effective unless the same shall be in writing and signed by First
Healthcare (or any successor to First Healthcare), and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which it is given; provided that no waiver, termination, amendment,
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other
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modification or consent, unless the same shall be in writing and signed by First
Healthcare (or any successor to First Healthcare) and by MediSave (or any
successor to MediSave), shall amend or otherwise modify Section 2.02, Section
2.04, Section 3.15, Section 3.17, Section 3.20, Section 3.22, Section 5.08 or
this Section 7.01. For the purposes of this Section, no writing signed by First
Healthcare (or any successor to First Healthcare) or by MediSave (or any
successor to MediSave) shall be effective unless such writing shall be signed by
the chief executive officer or the president of First Healthcare (or such
successor to First Healthcare) or MediSave (or such successor to MediSave), as
the case may be, or by any other individual expressly authorized in writing by
the board or directors, the chief executive officer or the president of First
Healthcare (or such successor to First Healthcare) or MediSave (or such
successor to MediSave), as the case may be, to sign waivers, terminations,
amendments and other modifications for and on behalf of First Healthcare (or
such successor to First Healthcare) or MediSave (or such successor to MediSave),
as the case may be.
7.02 Notices. All notices, requests, demands, directions, consents and
-------
other communications to any party under or in connection with this Agreement or
any other Forbearance Document shall be in writing (including telephone
facsimile communications) and shall be sent via certified or registered mail,
return receipt requested, via telephone facsimile transmission, via personal
delivery or via express courier or delivery service, addressed to such party at
such party's address or telephone facsimile number set forth below or at such
other address or telephone facsimile number as shall be designated by such party
in a written notice given to each other party complying as to delivery with the
terms of this Section:
if to any Partnership, MidAmerica or the General Partner, at:
c/o Don G. Angell
6000 Meadowbrook Mall
Suite 27
Clemmons, North Carolina 27012
or
P.O. Box 1670
Clemmons, North Carolina 27012
Facsimile: (910)766-5220
and
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c/o Daniel D. Mosca
4901 Holly Ridge Drive
Raleigh, North Carolina 27612
Facsimile: (919)831-4768
with a copy to:
Blanco Tackabery Combs & Matamoros, P.A.
Stratford Executive Park
215 Executive Park Boulevard
Winston-Salem, North Carolina 27103-1594
Attention: George E. Hollodick
or
P.O. Drawer 25008
Winston-Salem, North Carolina 27114-5008
Attention: George E. Hollodick
Facsimile: (910)765-4830;
if to Angell, at:
Don G. Angell
6000 Meadowbrook Mall
Suite 27
Clemmons, North Carolina 27012
or
P.O. Box 1670
Clemmons, North Carolina 27012
Facsimile: (910)766-5220
with a copy to:
Blanco Tackabery Combs & Matamoros, P.A.
Stratford Executive Park
215 Executive Park Boulevard
Winston-Salem, North Carolina 27103-1594
Attention: George E. Hollodick
or
P.O. Drawer 25008
Winston-Salem, North Carolina 27114-5008
Attention: George E. Hollodick
Facsimile: (910)765-4830;
if to Mosca, at:
Daniel D. Mosca
4901 Holly Ridge Drive
Raleigh, North Carolina 27612
Facsimile: (919)831-4768
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with a copy to:
Blanco Tackabery Combs & Matamoros, P.A.
Stratford Executive Park
215 Executive Park Boulevard
Winston-Salem, North Carolina 27103-1594
Attention: George E. Hollodick
or
P.O. Drawer 25008
Winston-Salem, North Carolina 27114-5008
Attention: George E. Hollodick
Facsimile: (910)765-4830;
if to First Healthcare, at:
First Healthcare Corporation
c/o The Hillhaven Corporation
1148 Broadway Plaza
Tacoma, Washington 98402
Attention: Credit Portfolio Manager
Facsimile: (206)502-3916
with a copy to:
The Hillhaven Corporation
1148 Broadway Plaza
Tacoma, Washington 98402
Attention: General Counsel
Facsimile: (206)502-3623
if to MediSave, at:
MediSave Pharmacies, Inc.
10877 Reiger Road
Baton Rouge, Louisiana 70821
Attention: Chief Executive Officer
Facsimile: (504)296-5219
with a copy to:
The Hillhaven Corporation
1148 Broadway Plaza
Tacoma, Washington 98402
Attention: General Counsel
Facsimile: (206)502-3623.
All such notices, requests, demands, directions, consents and other
communications shall be deemed given (a) when given and receipted for (or upon
the date of attempted delivery when delivery is refused), if sent via certified
or registered mail, return receipt requested, via personal delivery or via
express
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courier or delivery service or (b) when received, if sent via telephone
facsimile (confirmation of such receipt via confirmed telephone facsimile being
deemed receipt).
7.03 Entire Agreement. This Agreement, the other Forbearance Documents,
----------------
the other MediSave Forbearance Documents, the Escrowed Documents, the
Transaction Documents and the MediSave Transaction Documents constitute the
entire agreement between and among the Forbearance Parties, the MidAmerica
Parties, First Healthcare and MediSave with respect to the subject matter of
this Agreement and supersede all prior agreements, understandings and
negotiations, both written and oral, between and among the Forbearance Parties,
the MidAmerica Parties, First Healthcare and MediSave with respect to the
subject matter of this Agreement. No representation, warranty, inducement,
promise, understanding or condition that is not set forth in this Agreement, any
other Forbearance Document, any other MediSave Document, any Escrowed Document,
any Transaction Document or any MediSave Transaction Document has been made or
relied upon by any Forbearance Party, any MidAmerica Party, First Healthcare or
MediSave.
7.04 No Waiver; Remedies Cumulative. The execution, delivery and
------------------------------
effectiveness of this Agreement shall not, except as expressly provided in this
Agreement, (a) operate as a waiver of any power, right or remedy of First
Healthcare under any Transaction Document or with respect to any Designated
Default or any other event or condition which constitutes a breach of or a
default under any Transaction Document, (b) constitute a waiver of any
Designated Default or any other event or condition which constitutes a breach of
or a default under any Transaction Document, (c) constitute a waiver of any
provision of any Transaction Document, (d) operate as a waiver of any power,
right or remedy of MediSave under any MediSave Transaction Document or with
respect to any event or condition which constitutes a breach of or a default
under any MediSave Transaction Document, (e) constitute a waiver of any event
or condition which constitutes a breach of or a default under any MediSave
Transaction Document or (f) constitute a waiver of any provision of any MediSave
Transaction Document. No failure by any party to this Agreement to exercise,
and no delay by any such party in exercising, any power, right or remedy under
this Agreement shall operate as a waiver of such power, right or remedy, and no
single or partial exercise of any such power, right or remedy shall preclude any
other or further exercise of such power, right or remedy or the exercise of any
other power, right or remedy. The rights and remedies provided in this
Agreement, the other Forbearance Documents, the other MediSave Forbearance
Documents, the Transaction Documents, the MediSave Transaction Documents and the
Escrowed Documents shall be cumulative and not exclusive of any rights or
remedies provided by law. Without limiting the
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generality of the preceding provisions of this Section, except as expressly
provided in this Agreement, First Healthcare expressly reserves all power,
rights and remedies available to First Healthcare with respect to the Designated
Defaults by agreement, at law, in equity or otherwise.
7.05 Costs and Expenses. First Healthcare and the Forbearance Parties
------------------
acknowledge and agree that the Default Costs and Expenses include, among other
things, compensation paid or to be paid to the Escrow Agent by First Healthcare
for and on behalf of (and at the request of) the Forbearance Parties pursuant to
the Escrow Agreement and certain other costs and expenses (including, but not
limited to, reasonable fees and disbursements of attorneys) incurred or to be
incurred by First Healthcare in connection with the negotiation and preparation
of the Forbearance Documents, the Escrowed Documents and the MediSave
Forbearance Documents and the filing, recording and registration of the
Forbearance Documents and the MediSave Forbearance Documents. Other than costs
and expenses that are included in the Default Costs and Expenses which are
payable as part of the Arrearages in accordance with Sections 3.06 and 3.07, all
costs and expenses incurred in connection with the negotiation and preparation
of the Forbearance Documents, the Escrowed Documents and the MediSave
Forbearance Documents and the filing, recording and registration of the
Forbearance Documents and the MediSave Forbearance Documents shall be paid by
the party incurring such costs and expenses. Other than costs and expenses that
are included in the Default Costs and Expenses which are payable as part of the
Arrearages in accordance with Sections 3.06 and 3.07, the Partnerships, jointly
and severally, agree to pay on demand all costs and expenses (including, but not
limited to, reasonable fees and disbursements of attorneys) incurred by First
Healthcare in connection with the enforcement (including, but not limited to,
the acceptance, filing, recording and registration of the Escrowed Documents)
after the date of this Agreement (whether through negotiations, legal
proceedings or otherwise) of the Transaction Documents, the Forbearance
Documents, the Escrowed Documents and the other documents to be delivered under
the Forbearance Documents and the Escrowed Documents. Without limiting the
generality of the preceding provisions of this Section, if any action or
proceeding (including, but not limited to, any arbitration or mediation) is
commenced to enforce or interpret this Agreement, any other Forbearance Document
or any other MediSave Forbearance Document, the prevailing party shall be
entitled to recover from the nonprevailing party the costs and expenses of
maintaining such action or proceeding, including, but not limited to, reasonable
fees and disbursements of attorneys incurred before such action or proceeding is
commenced, and before, during and after any trial, arbitration or mediation, and
on any appeal, whether the action or proceeding is at law, in equity or in a
bankruptcy case or proceeding.
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7.06 Consent to Jurisdiction. Each Forbearance Party and each MidAmerica
-----------------------
Party hereby irrevocably submits to the jurisdiction of any court of the state
of Washington or any federal court of the United States of America for any
district of the state of Washington, and any appellate court from any of such
courts, in any action or proceeding arising from or by reason of, or otherwise
relating to, this Agreement, any other Forbearance Document, any other MediSave
Forbearance Document, any Transaction Document and any MediSave Transaction
Document, and each Forbearance Party and each MidAmerica Party hereby
irrevocably agrees that all claims in respect of such action or proceeding may
be heard and determined in such court of the state of Washington or in such
federal court of the United States of America for any district of the state of
Washington. Each Forbearance Party and each MidAmerica Party, to the fullest
extent permitted by applicable law, hereby irrevocably waives the defense of an
inconvenient forum to the maintenance of such action or proceeding. Each
Forbearance Party and each MidAmerica Party hereby irrevocably appoints Blanco
Tackabery Combs & Matamoros, P.A. (the "Process Agent"), as such Forbearance
Party's or such MidAmerica Party's agent, to receive on behalf of such
Forbearance Party and its property or such MidAmerica Party and its property, as
the case may be, service of copies of the summons and complaint and any other
process which may be served in any such action or proceeding. Such service may
be made by mailing or delivering a copy of such process to such Forbearance
Party or such MidAmerica Party, as the case may be, in care of the Process Agent
at Stratford Executive Park, 215 Executive Park Boulevard, Winston-Salem, North
Carolina 27103-1594 or P.O. Drawer 25008, Winston-Salem, North Carolina
27114-5008, and each Forbearance Party and each MidAmerica Party hereby
irrevocably authorizes and directs the Process Agent to accept such service on
behalf of such Forbearance Party and its property or such MidAmerica Party and
its property, as the case may be. As an alternative method of service, each
Forbearance Party and each MidAmerica Party also irrevocably consents to the
service of any and all process in any such action or proceeding by the mailing
of copies of such process to such Forbearance Party or such MidAmerica Party, as
the case may be, at its address specified in Section 7.02. Each Forbearance
Party and each MidAmerica Party agrees that a final judgment in any such action
or proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this
Section shall affect the right of First Healthcare or MediSave to serve legal
process in any other manner permitted by law or shall affect the right of First
Healthcare or MediSave to bring any action or proceeding against any Forbearance
Party, any MidAmerica Party or any property of any Forbearance Party or any
MidAmerica Party in the courts of any other jurisdictions.
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7.07 Binding Effect. This Agreement shall become effective upon the
--------------
satisfaction (or the waiver in writing in whole or in part by First Healthcare
in its sole discretion) of the applicable conditions to effectiveness set forth
in Article IV, and thereafter (a) shall be binding upon First Healthcare,
MediSave, each Forbearance Party, each MidAmerica Party and the respective
heirs, executors, administrators, personal representatives, legal
representatives, successors and assigns of First Healthcare, MediSave, each
Forbearance Party and each MidAmerica Party, (b) shall inure to the benefit of
and be enforceable by First Healthcare, MediSave, each Forbearance Party, each
MidAmerica Party and the respective heirs, executors, administrators, personal
representatives, legal representatives, successors and assigns of First
Healthcare, MediSave, each Forbearance Party and each MidAmerica Party and (c)
with respect to Sections 2.03 and 2.04, also shall inure to the benefit of and
be enforceable by First Healthcare, Hillhaven, MediSave, First Rehab, the
respective subsidiaries and affiliates of First Healthcare, Hillhaven, MediSave
and First Rehab, the respective directors, officers, employees, insurers, agents
and representatives of First Healthcare, Hillhaven, MediSave, First Rehab and
their respective subsidiaries and affiliates, and all of their respective heirs,
executors, administrators, personal representatives, legal representatives,
successors and assigns; provided that neither any Forbearance Party nor any
--------
MidAmerica Party shall have any right to assign any of its rights under or any
interest in, or to delegate any duty or obligation under, this Agreement, any
other Forbearance Document, any other MediSave Forbearance Document, any
Transaction Document or any MediSave Transaction Document. Except as provided
in the preceding sentence, no Persons other than First Healthcare, MediSave,
each Forbearance Party, each MidAmerica Party and the respective heirs,
executors, administrators, personal representatives, legal representatives,
successors and assigns of First Healthcare, MediSave, each Forbearance Party and
each MidAmerica Party shall have any right or remedy under, or any interest in,
this Agreement. The Forbearance Parties, the MidAmerica Parties and MediSave
acknowledge that First Healthcare may be acquired by or merged or consolidated
with or into another Person and that, from and after the consummation of any
such acquisition by or merger or consolidation with or into such other Person,
such other Person shall have all of the rights, remedies and benefits of First
Healthcare under this Agreement, the other Forbearance Documents and the
Transaction Documents, including, but not limited to, the right to request and
receive Escrowed Documents from the Escrow Agent and to exercise and enforce all
of the other rights and remedies of First Healthcare under this Agreement, the
other Forbearance Documents and the Transaction Documents.
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7.08 Severability. Any provision of this Agreement that is prohibited or
------------
unenforceable in any jurisdiction shall be ineffective, as to such jurisdiction,
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.
7.09 Captions. The headings of the Articles, Sections, subsections,
--------
paragraphs and other divisions of this Agreement are included for convenience of
reference only, and shall not in any way limit or affect the construction or
interpretation of any provision of this Agreement.
7.10 Survival. The Obligations, the MidAmerica Obligations and the
--------
representations, warranties and covenants of the parties to this Agreement, the
Transaction Documents, the MediSave Transaction Documents, the other Forbearance
Documents, the other MediSave Forbearance Documents and the Escrowed Documents
shall survive the execution and delivery of this Agreement, the other
Forbearance Documents, the other MediSave Forbearance Documents and the Escrowed
Documents and the termination of the Forbearance Period.
7.11 Execution in Counterparts. This Agreement may be executed in any
-------------------------
number of counterparts and by different parties to this Agreement in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same agreement. Delivery of an executed counterpart of a signature page to this
Agreement via telephone facsimile transmission shall be effective as delivery of
a manually executed counterpart of this Agreement.
7.12 Governing Law. This Agreement shall be governed by, and construed
-------------
in all respects in accordance with, the laws of the State of Washington, without
regard to the conflicts of law rules of such state.
7.13 Waiver of Jury Trial. EACH FORBEARANCE PARTY AND EACH MIDAMERICA
--------------------
PARTY HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES SUCH FORBEARANCE PARTY'S OR
SUCH MIDAMERICA PARTY'S RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM DIRECTLY OR INDIRECTLY BASED UPON OR ARISING OUT OF OR RELATING TO
ANY OF THIS AGREEMENT, ANY OTHER FORBEARANCE DOCUMENT, ANY OTHER MEDISAVE
FORBEARANCE DOCUMENT, ANY ESCROWED DOCUMENT, ANY TRANSACTION DOCUMENT, ANY
MEDISAVE TRANSACTION DOCUMENT, ANY OF THE OBLIGATIONS, ANY OF THE MIDAMERICA
OBLIGATIONS, ANY OTHER DOCUMENTS AND AGREEMENTS RELATING TO ANY OF THE
OBLIGATIONS OR ANY OF THE MIDAMERICA OBLIGATIONS, OR THE ACTIONS OF FIRST
HEALTHCARE OR MEDISAVE IN THE NEGOTIATION, PREPARATION, EXECUTION, DELIVERY,
ADMINISTRATION, PERFORMANCE OR ENFORCEMENT
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OF THIS AGREEMENT, ANY OTHER FORBEARANCE DOCUMENT, ANY OTHER MEDISAVE
FORBEARANCE DOCUMENT, ANY ESCROWED DOCUMENT, ANY TRANSACTION DOCUMENT, ANY
MEDISAVE TRANSACTION DOCUMENT, ANY OF THE OBLIGATIONS, ANY OF THE MIDAMERICA
OBLIGATIONS, OR ANY OTHER DOCUMENTS AND AGREEMENTS RELATING TO ANY OF THE
OBLIGATIONS OR ANY OF THE MIDAMERICA OBLIGATIONS. THE SCOPE OF THIS WAIVER IS
INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY
COURT (INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW AND STATUTORY CLAIMS). THIS WAIVER IS IRREVOCABLE, MEANING
THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, EXTENSIONS, RENEWALS OR OTHER MODIFICATIONS OF ANY OF
THIS AGREEMENT, ANY OTHER FORBEARANCE DOCUMENT, ANY OTHER MEDISAVE FORBEARANCE
DOCUMENT, ANY ESCROWED DOCUMENT, ANY TRANSACTION DOCUMENT, ANY MEDISAVE
TRANSACTION DOCUMENT, ANY OF THE OBLIGATIONS, ANY OF THE MIDAMERICA OBLIGATIONS,
OR ANY OTHER DOCUMENT OR AGREEMENT RELATING TO ANY OF THE OBLIGATIONS OR ANY OF
THE MIDAMERICA OBLIGATIONS.
7.14 Oral Agreements Unenforceable. ORAL AGREEMENTS OR ORAL COMMITMENTS
----------------------------- -----------------------------------
TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT
- ------------------------------------------------------------------------------
ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
- ----------------------------------------
IN WITNESS WHEREOF, the Partnerships, the Guarantors, the General Partner,
MidAmerica, First Healthcare and MediSave have executed this Agreement as of the
date first above written.
(Partnerships)
MEADOWBROOK MANOR OF AVA LIMITED MEADOWBROOK MANOR OF BALLWIN
PARTNERSHIP LIMITED PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS & By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC., General MISSOURI, INC., General
Partner Partner
[SIGNATURE ILLEGIBLE] [SIGNATURE ILLEGIBLE]
By -------------------------- By -----------------------------
[ILLEGIBLE] [ILLEGIBLE]
Title: ------------------- Title:-----------------------
MEADOWBROOK MANOR BLUE HILLS OF MEADOWBROOK MANOR OF BUFFALO
KANSAS CITY LIMITED PARTNERSHIP I LIMITED PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS & By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC., General MISSOURI, INC., General
Partner Partner
[SIGNATURE ILLEGIBLE] [SIGNATURE ILLEGIBLE]
By -------------------------- By --------------------------
[ILLEGIBLE] [ILLEGIBLE]
Title: ------------------- Title: -------------------
-75-
<PAGE>
MEADOWBROOK MANOR OF CHANUTE MEADOWBROOK MANOR OF CLINTON
LIMITED PARTNERSHIP LIMITED PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS & By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC., General MISSOURI, INC., General
Partner Partner
[SIGNATURE ILLEGIBLE] [SIGNATURE ILLEGIBLE]
By -------------------------- By ---------------------------
[ILLEGIBLE] [ILLEGIBLE]
Title: ------------------- Title: ---------------------
MEADOWBROOK MANOR COLONIAL MEADOWBROOK MANOR OF COLUMBIA
TERRACE OF INDEPENDENCE LIMITED PARTNERSHIP
LIMITED PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
By MEADOWBROOK MANOR OF KANSAS & MISSOURI, INC., General
MISSOURI, INC., General Partner
Partner
[SIGNATURE ILLEGIBLE]
By --------------------------
[SIGNATURE ILLEGIBLE] [ILLEGIBLE]
By -------------------------- Title: -------------------
[ILLEGIBLE]
Title: -------------------
MEADOWBROOK MANOR OF COUNCIL MEADOWBROOK MANOR OF CRANE
GROVE LIMITED PARTNERSHIP LIMITED PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS & By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC., General MISSOURI, INC., General
Partner Partner
[SIGNATURE ILLEGIBLE] [SIGNATURE ILLEGIBLE]
By -------------------------- By --------------------------
[ILLEGIBLE] [ILLEGIBLE]
Title: ------------------- Title: -------------------
MEADOWBROOK MANOR OF DES PERES MEADOWBROOK MANOR OF HAYSVILLE
LIMITED PARTNERSHIP LIMITED PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS & By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC., General MISSOURI, INC., General
Partner Partner
[SIGNATURE ILLEGIBLE] [SIGNATURE ILLEGIBLE]
By -------------------------- By --------------------------
[ILLEGIBLE] [ILLEGIBLE]
Title: ------------------- Title: -------------------
-76-
<PAGE>
MEADOWBROOK MANOR OF JEFFERSON MEADOWBROOK MANOR OF JOPLIN
LIMITED PARTNERSHIP LIMITED PARTNERSHIP I
By MEADOWBROOK MANOR OF KANSAS & By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC., General MISSOURI, INC., General
Partner Partner
[SIGNATURE ILLEGIBLE] [SIGNATURE ILLEGIBLE]
By -------------------------- By --------------------------
[ILLEGIBLE] [ILLEGIBLE]
Title: ------------------- Title: -------------------
MEADOWBROOK MANOR OF JOPLIN MEADOWBROOK MANOR OF KIMBERLING
LIMITED PARTNERSHIP II CITY LIMITED PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS & By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC., General MISSOURI, INC., General
Partner Partner
[SIGNATURE ILLEGIBLE] [SIGNATURE ILLEGIBLE]
By -------------------------- By --------------------------
[ILLEGIBLE] [ILLEGIBLE]
Title:-------------------- Title: -------------------
MEADOWBROOK MANOR RESIDENTIAL OF MEADOWBROOK MANOR OF LAMAR
KIMBERLING CITY LIMITED LIMITED PARTNERSHIP
PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS &
By MEADOWBROOK MANOR OF KANSAS & MISSOURI, INC., General
MISSOURI, INC., General Partner
Partner
[SIGNATURE ILLEGIBLE]
By --------------------------
[SIGNATURE ILLEGIBLE] [ILLEGIBLE]
By -------------------------- Title: -------------------
[ILLEGIBLE]
Title:--------------------
MEADOWBROOK MANOR OF LARNED MEADOWBROOK MANOR OF MARCELINE
LIMITED PARTNERSHIP LIMITED PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS & By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC., General MISSOURI, INC., General
Partner Partner
[SIGNATURE ILLEGIBLE] [SIGNATURE ILLEGIBLE]
By -------------------------- By --------------------------
[ILLEGIBLE] [ILLEGIBLE]
Title: ------------------- Title: -------------------
-77-
<PAGE>
MEADOWBROOK MANOR OF SEDGWICK MEADOWBROOK MANOR OF SHADY OAKS
LIMITED PARTNERSHIP LIMITED PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS & By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC., General MISSOURI, INC., General
Partner Partner
[SIGNATURE ILLEGIBLE] [SIGNATURE ILLEGIBLE]
By -------------------------- By --------------------------
[ILLEGIBLE] [ILLEGIBLE]
Title: ------------------- Title: -------------------
MEADOWBROOK MANOR OF SPRINGFIELD MEADOWBROOK MANOR OF ST. CHARLES
LIMITED PARTNERSHIP LIMITED PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS & By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC., General MISSOURI, INC., General
Partner Partner
[SIGNATURE ILLEGIBLE] [SIGNATURE ILLEGIBLE]
By -------------------------- By --------------------------
[ILLEGIBLE] [ILLEGIBLE]
Title: ------------------- Title: -------------------
MEADOWBROOK MANOR OF TOPEKA MEADOWBROOK MANOR WORNALL OF
LIMITED PARTNERSHIP KANSAS CITY LIMITED PARTNERSHIP
By MEADOWBROOK MANOR OF KANSAS & By MEADOWBROOK MANOR OF KANSAS &
MISSOURI, INC., General MISSOURI, INC., General
Partner Partner
[SIGNATURE ILLEGIBLE] [SIGNATURE ILLEGIBLE]
By -------------------------- By --------------------------
[ILLEGIBLE] [ILLEGIBLE]
Title: ------------------- Title: -------------------
(Guarantors)
/s/ Don G. Angell /s/ Daniel D. Mosca
- ------------------------------- --------------------------------
Don G. Angell, individually Daniel D. Mosca, individually
(General Partner) (MidAmerica)
MEADOWBROOK MANOR OF KANSAS & MIDAMERICA PHARMACIES LIMITED
MISSOURI, INC. PARTNERSHIP
[SIGNATURE ILLEGIBLE]
By ----------------------------- By MEADOWBROOK MANOR OF KANSAS &
[ILLEGIBLE] MISSOURI, INC., General
Title: ---------------------- Partner
[SIGNATURE ILLEGIBLE]
By -----------------------------
[ILLEGIBLE]
Title: ---------------------
-78-
<PAGE>
(First Healthcare) (MediSave)
FIRST HEALTHCARE CORPORATION MEDISAVE PHARMACIES, INC.
[SIGNATURE ILLEGIBLE] [SIGNATURE ILLEGIBLE]
By -------------------------------- By -----------------------------
Credit Portfolio Manager Vice President
Title: ------------------------- Title: ----------------------
-79-
<PAGE>
EXHIBIT 10.53
June 22, 1993
Mr. Maris Andersons
Executive Vice President and Treasurer
National Medical Enterprises, Inc.
2700 Colorado Avenue
Santa Monica, California 90404
Dear Maris:
I am writing to confirm our understanding and agreement regarding the terms
and conditions pursuant to which certain of the various agreements between
National Medical Enterprises, Inc. and certain of its Subsidiaries
(collectively, "NME") and The Hillhaven Corporation and certain of its
subsidiaries (collectively, "Hillhaven") will be amended or cancelled.
A. Present Status of Relationship. NME and Hillhaven participate in the
------------------------------
following arrangements:
1. Leased Buildings. First Healthcare Corporation ("FHC") lease: or
----------------
subleases the 23 facilities set forth on Exhibit A (the "Leased
---------
Facilities") from NME, pursuant to individual leases each dated as of
January 26, 1990, as amended by that certain Omnibus Amendment to
Leases dated as of April 1, 1992, and as further amended by that
certain Second Omnibus Amendment to Leases dated as of November 12,
1992, and as individual Leases may have been amended from time to time
(as so amended, the "Leases").
2. Obligation to Finance Purchase of Leased Facilities. Pursuant to
---------------------------------------------------
that certain Master Loan Agreement dated as of April 1, 1992, as
amended by that certain First Amendment to Master Loan Agreement dated
as of November 12, 1992 (as amended the "Master Loan Agreement"), NME
has agreed to provide 100% financing of the purchase price if NME
requires FHC to acquire the Leased Facilities pursuant to the terms of
the Leases.
<PAGE>
Mr. Maris Andersons
June 22, 1993
Page 2
3. Loans Made With Respect to Certain Previously Leased Facilities.
---------------------------------------------------------------
Pursuant to the Master Loan Agreement, NME has financed a portion of
FHC's acquisition of the 28 facilities listed on Exhibit B. The
---------
financing with respect to each such facility is evidenced by a
promissory note and a Mortgage, Assignment of Leases and Rents,
Security Agreement and Fixtures Filing or a Deed of Trust, Assignment
of Leases and Rents, Security Agreement and Fixture Filing. Pursuant
to its Guaranty dated as of April 1, 1992, Hillhaven has guaranteed
the obligations of FHC with respect to the Master Loan Agreement and
each loan made thereunder. The outstanding balance owed by Hillhaven
to NME pursuant to such financing is approximately $92,200,000, plus
accrued interest.
4. Obligation to Finance Certain Previously Leased Facilities.
----------------------------------------------------------
Pursuant to that certain letter agreement dated May 31, 1990, as
amended by that certain Amendment No. One to Commitment Letter dated
as of May 1, 1991 (as amended, the Commitment Letter"), NME agreed to
loan not in excess of $22.5 million with respect to the purchase by
FHC of the five facilities set forth on Exhibit C. Pursuant to the
---------
Commitment Letter, FHC has borrowed from NME approximately $6,000,000
with respect to the purchase of Clayton House (No. 445). In addition,
NME has provided "wrap" financing in the amount of $1,452,626.43 with
respect to the purchase of Greenbriar Terrace (No. 592) and
$893,194.45 with respect to the purchase of Birchwood Terrace (No.
559).
5. Promissory Note/Note Guarantee Agreement. Pursuant to that
----------------------------------------
certain Promissory Note dated January 31, 1990, as amended by that
certain First Amendment to Promissory Note dated as of May 1, 1991 (as
amended, the "Promissory Note"), NME loaned FHC the original principal
amount of $135,859,396. As of the date hereof, the principal amount of
the Promissory
<PAGE>
Mr. Maris Andersons
June 22, 1993
Page 3
Note is $49,059,396, plus accrued interest; no amounts are outstanding
with respect to the $18 million of the Promissory Note that was
converted to a revolving credit facility. Pursuant to that certain
Note Guarantee Agreement dated as of January 31, 1990, Hillhaven
agreed to guarantee FHC's obligations under the Promissory Note.
6. Revolving Credit and Term Loan Agreement. Pursuant to that
----------------------------------------
certain Revolving Credit and Term Loan Agreement dated as of January
31, 1990, as amended by that certain First Amendment to Revolving
Credit and Term Loan Agreement dated as of November 12, 1992 (as
amended, the "Credit Agreement"), NME agreed to loan Hillhaven up to
$50 million.
7. Guarantee Reimbursement Agreement. Pursuant to that certain
----------------------------------
Guarantee Reimbursement Agreement dated as of January 31, 1990, as
amended by amendments thereto dated as of October 30, 1990, May 30,
1991, October 2, 1991, April 1, 1992, November 12, 1992, February 19,
1993 and two amendments each dated May 28, 1993 (as amended, the
"Guarantee Reimbursement Agreement"), Hillhaven agreed to pay NME a
fee with respect to the "Obligations" (as defined therein) and to
reimburse NME for any payments NME is required to make with respect to
the Obligations. Certain of the Obligations represent rental payments
with respect to facilities which NME leases or subleases from third
parties and as to which NME assigned a portion of its leasehold
interest to FHC, but did not assign all of the renewal or purchase
options contained in such leases or subleases. Exhibit D sets forth
---------
those facilities leased from third parties where NME or Hillhaven
leased, subleased or assigned its leasehold interest to other third
parties, including NME's renewal and/or purchase option with respect
thereto, but where NME did not assign to FHC such renewal and/or
purchase options
<PAGE>
Mr. Maris Andersons
June 22, 1993
Page 4
(the "Third Party Leased Facilities").
8. Common Stock Ownership. As of the date hereof, NME owns
----------------------
14,390,737 shares of Hillhaven's Common Stock.
9. Series C Preferred Stock Ownership. As of the date hereof, NME
----------------------------------
owns 35,000 shares of Hillhaven's Series C Preferred Stock.
10. Warrants. As of the date hereof, NME owns warrants (the
--------
"Warrants") to purchase 30 million shares of Hillhaven's Common Stock.
Pursuant to that certain Warrant and Registration Rights Agreement
dated as of January 30, 1990, Hillhaven agreed to register the shares
covered by the Warrants under the terms and conditions set forth
therein.
11. Management Agreements. Pursuant to Management Agreements, each
---------------------
dated as of January 31, 1990, Hillhaven manages on behalf of NME the
seven facilities set forth on Exhibit E.
---------
12. Miscellaneous Agreements. Hillhaven and NME have entered into
------------------------
the following agreements each dated as of January 31, 1990:
a. Employee and Employee Benefits Agreement;
b. Government Programs Agreement;
c. Insurance Agreement;
d. Services Agreement; and
e. Tax Sharing Agreement.
B. Agreement to Restructure Arrangements. NME and Hillhaven have agreed
-------------------------------------
to make significant changes to a
<PAGE>
Mr. Maris Andersons
June 22, 1993
Page 5
number of the aforesaid agreements. Such changes are being made for the benefit
of both parties after significant negotiations for the purposes of: (1) allowing
FHC to purchase the Leased Facilities; (2) paying off all debt owed by FHC to
NME; (3) removing NME from liability with respect to a significant portion
(approximately $400,000,000) of the Obligations; (4) capping Hillhaven's maximum
guaranty fee on the Obligations under the Guarantee Reimbursement Agreement; and
(5) relieving NME of it. loan commitments to Hillhaven. In particular, we have
agreed to the following actions:
1. Purchase of Leased Facilities. FHC shall purchase the Leased
-----------------------------
Facilities at an aggregate $23.6 million discount off the aggregate
option amount of $135,400,000 (as set forth in Exhibit A hereto), to
---------
be allocated among the Leased Facilities as the parties shall mutually
agree. Pending the consummation of the transactions set forth herein,
NME shall not exercise its options under the Leases to require FHC to
purchase any of the Leased Facilities. NME shall pay any prepayment
penalty or similar charge payable with respect to the payoff of third
party debt on the Leased Facilities.
2. Pay Off Debt. FHC shall repay all debt which it currently owes
------------
to NME including interest thereon. This debt includes loans made
pursuant to the Master Loan Agreement (with an aggregate balance of
approximately $92.200,000 as of June 1, 1993), the Promissory Note
(with a balance of approximately $49,100,000 as of June 1, 1993) and
loans made with respect to Clayton House (No. 445), Birchwood Terrace
Healthcare (No. 559) and Greenbriar Terrace Healthcare (No. 592). NME
shall pay any prepayment penalty or similar charge payable with
respect to the payoff of third party debt of Birchwood Terrace
Healthcare and Greenbriar Terrace Healthcare.
<PAGE>
Mr. Maris Andersons
June 22, 1993
Page 6
3. Release of Obligations to Provide Financing. NME shall be
--------------------------------------------
released from its obligation to provide any further financing to FHC
under the Credit Agreement, the Master Loan Agreement, the Promissory
Note or the Commitment Letter and any other commitments by NME to
provide financing to Hillhaven. Pending consummation of the
transactions set forth herein, Hillhaven shall not borrow from NME any
additional amounts under these financing arrangements.
4. Series D Preferred Stock. Hillhaven shall issue to NME, and NME
------------------------
shall purchase from Hillhaven, shares (representing $120 million) of a
newly created Series D Preferred Stock. Such Series D Preferred Stock
shall (a) be non-voting; (b) be redeemable by Hillhaven at any time
for cash; (c) be redeemed by Hillhaven at any time at NME's request to
fund NME's exercise of all, but not less than all, of the Warrants;
(d) shall be redeemed by Hillhaven at NME's request at any time
following the occurrence of a "Designated Event" (as defined in the
Promissory Note) unless such Designated Event occurs on account of a
transfer by NME of any of its equity interest in Hillhaven; and (e)
provide for dividends "payable-in-kind" in Series D Preferred Stock
("PIK"), at the rates (compounded annually) of: 6.5% from the date of
issuance through August 31, 1994; 5.5% from September 1, 1994 through
August 31, 1995; 4.5% from September 1, 1995 through August 31, 1996;
and 4% thereafter; provided, however, that dividends there for shall
-------- -------
be paid quarterly in cash commencing on the earlier to occur (the
"Conversion Date") of (i) the sixth anniversary of the closing of the
Bank Financing (as defined below) or (ii) three months after the
stated initial maturity of the Bank Financing; provided further,
-------- -------
however, that upon NME's exercise of all, but not less than all, of
-------
the Warrants, the rate in effect at such time shall be fixed as the
rate
<PAGE>
Mr. Maris Andersons
June 22, 1993
Page 7
applicable to the remaining Series D Preferred Stock (including PIK
dividends) thereafter; provided further, however, that in the event
-------- ------- -------
that NME has not exercised all of the Warrants by the Conversion Date,
the annual dividend payable on and after the Conversion Date shall be
paid in cash up to $5,745,000, and then any remainder shall be paid in
PIK preferred stock.
5. Amendment to Guarantee Reimbursement Agreement. The Guarantee
----------------------------------------------
Reimbursement Agreement shall be amended to provide: (a) when any
Obligations are paid off in full with proceeds from the Financing (as
defined below), the fee payable with respect to those Obligations that
have been paid off during the fiscal year ending May 31, 1994 with
proceeds from the Financing shall be prorated to the date of payoff;
(b) that, commencing with the first quarter following completion of
the Financing, the amount of Obligations shall be calculated
quarterly, at the end of each quarter, instead of annually, for the
purpose of determining the fee payable by Hillhaven for the following
quarter thereunder; and (c) that the maximum guarantee fee payable by
Hillhaven is two percent (2%) per annum of the Obligations.
6. Third Party Leased Facilities. With respect to the Third
--------------------------------
Party Leased Facilities, NME shall assign to FHC its renewal and/or
purchase options under such underlying leases (along with the leases
for any facilities which are part of a "basket" to which such Third
Party Leased Facilities belong). Such assignments, however, shall
restrict FHC's ability to exercise such renewal and/or purchase
options unless required to do so (a) as a result of the exercise of
any of such options by a sublessee or assignee of any of such Third
Party Leased Facilities, or (b) in order to comply with the terms of
the subleases or assignments to such sublessees or
<PAGE>
Mr. Maris Andersons
June 22, 1993
Page 8
assignees. Such assignments shall also prohibit FHC from further
assignments of such options to third parties. The Guarantee
Reimbursement Agreement shall be further amended to provide that in
the event that FHC or its sublessee or assignee exercises any of such
renewal options, then the rents during the period of such renewal
shall be deemed to be part of the Obligations as of the date of
exercise.
7. Repayment of Certain Guaranteed Obligations. Hillhaven shall
-------------------------------------------
in the case of the industrial development bond financings referred to
in clause (e) below shall use its best efforts to cause within a
reasonable period following the closing of the Financing, the
following obligations to be repaid (or otherwise cause NME to be
effectively removed from liability or financial responsibility with
respect to):
a. THC Facilities financing;
b. Hillhaven's portion of the MP Funding financing;
c. Third party debt with respect to Hillhaven's Performance
Investment Plan;
d. Hillhaven's accounts receivable financing; and
e. Industrial development bond financing set forth in
Exhibit F.
---------
8. Series C Preferred Stock. The Series C Preferred Stock will be
------------------------
amended: (a) to permit the issuance of PIK dividends and the
accrual of cash dividends on the Series D Preferred Stock, and
redemption of the Series D Preferred Stock if NME requests the
redemption to fund its exercise of all the Warrants, even if the
<PAGE>
Mr. Maris Andersons
June 22, 1993
Page 9
dividends on the Series C Preferred Stock are in arrears; and (b)
to provide that the Series C Preferred Stock shall be redeemed by
Hillhaven at NME's request at any time following the occurrence
of a "Designated Event" (as defined in the Promissory Note).
Hillhaven will not use the proceeds from the Financing (as
defined below) or the proceeds from sale of the Series D
Preferred Stock to redeem any of the shares of the Series C
Preferred Stock.
C. Conditions to Effectiveness. The foregoing changes will only be
---------------------------
effective upon completion of the actions required under Section B (excluding,
however, the actions set forth under Section B(7)(e), as to which Hillhaven
shall be obligated to use its best efforts to complete such actions within a
reasonable period following the closing of the Financing) of this Agreement and
satisfaction of each of the following conditions:
1. The transactions shall be approved by the Boards of Directors or
committees of the Boards of Directors of NME and Hillhaven.
2. Hillhaven shall obtain satisfactory third party bank financing in
the approximate amount of $400 million (the "Bank Financing").
3. Hillhaven shall successfully complete a public or private debt
financing in the approximate amount of $175 million (the "High Yield
Financing;" the Bank Financing and the High Yield Financing being
collectively referred to as the "Financing").
4. FHC shall obtain regulatory and other consents and approvals
necessary to acquire the Leased Facilities.
5. Appropriate documents satisfactory to NME and Hillhaven shall be
prepared and executed evidencing the transactions.
<PAGE>
Mr. Maris Andersons
June 22, 1993
Page 10
In the event that any of the foregoing conditions cannot be satisfied for
any reason or any of the actions required under Section B of this Agreement are
not completed by November 1, 1993, neither party shall have any liability to the
other and all obligations hereunder shall cease.
D. Effect on Agreements. Except as provided for in this letter, each of
--------------------
the agreements between NME and Hillhaven shall remain unmodified and in full
force and effect.
E. Expenses. Each party shall bear its own costs and expenses in
--------
connection with the transaction contemplated in this letter.
F. Disclosure of Transactions. NME and Hillhaven must approve the form
--------------------------
and content of any public statement or press release concerning these
transactions, whether in writing or verbally, prior to the release or issuance
thereof.
G. Cooperation. The parties agree to execute and deliver such other
-----------
documents and instruments and do all such other acts and things as may be
reasonably required to give effect to the agreements contained in this letter.
H. Modification; Governing Law. No amendment or modifications of this
---------------------------
letter shall be effective unless in writing signed by the parties. This letter
shall be governed by and construed in accordance with California law.
Please indicate your agreement with the forgoing agreement by executing the
enclosed duplicate copy of this letter where indicated below and returning it to
my attention. This letter may be executed in counterparts, each of which shall
be an original, but all of which together shall constitute but one and the same
instrument.
Very truly yours
THE HILLHAVEN CORPORATION
By [SIGNATURE NOT LEGIBLE]
------------------------
Senior Vice President
<PAGE>
Mr. Maris Andersons
June 22, 1993
Page 11
FIRST HEALTHCARE CORPORATION
By:[SIGNATURE NOT LEGIBLE]
-------------------------
Senior Vice President
Accepted and agreed this 22 day of June, 1993.
NATIONAL MEDICAL ENTERPRISES, INC.
By: ______________________________
NME PROPERTIES CORP.
By: ______________________________
NME PROPERTIES, INC.
By: ______________________________
NORTHWEST CONTINUUM CARE CENTER, INC.
By: ______________________________
<PAGE>
Mr. Maris Andersons
June 22, 1993
Page 12
By:____________________________
FIRST HEALTHCARE CORPORATION
By: ___________________________
Accepted and agreed this 22nd day of June, 1993.
---- ----
NATIONAL MEDICAL ENTERPRISES, INC.
By:[SIGNATURE NOT LEGIBLE]
-------------------------------
Senior Vice President
NME PROPERTIES CORP.
By:[SIGNATURE NOT LEGIBLE]
-------------------------------
Senior Vice President
NME PROPERTIES, INC
By:[SIGNATURE NOT LEGIBLE]
-------------------------------
Senior Vice President
<PAGE>
Mr. Maris Andersons
June 22, 1993
Page 13
NORTHWEST CONTINUUM CARE CENTER, INC.
