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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A NO. 2
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period from ___________ to ___________
Commission File Number: 0-17969
NEXTHEALTH, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 86-0589712
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
16600 N. Lago Del Oro Parkway, Tucson, Arizona 85739
(Address of Principal Executive Offices) (Zip Code)
(520) 792-5800
(Registrant's Telephone Number, including Area Code)
N/A
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1)has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2)has been subject to such filing
requirements for the past 90 days. [X] YES [ ] NO
On March 14, 1997, there were 8,554,938 shares of the registrant's Common Stock
outstanding.
Reference is made to the listing beginning on page 2 of all exhibits filed as a
part of this report.
PART II - OTHER INFORMATION
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
4.2 Certificate of Designation, Preferences and Rights of the
Convertible Preferred Stock, Series A and Cumulative Preferred
Stock, Series B of NextHealth, Inc.
10.80 Term Note A between NextHealth, Inc. and AP LOM, LLC
10.81 Term Note B between NextHealth, Inc. and AP LOM, LLC
10.82 Warrant for 500,000 shares of Common Stock
10.83 Deed of Trust for the use and benefit of AP LOM, LLC
10.84 Guaranty made by NextHealth's subsidiaries
10.85 General Security Agreement among NextHealth's subsidiaries and
AP LOM, LLC
(b) Reports on Form 8-K
NONE
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NextHealth, Inc.
Registrant
DATE: March 26, 1997 BY: /s/ William T O'Donnell, Jr
--------------------------------------
William T O'Donnell, Jr
President and Chief Executive Officer
DATE: March 26, 1997 BY: /s/ Loree Thompson
--------------------------------------
LOREE THOMPSON
Chief Financial Officer
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EXHIBIT 4.2
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF THE
CONVERTIBLE PREFERRED STOCK, SERIES A
AND
CUMULATIVE PREFERRED STOCK, SERIES B
(PAR VALUE $0.01 PER SHARE)
OF
NEXTHEALTH, INC.
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PURSUANT TO SECTION 151 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
------------------------------------------------
NextHealth, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (hereinafter called the
"Corporation"), does hereby certify that, pursuant to authority conferred on its
Board of Directors by the Certificate of Incorporation, as amended, of the
Corporation, and pursuant to the provisions of Section 151 of Title 8 of the
Delaware Code of 1953, as amended, the Board of Directors, at a meeting held on