By:[SIGNATURE NOT LEGIBLE]
-------------------------------
Senior Vice President
FLAGG INDUSTRIES, INC.
By:[SIGNATURE NOT LEGIBLE]
-------------------------------
Senior Vice President
NME PROPERTY HOLDING CO., INC.
By:[SIGNATURE NOT LEGIBLE]
-------------------------------
Senior Vice President
NME PROPERTIES WEST, INC.
By:[SIGNATURE NOT LEGIBLE]
-------------------------------
Senior Vice President
GUARDIAN MEDICAL SERVICES, INC.
By:[SIGNATURE NOT LEGIBLE]
-------------------------------
Senior Vice President
NME ARIZONA, INC.
By:[SIGNATURE NOT LEGIBLE]
-------------------------------
Senior Vice President
SEDGEWICK CONVALESCENT CENTER, INC
By:[SIGNATURE NOT LEGIBLE]
-------------------------------
Senior Vice President
HAMMOND HOLIDAY HOME
By:[SIGNATURE NOT LEGIBLE]
-------------------------------
Senior Vice President
<PAGE>
Mr. Maris Andersons
June 22, 1993
Page 14
LAKE HEALTH CARE FACILITIES, INC.
By:[SIGNATURE NOT LEGIBLE]
-------------------------------
Senior Vice President
<PAGE>
EXHIBIT A
---------
<TABLE>
<CAPTION>
No. Facility Name Option Price
- ----- ------------- ------------
<S> <C> <C>
116 Hillhaven Rehab. & Conv. Center 4,300,000
Durham, North Carolina
117 East Manor Medical Care Center 5,700,000
Sarasota, Florida
149 Fair Oaks Healthcare Center 6,600,000
Fair Oaks, California
150 Hillhaven/San Francisco 12,100,000
San Francisco, California
180 Hillhaven Convalescent Center 3,300,000
Vancouver, Washington
286 Columbia Nursing Plaza 7,300,000
Evansville, Indiana
416 Park Place Hillhaven Conv. Center 7,800,000
Great Falls, Montana
436/437 Valley House Healthcare/Apts. 4,000,000
Tucson, Arizona
563 Camelot Nursing Home 1,800,000
New London, Connecticut
565 Hamilton Pavilion Healthcare 2,900,000
Norwich, Connecticut
566 Hillhaven of Windsor 2,700,000
Windsor, Connecticut
568 Parkway Pavilion Healthcare 3,000,000
Enfield, Connecticut
572 Winchester Place 7,400,000*
Canal Winchester, Ohio
707 Guardian Care of Monroe 5,800,000
Monroe, North Carolina
738 Hillhaven, Alameda, California 7,300,000
770 Vallhaven Care Center 5,800,000
Neenah, Wisconsin
783 Lexington Manor Health Care 6,100,000
Lexington, Kentucky
802 Hillhaven Convalescent Center 6,900,000
Akron, Ohio
806 Hillhaven Convalescent Center 7,000,000
Chapel Hill, North Carolina
</TABLE>
____________________
* Sale evidenced by assignment of sublease and all options and rights to
purchase of NME, as to Canal Winchester I, and deed conveying fee
interest in Canal Winchester II
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
818 Hillhaven, Little Rock, Arkansas 4,500,000
826 Hillhaven Rehab & Conv. Center 5,200,000
836 Medicenter/Tampa 5,000,000
Tampa, Florida
851/852 Villa Campana Health Center/ 12,900,000
Retirement, Tucson, Arizona
------------
135,400,000
</TABLE>
-2- Exhibit A
<PAGE>
Exhibit B
---------
<TABLE>
<CAPTION>
No. Facility Name
--- -------------
<S> <C> <C>
1. 593 Hanover Terrace, Hanover, New Hampshire
2. 779 Westview Manor, Bedford, Indiana
3. 145 Reno Healthcare, Reno, Nevada
4. 433 Parkview Acres, Dillon, Montana
5. 462 Queen Anne, Seattle, Washington
6. 481 Park Manor, Rawlins, Wyoming
7. 483 Sage View, Rock Springs, Wyoming
8. 767 Colony-Oaks, Appleton, Wisconsin
9. 859 Castle Garden, Northglenn, Colorado
10. 203 Hillhaven-Willow Pass, Concord, California
11. 420 Maywood Acres, Oxnard, California
12. 125 Titusville, Titusville, Florida
13. 136 Hillhaven-LaSalle, Durham, North Carolina
14. 842 Medicenter-Virginia Beach, Virginia Beach, Virginia
15. 706 Guardian Care of Henderson, Henderson, North Carolina
16. 711 Guardian Care of Kinston, Kinston, North Carolina
17. 713 Guardian Care of Zebulon, Zebulon, North Carolina
18. 114 Arden Nursing Home, Seattle, Washington
19. 115 Palm Beaches, West Palm Beach, Florida
20. 155 Savannah Convalescent, Savannah, Georgia
21. 158 Bellingham Care, Bellingham, Washington
22. 188 Hillhaven Rehab, Wilmington, North Carolina
23. 191 Silas Creek, Winston-Salem, North Carolina
24. 320 Hillhaven Convalescent, Burlingame, California
25. 427 Twin Pines, Santa Paula, California
26. 645 Hillhaven Rehab, Marietta, Georgia
27. 690 Wasatch Villa, Salt Lake City, Utah
28. 727 Brookvue Convalescent, San Pablo, California
</TABLE>
Exhibit B
<PAGE>
Exhibit C
---------
<TABLE>
<CAPTION>
No. Facility Name
- ---- -------------
<S> <C>
445 Clayton House, Ballwin, Missouri
559 Birchwood Terrace, Burlington, Vermont
591 Dover House, Dover, New Hampshire
592 Greenbriar Terrace, Nashua, New Hampshire
822 Memphis-Hillhaven Convalescent, Memphis, Tennessee
</TABLE>
Exhibit C
<PAGE>
Exhibit D
---------
<TABLE>
<CAPTION>
No. Facility Name
- --- -------------
<S> <C>
272 Hughes Springs Nursing Home
Hughes Springs, Texas
273 Pinecrest Convalescent Home
Daingerfield, Texas
274 Coastal Care Center
Texas City, Texas
275 Great Southwest Convalescent Center
Grand Prairie, Texas
292 Twin City Nursing Home
Gas City, Indiana
298 Driftwood Convalescent Hospital
Yuba City, California
299 Marysville Convalescent Hospital
Marysville, California
305 University Nursing Center
Upland, Indiana
880 Four States Nursing Home
Texarkana, Texas
881 Southwest Senior Care Center
Las Vegas, New Mexico
</TABLE>
Exhibit D
<PAGE>
Exhibit E
---------
<TABLE>
<CAPTION>
No. Facility Name
- --- -------------
<S> <C>
902 Alvarado Convalescent, San Diego, California
974 J.D. French Center, Los Alamitos, California
169 Menorah House, Palm Beach, Florida
815 Del Ray Beach, Del Ray Beach, Florida
978 Northshore Living Center, Slidell, Louisiana
993 Brookhaven Nursing Center, Carrollton, Texas
990 Jo Ellen Smith, New Orleans, Louisiana
</TABLE>
Exhibit E
<PAGE>
Exhibit F
---------
<TABLE>
<CAPTION>
Original
Principal
Facility No./Name Letter of Credit Amount
----------------- ---------------- -----------
<S> <C> <C> <C>
1. 322 Meadowview Wachovia 842,000
2. 324 Spring Valley Wachovia 1,355,000
3. 325 Glenwood Wachovia 985,000
4. 501 Blue Hills Wachovia 889,000
5. 503 Brigham Manor Wachovia 743,000
6. 507 Country Manor Wachovia 1,518,000
7. 508 Crawford House Wachovia 1,280,000
8. 509 Crestwood Wachovia 900,000
9. 513 Hallmark Wachovia 1,100,000
10. 514 Forge Pond Wachovia 1,116,000
11. 516 Hammersmith Wachovia 492,000
12. 517 Oakwood Wachovia 1,130,000
13. 518 Timberlyn Wachovia 885,000
14. 521 Sandalwood Wachovia 875,000
15. 581 Blueberry Hill Wachovia 2,025,000
16. 853 Kachina Point (7/93) Wachovia 4,230,000**
17. 982 Village Square Wachovia 4,410,000
-----------
Subtotal 24,775,000
18. 7100 Campana del Rio Swiss Bank 10,750,000
19. 7105 Kachina Point Swiss Bank 6,200,000
20. 7125 Castle Gardens Swiss Bank 5,000,000
21. 7185 Crosslands Swiss Bank 5,900,000
-----------
Subtotal 27,850,000
22. 350 Valley Gardens Bank Cal 3,580,000
23. 981 Foothill Bank Cal 4,265,000
-----------
Subtotal 7,845,000
</TABLE>
Exhibit F
____________________
**The Bonds with respect to this facility will be refunded under the
Wachovia program in July 1993.
<PAGE>
<TABLE>
<CAPTION>
Original
Principal
Facility No./Name Letter of Credit Amount
----------------- ---------------- -----------
<S> <C> <C> <C>
24. 922 Windsor Woods Kredietbank 3,675,000
25. 955 Heritage Villa Kredietbank 3,130,000
26. 1106 Springfield Kredietbank 6,255,000
27. 7137 Woodhaven Kredietbank 9,500,000
28. 7165 Hearthstone Kredietbank 8,440,000
----------
SUBTOTAL 31,000,000
29. 210 Californian Seafirst 4,900,000
30. 947 St. George Seafirst 2,700,000
31. Chico Seafirst 4,400,000
----------
SUBTOTAL 12,000,000
TOTAL 103,470,000
===========
</TABLE>
Exhibit F
-2-
<PAGE>
Exhibit 10.54
AGREEMENT AND WAIVER
This AGREEMENT AND WAIVER (this "Agreement") dated as of
September 2, 1993, by and among National Medical Enterprises,
Inc., a Nevada corporation ("NME"), the subsidiaries of NME which
are signatories hereto, The Hillhaven Corporation, a Nevada
corporation ("Hillhaven"), and First Healthcare Corporation, a
Delaware corporation ("FHC").
WITNESSETH:
WHEREAS, pursuant to that certain Revolving Credit and Term
Loan Agreement dated as of January 31, 1990 between NME and
Hillhaven, as amended by that certain First Amendment thereto
dated as of November 12, 1992 (as amended, the "Revolving Credit
Agreement"), NME agreed to make certain loans to Hillhaven
through May 31, 1994 subject to the conditions set forth therein;
and
WHEREAS, pursuant to that certain Commitment Letter dated
May 31, 1990, between NME and FHC, as amended by that certain
Amendment No. One thereto dated as of May 1, 1991 (as amended,
the "Commitment Letter"), NME agreed to make certain loans to FHC
subject to the conditions set forth therein; and
WHEREAS, pursuant to that certain Master Loan Agreement
dated as of April 1, 1992 among the lenders parties thereto, NME,
FHC and Hillhaven, as amended by that certain First Amendment
thereto dated as of November 12, 1992 (as amended, the "Master
Loan Agreement"), the lenders which were parties thereto agreed
to finance up to 100% of the purchase price of the facilities
referred to therein; and
WHEREAS, pursuant to that certain Guaranty dated as of April
1, 1992 from Hillhaven in favor of the lenders listed thereon
(the "Master Loan Agreement Guaranty"), Hillhaven guaranteed the
obligations of FHC under the Master Loan Agreement; and
WHEREAS, pursuant to that certain Master Loan Agreement for
Purchase of Nine Facilities dated as of June 1, 1992 among the
lenders parties thereto and FHC (the "Second Master Loan
Agreement"), the lenders which were parties thereto agreed to
finance up to 100% of the purchase price of the facilities
referred to therein; and
WHEREAS, pursuant to that certain Guaranty dated as of June
1, 1992 from Hillhaven in favor of the lenders listed thereon
(the "Second Master Loan Agreement Guaranty"), Hillhaven
guaranteed FHC's obligations under the Second Master Loan
Agreement; and
WHEREAS, pursuant to that certain Promissory Note dated
January 31, 1990 (the "Promissory Note") by FHC in favor of NME
Properties Corp., a Tennessee corporation (formerly known as The
Hillhaven Corporation), FHC owes certain monies to NME Properties
Corp.; and
<PAGE>
WHEREAS, pursuant to that certain Note Guarantee Agreement
dated as of January 31, 1990 among Hillhaven, NME and the payees
identified therein (the "Note Guarantee Agreement"), Hillhaven
guaranteed FHC's obligations under the Promissory Note; and
WHEREAS, Hillhaven is restructuring its relationship with
NME to, inter alia, repay amounts owing to NME pursuant to the
Master Loan Agreement, the Second Master Loan Agreement and the
Promissory Note, and terminate NME's commitment to loan funds
pursuant to the Revolving Credit Agreement and the Master Loan
Agreement; and
WHEREAS, in connection therewith the parties desire to
eliminate NME's commitments under the Revolving Credit Agreement,
and the Master Loan Agreement, and to terminate Hillhaven's
obligations under the Master Loan Agreement Guaranty, Second
Master Loan Agreement Guaranty and Note Guarantee Agreement; and
WHEREAS, the aforesaid restructuring will be financed
through (1) the issuance by Hillhaven to NME or its subsidiaries
of $120 million of a newly created series of payable-in-kind
preferred stock, (2) the incurrence by FHC of up to $360 million
of indebtedness in the form of term loans, letters of credit and
working capital loans under a secured credit facility with Morgan
Guaranty Trust Company of New York and a syndicate of other
lenders (the "Bank Financing"), (3) the sale by Hillhaven of
senior subordinated notes in the approximate amount of $175
million (the "Notes"), (4) the extension of FHC's commercial
paper program backed by certain of its (and certain of its
subsidiaries') Medicaid accounts receivable and increase in
permitted borrowings under such program from $30.0 million to
$40.0 million and (5) the use of available cash; and
WHEREAS, in connection with the Bank Financing, Hillhaven
has transferred its bank accounts to FHC; and
WHEREAS, pursuant to Sections 5(a), 5(b) and 5(i) of that
certain Guarantee Reimbursement Agreement, as amended (as so
amended, the "Guarantee Reimbursement Agreement"), Hillhaven
agreed, inter alia, to certain covenants which may be violated as
a result of the Bank Financing, the Notes and the transfer of
bank accounts to FHC;
NOW, THEREFORE, in consideration of the foregoing recitals
and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto
intending to be legally bound, hereby agree as follows:
1. Termination of Obligations to Lend. NME's obligations
to loan funds to Hillhaven under the Revolving Credit Agreement,
the Master Loan Agreement, the Second Master Loan Agreement, the
Promissory Note and the Commitment Letter shall terminate as of
the date hereof.
2. Termination of Guarantees. Hillhaven's obligations
under the Master Loan Agreement Guaranty, Second Master Loan
Agreement Guaranty and Note Guarantee Agreement shall terminate
as of the date hereof.
<PAGE>
3. Waiver. NME hereby waives compliance with the
following provisions of the Guarantee Reimbursement Agreement:
(a) Sections 5(a) and 5(b) of the Guarantee
Reimbursement Agreement are hereby waived to the
extent necessary to permit (i) the transactions
contemplated by the Bank Financing, including the
placement of mortgages on facilities owned by FHC
or its subsidiaries, the substitution of
facilities as collateral and any subsequent
addition of collateral, and (ii) the issuance of
the Notes.
(b) Section 5(i) of the Guarantee Reimbursement
Agreement is hereby waived to the extent necessary
to permit Hillhaven to transfer any or all of its
bank accounts to FHC.
4. Costs. Each party shall bear its own cost and expenses
in connection with the transactions contemplated in this
Agreement.
5. Cooperation. The parties agree to execute and deliver
such other documents and instruments and do all such other acts
and things as may be reasonably required to give effect to the
agreements contained in this Agreement.
6. Amendment. No amendment or modifications of this
Agreement shall be effective unless in writing signed by the
parties.
7. Governing Law. This Agreement shall be governed by and
construed in accordance with California law.
8. Counterparts. This Agreement may be executed in
counterparts, each of which shall be an original, but all of
which together shall constitute but one and the same instrument.
9. No Further Waiver. The waivers set forth herein shall
be effective only for the specific purposes for which given.
IN WITNESS WHEREOF, each of the parties hereto has caused
this Agreement to be duly executed on its behalf as of the date
first set forth above.
NATIONAL MEDICAL ENTERPRISES, INC.,
a Nevada corporation
By: /s/ Timothy Pullen
Its: Vice President
<PAGE>
NME PROPERTIES CORP.,
a Tennessee corporation
By: /s/ Timothy Pullen
Its: Vice President
NME PROPERTIES, INC.,
a Delaware corporation
By: /s/ Timothy Pullen
Its: Vice President
NME PROPERTY HOLDING CO., INC.,
a Delaware corporation
By: /s/ Timothy Pullen
Its: Vice President
NME PROPERTIES WEST, INC.,
a Delaware corporation
By: /s/ Timothy Pullen
Its: Vice President
HAMMOND HOLIDAY HOME, INC.,
a Kansas corporation
By: /s/ Timothy Pullen
Its: Vice President
SEDGWICK CONVALESCENT CENTER, INC.,
a Kansas corporation
By: /s/ Timothy Pullen
Its: Vice President
NORTHWEST CONTINUUM CARE
CENTER, INC.,
a Washington corporation
By: /s/ Timothy Pullen
Its: Vice President
<PAGE>
FLAGG INDUSTRIES, INC.,
a California corporation
By: /s/ Timothy Pullen
Its: Vice President
GUARDIAN MEDICAL SERVICES, INC.,
a North Carolina corporation
By: /s/ Timothy Pullen
Its: Vice President
NHE ARIZONA, INC.,
an Arizona corporation
By: /s/ Timothy Pullen
Its: Vice President
LAKE HEALTH CARE FACILITIES, INC.,
a Delaware corporation
By: /s/ Timothy Pullen
Its: Vice President
THE HILLHAVEN CORPORATION,
a Nevada corporation
By: /s/ Robert K. Schneider
Its: Vice President & Treasurer
FIRST HEALTHCARE CORPORATION
a Delaware corporation
By: /s/ Robert K. Schneider
Its: Vice President & Treasurer
<PAGE>
EXHIBIT 10.55
TRUST AGREEMENT
BETWEEN
THE HILLHAVEN CORPORATION
AND
WACHOVIA BANK OF NORTH CAROLINA, N.A.
AS TRUSTEE,
FOR THE BENEFIT OF
PARTICIPATING EMPLOYEES
<PAGE>
TRUST AGREEMENT made and entered into as of
January 16, 1995 by and between The Hillhaven Corporation, a
corporation organized under the laws of the State of
Nevada (the "Company"), and Wachovia Bank of North Carolina,
N.A., a national banking association, organized under the
laws of the United States of America (the "Trustee").
WITNESSETH:
WHEREAS, the Company has in place various non-
qualified and qualified employee benefit plans and
arrangements for the benefit of some or all of the
employees of the Company and certain of its subsidiaries
and affiliates and may from time to time adopt one or
more additional plans or arrangements;
WHEREAS, the Company and its subsidiaries or
affiliates have and will have certain legal obligations
under these employee benefit plans or arrangements;
WHEREAS, the Company wishes to establish a trust
to assist it in meeting certain of these obligations and
intends to make contributions and/or loans to such trust at
such time or times and in such amount or amounts as it
may determine;
WHEREAS, the Company intends that such contributions
shall be held by the Trustee and used for the purpose of
acquiring common stock of the Company and making payments
with respect to loans used to acquire common stock of the Company
all in accordance with the provisions of this Trust
Agreement;
WHEREAS, the Company intends that such loans made to
the Trustee by the Company shall be used for the exclusive
purpose of acquiring common stock of the Company in accordance
with the provisions of this Trust Agreement;
WHEREAS, inasmuch as the income and corpus of
such trust may and will be applied in discharge of the
legal obligations of the Company, its subsidiaries and
affiliates, such trust is intended to be a "grantor trust"
within the meaning of Section 671 of the Code; and
WHEREAS, the Company intends that the assets of
such trust at all times shall be subject to the claims
of bankruptcy and other general creditors of the Company
as provided in Section 17 of this Trust Agreement.
NOW, THEREFORE, in consideration of the mutual
covenants herein contained, the Company and the Trustee
declare and agree as follows:
<PAGE>
SECTION 1 Definitions.
As used in this Trust Agreement, the following
definitions apply to the terms indicated below:
1.1 "Administrator" or "Administrators" shall
refer to the committee, Company official(s) or other persons
listed in Schedule A charged with responsibility for
overseeing and administering the Plans and provision of
Benefits.
1.2 "Affiliate" shall refer to any subsidiary
or other firm related by direct or indirect stock
ownership that has adopted a Plan while each such entity
remains a subsidiary or related firm of the Company.
1.3 "Beneficiary" shall mean any person entitled
to receive benefits under any Plan on the death of a
Participant.
1.4 "Benefits" shall mean amounts that the
Company or an Affiliate has an obligation to pay to
Participants pursuant to any Plan or arrangement described in
Schedule A under which the Company has a legal obligation to (i)
pay from its general assets, (ii) provide for the payment
of by making contributions from its general assets, or
(iii) deliver in shares of Company Stock.
1.5 "Board of Directors" shall mean the Board
of Directors of the Company.
1.6 "Change in Control" shall be deemed to
occur if the Committee certifies to the Trustee that a
"Change in Control" as defined in the 1990 Stock Incentive Plan
has occurred or the occurrence of such a "Change in Control" is
evidenced by a filing made pursuant to Section 13(d) of the
Securities Exchange Act of 1934.
1.7 "Code" shall mean the Internal Revenue Code
of 1986 as it may be amended from time to time.
1.8 "Committee" shall mean such committee as
the Board of Directors shall appoint from time to time to
administer the Trust. The Committee shall consist of at
least three persons, including at all times the persons holding
the title of: Vice President, Treasurer; General Counsel, Senior
Vice President and Secretary; and the Senior Vice President and
Chief Financial Officer. Other members of the Committee (if any)
will be certified to the Trustee by the Secretary or Assistant
Secretary of the Board of Directors.
1.9 "Company Stock" shall mean the common stock
of the Company, par value $.75 per share.
<PAGE>
1.10 "Daily Value" shall mean, with respect to
a share of Company Stock, the closing reported sales price
per share of Company Stock on the New York Stock Exchange
Composite Tape, or if Company Stock is not traded on
such stock exchange, the principal national securities
exchange on which Company Stock is traded, or if not so
traded, the mean between the highest bid and lowest asked
quotation on the over-the-counter market as reported by
the National Quotations Bureau, or any similar organization,
on any relevant date, or if not so reported, as
determined by the Committee in a manner consistently
applied.
1.11 "Director" shall mean the Senior Vice President,
Human Resources & Support Services for the Company.
1.12 "Eligible Participant" shall mean a
Participant who is an Employee who as of the date upon which
Eligible Participants are determined, either (a) holds an
unexercised vested option with respect to Company Stock granted
to him or her pursuant to the 1990 Stock Incentive Plan or the
1991 Performance Investment Plan, or (b) elected to purchase
stock pursuant to the Employee Monthly Stock Investment Plan (the
"EMSIP") within the 12-month period preceding such date.
1.13 "Employee" shall mean any individual who
is actively employed by the Company or an Affiliate.
1.14 "ERISA" shall mean the Employee
Retirement Income Security Act of 1974, as amended from
time to time.
1.15 "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended from time to time.
1.16 "Minimum Distribution Schedule" shall mean
the schedule (or schedules) set forth in Schedule B. An
additional Minimum Distribution Schedule shall be created each
time the Company makes a contribution to the Trust, unless such
contribution is used to pay an obligation of the Trust described
in Section 9 or is used to repay a loan described in Subsection
4.1.2.
1.17 "Other Assets" shall mean any asset or
investment aside from cash held by the Trust that is not
Company Stock.
1.18 "Participant Schedule" shall mean the
schedule prepared by the Company from time to time pursuant
to Subsection 5.2.
1.19 "Participants" shall mean those individuals
who participate in one or more of the Plans described in
Schedule A.
1.20 "Plans" shall mean the plans or arrangements
referred to in Schedule A, as amended from time to time.
<PAGE>
1.21 "Trust" shall mean the trust established
pursuant to this Trust Agreement.
1.22 "Trust Fund" shall mean all Company Stock,
money and other property from time to time obtained by
the Trust and all investments and reinvestments made
therewith or proceeds thereof and all earnings and profits
thereon, less all payments and charges as authorized
herein.
SECTION 2 Establishment of the Trust.
2.1 Trust Fund. The Company hereby establishes
the Trust. The Trust Fund shall consist of such sums of
Company Stock, money and other property acceptable to the
Trustee as are from time to time paid to or otherwise
acquired by the Trustee. Except as otherwise provided in
Subsection 8.1.2, the Company shall have no duty or
obligation to make any contributions to the Trust and the
Trustee shall have no duty or obligation to require the
Company to make any contribution to the Trust. The Trust
Fund shall be held by the Trustee in trust and shall be
dealt with in accordance with the provisions of this
Trust Agreement. The Trustee, and any successor Trustee
appointed pursuant to Section 11 hereof or resulting under
Subsection 19.4 hereof, shall at all times be a bank and
trust company or other national banking association that
is neither a subsidiary of nor other firm related by
direct or indirect stock ownership to the Company.
2.2 Irrevocability. Except as provided in
Section 17 hereof, the Trust shall be for the exclusive
purpose of assisting the Company in funding Plans and
Benefits and defraying expenses of the Trust in accordance
with the provisions of this Trust Agreement. No part of
the income or corpus of the Trust Fund shall be recover-
able by the Company; provided, however, that the Trust
Fund shall be applied in discharge of the Company's legal
obligations as provided in this Trust Agreement.
2.3 Claims of Creditors. Notwithstanding anything
in this Trust Agreement or the Plans to the contrary, the
Trust Fund shall at all times be subject to the claims
of bankruptcy and other general creditors of the Company
as provided in Section 17 hereof. No Participant or
Plan shall have any claim against the Trust Fund other
than as a general unsecured creditor of the Company.
SECTION 3 Acceptance by the Trustee.
The Trustee accepts the Trust established under
this Trust Agreement on the terms and subject to the
provisions set forth herein. The Trustee agrees to
discharge and perform fully and faithfully all of the
duties and obligations imposed upon it under this Trust
Agreement.
<PAGE>
SECTION 4 Investment of the Trust.
4.1 General Duty of Trustee. Except as
otherwise provided in this Subsection 4.1 or except as
otherwise expressly provided in this Trust Agreement, all
assets received by the Trustee other than Company Stock
shall be invested as soon as practicable in, and remain
invested in, Company Stock.
4.1.1 Upon direction of the Committee, the
Trustee shall acquire shares of Company Stock from the
Company.
4.1.2 From time to time, the Trustee shall have
the ability, upon direction of the Committee, to borrow funds for
the purpose of acquiring shares of Company Stock and/or issue one
or more notes to the Company in exchange for shares of Company
Stock. The Trustee shall have the ability to pledge any shares
so acquired as collateral. Subject to the requirements of
Subsection 8.1.4, the terms and conditions of any borrowing shall
be fair and reasonable. It is contemplated that any such
obligation shall be repaid using cash contributions and earnings
attributable to Company Stock held by the Trust Fund.
4.1.3 Notwithstanding anything herein to the
contrary, unless the Committee otherwise directs, cash or
Other Assets received by the Trustee shall be retained
and invested in Other Assets provided that, after payment
of the costs of the Trust, including, without limitation,
Trustee fees and expenses and, if applicable, debt repayment
described in Subsection 4.1.2, through the end of the
calendar year during which such cash or Other Assets are
received by the Trustee, any such cash or Other Assets
remaining shall be distributed by the Trustee to the
Administrators or the Director at the end of such calendar
year to fund such Plans or Benefits as determined by the
Committee taking into account the best interests of a broad
cross-section of Participants.
4.2 Additional Powers of Trustee. Subject to the
provisions of Section 4.1, the Trustee shall have the
following additional powers and authority with respect to
all property constituting a part of the Trust Fund:
4.2.1 To purchase securities or any other
kind of property and to retain such securities or other
property, regardless of diversification and without being
limited to investments authorized by law for the
investment of trust funds.
<PAGE>
4.2.2 Subject to Subsection 7.2 hereof, to
sell, exchange or transfer any such property at public or
private sale for cash or on credit and grant options for
the purchase or exchange thereof, provided that, with respect
to any sale of shares of Company Stock (other than pursuant to
Subsection 7.2 hereof, and excluding any distribution of Company
Stock made pursuant to this Trust Agreement), such shares shall
first be offered for sale to the Company at the Daily Value
before being sold to one or more third parties.
4.2.3 Subject to Section 7 hereof, to
participate in any plan of reorganization, consolidation,
merger, combination, liquidation or other similar plan
relating to any such property, and to consent to or
oppose any such plan or any action thereunder, or any
contract, lease, mortgage, purchase, sale or other action
by any corporation or other entity any of the securities
of which may at any time be held in the Trust Fund, and
to do any act with reference thereto.
4.2.4 To deposit cash or any Other Assets
with any protective, reorganization or similar committee; to
delegate discretionary power to any such committee; and to
pay part of the expenses and compensation of any such
committee and any assessments levied with respect to any
property so deposited.
4.2.5 To exercise any conversion privilege
or subscription right available in connection with any such
property, and to do any act with reference thereto,
including the exercise of options, the making of
agreements or subscriptions and the payment of expenses,
assessments or subscriptions, which may be deemed necessary
or advisable in connection therewith, and to hold and
retain any securities or other property which it may so
acquire.
4.2.6 Subject to Subsection 9.4 hereof, to
commence or defend suits or legal proceedings and to
represent the Trust in all suits or legal proceedings; to
settle, compromise or submit to arbitration any claims,
debts or damages, due or owing to or from the Trust.
4.2.7 Subject to Section 7 hereof, to
exercise, personally or by general or limited power of
attorney, any right, including the right to vote,
appurtenant to any securities or other such property.
4.2.8 To hold cash awaiting investment
uninvested, and to maintain such additional cash balances
as it shall deem reasonable or necessary to meet
anticipated cash distributions from or administrative costs
of the Trust.
<PAGE>
4.2.9 To invest cash or Other Assets at
Wachovia Bank of North Carolina, N.A. or another bank and
trust company or national banking association in any type
of interest-bearing investment, including, without limitation,
deposit accounts, certificates of deposit and repurchase
agreements.
4.2.10 To invest and reinvest all or any
specified portion of cash or Other Assets (i) through the
medium of any common trust fund which has been or may
hereafter be established and maintained by the Trustee, or
(ii) in shares of open end or closed end investment companies
provided that, prior to investing any portion of the Trust
Fund for the first time in any such common trust fund or
investment company, the Trustee shall advise the Company of
its intent to make such an investment and furnish to the
Company any information it may reasonably request with
respect to such investment.
4.2.11 To form corporations or partnerships
and to create trusts to hold title to any cash or Other
Assets constituting the Trust Fund, upon such terms and
conditions as may be deemed advisable.
4.2.12 To engage legal counsel, including
(except following the occurrence of a Change in Control)
counsel to the Company, or any other suitable agents, to
consult with such counsel or agents with respect to the
implementation or construction of this Trust Agreement, the
duties of the Trustee hereunder, the transactions
contemplated by this Trust Agreement or any act which the
Trustee proposes to take or omit, to rely upon the
advice of such counsel or agents, and to pay any such
counsel's or agent's reasonable fees, expenses and
compensation.
4.2.13 To register or hold any securities
or other property held by it in its own name or in the
name of any custodian of such property or of its
nominee, including the nominee of any system for the
central handling of securities, with or without the
addition of words indicating that such securities are held
in a fiduciary capacity, to deposit or arrange for the
deposit of any such securities with such a system and to
hold any securities in bearer form.
4.2.14 To make, execute and deliver, as
Trustee, any and all deeds, leases, notes, bonds,
guarantees, mortgages, conveyances, contracts, waivers,
releases or other instruments in writing that are
necessary or proper for the accomplishment of any of the
foregoing powers.
4.2.15 Pursuant to the direction of the
Committee as to all aspects of the transaction, including,
without limitation, interest rate, term and identity of lender,
to undertake a borrowing sufficient to enable the Trust to
acquire newly issued Company Stock.
<PAGE>
4.2.16 Subject to Section 7 hereof,
generally, to exercise any of the powers of an owner with
respect to property held in the Trust Fund.
SECTION 5. Establishment and Maintenance of Participant
Schedule.
5.1 Form of Participant Schedule. The Trustee
may, from time to time, request the Company to prepare and
deliver to the Trustee in accordance with Subsection 5.2
hereof, a schedule that sets forth the name of each
Participant entitled to receive a Benefit under a Plan or
arrangement or such group of Participants that the Trustee may
need to know in order to carry out the provisions of this
Agreement.
5.2 Maintaining the Participant Schedule. At the
request of the Trustee, the Company shall from time to time
update the Participant Schedule. Each Participant Schedule
shall state the date as of which it applies, and the
Trustee shall be entitled to rely upon such Participant
Schedule, without a duty of further inquiry, until it
receives an updated Participant Schedule bearing a later
date. Each Participant Schedule shall contain all
information concerning a Participant which the Trustee will
need to complete its responsibilities under this Agreement.
SECTION 6 Maintenance of Trust.
6.1 Trust Assets and Allocation to Plans. The
Trustee shall hold all assets contributed or otherwise
obtained by the Trust and shall distribute such assets and
any earnings thereon to such Administrators, Participants or
the Director, as provided for and in accordance with this Trust
Agreement or use such assets to pay obligations of the Trust
described in Section 9 or to repay a loan described in
Subsection 4.1.2.
6.2 Valuation of Trust and Accounts. The Trustee
shall revalue the Trust Fund as of the last business day
of each calendar quarter. Shares of Company Stock shall
be valued at the Daily Value of Company Stock as of
such date.
SECTION 7 Voting and Tender of Company Stock Held in
Trust
7.1 Voting of Company Stock. The Trustee shall
vote the shares of Company Stock held by the Trust in accordance
with, and by soliciting and receiving, voting directions from
Eligible Participants. As soon as practicable following the
record date in question, the Company shall deliver to the
Trustee a Participant Schedule listing Eligible Participants
determined as of such record date. Each Eligible
Participant listed on such Participant Schedule shall have
the right to direct the vote with respect to that number
<PAGE>
of shares of Company Stock held by the Trust as determined
by the following formula: multiply the shares held by the Trust
by a fraction for each Eligible Participant who has given voting
instructions. The numerator of such fraction shall equal the sum
of (1) shares purchased pursuant to the EMSIP by the Participant
during the preceding 12 months, and (2) the total vested,
unexercised options held by the Participant; the denominator
shall equal the total number of shares purchased pursuant to the
EMSIP during the preceding 12 months by all Eligible Participants
who have exercised their voting rights pursuant to this
Subsection 7.1, plus the total number of vested, unexercised
options held, by all Eligible Participants who have exercised
their voting rights pursuant to this Subsection 7.1. The
Trustee shall devise and implement a procedure to assure
confidentiality of any directions given by Eligible
Participants in respect of votes. All actions taken by
Eligible Participants pursuant to this Subsection 7.1 shall
be held confidential by the Trustee and shall not be
divulged or released to any person, other than (i) agents
of the Trustee who are not affiliated with the Company or
its Affiliates, (ii) by virtue of the execution by the
Trustee of any proxy, consent or letter of transmittal
for the shares of Company Stock held in the Trust, or
(iii) as may be required by court order.
7.2 Tender Rights. If any person shall commence a
tender or exchange offer with respect to Company Stock, the
Trustee shall tender the shares of Company Stock held by the
Trust by passing through tender or exchange rights to Eligible
Participants determined as of the commencement of such tender or
exchange offer. As soon as practicable following the
commencement of such tender or exchange offer, the Company
shall deliver to the Trustee a Participant Schedule
listing the Eligible Participants determined as of the
commencement of such tender or exchange offer. Each
Eligible Participant listed on such Participant Schedule
shall have the right to direct the tender or exchange of
that number of shares of Company stock held by the Trust
as determined by the following formula: multiply the shares held
by the Trust by a fraction for each Eligible Participant who has
given tender or exchange instructions. The numerator of such
fraction shall equal the sum of (1) shares purchased pursuant to
the EMSIP by the Participant during the preceding 12 months and
(2) the total vested, unexercised options held by the
Participant; the denominator shall equal the total number of
shares purchased pursuant to the EMSIP during the preceding 12
months by all Eligible Participants who have exercised their
voting rights pursuant to this Subsection 7.1, plus the total
number of vested, unexercised options held, by all Eligible
Participants who have exercised their exchange or tender rights
pursuant to this Subsection 7.2. The Trustee shall devise and
implement a procedure to assure the confidentiality of any
directions given by Eligible Participants in response to
such offers. All actions taken by Eligible Participants
pursuant to this Subsection 7.2 shall be held confidential
by the Trustee and shall not be divulged or released to
<PAGE>
any person, other than (i) agents of the Trustee who are
not affiliated with the Company or its Affiliates, (ii) by
virtue of the execution by the Trustee of any proxy,
consent or letter of transmittal for the shares of
Company Stock held in the Trust, or (iii) as may be
required by court order.
7.3 Notices and Information Statements. The
Company shall provide the Trustee in a timely manner with
notices and information statements (including proxy
statements) when voting rights are to be exercised, and
with respect to tender, exchange or similar offers, notices
and offer materials, at the same time and in the same
manner (except to the extent the Exchange Act requires
otherwise) as such notices, information statements, and offer
materials are provided to shareholders of the Company
generally. The Trustee shall, in turn, provide all
material received by the Company pursuant to this
Subsection 7.3 to Eligible Participants described in
Subsections 7.1 and 7.2.
SECTION 8 Distributions from the Trust
8.1 Distributions of Company Stock from the Trust.
Distributions of Company Stock from the Trust shall be made (a)
in accordance with the Minimum Distribution Schedule, in the case
of Company Stock contributed to the Trust or acquired with cash
contributed to the Trust (other than cash contributed for the
purpose of repayment of a loan described in Subsection 4.1.2 or
payment of an obligation of the Trust described in Section 9), or
(b) in proportion to the principal payment made (or deemed
forgiven) with respect to the loan used to acquire such Company
Stock described in Subsection 4.1.2, in the case of Company Stock
acquired with the proceeds of such loan. For purposes of the
foregoing clause (b) of the preceding sentence, the proportion of
the principal payment made (or deemed forgiven) with respect to
the loan shall be determined by dividing the amount of the
principal payment made (or deemed forgiven) by the sum of such
principal payment and the principal balance of the loan remaining
after such payment.
8.1.1 Shares Released Pursuant to a Minimum
Distribution Schedule. The particular Plan with respect to
which any distribution from the Trust is made will be
determined by the Committee in accordance with the
following directions: (a) to the extent available, shares
of Company Stock sufficient to meet the obligations of the
1990 Stock Incentive Plan shall first be allocated to the
Administrator of such Plan, (b) remaining shares of
Company Stock (if any) to the extent available shall be
transferred to the Administrator to fund the 1991 Performance
Investment Plan, and (c) remaining shares of Company Stock (if
any) to the extent available shall be transferred to the
Administrator to fund the EMSIP, and (d) remaining shares (if
any) shall be transferred to the Director or Administrators to
fund such Plans or Benefits as determined by the Committee taking
<PAGE>
into account the best interests of a broad cross-section of
Participants, provided that it is determined that such Plans or
Benefits constitute contractual liabilities of the Company or its
Affiliates.
8.1.2 Release of Shares acquired with the
Proceeds of a Loan. Shares of Company Stock to be distributed in
accordance with clause (b) of the first sentence of this
Subsection 8.1 shall be allocated in the same manner described in
Subsection 8.1.1 above. If a loan described in Subsection 4.1.2
is outstanding, and if the earnings attributable to the shares of
Company Stock acquired with the proceeds of such loan together
with any contributions made by the Company for the purpose of
repayment of such loan are not sufficient to enable the Trust to
make a scheduled repayment of principal under such loan that will
cause a release and distribution of shares sufficient to fund
Benefits described in 8.1.1(a), (b) and (c), then, to the extent
of any such deficiency, such repayment of principal shall be
deemed forgiven by the Company.
8.1.3 Reliance Upon Committee Instruction.
The Committee shall inform the Trustee in writing of how many
shares are required to fund 8.1.1(a), (b), (c), and (d). The
Trustee may rely upon written instructions received by the
Committee to carry out the instructions contained in this
Subsection 8.1 and shall have no responsibility to verify or
monitor the determinations made by the Committee. If no
direction regarding allocation of shares of Company Stock
pursuant to clause (d) of Subsection 8.1.1 is received by
the Trustee from the Committee by the date specified in
the Minimum Distribution Schedule or the date a principal
payment has been made or forgiven, whichever is applicable, the
shares of Company Stock subject to such allocation under
said clause (d) shall be distributed to the Director to
fund non-discretionary compensation of those Participants who are
Employees taking into account the best interests of a broad
cross-section of such Participants.
8.1.4 Acceleration. Notwithstanding
anything herein to the contrary, the Committee can direct
that the number of shares distributed in any year exceed
the number of shares required to be distributed under the
Minimum Distribution Schedule and/or that shares be
distributed prior to the date specified in such schedule,
provided that such acceleration satisfies the terms of any
restrictions contained in the Minimum Distribution Schedule, if
any. If, in any year, the Committee directs that the
number of shares distributed exceeds the number required
to be distributed pursuant to the Minimum Distribution
Schedule, such Schedule shall be revised by the Committee,
so that the remaining minimum distribution amounts will be
reduced proportionately to reflect the acceleration.
Notwithstanding anything herein to the contrary, if the Trustee
undertakes a loan to acquire Company Stock pursuant to Subsection
4.1, such loan shall at all times provide that principal payments
may be accelerated at any time at the discretion of the
Committee.
<PAGE>
8.2 Significant Event. If an event occurs
that causes 30 percent or more of the Participants to
cease to be Employees within a 12-month period, as
certified by the Committee, then all remaining distribution
amounts under the Minimum Distribution Schedule will be
reduced in direct proportion to such reduction and, with
respect to Company Stock, the Minimum Distribution Schedule
will be correspondingly extended.
8.3 Protection of Trustee. The Trustee shall,
to the maximum extent permitted by applicable law, be
fully protected in acting upon any written statement,
affidavit or certification from the Company, the Committee or
the Director. The Trustee shall at all times, to the
maximum extent permitted by applicable law, be fully
protected in making distributions pursuant to Sections 4,
8, 9, 13 and 17 hereof.
8.4 Company Obligations. Notwithstanding the
provisions of this Trust Agreement, the Company and its
Affiliates shall remain obligated with respect to the
Benefits attributable to their respective employees.
Nothing in this Trust Agreement shall relieve the Company
or any of its Affiliates of their respective liabilities
with respect to the Benefits except to the extent such
amounts are paid to a Plan or a Participant from the
Trust, it nevertheless being the Company's intent that the
Trust Fund shall be applied in discharge of the Company's
legal obligations as provided in this Trust Agreement.
Notwithstanding anything herein to the contrary, no plan or
benefit may be funded pursuant to this Section 8 unless it gives
rise to a contractual obligation of the Company or its Affiliates
and it is a Benefit described in Schedule A.
8.5 Trustee as Holder of Legal Title to Trust
Assets. Subject to Section 17 hereof, the Trustee shall
hold legal title to all assets in the Trust for benefit
of the Participants and Employees.
8.6 Federal Income Tax Consequences of the
Trust. The Trust Fund may be applied in the discharge of
legal obligations of the Company as provided herein.
Accordingly, the Company shall take into account in
computing its tax liability, those items of income,
deductions and credits against tax attributable to assets
held in the Trust to which the Company would have been
entitled had the Trust not been in existence. The
Trustee shall notify the Company promptly after it becomes
aware of any tax liability assessed against, or imposed
upon, the Trust or the Trustee in its capacity as Trustee
of the Trust. The Company shall be responsible for all
matters in respect of such assessment or imposition, and
shall have sole responsibility for any defense in
connection therewith. Payments in respect of any tax
liability of the Company arising in connection with
earnings, gains or activities relating to the Trust,
<PAGE>
including, without limitation, interest and penalties, shall
be made from the Trust Fund after a final determination
of such liability, unless the Company promptly pays such
liability. In the event the assets of the Trust are
insufficient to pay such liability, any deficit shall be
paid promptly by the Company.
SECTION 9 Expenses, Compensation and Indemnification
9.1 Expenses. The Trustee shall be reimbursed
by the Company for its reasonable expenses of
implementation, management and administration of the Trust,
including brokerage commissions and the reasonable
compensation of attorneys or other agents engaged by the
Trustee or by the Company to assist in such
implementation, management and administration.
9.2 Compensation. The Company shall pay the
Trustee compensation in accordance with the compensation
schedule attached hereto as Schedule C, unless the Company
and the Trustee otherwise agree in writing.
9.3 Charge on Trust Fund. All expenses and
compensation referred to in Sections 9.1 and 9.2 hereof
shall be a charge on the Trust Fund and shall constitute
a lien on the Trust Fund in favor of the Trustee and
shall be payable from the Trust Fund unless paid when due
by the Company.
9.4 Indemnification. The Company hereby agrees
to indemnify and hold harmless the Trustee from and
against any losses, costs, damages, claims or expenses,
including without limitation reasonable attorneys' fees,
which the Trustee may incur or pay out in connection
with, or otherwise arising out of:
9.4.1 the performance by the Trustee of
its duties hereunder, unless any such loss, cost, damage,
claim or expense is a result of negligence or willful
misconduct by the Trustee or the breach by the Trustee
of its fiduciary duties hereunder; or
9.4.2 any action taken by the Trustee in
good faith pursuant to the written direction of the
Company, the Committee or the Director.
In the event that any action or regulatory proceeding
shall be commenced or claim asserted which may entitle the
Trustee to be indemnified hereunder, the Trustee shall give
the Company written notice of such action or claim
promptly after becoming aware of such commencement or
assertion unless the Company has otherwise received notice
of such action or claim. The Company shall be entitled
to participate in and, upon notice to the Trustee, assume
the defense of any such action or claim using counsel
reasonably acceptable to the Trustee. The Trustee shall
<PAGE>
cooperate with the Company in connection with the defense
of any such action or claim. Subject to Section 17 the
Trustee shall have no claim on the assets of the Trust
Fund in respect of amounts payable to the Trustee under
this Subsection 9.4.
9.5 Payment from Trust Fund. All payments of
expenses and compensation referred to in Subsections 9.1
and 9.2 hereof shall be made only with the written approval
of or at the direction of the Committee.
SECTION 10 Administration and Records
10.1 Records. Subject to Subsections 7.1 and
7.2, the Trustee shall keep or cause to be kept accurate
and detailed accounts of any investments, receipts,
disbursements and other transactions hereunder and all
accounts, books and records relating thereto shall be open
to inspection and audit at all reasonable times by any
person designated by the Company. The Trustee shall
preserve all such accounts, books and records, in original
form or on microfilm, magnetic tape or any other similar
process, for such period as the Trustee may determine,
but the Trustee may destroy such accounts, books and
records only after first notifying the Company in writing
of its intention to do so and transferring to the
Company, subject to Subsections 7.1 and 7.2 hereof, any of
such accounts, books and records that the Company shall
request.
10.2 Settlement of Accounts. Subject to
Subsections 7.1 and 7.2, within 60 days after the close
of each calendar year, and within 60 days after the
removal or resignation of the Trustee or the termination
of the Trust (or any portion thereof), the Trustee shall
file with the Company a written account setting forth all
investments, receipts, disbursements and other transactions
effected by it with respect to the Trust during the
preceding calendar year or during the period from the
close of the preceding calendar year to the date of such
removal, resignation or termination, including a description
of all investments and securities purchased and sold, with
the cost or net proceeds of such purchases or sales, and
showing all cash, securities and other property held at
the end of such calendar year or other period.
It shall be the duty of the Company to review
such written account promptly within 90 days from the date
of filing any such account and if, within such 90-day
period, the Company does not file with the Trustee a
written notice of objection to any of the Trustee's acts
or transactions, the initial account shall become an
account stated between the Trustee and the Company. If the
Company files a written notice of objection with the
Trustee, the Trustee may file with the Company an adjusted
account, in which case it shall be the duty of the
<PAGE>
Company to review such adjusted account promptly within 30
days from the date of its filing. If, within such 30-day
period, the Company fails to file a written notice of
objection to any of the Trustee's acts or transactions as
so adjusted with the Trustee, the adjusted account shall
become an account stated between the Trustee and the
Company.
Unless an account is fraudulent, when it becomes
an account stated it shall be finally settled, and the
Trustee shall, to the maximum extent permitted by
applicable law, be forever released and discharged from
all liability and accountability with respect to the
propriety of its acts and transactions shown in such
account.
10.3 Audit. The Trustee shall from time to
time permit an independent public accountant selected by
the Company to have access during ordinary business hours
to such records as may be necessary to audit the
Trustee's accounts.
10.4 Judicial Settlement. Nothing contained in
this Trust Agreement shall be construed as depriving the
Trustee or the Company of the right to have a judicial
settlement of the Trustee's accounts. Upon any proceeding
for a judicial settlement of the Trustee's accounts or for
instructions the only necessary party thereto in addition
to the Trustee shall be the Company.
10.5 Delivery of Records to Successor. In the
event of the removal or resignation of the Trustee, the
Trustee shall deliver to the successor Trustee all records
which shall be required by the successor Trustee to
enable it to carry out the provisions of this Trust
Agreement.
10.6 Tax Filings. In addition to any returns
required of the Trustee by law (e.g., any information
return required to be filed on IRS Form 1041), the
Trustee shall prepare and file such tax reports and other
returns as the Company and the Trustee may from time to
time agree.
SECTION 11 Removal or Resignation of the Trustee and
Designation of Successor Trustee.
11.1 Removal. At any time prior to the
occurrence of a Change in Control, the Company may remove
the Trustee with or without cause upon at least 60 days'
notice in writing to the Trustee. At any time after
the occurrence of a Change in Control, the Trustee may
not be removed except for cause or by order of a court of
competent jurisdiction. No removal of the Trustee shall
be effective until the Company has appointed in writing
a successor Trustee, and such successor has accepted the
appointment in writing.
<PAGE>
11.2 Resignation. Trustee may resign at any
time upon at least 60 days' notice in writing to the
Company, except that any such resignation shall not be
effective until the Company has appointed in writing a
successor Trustee, and such successor has accepted the
appointment in writing. At any time after 30 days
following the sending of such notice of resignation, if
the Company is unable to appoint a successor Trustee or
if a successor Trustee has not accepted an appointment,
the Trustee shall be entitled, at the expense of the
Company, to petition a United States District Court or any
of the courts of the State of Washington or other court
having jurisdiction to appoint its successor.
11.3 Successor Trustee. Subject to Subsection
2.1 hereof, each successor Trustee, during such period as
it shall act as such, shall have the powers and duties
herein conferred upon the Trustee, and the word "Trustee"
wherever used herein, except where the context otherwise
requires, shall be deemed to include any successor Trustee.
Upon designation of a successor Trustee and delivery to
the resigned or removed Trustee of written acceptance by
the successor Trustee of such designation, such resigned or
removed Trustee shall promptly assign, transfer, deliver and
pay over to such Trustee, in conformity with the
requirements of applicable law, the funds and properties in
its control or possession then constituting the Trust Fund.
SECTION 12 Enforcement of Trust Agreement.
12.1 Rights of Parties to Enforce the Trust
Agreement The Company and the Trustee shall have the
right to enforce any provision of this Trust Agreement. In
any action or proceeding affecting the Trust, the only
necessary parties shall be the Company and the Trustee
and, except as otherwise required by applicable law, no
other person shall be entitled to any notice or service
of process. Any judgment entered in such an action or
proceeding shall, to the maximum extent permitted by
applicable law, be binding and conclusive on all persons
having or claiming to have any interest in the Trust or
any Plan.
12.2 Limitation on Rights of Participants and
Beneficiaries Neither the Plans nor any Participant or
Beneficiary shall have any rights with respect to the
Trust Fund, no Plan shall be deemed to have any
beneficial interest in the Trust Fund and no Employee
shall be deemed to have any beneficial interest in the
Trust Fund arising from his participation in any
particular Plan.
SECTION 13 Termination.
13.1 Termination upon Specific Events. The Trust
shall be terminated as soon as practicable after the
Trustee has received written notice from the Committee that
one or more of the following events has occurred:
<PAGE>
13.1.1 the Department of Labor or a court
of competent jurisdiction has determined (or, in the
Committee s sole discretion, would be likely to determine)
that the assets of the Trust are subject to Part 4 of
Subtitle B of Title I of ERISA,
13.1.2 the Internal Revenue Service or a
court of competent jurisdiction has determined (or, in the
Committee s sole discretion, would be likely to determine)
that any portion of the Trust Fund is presently taxable
to any Participant or Beneficiary, or
l3.1.3 a Change in Control has occurred.
In the event of a termination pursuant to this Subsection
13.1, the Trustee shall distribute all assets then
constituting the Trust Fund attributable to Company Stock to
the Administrator or Director to be distributed in the form of
Company Stock or cash (as provided pursuant to the terms of a
particular Plan) to Participants. Distributions shall first be
made to satisfy accrued, vested benefits described in (a) of
Subsection 8.1; remaining assets, if any, shall be distributed to
satisfy accrued, vested benefits described in (b) of Subsection
8.1; remaining assets, if any, shall then be distributed to
satisfy any exercises that have not yet been funded pursuant to
the plan described in (c) of Subsection 8.1. Remaining assets,
if any, shall then be used to fund the following plans (in the
following order): any obligation the Company or an Affiliate has
under the Annual Incentive Plan, any obligation the Company or an
Affiliate has under the Hillhaven Supplemental Executive
Retirement Plan, or any obligation the Company or an Affiliate
has under the Hillhaven Deferred Compensation Plan. Assets
remaining shall be allocated among Plans described in Schedule B,
in the order set out in such Schedule.
13.2 Termination in Other Events. Notwithstanding
anything herein to the contrary, the Trust shall terminate
on the earliest of (a) 21 years following the death of the
last surviving Participant included on the Participant Schedules
received by the Trustee in 1995, (b) the date on which the
Committee informs the Trustee in writing that the Company and
its Affiliates have no obligations under any Plans (or
the date on which there are no Plans) or (c) the date
on which the Trust contains no assets and retains no
claims to recover assets from the Company and its
Affiliates pursuant to any provision hereof, whichever shall
first occur. In the event of a termination described in
clauses (a) or (b) of this Section, the Trustee shall
distribute the assets remaining in the Trust Fund to all
Participants listed on the Participant Schedule in an equal
amount per Participant.
<PAGE>
13.3 Limitation on Trustee Liability upon Total
Distribution; Continuation of Trustee Powers. Upon a
total distribution of the Trust assets pursuant to Section
8 or this Section 13.3, the Trustee shall be relieved from
all further liability. The powers of the Trustee
hereunder shall continue so long as any assets of the
Trust remain in its hands.
13.4 Nonapplicability of ERISA. Notwithstanding
anything herein to the contrary, no amount shall be
distributed to any Participant pursuant to this Section 13
if such distribution could, in the opinion of independent
counsel, cause the Trust to be subject to ERISA (other
than as an unfunded plan described in ERISA section
201(2)). Prior to a distribution pursuant to this Section, the
Committee shall provide the Trustee with a Schedule of
Participants eligible for a distribution (taking into account
this subsection 13.4).
SECTION 14 Amendment.
14.1 Amendments in General. The Company may,
in its sole discretion, from time to time amend, in whole
or in part, any or all of the provisions of this Trust
Agreement, including, without limitation, by adding to, or
subtracting from, Schedule A hereto one or more employee
benefit plans (within the meaning of Section 3(3) of
ERISA) or plans or arrangements that are not employee
benefit plans (within the meaning of such Section);
provided, that (a) in making any modification to Schedule A
hereto, the Company shall act in good faith taking into
account the best interests of a broad cross-section of
Participants, and (b) the Company shall ensure that at all
times Schedule A shall include at least one employee
benefit plan that is not an employee benefit plan within
the meaning of Section 3(3) of ERISA. Notwithstanding
anything herein to the contrary, no amendment shall be made to
Sections 2.2, 7, 8 or 13.
14.2 Specific Amendments. Notwithstanding Subsection
14.1, the Company may amend this Trust Agreement from time
to time in such a manner as may be necessary, in the
opinion of independent counsel, to prevent this Trust
Agreement or the Trust from becoming subject to ERISA and
to prevent the current taxation of the Trust Fund to
Participants.
SECTION 15 Nonalienation.
15.1 Prohibition Against Certain Transfers, Pledges,
Etc. Except as otherwise provided by this Trust Agreement
and except as otherwise may be required by applicable law,
(a) no amount payable to or in respect of any Plan,
Participant or Employee at any time under the Trust shall
be subject in any manner to alienation by anticipation,
sale, transfer, assignment, bankruptcy, pledge, attachment,
<PAGE>
charge, or encumbrance of any kind, and any attempt to
so alienate, sell, transfer, assign, pledge, attach, charge,
or otherwise encumber any such amount, whether presently or
thereafter payable, shall be void and (b) the Trust Fund
shall in no manner be liable for or subject to the debts
or liabilities of any Participant.
SECTION 16 Communications.
16.1 To the Company, Board of Directors and
Committee. Communications to the Company, the Board of
Directors and the Committee shall be addressed to:
The Hillhaven Corporation
1148 Broadway Plaza
Tacoma, Washington 98402
Attention: Vice President, Treasurer
with a copy to:
The Hillhaven Corporation
1148 Broadway Plaza
Tacoma, Washington 98402
Attention: Senior Vice President and General
Counsel
provided, however, that upon the Company's written
request, such communications shall be sent to such other
address as the Company may specify.
16.2 To the Trustee. Communications to the
Trustee shall be addressed to:
Wachovia Bank of North Carolina, N.A.
301 N. Main Street
Winston-Salem, N.C. 27150
Attention: Steve Watts
Vice President
with a copy to:
Wachovia Bank of North Carolina, N.A.
301 N. Main Street
Winston-Salem, NC 27150
Attention: John Smith
Vice President
provided, however, that upon the Trustee's written request,
such communications shall be sent to such other address as
the Trustee may specify.
16.3 To a Participant. Communications to a
Participant or to his Beneficiaries shall be addressed to
the Participant or his Beneficiaries, respectively, at the
address indicated on the Participant Schedule as in effect
at the time of the communication.
<PAGE>
16.4 Binding upon Receipt. No communication
shall be binding on the Trustee until it is received by
the Trustee, and no communication shall be binding on the
Company, the Board of Directors or the Committee until it
is received by the Company, the Board of Directors or the
Committee, respectively. A communication shall be deemed
binding on a Participant or the Participant's Beneficiaries
60 days following the date notice is given or sent pursuant to
Subsection 16.3.
16.5 Authority to Act. The Secretary of the
Company shall from time to time certify to the Trustee
the person or persons authorized to act for the Company,
the Committee and the Board of Directors, and shall
provide the Trustee with such information regarding the
Company as the Trustee may reasonably request. The Trustee
may continue to rely on any such certification until
notified to the contrary.
16.6 Authenticity of Instruments. The Trustee
shall be fully protected in acting upon any instrument,
certificate, or paper reasonably believed by it to be
genuine and to be signed or presented by the proper
person or persons, and the Trustee shall be under no duty
to make any investigation or inquiry as to any statement
contained in any such writing but may accept the same as
conclusive evidence of the truth and accuracy of the
statements therein contained.
SECTION 17 Claims of Company's Bankruptcy Creditors.
17.1 Bankruptcy Creditors. In the event of the
Company's "insolvency," the assets of the Trust shall be
available to pay the claims of any creditor of the
Company to whom a distribution may be made in accordance
with state and federal bankruptcy laws. The Company shall
be deemed to be "insolvent" if it is either (a) unable
to pay its debts and liabilities as they become due or
(b) subject to a pending proceeding as a debtor under the
federal Bankruptcy Code (or any successor federal statute)
or any state bankruptcy code. In the event the Company
becomes insolvent, the Board of Directors and the Chief
Executive Officer of the Company shall notify the Trustee
of the event as soon as practicable. Upon receipt of
such notice, or if the Trustee receives other written
allegations of the Company's insolvency from a third party
considered by the Trustee to be reliable and responsible,
the Trustee shall cease making any distributions from the
assets of the Trust, shall hold the assets in the Trust
for the benefit of the Company's creditors and shall take
such steps as are necessary to determine within a
reasonable period of time whether the Company is insolvent.
In making such determination, the Trustee may rely upon a
certificate of the Board of Directors and the Chief
Executive Officer of the Company or a determination by a
<PAGE>
court of competent jurisdiction that the Company is or is
not insolvent. In the case of the Trustee's
determination of the Company's insolvency, the Trustee will
deliver assets of the Trust to satisfy claims of the
Company's creditors as directed pursuant to a final order
of a court of competent jurisdiction.
17.2 Resumption of Benefits; Restoration of
Accounts. In the event the Trustee ceases making
distributions by reason of Subsection 17.1, the Trustee
shall resume making distributions pursuant to Sections 4,
8, or 13 of this Agreement only after the Trustee has
determined that the Company is no longer insolvent or
upon receipt of an order of a court of competent
jurisdiction requiring such distributions. In making any
determination under this Section, the Trustee may rely
upon a certificate of the Board of Directors and the
Chief Executive Officer of the Company.
SECTION 18 Consolidation, Merger or Sale of the Company.
18.1 Consolidation, Merger or Sale of the
Company. Effective upon consolidation of the Company with,
or merger of the Company with or into, any corporation or
corporations, or any sale or conveyance of all or sub-
stantially all of the assets of the Company, the Trustee
shall deal with the corporation formed by such
consolidation, or with or into which the Company is
merged, or the person that acquires the assets of the
Company on the same basis as it dealt with the Company
prior to such transactions and, in such event, the term
"Company" within this Agreement shall mean such corporation
or person.
SECTION 19 Miscellaneous Provisions
19.1 Binding Effect. This Trust Agreement shall
be binding on the Company and the Trustee and their re-
spective successors and assigns.
19.2 Inquiry as to Authority. A third party
dealing with the Trustee shall not be required to make
inquiry as to the authority of the Trustee to take any
action nor be under any obligation to follow the proper
application by the Trustee of the proceeds of sale of any
property sold by the Trustee or to inquire into the
validity or propriety of any act of the Trustee.
19.3 Responsibility for Company Action. The
Trustee assumes no obligation or responsibility with respect
to any action required by this Trust Agreement on the
part of the Company, the Board of Directors, the
Committee, any Affiliate, the Participants or any
Beneficiaries. The Trustee shall be under no duties
except such duties as are specifically set forth as such
in this Trust Agreement or under applicable law, and no
implied covenant or obligation shall be read into this
Trust Agreement against the Trustee.
<PAGE>
19.4 Successor to Trustee. Subject to
Subsection 2.1, any corporation into which the Trustee may
be merged or with which it may be consolidated, or any
corporation resulting from any merger, reorganization or
consolidation to which the Trustee may be a party, or any
corporation to which all or substantially all the trust
business of the Trustee may be transferred shall be the
successor of the Trustee hereunder without the execution or
filing of any instrument or the performance of any act.
19.5 Intercompany Agreements. The Company may
require any Affiliate to enter into such other agreement
or agreements as it shall deem necessary to obligate such
Affiliate to reimburse the Company for any other amounts
paid by the Company hereunder, directly or indirectly, in
respect of such Affiliate's employees.
19.6 Titles Not to Control. Titles to the
Sections of this Trust Agreement are included for
convenience only and shall not control the meaning or
interpretation of any provision of this Trust Agreement.
19.7 Laws of the State of Washington to Govern.
This Trust Agreement and the Trust established hereunder
shall be governed by and construed, enforced, and
administered in accordance with the laws of the State of
Washington, without reference to the principles of conflicts
of law thereof.
19.8 Fractional Shares. Notwithstanding anything
herein to the contrary, the Trustee may distribute any
fractional share otherwise required to be distributed to
Administrators or Participants pursuant to Sections 8 or
13, in cash in an amount equal to the Daily Value,
multiplied by such fraction.
IN WITNESS WHEREOF, this Trust Agreement has
been duly executed by the parties hereto as of the day
and year first above written.
<PAGE>
THE HILLHAVEN CORPORATION
Attest: /s/ Ellen B. Alben By: /s/ Richard P. Adcock
Ellen B. Alben Richard P. Adcock
Assistant Secretary Senior Vice President
WACHOVIA BANK OF NORTH
CAROLINA, N.A. as Trustee
Attest: /s/ Donna Stern By: /s/ John N. Smith, III
Donna Stern John N. Smith, III
Assistant Secretary Vice President
STATE OF WASHINGTON
COUNTY OF PIERCE
On the 26th day of January, 1995, before me
personally came to me Richard P. Adcock, who, being by me duly
sworn, did depose and say that he resides at Gig Harbor,
Washington; that he is of THE HILLHAVEN CORPORATION, one of the
corporations described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the
seal affixed to said instrument is such corporate seal; that it
was so affixed by order of the board of directors of said
corporation; and that he signed his name thereto by like order.
/s/ Helen Harmon
Helene Harmon
Notary Public
My commission expires 3/25/95
STATE OF NORTH CAROLINA
COUNTY OF FORSYTH
On the 27th day of January, 1995, before me
personally came to me John N. Smith, III, who, being by me
duly sworn, did depose and say that he resides at Winston-
Salem, North Carolina; that he is of WACHOVIA BANK OF NORTH
CAROLINA, N.A., one of the corporations described in and
which executed the foregoing instrument; that he knows the
seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by
order of the board of directors of said corporation; and that he
signed his name thereto by like order.
/s/ Sheri M. Utt
Sheri M. Utt
Notary Public
Commission Expires 2/18/95
<PAGE>
Schedule A
LIST OF PLANS
The Hillhaven Corporation 1991 Performance Investment Plan
The Hillhaven Corporation 1990 Stock Incentive Plan
The Hillhaven Corporation Employee Monthly Stock Investment Plan
The Hillhaven Corporation Deferred Compensation Plan
The Hillhaven Corporation Supplemental Executive Retirement Plan
The Hillhaven Corporation Annual Incentive Plan
The Hillhaven Corporation Long Term Incentive Plan
Other non-discretionary based compensation
<PAGE>
Schedule C
TRUSTEE'S COMPENSATION SCHEDULE
HILHAVEN GRANTOR TRUST
FEE ESTIMATE FOR
NON-QUALIFIED PLAN SERVICES
I. TRUSTEE SERVICES $15,750.00
II. PROXY ADMINISTRATION 0.00
----------
TOTAL TRUSTEE: $15,750.00
==========
<PAGE>
EXHIBIT 10.56
AMENDED AND RESTATED
AGREEMENT AND PLAN OF SHARE EXCHANGE
AND AGREEMENTS TO ASSIGN PARTNERSHIP INTERESTS
BY AND AMONG
THE HILLHAVEN CORPORATION
NATIONWIDE CARE, INC.
PHILLIPPE ENTERPRISES, INC.
MEADOWVALE SKILLED CARE CENTER, INC.
AND
SPECIFIED PARTNERS OF
CAMELOT CARE CENTERS
EVERGREEN WOODS, LTD.
AND
SHANGRI-LA PARTNERSHIP
DATED AS OF
FEBRUARY 27, 1995
==============================================================================
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TABLE OF CONTENTS
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Preliminary Statement................................................................... 1
Terms and Conditions.................................................................... 2
ARTICLE I The Share Exchanges................................................... 2
SECTION 1.1. Share Exchanges....................................................... 2
SECTION 1.2. Effective Time of Share Exchanges..................................... 2
SECTION 1.3. Other Actions......................................................... 2
ARTICLE II Corporate Governance.................................................. 3
SECTION 2.1. [Intentionally Omitted]............................................... 3
SECTION 2.2. Directors and Officers................................................ 3
ARTICLE III Exchange of Shares; Assignment of Partnership
Interests; Prepayment of Subordinated Notes and
Redemption of Preferred Stock......................................... 3
SECTION 3.1. Effect of Share Exchanges............................................. 3
SECTION 3.2. Consideration for Share Exchanges..................................... 3
SECTION 3.3. Escrow................................................................ 3
SECTION 3.4. Surrender and Payment for the Target Common Shares.................... 4
SECTION 3.5. Redemption of Nationwide Subordinated Notes and Nationwide Preferred
Stock................................................................. 5
ARTICLE IV Representations and Warranties of Corporate Targets and Partners...... 5
SECTION 4.1. Organization; Power................................................... 5
SECTION 4.2. Capital Stock......................................................... 5
SECTION 4.3. Authority; No Violation............................................... 6
SECTION 4.4. Consents and Approvals................................................ 6
SECTION 4.5. Transactions with Certain Persons..................................... 6
SECTION 4.6. Books and Records..................................................... 7
SECTION 4.7. Financial Statements.................................................. 7
SECTION 4.8. Absence of Undisclosed Liabilities.................................... 7
SECTION 4.9. Actions Pending....................................................... 7
SECTION 4.10. Outstanding Debt and Related Matters.................................. 7
SECTION 4.11. Tax Matters........................................................... 7
SECTION 4.12. Absence of Changes or Events.......................................... 8
SECTION 4.13. Compliance with Laws; No Default...................................... 9
SECTION 4.14. Property.............................................................. 9
SECTION 4.15. Contracts............................................................. 10
SECTION 4.16. Licenses and Permits.................................................. 11
SECTION 4.17. Proprietary Information............................................... 11
SECTION 4.18. Title to Assets and Related Matters................................... 11
SECTION 4.19. Environmental Matters................................................. 11
SECTION 4.20. Labor Relations; Employees............................................ 12
SECTION 4.21. Employee Benefit Plans................................................ 13
SECTION 4.22. Insurance............................................................. 13
SECTION 4.23. Life Care Contracts................................................... 13
SECTION 4.24. Survey Reports........................................................ 13
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SECTION 4.25. Payment Programs...................................................... 13
SECTION 4.26. Gratuitous Payments................................................... 14
SECTION 4.27. Brokers' or Finders' Fees............................................. 14
SECTION 4.28. Disclosure............................................................ 14
SECTION 4.29. Tax Representations................................................... 15
SECTION 4.30. Representations and Warranties as of Date Hereof;
No Other Representations and Warranties............................... 15
ARTICLE V Representations and Warranties of Acquiror............................ 15
SECTION 5.1. Organization; Power................................................... 15
SECTION 5.2. Capital Stock......................................................... 15
SECTION 5.3. Authority; No Violation; Etc.......................................... 15
SECTION 5.4. Consents and Approvals................................................ 16
SECTION 5.5. Reports............................................................... 16
SECTION 5.6. Due Authorization of Shares........................................... 16
SECTION 5.7. Compliance with Laws; No Default or Litigation........................ 16
SECTION 5.8. Tax Representations................................................... 17
SECTION 5.9. Brokers' or Finders' Fees............................................. 17
SECTION 5.10. Representations and Warranties as of Date Hereof...................... 17
ARTICLE VI Certain Pre-Closing Covenants of the Targets.......................... 17
SECTION 6.1. Maintenance of Corporate Status....................................... 17
SECTION 6.2. No Change in Capitalization........................................... 17
SECTION 6.3. Shareholders Meetings................................................. 17
SECTION 6.4. Operation of the Business............................................. 18
SECTION 6.5. Other Offers.......................................................... 18
SECTION 6.6. Compliance with the Securities Act; Affiliates........................ 18
SECTION 6.7. Taxes................................................................. 19
SECTION 6.8. Access; Review........................................................ 19
SECTION 6.9. Insurance............................................................. 19
SECTION 6.10. Monthly Financial Statements.......................................... 19
SECTION 6.11. Approvals, Notices and Consents....................................... 19
SECTION 6.12. The Targets' Actions; Supplements to Representations and Warranties... 19
SECTION 6.13. Notice of Material Adverse Change..................................... 20
SECTION 6.14. Pooling............................................................... 20
SECTION 6.15. Tax Statements........................................................ 20
SECTION 6.16. Cooperation........................................................... 20
SECTION 6.17. Nationwide to Use Its Best Efforts to Terminate Option................ 20
ARTICLE VII Certain Pre-Closing Covenants of Acquiror............................. 20
SECTION 7.1. Required Consents and Approvals....................................... 20
SECTION 7.2. Pre-transaction Notification.......................................... 20
SECTION 7.3. Registration Statement; NYSE Listing.................................. 20
SECTION 7.4. Notice of Material Adverse Change..................................... 20
SECTION 7.5. Pooling Actions....................................................... 20
SECTION 7.6. Pooling Letter........................................................ 21
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SECTION 7.7. Tax Statements........................................................ 21
SECTION 7.8. Environmental Surveys................................................. 21
SECTION 7.9. Cooperation........................................................... 21
ARTICLE VIII Conditions Precedent to the Performance of Acquiror................... 21
SECTION 8.1. Accuracy of Representations and Warranties of the Targets............. 21
SECTION 8.2. Compliance............................................................ 21
SECTION 8.3. Approval.............................................................. 21
SECTION 8.4. HSR Act Approval...................................................... 21
SECTION 8.5. Authorizations........................................................ 21
SECTION 8.6. Litigation............................................................ 22
SECTION 8.7. No Material Adverse Change............................................ 22
SECTION 8.8. Closing Deliveries.................................................... 22
SECTION 8.9. Dissenters' Rights.................................................... 22
SECTION 8.10. Pooling Letter........................................................ 22
SECTION 8.11. Exercise of Warrants.................................................. 22
SECTION 8.12. Tax Opinions.......................................................... 22
SECTION 8.13. Lease Extensions...................................................... 22
SECTION 8.14. Option Termination.................................................... 24
ARTICLE IX Conditions Precedent to Performance of the Corporate Targets and
Partners.............................................................. 22
SECTION 9.1. Accuracy of Representations and Warranties of Acquiror................ 22
SECTION 9.2. Compliance............................................................ 22
SECTION 9.3. Corporate Approval.................................................... 22
SECTION 9.4. Authorizations........................................................ 22
SECTION 9.5. Registration Statement................................................ 23
SECTION 9.6. Litigation............................................................ 23
SECTION 9.7. No Material Adverse Change............................................ 23
SECTION 9.8. HSR Act Waiting Periods............................................... 23
SECTION 9.9. Closing Deliveries.................................................... 23
SECTION 9.10. Tax Opinions.......................................................... 23
SECTION 9.11. Release of Guarantees................................................. 23
ARTICLE X Termination........................................................... 23
SECTION 10.1. Termination by Mutual Agreement....................................... 23
SECTION 10.2. Termination by Acquiror............................................... 23
SECTION 10.3. Termination by the Corporate Targets and Partners..................... 24
ARTICLE XI Additional Agreements................................................. 24
SECTION 11.1. Confidentiality....................................................... 24
SECTION 11.2. Employee Benefit Matters.............................................. 24
SECTION 11.3. Agreements Respecting Meadowvale...................................... 24
SECTION 11.4. Preservation of Tax-Free Reorganization Treatment..................... 24
SECTION 11.5. Publication of Financial Results...................................... 25
SECTION 11.6. The Shangri-La Partners............................................... 25
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ARTICLE XII The Closing........................................................... 25
SECTION 12.1. Time and Place........................................................ 25
SECTION 12.2. Deliveries to Acquiror at the Closing................................. 25
SECTION 12.3. Deliveries to the Targets at the Closing.............................. 26
ARTICLE XIII Indemnification....................................................... 26
SECTION 13.1. Indemnification of Acquiror........................................... 26
SECTION 13.2. Threshold and Maximum Amounts......................................... 26
SECTION 13.3. Survival of Indemnification Obligations............................... 27
ARTICLE XIV Supplemental Indemnification.......................................... 27
SECTION 14.1. Supplemental Indemnification of Acquiror.............................. 27
SECTION 14.2. Maximum Amounts....................................................... 27
SECTION 14.3. Survival of Indemnification Obligations............................... 28
ARTICLE XV Miscellaneous Provisions.............................................. 28
SECTION 15.1. Survival of Representations and Warranties............................ 28
SECTION 15.2. Definition of Knowledge............................................... 28
SECTION 15.3. Counterparts.......................................................... 28
SECTION 15.4. Entire Agreement...................................................... 28
SECTION 15.5. Exhibits and Schedules................................................ 28
SECTION 15.6. Parties in Interest................................................... 28
SECTION 15.7. Expenses.............................................................. 29
SECTION 15.8. Gender................................................................ 29
SECTION 15.9. Governing Law......................................................... 29
SECTION 15.10. Headings.............................................................. 29
SECTION 15.11. Modification and Waiver............................................... 29
SECTION 15.12. Notices............................................................... 29
SECTION 15.13. Press Releases........................................................ 30
SECTION 15.14. Rights of Parties..................................................... 30
SECTION 15.15. Successors............................................................ 30
SECTION 15.16. Intent; Construction.................................................. 30
SECTION 15.17. Release............................................................... 30
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<PAGE>
AMENDED AND RESTATED
AGREEMENT AND PLAN OF SHARE EXCHANGE AND
AGREEMENTS TO ASSIGN PARTNERSHIP INTERESTS
This Amended and Restated Agreement and Plan of Share Exchange and
Agreements to Assign Partnership Interests (the "Agreement") dated as of the
27th day of February, 1995, is by and among The Hillhaven Corporation, a Nevada
Corporation ("Acquiror"), Nationwide Care, Inc., an Indiana corporation
("Nationwide"), Phillippe Enterprises, Inc., an Indiana corporation ("PEI"),
Meadowvale Skilled Care Center, Inc., an Indiana corporation ("Meadowvale")
(Nationwide, PEI and Meadowvale are collectively referred to herein as the
"Corporate Targets"), the partners of Camelot Care Centers, an Indiana general
partnership ("Camelot"), (subject to Section 11.6 hereof) the partners of
Shangri-La Partnership, an Indiana general partnership ("Shangri-La") and the
limited partners of Evergreen Woods, Ltd., a Florida limited partnership
("Evergreen") (Camelot, Shangri-La and Evergreen are collectively referred to
herein as the "Partnership Targets"; the partners of Camelot and Shangri-La and
the limited partners of Evergreen are collectively referred to herein as the
"Partners"; the interests in the Partnerships held by the Partners are
collectively referred to herein as the "Partnership Interests"). The Corporate
Targets and the Partnership Targets are collectively referred to herein as the
"Targets."
PRELIMINARY STATEMENT
Acquiror and its subsidiaries operate nursing centers, pharmacies and
retirement housing communities. Nationwide and its subsidiaries operate
long-term health care centers located in Indiana, Ohio and Florida. Dr. Thomas
E. Phillippe, Sr. and Thomas E. Phillippe, Jr. (the "Phillippes") are the
majority owners of Nationwide. Shangri-La, which is owned by the Phillippes and
two other parties, owns an 81-bed long term care health care facility. PEI is
wholly-owned by the Phillippes and owns a 90 bed assisted living center in
Florida managed by Nationwide. Meadowvale is owned by certain relatives of the
Phillippes. Meadowvale owns a 120 bed long-term care center in Indiana leased by
Nationwide. Each of Camelot and Evergreen operates long term care facilities.
Nationwide owns in excess of 95% of the Partnership Interests of Camelot and
Evergreen.
The capital structure of Acquiror consists of 60 million authorized shares
of Common Stock, par value $0.75 per share, of which approximately 32,824,863
are outstanding (the "Acquiror Common Shares"); 25 million authorized shares of
preferred stock, par value $0.15 per share, of which the following series have
been designated: 3 million authorized shares of Series A Preferred Stock, of
which no shares are outstanding; 950 authorized shares of Series B Convertible
Preferred Stock, of which 618 shares have been designated as Subseries 1, of
which no shares are outstanding; 35,000 authorized shares of Series C Preferred
Stock, all of which are outstanding; and 300,000 authorized shares of Series D
Preferred Stock, of which approximately 63,403 shares are outstanding. The
capital structure of Nationwide consists of 48,000,000 authorized shares of
Common Stock, without par value, of which 7,431,458 shares are issued and
outstanding (the "Nationwide Voting Common"); 2,000,000 authorized shares of
Nonvoting Common Stock, without par value, of which 76,592 shares are issued and
outstanding (the "Nationwide Nonvoting Common")(the Nationwide Voting Common and
the Nationwide Nonvoting Common are collectively referred to herein as the
"Nationwide Common Shares"); and 2,000,000 authorized shares of Preferred Stock,
without par value, of which 300,000 shares of Redeemable Preferred Stock are
issued and outstanding (the "Nationwide Preferred Stock"). Nationwide also has
outstanding warrants to purchase 987,188 shares of Nationwide Nonvoting Common
(the "Nationwide Warrants"), which will be exercised prior to the Closing (as
defined in Section 12.1). The capital structure of PEI consists of 10,000
authorized shares of Common Stock, without par value, of which 2,000 are issued
and outstanding (the "PEI Common Shares"). The capital structure of Meadowvale
consists of 3,000 authorized shares of Common Stock, without par value, of which
3,000 are issued and outstanding (the "Meadowvale Common Shares"). The
Nationwide Common Shares, PEI Common Shares and Meadowvale Common Shares are
collectively referred to herein as the "Target Common Shares." Nationwide owns
substantially all of each of the Partnerships, except that Shangri-La is
controlled by the Phillippes. The ownership of the Partnerships is as set forth
in Section 1 of the statement of disclosure delivered by the
<PAGE>
Corporate Targets and the Partners to Acquiror in connection with the execution
of this Agreement (the "Disclosure Statement").
The parties to this Agreement previously had executed an Agreement and Plan
of Merger and Agreements to Assign Partnership Interests, dated as of February
27, 1995 (the "Original Agreement"). Subsequent to execution of the Original
Agreement, the parties determined to restructure the acquisitions of the
Corporate Targets in the form of statutory share exchanges, whereby all of the
outstanding common stock of each of the Corporate Targets would be exchanged for
Acquiror Common Shares (the "Share Exchanges"), so that the transactions
contemplated thereby would be treated as a "reorganization" within the meaning
of Sections 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended (the
"Code"). The parties to the Original Agreement have therefore executed this
Agreement to amend and restate the Original Agreement. The Board of Directors of
Acquiror deems the Share Exchanges pursuant to the terms of this Agreement
desirable and in the best interests of Acquiror. The Board of Directors of each
of the Corporate Targets deems each respective Share Exchange desirable and in
the best interests of the respective Corporate Target. The Board of Directors of
Acquiror has, by resolutions duly adopted, approved this Agreement. The Board of
Directors of each of the Corporate Targets has, by resolutions duly adopted,
approved this Agreement. The question of approval of each of the Share Exchanges
will be submitted to the shareholders of each of the respective Corporate
Targets. In connection with this Agreement, the Phillippes have agreed to
approve the Share Exchanges. Each of the Partners deems the assignment of his,
her or its Partnership Interests to be desirable and in his, her or its best
interest and, where appropriate, has approved such assignment.
It is intended that the Share Exchanges shall qualify for treatment as
"poolings of interests" transactions.
TERMS AND CONDITIONS
In consideration of the mutual covenants, agreements, representations and
warranties contained in this Agreement, and intending to be legally bound
thereby, the parties agree to amend and restate the Original Agreement in its
entirety as follows.
ARTICLE I
THE SHARE EXCHANGES
SECTION 1.1. Share Exchanges. Upon the terms and subject to the
satisfaction of the conditions precedent contained in this Agreement, each of
the shareholders of the Corporate Targets shall exchange their respective Target
Common Shares for Acquiror Common Shares. The Share Exchanges shall be effected
pursuant to the provisions of and with the effect provided in the Indiana
Business Corporation Law (the "BCL") and the Nevada General Corporation Law (the
"NCL").
SECTION 1.2. Effective Time of Share Exchanges. If (a) all of the
conditions precedent to the Share Exchanges as set forth in Article VIII and
Article IX of this Agreement are satisfied or waived, and (b) this Agreement is
not terminated prior to the Closing (as permitted by the provisions of this
Agreement, then as soon as reasonably practicable following the Closing,
Acquiror and the Corporate Targets shall cause Articles of Share Exchange
conforming to the requirements of the BCL and the NCL (the "Articles of Share
Exchange") to be filed with the Secretary of State of the State of Indiana (the
"Indiana Secretary of State") and the Secretary of State of the State of Nevada
(the "Nevada Secretary of State") with respect to each of the Share Exchanges,
in the manner provided under the BCL and the NCL. The Share Exchanges shall
become effective as of 12:01 a.m., Eastern Standard Time, on the date following
the date of such filing of the Articles of Share Exchange (the "Effective
Time").
SECTION 1.3. Other Actions. If after the Effective Time any further action
is necessary or desirable to carry out the purposes of this Agreement, the
officers and directors of Acquiror shall have the authority to take that action.
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ARTICLE II
CORPORATE GOVERNANCE
SECTION 2.1. [Intentionally Omitted].
SECTION 2.2. Directors and Officers. The persons set forth in Schedule 2.2
shall become the directors and officers, respectively, of each of the Corporate
Targets at the Effective Time, to serve until their successors shall have been
elected or appointed and qualified in the manner provided in their respective
Articles of Incorporation and Bylaws, or as otherwise provided by law.
ARTICLE III
EXCHANGE OF SHARES; ASSIGNMENT OF PARTNERSHIP INTERESTS;
PREPAYMENT OF SUBORDINATED NOTES AND REDEMPTION OF PREFERRED STOCK
SECTION 3.1. Effect of Share Exchanges. At the Effective Time, each of the
Target Common Shares will be exchanged for Acquiror Common Shares as provided in
this Agreement, and the former holders of Target Common Shares will be entitled
only to the exchange rights provided in this Agreement.
SECTION 3.2. Consideration for Share Exchanges.
(a) As of the Effective Time, the Target Common Shares issued and
outstanding immediately prior to the Effective Time shall be exchanged for the
number of Acquiror Common Shares as set forth in Schedule 3.2 (subject to
adjustment as described in Section 3.2(c), below) to this Agreement. At the
Closing, the Partners of the Partnerships (except Nationwide) shall assign to
Nationwide, free and clear of all liens, security interests and encumbrances,
their Partnership Interests and shall receive in exchange the number of Acquiror
Common Shares as is set forth in Schedule 3.2 (subject to adjustment as
described in Section 3.2(c), below). The total consideration to be received by
holders of the Target Common Shares and by the Partners of the Partnerships in
connection with the transactions contemplated herein is referred to herein as
the "Exchange Consideration."
(b) The Exchange Consideration shall consist of five million (5,000,000)
Acquiror Common Shares, provided that the average closing price of one Acquiror
Common Share as reported on the New York Stock Exchange ("NYSE") for the ten
(10) trading days immediately preceding the Closing Date (the "Trading Price")
is greater than or equal to Twenty-Four Dollars ($24.00). If the Trading Price
is less than Twenty-Four Dollars ($24.00), the Exchange Consideration shall
consist of the number (the "Consideration Number") of Acquiror Common Shares
equal to the quotient of (i) One Hundred Twenty Million Dollars ($120,000,000),
divided by the Trading Price; provided, however, that the Consideration Number
shall not be greater than five and one-half million (5,500,000) Acquiror Common
Shares.
(c) The allocation of Acquiror Common Shares among the Corporate Targets
and the Partners set forth in Schedule 3.2 shall be determined assuming that the
Exchange Consideration consists of five million (5,000,000) Acquiror Common
Shares. In the event of an adjustment in the Exchange Consideration as provided
in Section 3.2(b), above, the number of Acquiror Common Shares to be received in
exchange for each Target Common Share and each Partnership Interest,
respectively, shall be multiplied by a fraction, the numerator of which is the
number of Acquiror Common Shares which comprise the Exchange Consideration as
adjusted pursuant to Section 3.2(b), above, and the denominator of which is five
million (5,000,000).
SECTION 3.3. Escrow. As security for, and as the sole source for
satisfaction of, the indemnification obligations provided for in Article XIII
(except as provided in the proviso to Section 13.2(b) hereof), ten percent (10%)
of the number of Acquiror Common Shares received by the shareholders of the
Corporate Targets and the Partners that comprise the Exchange Consideration
shall be transferred by the shareholders of the Corporate Targets and the
Partners to and held by Bank One, Indianapolis, N.A., as escrow agent, in escrow
for the period and in accordance with the other terms, conditions and procedures
set forth in the Escrow Agreement attached hereto as Exhibit 3.3(a) (the
"Escrow"). In addition, as security for the indemnification obligations provided
for in Article XIV, five percent (5%) of the number of Acquiror Common
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Shares received by the shareholders of the Corporate Targets and the Partners
that comprise the Exchange Consideration shall be transferred by the
shareholders of Nationwide to and held by Bank One, Indianapolis, N.A., as
escrow agent, in escrow for the period and in accordance with the other terms,
conditions and procedures set forth in the Supplemental Escrow Agreement
attached hereto as Exhibit 3.3(b) (the "Supplemental Escrow"); provided that the
Acquiror Common Shares to be delivered to the Supplemental Escrow shall be
deducted pro rata solely from the Acquiror Common Shares to be delivered to the
shareholders of Nationwide.
SECTION 3.4. Surrender and Payment for the Target Common Shares.
(a) At the Closing, each holder of Target Common Shares shall deliver to
Acquiror each certificate (a "Certificate") for such shares held of record by
such holder. Risk of loss and title to the Certificates shall pass upon delivery
of the certificates to Acquiror. At the Closing, each Partner shall deliver to
Acquiror such documents and instruments agreed to by Acquiror and the Partners.
Promptly following the Effective Time, Acquiror shall deliver to (i) each holder
so delivering his, her or its Certificate(s) or assigning his, her or its
Partnership Interest in exchange therefor the Acquiror Common Shares such holder
would be entitled to receive under Section 3.2, less such Acquiror Common Shares
to be escrowed pursuant to Section 3.3 and (ii) the Escrow and the Supplemental
Escrow, the balance of the Acquiror Common Shares otherwise deliverable pursuant
to Sections 3.2 and 3.3.
(b) No certificates or scrip representing fractional Acquiror Common Shares
shall be issued in the Share Exchanges or in connection with the assignment of
the Partnership Interests and no holder of any such fractional share interest
shall be entitled to vote, to receive any dividends or other distributions paid
or declared on Acquiror Common Shares, or to exercise any other rights as a
shareholder of Acquiror with respect to such fractional share interest.
(c) Each holder of Target Common Shares as of the Effective Time shall be
entitled to receive the applicable Exchange Consideration upon surrender to the
Acquiror of the Certificates representing the Target Common Shares owned by the
shareholder. Each Partner shall be entitled to receive the consideration
specified in Section 3.2 upon execution and delivery of such documents and
instruments to be agreed to by Acquiror and the Partners.
(d) In the event that any Certificate representing Target Common Shares is
lost, stolen or destroyed, Acquiror may require as a condition to the payment of
the Exchange Consideration with respect to such Target Common Shares pursuant to
this Agreement that the holder of such Target Common Shares execute such
affidavits and indemnities as Acquiror shall reasonably require.
(e) In the event a dividend or other distribution is declared by Acquiror
on the Acquiror Common Shares the record date for which is at or after the
Effective Time, the declaration shall include dividends or other distributions
on all Acquiror Common Shares issuable pursuant to this Agreement; provided that
no dividend or other distribution declared or made on the Acquiror Common Shares
shall be paid to the holder of any unsurrendered Certificate with respect to the
Acquiror Common Shares (including those Acquiror Common Shares deliverable into
the Escrow or the Supplemental Escrow) represented thereby until the holder of
such Certificate shall duly surrender such Certificate in accordance with this
Section 3.4; and provided further that no holder of any unsurrendered
Certificate shall have any rights (including voting rights, if applicable) with
respect to Acquiror Common Shares (including those Acquiror Common Shares
deliverable into the Escrow or the Supplemental Escrow) represented thereby
until the holder of such Certificate shall duly surrender such Certificate in
accordance with this Section 3.4.
(f) If, after the Effective Time, Certificates are presented to Acquiror,
they shall be exchanged for the Exchange Consideration deliverable in respect
thereof pursuant to this Agreement in accordance with the procedures set forth
in this Section 3.4.
(g) Following the Effective Time, if Certificates previously representing
Target Common Shares are not delivered to Acquiror or the payment of Exchange
Consideration therefor is not claimed prior to the date on which such payments
would otherwise escheat or become the property of any governmental unit or
agency, the unclaimed items shall, to the extent permitted by abandoned property
and any other applicable law, become
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the property of Acquiror (and to the extent not in its possession shall be paid
over to it), free and clear of all claims or interest of any person previously
entitled to such claims. Notwithstanding the foregoing, neither Acquiror nor any
other person shall be liable to any former holder of Target Common Shares for
any amount delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
SECTION 3.5. Redemption of Nationwide Subordinated Notes and Nationwide
Preferred Stock. At the Closing, the Subordinated Notes of Nationwide, as set
forth on Schedule 3.5 (the "Nationwide Subordinated Notes") shall be prepaid by
Acquiror, in accordance with the terms thereof; provided, however, that no
"Additional Premium" (as that term is defined in that certain Subordinated Note
Purchase Agreement dated as of July 27, 1993 between Nationwide and Continental
Bank, N.A.) shall be incurred in connection with the prepayment of the
Nationwide Subordinated Notes. At the Closing, the Nationwide Preferred Stock
shall be redeemed by Nationwide, in accordance with the terms thereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CORPORATE TARGETS AND PARTNERS
For purposes of this Article IV, each of the representations and warranties
of the Corporate Targets shall be deemed to have been made with respect to the
Corporate Targets and their respective subsidiaries. As a material inducement to
Acquiror to enter into this Agreement and to consummate the transactions
contemplated hereby, the Corporate Targets and the Partners jointly and
severally represent and warrant to Acquiror that:
SECTION 4.1. Organization; Power. Each of the Corporate Targets is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation. Each of the Corporate Targets is qualified as
a foreign corporation to transact business and is in good standing in each
jurisdiction, if any, in which the conduct of its business or the ownership or
leasing of its properties requires it to be so qualified. Each business entity
in which any of the Targets owns an equity interest, together with such entity's
jurisdiction of organization and such Target's percentage ownership interest
therein and the states in which the Targets and each such entity are qualified
as a foreign corporation or otherwise are listed in Section 4.1 of the
Disclosure Statement. Each of the Corporate Targets has all requisite corporate
power and authority to own, lease and operate its business as it is now being
conducted, and to enter into, execute and deliver this Agreement, to consummate
the transactions contemplated hereby, and to comply with and fulfill the terms
and conditions hereof. Each of the Corporate Targets has delivered to Acquiror
(a) true and complete copies of its Articles of Incorporation, as may be amended
or restated, certified by the Indiana Secretary of State, (b) Certificates of
Existence issued by the Indiana Secretary of State and by any other state in
which it is qualified to do business and (c) a copy of its Bylaws, as currently
in effect, certified as true and complete by the respective Corporate Target's
Secretary. Each of the Partnerships has been duly formed under the laws of its
jurisdiction of formation. Each of the Partnerships is duly qualified to do
business in each jurisdiction in which the conduct of its business or the
ownership or leasing of its properties requires it to be so qualified. Each of
the Partners has all requisite power and authority to enter into, execute and
deliver this Agreement, to consummate the transactions contemplated hereby, and
to comply with and fulfill the terms and conditions hereof. The Partners have
delivered to Acquiror true and complete copies of the partnership agreements of
each of the Partnerships.
SECTION 4.2. Capital Stock. The authorized capital stock of each of the
Corporate Targets is as set forth in the Preliminary Statement of this
Agreement. All issued and outstanding Common Shares of each Corporate Target are
validly issued and outstanding, fully paid and nonassessable. Except as set
forth in Section 4.2 of the Disclosure Statement, there are no outstanding
warrants, options, agreements, convertible securities or other commitments
pursuant to which any of the Corporate Targets are or may become obligated to
issue any Target Common Shares or other securities of any of the Corporate
Targets. Except as set forth in Section 4.2 of the Disclosure Statement, there
are not outstanding any agreements or commitments pursuant to which any of the
Corporate Targets are or may become obligated to purchase or redeem any of the
Target Common Shares or other securities. The ownership of the Partnerships is
as set forth in Section 1 of the Disclosure Statement.
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SECTION 4.3. Authority; No Violation.
(a) The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
all necessary action on the part of each of the Corporate Targets and the
Partners. This Agreement is a valid and binding obligation of each of the
Corporate Targets and the Partners, enforceable against each of them in
accordance with its terms and conditions, except as the enforcement hereof may
be limited by bankruptcy, insolvency, moratorium or other laws relating to or
limiting creditors' rights generally or by general principles of equity,
regardless of whether such enforceability is considered in a proceeding at law
or in equity.
(b) Except as set forth in Section 4.3 of the Disclosure Statement, neither
the execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, nor compliance by each of the Corporate
Targets and the Partners with any of the provisions hereof, will:
(i) conflict with, violate, result in a breach of, constitute a
default (or an event that, with notice or lapse of time, or both, would
constitute a default) under, or give rise to any right of termination,
cancellation or acceleration under any provision of the Articles of
Incorporation, Bylaws or partnership agreements of any of the Targets, or
any of the terms, conditions or provisions of any note, lien, bond,
mortgage, indenture, license, lease, contract, commitment, agreement,
understanding, arrangement, restriction or other instrument or obligation
to which any of the Corporate Targets or Partners is a party or by which
any of the Corporate Targets or Partners may be bound;
(ii) violate any law, rule or regulation of any government or
governmental agency or body, or any judgment, order, writ, injunction or
decree of any court, administrative agency or governmental agency or body
applicable to any of the Targets; or
(iii) constitute an event that, with or without notice, lapse of time
or action by a third party, could result in the creation of any lien,
charge or encumbrance upon any of the assets of any of the Targets or cause
the maturity of any liability, obligation or debt of any of the Targets to
be accelerated or increased.
SECTION 4.4. Consents and Approvals. Except in connection with the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR Act"),
the Securities Act of 1933, as amended ("Securities Act"), the Securities
Exchange Act of 1934, as amended ("Exchange Act"), the approval of the
shareholders of each of the Corporate Targets under the BCL and as set forth in
Section 4.4 of the Disclosure Statement, the execution, delivery and performance
of this Agreement by each of the Corporate Targets and the Partners, and the
consummation of the transactions contemplated hereby, will not require any
notice to, action of, filing with, or consent, authorization, order or approval
from any court, administrative agency or other governmental authority or agency,
or any individual, corporation, partnership, joint venture, association, firm,
organization, group or any other entity or enterprise. Any and all notices,
actions, filings, consents, authorizations, orders and approvals necessary to
consummate the transactions contemplated by this Agreement shall have been made
and obtained on or prior to and shall be in effect as of the Effective Time.
SECTION 4.5. Transactions with Certain Persons. Except as set forth in
Section 4.5 of the Disclosure Statement, during the past two years no Target
has, directly or indirectly, in the ordinary course of business or otherwise,
purchased, leased or otherwise acquired any property or obtained any services
from, or sold, leased or otherwise disposed of any property or furnished any
services (except with respect to remuneration for services rendered as a
director, officer or employee of any of the Targets in the ordinary course of
business) to, any current or former director, officer, employee or consultant of
any of the Targets, any person who is the beneficial owner (within the meaning
of Rule 13d-3 of the SEC under the Exchange Act) of 5% or more of the
outstanding Target Common Shares or any "affiliate" of any of the Targets as
defined in Rule 12b-2 under the Exchange Act (individually an "Affiliate"). None
of the Targets owes any amount to, or has any contract with or commitment to,
any Affiliate (other than compensation for current services not yet due and
payable and reimbursement of expenses arising in the ordinary course of
business), and no such Affiliate owes any amount to any of the Targets. No
properties or assets owned by any Affiliate or by any subsidiary or affiliate of
any Affiliate is used by any of the Targets in connection with their respective
businesses. No Affiliate is or during the past three years has been the direct
or indirect owner of any interest in any entity that is a
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competitor or supplier or a potential competitor or supplier of any of the
Targets, nor does any Affiliate receive or has any Affiliate received income
from any source other than the Targets that relates to the business of the
Targets or should properly accrue to the Targets.
SECTION 4.6. Books and Records. The minute books of each of the Corporate
Targets as previously made available to Acquiror contain accurate records of all
meetings of and corporate actions or written consents by the respective Board of
Directors, any committee thereof, and the shareholders of each of the Corporate
Targets. There have been no material transactions involving the business of any
of the Corporate Targets that should have been set forth in the respective books
of account, minute book, stock record book or stock transfer ledger, but which
have not been accurately set forth therein.
SECTION 4.7. Financial Statements. True and complete copies of the
consolidated balance sheets of Nationwide as of September 30, 1994 and 1993, and
the related statements of income, other shareholders' equity and cash flows for
the years then ended, as audited by Ernst & Young LLP, Certified Public
Accountants, (collectively, the "Audited Financial Statements") and the
unaudited consolidated balance sheets of the Targets as of December 31, 1994 and
1993, and the related statements of income for the year and, in the case of
Nationwide, the three months then ended (the "Unaudited Financial Statements"),
are set forth in Section 4.7 of the Disclosure Statement. The Audited Financial
Statements and the Unaudited Financial Statements (collectively the "Financial
Statements") (including any related schedules and/or notes) present fairly in
all material respects, the financial position of the Targets at the dates
thereof and the results of their operations and their cash flows for the periods
then ended, in conformity with generally accepted accounting principles.
SECTION 4.8. Absence of Undisclosed Liabilities. Except as set forth or
reserved against on the face of the balance sheets of any of the Targets
included in the Financial Statements ("Target Balance Sheets") or in Section 4.8
of the Disclosure Statement, as of the date of the respective Target Balance
Sheets, none of the Targets had any debts, liabilities or obligations of any
nature whatsoever (known or unknown, matured or unmatured, absolute, accrued,
fixed, contingent or otherwise, including, without limitation, any foreign or
domestic tax liabilities or deferred tax liabilities incurred in respect of or
measured by any Target's income, and products liability or any other liability
attributable to defects in products, materials or workmanship not covered by
insurance) that are required by generally accepted accounting principles to be
so set forth or reserved against that are not set forth or reserved against on
the Target Balance Sheets.
SECTION 4.9. Actions Pending. Section 4.9 of the Disclosure Statement lists
all actions, suits and proceedings pending, or to the knowledge of each of the
Targets, threatened (whether or not purportedly brought on behalf of any of the
Targets), and all investigations, to the knowledge of each of the Targets,
pending or threatened, against each of the Targets, or any properties or rights
of the Targets, by or before any court, arbitrator or administrative or
governmental body. None of such actions, suits or proceedings, would reasonably
be expected to have a material adverse effect on such Target's condition
(financial or otherwise), properties, assets, liabilities, operations or
prospects, or which in any manner challenges or seeks to prevent, enjoin, alter
or materially delay the transactions contemplated hereby.
SECTION 4.10. Outstanding Debt and Related Matters. None of the Targets has
outstanding any debt except as set forth in Section 4.10 of the Disclosure
Statement ("Existing Debt"). Except as set forth in Section 4.10 of the
Disclosure Statement, there exists no default under the provisions of any
instrument evidencing such Existing Debt or of any agreement relating thereto.
Section 4.10 of the Disclosure Statement lists all contracts or commitments of
any of the Targets for the guaranty of any obligation of a third party (i.e., a
party not a Target) in excess of $10,000.
SECTION 4.11. Tax Matters.
(a) Each of the Targets has timely filed with the Internal Revenue Service
and other appropriate governmental authorities, or provided to its employees,
shareholders, consultants and other persons, as the case may be, all tax
returns, statements, forms or reports ("Returns") required to be filed or
provided by it on or before the Closing Date. All federal, state, county, local,
foreign and other taxes, including without limitation income (including gross,
adjusted gross and supplemental net income taxes), receipts, sales, use,
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franchise, value added, excise, recording, filing, real and personal property,
employees' income, unemployment, social security taxes (including withholding
obligations for trust fund taxes), and all other taxes (together with all
interest and penalties imposed thereon) ("Taxes"), due and payable by or on
behalf of each of the Targets have been timely paid in full or timely and fully
withheld and paid, as the case may be, except for Taxes being contested in good
faith by appropriate proceedings as described in Section 4.11 of the Disclosure
Statement. None of the Targets has been delinquent in the payment of any Tax
assessment (whether proposed or final) or governmental charge or deposit of any
kind or character.
(b) All accrued but unpaid Taxes accrued for tax periods or portions
thereof ending on or prior to December 31, 1994 are duly reflected as a
liability or reserved against on the respective Target's Balance Sheet and each
Target has established and maintained adequate reserves for Taxes for all prior
tax periods.
(c) None of the Targets (i) has any Tax deficiency or claim outstanding,
proposed or assessed against it and there is no basis for any such deficiency or
claim; (ii) has any audit, action, suit, proceeding or investigation for Taxes
pending or threatened against it; and (iii) has received any notice that any
deficiency, claim, audit, action, suit, proceeding or investigation may be made
against or with respect to it. Except as described in Section 4.11 of the
Disclosure Statement, during their existence none of the Targets has received
any notice of any material deficiency which has not been satisfactorily resolved
or other adjustment from the Internal Revenue Service or any other Taxing
Authority, and, except as set forth in Section 4.11 of the Disclosure Statement,
none of the Returns has been audited by the Internal Revenue Service.
(d) Except as described in Section 4.11 of the Disclosure Statement, there
is not now in force any extension of time with respect to the date on which any
Return was or is due to be filed or provided by or on behalf of or with respect
to any of the Targets or any waiver or agreement by any of the Targets for an
extension of time for the assessment of any Tax. No election has been made to
treat any of the Targets as a "collapsible corporation" under Section 341(f) of
the Internal Revenue Code of 1986, as amended (the "Code"). None of the Targets
is subject to any penalty by reason of a violation of any order, rule or
regulation of, or a default with respect to any Return required to be filed with
any governmental authority. Except as described in Section 4.11 of the
Disclosure Statement, none of the Targets has any pending requests with any
governmental authority for rulings as to payment of any Tax.
(e) All leases have been properly reported as either "capital" leases or
"true" leases, as those terms are commonly used for federal income tax purposes.
None of the property owned or used by any of the Targets is subject to a tax
benefit transfer lease executed in accordance with Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended by the Economic Recovery Tax Act of
1981.
(f) There are no liens for Taxes upon any of the Targets' assets, except
liens for current Taxes not yet due. Except as described in Section 4.11 of the
Disclosure Statement, none of the Targets is currently under any contractual
obligation to indemnify any other person with respect to Taxes and none of the
Targets is a party to any agreement providing for payments with respect to
Taxes. None of the Targets will be required, as a result of a change in method
of accounting, to include any adjustment under Section 481(c) of the Code in any
period ending after the Closing Date. Except as set forth in Section 4.11 of the
Disclosure Statement, no agreement exists that may cause any payment by any of
the Targets to be nondeductible in full or in part under Section 280G of the
Code. Since January 1, 1990, none of the Targets has been a member of an
affiliated group of corporations within the meaning of Section 1504 of the Code
but Nationwide is a common parent of such an affiliated group.
SECTION 4.12. Absence of Changes or Events. Except as set forth in Section
4.12 of the Disclosure Statement, since the most recent date of each Target
Balance Sheet delivered to Acquiror (the "Bring-down Date") the business of each
of the Targets has been conducted only in the ordinary course and consistent
with historical practices and, since the Bring-down Date, none of the Targets
has:
(a) Declared, set aside or made any payment of dividends or other
distributions to its shareholders upon or in respect of any the Target
Common Shares or purchased, retired or redeemed any Target Common Shares or
other securities issued by it;
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(b) Mortgaged, pledged or subjected to lien, mortgage, pledge, claim,
security interest, charge, encumbrance or restriction any material portion
of its tangible or intangible property, business or assets;
(c) Sold, transferred, leased to others or otherwise disposed of any
material portion of its tangible or intangible assets or properties, except
for inventory sold in the ordinary course of business;
(d) Encountered any actual or threatened labor union organizing
activity or collective bargaining agreement negotiation, had any actual or
threatened employee strikes, work stoppages, slow-downs or lock-outs, or
had any material change in its relationship with its employees, agents,
consultants, salespersons, distributors or independent contractors;
(e) Transferred or granted any concessions, leases, licenses,
agreements or other rights with respect to or under, or entered into any
settlement regarding the breach or infringement of, any United States or
foreign license, patent, copyright, trademark, service mark, trade name,
invention or similar rights, or modified any existing rights with respect
thereto;
(f) Made any change in the rate of compensation, commission, bonus or
other direct or indirect remuneration payable, or paid or agreed to pay,
conditionally or otherwise, any bonus, extra compensation, pension,
severance or vacation pay, to any director, officer, employee, consultant,
sales representative, distributor or independent contractor of such Targets
other than normal annual increases consistent with past practice, entered
into any employment contract with any officer or salaried employee,
instituted any employee welfare, bonus, stock option, profit-sharing,
retirement or similar plan or arrangement, or made any loan or advance to
any third party except those made pursuant to normal trade terms extended
to customers;
(g) Issued or sold any shares of its capital stock, partnership
interests, bonds, notes or other securities, or issued, granted or sold any
options, rights or warrants with respect thereto, or acquired any capital
stock or other securities of any corporation or any interest in any
business enterprise, or otherwise made any loan or advance to or investment
in any third party;
(h) Changed its accounting methods or practices, including without
limitation changes in depreciation or amortization policies or rates and in
the method of accounting for inventory;
(i) Suffered any change, event or condition that, in any case or in
the aggregate, has had or may have a material adverse effect on the
Target's condition (financial or otherwise), properties, assets,
liabilities, operations or prospects;
(j) Entered into any transaction, contract or commitment, other than
in the ordinary course of business; or
(k) Entered into any agreement or contract, made any commitment or
otherwise obligated itself to take any of the types of action described in
Subsections (a) through (j) of this Section 4.12.
SECTION 4.13. Compliance with Laws; No Default. Except as set forth in
Section 4.13 of the Disclosure Statement, none of the Targets is in default of
or has violated (nor is there any event or condition which, with notice or lapse
of time or both, would constitute a default or violation of) in any respect (i)
any contract, agreement, lease, consent order or other written commitment or
instrument to which it is a party or by which the assets or business of any of
the Targets are bound, or (ii) any law, rule, regulation, ordinance, writ,
injunction, development order, permit, resolution, approval, order, decree,
policy or guideline of any court or any foreign, federal, state, local or other
governmental department, commission, board, bureau, agency or instrumentality
(including without limitation applicable laws, rules and regulations relating to
environmental protection, antitrust, civil rights, health and occupational
health and safety).
SECTION 4.14. Property.
(a) Section 4.14 of the Disclosure Statement contains (i) the street
address and legal description of each parcel of all real property owned or
leased from third parties by any of the Targets, including all buildings,
structures and improvements located thereon ("Real Property") and (ii) a brief
description of the use to which each parcel of the Real Property is being
employed and/or the use for which it is currently intended.
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(b) Each of the Targets owns or leases from third parties all tools,
furniture, machinery, computer hardware and software, supplies, vehicles,
equipment and other items of tangible personal property that are required to
conduct its business ("Personal Property").
(c) Except as set forth in Section 4.14 of the Disclosure Certificate, the
Real Property and each item of the Personal Property conforms in all material
respects to applicable federal, state, local and foreign laws, regulations and
ordinances, including without limitation, in the case of the Real Property,
those related to zoning, use or construction, and the Real Property is zoned for
the purposes for which it presently is used. The Real Property and each item of
the Personal Property is in good operating condition and repair, subject to
normal wear and tear, and is suitable for its intended use by the Target owning
or leasing such Real Property and Personal Property.
(d) With respect to each parcel of Real Property and each item of Personal
Property that is leased from third parties ("Leased Property"), the respective
Target is the owner and holder of the entire interest in the leasehold estates
purported to be granted by the leases or agreements, each of which is in full
force and effect and constitutes a legal, valid and binding obligation of the
respective parties thereto, enforceable in accordance with its terms. No consent
of any lessor of the Leased Property is required in connection with the
transactions contemplated by this Agreement, except as set forth in Schedule
4.14 of the Disclosure Certificate.
SECTION 4.15. Contracts.
(a) Section 4.15(a) of the Disclosure Statement lists all contracts,
leases, commitments, purchase orders, work orders, agreements, consent orders
and other arrangements, including all amendments thereto, to which each of the
Targets is a party or is subject or by which each of the Targets, its assets, or
its business is bound, that fall into one or more of the following categories
("Contracts"):
(i) All loans, lines of credit, security agreements, guaranties or
other payment obligations;
(ii) All employment agreements, contracts, policies and commitments
with or between any Target and any of its employees, directors or officers,
individually or as one or more groups, including without limitation those
relating to severance;
(iii) All agreements of guaranty or indemnification;
(iv) All agreements, contracts and commitments containing any covenant
limiting the right of any Target to engage in any line of business or
compete with any person;
(v) Each agreement, contract and commitment relating to capital
expenditures in excess of One Hundred Thousand Dollars ($100,000.00), or
Two Hundred and Fifty Thousand Dollars ($250,000.00) in the aggregate;
(vi) All agreements, contracts and commitments entered into that
individually involve the payment of One Hundred Thousand Dollars ($100,000)
or more over their remaining terms (including any period of extension or
renewal) and are not cancelable within sixty (60) days or less notice;
(vii) All agreements, contracts and commitments relating to the grant
or receipt of any license or royalty;
(viii) All agreements, contracts and commitments that require consent
by any other person in connection with the consummation of the transactions
contemplated by this Agreement and the Mergers either to prevent a breach
or to continue the effectiveness thereof; and
(ix) All agreements with any Affiliate of any Target.
(b) All of the Contracts are valid and binding obligations of the
respective parties thereto, enforceable in accordance with their respective
terms, are in full force and effect, and Acquiror will be entitled to the full
benefits thereof. Within 30 days of the date of this Agreement, the Targets will
deliver to Acquiror true and complete copies of all of the Contracts. With
respect to those Contracts which are substantially the same from facility to
facility of the Targets, the Targets have provided to Acquiror or its counsel an
example of a form of such Contracts, and such forms are substantially the same
from facility to facility.
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SECTION 4.16. Licenses and Permits.
(a) Section 4.16 of the Disclosure Statement contains a true and complete
list of certificates of need, franchises, licenses, permits, certificates,
approvals, resolutions, development orders, consents and other authorizations
necessary to own, lease or operate each of the Target's assets or to conduct its
business in compliance with applicable law ("Permits") and, with respect to each
Permit, the name of the licensor or grantor, a description of the subject
matter, the termination date, and the terms of any renewal options. Each of the
Targets has delivered to Acquiror true and complete copies of all of its
Permits.
(b) Each of the Targets lawfully obtained and currently possesses the
respective Permits and has fulfilled and performed its obligations under each of
the Permits. No event has occurred and no condition or state of facts exists
which constitutes or, after notice or lapse of time or both, would constitute a
breach or default under any of the Permits or would allow revocation or
termination of any of the Permits, or which might adversely affect the rights of
any Target under any of the Permits. No notice of cancellation, of default, or
of any dispute concerning any of the Permits, or of any event, condition or
state of facts described in the preceding sentence, has been received by, or is
known to, any Target or their respective officers, directors or employees.
Except as set forth in Section 4.16 of the Disclosure Statement, each of the
Permits is valid, subsisting and in full force and effect, and will continue in
full force and effect after the Merger, in each case without (i) the occurrence
of any breach, default or forfeiture of rights thereunder, or (ii) the consent,
approval or act of, or the making of any filing with, any governmental body,
regulatory commission or other person.
(c) The Permits include all applicable environmental, land use and growth
management obligations required by any federal, state, local, foreign or other
governmental department, commission, board, bureau, agency or instrumentality.
SECTION 4.17. Proprietary Information. Section 4.17 of the Disclosure
Statement contains a true and complete list and brief description of all
Intellectual Property, directly or indirectly related to the products, services
or operations of each of the Targets or necessary to use the assets or conduct
the business of the Targets as presently used or conducted. Each of the Targets
owns or possesses the licenses or other rights to use their respective names and
all the Intellectual Property identified in Section 4.17 of the Disclosure
Statement. Except as set forth in Section 4.17 of the Disclosure Statement, to
its knowledge, no Target is infringing upon or otherwise acting adversely to any
Intellectual Property, the rights to which are owned by any other person. There
is no claim or action by any person pending or threatened, with respect thereto.
For the purposes of this Agreement, "Intellectual Property" means the names
"Nationwide Care" (and any and all variations thereof) and all the corporate
names, trade names, trademarks, trademark applications, service marks, service
mark applications, theme concepts, copyrights, copyright applications, patents,
patent applications, inventions, trade secrets, shop rights, know-how, business
plans and strategies, proprietary processes and formulae, data bases, telephone
numbers and all other proprietary technical information, whether patentable or
unpatentable, directly or indirectly related to the products, services or
operations of the business or necessary to conduct the business as it is now
being conducted.
SECTION 4.18. Title to Assets and Related Matters. Each of the Targets has
good, valid, marketable and insurable title to all of the assets owned by it
free and clear of all mortgages, liens, pledges, charges, claims, security
interests, encumbrances, easements, encroachments, limitations, restrictions,
rights of third parties or other interests of any kind or character, except as
set forth in Section 4.18 of the Disclosure Statement and except for liens for
Taxes not yet due and payable.
SECTION 4.19. Environmental Matters.
(a) Except as set forth in Section 4.19 of the Disclosure Statement, all of
the Real Property and all operations conducted thereon, including without
limitation the respective Target's use of its assets and the Real Property, are
currently in compliance with all applicable federal, state, local and foreign
environmental, land use and growth management laws, regulations, rules,
ordinances, permits, development orders, approvals, resolutions and orders,
including all consent orders.
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(b) Except as set forth in Section 4.19 of the Disclosure Statement, with
respect to the Real Property, there exists no state of affairs and to each
Target's knowledge there has occurred no event that currently requires, or is
currently expected to require in the future, reporting or disclosure by the
Corporate Targets to any federal, state, local or foreign agency concerned with
environmental protection and management or land use control or growth
management.
(c) There are no pending or threatened claims by any private parties or
governmental agencies, and there are no pending or threatened judicial or
administrative actions, alleging violations of any federal, state, local or
foreign environmental, land use or growth management laws, regulations, rules,
ordinances, permits, development orders, approvals, resolutions or orders on or
connected with the Real Property, the assets or the operations conducted thereon
or at any time prior to the Closing Date.
(d) Section 4.19 of the Disclosure Statement contains a list and brief
description of all written and oral communications between each of the Targets
and any federal, state or local governmental authority with respect to any
removal, remediation or clean-up required to be undertaken, the results of any
inspection or compliance review, potential liability arising under or potential
violations of the Clean Air Act, the Clean Water Act, the Resource Conservation
and Recovery Act, the Toxic Substances Control Act and the Comprehensive
Environmental Response, Compensation and Liability Act and equivalent state and
local laws, regulations, rules, ordinances and all court and administrative
orders issued pursuant thereto, since January 1, 1991.
SECTION 4.20. Labor Relations; Employees.
(a) The Targets collectively employ approximately 4,500 employees. No
Target is a party to any collective bargaining agreement with respect to its
work force or any portion thereof. Except as set forth in Section 4.20 of the
Disclosure Statement:
(i) each Target has paid in full to all its employees all due and
owing wages, salaries, commissions, bonuses, fringe benefit payments and
all other direct and indirect compensation of any kind for all services
performed by them and each of them to the date hereof;
(ii) each Target is in compliance with (1) all federal, state, local
and foreign laws, regulations, rules, ordinances and court and
administrative orders dealing with employment and employment practices of
any kind, (2) all of the terms and conditions of employment of any kind
with respect to its business, and (3) all wages and hours requirements and
regulations;
(iii) there is no unfair labor practice, safety, health,
discrimination or wage claim, charge, complaint suit, arbitration or
proceeding pending or to each Target's knowledge threatened against or
involving such Target before the National Labor Relations Board,
Occupational Safety and Health Administration, Equal Employment Opportunity
Commission, Department of Labor or any other federal, state, local or
foreign agency;
(iv) there is no labor dispute, strike, work stoppage, interference
with production or slowdown in progress or threatened against or involving
such Target;
(v) there is no question of representation under the National Labor
Relations Act, as amended, or any similar state statute, pending with
respect to the employees of any Target;
(vi) there is no grievance pending or threatened which might have an
adverse effect on any Target or on the conduct of its business; and
(vii) there is no collective bargaining agreement currently being
negotiated or subject to negotiation or renegotiation by any Target.
SECTION 4.21. Employee Benefit Plans.
(a) Except as set forth in Section 4.21 of the Disclosure Statement, no
Target maintains any (i) employee welfare benefit plan (as defined in Section
3(1) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), or (ii) employee pension benefit plan (as defined in Section 3.(2)
of
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ERISA), (a) which was maintained or administered by the Target immediately prior
to Closing; (b) to which the Target contributed to, or was legally obligated to
contribute to immediately prior to Closing, or (c) under which the Target had
any liability immediately prior to Closing, with respect to its current or
former employees or independent contractors. Except as set forth in Section 4.21
of the Disclosure Statement, none of the Targets or any ERISA Affiliate is now
or has been in the past obligated to contribute to any multiemployer plan (as
defined in ERISA Section 3(37) or to any plan subject to Title IV of ERISA. For
purposes of this Agreement, "ERISA Affiliate" means any member (other than a
Target) of a group of business entities including a Target, which are treated as
a single employer under Section 414 of the Code.
(b) The only plans or arrangements maintained by any of the Targets for the
benefit of current or former employees (including, without limitation, the plans
referred to in paragraph (a)), are set forth in Section 4.21 of the Disclosure
Statement (collectively, the "Benefit Plans"). The Targets have delivered or
prior to the Closing shall deliver to Acquiror true and correct copies of each
of the Benefit Plans. Each of the Benefit Plans has been established and
maintained in all material respects in accordance with its terms and compliance
with all applicable laws, including, but not limited to, ERISA and the Code. As
of the Closing, all contributions required under applicable law or the terms of
any Benefit Plan or other agreement relating to a Benefit Plan to be paid by any
Target have been completely and timely made to such Benefit Plan when due, and
each Target has established adequate reserves on its books to meet liabilities
for contributions accrued but that have not been made because they are not yet
due and payable.
SECTION 4.22. Insurance.
(a) Each of the Targets is insured by financially sound and reputable
insurers with respect to its properties and the conduct of its businesses.
(b) Section 4.22 of the Disclosure Statement contains (i) a true and
complete list of all policies of liability, theft, fidelity, life, fire, product
liability, workers' compensation, health and other forms of insurance held by
the Targets and specifies the insurer, amount of coverage, type of insurance and
policy number; and (ii) for the past three (3) fiscal years, an accurate
description of any prior claims, any cancellation or significant increase in
premiums and any pending claims under those or predecessor policies.
(c) The policies listed in Section 4.22 of the Disclosure Statement are
outstanding, in full force and effect and all premiums billed with respect to
those policies have been paid. The insurance coverage provided by the policies
listed in Section 4.22 of the Disclosure Statement satisfies all contractual and
statutory requirements applicable to each Target, its assets or its business and
is in such amounts and insures against such liabilities and hazards as is
consistent with past practice and as is customarily maintained by other
companies operating in similar businesses. No Target has, during the past five
fiscal years, been denied or had revoked or rescinded by a carrier any policy of
insurance.
SECTION 4.23. Life Care Contracts. No Target is a party to any contract
pursuant to which such Target has agreed to care for any individual for such
individual's life.
SECTION 4.24. Survey Reports. A true and complete copy of the most recent
survey reports and any waivers of deficiencies, plans of correction and other
investigation reports issued with respect to any facility of any Target has been
delivered to Acquiror. Each facility is in compliance with all conditions and
standards of licensing and participation in the Medicare and Medicaid programs.
SECTION 4.25. Payment Programs. Each Target is now, and on the Closing Date
will be, certified for participation in, and party to valid provider agreements
for payment by, the federal Medicare and Medicaid programs (the "Programs");
provided, however, that Nationwide's Markle Health Care facility is not
certified for participation in the Medicare program. The Targets have filed all
cost reports in connection with their businesses and operations that are
required to be filed with any federal or state governmental or regulatory
authority (including pursuant to Titles XVIII and XIX of the Social Security
Act). A true and complete copy of all such cost reports has been provided to
Acquiror. Except as set forth in Section 4.25 of the Disclosure Statement, the
Targets have not received any notice of pending or threatened investigations by
any Program which poses a risk to the Targets' participation in the Program or
may result in any adjustments to reimbursements that have been paid, excluding
survey report deficiencies that have been corrected. All billing
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practices by the Target to all third payors, including the federal Medicare
program, state Medicaid programs and private insurance companies, have been
true, fair and correct and in compliance with all applicable laws, regulations
and policies of all such third payors, and the Targets have not billed for or
received any payment or reimbursement in excess of amounts allowed by law, other
than insignificant amounts subject to adjustment pursuant to periodic audits of
cost reports submitted by the Target. Neither any Target, nor any Affiliate
thereof, nor any director, officer or employee thereof, is a party to any
contract, lease, agreement or arrangement, including any joint venture or
consulting agreement with any physician, hospital, nursing facility, home health
agency or other person who is in a position to make or influence referrals to or
otherwise generate business for any Target to provide services, lease space,
lease equipment or engage in any other venture or activity, to the extent
prohibited by law or regulations.
SECTION 4.26. Gratuitous Payments. Neither any Target, nor any director,
officer or employee, nor any agent acting on behalf of or for the benefit of any
thereof, has directly or indirectly (i) offered or paid any remuneration, in
cash or in kind, to, or made any financial arrangements with, any past or
present customers, past or present suppliers, contractors or third party payors
of any Target in order to obtain business or payments from such persons, other
than entertainment activities in the ordinary and lawful course of business;
(ii) given or agreed to give, or has knowledge that there has been made or that
there is any agreement to make, any gift or gratuitous payment of any kind,
nature or description (whether in money, property or services) to any customer
or potential customer, supplier or potential supplier, contractors, third party
payor or any other person other than in connection with promotional or
entertainment activities in the ordinary and lawful course of business; (iii)
made or agreed to make, or is aware that there has been made or that there is
any agreement to make, any contribution, payment or gift of funds or property
to, or for the private use of, any governmental official, employee or agent if
either the contribution, payment or gift or the purpose of such contribution,
payment or gift is or was illegal under the laws of the United States or under
the laws of any state thereof or any other jurisdiction (foreign or domestic)
under which such payment, contribution or gift was made; (iv) established or
maintained any unrecorded fund or asset for any purpose or made any false or
artificial entries on any of its books or records for any reason; or (v) made,
or agreed to make, or has knowledge that there has been made or that the
intention or understanding that any part of such payment would be used for any
purpose other than that described in the documents supporting such payment.
SECTION 4.27. Brokers' or Finders' Fees. No agent, broker, investment
banker or other person or firm acting on behalf of the Targets or Partners or
any of their directors, executive officers, or partners or under the authority
of any of them, is or will be entitled to any broker's or finder's fee or any
other commission or similar fee, directly or indirectly, from any of the parties
hereto in connection with any of the transactions contemplated hereby, except
for those fees or commissions set forth and described in Section 4.27 of the
Disclosure Statement which the Targets shall have paid in full prior to or at
the Closing, and evidence of payment for which shall have been delivered to
Acquiror at the Closing.
SECTION 4.28. Disclosure.
(a) No representation or warranty by any Corporate Target or Partner
contained in this Agreement and no statement made by any Corporate Target or
Partner contained in the Disclosure Statement or any certificate or other
instrument delivered or to be delivered pursuant to this Agreement contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary in order to make the statements contained herein
or therein not misleading. All information in the Disclosure Statement or any
Schedule, Exhibit or any contract delivered on behalf of the Corporate Targets
and the Partners pursuant hereto or in connection with the transactions
contemplated hereby shall be deemed to have been relied upon by Acquiror and
constitute representations and warranties by the Corporate Targets and the
Partners herein.
(b) None of the information supplied or to be supplied by the Targets for
inclusion in the registration statement on Form S-4 or other appropriate
registration form to be filed with the SEC by Acquiror in connection with the
offer and issuance of the Acquiror Common Shares in or as a result of the Share
Exchanges (the "Registration Statement"), will at the time the Registration
Statement becomes effective under the Securities Act contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
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SECTION 4.29. Tax Representations. The representations and warranties by
the shareholders of the Corporate Targets required under Section 6.15 shall be
true, correct and complete in all respects as of the Effective Time.
SECTION 4.30. Representations and Warranties as of Date Hereof; No Other
Representations and Warranties. The representations and warranties contained in
the foregoing Sections 4.1 through 4.29 inclusive are made as of the date
hereof, except as otherwise expressly indicated therein. None of the Corporate
Targets or Partners makes, and no party shall be entitled to rely upon, any
representation or warranty as to any fact or matter other than as expressly set
forth herein.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
As a material inducement to the Corporate Targets and the Partners to enter
into this Agreement and to consummate the transactions contemplated hereby,
Acquiror represents and warrants to the Corporate Targets and the Partners that:
SECTION 5.1. Organization; Power. Acquiror is a corporation duly organized
and validly existing under the laws of the State of Nevada, for which all
required annual reports have been filed with the Nevada Secretary of State and
for which no Articles of Dissolution appear as having been filed with the Nevada
Secretary of State. Acquiror has all the requisite corporate power and authority
to own, lease and operate its business as it is now being conducted and to enter
into this Agreement, to consummate the transactions contemplated hereby, and to
comply with and fulfill the terms and conditions of this Agreement.
SECTION 5.2. Capital Stock. The authorized shares of Acquiror are as set
forth in the Preliminary Statement to this Agreement. All issued and outstanding
Acquiror Common Shares are validly issued and outstanding, fully paid and
nonassessable.
SECTION 5.3. Authority; No Violation; Etc.
(a) The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action on the part of Acquiror. This Agreement is a
valid and binding obligation of Acquiror, enforceable against Acquiror in
accordance with its terms and conditions, except as the enforcement hereof and
thereof may be affected by bankruptcy, insolvency, moratorium or other laws
relating to or limiting creditors' rights generally or by general principles of
equity, regardless of whether such enforceability is considered in a proceeding
at law or in equity.
(b) Except as set forth in Section 5.3 of the statement of disclosure
delivered by the Acquiror to the Corporate Targets and the Partners in
connection with the execution of this Agreement (the "Acquiror's Disclosure
Statement"), neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby, nor compliance by Acquiror
with any of the provisions hereof, will:
(i) conflict with, violate, result in a breach of, constitute a
default (or an event that, with notice or lapse of time, or both, would
constitute a default) under, or give rise to any right of termination,
cancellation or acceleration under any provision of the Articles of
Incorporation or Bylaws of Acquiror, or any of the terms, conditions or
provisions of any note, lien, bond, mortgage, indenture, license, lease,
contract, commitment, agreement, understanding, arrangement, restriction or
other instrument or obligation to which Acquiror is a party or by which
Acquiror may be bound;
(ii) violate any law, rule or regulation of any government or
governmental agency or body, or any judgment, order, writ, injunction or
decree of any court, administrative agency or governmental agency or body
applicable to Acquiror; or
(iii) constitute an event that, with or without notice, lapse of time
or action by a third party, could result in the creation of any lien,
charge or encumbrance upon any of the assets of Acquiror or cause the
maturity of any liability, obligation or debt of Acquiror to be accelerated
or increased.
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SECTION 5.4. Consents and Approvals. Except in connection with the HSR Act,
the Securities Act and the Exchange Act, and as set forth in Section 5.4 of the
Acquiror's Disclosure Statement, the execution, delivery and performance of this
Agreement by Acquiror and the consummation of the transactions contemplated
hereby will not require any notice to, action of, filing with or consent,
authorization, order or approval from any court, administrative agency or other
governmental authority or agency, or any individual, corporation, partnership,
joint venture, association, firm, organization, group or any other entity or
enterprise.
SECTION 5.5. Reports. Acquiror has filed all required forms, reports and
documents with the SEC required to be filed by it pursuant to the federal
securities laws and the rules and regulations of the SEC thereunder (the
"Acquiror SEC Reports"), each of which complied, at the time such form, report
or document was filed, in all material respects with the then applicable
requirements of the Securities Act and the Exchange Act, and the rules and
regulations thereunder. None of the Acquiror SEC Reports, including without
limitation any financial statements or schedules included therein, at the time
filed, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The audited consolidated financial statements and unaudited
interim financial statements of Acquiror included in the Acquiror SEC Reports
(the "Acquiror Financial Statements") were prepared from Acquiror's books and
records in accordance with generally accepted accounting principles applied on a
consistent basis (except as may be indicated therein or in the notes thereto)
and fairly present the financial position of Acquiror and its consolidated
subsidiaries as at the dates thereof and the results of their operations and
their cash flows for the periods then ended, subject, in the case of the
unaudited interim financial statements, to normal, recurring year-end
adjustments and any other adjustments described therein. Since the date of the
last audited balance sheet in the Acquiror Financial Statements (the "Acquiror
Bring Down Date"), neither Acquiror nor any of its subsidiaries has incurred any
liabilities or obligations, whether absolute, accrued, fixed, contingent,
liquidated, unliquidated or otherwise and whether due or to become due, except
(i) as and to the extent set forth on the audited balance sheet of the Acquiror
and its subsidiaries as at the Acquiror Bring Down Date (including the notes
thereto), (ii) as incurred in connection with the transactions contemplated, or
as provided, by this Agreement, (iii) as incurred after the Acquiror Bring Down
Date in the ordinary course of business and consistent with past practices, (iv)
as described in the Acquiror SEC Reports or (v) as would not, individually or in
the aggregate, have a material adverse effect upon the business, assets or
condition, financial or otherwise, of Acquiror and its subsidiaries considered
as a whole. Acquiror has delivered to Nationwide all Acquiror SEC Reports filed
with the SEC since January 1, 1993.
SECTION 5.6. Due Authorization of Shares. The Acquiror Common Shares to be
issued at the Closing will, when issued, be duly authorized Common Shares of
Acquiror and, when delivered, will be duly and validly issued, fully paid and
nonassessable and qualified for trading on the NYSE subject to notice of
issuance.
SECTION 5.7. Compliance with Laws; No Default or Litigation. Except as set
forth in Section 5.7 of the Acquiror's Disclosure Statement, neither Acquiror
nor any of its subsidiaries is in default of or has violated (nor is there any
event or condition which, with notice or lapse of time or both, would constitute
a default or violation of) in any respect, (i) any contract, agreement, lease,
consent, order or other written commitment or instrument to which it is a party
or by which the assets or business of any of the Acquiror or its subsidiaries
are bound, or (ii) any law, rule, regulation, ordinance, writ, injunction,
development order, permit, resolution, approval, order, decree, policy or
guideline of any court or any foreign, federal, state, local or other
governmental department, commission, board, bureau, agency or instrumentality
(including without limitation applicable laws, rules and regulations relating to
environmental protection, antitrust, civil rights, health and occupational
health and safety) except where such default or violation would not,
individually or in the aggregate with all other defaults and/or violations, have
a material adverse effect on the business, assets or condition, financial or
otherwise, of Acquiror and its subsidiaries considered as a whole. Except as
disclosed in the Acquiror Financial Statements or as set forth in Section 5.7 of
the Acquiror's Disclosure Statement: neither Acquiror nor any of its
subsidiaries is presently engaged in or threatened with or aware of any
situation that could subject Acquiror or any of its subsidiaries (together, the
"Acquiring Companies") to any litigation (including appeals of lower court
decisions), arbitration, claim or other legal proceedings or governmental or
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any other investigation relating to the affairs of any of the Acquiring
Companies or any of their properties or assets that (a) questions the validity
or enforceability of this Agreement or that could prevent, hinder or delay
consummation of the transactions contemplated by this Agreement or (b) would
reasonably be expected to have a material adverse effect on the business, assets
or condition, financial or otherwise, of Acquiror and its subsidiaries
considered as a whole.
SECTION 5.8. Tax Representations. The representations and warranties by
Acquiror required under Section 7.7 shall be true, correct and complete in all
respects as of the Effective Time.
SECTION 5.9. Brokers' or Finders' Fees. Except for certain fees and expense
reimbursements to be paid by Acquiror to Merrill Lynch, Pierce, Fenner & Smith,
Incorporated, no agent, broker, investment banker or other person or firm acting
on behalf of Acquiror or any of its directors or executive officers, or under
the authority of any of them is or will be entitled to any broker's or finder's
fee or any other commission or similar fee, directly or indirectly, from
Acquiror in connection with any of the transactions contemplated hereby.
SECTION 5.10. Representations and Warranties as of Date Hereof. The
representations and warranties contained in the foregoing Sections 5.1 through
5.9 inclusive are made as of the date hereof, except as otherwise expressly
indicated therein. The Acquiror does not make, and no party shall be entitled to
rely upon, any representation or warranty as to any fact or matter other than as
expressly set forth herein.
ARTICLE VI
CERTAIN PRE-CLOSING COVENANTS OF THE TARGETS
Each of the Corporate Targets and the Partners covenants and agrees that
between the date hereof and the Closing:
SECTION 6.1. Maintenance of Corporate Status. Each of the Corporate Targets
shall be maintained at all times as a corporation validly existing and in good
standing under the laws of the state of its incorporation and in good standing
as a foreign corporation in all states in which it is currently qualified to do
business. No amendment shall be made to the Articles of Incorporation or Bylaws
of any of the Corporate Targets without the prior written consent of Acquiror.
SECTION 6.2. No Change in Capitalization. No change will be made in the
number of issued and outstanding Target Common Shares, other than as a result of
the exercise of outstanding warrants or options to purchase Target Common Shares
in accordance with the terms of such warrants or options. No option, warrant or
any other right to purchase or to convert any obligation or security into Target
Common Shares will be sold, issued or granted by the Targets.
SECTION 6.3. Shareholders Meetings. Each of the Corporate Targets shall
cause a meeting of its shareholders to be duly called and held as soon as
practicable following the effectiveness of the Registration Statement (but not
earlier than 20 business days after the date of such effectiveness) for the
purpose of voting on the approval and adoption of this Agreement and the Share
Exchanges. The Board of Directors of each of the Corporate Targets shall
recommend approval and adoption of this Agreement and the Share Exchanges by the
respective Corporate Target's shareholders. In connection with such meeting,
each of the Targets:
(a) will cooperate with Acquiror in the prompt preparation of the
Registration Statement and use its best efforts to have the Registration
Statement declared effective by the SEC, and will thereafter mail to its
shareholders as promptly as practicable the Prospectus/Information
Statement and all other solicitation materials for use in connection with
the meeting of shareholders;
(b) will use its best efforts to obtain the necessary approvals by its
shareholders of this Agreement and the Share Exchanges; and
(c) will otherwise comply with all legal requirements applicable to
such meeting.
SECTION 6.4. Operation of the Business. Each of the Targets shall operate
its business diligently and only in the regular and ordinary course and manner
as it has previously been operated. Without limiting the
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generality of the foregoing, each of the Targets shall use all reasonable
efforts to (i) preserve its present business organization intact and conserve
its goodwill; (ii) keep available and maintain the services of all officers,
employees, agents and representatives on the same or substantially the same
terms; (iii) continue and preserve good relationships with suppliers, customers,
lenders and others having business dealings or relationships with the Targets;
(iv) maintain in full force and effect all Permits required for the operation of
the business as presently conducted; and (v) maintain and keep in good order,
consistent with past practice, all of the Targets's tangible assets, ordinary
wear and tear excepted. None of the Targets shall, without the prior written
consent of Acquiror: (i) incur any indebtedness to any third party, except trade
payables incurred in the ordinary course of business consistent with past
practices; (ii) declare, set aside or pay any dividends or other distributions
or payments on or in respect of its outstanding shares, or purchase, redeem or
otherwise acquire, or agree to purchase, redeem or otherwise acquire any Target
Common Shares; (iii) knowingly do any act or omit any act or permit any omission
to act within its control, which will cause a breach or default in any of the
Targets' contracts, commitments or obligations; (iv) except in the ordinary
course of business consistent with past practices, change or increase the rate
of compensation paid by any of the Targets to any of their directors, officers,
employees or agents, including without limitation the payment of bonuses and
arrangements for severance pay, or (v) enter into any agreement to do any of the
foregoing.
SECTION 6.5. Other Offers. From the date of this Agreement until it is
terminated in accordance with Article X, the Targets shall not and shall cause
its officers, directors, partners, employees and other agents not to, directly
or indirectly, take any action to solicit, initiate or encourage the making of
any Acquisition Proposal (as hereinafter defined). Until this Agreement shall be
terminated in accordance with Article X, the Targets will not enter into any
agreement to merge or consolidate with, issue Target Common Shares to, exchange
the Target Common Shares with, or sell a substantial portion of the Targets'
assets to, any person or entity. The Targets will promptly notify Acquiror after
receipt of any Acquisition Proposal or any request for nonpublic information
relating to the Targets in connection with an Acquisition Proposal or for access
to the personnel, properties, books or records of any of the Targets by any
person or entity that informs the Board of Directors or Partners of any of the
Targets that it is considering making, or has made, an Acquisition Proposal. The
term "Acquisition Proposal" as used herein means any offer or proposal for, or
any indication of interest in, a merger or other business combination involving
any of the Targets or the acquisition of a majority of the equity interest in,
or a majority of the assets of, any of the Targets, other than the transactions
contemplated by this Agreement.
SECTION 6.6. Compliance with the Securities Act; Affiliates. Each of the
Targets shall use its best efforts to cause each person who is an "affiliate,"
as that term is used in paragraphs (c) and (d) of Rule 145 under the Securities
Act, of such Target to deliver to the Target at or prior to the Effective Time a
written agreement to the effect that such person will not offer to sell, sell or
otherwise dispose of any Acquiror Common Shares issued in the Share Exchanges,
except, in each case, pursuant to an effective registration statement or in
compliance with Rule 145, as amended from time to time, or in a transaction
that, in the opinion of legal counsel satisfactory to Acquiror, is exempt from
the registration requirements of the Securities Act, such agreement to be in
substantially the form attached hereto as Exhibit 6.6(a). Each of the Targets
shall use its best efforts to cause each such person not to take any action that
would impair Acquiror's ability to account for the Share Exchanges as poolings
of interests. Accordingly, each of the Targets shall use its best efforts to
cause each such person to deliver prior to the Effective Time a written
agreement in the form attached as Exhibit 6.6(b) to this Agreement, to the
effect that such person shall not sell or otherwise reduce his or her risk
relative to any Acquiror Common Shares received in connection with the Share
Exchanges (within the meaning of the SEC's Codification of Financial Reporting
Policies sec. 201.01) until Acquiror has published financial results (including
combined sales and net income) covering at least thirty days of post-Share
Exchange operations, except as permitted by Staff Accounting Bulletin No. 76
issued by the SEC.
SECTION 6.7. Taxes. Each of the Targets shall timely file all Tax reports
and Returns required to be filed with any governmental authority wherein the
nature of its activities is such as to require the filing thereof, and shall
promptly pay, when due, all federal, state, local and foreign taxes,
assessments, governmental charges, fees, interest and penalties lawfully levied
or assessed upon it or its properties.
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SECTION 6.8. Access; Review. Each of the Targets shall provide to Acquiror,
its attorneys, accountants, appraisers and other authorized representatives or
retained experts access upon reasonable notice to all the premises, books,
records, personnel and income tax returns of or relating to such Target during
normal business hours and shall furnish to such persons such financial and
operating data and other information as Acquiror or such persons may from time
to time reasonably request. In addition, each of the Targets shall authorize its
independent certified public accountants to give Acquiror's independent
certified public accountants access to books and records and work papers
regarding the Target's financial statements. No investigation, test, examination
or inquiry by Acquiror shall affect the representations and warranties contained
in this Agreement.
SECTION 6.9. Insurance. Each of the Targets shall maintain the types and
levels of insurance currently in effect to insure its assets and its business
against the risk of loss or damage attributable to casualty, storm, fire, theft,
burglary or riot.
SECTION 6.10. Monthly Financial Statements. On or prior to the thirtieth
day of each calendar month, each of the Targets shall deliver to Acquiror copies
(identified with a reference to this Section 6.10) of the unaudited monthly
balance sheet and statement of income of such Target for the immediately
preceding month (the "monthly statements"), prepared in a manner consistent with
past practices used in preparation of such statements, all of which when
delivered, shall be materially complete and correct, prepared from the books and
records of such Target in accordance with generally accepted accounting
principles (except for the omission of notes thereto) consistently applied and
maintained throughout such months, and shall in all material respects fairly
present the financial condition of such Target as at their respective dates and
the results of the operations of its business for the months covered thereby.
SECTION 6.11. Approvals, Notices and Consents. Promptly after the execution
of this Agreement, each of the Targets shall file all forms, applications and
reports, including without limitation all filings under the HSR Act, and take
such other action which is required to be taken or filed with any governmental
agency or authority in connection with the transactions contemplated by this
Agreement. Each of the Targets shall cooperate with Acquiror in promptly
producing such additional information as those authorities may require to allow
early termination of the notice period provided by the HSR Act or as otherwise
necessary to comply with statutory requirements and requests of the Federal
Trade Commission or the Department of Justice. Each of the Targets shall give
all additional notices to third parties and take such other action required to
be given or taken by it under any authorization, lease, note, mortgage,
indenture, agreement or other instrument or any law, rule, regulation, demand or
court or administrative order in connection with the transactions contemplated
by this Agreement, and shall use its best efforts to obtain all consents and
approvals necessary to enable it to consummate the transactions contemplated by
this Agreement. Each of the Targets shall use its reasonable efforts to obtain
estoppel certificates from the lessors under the leases of Real Property.
SECTION 6.12. The Targets' Actions; Supplements to Representations and
Warranties. From the date of this Agreement through the Closing, (a) each of the
Targets shall use its best efforts to cause the conditions to the obligations of
the Corporate Targets and the Partners set forth in Article IX to be satisfied
to the extent that the satisfaction of such conditions is within the control of
such Target; provided, however, that the foregoing shall not constitute a
limitation upon the covenants and obligations of the Corporate Targets and the
Partners otherwise set forth in this Agreement; (b) none of the Targets shall
take any action or omit to take any action within its control to the extent such
action or omission might result in a breach of any term or condition of this
Agreement or in any representation or warranty contained in this Agreement being
inaccurate or incorrect on and as of the Closing Date; and (c) each of the
Targets shall deliver to Acquiror, as soon as possible after discovery thereof,
but not later than at the Closing, supplemental information updating the
information set forth in the representations and warranties of the Targets set
forth in this Agreement to reflect subsequent occurrences, if any, (along with a
notice stating the representations and warranties, including the schedules
referred to therein, to which such supplemental information relates) so that
such representations and warranties as supplemented by such information will be
true and correct as of the Closing as if then made. The foregoing provisions
shall not be deemed to permit any transaction between the date hereof and the
Closing not otherwise contemplated or permitted by this Agreement nor shall any
action taken by any of the
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Targets pursuant to the foregoing provisions impair the exercise by Acquiror of
its rights as set forth in Section 10.2.
SECTION 6.13. Notice of Material Adverse Change. The Targets shall promptly
advise Acquiror in writing of any material adverse change in the assets or
financial condition, results of operations, businesses or properties of the
Targets considered as a whole.
SECTION 6.14. Pooling. None of the Targets shall take any action that would
prevent the Share Exchanges from qualifying for pooling of interests accounting
treatment.
SECTION 6.15. Tax Statements. The Targets will make and will use their
reasonable efforts to cause their respective shareholders to make the
representations and warranties contained in Exhibit 6.15, and such other
representations and warranties as considered reasonably necessary by the
accountants or counsel for purposes of rendering the opinions referred to in
Sections 8.12 and 9.10.
SECTION 6.16. Cooperation. Each of the Targets shall generally cooperate
with Acquiror and its officers, employees, attorneys, accountants and other
agents and, generally, do such other acts and things in good faith as may be
reasonable, necessary, or appropriate to timely effectuate the intents and
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
SECTION 6.17 Nationwide to Use Its Reasonable Best Efforts to Terminate
Option. Nationwide shall use its reasonable best efforts to terminate that
certain option to purchase the Marietta, Ohio facility pursuant to that certain
Lease Agreement by and between Marietta Convalescent Center, Inc. (previously
merged into Nationwide) and Jackson-Browne Enterprises, Inc., dated July 12,
1983. The terms of such termination shall be reasonably acceptable to Acquiror
and Acquiror shall assist Nationwide with the negotiations to terminate such
option to the extent Nationwide shall reasonably deem appropriate.
ARTICLE VII
CERTAIN PRE-CLOSING COVENANTS OF ACQUIROR
Acquiror covenants and agrees that between the date hereof and the Closing:
SECTION 7.1. Required Consents and Approvals. It shall use all reasonable
efforts to obtain all consents and approvals necessary to enable it to
consummate the transactions contemplated by this Agreement. Acquiror shall also
use its best efforts to obtain by April 28, 1995 all necessary consents from its
principal lenders, as set forth in Section 5.4 of Acquiror's Disclosure
Statement.
SECTION 7.2. Pre-transaction Notification. It shall file with the proper
authorities all forms and other documents necessary to be filed pursuant to the
HSR Act and regulations issued thereunder as promptly as possible and shall
cooperate with the Targets in promptly producing such additional information as
such authorities may require to allow early termination of the notice period
provided by the HSR Act or as otherwise necessary to comply with statutory
requirements and requests of the Federal Trade Commission or the Department of
Justice.
SECTION 7.3. Registration Statement; NYSE Listing.
(a) Acquiror shall promptly prepare and file with the SEC under the
Securities Act the Registration Statement and shall use all reasonable efforts
to cause the Registration Statement to be declared effective as promptly as
practicable. Acquiror shall take all reasonable action required to be taken
under applicable state securities or Blue Sky laws in connection with the
issuance of Acquiror Common Shares in the Share Exchanges.
(b) Acquiror shall take all such action as is reasonably necessary to
qualify the Acquiror Common Shares to be issued in the Share Exchanges for
trading on the NYSE effective upon notice of issuance.
SECTION 7.4. Notice of Material Adverse Change. Acquiror shall promptly
advise the Targets in writing of any material adverse change in Acquiror, its
assets or the financial condition, results of operations, businesses or
properties of Acquiror and its subsidiaries considered as a whole.
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SECTION 7.5. Pooling Actions. Neither Acquiror nor any of its subsidiaries
shall take any action that would prevent the Share Exchanges from qualifying for
pooling of interests accounting treatment.
SECTION 7.6. Pooling Letter. Prior to the date of Closing, Acquiror shall
have caused KPMG Peat Marwick LLP to deliver to Acquiror a letter with respect
to whether the Share Exchanges will qualify for pooling of interests accounting
treatment.
SECTION 7.7. Tax Statements. Acquiror will make the representations,
warranties and covenants contained in Exhibit 7.7, and such other
representations, warranties and covenants as considered reasonably necessary by
the accountants or counsel for purposes of rendering the opinions referred to in
Sections 8.12 and 9.10.
SECTION 7.8. Environmental Surveys. Acquiror shall use its reasonable
efforts to cause to have performed by April 28, 1995, at Acquiror's expense,
Phase I environmental surveys of all long-term health care facilities currently
operated but not owned by the Targets and to be operated by the Corporate
Targets following the Closing.
SECTION 7.9. Cooperation. Acquiror shall generally cooperate with each of
the Targets and its officers, employees, attorneys, accountants and other
agents, and, generally, do such other acts and things in good faith as may be
reasonable, necessary or appropriate to timely effectuate the intents and
purposes of this Agreement and the consummation of the transactions contemplated
hereby, including assisting the Targets in obtaining agreements to release at
the Closing the personal guarantees as described in Section 9.11. Prior to the
Closing Date, Acquiror agrees to disclose to the Targets any fact or matter that
comes to the attention of Acquiror that might indicate that any of the
representations or warranties of any of the Targets may be untrue, incorrect, or
misleading in any material respect.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE PERFORMANCE OF ACQUIROR
The obligations of Acquiror pursuant to the terms of this Agreement are
subject to the satisfaction, at the Closing, of each of the following
conditions:
SECTION 8.1. Accuracy of Representations and Warranties of the
Targets. Each of the representations and warranties of each of the Corporate
Targets and the Partners contained in this Agreement shall be true and correct
in all material respects at and as of the Closing Date with the same force and
effect as if made at and as of the Closing Date. For purposes of this Section
8.1, all references in such representations and warranties to "the date hereof,"
"the date of this Agreement" and like language shall mean the Closing Date.
SECTION 8.2. Compliance. Each of the Targets and the Partners shall have
performed, complied with and fulfilled in all material respects all the
covenants, agreements, obligations and conditions required by this Agreement to
be performed, complied with or fulfilled by it at or prior to the Closing.
SECTION 8.3. Approval. The execution and delivery of this Agreement by each
of the Corporate Targets and the Partners, and the performance of the Targets'
and Partners' covenants and obligations hereunder, shall have been duly
authorized by all necessary action on the part of such Target or Partner.
SECTION 8.4. HSR Act Approval. Any applicable waiting period under the HSR
Act relating to the Share Exchanges shall have expired or been terminated.
SECTION 8.5. Authorizations. All material permits, authorizations,
approvals and consents of and notices to any federal, state or local
governmental body, agency or authority or any other third party, which may be
required by law, regulation, rule, ordinance, order, decree, agreement,
indenture, lease or other instrument or document to which any of the Targets or
Acquiror is a party or by which such Target or Acquiror or its assets are bound
or which Acquiror may otherwise reasonably require in connection with the
execution of this Agreement or effectuation of the transactions contemplated by
this Agreement shall have been obtained or made by the respective Target or
Acquiror on terms and conditions reasonably satisfactory to
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Acquiror, other than licenses set forth in Section 4.16 of the Disclosure
Statement which cannot be transferred, but which must be issued to Acquiror
after the Closing.
SECTION 8.6. Litigation. No order, decree, writ or ruling of any
governmental authority or court shall have been entered that restrains, enjoins,
or otherwise prohibits the consummation of the transactions contemplated hereby.
SECTION 8.7. No Material Adverse Change. In the reasonable judgment of
Acquiror, between the date hereof, and the Closing, there shall not have been
any material adverse change or any event which is likely to result in any
material adverse change in the assets, business, financial condition or results
of operations of the Targets and their subsidiaries taken as a whole.
SECTION 8.8. Closing Deliveries. Acquiror shall have received from the
respective Target all of the instruments, documents and considerations described
in Section 12.2, and the form and substance of all such deliveries shall be
reasonably satisfactory in all material respects to Acquiror.
SECTION 8.9. Dissenters' Rights. Holders in excess of 5% of the Target
Common Shares shall not have exercised dissenters' rights under applicable law.
SECTION 8.10. Pooling Letter. Acquiror shall have received a letter from
KPMG Peat Marwick LLP, in form and substance reasonably satisfactory to
Acquiror, stating that the Share Exchanges will qualify for poolings of
interests accounting treatment.
SECTION 8.11. Exercise of Warrants. All warrants issued by Nationwide shall
have been exercised prior to the Closing.
SECTION 8.12. Tax Opinions. Acquiror shall have received opinions of KPMG
Peat Marwick LLP acceptable in form and content to Acquiror substantially to the
effect that the exchange of Target Common Shares for Acquiror Common Shares as
provided in this Agreement will, in each instance, constitute a reorganization
within the meaning of Section 368(a)(1)(B) of the Code, and each Corporate
Target and Acquiror will be a "party to reorganization" within the meaning of
Section 368(b) of the Code.
SECTION 8.13. Lease Extensions. The lease of Colonial Oaks Health Care
Center shall have been renewed in accordance with such lease for an additional
five year term, and the Targets shall have used their reasonable efforts to
obtain modifications to the lease of Ossian Health Care to provide for a five
year extension.
SECTION 8.14. Option Termination. That certain Option to Purchase dated
January 25, 1993 by and among Craig Moore, John Maxwell, the Anita Maxwell Trust
(collectively, the "Optionees") and Nationwide, relating to the Cambridge and
Parkwood facilities, shall have been terminated in exchange for the payment of
not more than $300,000 to the Optionees, and Acquiror agrees that such
termination and payment shall not constitute a breach of any representation,
warranty or other provision of this Agreement.
ARTICLE IX
CONDITIONS PRECEDENT TO PERFORMANCE OF THE CORPORATE TARGETS AND PARTNERS
The obligations of each of the Corporate Targets and Partners pursuant to
the terms of this Agreement are subject to the satisfaction, at the Closing, of
each of the following conditions:
SECTION 9.1. Accuracy of Representations and Warranties of Acquiror. Each
of the representations and warranties of Acquiror contained in this Agreement
shall be true and correct in all material respects at the Closing with the same
force and effect as if made at the Closing. For purposes of this Section 9.1,
all references in such representations and warranties to "the date hereof," "the
date of this Agreement" and like language shall mean the Closing Date.
SECTION 9.2. Compliance. Acquiror shall have performed, complied with and
fulfilled in all material respects all the covenants, agreements, obligations
and conditions required by this Agreement to be performed, complied with or
fulfilled by it at or prior to the Closing.
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SECTION 9.3. Corporate Approval. The execution and delivery of this
Agreement by Acquiror and the performance by Acquiror of all of its covenants
and obligations hereunder shall have been duly authorized by all necessary
corporate action on the part of Acquiror.
SECTION 9.4. Authorizations. All material permits, authorizations,
approvals and consents of and notices to any federal, state or local
governmental body, agency or authority or any other third party, which may be
required by law, regulation, rule, ordinance, order, decree, agreement,
indenture, lease or other instrument or document to which any of the Targets or
Acquiror is a party or by which such Target or Acquiror or its assets are bound
or which the Targets may otherwise reasonably require in connection with the
execution of this Agreement or effectuation of the transactions contemplated by
this Agreement shall have been obtained or made by the respective Target or
Acquiror on terms and conditions reasonably satisfactory to the Targets.
SECTION 9.5. Registration Statement. The Registration Statement shall have
become effective under the Securities Act and the Acquiror Common Shares to be
issued in the Share Exchanges shall have become qualified or registered (or
shall be exempt from qualification or registration) under comparable state
securities laws, and at or prior to the Effective Time no stop order suspending
the effectiveness of the Registration Statement or the qualification or
registration of the Acquiror Common Shares to be issued in the Share Exchanges
under the Blue Sky laws of any jurisdiction shall have been issued and no
proceeding for that purpose shall have been initiated or shall be threatened or
contemplated by the SEC or the authorities of any such jurisdictions, and the
Acquiror Common Shares shall be eligible for trading on the NYSE upon notice of
issuance.
SECTION 9.6. Litigation. No order, decree, writ or ruling of any
governmental authority or court shall have been entered that restrains, enjoins
or otherwise prohibits the consummation of the transactions contemplated by this
Agreement.
SECTION 9.7. No Material Adverse Change. In the reasonable judgment of the
Targets, between the date of execution and the Closing, there shall not have
been any material adverse change or any event which is likely to result in any
material adverse change in the assets, business, financial condition or results
of operations of Acquiror and its subsidiaries, taken as a whole.
SECTION 9.8. HSR Act Waiting Periods. Acquiror and the Targets shall have
filed all notifications required by the HSR Act with the Department of Justice
and the Federal Trade Commission and the applicable waiting periods with respect
thereto (including any extension thereof by reason of a request for additional
information) shall have expired or been terminated.
SECTION 9.9. Closing Deliveries. Each of the Targets shall have received
from Acquiror all of the instruments, documents and considerations described in
Section 12.3, and the form and substance of all such deliveries shall be
reasonably satisfactory in all material respects to the Targets.
SECTION 9.10. Tax Opinions. Nationwide shall have received opinions of Ice
Miller Donadio & Ryan acceptable in form and content to Nationwide,
substantially to the effect that the exchange of Target Common Shares for
Acquiror Common Shares as provided in this Agreement will, in each instance,
constitute a reorganization within the meaning of Section 368(a)(1)(B) of the
Code, and each Corporate Target and Acquiror will be a "party to a
reorganization" within the meaning of Section 368(b) of the Code.
SECTION 9.11. Release of Guarantees. The beneficiaries with respect to the
personal guarantees by the shareholders of the Corporate Targets and/or Partners
in the Partnership Targets that are set forth in Section 9.11 of the Disclosure
Statement shall have agreed to release such guarantees at the time of the
Closing or Nationwide shall have agreed to indemnify such shareholders and/or
Partners for any losses resulting from such guarantees.
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ARTICLE X
TERMINATION
SECTION 10.1. Termination by Mutual Agreement. This Agreement may be
terminated by the mutual agreement in writing of the parties hereto at any time
prior to the Closing.
SECTION 10.2. Termination by Acquiror. This Agreement and any obligations
of Acquiror hereunder (other than its obligations under the Confidentiality
Agreement referred to in Section 11.1) may be terminated upon written notice to
that effect by Acquiror at any time prior to or at the Closing, if in the
judgment of Acquiror (a) any of the Targets or the Partners shall have breached
or failed to perform in any material respect any of its covenants or obligations
under this Agreement; (b) any representation or warranty of any of the Targets
or the Partners contained in this Agreement is false or misleading in any
material respect and cannot be cured prior to July 31, 1995; or (c) any other
material condition precedent to Acquiror's performance of its obligations under
this Agreement is not capable of being met.
SECTION 10.3. Termination by the Corporate Targets and Partners. This
Agreement and any obligations of any of the Corporate Targets and Partners
hereunder (other than their obligations under the Confidentiality Agreement
referred to in Section 11.1) may be terminated upon written notice to that
effect by any of the Corporate Targets and the Partners at any time prior to or
at the Closing if in the judgment of such Target or Partner (a) Acquiror shall
have breached or failed to perform in any material respect any of its covenants
or obligations under this Agreement; (b) any representation or warranty of
Acquiror contained in this Agreement is false or misleading in any material
respect and cannot be cured prior to July 31, 1995; (c) any other material
condition precedent to such Target's or Partner's performance of its obligations
under this Agreement is not capable of being met; (d) the average closing price
of one Acquiror Common Share as reported by the NYSE for the ten (10) trading
days immediately preceding the Closing Date is less than $21.82; or (e) the
Share Exchanges have not been consummated by July 31, 1995.
ARTICLE XI
ADDITIONAL AGREEMENTS
SECTION 11.1. Confidentiality. Acquiror and each of the Targets agree that
the Confidentiality Agreement dated November 7, 1994 between Acquiror and
Nationwide shall remain in full force and effect at all times prior to the
Effective Time and after any termination of this Agreement, and each agrees to
comply with the terms of that agreement.
SECTION 11.2. Employee Benefit Matters. Acquiror agrees to continue in full
force and effect the Benefit Plans of the Targets referred to in Section 4.21 of
the Disclosure Statement and existing at the Effective Time until those
employees of the Targets who continue as employees of the Targets or Acquiror
after the Effective Time become eligible to participate in the employee benefit
plans of Acquiror. Acquiror will recognize such transferred employees' service
with any of the Targets for purposes of eligibility and vesting under such
Acquiror plans. Nothing set forth in this Agreement shall be construed to impose
any obligation on Acquiror to continue the employment of any person after the
Effective Time or give any person any rights to such employment; provided,
however, that Acquiror acknowledges that it will cause Nationwide to honor and
perform after the Effective Time the obligations of Nationwide pursuant to those
Employment Agreements set forth on Schedule 11.2(a). Acquiror also agrees that
prior to the termination of any employee whose name is set forth on Schedule
11.2(b), Acquiror will cause the Corporate Targets to give such employee thirty
days notice and will pay to such terminated employee as severance one week's
salary for each year such employee has been employed by Nationwide or its
affiliates, as set forth on Schedule 11.2(b), less applicable withholdings.
SECTION 11.3. Agreements Respecting Meadowvale. Prior to the Effective
Time, Meadowvale will transfer to Donald Cheesman ("Cheesman") real property
including land and a home built thereon located at 1529 West Lancaster Street,
Bluffton, Indiana and owned by Meadowvale (the "Residence"). In addition,
Meadowvale will repay to Cheesman all amounts owing by Meadowvale to Cheesman
pursuant to that certain
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Promissory Note dated February 1, 1986 executed by Meadowvale in favor of
Cheesman. After the Effective Time, Acquiror shall, subject to Section 11.6
below, cause Nationwide to honor and pay out of its own funds the debt in the
amount of $313,408 owed to Thomas E. Phillippe, Sr. by Shangri-La. The parties
to this Agreement agree that the transactions contemplated by this Section 11.3
shall not affect the amount of Exchange Consideration due pursuant to this
Agreement.
SECTION 11.4. Preservation of Tax-Free Reorganization Treatment. Acquiror
shall not take or cause to be taken any action, and shall not permit its
affiliates to take or cause to be taken any action within Acquiror's control,
whether before or after the Effective Time, which would disqualify any of the
Share Exchanges as a "reorganization" within the meaning of Section 368(a)(1)(B)
of the Code. Without limiting the foregoing, Acquiror may not participate in any
tax-free reorganization or share exchange without first (i) obtaining an
unqualified opinion, acceptable in form to the Representative (as defined in the
Agreement among Shareholders attached hereto as Exhibit 12.2(i)), of KPMG Peat
Marwick LLP that such reorganization or share exchange does not disqualify any
of the Share Exchanges as a tax-free reorganization within the meaning of
Section 368(a)(1)(B) of the Code; and (ii) providing such opinion to the
Representative.
SECTION 11.5. Publication of Financial Results. In accordance with the
Codification of Financial Reporting Policies of the Securities and Exchange
Commission, in order to permit the sale of Acquiror Common Shares following the
Closing and also to preserve the treatment of the transactions described herein
as a pooling of interests for accounting purposes, Acquiror agrees to publish
the financial results of the combined operations of Acquiror and the Targets,
covering at least 30 days of such combined operations, no later than the last to
occur of (a) 60 days following the end of the month in which the Closing occurs
and (b) 10 days following delivery of such financial information with respect to
the operations previously owned by the Targets as Acquiror considers reasonably
necessary to prepare the combined financial results described in this Section
11.5.
SECTION 11.6. The Shangri-La Partners. Shangri-La owns an 81-bed
long-term care center, known as Rolling Meadows Health Care Center (the "Rolling
Meadows Facility"). Pursuant to a certain Lease Agreement (the "Shangri-La
Lease") dated September 23, 1991 between Shangri-La and Rolling Meadows Health
Care Center, Inc. (the "Lessee"), Shangri-La has leased the Rolling Meadows
Facility to the Lessee. The Shangri-La Lease grants the Lessee the option to
purchase the Rolling Meadows Facility from Shangri-La. On March 1, 1995, the
Lessee notified Shangri-La of its intention to exercise this option.
Notwithstanding any other provision of this Agreement, if the Lessee purchases
the Rolling Meadows Facility prior to the Effective Time, (a) the partners of
Shangri-La shall not be considered parties to the Original Agreement or this
Agreement, and such partners shall be released and forever discharged from all
obligations thereunder or hereunder, including without limitation, any
obligation to assign their partnership interest to Nationwide and any
representation or warranty pursuant to Article IV hereof; and (b) Acquiror and
Nationwide shall be released and forever discharged from all obligations to the
partners of Shangri-La pursuant to the Original Agreement and this Agreement,
and the obligation to pay $313,408 to Thomas E. Phillippe, Sr. pursuant to
Section 11.3 above.
ARTICLE XII
THE CLOSING
SECTION 12.1. Time and Place. The closing of the transactions contemplated
by this Agreement shall take place at the offices of Ice Miller Donadio & Ryan,
One American Square, 34th Floor, Indianapolis, Indiana, at 10:00 a.m.
Indianapolis time on June 30, 1995, or on such other date as the parties
hereafter agree (the "Closing").
SECTION 12.2. Deliveries to Acquiror at the Closing. At the Closing, and
simultaneously with the deliveries to the Targets specified in Section 12.3, the
Corporate Targets and the Partners shall deliver or cause to be delivered to
Acquiror the following:
(a) Certificates of the President and Chief Financial Officer of each
of the Corporate Targets and of each of the Partners as to the accuracy of
its representations and warranties contained in this Agreement
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and as to its compliance with and fulfillment of all covenants, agreements,
obligations and conditions required by this Agreement.
(b) Copies of all resolutions adopted by the Board of Directors and
the shareholders of each of the Corporate Targets authorizing the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby, together with a certificate, duly executed by the
Secretary of such Target, stating that such copies are true, complete and
correct, and that the resolutions have been duly adopted by the Board of
Directors and the shareholders, as the case may be, have not been amended
since adoption, and remain in full force and effect.
(c) Copies of all permits, authorizations, approvals and consents
required to be obtained pursuant to Section 8.5.
(d) An opinion of Ice Miller Donadio & Ryan, counsel to the Targets,
dated the Closing Date, in such form as shall be agreed to by the parties
hereto prior to the Closing, in their reasonable discretion.
(e) If required by Section 6.6, the written agreements and letters
described in Section 6.6.
(f) The Certificates and such documents and instruments as agreed to
by Acquiror and the Partners.
(g) The lease amendment referred to in Section 8.13.
(h) Noncompetition Agreements between Acquiror and each of the
Phillippes, in the form of Exhibit 12.2(h).
(i) Agreements among the shareholders of each of the Corporate Targets
in substantially the form of Exhibit 12.2(i).
(j) Resignations of each of the officers and directors of each of the
Corporate Targets.
(k) Evidence of redemption of the Nationwide Preferred Stock.
SECTION 12.3. Deliveries to the Targets at the Closing. At the Closing, and
simultaneously with the deliveries to Acquiror specified in Section 12.2,
Acquiror shall deliver or cause to be delivered to the Targets and the Partners
the following:
(a) Certificates of the President and Chief Financial Officer of
Acquiror as to the accuracy of its representations and warranties contained
in this Agreement and as to its compliance with and fulfillment of all
covenants, agreements, obligations and conditions required by this
Agreement.
(b) Copies of all permits, authorizations, approvals and consents
required to be obtained pursuant to Section 9.4.
(c) An opinion of Richard P. Adcock, General Counsel to Acquiror,
dated the Closing Date, in such form as shall be agreed to by the parties
hereto prior to the Closing, in their reasonable discretion.
(d) The Exchange Consideration (less any amounts to be delivered to
the Escrow and the Supplemental Escrow).
(e) Evidence of prepayment of the Nationwide Subordinated Notes.
ARTICLE XIII
INDEMNIFICATION
SECTION 13.1. Indemnification of Acquiror. Subject to Section 13.2, and
except with respect to Supplemental Losses (as that term is defined in Section
14.1 hereof), Acquiror shall be indemnified and held harmless from and against
any damages, loss, cost, liability, or expense (including, without limitation,
costs and expenses of litigation, settlement and reasonable attorney's fees, but
net of amounts received under applicable insurance carried by the Targets)
("Losses") that may be incurred by or suffered by or asserted
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against Acquiror or any of its subsidiaries (hereinafter, collectively, the
"Indemnified Party"), but without duplication, arising out of or related to,
directly or indirectly, the incorrectness of any of the representations or
warranties contained in Article IV of this Agreement (or any section of the
Disclosure Statement referred to in Article IV), or the breach prior to the
Effective Time of any of the covenants or agreements of any Target or Partner
contained in this Agreement or in any other instrument executed or delivered by
the Targets or the Partners.
SECTION 13.2. Threshold and Maximum Amounts.
(a) The Indemnified Party shall be entitled to indemnification under this
Article XIII only when the aggregate of all Losses suffered by the Indemnified
Party, with respect to which the Indemnified Party would otherwise be entitled
to indemnification hereunder exceeds Two Hundred and Fifty Thousand Dollars
($250,000.00) (the "Threshold Amount"), whereupon the Indemnified Party shall be
entitled to indemnification for any and all such Losses in excess of the
Threshold Amount; provided, however, that in the case of the incorrectness of
any representation contained in Section 4.2 or fraud, the Threshold Amount shall
not apply.
(b) Subject to Section 13.2(c) below, the aggregate dollar amount of all
Losses the Indemnified Party may be indemnified for under this Article XIII
shall not exceed the fair market value, as of the Closing Date, of the Acquiror
Common Shares delivered to the Escrow Agent for the Escrow pursuant to Section
3.3 (the "Escrow Value"); provided, however, that, in the case of the
incorrectness of any representation contained in Section 4.2 or fraud, the
Indemnified Party may be indemnified for an amount in excess of the Escrow
Value.
(c) Any and all Losses for which the Indemnified Party may be indemnified
under this Article XIII shall be paid or satisfied only by distribution to
Acquiror of the Acquiror Common Shares and cash, if any, held in the Escrow in
accordance with Section 3.3 and the Escrow Agreement attached hereto as Exhibit
3.3(a). The Indemnified Party shall have no recourse against any of the former
holders of the Target Common Shares, and such former holders shall have no
personal liability to the Indemnified Party with respect to the indemnification
provided for in Section 13.1, except to the extent such holders hold Acquiror
Common Shares and cash, if any, in the Escrow or, with respect to the Targets
and their respective officers, directors and employees only, as otherwise
provided in Section 13.2(b). Except with respect to Supplemental Losses,
indemnification pursuant to this Article XIII shall be the exclusive remedy of
Acquiror for a breach of a representation or warranty made by any Target or
Partner or a covenant of any Target or Partner set forth in this Agreement.
SECTION 13.3. Survival of Indemnification Obligations.
(a) The foregoing indemnification obligations shall survive, in the case of
the incorrectness of any representation contained in Section 4.2 or fraud,
indefinitely.
(b) Except as provided in Section 13.3(a) and subject to Section 13.3(c),
the foregoing indemnification obligations shall survive, in the case of the
representations and warranties of the Targets and Partners contained in Article
IV, until the date that Acquiror's independent accountants have completed the
first audit following the Effective Time of Acquiror's and the Targets' combined
operations, but not later than one year after the Closing Date. Acquiror Common
Shares and cash, if any, held in the Escrow shall be distributed, if available,
to the former holders of the Target Common Shares promptly following completion
of such audit, but not later than one year after the Closing Date.
(c) Notwithstanding the foregoing survival periods, if written notice of a
claim or written notice describing with particularity facts and circumstances
that exist and will be substantially likely, in the good faith judgment of
Acquiror, to give rise to a claim of indemnification hereunder has been given by
Acquiror to the Targets prior to the termination of any applicable
representation and warranty of the Targets or the termination of the Escrow as
specified in the Escrow Procedures, then the relevant representation and
warranty, and the term of the Escrow shall survive, solely as to such claim as
provided in the notice, until the claim has been finally resolved.
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ARTICLE XIV
SUPPLEMENTAL INDEMNIFICATION
SECTION 14.1. Supplemental Indemnification of Acquiror. Subject to Section
14.2, and in addition to the indemnification provided for in Article XIII
hereof, an Indemnified Party shall be indemnified and held harmless from and
against any Loss that may be incurred by or suffered by or asserted against such
Indemnified Party, but without duplication, arising out of or related to,
directly or indirectly, the litigation entitled Jerry K. Wright, Guardian of the
Estate and Person of Oleta May Skelton, an Adult Incompetent v. Nationwide Care,
Inc., Vigo Superior Court, State of Indiana, Cause No. 84D01-9409-CP-1618 (the
"Pending Matter")(Losses with respect to the Pending Matter are referred to
herein as "Supplemental Losses").
SECTION 14.2. Maximum Amounts.
(a) Subject to Section 14.2(b) below, the aggregate dollar amount of all
Supplemental Losses the Indemnified Party may be indemnified for under this
Article XIV shall not exceed the fair market value, as of the Closing Date, of
the Acquiror Common Shares delivered to the Escrow Agent for deposit in the
Supplemental Escrow pursuant to Section 3.3 (the "Supplemental Escrow Value").
(b) Any and all Supplemental Losses for which the Indemnified Party may be
indemnified under this Article XIV shall be paid or satisfied only by
distribution to Acquiror of the Acquiror Common Shares and cash, if any, held in
the Supplemental Escrow in accordance with Section 3.3 and the Supplemental
Escrow Agreement attached hereto as Exhibit 3.3(b). The Indemnified Party shall
have no recourse against any of the former holders of Nationwide, and such
former holders shall have no personal liability to the Indemnified Party with
respect to the indemnification provided for in Section 14.1, except to the
extent such holders hold Acquiror Common Shares and cash, if any, in the
Supplemental Escrow. Indemnification pursuant to this Article XIV shall be the
exclusive remedy of the Indemnified Party for the incurrence of a Supplemental
Loss.
SECTION 14.3. Survival of Indemnification Obligations. Notwithstanding the
provisions of Section 15.1, the indemnification obligations set forth in this
Article XIV with respect to Supplemental Losses shall survive until such time as
(a) the Pending Matter has been settled; (b) an order of a court of competent
jurisdiction has been entered and either no appeal can be taken from such order
or the time for such an appeal has run; or (c) a summary judgment or other order
has been granted to the effect that punitive damages will not be awarded with
respect to the Pending Matter.
ARTICLE XV
MISCELLANEOUS PROVISIONS
SECTION 15.1. Survival of Representations and Warranties. Except as set
forth in Sections 13.3 and 14.3, the representations and warranties contained in
this Agreement shall survive until the date that Acquiror's independent
accountants have completed the first audit following the Effective Time of
Acquiror's and the Targets' combined operations, but not later than one year
after the Closing Date.
SECTION 15.2. Definition of Knowledge. For purposes of this Agreement, "to
the knowledge of" or words of like import mean that the party to which the
statement is attributed:
(a) has made such investigations, and has made such inquiries of
directors, officers, partners and responsible employees of such party and
of legal counsel, independent auditors, actuaries and other persons who
have performed services for such party as shall be reasonably necessary to
determine the accuracy of such representation or warranty; and
(b) nothing has come to the person's attention in the course of such
investigation and review or otherwise, which would cause the person, in the
exercise of reasonable care (in accordance with the standards of what a
reasonable person in similar circumstances would have done to satisfy
himself as to the accuracy of the representation and warranty), to believe
that such representation and warranty is not true and correct in all
respects.
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<PAGE>
SECTION 15.3. Counterparts. This Agreement may be executed simultaneously
in one or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
SECTION 15.4. Entire Agreement. This Agreement and the agreements to be
delivered pursuant to this Agreement and the Confidentiality Agreement between
the parties dated November 7, 1994 constitute the entire agreement among the
parties pertaining to the subject matter contained herein and therein and
supersede all other prior and contemporaneous agreements, representations and
understandings of the parties.
SECTION 15.5. Exhibits and Schedules. All exhibits and schedules attached
to this Agreement are incorporated herein and made a part hereof in the same
manner as if such exhibits and schedules were set forth at length herein.
SECTION 15.6. Parties in Interest. This Agreement will be binding upon and
inure solely to the benefit of each of the parties, and nothing in this
Agreement, express or implied, is intended to or will confer upon any other
person any right, benefit, or remedy; provided, however, each person receiving
Acquiror Common Shares in connection with the Share Exchanges or the assignments
of the Partnership Interests pursuant to this Agreement shall be a third-party
beneficiary of this Agreement and shall be entitled, after the Effective Time,
to enforce the Agreement against Acquiror for the benefit of such shareholders
with respect to the covenants of Acquiror contained herein and shall be entitled
to pursue all remedies available at law or in equity for, and Acquiror shall
indemnify such shareholders from, any Losses that may be incurred by or suffered
by or asserted against such shareholders (or any of them) arising out of or
related to, directly or indirectly, the incorrectness of any representations and
warranties of Acquiror in Article V of this Agreement or for any breach of any
of the covenants or agreements of Acquiror contained herein. Except in the case
of fraud, such indemnification obligations shall survive until the date that
Acquiror's independent accountants have completed the first audit following the
Effective Time of Acquiror's and the Targets' combined operations, but not later
than one year after the Closing Date.
SECTION 15.7. Expenses. Each of the parties shall pay all costs and
expenses incurred or to be incurred by it in negotiating and preparing this
Agreement and in closing and carrying out the transactions contemplated by this
Agreement, except as otherwise expressly provided for herein.
SECTION 15.8. Gender. Any reference to the masculine gender shall be deemed
to include the feminine and neuter genders unless the context otherwise
requires.
SECTION 15.9. Governing Law. This Agreement and all transactions
contemplated hereby shall be governed, construed and enforced in accordance with
the laws of the State of Washington, notwithstanding any state's choice of law
rules to the contrary.
SECTION 15.10. Headings. The subject headings of the articles and sections
of this Agreement are included for purposes of convenience only, and shall not
affect the construction or interpretation of any of its provisions.
SECTION 15.11. Modification and Waiver. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by the
parties. The party for whose benefit a warranty, representation, covenant or
condition is intended may in writing waive any inaccuracies in the warranties
and representations contained in this Agreement or waive compliance with any of
the covenants or conditions contained herein and so waive performance of any of
the obligations of the other party hereto, and any defaults hereunder; provided,
however, that such waiver shall not affect or impair the waiving party's rights
with respect to any other warranty, representation or covenant or any default
hereunder, nor shall any waiver constitute a continuing waiver.
SECTION 15.12. Notices. All notices, requests, demands, waivers and other
communications required to be given under this Agreement shall be in writing and
shall be deemed to have been duly given on (a) the date of service if served
personally on the party to whom notice is to be given, (b) the date sent if
given by telegram, confirmed facsimile transmission or telex addressed to the
party to whom notice is to be given or
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(c) the third day after mailing if mailed to the party to whom notice is to be
given by certified mail, return receipt requested, and properly addressed as
follows:
If to Acquiror:
The Hillhaven Corporation
1148 Broadway Plaza
Tacoma, Washington 98402
Attention: General Counsel
Fax: (206) 756-4845
With a copy to:
Edmund O. Belsheim, Jr.
Bogle & Gates
Two Union Square
601 Union Street
Seattle, Washington 98101-2346
Fax: (206) 621-2660
If to any of the Targets:
Dr. Thomas E. Phillippe, Sr.
9200 Keystone Crossing
Suite 800
Indianapolis, Indiana 46240
Fax: (317) 848-3197
With a copy to:
Marcus B. Chandler
Ice Miller Donadio & Ryan
One American Square, Suite 3400
Indianapolis, Indiana 20036
Fax: (317) 236-2219
Any party may change the address to which notice is to be sent or the telephone
number for facsimile transmission pursuant to this Section 15.11 by giving
written notice thereof in compliance with this section.
SECTION 15.13. Press Releases. Acquiror and the Targets shall consult with
each other with respect to the form and substance of any press release or other
public disclosure of matters related to this Agreement or any of the
transactions contemplated hereby.
SECTION 15.14. Rights of Parties. Nothing in this Agreement, whether
express or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any person other than the parties to it and their
respective successors and assigns, nor is anything in this Agreement intended to
relieve or discharge the obligation or liability of any third person to any
party to this Agreement, nor shall any provision give any third person any right
of subrogation or action over or against any party to this Agreement.
SECTION 15.15. Successors. This Agreement shall be binding on, and shall
inure to the benefit of, the parties and their respective successors and
assigns.
SECTION 15.16. Intent; Construction. It is the intent of the parties that
this Agreement and the transactions contemplated hereby will satisfy the
requirements contained in Section 368(a)(1)(B) of the Code and the regulations
promulgated thereunder, and that it will qualify as a corporate reorganization
without recognition of gain by any of the holders of Target Common Shares other
than to the extent any holder shall receive cash in lieu of fractional shares
for all or part of his, hers or its Target Common Shares, and this Agreement
shall be construed to effect the foregoing. Any transactions inconsistent with
the foregoing shall be void and of no force or effect.
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SECTION 15.17. Release. NCI Acquisition Corp., a party to the Original
Agreement, is hereby released of any obligation under the Original Agreement and
shall have no obligation under this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
THE HILLHAVEN CORPORATION
By: /s/ ROBERT F. PACQUER
---------------------------------
Robert F. Pacquer
Senior Vice President and Chief
Financial Officer
Attest: /s/ RICHARD P. ADCOCK
-----------------------------
Richard P. Adcock
Secretary
NATIONWIDE CARE, INC.
By: /s/ THOMAS E. PHILLIPPE, SR.
---------------------------------
Dr. Thomas E. Phillippe, Sr.
Chairman of the Board
Attest: /s/ GREGORY O. MERVINE
-----------------------------
Gregory O. Mervine
Secretary
PHILLIPPE ENTERPRISES, INC.
By: /s/ THOMAS E. PHILLIPPE, SR.
---------------------------------
Dr. Thomas E. Phillippe, Sr.
President
Attest: /s/ THOMAS E. PHILLIPPE, JR.
-----------------------------
Thomas E. Phillippe, Jr.
Secretary
MEADOWVALE SKILLED CARE
CENTER, INC.
By: /s/ DONALD CHEESMAN
---------------------------------
Donald Cheesman
President
Attest: /s/ JOAN M. PHILLIPPE
-----------------------------
Joan M. Phillippe
Secretary
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THE PARTNERS OF
CAMELOT CARE CENTERS
/s/ RODNEY BENSON
-------------------------------------
Rodney Benson
THE PARTNERS OF
SHANGRI-LA PARTNERSHIP
/s/ THOMAS E. PHILLIPPE, SR.
-------------------------------------
Dr. Thomas E. Phillippe, Sr.
/s/ THOMAS E. PHILLIPPE, JR.
-------------------------------------
Thomas E. Phillippe, Jr.
/s/ LUPE M. BROWNE
-------------------------------------
Lupe M. Browne, as Executor of Estate
of Jim Browne
/s/ GREGORY O. MERVINE
-------------------------------------
Gregory O. Mervine
THE LIMITED PARTNERS OF
EVERGREEN WOODS, LTD.
/s/ THOMAS E. PHILLIPPE, SR.
-------------------------------------
Dr. Thomas E. Phillippe, Sr.
/s/ THOMAS E. PHILLIPPE, JR.
-------------------------------------
Thomas E. Phillippe, Jr.
/s/ LORENE BURNS
-------------------------------------
Lorene Burns
/s/ RODNEY BURNS
-------------------------------------
Rodney Burns
Each of the undersigned persons hereby agrees to vote all shares or
ownership interests owned by such person in each of the Targets (as defined in
this Agreement) in favor of approval of the transactions contemplated by this
Agreement.
/s/ THOMAS E. PHILLIPPE, SR.
-------------------------------------
Dr. Thomas E. Phillippe, Sr.
/s/ THOMAS E. PHILLIPPE, JR.
-------------------------------------
Thomas E. Phillippe, Jr.
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EXHIBIT LISTING
<TABLE>
<S> <C>
Exhibit 3.3(a). Escrow Agreement
Exhibit 3.3(b). Supplemental Escrow Agreement
Exhibit 6.6(a). Affiliate Letter
Exhibit 6.6(b). Pooling Letter
Exhibit 6.15. Tax Certificate of Targets
Exhibit 7.7. Tax Certificate of Acquiror and AC
Exhibit 12.2(h). Noncompetition Agreement
Exhibit 12.2(i). Agreement among Shareholders
</TABLE>
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EXHIBIT 3.3 (A)
ESCROW AGREEMENT
This ESCROW AGREEMENT (this "Agreement") is made this day of
, 1995, by and among The Hillhaven Corporation, a Nevada Corporation
(such corporation and its subsidiaries being referred to herein collectively as
"Acquiror"), the individuals listed on Exhibit A (collectively, the
"Shareholders") and Bank One, Indianapolis, N.A. (the "Escrow Agent").
EXPLANATION STATEMENT
A. Acquiror and the Targets are parties to that certain Amended and
Restated Agreement and Plan of Share Exchange and Agreements to Assign
Partnership Interests (the "Share Exchange Agreement"), dated as of February 27,
1995. Capitalized terms used herein and not otherwise defined herein shall have
the respective meanings assigned thereto in the Share Exchange Agreement.
B. Prior to the Effective Time, the Shareholders owned all the capital
stock of the Corporate Targets and all the partnership interests in the
Partnership Targets.
C. In order to induce Acquiror to enter into the Share Exchange Agreement
and to consummate the transactions contemplated thereby, the Shareholders wish
to execute and deliver this Agreement and to deposit or to cause to be deposited
in escrow hereunder certificates representing ten percent (10%) of the Acquiror
Common Shares that comprise the Exchange Consideration (such percentage of
shares being referred to herein collectively as the "Escrow Shares") to secure
the indemnification obligations under Article XIII of the Share Exchange
Agreement, the terms of which Article are incorporated herein by this reference.
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby,
and in consideration of the mutual covenants herein contained, agree as follows:
1. DEPOSIT OF ESCROW SHARES; ESCROW ACCOUNT; SHAREHOLDER AGENT.
1.1 Promptly following the Effective Time, Acquiror shall withhold from
the Exchange Consideration and deposit with the Escrow Agent the Escrow Shares.
The Escrow Agent shall establish an account (the "Escrow Account") for the
Shareholders and place the Escrow Shares therein. The Escrow Agent agrees that
the Escrow Shares shall be held in the Escrow Account and disbursed by the
Escrow Agent in accordance with, and subject to the terms and conditions of,
this Agreement.
1.2 Acquiror and the Shareholders acknowledge and agree that, to the
extent and for so long as Escrow Shares are held by the Escrow Agent hereunder,
Acquiror shall have, as of and from the date such Escrow Shares are received by
the Escrow Agent, a perfected, first priority security interest in such Escrow
Shares to secure the payment of amounts, if any, payable pursuant to Article
XIII of the Share Exchange Agreement. In connection therewith, the Shareholders
expressly agree (i) that the Escrow Agent is acting solely as Acquiror's agent
to the extent necessary to perfect Acquiror's first-priority security interest
in the Escrow Shares and (ii) to execute and deliver such instruments as
Acquiror may from time to time reasonably request for the purpose of evidencing
and perfecting such security interest.
1.3 All of the Shareholders hereby appoint Thomas E. Phillippe, Jr., an
individual (the "Shareholder Agent"), as their attorney-in-fact to act as their
agent in the performance of all of their obligations and exercise of all of
their rights under this Agreement.
2. VOTING RIGHTS; DIVIDENDS ON ESCROW SHARES; SALE OF SHARES; INVESTMENT OF
CASH.
2.1 All voting rights with respect to the Escrow Shares shall remain with
the Shareholders. All cash dividends on Escrow Shares shall be distributed by
Acquiror to the Escrow Agent. Within three (3) business days following receipt
thereof by the Escrow Agent, the Escrow Agent shall distribute such dividends in
respect of the Escrow Shares to the Shareholders, respectively.
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2.2 All non-cash dividends (including, without limitation, any stock split,
share dividend, rights offering or recapitalization) on any Escrow Shares shall
be added to the Escrow Account as additional Escrow Shares fully subject to the
terms of this Agreement.
2.3 At any time while there are Escrow Shares in the Escrow Account, the
Shareholder Agent may, by delivering written instructions to the Escrow Agent,
direct the Escrow Agent to sell one or more of the Escrow Shares on the NYSE and
deposit the sale proceeds into the Escrow Account, which proceeds shall be
distributed, designated, withheld and otherwise subject to the terms of this
Agreement in the same manner and to the same extent as the Escrow Shares, except
that the Escrow Agent shall designate and withhold cash in the Escrow Account,
to the extent thereof, to Pending Claim Notices and Escrow Disposition Notices
(as defined in Section 4.2) prior to applying any remaining Escrow Shares to
such claims.
2.4 Cash deposited into the Escrow Account pursuant to Section 2.3 shall
be invested and reinvested by the Escrow Agent in (a) bonds, treasury notes or
other evidences of indebtedness of, and those unconditionally guaranteed as to
the payment of principal and interest by, the United States, (b) certificates of
deposit of banks or trust companies (including the Escrow Agent) organized under
the laws of the United States, or any state thereof, each of which has a
combined capital, surplus and retained earnings of at least $50,000,000 and (c)
money market funds, including short term investment funds of the Escrow Agent.
In investing and reinvesting any such monies, the Escrow Agent shall seek to
obtain the best yields consistent with safety of principal and ready
marketability. The Escrow Agent shall have no duty or right to invest cash on
deposit in the Escrow Account other than as provided in the foregoing sentence.
Earnings on cash so invested shall be paid to the Shareholders.
3. ACCOUNTING.
The Escrow Agent shall mail to Acquiror and the Shareholder Agent a written
accounting of all transactions relating to the Escrow Account not less
frequently than quarterly.
4. DISPOSITION OF ESCROW SHARES.
4.1 Prior to the Distribution Date (as defined in Section 4.3), Acquiror
will issue, or cause to be issued, from time to time to the Escrow Agent and the
Shareholder Agent one or more Pending Claim Notices in the form of Exhibit B
(each a "Pending Claim Notice") describing with particularity existing facts and
circumstances, if any, that are substantially likely, in the good faith judgment
of Acquiror, to give rise to a claim of indemnification under Article XIII of
the Share Exchange Agreement and designating the number of Escrow Shares
necessary to satisfy in whole or, if there are not sufficient Escrow Shares in
the Escrow Account, in part such claim. The Escrow Agent shall withhold and
distribute such designated number of Escrow Shares as required by Sections 4.2
and 4.3. For all designations, withholdings and distributions of Escrow Shares
pursuant to a Pending Claim Notice or Escrow Disposition Notice, the number of
Escrow Shares to be designated, withheld and/or distributed shall be (i)
determined using the average closing price of one Acquiror Common Share as
reported on the NYSE for the ten (10) trading days immediately preceding the
date of such notice and (ii) rounded to the nearest whole share. To the extent
Acquiror and the Shareholder Agent are not in dispute as to the distribution or
retention of Escrow Shares withheld pursuant to a Pending Claim Notice, Acquiror
and the Shareholder Agent shall promptly prepare an Escrow Disposition Notice
(as defined in Section 4.2) directing the Escrow Agent to so distribute or
retain such Escrow Shares.
4.2 The Escrow Agent shall distribute the Escrow Shares only in accordance
with (i) written instructions contained in one or more notices in the form of
Exhibit C (each an "Escrow Disposition Notice") delivered to the Escrow Agent
and executed by Acquiror and the Shareholder Agent, (ii) a final arbitration
award secured under the provisions of Section 4.4 hereof, (iii) an order of a
court of competent jurisdiction pursuant to Section 9 hereof or (iv) the
procedures set forth in Section 4.3, as applicable. The Escrow Agent shall
promptly comply with such instructions, award, order or procedures, as
applicable, to the extent that there are sufficient Escrow Shares in the Escrow
Account to so comply.
4.3 Promptly following the date that Acquiror's independent accountants
have completed the first audit following the Effective Time of Acquiror's and
the Targets' combined operations, but not later than one year after the Closing
Date (such audit completion date being referred to herein as the "Distribution
Date"), the
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Escrow Agent shall distribute to each Shareholder from the Escrow Account his or
her percentage interest, as listed on Exhibit A, of the Escrow Shares remaining
in the Escrow Account less the number of Escrow Shares specified in any
unresolved Pending Claim Notice(s) received by the Escrow Agent prior to the
Distribution Date, which specified Escrow Shares the Escrow Agent shall withhold
from such distribution and not distribute except as provided in clause (i), (ii)
or (iii) of Section 4.2, as applicable. If the first audit of Acquiror's and the
Targets' combined operations is completed on or before the date that is one year
after the Closing Date, then Acquiror shall notify the Escrow Agent and the
Shareholder Agent in writing of such completion within five (5) days following
such completion.
4.4 Acquiror and the Shareholder Agent agree to use their respective best
efforts to resolve any dispute that may arise with respect to this Agreement,
including without limitation any dispute regarding the validity of or the amount
of Escrow Shares designated in any Pending Claim Notice, amicably and without
resort to any third party dispute resolution forum. At any time Acquiror on the
one hand or the Shareholder Agent on the other believes that a dispute exists
among the parties with respect to this Agreement, it or he shall give prompt
written notice thereof to the other party(s). Any dispute which has not been
settled or resolved within thirty (30) days of receipt by Acquiror or the
Shareholder Agent of the notice thereof shall be submitted for binding
arbitration in Marion County, Indiana in an arbitration proceeding that, except
as may otherwise be provided herein, shall be conducted in accordance with the
Commercial Arbitration Rules of the American Arbitration Association before a
single arbitrator chosen in accordance with such rules. All evidentiary and
discovery matters shall be conducted in accordance with and governed by the
applicable Federal Rules of Civil Procedure. No later than 10 calendar days
after the arbitrator is appointed, the arbitrator shall schedule the arbitration
for a hearing to commence on a mutually convenient date. All discovery shall be
completed no later than the commencement of the arbitration hearing or 90
calendar days after the date that a proper demand for arbitration is served,
whichever occurs first, unless, upon a showing of good cause, the arbitrator
extends such period. The hearing shall commence no later than 90 calendar days
after the arbitrator is appointed and shall continue until completed. The
arbitrator shall issue his or her award in writing no later than 20 calendar
days after the conclusion of the hearing. The parties to this Agreement agree
that, in rendering an award, the arbitrator shall have no jurisdiction to
consider evidence with respect to or render any award of judgment for punitive
damages or any other amount awarded for purposes of imposing a penalty. The
arbitrator shall not have the power to amend this Agreement in any respect. The
arbitrator's decision shall be binding and conclusive upon the parties. The
costs of any arbitration conducted pursuant to this Section 4.4 shall be borne
by the non-prevailing party(s), as identified by the arbitrator, regardless of
whether the subject dispute is arbitrated to completion. Each party hereto
agrees to provide notice of the commencement of any such arbitration proceeding
to the Escrow Agent and the other parties, as the case may be.
5. CONTROL OF LITIGATION.
5.1 Within 20 calendar days following receipt by Acquiror of notice of any
claim by a third party or of the commencement of any action or proceeding by a
third party which may give rise to an indemnity claim under Article XIII of the
Share Exchange Agreement, Acquiror shall notify the Shareholder Agent in writing
of such claim, action or proceeding; provided, that failure to give such
notification shall not affect Acquiror's rights to indemnification under Article
XIII of the Share Exchange Agreement, except to the extent the Shareholder Agent
shall have been prejudiced as a result of such failure. Upon receipt of such
written notice, the Shareholder Agent shall be entitled to participate in and,
to the extent that it may wish, unless it is reasonably foreseeable that the
Losses from such claim, action or proceeding will exceed the value of the Escrow
Shares remaining in the Escrow Account or such claim, action or proceeding
involves a claim for injunction or other specific relief, assume the defense,
conduct or settlement of such claim, action or proceeding by giving written
notice thereof to Acquiror within forty-five (45) days of his receipt of notice
of such claim, action or proceeding. After delivery of such notice to Acquiror,
the Shareholders shall not be liable to Acquiror for any legal expenses
subsequently incurred by Acquiror in connection with the defense, conduct or
settlement of such claim, action or proceeding; provided, that, if the
Shareholder Agent fails to take reasonable steps necessary to diligently defend
such claim, action or proceeding within 20 calendar days after receiving written
notice from Acquiror that it believes the Shareholder Agent has failed to take
such steps, then Acquiror may assume such defense, and the Shareholders shall be
liable for any expenses therefor.
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<PAGE>
Without limiting the foregoing sentence, if the Shareholder Agent assumes the
defense of a third party claim, action or proceeding hereunder, then Acquiror
shall have the right to participate in such defense at its own expense by giving
prompt written notice thereof to the Shareholder Agent. If, after assuming the
defense of a third party claim, action or proceeding hereunder, the Shareholder
Agent obtains an award from the third party claimant on behalf of the
Shareholders, then Acquiror shall be entitled to recover its costs, including
reasonable attorney's fees of outside counsel incurred in defending such claim
and obtaining such award, from the proceeds of such award; provided, that such
recovery shall not be a waiver of any right, claim or amount to which Acquiror
may otherwise be entitled. In the event the Shareholder Agent assumes the
defense of a claim, action or proceeding hereunder, the Shareholder Agent shall
be entitled to receive from the Escrow Agent distributions of cash or Escrow
Shares from the Escrow Account to reimburse the Shareholder Agent (and, thereby,
the Shareholders for whom he will be acting) for the reasonable costs incurred
in such defense as well as the costs of any settlement or damages paid with
respect to such claim, action or proceeding. The Escrow Agent shall make such a
distribution to the Shareholder Agent only upon the receipt of a properly
executed Escrow Disposition Notice.
5.2 To the extent that a third party may be responsible for a Loss
incurred or suffered by Acquiror, Acquiror either (a) may seek recovery of the
Loss from the third party, in which case the Shareholders shall be responsible
only to the extent that the Loss is not recoverable from the third party (other
than claims for Losses incurred in obtaining such recovery), or (b) seek
indemnification from the Shareholders for the Loss pursuant to Article XIII of
the Share Exchange Agreement, in which case Acquiror shall assign to the
Shareholders all rights relating to the Loss that Acquiror may have against the
third party, shall not release the third party from its obligations and shall
cooperate with the Shareholders and take all other action reasonably requested
by the Shareholders to enable them to seek recovery of the Loss from the third
party.
5.3 Notwithstanding anything herein to the contrary, neither Acquiror on
the one hand nor the Shareholder Agent on the other shall have the right to
settle or compromise a third-party claim, action or proceeding without obtaining
the prior written consent of the other, which consent shall not be unreasonably
withheld. In addition, the Shareholder Agent shall not permit to exist any lien,
encumbrance or other adverse charge upon any asset of, or consent to the
imposition of any injunction against, Acquiror or any of its respective
affiliates without obtaining its prior written consent, which consent shall not
be unreasonably withheld.
6. ESCROW PROVISIONS.
6.1 Upon termination of this Agreement and delivery of the balance of the
Escrow Shares to the parties entitled thereto, the Escrow Agent shall be
discharged from any further obligation hereunder.
6.2 The Escrow Agent shall be entitled to rely upon any order, judgment,
certification, demand, notice, instrument or other writing delivered to it
hereunder without being required to determine the authenticity or the
correctness of any fact stated therein or the propriety, validity or service
thereof. The Escrow Agent may act in reliance upon any instrument or signature
believed by it to be genuine and may assume that any person purporting to give
notice or receipt or advice, or make any statement or execute any document, in
connection with the provisions hereof has been duly authorized to do so.
6.3 The Escrow Agent shall not be liable to the other parties hereto for
any error of judgment, action taken or omitted in good faith or mistake of fact
or law, or anything which it may do or refrain from doing in connection
therewith, except in the case of its own gross negligence, willful misconduct or
bad faith.
6.4 The Escrow Agent shall be entitled to consult with competent and
responsible counsel of its choice with respect to the interpretation of the
provisions hereof, and any other legal matters relating hereto, and shall be
fully protected in taking any action or omitting to take any action in good
faith and in accordance with the advice of such counsel.
6.5 The Escrow Agent shall be entitled to be indemnified and held harmless
by Acquiror and the Shareholders, jointly and severally, for any and all claims,
liabilities, costs, payments and expenses, including reasonable fees of counsel
(who may be selected by the Escrow Agent), incurred by the Escrow Agent which
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<PAGE>
arise out of or in connection with any act or omission by it in the performance
of its obligations under this Agreement, except in the case of the Escrow
Agent's own gross negligence, willful misconduct or bad faith.
7. TIME OF PERFORMANCE. Whenever under the terms hereof the time for
performance of any provision shall fall on a date which is not a regular
business day of the Escrow Agent, the performance thereof on the next succeeding
regular business day of the Escrow Agent shall be deemed to be in full
compliance.
8. DEATH, DISABILITY, ETC. The death, disability, bankruptcy or insolvency
of any of the Shareholders shall not affect or prevent the performance by the
Escrow Agent of its obligations and instructions received hereunder. Without
limiting the foregoing sentence, the Shareholder Agent shall notify the Escrow
Agent in writing of any person who or that, as a result of a Shareholder's
death, disability, bankruptcy or insolvency, should receive distributions, if
any, that would otherwise be made hereunder to such Shareholder.
9. RESOLUTION OF CONTROVERSIES. In the event any dispute or controversy
arises respecting the administration or disposition of the Escrow Shares, or any
part thereof, and such dispute or controversy has not been submitted to
arbitration as provided in Section 4.4 hereof, the Escrow Agent shall have the
right but not the obligation to interplead the parties to such dispute or
controversy in any court of competent jurisdiction, including but not limited to
the courts of the State of Indiana and the United States District Court for the
Southern District of Indiana which shall be deemed to be courts of competent
jurisdiction, and to deposit with such court the Escrow Shares remaining in the
Escrow Account, or any portion thereof. Thereafter the Escrow Agent shall be
fully released and discharged from all further obligations hereunder with
respect to the Escrow Shares held in the Escrow Account or the portion thereof
deposited with the court in such proceedings, except in the case of its own
gross negligence, willful misconduct, or bad faith. Acquiror and the
Shareholders, jointly and severally, shall reimburse the Escrow Agent for all
expenses, fees and charges (including reasonable attorneys' fees and expenses)
reasonably incurred by the Escrow Agent in any such interpleader action.
10. RESIGNATION OR REMOVAL OF ESCROW AGENT. If the Escrow Agent resigns or
is removed, then Acquiror and the Shareholder Agent shall mutually agree upon
and name a substitute for the Escrow Agent ("Successor Escrow Agent"), which
shall be a bank or trust company and which shall perform the same duties and
responsibilities, and which shall be entitled to the same protection and
substantially equivalent fees, as the original Escrow Agent named herein. The
Escrow Agent shall have the unequivocal right to resign as Escrow Agent upon at
least sixty (60) days' prior written notice delivered to Acquiror and the
Shareholder Agent; provided, that, in any event, such resignation shall not be
effective until such time as a Successor Escrow Agent has been appointed, has
accepted its appointment and has taken possession of the Escrow Shares. Upon
mutual agreement by Acquiror and the Shareholder Agent, the Escrow Agent may be
removed upon at least sixty (60) days' prior written notice; provided, that, in
any event, such removal shall not be effective until such time as a Successor
Escrow Agent has been appointed, has accepted its appointment and has taken
possession of the Escrow Shares. In either of said events, if a Successor Escrow
Agent is not appointed within said sixty (60) day period, the Escrow Agent,
Acquiror or the Shareholder Agent may petition a court of competent jurisdiction
to name a Successor Escrow Agent, whether by interpleader or other appropriate
action, and the decision of such court shall be binding upon all parties to this
Agreement.
11. ACCEPTANCE OF ESCROW: COMPENSATION OF ESCROW AGENT. The Escrow Agent
hereby agrees to serve as Escrow Agent pursuant to this Agreement and to perform
the duties and responsibilities conferred upon it hereunder. The Escrow Agent
has agreed to serve hereunder for such fees as are set forth in Exhibit D, which
fees are to be paid as described in Exhibit D. Such fees shall be borne by
Acquiror.
12. TERMINATION. This Agreement shall terminate without further action of
any party when all of the terms hereof shall have been fully performed.
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<PAGE>
13. NOTICES. Any notice, request, instruction or other document to be given
under this Agreement by any party shall be in writing and shall be delivered
personally, by registered or certified mail, postage prepaid, return receipt
requested, by overnight courier or by facsimile transmission, as follows:
(a) If to Acquiror, at:
The Hillhaven Corporation
1148 Broadway Plaza
Tacoma, WA 98402
Attention: General Counsel
Facsimile: (206) 756-4845
With a copy to:
Edmund O. Belsheim, Jr.
Bogle & Gates
Two Union Square
601 Union Street
Seattle, WA 98101-2346
Facsimile: (206) 621-2660
(b) If to the Shareholders, at:
c/o Thomas E. Phillippe, Jr.
Attention:
Facsimile:
With a copy to:
Marcus B. Chandler, Esq.
ICE MILLER DONADIO & RYAN
One American Square
Box 82001
Indianapolis, IN 46282-0002
Facsimile: (317) 236-2219
or to such other address or person as any party may designate by a notice to the
other parties which is given in the manner required above. Any such notice,
request, instruction or other document shall be deemed to have been delivered
and received as of the date personally delivered, or if mailed, three days after
the date so mailed, or if telecopied, the date on which such telecopy is sent
(as confirmed by return facsimile transmission) or if by overnight courier the
day following the day on which such notice is properly placed with the courier.
14. COOPERATION WITH ESCROW AGENT. The parties to this Agreement shall
cooperate with the Escrow Agent, as the Escrow Agent reasonably deems necessary
or desirable to perform its duties and obligations under this Agreement. Without
limiting the foregoing, the parties shall provide the Escrow Agent with all
information necessary to make any distribution, including names, addresses,
social security numbers and tax identification numbers. The Escrow Agent shall
be entitled to rely upon the most recent information received from any party
without further inquiry and each party shall be responsible for notifying the
Escrow Agent of any new or changed information pertaining to such party.
15. TAXES: REPORTS TO GOVERNMENTAL AUTHORITIES. The Shareholders severally
agree to assume any obligations imposed now or hereafter by any applicable tax
law with respect to any payment from the Escrow Account to the Shareholders
under this Agreement and undertake to instruct the Escrow Agent in writing with
respect to the Escrow Agent's responsibility for withholding taxes and any other
taxes, assessments or
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<PAGE>
other governmental charges and any certifications and governmental reporting
required in connection therewith.
16. MISCELLANEOUS.
16.1 This Agreement may not be amended or modified in any way except by an
instrument in writing signed by all of the parties hereto.
16.2 This Agreement shall be governed by and interpreted in accordance with
the laws of the State of Indiana without reference to its conflicts of law
provisions.
16.3 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same agreement.
16.4 The headings contained in this Agreement are for convenience only,
shall not affect this Agreement in any way, and shall not be used to construe or
interpret the scope or intent of this Agreement.
16.5 This Agreement shall inure to the benefit of and shall bind the
parties hereto and their respective heirs, devisees, personal representatives,
successors, transferees and assigns; provided, that, except as otherwise
expressly set forth in this Agreement, including without limitation Section 10,
neither the rights nor the obligations of any party may be assigned or delegated
without the prior written consent of the other parties.
IN WITNESS WHEREOF, the parties have duly executed and have caused to be
duly executed this Agreement as of the date first written above.
THE HILLHAVEN CORPORATION
By
------------------------------------
Name:
Title:
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
BANK ONE, INDIANAPOLIS, N.A.
By
------------------------------------
Name:
Title:
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<PAGE>
EXHIBIT A
SHAREHOLDERS
<TABLE>
<CAPTION>
INDIVIDUAL PERCENTAGE
- - ----------
<S> <C>
- - ----------------------------------------------------------------------------
- - ----------------------------------------------------------------------------
- - ----------------------------------------------------------------------------
- - ----------------------------------------------------------------------------
- - ----------------------------------------------------------------------------
- - ----------------------------------------------------------------------------
</TABLE>
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EXHIBIT B
PENDING CLAIM NOTICE
<TABLE>
<S> <C>
To: Bank One, Indianapolis, N.A.
From: The Hillhaven Corporation
Date:
------------------------------
</TABLE>
This Pending Claim Notice is delivered to you pursuant to Section 4.1 of
the Escrow Agreement, dated , 1995 (the "Escrow Agreement"), by and among
The Hillhaven Corporation, a Nevada corporation, the Shareholders and Bank One,
Indianapolis, N.A. Capitalized terms used herein and not otherwise defined shall
have the meanings assigned to those terms in the Escrow Agreement.
Please be advised that you are hereby instructed to withhold from the
distribution to the Shareholders that is due to be made on the Distribution Date
from the Escrow Account a total of Escrow Shares.
The undersigned maintains in good faith that it is entitled to
indemnification in the aforementioned amount of Escrow Shares pursuant to the
terms of the Share Exchange Agreement based upon the following:
[LIST INDEMNIFICATION ITEMS AND THE AMOUNT OF EACH ITEM. ATTACH ANY
DOCUMENTS REASONABLY DEMONSTRATING THE INDEMNIFICATION ITEMS.]
The Shareholder Agent has been sent a copy of this Pending Claim Notice
along with any attached information relating to the claimed right to
indemnification.
Signed this day of , 199 .
THE HILLHAVEN CORPORATION
By
--------------------------------
Name:
Title:
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EXHIBIT C
ESCROW DISPOSITION NOTICE
<TABLE>
<S> <C>
To: Bank One, Indianapolis, N.A.
From: The Hillhaven Corporation
Thomas E. Phillippe, Jr.
Date:
-------------------------------
</TABLE>
This Escrow Disposition Notice is delivered to you pursuant to Section 4.2
of the Escrow Agreement, dated , 1995 (the "Escrow Agreement"), by and
among The Hillhaven Corporation, a Nevada corporation, the Shareholders and Bank
One, Indianapolis, N.A. Capitalized terms used herein and not otherwise defined
shall have the meanings assigned to those terms in the Escrow Agreement.
Please be advised that you are hereby directed to [distribute from] [retain
in] the Escrow Account the property now held in your possession and described
herein in the following manner, to wit:
[STATE THE NUMBER OF ESCROW SHARES TO BE DISTRIBUTED OR RETAINED AND, IF
DISTRIBUTED, THE RECIPIENT(S) OF SUCH SHARES]
Signed this day of , 199 .
THE HILLHAVEN CORPORATION
By
-----------------------------------
Name:
Title:
--------------------------------------
Thomas E. Phillippe, Jr.
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<PAGE>
EXHIBIT D
ESCROW AGENT FEES
DOLLARS ($ ) PER YEAR
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<PAGE>
EXHIBIT 3.3(B)
ESCROW AGREEMENT
This ESCROW AGREEMENT (this "Agreement") is made this day of ,
1995, by and among The Hillhaven Corporation, a Nevada Corporation (such
corporation and its subsidiaries being referred to herein collectively as
"Acquiror"), the individuals listed on Exhibit A (collectively, the
"Shareholders") and Bank One, Indianapolis, N.A. (the "Escrow Agent").
EXPLANATION STATEMENT
A. Acquiror and the Targets are parties to that certain Amended and
Restated Agreement and Plan of Share Exchange and Agreements to Assign
Partnership Interests (the "Share Exchange Agreement"), dated as of February 27,
1995. Capitalized terms used herein and not otherwise defined herein shall have
the respective meanings assigned thereto in the Share Exchange Agreement.
B. Prior to the Effective Time, the Shareholders owned all the capital
stock of Nationwide Care, Inc., an Indiana corporation.
C. In order to induce Acquiror to enter into the Share Exchange Agreement
and to consummate the transactions contemplated thereby, the Shareholders wish
to execute and deliver this Agreement and to deposit or to cause to be deposited
in escrow hereunder certificates representing five percent (5%) of the Acquiror
Common Shares that comprise the Exchange Consideration (such percentage of
shares being referred to herein collectively as the "Escrow Shares") to secure
the indemnification obligations under Article XIV of the Share Exchange
Agreement, the terms of which Article are incorporated herein by this reference.
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby,
and in consideration of the mutual covenants herein contained, agree as follows:
1. DEPOSIT OF ESCROW SHARES; ESCROW ACCOUNT; SHAREHOLDER AGENT.
1.1 Promptly following the Effective Time, Acquiror shall withhold from
the Exchange Consideration and deposit with the Escrow Agent the Escrow Shares.
The Escrow Agent shall establish an account (the "Escrow Account") for the
Shareholders and place the Escrow Shares therein. The Escrow Agent agrees that
the Escrow Shares shall be held in the Escrow Account and disbursed by the
Escrow Agent in accordance with, and subject to the terms and conditions of,
this Agreement.
1.2 Acquiror and the Shareholders acknowledge and agree that, to the
extent and for so long as Escrow Shares are held by the Escrow Agent hereunder,
Acquiror shall have, as of and from the date such Escrow Shares are received by
the Escrow Agent, a perfected, first priority security interest in such Escrow
Shares to secure the payment of amounts, if any, payable pursuant to Article XIV
of the Share Exchange Agreement. In connection therewith, the Shareholders
expressly agree (i) that the Escrow Agent is acting solely as Acquiror's agent
to the extent necessary to perfect Acquiror's first-priority security interest
in the Escrow Shares and (ii) to execute and deliver such instruments as
Acquiror may from time to time reasonably request for the purpose of evidencing
and perfecting such security interest.
1.3 All of the Shareholders hereby appoint Thomas E. Phillippe, Jr., an
individual (the "Shareholder Agent"), as their attorney-in-fact to act as their
agent in the performance of all of their obligations and exercise of all of
their rights under this Agreement.
2. VOTING RIGHTS; DIVIDENDS ON ESCROW SHARES; SALE OF SHARES; INVESTMENT OF
CASH.
2.1 All voting rights with respect to the Escrow Shares shall remain with
the Shareholders. All cash dividends on Escrow Shares shall be distributed by
Acquiror to the Escrow Agent. Within three (3) business days following receipt
thereof by the Escrow Agent, the Escrow Agent shall distribute such dividends in
respect of the Escrow Shares to the Shareholders, respectively.
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<PAGE>
2.2 All non-cash dividends (including, without limitation, any stock
split, share dividend, rights offering or recapitalization) on any Escrow Shares
shall be added to the Escrow Account as additional Escrow Shares fully subject
to the terms of this Agreement.
2.3 At any time while there are Escrow Shares in the Escrow Account, the
Shareholder Agent may, by delivering written instructions to the Escrow Agent,
direct the Escrow Agent to sell one or more of the Escrow Shares on the NYSE and
deposit the sale proceeds into the Escrow Account, which proceeds shall be
distributed, designated, withheld and otherwise subject to the terms of this
Agreement in the same manner and to the same extent as the Escrow Shares.
2.4 Cash deposited into the Escrow Account pursuant to Section 2.3 shall
be invested and reinvested by the Escrow Agent in (a) bonds, treasury notes or
other evidences of indebtedness of, and those unconditionally guaranteed as to
the payment of principal and interest by, the United States, (b) certificates of
deposit of banks or trust companies (including the Escrow Agent) organized under
the laws of the United States, or any state thereof, each of which has a
combined capital, surplus and retained earnings of at least $50,000,000 and (c)
money market funds, including short term investment funds of the Escrow Agent.
In investing and reinvesting any such monies, the Escrow Agent shall seek to
obtain the best yields consistent with safety of principal and ready
marketability. The Escrow Agent shall have no duty or right to invest cash on
deposit in the Escrow Account other than as provided in the foregoing sentence.
Earnings on cash so invested shall be paid to the Shareholders.
3. ACCOUNTING.
The Escrow Agent shall mail to Acquiror and the Shareholder Agent a written
accounting of all transactions relating to the Escrow Account not less
frequently than quarterly.
4. DISPOSITION OF ESCROW SHARES.
4.1 The Escrow Agent shall distribute the Escrow Shares only in accordance
with (i) written instructions contained in the form of Exhibit B (the "Escrow
Disposition Notice") delivered to the Escrow Agent and executed by Acquiror and
the Shareholder Agent, (ii) a final arbitration award secured under the
provisions of Section 4.3 hereof, or (iii) an order of a court of competent
jurisdiction pursuant to Section 9, as applicable. The Escrow Agent shall
promptly comply with such instructions, award or order, as applicable, to the
extent that there are sufficient Escrow Shares in the Escrow Account to so
comply. The number of Escrow Shares to be distributed hereunder shall be (i)
determined using the average closing price of one Acquiror Common Share as
reported on the NYSE for the ten (10) trading days immediately preceding the
date of such distribution and (ii) rounded to the nearest whole share.
4.2 Promptly following the earlier of the date that the [redacted]
Litigation (as defined in this Section 4.2) has been settled or otherwise
finally resolved or the date that a summary judgment to the effect that punitive
damages will not be allowed in such litigation has been granted, either of which
must be reflected in a final order of a court of competent jurisdiction from
which appeal may not be taken (due to lapse of time or otherwise), Acquiror and
the Shareholder Agent shall, subject to Section 4.3, prepare and deliver to the
Escrow Agent the Escrow Disposition Notice, and the Escrow Agent shall
distribute the Escrow Shares to the Shareholders and/or Acquiror in accordance
therewith. As used herein, the "[redacted] Litigation" shall mean [redacted].
4.3 Acquiror and the Shareholder Agent agree to use their respective best
efforts to resolve any dispute that may arise with respect to this Agreement
amicably and without resort to any third party dispute resolution forum. At any
time Acquiror on the one hand or the Shareholder Agent on the other believes
that a dispute exists among the parties with respect to this Agreement, it or he
shall give prompt written notice thereof to the other party(s). Any dispute
which has not been settled or resolved within thirty (30) days of receipt by
Acquiror or the Shareholder Agent of the notice thereof shall be submitted for
binding arbitration in Marion County, Indiana in an arbitration proceeding that,
except as may otherwise be provided herein, shall be conducted in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
before a single arbitrator chosen in accordance with such rules. All evidentiary
and discovery matters shall be conducted in accordance with and governed by the
applicable Federal Rules of Civil Procedure. No later than
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<PAGE>
10 calendar days after the arbitrator is appointed, the arbitrator shall
schedule the arbitration for a hearing to commence on a mutually convenient
date. All discovery shall be completed no later than the commencement of the
arbitration hearing or 90 calendar days after the date that a proper demand for
arbitration is served, whichever occurs first, unless, upon a showing of good
cause, the arbitrator extends such period. The hearing shall commence no later
than 90 calendar days after the arbitrator is appointed and shall continue until
completed. The arbitrator shall issue his or her award in writing no later than
20 calendar days after the conclusion of the hearing. The parties to this
Agreement agree that, in rendering an award, the arbitrator shall have no
jurisdiction to consider evidence with respect to or render any award of
judgment for punitive damages or any other amount awarded for purposes of
imposing a penalty. The arbitrator shall not have the power to amend this
Agreement in any respect. The arbitrator's decision shall be binding and
conclusive upon the parties. The costs of any arbitration conducted pursuant to
this Section 4.3 shall be borne by the non-prevailing party(s), as identified by
the arbitrator, regardless of whether the subject dispute is arbitrated to
completion. Each party hereto agrees to provide notice of the commencement of
any such arbitration proceeding to the Escrow Agent and the other parties, as
the case may be.
5. CONTROL OF LITIGATION.
5.1 The Shareholder Agent shall control the defense, conduct or settlement
of the [redacted] Litigation, and Acquiror shall have the right, at its own
expense, to participate therein by giving written notice to the Shareholder
Agent. If the Shareholder Agent obtains an award from the third party claimant
in the [redacted] Litigation on behalf of the Shareholders, then Acquiror shall
be entitled to recover its costs, including reasonable attorney's fees of
outside counsel incurred in defending such claim and obtaining such award, from
the proceeds of such award; provided, that such recovery shall not be a waiver
of any right, claim or amount to which Acquiror may otherwise be entitled.
5.2 Notwithstanding anything herein to the contrary, the Shareholder Agent
shall not have the right to settle or compromise the [redacted] Litigation
without obtaining the prior written consent of Acquiror, which consent shall not
be unreasonably withheld. In addition, the Shareholder Agent shall not permit to
exist any lien, encumbrance or other adverse charge upon any asset of, or
consent to the imposition of any injunction against, Acquiror or any of its
affiliates without obtaining its prior written consent, which consent shall not
be unreasonably withheld.
6. ESCROW PROVISIONS.
6.1 Upon termination of this Agreement and delivery of the balance of the
Escrow Shares to the parties entitled thereto, the Escrow Agent shall be
discharged from any further obligation hereunder.
6.2 The Escrow Agent shall be entitled to rely upon any order, judgment,
certification, demand, notice, instrument or other writing delivered to it
hereunder without being required to determine the authenticity or the
correctness of any fact stated therein or the propriety, validity or service
thereof. The Escrow Agent may act in reliance upon any instrument or signature
believed by it to be genuine and may assume that any person purporting to give
notice or receipt or advice, or make any statement or execute any document, in
connection with the provisions hereof has been duly authorized to do so.
6.3 The Escrow Agent shall not be liable to the other parties hereto for
any error of judgment, action taken or omitted in good faith or mistake of fact
or law, or anything which it may do or refrain from doing in connection
therewith, except in the case of its own gross negligence, willful misconduct or
bad faith.
6.4 The Escrow Agent shall be entitled to consult with competent and
responsible counsel of its choice with respect to the interpretation of the
provisions hereof, and any other legal matters relating hereto, and shall be
fully protected in taking any action or omitting to take any action in good
faith and in accordance with the advice of such counsel.
6.5 The Escrow Agent shall be entitled to be indemnified and held harmless
by Acquiror and the Shareholders, jointly and severally, for any and all claims,
liabilities, costs, payments and expenses, including reasonable fees of counsel
(who may be selected by the Escrow Agent), incurred by the Escrow Agent which
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arise out of or in connection with any act or omission by it in the performance
of its obligations under this Agreement, except in the case of the Escrow
Agent's own gross negligence, willful misconduct or bad faith.
7. TIME OF PERFORMANCE. Whenever under the terms hereof the time for
performance of any provision shall fall on a date which is not a regular
business day of the Escrow Agent, the performance thereof on the next succeeding
regular business day of the Escrow Agent shall be deemed to be in full
compliance.
8. DEATH, DISABILITY, ETC. The death, disability, bankruptcy or insolvency
of any of the Shareholders shall not affect or prevent the performance by the
Escrow Agent of its obligations and instructions received hereunder. Without
limiting the foregoing sentence, the Shareholder Agent shall notify the Escrow
Agent in writing of any person who or that, as a result of a Shareholder's
death, disability, bankruptcy or insolvency, should receive distributions, if
any, that would otherwise be made hereunder to such Shareholder.
9. RESOLUTION OF CONTROVERSIES. In the event any dispute or controversy
arises respecting the administration or disposition of the Escrow Shares, or any
part thereof, and such dispute or controversy has not been submitted to
arbitration as provided in Section 4.3 hereof, the Escrow Agent shall have the
right but not the obligation to interplead the parties to such dispute or
controversy in any court of competent jurisdiction, including but not limited to
the courts of the State of Indiana and the United States District Court for the
Southern District of Indiana which shall be deemed to be courts of competent
jurisdiction, and to deposit with such court the Escrow Shares remaining in the
Escrow Account, or any portion thereof. Thereafter the Escrow Agent shall be
fully released and discharged from all further obligations hereunder with
respect to the Escrow Shares held in the Escrow Account or the portion thereof
deposited with the court in such proceedings, except in the case of its own
gross negligence, willful misconduct, or bad faith. Acquiror and the
Shareholders, jointly and severally, shall reimburse the Escrow Agent for all
expenses, fees and charges (including reasonable attorneys' fees and expenses)
reasonably incurred by the Escrow Agent in any such interpleader action.
10. RESIGNATION OR REMOVAL OF ESCROW AGENT. If the Escrow Agent resigns or
is removed, then Acquiror and the Shareholder Agent shall mutually agree upon
and name a substitute for the Escrow Agent ("Successor Escrow Agent"), which
shall be a bank or trust company and which shall perform the same duties and
responsibilities, and which shall be entitled to the same protection and
substantially equivalent fees, as the original Escrow Agent named herein. The
Escrow Agent shall have the unequivocal right to resign as Escrow Agent upon at
least sixty (60) days' prior written notice delivered to Acquiror and the
Shareholder Agent; provided, that, in any event, such resignation shall not be
effective until such time as a Successor Escrow Agent has been appointed, has
accepted its appointment and has taken possession of the Escrow Shares. Upon
mutual agreement by Acquiror and the Shareholder Agent, the Escrow Agent may be
removed upon at least sixty (60) days' prior written notice; provided, that, in
any event, such removal shall not be effective until such time as a Successor
Escrow Agent has been appointed, has accepted its appointment and has taken
possession of the Escrow Shares. In either of said events, if a Successor Escrow
Agent is not appointed within said sixty (60) day period, the Escrow Agent,
Acquiror or the Shareholder Agent may petition a court of competent jurisdiction
to name a Successor Escrow Agent, whether by interpleader or other appropriate
action, and the decision of such court shall be binding upon all parties to this
Agreement.
11. ACCEPTANCE OF ESCROW: COMPENSATION OF ESCROW AGENT. The Escrow Agent
hereby agrees to serve as Escrow Agent pursuant to this Agreement and to perform
the duties and responsibilities conferred upon it hereunder. The Escrow Agent
has agreed to serve hereunder for such fees as are set forth in Exhibit C, which
fees are to be paid as described in Exhibit C. Such fees shall be borne by
Acquiror.
12. TERMINATION. This Agreement shall terminate without further action of
any party when all of the terms hereof shall have been fully performed.
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13. NOTICES. Any notice, request, instruction or other document to be given
under this Agreement by any party shall be in writing and shall be delivered
personally, by registered or certified mail, postage prepaid, return receipt
requested, by overnight courier or by facsimile transmission, as follows:
(a) If to Acquiror, at:
The Hillhaven Corporation
1148 Broadway Plaza
Tacoma, WA 98402
Attention: General Counsel
Facsimile: (206) 756-4845
With a copy to:
Edmund O. Belsheim, Jr.
Bogle & Gates
Two Union Square
601 Union Street
Seattle, WA 98101-2346
Facsimile: (206) 621-2660
(b) If to the Shareholders, at:
c/o Thomas E. Phillippe, Jr.
---------------------------------------------
---------------------------------------------
Attention:
Facsimile:
With a copy to:
Marcus B. Chandler, Esq.
ICE MILLER DONADIO & RYAN
One American Square
Box 82001
Indianapolis, IN 46282-0002
Facsimile: (317) 236-2219
or to such other address or person as any party may designate by a notice to the
other parties which is given in the manner required above. Any such notice,
request, instruction or other document shall be deemed to have been delivered
and received as of the date personally delivered, or if mailed, three days after
the date so mailed, or if telecopied, the date on which such telecopy is sent
(as confirmed by return facsimile transmission) or if by overnight courier the
day following the day on which such notice is properly placed with the courier.
14. COOPERATION WITH ESCROW AGENT. The parties to this Agreement shall
cooperate with the Escrow Agent, as the Escrow Agent reasonably deems necessary
or desirable to perform its duties and obligations under this Agreement. Without
limiting the foregoing, the parties shall provide the Escrow Agent with all
information necessary to make any distribution, including names, addresses,
social security numbers and tax identification numbers. The Escrow Agent shall
be entitled to rely upon the most recent information received from any party
without further inquiry and each party shall be responsible for notifying the
Escrow Agent of any new or changed information pertaining to such party.
15. TAXES: REPORTS TO GOVERNMENTAL AUTHORITIES. The Shareholders severally
agree to assume any obligations imposed now or hereafter by any applicable tax
law with respect to any payment from the Escrow Account to the Shareholders
under this Agreement and undertake to instruct the Escrow Agent in writing with
respect to the Escrow Agent's responsibility for withholding taxes and any other
taxes, assessments or
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other governmental charges and any certifications and governmental reporting
required in connection therewith.
16. MISCELLANEOUS.
16.1 This Agreement may not be amended or modified in any way except by an
instrument in writing signed by all of the parties hereto.
16.2 This Agreement shall be governed by and interpreted in accordance
with the laws of the State of Indiana without reference to its conflicts of law
provisions.
16.3 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same agreement.
16.4 The headings contained in this Agreement are for convenience only,
shall not affect this Agreement in any way, and shall not be used to construe or
interpret the scope or intent of this Agreement.
16.5 This Agreement shall inure to the benefit of and shall bind the
parties hereto and their respective heirs, devisees, personal representatives,
successors, transferees and assigns; provided, that, except as otherwise
expressly set forth in this Agreement, including without limitation Section 10,
neither the rights nor the obligations of any party may be assigned or delegated
without the prior written consent of the other parties.
IN WITNESS WHEREOF, the parties have duly executed and have caused to be
duly executed this Agreement as of the date first written above.
THE HILLHAVEN CORPORATION
By
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Name:
Title:
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BANK ONE, INDIANAPOLIS, N.A.
By
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Name:
Title:
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EXHIBIT A
SHAREHOLDERS
INDIVIDUAL
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EXHIBIT B
ESCROW DISPOSITION NOTICE
To: Bank One, Indianapolis, N.A.
From: The Hillhaven Corporation
Thomas E. Phillippe, Jr.
Date:
---------------------------
This Escrow Disposition Notice is delivered to you pursuant to Section 4.1
of the Escrow Agreement, dated , 1995 (the "Escrow Agreement"), by
and among The Hillhaven Corporation, a Nevada corporation, the Shareholders and
Bank One, Indianapolis, N.A. Capitalized terms used herein and not otherwise
defined shall have the meanings assigned to those terms in the Escrow Agreement.
Please be advised that you are hereby directed to distribute from the
Escrow Account the property now held in your possession and described herein in
the following manner, to wit:
[STATE THE NUMBER OF ESCROW SHARES/AMOUNT OF CASH TO BE DISTRIBUTED AND THE
RECIPIENT(S) OF SUCH SHARES/CASH]
Signed this day of , 1995.
THE HILLHAVEN CORPORATION
By
----------------------------------
Name:
Title:
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Thomas E. Phillippe, Jr.
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EXHIBIT C
ESCROW AGENT FEES
DOLLARS ($ ) PER YEAR
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EXHIBIT 6.15
CERTIFICATE
EXECUTED BY NATIONWIDE CARE, INC.
This Certificate is executed and delivered in connection with the Amended
and Restated Agreement and Plan of Share Exchange and Agreements to Assign
Partnership Interests, by and among The Hillhaven Corporation, a Nevada
corporation ("Acquiror"), Nationwide Care, Inc., an Indiana corporation
("Nationwide"), Phillippe Enterprises, Inc., an Indiana corporation ("PEI"),
Meadowvale Skilled Care Center, Inc., an Indiana corporation ("Meadowvale")
(Nationwide, PEI and Meadowvale are collectively referred to as the "Targets"),
the partners of Camelot Care Centers, an Indiana general partnership
("Camelot"), the partners of Shangri-La Partnership, an Indiana general
partnership ("Shangri-La"), and the limited partners of Evergreen Woods, Ltd., a
Florida limited partnership ("Evergreen") (Camelot, Shangri-La and Evergreen are
collectively referred to as the "Partnerships"), dated as of February 27, 1995
("Reorganization Agreement"); and the documents executed and delivered in
connection therewith (collectively with the Reorganization Agreement, the
"Transaction Documents"). Terms which are not defined herein and are used with
initial capitalization when the rules of grammar would not otherwise so require
and which are defined in the Transaction Documents shall have the meanings
assigned to such terms in the Transaction Documents.
In accordance with Section 9.10 of the Reorganization Agreement, the
undersigned has requested the opinions of Ice Miller Donadio & Ryan as to
certain federal income tax consequences of the Share Exchange as a condition
precedent to Closing. In rendering its opinion, Ice Miller Donadio & Ryan may
assume that, and the undersigned hereby certifies, represents, and warrants to
Ice Miller Donadio & Ryan that: (1) the Share Exchange will be consummated in
accordance with the terms, conditions, and other provisions of the Transaction
Documents; and (2) all of the factual information, descriptions,
representations, and assumptions set forth in the Transaction Documents, in the
Form S-4 Registration Statement to be filed with the Securities and Exchange
Commission on April , 1995 in connection with the Share Exchange (the
"Registration Statement"), and in this Certificate are accurate and complete in
all respects and will be accurate and complete in all respects at the time the
Registration Statement becomes effective and at the Effective Time of the Share
Exchange (the "Effective Time").
Pursuant to the foregoing, the undersigned hereby certifies, represents,
and warrants to Ice Miller Donadio & Ryan as follows:
THE SHARE EXCHANGE
Nationwide operates long-term health care centers primarily located in
Indiana, Ohio and Florida. Dr. Thomas E. Phillippe, Sr. and Thomas E. Phillippe,
Jr. are the majority owners of Nationwide. The capital structure of Nationwide
consists of: 48,000,000 authorized shares of Common Stock, without par value, of
which approximately 7,431,458 shares are issued and outstanding (the "Nationwide
Voting Common"); 2,000,000 authorized shares of Nonvoting Common Stock, without
par value, of which 76,592 shares are issued and outstanding (the "Nationwide
Nonvoting Common") (the Nationwide Voting Common and the Nationwide Nonvoting
Common are collectively referred to herein as the "Nationwide Common Shares");
and 2,000,000 authorized shares of Preferred Stock, without par value, of which
300,000 shares of Redeemable Preferred Stock are issued and outstanding (the
"Nationwide Preferred Stock"). Nationwide also has outstanding warrants to
purchase 987,188 shares of Nationwide Nonvoting Common (the "Nationwide
Warrants"). Nationwide files a consolidated return with its one subsidiary, and
Nationwide does not have an excess loss account with respect to the stock of, or
gains deferred under Treasury Regulation sec. 1502-13 with respect to, any such
subsidiary. The Share Exchange is totally unrelated to the Nationwide 1993
reorganization.
The Transaction Documents provide that all of the outstanding Nationwide
Common Shares will be exchanged solely for shares of Acquiror Common Stock. The
Share Exchange will be consummated in accordance with the Indiana Business
Corporation Law, as amended ("BCL"), and the Nevada General Corporation Law, as
amended ("NCL"). The Share Exchange was approved by the Board of Directors of
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Nationwide on April , 1995 and is subject to the approval of the holders of a
majority of the outstanding shares of Nationwide stock at a duly called and held
meeting of the Nationwide shareholders on June , 1995.
At the Effective Time, each Nationwide Common Share then outstanding will
be exchanged for that number of shares of Acquiror Common Stock determined in
accordance with the Reorganization Agreement, rounded to the nearest whole
share. Other than shares of Acquiror Common Stock, there will be no cash or
other property exchanged in the Share Exchange.
Prior to the Effective Time, the Nationwide Preferred Stock will be
redeemed by Nationwide with its own funds and without reimbursement directly or
indirectly from Acquiror. Prior to the Effective Time, the Nationwide Warrants
shall be exercised into the corresponding number of Nationwide Nonvoting Common
pursuant to the terms of the Warrants, and the resulting Nationwide Nonvoting
Common will be exchanged for that number of shares of Acquiror Common Stock
determined in accordance with the Reorganization Agreement, rounded to the
nearest whole share.
At the Closing, the Nationwide Subordinated Notes will be prepaid directly
by Acquiror. The Nationwide Subordinated Notes are debt (not stock or equity)
under general principles of federal taxation law, and Acquiror will not pay any
amounts in excess of such indebtedness. The Nationwide Common Shares held by the
holders of the Nationwide Subordinated Notes shall be valued in the Share
Exchange in the same manner as other Nationwide Common Shares.
Except for the redemption of the Nationwide Preferred Stock, there have
been and will be no distributions to any of the Nationwide shareholders with
respect to their Nationwide stock in contemplation of the Share Exchange, and no
Nationwide stock has been or will be sold, redeemed or otherwise disposed of in
contemplation of the Share Exchange. Nationwide shareholders are entitled to
dissenters' rights in connection with the proposed Share Exchange. Any payments
to dissenters in connection with the Share Exchange shall be made by Nationwide
out of its own funds without reimbursement directly or indirectly from Acquiror.
Except for the Nationwide Warrants, there are no outstanding options or
warrants to purchase any Nationwide stock or outstanding securities or other
instruments or rights convertible into any Nationwide stock or which constitute
equity under general principles of federal tax law, and no such options,
warrants, securities, instruments, or rights have been or will be issued or
cancelled in contemplation of the Share Exchange.
At the Effective Time, the Partnership Interests shall be assigned to
Nationwide. All of the parties to the Reorganization Agreement agree that the
Partnership Interests have no value, nor do they represent liabilities. None of
the Acquiror Common Stock is being transferred pursuant to the Reorganization
Agreement in exchange for such Partnership Interests. The parties agree that the
shareholders of the Targets and Partners of the Partnerships were not the
primary obligors with respect to the obligations which they personally
guaranteed and which will be released prior to the Share Exchange. The
Nationwide Common Shares held by the Partners and by the guarantors shall be
valued in the Share Exchange in the same manner as the other Nationwide Common
Shares. Any debts owed by any Partnership to any of the Target shareholders
(including without limitation the debt owed by Shangri-La to Thomas E.
Phillippe, Sr.) shall be paid by Nationwide out of its own funds without
reimbursement directly or indirectly from Acquiror. Acquiror is making no
payment of cash or Acquiror Common Stock or other property or assuming any
liabilities in connection with or pursuant to the assumption of the Partnership
Interests, releases of guarantees or the Noncompetition Agreements, and will not
directly or indirectly reimburse Nationwide for any such payments.
ADDITIONAL REPRESENTATIONS
1. The fair market value of the shares of Acquiror Common Stock
received by each Nationwide shareholder will be approximately equal to the
fair market value of the shares of Nationwide stock surrendered in exchange
therefor.
2. There is no plan or intention by the shareholders of Nationwide who
own one percent or more of the shares of Nationwide stock, and to the best
of the knowledge of the management of Nationwide, there is no plan or
intention on the part of the remaining shareholders of Nationwide to sell,
exchange, or otherwise dispose of a number of shares of Acquiror Common
Stock received in the Share Exchange that
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would reduce the Nationwide shareholders' ownership of such shares of
Acquiror Common Stock (i.e., the shares of Acquiror Common Stock received
in the Share Exchange) to a number of shares having an aggregate value, as
of the Effective Time, of less than 50 percent of the value of all of the
formerly outstanding shares of Nationwide stock as of the same date. For
purposes of this representation, shares of Nationwide stock surrendered by
dissenters will be treated as outstanding shares of Nationwide stock at the
Effective Time. Moreover, shares of Nationwide stock and shares of Acquiror
Common Stock held by Nationwide shareholders and otherwise sold, redeemed,
or disposed of prior or subsequent to the Share Exchange (including the
Nationwide Preferred Stock) will be considered in making this
representation. Except for the redemption of the Nationwide Preferred
Stock, there have been and will be no distributions to the Nationwide
shareholders with respect to their Nationwide stock made in contemplation
of the Share Exchange, and no Nationwide stock has been or will be sold,
redeemed or otherwise disposed of in contemplation of the Share Exchange.
3. Nationwide has no plan or intention to issue additional shares of
its stock that would result in Acquiror losing control of Nationwide within
the meaning of Section 368(c) of the Internal Revenue Code of 1986, as
amended (the "Code").
4. Acquiror will acquire Nationwide stock solely in exchange for
Acquiror voting stock (Acquiror Common Shares). For purposes of this
representation, Nationwide stock redeemed for cash or other property
furnished by Acquiror will be considered as acquired by Acquiror. Further,
no liabilities of Nationwide or the Nationwide shareholders will be assumed
by Acquiror, nor will any of the Nationwide stock be subject to any
liabilities.
5. At the Effective Time, Nationwide will not have outstanding any
warrants, options, convertible securities, or any other type of right
pursuant to which any person could acquire stock in Nationwide that, if
exercised or converted, would affect Acquiror's acquisition or retention of
control of Nationwide, as defined in Code Section 368(c).
6. Nationwide will pay its dissenting shareholders the value of their
stock out of its own funds. No funds will be supplied for that purpose,
directly or indirectly, by Acquiror, nor will Acquiror directly or
indirectly reimburse Nationwide for any payments to dissenters.
7. The liabilities of Nationwide were incurred by Nationwide in the
ordinary course of its business.
8. Acquiror does not own, directly or indirectly, nor has it owned
during the past five years, directly or indirectly, any Nationwide stock,
including ownership by any Acquiror subsidiary.
9. Nationwide will pay its expenses incurred in connection with the
Share Exchange. Nationwide will not pay the expenses of Acquiror or the
Nationwide shareholders incurred in connection with the Share Exchange;
provided, however, that Nationwide may pay certain expenses it was
previously obligated to pay by contract in connection with the issuance of
the Nationwide Warrants, Nationwide Subordinated Notes and Nationwide
Preferred Stock out of its own funds and without reimbursement directly or
indirectly from Acquiror.
10. There is no intercorporate indebtedness existing between Acquiror
and Nationwide or between Acquiror and any Nationwide subsidiary that was
issued, acquired, or will be settled at a discount.
11. Neither Nationwide nor any Nationwide subsidiary is an investment
company as defined in Code Sections 368 (a)(2)(F)(iii) and
368(a)(2)(F)(iv).
12. Neither Nationwide nor any Nationwide subsidiary is under the
jurisdiction of a court in a Title 11 or similar case within the meaning of
Code Section 368(a)(3)(A).
13. At the Effective Time, the fair market value of the assets of
Nationwide will exceed the sum of its liabilities, plus the amount of
liabilities, if any, to which the assets are subject.
14. None of the compensation received by any shareholder who is an
employee of Nationwide will be separate consideration for, or allocable to,
any of their shares of Nationwide stock. None of the shares of Acquiror
Common Stock received by any shareholder who is an employee of Nationwide
will be separate consideration for, or allocable to, any employment
agreement. The compensation paid to any shareholder who is an employee of
Nationwide will be for services actually rendered and will be commensurate
with amounts paid to third parties bargaining at arm's-length for similar
services.
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15. The Share Exchange is being effected for bona fide business
reasons, including without limitation the reasons set forth in the
Registration Statement. Nationwide has looked for opportunities to expand
its nursing care operations and increase its operating efficiencies.
Nationwide also recognizes that some of its senior management executives,
who are both officers and directors, are approaching retirement age, and
others have expressed a desire to reduce or discontinue their role in the
management of Nationwide. Consequently, Nationwide, in considering business
expansion opportunities, has looked for businesses with strong senior
management with experience in the nursing care industry. Nationwide
determined that Acquiror offers an opportunity for it to meet these
objectives. Nationwide believes that a combination of its operations with
Acquiror will provide increased opportunity and flexibility for profitable
expansion and diversification, will enhance its ability to provide more
efficient and dependable service, and will result in operating efficiencies
and cost savings.
16. To the extent that a portion of the shares of Acquiror Common
Stock issued by Acquiror in exchange for Nationwide stock will be placed in
escrow by the Nationwide shareholders and will be made subject to a
condition pursuant to the Reorganization Agreement and the Escrow
Agreement, for possible return to Acquiror under specified conditions: (1)
there is a valid business reason for establishing the arrangement in that
the escrow is a mechanism to accomplish an exchange price adjustment,
bargained for at arm's length, in the event of a breach by Nationwide, and
no Nationwide shareholder is liable for any such breach; (2) the shares of
Acquiror Common Stock subject to such arrangement will appear as issued and
outstanding on the balance sheet of Acquiror and such shares of Acquiror
Common Stock will be legally outstanding under applicable state law; (3)
all dividends paid on such shares of Acquiror Common Stock will be
distributed currently to the Nationwide shareholders; (4) all voting rights
of such shares of Acquiror Common Stock will be exercisable by or on behalf
of the Nationwide shareholders or their authorized agent; (5) no shares of
such Acquiror Common Stock will be subject to restrictions requiring their
return to Acquiror because of death, failure to continue employment, or
similar restrictions; (6) all such shares of Acquiror Common Stock will be
released from the arrangement within five years from the date of
consummation of the Share Exchange (except where there is a bona fide
dispute as to whom the shares of Acquiror Common Stock should be released);
(7) at least 50 percent of the number of shares of each class of Acquiror
Common Stock issued initially to the Nationwide shareholders will not be
subject to the arrangement; (8) the return of the shares of Acquiror Common
Stock will not be triggered by an event the occurrence or nonoccurrence of
which is within the control of the Nationwide shareholders; (9) the return
of shares of Acquiror Common Stock will not be triggered by the payment of
additional tax or reduction in tax paid as a result of an Internal Revenue
Service audit of the Nationwide shareholders or the corporations either (a)
with respect to the Share Exchange, or (b) when the Share Exchange involves
persons related within the meaning of Code Section 267(c)(4); and (10) the
mechanism for the calculation of the number of shares of Acquiror Common
Stock to be returned is objective and will be readily ascertainable.
The foregoing is provided to Ice Miller Donadio & Ryan in connection with
the preparation of its opinions. We understand that its opinions will be
premised on the basis that all of the facts, representations, and assumptions on
which it is relying, whether contained herein or elsewhere, are accurate and
complete in all respects and will be accurate and complete in all respects at
the time the Registration Statement becomes effective and at the Effective Time.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of
this day of , 1995.
NATIONWIDE CARE, INC.
By:
-------------------------------
Dr. Thomas E. Phillippe, Sr.,
Chairman of the Board
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EXHIBIT 6.6(A)
, 1995
The Hillhaven Corporation
1148 Broadway Plaza
Tacoma, Washington 98402
Gentlemen:
Reference is made to the Restated and Amended Agreement and Plan of Share
Exchange and Agreements to Assign Partnership Interests dated as of ,
1995, as amended (the "Agreement"), by and among The Hillhaven Corporation
("Acquiror"), Nationwide Care, Inc. ("Nationwide"), Phillippe Enterprises, Inc.
("PEI"), Meadowvale Skilled Care Center, Inc. ("Meadowvale") and specified
Partners of Camelot Care Centers ("Camelot"), Evergreen Woods, Ltd.
("Evergreen") and Shangri-La Partnership ("Shangri-La")(Nationwide, PEI and
Meadowvale are collectively referred to herein as the "Corporate Targets";
Camelot, Evergreen and Shangri-La are collectively referred to herein as the
"Partnership Targets"; the Corporate Targets and Partnership Targets are
collectively referred to herein as the "Targets"), providing for the exchange of
all of the outstanding common stock of each of the Corporate Targets for common
stock of the Acquiror and the assignment of all interests in the Partnership
Targets to Nationwide (collectively, the "Acquisitions"). Pursuant to the
Agreement, I may receive a certain number of shares of Common Stock, par value
$0.75 per share, of Acquiror in exchange for the shares of Common Stock of the
Corporate Targets (the "Target Common Shares") or interests in the Partnership
Targets (the "Target Interests") owned by me (all shares of Acquiror Common
Stock to be acquired by me pursuant to the Agreement being hereinafter referred
to as "Acquiror Common Shares").
I have been advised that I may be deemed to be an "affiliate" of at least
one of the Targets within the meaning of Rule 144 of the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the "Act"),
and as that term is used in paragraphs (c) and (d) of Rule 145 under the Act.
For all purposes of this letter, the term "affiliate" shall have the foregoing
meaning. I understand that the Targets are obligated, pursuant to Section 6.6 of
the Agreement, to use their best efforts to cause me, and each person identified
as a possible affiliate, to deliver this letter (hereinafter referred to as an
"Affiliate Letter") to Acquiror.
A. In connection with, and in consideration of, the matters set forth
above:
1. I confirm that I have no agreement (oral or written) with any other
affiliate of the Targets pursuant to which I am subject to restrictions on
sales similar to the restrictions in this Affiliate Letter. I represent and
warrant that as of the date hereof I beneficially own such Target Common
Shares and Target Interests as are listed on Schedule A attached hereto.
2. I understand that the Acquiror Common Shares will, upon the
effectiveness of the Acquisitions, be registered with the SEC under the
Act. However, I also understand that, since I may be an affiliate of one of
the Targets at the time the Agreement is submitted to the stockholders and
partners of the Targets for approval and the distribution by me as a former
affiliate of a Target of Acquiror Common Shares has not been registered
under the Act, any sale or disposition by me of any of the Acquiror Common
Shares may, under current law, be made only in conformity with the
provisions of Rule 145(d) under the Act, pursuant to an effective
registration statement under the Act, or pursuant to an exemption from
registration thereunder. I understand that the provisions of Rule 145(d)
restrict my sales, during the two-year period after the effective date of
the Acquisitions, and permit sales, in general, while Acquiror is subject
to the requirements to file, and is filing, periodic reports under Section
13 or 15(d) of the Securities Exchange Act of 1934, as amended, only in
brokers' transactions or transactions directly with a market maker where
the aggregate number of shares sold at any time together with all sales of
restricted Acquiror securities sold for my account during the preceding
three-month period, does not exceed, generally, the greater of (i) one
percent of the outstanding shares of Common Stock of Acquiror, or (ii) the
average weekly volume of trading in such securities on all national
securities exchanges and/or
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reported through the automated quotation system of a registered securities
association during the four-week period preceding any such sale, all as set
forth in more detail in Rules 144 and 145 under the Act.
3. In view of the foregoing paragraph 2, unless the Agreement is
terminated, I agree that after the effective date of the Acquisitions, I
will not offer to sell, sell or otherwise dispose of Acquiror Common Shares
except (i) pursuant to an effective registration statement; (ii) pursuant
to the provisions of Rule 145 under the Act; or (iii) pursuant to another
exemption from registration under the Act.
4. I have carefully read this letter and understand the limitations
stated herein upon the sale, transfer or other disposition of (i) Target
Common Shares and Target Interests beneficially owned by me or hereafter
acquired by me and (ii) Acquiror Common Shares that I may acquire pursuant
to the Agreement.
B. In connection herewith, Acquiror represents, warrants, acknowledges and
agrees as follows:
1. Acquiror shall not give, or cause to be given, stop transfer
instructions to the transfer agent of Acquiror with respect to any of the
Acquiror Common Shares issued in connection with the Acquisitions except
for such instructions as shall be in conformity with the provisions hereof,
and shall place, or cause to be placed, on any certificate representing
such Acquiror Common Shares only the following legend:
The shares represented by this certificate were issued in a
transaction to which Rule 145 under the Securities Act of 1933
applies. The shares represented by this certificate may be
transferred only in accordance with the terms of a letter agreement
dated , 1995 between the registered holder and The
Hillhaven Corporation, a copy of which is on file at the principal
offices of The Hillhaven Corporation.
2. Acquiror shall use its best efforts to file, in a timely manner,
all reports with the SEC necessary for the current public information
requirement of Rule 144 under the Act to be satisfied.
Very truly yours,
--------------------------------------
Agreed this day of
, 1995:
The Hillhaven Corporation
- - ---------------------------------------------------------
Name:
Title:
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EXHIBIT 6.6 (B)
, 1995
The Hillhaven Corporation
1148 Broadway Plaza
Tacoma, Washington 98402
Gentlemen:
Reference is made to the Restated and Amended Agreement and Plan of Share
Exchange and Agreements to Assign Partnership Interests dated as of
, 1995, as amended (the "Agreement"), by and among The Hillhaven Corporation
("Acquiror"), Nationwide Care, Inc. ("Nationwide"), Phillippe Enterprises, Inc.
("PEI"), Meadowvale Skilled Care Center, Inc. ("Meadowvale") and specified
Partners of Camelot Care Centers ("Camelot"), Evergreen Woods, Ltd.
("Evergreen") and Shangri-La Partnership ("Shangri-La")(Nationwide, PEI and
Meadowvale are collectively referred to herein as the "Corporate Targets";
Camelot, Evergreen and Shangri-La are collectively referred to herein as the
"Partnership Targets"; the Corporate Targets and Partnership Targets are
collectively referred to herein as the "Targets"), providing for the exchange of
all of the outstanding common stock of each of the Corporate Targets for common
stock of the Acquiror and the assignment of all interests in the Partnership
Targets to Nationwide (collectively, the "Acquisitions"). Pursuant to the
Agreement, I may receive a certain number of shares of Common Stock, par value
$0.75 per share, of Acquiror in exchange for the shares of Common Stock of the
Corporate Targets (the "Target Common Shares") or interests in the Partnership
Targets (the "Target Interests") owned by me (all shares of Acquiror Common
Stock to be acquired by me pursuant to the Agreement being hereinafter referred
to as "Acquiror Common Shares").
I understand that the Targets are obligated, pursuant to Section 6.6 of the
Agreement, to use their best efforts to cause each shareholder of the Corporate
Targets and each partner of the Partnership Targets to deliver this letter
(hereinafter referred to as the a "Pooling Letter") to Acquiror.
In connection with, and in consideration of, the matters set forth above:
1. I confirm that I have no agreement (oral or written) with any
other shareholder or partner of the Targets pursuant to which I am subject
to restrictions on sales similar to the restrictions in this Pooling
Letter. I represent and warrant that as of the date hereof I beneficially
own such Target Common Shares and Target Interests as are listed on
Schedule A attached hereto.
2. I understand that, for accounting purposes, it is anticipated that
the Acquisitions will qualify for pooling-of-interests accounting treatment
under generally accepted accounting principles and that, in order for the
Acquisitions to so qualify, shareholders or partners of any Target can sell
Target Common Shares, Target Interests and Acquiror Common Shares only in
accordance with certain restrictions. In this connection, I will not make
any sales of Target Common Shares or Target Interests prior to the
effective date of the Acquisitions, or sales of Acquiror Common Shares
after the effective date of the Acquisitions, that would cause the criteria
for pooling-of-interests accounting treatment to be violated, it being
understood that sales of shares in accordance with paragraph 3 below shall
be deemed not to violate my obligations under this Pooling Letter.
3. In view of the foregoing paragraph 2, unless the Agreement is
terminated, I agree that with respect to the period beginning on the
effective date of the Acquisitions and ending at such time as financial
results covering at least 30 days of post-Acquisition combined operations
have been published, I will not sell, transfer or otherwise dispose of, or
reduce my interest in, or risk relating to, any Acquiror Common Shares
received by me pursuant to the Agreement, unless prior to any such
transaction I have obtained a letter from an independent public accounting
firm satisfactory to Acquiror to the effect that such transactions will not
cause the criteria for pooling-of-interests accounting to be violated.
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4. I have carefully read this letter and understand the limitations
stated herein upon the sale, transfer or other disposition of (i) Target
Common Shares and Target Interests beneficially owned by me or hereafter
acquired by me and (ii) Acquiror Common Shares that I may acquire pursuant
to the Agreement.
Very truly yours,
-------------------------------------
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EXHIBIT 7.7
CERTIFICATE
EXECUTED BY THE HILLHAVEN CORPORATION
FOR NATIONWIDE CARE, INC.
This Certificate is executed and delivered in connection with the Amended
and Restated Agreement and Plan of Share Exchange and Agreements to Assign
Partnership Interests, by and among The Hillhaven Corporation, a Nevada
corporation ("Acquiror"), Nationwide Care, Inc., an Indiana corporation
("Nationwide"), Phillippe Enterprises, Inc., an Indiana corporation ("PEI"),
Meadowvale Skilled Care Center, Inc., an Indiana corporation ("Meadowvale")
(Nationwide, PEI and Meadowvale are collectively referred to as the "Targets"),
the partners of Camelot Care Centers, an Indiana general partnership
("Camelot"), the partners of Shangri-La Partnership, an Indiana general
partnership ("Shangri-La"), and the limited partners of Evergreen Woods, Ltd., a
Florida limited partnership ("Evergreen") (Camelot, Shangri-La and Evergreen are
collectively referred to as the "Partnerships"), dated as of February 27, 1995
("Reorganization Agreement"); and the documents executed and delivered in
connection therewith (collectively with the Reorganization Agreement, the
"Transaction Documents"). Terms which are not defined herein and are used with
initial capitalization when the rules of grammar would not otherwise so require
and which are defined in the Transaction Documents shall have the meanings
assigned to such terms in the Transaction Documents.
In accordance with Section 9.10 of the Reorganization Agreement, Nationwide
has requested the opinions of Ice Miller Donadio & Ryan as to certain federal
income tax consequences of the Share Exchange as a condition precedent to
Closing. This Certificate is issued by Acquiror in accordance with Section 7.7
of the Reorganization Agreement. In rendering its opinion, Ice Miller Donadio &
Ryan may assume that, and the undersigned hereby certifies, represents, and
warrants to Ice Miller Donadio & Ryan that: (1) the Share Exchange will be
consummated in accordance with the terms, conditions, and other provisions of
the Transaction Documents; and (2) all of the factual information, descriptions,
representations, and assumptions set forth in the Transaction Documents, in the
Form S-4 Registration Statement to be filed with the Securities and Exchange
Commission on April , 1995 in connection with the Share Exchange (the
"Registration Statement"), and in this Certificate are accurate and complete in
all respects and will be accurate and complete in all respects at the time the
Registration Statement becomes effective and at the Effective Time of the Share
Exchange (the "Effective Time").
Pursuant to the foregoing, the undersigned hereby certifies, represents,
and warrants to Ice Miller Donadio & Ryan as follows:
THE SHARE EXCHANGE
Acquiror and its subsidiaries operate nursing centers, pharmacies and
retirement housing communities. The capital structure of Acquiror consists of 60
million authorized shares of voting Common Stock, par value $.75 per share of
which approximately 32,824,863 are outstanding (the "Acquiror Common Shares");
25 million authorized shares of preferred stock, par value $0.15 per share, of
which the following series have been designated: 3 million authorized shares of
Series A Preferred Stock, of which no shares are outstanding; 950 authorized
shares of Series B Convertible Preferred Stock, of which 618 shares have been
designated as Subseries 1, of which no shares are outstanding; 35,000 authorized
shares of Series C Preferred Stock, all of which are outstanding; and 300,000
authorized shares of Series D Preferred Stock, of which approximately 63,403 are
outstanding.
The Transaction Documents provide that all of the outstanding shares of
common stock of Nationwide will be exchanged solely for Acquiror Common Shares.
The Share Exchange will be consummated in accordance with the Indiana Business
Corporation Law, as amended ("BCL"), and the Nevada General Corporation Law, as
amended ("NCL"). The Share Exchange was approved by the Board of Directors of
Acquiror on April 12, 1995, and does not require the approval of the Acquiror
shareholders.
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At the Effective Time, each Nationwide Common Share then outstanding will
be exchanged for that number of shares of Acquiror Common Stock determined in
accordance with the Reorganization Agreement, rounded to the nearest whole
share. Other than shares of Acquiror Common Stock, there will be no cash or
other property exchanged in the Share Exchange.
Prior to the Effective Time, the Nationwide Preferred Stock will be
redeemed by Nationwide with its own funds and without reimbursement directly or
indirectly from Acquiror. Immediately prior to the Effective Time, the
Nationwide Warrants shall be exercised into the corresponding number of
Nationwide Nonvoting Common pursuant to the terms of the Warrants, and the
resulting Nationwide Nonvoting Common will be exchanged for that number of
shares of Acquiror Common Stock determined in accordance with the Reorganization
Agreement, rounded to the nearest whole share.
At the Closing, the Nationwide Subordinated Notes will be prepaid directly
by Acquiror. The Nationwide Subordinated Notes are debt (not stock or equity)
under general principles of federal taxation law, and Acquiror will pay only the
fair market value of such indebtedness, and will not pay any amounts in excess
of such indebtedness. The Nationwide Common Shares held by the holders of the
Nationwide Subordinated Notes shall be valued in the Share Exchange in the same
manner as the other Nationwide Common Shares.
At the Effective Time, the Partnership Interests shall be assigned to
Nationwide. All of the parties to the Reorganization Agreement agree that the
Partnership Interests have no value, nor do they represent liabilities. None of
the Acquiror Common Stock is being transferred pursuant to the Reorganization
Agreement in exchange for such Partnership Interests. The parties agree that the
shareholders of the Targets and Partners of the Partnerships were not the
primary obligors with respect to the obligations which they personally
guaranteed and which will be released prior to the Share Exchange. The
Nationwide Common Shares held by the Partners and by the guarantors shall be
valued in the Share Exchange in the same manner as the other Nationwide Common
Shares. Any debts owed by any Partnership to any of the Target shareholders
(including without limitation the debt owed by Shangri-La to Thomas E.
Phillippe, Sr.) shall be paid by Nationwide out of its own funds without
reimbursement directly or indirectly from Acquiror. Acquiror is making no
payment of cash or Acquiror Common Stock or other property or assuming any
liabilities in connection with or pursuant to the assumption of the Partnership
Interests, releases of gurantees or the Noncompetition Agreements, and will not
directly or indirectly reimburse Nationwide for any such payments.
Acquiror will not make, directly or indirectly, any payments to dissenters
or any other distributions to the Nationwide shareholders with respect to their
Nationwide stock in contemplation of the Share Exchange.
Except for the Nationwide Warrants, Acquiror is not aware of any
outstanding options or warrants to purchase Nationwide shares or outstanding
securities or other instruments or rights, convertible into Nationwide shares or
which constitute equity under general principles of federal tax law, and no such
options, warrants, securities, instruments or rights have been or will be issued
or cancelled in contemplation of the Share Exchange.
ADDITIONAL REPRESENTATIONS
1. The fair market value of the shares of Acquiror Common Stock
received by each Nationwide shareholder will be approximately equal to the
fair market value of the shares of Nationwide stock surrendered in exchange
therefor.
2. Following the Share Exchange, Acquiror will not permit Nationwide
to issue additional shares of its stock that would result in Acquiror
losing control of Nationwide within the meaning of Section 368(c) of the
Internal Revenue Code of 1986, as amended (the "Code").
3. Acquiror has no plan or intention to reacquire any of its stock
issued in the Share Exchange.
4. Acquiror has no plan or intention to liquidate Nationwide or any
Nationwide subsidiary; to merge Nationwide or any Nationwide subsidiary
with and into another corporation; to cause or permit Nationwide to sell or
otherwise dispose of any of its assets, or the assets of any Nationwide
subsidiary,
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except for dispositions made in the ordinary course of business; or to sell
or otherwise dispose of the stock of Nationwide or any Nationwide
subsidiary except for transfers described in Code Section 368 (a)(2)(C).
5. Following the Share Exchange, Nationwide will continue its historic
business or use a significant portion of its historic business assets in a
business.
6. Acquiror will pay its expenses incurred in connection with the
Share Exchange. Acquiror will not pay the expenses of Nationwide or the
Nationwide shareholders, if any, incurred in connection with the Share
Exchange.
7. Acquiror will acquire Nationwide stock solely in exchange for
Acquiror voting stock (Acquiror Common Shares). For purposes of this
representation, Nationwide stock redeemed for cash or other property
furnished by Acquiror will be considered as acquired by Acquiror. Further,
no liabilities of Nationwide or the Nationwide shareholders will be assumed
by Acquiror, nor will any of the Nationwide stock be subject to any
liabilities.
8. Nationwide will pay its dissenting shareholders the value of their
stock out of its own funds. No funds will be supplied for that purpose,
directly or indirectly, by Acquiror, nor will Acquiror directly or
indirectly reimburse Nationwide for any payments to dissenters.
9. There is no intercorporate indebtedness existing between Acquiror
and Nationwide or between Acquiror and any Nationwide subsidiaries that was
issued, acquired, or will be settled at a discount.
10. Acquiror is not an investment company as defined in Code Sections
368(a)(2)(F)(iii) and 368(a)(2)(F)(iv).
11. Acquiror is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Code Section 368(a)(3)(A).
12. Acquiror does not own, directly or indirectly, nor has it owned
during the past five years, directly or indirectly, any shares of
Nationwide stock, including any ownership by any Acquiror subsidiary.
Acquiror will not acquire, directly or indirectly, any shares of Nationwide
stock prior to the Effective Time.
13. The Share Exchange is being effected for bona fide business
reasons, including without limitation the reasons set forth in the
Registration Statement and for the reasons that Acquiror and its
subsidiaries have looked for growth opportunities which would increase
their percentage share of the nursing care market while increasing their
operating efficiencies by achieving economies of scale as a larger service
provider. Due in part to the proximity of the service areas, Acquiror
determined that Nationwide represented such an opportunity and expressed an
interest in combining the resources of the companies. Acquiror believes
that a combination of its operations with Nationwide will provide increased
opportunity and flexibility for profitable expansion and diversification,
will enhance their ability to provide more efficient and dependable
service, and will result in operating efficiencies and cost savings.
14. At the Effective Time, the fair market value of the assets of
Nationwide will exceed the sum of its liabilities, plus the amount of
liabilities, if any, to which the assets are subject.
15. None of the compensation received by any shareholder who is an
employee of Nationwide will be separate consideration for, or allocable to,
any of such shareholder's shares of Nationwide stock. None of the shares of
Acquiror Common Stock received by any shareholder who is an employee of
Nationwide will be separate consideration for, or allocable to, any
employment agreement. The compensation paid to any shareholder who is an
employee of Nationwide will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at arm's-length
for similar services.
16. To the extent that a portion of the shares of Acquiror Common
Stock issued in exchange for the Nationwide stock will be placed in escrow
by the Nationwide shareholders and will be made subject to a condition
pursuant to the Reorganization Agreement and the Escrow Agreement, for
possible return to Acquiror under specified conditions: (1) there is a
valid business reason for establishing the arrangement
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in that the escrow is a mechanism to accomplish an exchange price
adjustment, bargained for at arm's length, in the event of a breach by
Nationwide, and no Nationwide shareholder is liable for any such breach;
(2) the shares of Acquiror Common Stock subject to such arrangement will
appear as issued and outstanding on the balance sheet of Acquiror and such
shares of Acquiror Common Stock will be legally outstanding under
applicable state law; (3) all dividends paid on such shares of Acquiror
Common Stock will be distributed currently to the Nationwide shareholders;
(4) all voting rights of such shares of Acquiror Common Stock will be
exercisable by or on behalf of the Nationwide shareholders or their
authorized agent; (5) no shares of such Acquiror Common Stock will be
subject to restrictions requiring their return to Acquiror because of
death, failure to continue employment, or similar restrictions; (6) all
such shares of Acquiror Common Stock will be released from the arrangement
within five years from the date of consummation of the Share Exchange
(except where there is a bona fide dispute as to whom the shares of
Acquiror Common Stock should be released); (7) at least 50 percent of the
number of shares of each class of Acquiror Common Stock issued initially to
the Nationwide shareholders will not be subject to the arrangement; (8) the
return of the shares of Acquiror Common Stock will not be triggered by an
event the occurrence or nonoccurrence of which is within the control of the
Nationwide shareholders; (9) the return of shares of Acquiror Common Stock
will not be triggered by the payment of additional tax or reduction in tax
paid as a result of an Internal Revenue Service audit of the Nationwide
shareholders or the corporations either (a) with respect to the Share
Exchange, or (b) when the Share Exchange involves persons related within
the meaning of Code Section 267(c)(4); and (10) the mechanism for the
calculation of the number of shares of Acquiror Common Stock to be returned
is objective and will be readily ascertainable.
17. The purpose of the Hillhaven rights plan is to provide a mechanism
by which Hillhaven, a publicly traded corporation, can, in the future,
provide shareholders with rights to purchase Hillhaven stock at
substantially less than fair market value as a means of responding to
unsolicited offers to acquire Hillhaven. The plan provides that in the
event of an unsolicited offer in the future to acquire Hillhaven under
certain circumstances (a "triggering event"), the Hillhaven shareholders
will have the right to purchase Hillhaven stock. The rights until they
become exercisable may be redeemed at any time by Hillhaven for one cent
per right until a specified date. Until a triggering event, the rights are
not exercisable or separately tradeable, transferrable, or detachable, nor
are they represented by any certificate other than the Acquiror Common
Share certificate. Until a triggering event occurs, the exercise price is
anticipated to exceed the value of the Hillhaven stock at all times during
the life of the right. The likelihood that the rights would, at any time,
be exercised is both remote and speculative. No event has occurred, or is
anticipated to occur, that would make the rights exercisable.
The foregoing is provided to Ice Miller Donadio & Ryan in connection with
the preparation of its opinions. We understand that its opinions will be
premised on the basis that all of the facts, representations, and assumptions on
which it is relying, whether contained herein or elsewhere, are accurate and
complete in all respects and will be accurate and complete in all respects at
the time the Registration Statement becomes effective.
IN WITNESS WHEREOF, the undersigned have executed this Certificate as of
this day of , 1995.
THE HILLHAVEN CORPORATION
By:
-------------------------------
Printed:
--------------------------
Title:
----------------------------
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EXHIBIT 12.2(H)
PART 1
NONCOMPETITION AGREEMENT
This NONCOMPETITION AGREEMENT (this "Agreement"), dated [ ], 1995,
is made among The Hillhaven Corporation, a Nevada corporation ("Acquiror"), and
Dr. Thomas E. Phillippe, Sr. ("Phillippe"), an individual.
WHEREAS, Phillippe and certain other persons have, on this date, as part of
a single transaction, delivered to Acquiror all the issued and outstanding
shares of the capital stock of Nationwide Care, Inc. ("Nationwide"), Phillippe
Enterprises, Inc., and Meadowvale Skilled Care Center, Inc., each an Indiana
corporation (collectively, the "Corporate Targets"), and delivered to Nationwide
all the outstanding interests in Camelot Care Centers, a general partnership
governed by the laws of Indiana, Shangri-La Partnership, a general partnership
governed by the laws of Indiana, and Evergreen Woods, Ltd., a Florida limited
partnership (together, the "Partnership Targets") (the Corporate Targets and the
Partnership Targets being referred to herein collectively as the "Targets"),
pursuant to that certain Amended and Restated Agreement and Plan of Share
Exchange and Agreements to Assign Partnership Interests among Acquiror and the
Targets, dated as of February 27, 1995 (the "Share Exchange Agreement"; such
transaction contemplated therein hereinafter referred to as the "Transaction");
WHEREAS, Acquiror and the Targets are engaged in various locations in the
following businesses (i) owning, operating and managing nursing homes and
assisted living centers and (ii) providing home health care and rehabilitation
therapy care (the foregoing businesses being referred to herein collectively as
the "Business Activities");
WHEREAS, Phillippe has acquired knowledge relating to the Business
Activities as a result of Phillippe's relationship with the Targets; and
WHEREAS, as part of, and a condition precedent to, the Transaction,
Phillippe has agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual premises and agreements
herein set forth, the parties hereto, intending to be legally bound, agree as
follows:
1. Definitions. All capitalized terms used and not defined herein
shall have the meanings given such terms in the Share Exchange Agreement.
References to "Phillippe" herein shall mean Phillippe and any of his
Affiliates.
2. Rights of Acquiror. Covenants herein contained are cumulative to
the rights of Acquiror under the laws of the United States, the states of
Washington, Indiana, Ohio and Florida and other states, as applicable,
respecting Acquiror's rights to protect itself from the competition of
Phillippe.
3. Non-Competition. Phillippe agrees that, for a period of five (5)
years from the date of the Effective Time, Phillippe shall not, directly or
indirectly:
(a) have an interest in, own, manage, operate, control, be
connected with as a stockholder (other than as a stockholder of less
than 5% of the issued and outstanding stock of a publicly held
corporation), joint venturer, partner, limited liability company member
or manager, or consultant, or otherwise engage or invest or participate
in, or enjoy a financially beneficial relationship with, any business
which conducts any of the Business Activities within a five (5) mile
radius of any facility or other location at or from which Acquiror, a
Target or any of their respective Affiliates conducts any of the
Business Activities as of the date hereof.
(b) (i) solicit, recruit or hire any employee of Acquiror, a Target
or any of their respective Affiliates or any person who has worked for
Acquiror, a Target or any of their respective Affiliates
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within the six months preceding such solicitation, recruitment or hire;
or (ii) solicit or encourage any employee of Acquiror, a Target or any
of their respective Affiliates to leave such employment.
4. Specific Performance. Phillippe acknowledges that his failure to
comply with the provisions of this Agreement will result in irreparable and
continuing damage to Acquiror for which there will be no adequate remedy at
law and that, in the event of a failure of Phillippe so to comply, Acquiror
and its successors and assigns shall be entitled to injunctive relief and
to such other and further relief as may be proper and necessary to ensure
compliance with the provisions of this Agreement.
5. Amendments. No amendment to this Agreement shall be effective
unless it shall be in writing and signed by each party hereto.
6. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more such counterparts have been
signed by each of the parties and delivered to each other party.
7. Entire Agreement. This Agreement contains the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to
such subject matter.
8. Severability. If any provision of this Agreement or the
application of any such provision to any person or circumstance shall be
held invalid, illegal or unenforceable in any respect by a court of
competent jurisdiction, such invalidity, illegality or unenforceability
shall not affect any other provision hereof or other applications of such
provision.
9. Governing Law. This Agreement shall be governed by and construed
in all respects in accordance with the laws of the State of Indiana,
without regard to the conflicts of law principles of such state.
10. Arbitration. Any claim or controversy relating to the breach,
interpretation or enforcement of this Agreement shall be submitted to final
and binding arbitration in Marion County, Indiana, in an arbitration
proceeding that, except as may otherwise be provided herein, shall be
conducted in accordance with the Commercial Arbitration Rules of the
American Arbitration Association before a single arbitrator chosen in
accordance with such rules. All evidentiary and discovery matters shall be
conducted in accordance with and governed by the applicable Federal Rules
of Civil Procedure. No later than 10 calendar days after the arbitrator is
appointed, the arbitrator shall schedule the arbitration for a hearing to
commence on a mutually convenient date. All discovery shall be completed no
later than the commencement of the arbitration hearing or 90 calendar days
after the date that a proper demand for arbitration is served, whichever
occurs first, unless, upon a showing of good cause, the arbitrator extends
such period. The hearing shall commence no later than 90 calendar days
after the arbitrator is appointed and shall continue until completed. The
arbitrator shall issue his or her award in writing no later than 20
calendar days after the conclusion of the hearing. The arbitrator shall not
have the power to amend this Agreement in any respect. The arbitrator's
decision shall be binding and conclusive upon the parties.
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IN WITNESS WHEREOF, the parties have duly executed and have caused to be
duly executed this Agreement as of the date first above written.
THE HILLHAVEN CORPORATION
By:
--------------------------------
Robert F. Pacquer
Senior Vice President and
Chief Financial Officer
------------------------------------
Dr. Thomas E. Phillippe, Sr.
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EXHIBIT 12.2(H)
PART 2
NONCOMPETITION AGREEMENT
This NONCOMPETITION AGREEMENT (this "Agreement"), dated [ ],
1995, is made among The Hillhaven Corporation, a Nevada corporation
("Acquiror"), and Thomas E. Phillippe, Jr. ("Phillippe"), an individual.
WHEREAS, Phillippe and certain other persons have, on this date, as part of
a single transaction, delivered to Acquiror all the issued and outstanding
shares of the capital stock of Nationwide Care, Inc. ("Nationwide"), Phillippe
Enterprises, Inc., and Meadowvale Skilled Care Center, Inc., each an Indiana
corporation (collectively, the "Corporate Targets"), and delivered to Nationwide
all the outstanding interests in Camelot Care Centers, a general partnership
governed by the laws of Indiana, Shangri-La Partnership, a general partnership
governed by the laws of Indiana, and Evergreen Woods, Ltd., a Florida limited
partnership (together, the "Partnership Targets") (the Corporate Targets and the
Partnership Targets being referred to herein collectively as the "Targets"),
pursuant to that certain Amended and Restated Agreement and Plan of Share
Exchange and Agreements to Assign Partnership Interests among Acquiror and the
Targets, dated as of February 27, 1995 (the "Share Exchange Agreement"; such
transaction contemplated therein hereinafter referred to as the "Transaction");
WHEREAS, Acquiror and the Targets are engaged in various locations in the
following businesses (i) owning, operating and managing nursing homes and
assisted living centers and (ii) providing home health care and rehabilitation
therapy care (the foregoing businesses being referred to herein collectively as
the "Business Activities");
WHEREAS, Phillippe has acquired knowledge relating to the Business
Activities as a result of Phillippe's relationship with the Targets; and
WHEREAS, as part of, and a condition precedent to, the Transaction,
Phillippe has agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual premises and agreements
herein set forth, the parties hereto, intending to be legally bound, agree as
follows:
1. Definitions. All capitalized terms used and not defined herein
shall have the meanings given such terms in the Share Exchange Agreement.
References to "Phillippe" herein shall mean Phillippe and any of his
Affiliates.
2. Rights of Acquiror. Covenants herein contained are cumulative to
the rights of Acquiror under the laws of the United States, the states of
Washington, Indiana, Ohio and Florida and other states, as applicable,
respecting Acquiror's rights to protect itself from the competition of
Phillippe.
3. Non-Competition. Phillippe agrees that, for a period of five (5)
years from the date of the Effective Time, Phillippe shall not, directly or
indirectly:
(a) have an interest in, own, manage, operate, control, be
connected with as a stockholder (other than as a stockholder of less
than 5% of the issued and outstanding stock of a publicly held
corporation), joint venturer, partner, limited liability company member
or manager, or consultant, or otherwise engage or invest or participate
in, or enjoy a financially beneficial relationship with, any business
which conducts any of the Business Activities within a five (5) mile
radius of any facility or other location at or from which Acquiror, a
Target or any of their respective Affiliates conducts any of the
Business Activities as of the date hereof.
(b) (i) solicit, recruit or hire any employee of Acquiror, a Target
or any of their respective Affiliates or any person who has worked for
Acquiror, a Target or any of their respective Affiliates
-69-
<PAGE>
within the six months preceding such solicitation, recruitment or hire;
or (ii) solicit or encourage any employee of Acquiror, a Target or any
of their respective Affiliates to leave such employment.
4. Specific Performance. Phillippe acknowledges that his failure to
comply with the provisions of this Agreement will result in irreparable and
continuing damage to Acquiror for which there will be no adequate remedy at
law and that, in the event of a failure of Phillippe so to comply, Acquiror
and its successors and assigns shall be entitled to injunctive relief and
to such other and further relief as may be proper and necessary to ensure
compliance with the provisions of this Agreement.
5. Amendments. No amendment to this Agreement shall be effective
unless it shall be in writing and signed by each party hereto.
6. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more such counterparts have been
signed by each of the parties and delivered to each other party.
7. Entire Agreement. This Agreement contains the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to
such subject matter.
8. Severability. If any provision of this Agreement or the application
of any such provision to any person or circumstance shall be held invalid,
illegal or unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality or unenforceability shall not
affect any other provision hereof or other applications of such provision.
9. Governing Law. This Agreement shall be governed by and construed in
all respects in accordance with the laws of the State of Indiana, without
regard to the conflicts of law principles of such state.
10. Arbitration. Any claim or controversy relating to the breach,
interpretation or enforcement of this Agreement shall be submitted to final
and binding arbitration in Marion County, Indiana, in an arbitration
proceeding that, except as may otherwise be provided herein, shall be
conducted in accordance with the Commercial Arbitration Rules of the
American Arbitration Association before a single arbitrator chosen in
accordance with such rules. All evidentiary and discovery matters shall be
conducted in accordance with and governed by the applicable Federal Rules
of Civil Procedure. No later than 10 calendar days after the arbitrator is
appointed, the arbitrator shall schedule the arbitration for a hearing to
commence on a mutually convenient date. All discovery shall be completed no
later than the commencement of the arbitration hearing or 90 calendar days
after the date that a proper demand for arbitration is served, whichever
occurs first, unless, upon a showing of good cause, the arbitrator extends
such period. The hearing shall commence no later than 90 calendar days
after the arbitrator is appointed and shall continue until completed. The
arbitrator shall issue his or her award in writing no later than 20
calendar days after the conclusion of the hearing. The arbitrator shall not
have the power to amend this Agreement in any respect. The arbitrator's
decision shall be binding and conclusive upon the parties.
-70-
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed and have caused to be
duly executed this Agreement as of the date first above written.
THE HILLHAVEN CORPORATION
By:
---------------------------------
Robert F. Pacquer
Senior Vice President and
Chief Financial Officer
------------------------------------
Thomas E. Phillippe, Jr.
-71-
<PAGE>
EXHIBIT 12.2(i)
AGREEMENT AMONG SHAREHOLDERS
THIS AGREEMENT AMONG SHAREHOLDERS ("Agreement") is entered into as of
, 1995, by and among all of the shareholders (the "Shareholders") of
Nationwide Care, Inc., an Indiana corporation ("Nationwide").
PRELIMINARY STATEMENTS
Nationwide, The Hillhaven Corporation, a Nevada corporation ("Acquiror"),
Phillippe Enterprises, Inc., an Indiana corporation ("PEI"), Meadowvale Skilled
Care Center, Inc., an Indiana corporation ("Meadowvale") (Nationwide, PEI and
Meadowvale are collectively referred to as the "Corporate Targets"), the
partners of Camelot Care Centers, an Indiana general partnership ("Camelot"),
the partners of Shangri-La Partnership, an Indiana general partnership
("Shangri-La"), and the limited partners of Evergreen Woods, Ltd., a Florida
limited partnership ("Evergreen") (Camelot, Shangri-La and Evergreen are
collectively referred to as the "Partnerships"), have entered into that certain
Amended and Restated Agreement and Plan of Share Exchange and Agreements to
Assign Partnership Interests, dated as of February 27, 1995 (the "Reorganization
Agreement"), and the documents executed and delivered in connection therewith
(collectively with the Reorganization Agreement, the "Transaction Documents"),
pursuant to which all of the shares of common stock of Nationwide will be
exchanged solely for Acquiror Voting Common Stock (the "Share Exchange") in a
reorganization within the meaning of Section 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended (the "Code"). Voting Acquiror Common Shares
will be the only consideration issued to the Shareholders in the Share Exchange.
Section 9.10 of the Reorganization Agreement provides that, as a condition
precedent to the consummation of the Share Exchange, Nationwide shall receive
opinions of counsel that the Share Exchange will qualify as a reorganization
within the meaning of Code Section 368(a)(1)(B). The Shareholders desire to set
forth their agreement concerning ownership of the Acquiror Common Shares
received in the Share Exchange in order to facilitate the issuance of the
opinions referred to in Section 9.10 of the Reorganization Agreement and to
otherwise ensure that the continuity of shareholder interest requirement set
forth in Treasury Regulation sec. 1.368-1(b) will be satisfied with respect to
the Share Exchange.
Terms which are not defined herein and are used with initial capitalization
when the rules of grammar would not otherwise so require and which are defined
in the Transaction Documents shall have the meanings assigned to such terms in
the Transaction Documents.
NOW, THEREFORE, in consideration of the mutual covenants, undertakings and
promises set forth in this Agreement, the Shareholders agree as follows:
TERMS AND CONDITIONS
SECTION 1. Representations, Warranties, and Covenants of the
Shareholders. Each Shareholder severally represents, warrants, and covenants to
the other Shareholders that the Shareholder has no plan, intention, or
arrangement to sell, exchange or otherwise dispose of a number of the Acquiror
Common Shares received in the Share Exchange that would reduce that
Shareholder's ownership of the Acquiror Common Shares to a number of Acquiror
Common Shares having a value, determined as of the Effective Time of the Share
Exchange (the "Effective Time"), of less than 50 percent of the value of the
Nationwide stock held by that Shareholder immediately before the Share Exchange.
For purposes of this representation, warranty, and covenant, Nationwide stock
(including voting and nonvoting common stock and preferred stock) and Acquiror
Common Shares held by the Shareholder and otherwise sold, redeemed, or disposed
of prior or subsequent to the Share Exchange have been considered in making this
representation, warranty, and covenant. Each Shareholder further represents,
warrants, and covenants that such Shareholder has no plan, intention, or
arrangement to sell, exchange, or otherwise dispose of any Acquiror Common
Shares received in the Share Exchange except as set forth on Exhibit A.
-72-
<PAGE>
SECTION 2. Prohibition on Disposition within Two Years. No Shareholder
shall, within two years of the Effective Time, sell, exchange, or otherwise
dispose of any of the Acquiror Common Shares received in the Share Exchange,
except as set forth on Exhibit A, unless and until (a) such sale, exchange or
disposition would not reduce the fair market value of the Acquiror Common Shares
(determined as of the Effective Time) retained by that Shareholder to an amount
less than fifty percent (50%) of the fair market value of the Nationwide stock
held by that Shareholder immediately before Share Exchange (determined in the
same manner as set forth in Section 1 of this Agreement); or (b) in the event
such sale, exchange or disposition would reduce the fair market value of the
Acquiror Common Shares (determined as of the Effective Time) retained by that
Shareholder to an amount less than fifty percent (50%) of the fair market value
of the Nationwide stock held by that Shareholder immediately before the Share
Exchange, (i) such Shareholder obtains and delivers to Thomas E. Phillippe, Jr.,
acting as representative of all the Shareholders (the "Representative"), an
unqualified opinion of counsel (from counsel reasonably acceptable to the
Representative, and in a form acceptable to the Representative) to the effect
that such sale, exchange or disposition would not adversely affect the tax-free
status of the Share Exchange; and (ii) the Representative and Thomas E.
Phillippe, Sr. (the "Phillippes") jointly consent in writing to such sale,
exchange or disposition. The Phillippes shall use reasonable efforts to reply to
a request for a disposition of shares pursuant to clause (b) above within 30
days of receipt of a written notice of a Shareholder's request to sell shares
pursuant to such clause.
SECTION 3. Nonwaiver. The failure of any Shareholder or of the
Representative to insist in any one or more instances upon performance of any
provisions of this Agreement or to pursue rights under this Agreement shall not
be construed as a waiver of any such provisions or the relinquishment of any
such rights.
SECTION 4. Governing Law. The laws of the State of Indiana shall govern the
validity, performance, enforcement, interpretation and any other aspect of this
Agreement.
SECTION 5. Modification. This Agreement may not be modified or altered
except by written instrument duly executed by all of the Shareholders.
SECTION 6. Entire Agreement. The Transaction Documents and this Agreement
contain the entire agreement of the Shareholders with respect to the subject
matter of this Agreement and shall be deemed to supersede all prior agreements,
whether written or oral, and the terms and provisions of any such prior
agreements shall be deemed to have been merged into this Agreement.
SECTION 7. Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but which
together shall constitute one and the same instrument.
<TABLE>
<S> <C>
- - ------------------------------------------ ------------------------------------------
- - ------------------------------------------ ------------------------------------------
- - ------------------------------------------ ------------------------------------------
- - ------------------------------------------ ------------------------------------------
- - ------------------------------------------ ------------------------------------------
- - ------------------------------------------ ------------------------------------------
- - ------------------------------------------ ------------------------------------------
- - ------------------------------------------ ------------------------------------------
- - ------------------------------------------ ------------------------------------------
- - ------------------------------------------ ------------------------------------------
- - ------------------------------------------ ------------------------------------------
- - ------------------------------------------ ------------------------------------------
</TABLE>
-73-
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
NUMBER OF SHARES
WHICH THE
SHAREHOLDER HAS
A PLAN,
INTENTION, OR
ARRANGEMENT TO
SELL, EXCHANGE,
NUMBER OF OR OTHERWISE
SHAREHOLDER SHARES HELD DISPOSE OF
----------- ----------- ----------------
<S> <C> <C>
VOTING COMMON SHARES
Lorene Burns..................................... 35,418
Rod Benson....................................... 159,694
Kathy Benson..................................... 60,000
Joe Edwards...................................... 66,570
Don Polston...................................... 30,000
Kaylynn Cheesman................................. 7,500
Mark Benson...................................... 7,500
Dan Benson....................................... 7,500
David Benson..................................... 7,500
Lorayn Hoop...................................... 113,172
Phil Caldwell.................................... 3,750
Chuck Cooper..................................... 3,750
William Phillippe................................ 79,206
Joe Phillippe.................................... 22,540
Mike Goodspeed................................... 24,624
Tom Phillippe, Jr................................ 1,475,812
Tom Phillippe, Sr................................ 1,982,967
Tom Phillippe, Sr., as Trustee under Annuity
Trust for the benefit of Tom Phillippe, Jr..... 850,000
Tom Phillippe, Sr., as Trustee under Annuity
Trust for the benefit of Towana Moore.......... 850,000
Tom Phillippe, Sr., as Trustee under Annuity
Trust for the benefit of Stacey Mervine........ 850,000
Indiana Wesleyan................................. 50,000
Towana Moore..................................... 264,865
Craig Moore...................................... 110,736
Greg & Stacy Mervine............................. 368,354
Warrants to be exercised......................... 987,188
TOTAL FOR VOTING COMMON SHARES:................ 8,418,646
NONVOTING COMMON SHARES
Ford S. Bartholomew.............................. 3,192
Matthew W. Clary................................. 1,596
Jeffrey M. Mann.................................. 2,394
M. Ann O'Brien................................... 16,754
Robert F. Perille................................ 18,350
Christopher J. Perry............................. 32,710
Thomas E. Van Pelt............................... 1,596
TOTAL FOR NONVOTING COMMON SHARES:............. 76,592
</TABLE>
-74-
<PAGE>
EXHIBIT 11
VENCOR, INC.
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
PRIMARY EARNINGS (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE:
Earnings (loss):
Income from operations........................... $ 8,363 $86,139 $68,976
Preferred stock dividend requirements............ (5,280) (7,574) (2,344)
Gain on redemption of preferred stock............ 10,176 - -
Other............................................ - (179) -
-------- ------- -------
Income from operations available to common
stockholders.................................... 13,259 78,386 66,632
Extraordinary loss on extinguishment of debt, net
of income
tax benefit..................................... (23,252) (241) (2,217)
Cumulative effect on prior years of a change in
accounting
for income taxes................................ - - (1,103)
-------- ------- -------
Income (loss) available to common
stockholders.................................. $ (9,993) $78,145 $63,312
======== ======= =======
Shares used in the computation:
Weighted average common shares outstanding....... 61,196 55,522 51,985
Dilutive effect of common stock equivalents...... 1,122 1,515 2,570
-------- ------- -------
Shares used in computing earnings (loss) per
common
and common equivalent share................... 62,318 57,037 54,555
======== ======= =======
Primary earnings (loss) per common and common
equivalent share:
Income from operations........................... $ .21 $ 1.37 $ 1.22
Extraordinary loss on extinguishment of debt..... (.37) - (.04)
Cumulative effect on prior years of a change in
accounting
for income taxes................................ - - (.02)
-------- ------- -------
Net income (loss).............................. $ (.16) $ 1.37 $ 1.16
======== ======= =======
</TABLE>
<PAGE>
EXHIBIT 11
VENCOR, INC.
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
FULLY DILUTED EARNINGS (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE:
Earnings (loss):
Income from operations available to common
stockholders..................................... $ 13,259 $78,386 $66,632
Interest addback on convertible securities, net of
income taxes..................................... 7,380 10,127 7,056
-------- ------- -------
Adjusted income from operations available to
common stockholders.............................. 20,639 88,513 73,688
Extraordinary loss on extinguishment of debt, net
of income
tax benefit...................................... (23,252) (241) (2,217)
Cumulative effect on prior years of a change in
accounting
for income taxes................................. - - (1,103)
-------- ------- -------
Income (loss) available to common stockholders.. $ (2,613) $88,272 $70,368
======== ======= =======
Shares used in the computation:
Weighted average common shares outstanding........ 61,196 55,522 51,985
Dilutive effect of common stock equivalents and
other dilutive securities (a).................... 10,771 13,492 8,655
-------- ------- -------
Shares used in computing earnings (loss) per
common
and common equivalent share.................... 71,967 69,014 60,640
======== ======= =======
Fully diluted earnings (loss) per common and common
equivalent share:
Income from operations............................ $ .29 $ 1.28 $ 1.22
Extraordinary loss on extinguishment of debt...... (.32) - (.04)
Cumulative effect on prior years of a change in
accounting
for income taxes................................. - - (.02)
-------- ------- -------
Net income (loss)............................... $ (.03) $ 1.28 $ 1.16
======== ======= =======
</TABLE>
- --------
(a) During 1995 all convertible debt securities were redeemed in exchange for
cash or converted into Vencor common stock. Accordingly, the computation
of fully diluted earnings per common share assumes that the equivalent
number of common shares underlying such debt securities were outstanding
during the entire year even though the result thereof is antidilutive.
<PAGE>
EXHIBIT 13.1
Market Prices and Dividend Information
Vencor has approximately 36,000 shareholders based on the number of record
holders of the Company's common stock and an estimate of the number of
individual participants represented by security position listings. No cash
dividends have been paid. The prices in the table below represent the high and
low sales prices for Vencor common stock as reported by the New York Stock
Exchange. All prices have been adjusted and rounded to the nearest one-eighth
to reflect prior stock splits.
<TABLE>
<CAPTION>
1995 1994
- ----------------------------------------------------------------------------
High Low High Low
------------------------------------------------------------
<S> <C> <C> <C> <C>
First Quarter $37 $27 1/8 $24 7/8 $19 1/8
Second Quarter $38 $28 1/2 $24 $20
Third Quarter $36 1/8 $28 1/4 $30 3/8 $22 3/8
Fourth Quarter $33 3/4 $26 $30 5/8 $25 3/4
</TABLE>
<PAGE>
EXHIBIT 21
REGISTRANT'S SUBSIDIARIES
Vencor, Inc., a Delaware corporation
VCI Specialty Services, Inc., a Delaware corporation
Vencor Properties, Inc., a Delaware corporation
Vencor Hospitals Texas, Ltd., a Texas limited partnership
Vencor Investments, Inc., a Delaware corporation
Vencor Hospitals California, Inc., a Delaware corporation
Vencor Hospitals South, Inc., a Delaware corporation
Ventech Systems, Inc., a Delaware corporation
Vencor Hospitals East, Inc., a Delaware corporation
Hahnemann Hospital, Inc., a Delaware corporation
Vencor Hospitals Illinois, Inc., a Delaware corporation
Vencor Kentucky, Inc., a Delaware corporation
Vencare, Inc., a Delaware corporation
Hospice Homecare, Inc., a Kentucky corporation
Vencare Florida, Inc., a Delaware corporation
Candle Subacute Services, Inc., a California corporation
Healthcare Rehabilitation, a California corporation
Respiratory Supply Group, Inc., a California corporation
Healthcare Respiratory Therapy, Inc., a California corporation
Healthcare Respiratory Services, Inc., a California corporation
First Healthcare Corporation, a Delaware corporation
Hillhaven of Central Florida, Inc., a Delaware corporation
<PAGE>
Northwest Health Care, Inc., an Idaho corporation
Pasatiempo Development Corp., a California corporation
Professional Medical Enterprises, Inc., a Massachusetts corporation
Hillhaven Home Care, Inc., a Delaware corporation
CIC Risk Management Corporation, a Delaware corporation
Hillhaven Health Services Malaysia, Inc., a Delaware corporation
Hillhaven Properties, Ltd., an Oregon corporation
Brim-Olive Grove, Inc., an Oregon corporation
Fairview Living Centers, Inc., an Oregon corporation
Twenty-Nine Hundred Corporation, a Florida corporation
Ledgewood Health Care Corporation, a Massachusetts corporation/*/
Cornerstone Insurance Company, a Cayman Islands corporation
Brim of Massachusetts, Inc., a Massachusetts corporation
Hillhaven Funding Corporation, a Nevada corporation
Medisave Pharmacies, Inc., a Delaware corporation
Medisave of Florida, Inc., a Delaware corporation
Medisave of Tennessee, Inc., a Delaware corporation
American X-Rays, Inc., a Louisiana corporation
First Rehab, Inc., a Delaware corporation
Convalescent Pharmaceutical Services, Inc., a California corporation
Advanced Infusion Systems, Inc., a California corporation
Hillhaven PIP Funding I, Inc., a Delaware corporation
2
<PAGE>
NCI Corp. of Delaware, a Delaware corporation
Nationwide Care, Inc., an Indiana corporation
Nationwide Funding Corporation, a Delaware corporation
Phillippe Enterprises, Inc., a Delaware corporation
Meadowvale Skilled Care Center, Inc., a Delaware corporation
Hillhaven Community Health Partnership, a Florida General Partnership/*/
Windsor Woods Nursing Home Partnership, a Washington General Partnership
St. George Nursing Home Limited Partnership, an Oregon Limited Partnership
Bartlesville Nursing Home Partnership, an Oregon General Partnership/*/
Carrollwood Care Center, a Tennessee General Partnership
Foothill Nursing Company Partnership, a California General Partnership/*/
San Marcos Nursing Home Partnership, a California General Partnership/*/
Fox Hill Village Partnership, a Massachusetts General Partnership/*/
Starr Farm Partnership, a Vermont General Partnership/*/
New Pond Village Associates, a Massachusetts General Partnership
Tucson Retirement Center Limited, an Oregon Limited Partnership
San Marcos Retirement Village, a California General Partner
Castle Gardens Retirement Center Limited Partnership, an Oregon Limited
Partnership
Lantana Partners, Ltd., a Florida Limited Partnership, Hillhaven
Properties, Ltd.
Woodhaven Partners, Ltd., a Florida Limited Partnership/*/
Hillcrest Retirement Center, Ltd., an Oregon Limited Partnership
Topeka Retirement Center, Ltd., a Kansas Limited Partnership
Sandy Retirement Center Limited Partnership, an Oregon Limited Partnership
3
<PAGE>
Hillhaven-MSC Partnership, a California General Partnership/*/
Stockton Health Care Center Limited Partnership, an Oregon Limited Partnership
Twenty-Nine Hundred Associates, Ltd., a Florida Limited Partnership
MedLife Pharmacy Network Partnership, a Tennessee General Partnership/*/
Hillhaven/Indiana Partnership, a Washington General Partnership
Hillhaven/Westfield Partnership, a Washington General Partnership
Pharmaceutical Infusion Therapy, a California General Partnership**
CPS-Sacramento, a California General Partnership/***/
Visiting Nurse Advanced Infusion Systems, a California general partnership
* Only fifty percent (50%) is owned by one of the Registrant's subsidiaries
** Only fifty-one percent (51%) is owned by one of the Registrant's
subsidiaries
*** Only sixty percent (60%) is owned by one of the Registrant's subsidiaries
4
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-38188) pertaining to the Vencor, Inc. Retirement Savings Plan; in the
Registration Statement (Form S-8 No. 33-34191) pertaining to the Vencor, Inc.
1987 Incentive Compensation Program; in the Registration Statement (Form S-8 No.
33-40949) pertaining to the Vencor, Inc. 1987 Incentive Compensation Program-
additional shares; in the Registration Statement (Form S-8 No. 33-34192)
pertaining to the Vencor, Inc. 1987 Stock Option Plan for Nonemployee Directors;
in the Registration Statement (Form S-8 No. 33-66774) pertaining to the Vencor,
Inc. Nonemployee Directors Deferred Compensation Plan; in the Registration
Statement (Form S-8 No. 33-81988) pertaining to the Vencor, Inc. 1987 Incentive
Compensation Program-additional shares; and in the Registration Statement (Form
S-3 No. 33-71910) pertaining to shares to be issued in connection with
acquisitions, of our report dated March 1, 1996, with respect to the
consolidated financial statements and schedule of Vencor, Inc. included in the
Annual Report (Form 10-K) for the year ended December 31, 1995.
ERNST & YOUNG LLP
Louisvile, Kentucky
March 26, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 35,182
<SECURITIES> 0
<RECEIVABLES> 360,147
<ALLOWANCES> (16,785)
<INVENTORY> 24,862
<CURRENT-ASSETS> 524,679
<PP&E> 1,552,293
<DEPRECIATION> (362,199)
<TOTAL-ASSETS> 1,912,454
<CURRENT-LIABILITIES> 285,013
<BONDS> 778,100
0
0
<COMMON> 18,040
<OTHER-SE> 754,024
<TOTAL-LIABILITY-AND-EQUITY> 1,912,454
<SALES> 0
<TOTAL-REVENUES> 2,323,956
<CGS> 0
<TOTAL-COSTS> 1,620,397
<OTHER-EXPENSES> 416,969
<LOSS-PROVISION> 7,851
<INTEREST-EXPENSE> 60,918
<INCOME-PRETAX> 32,364
<INCOME-TAX> 24,001
<INCOME-CONTINUING> 8,363
<DISCONTINUED> 0
<EXTRAORDINARY> (23,252)
<CHANGES> 0
<NET-INCOME> (14,889)
<EPS-PRIMARY> (.16)
<EPS-DILUTED> (.03)
</TABLE>
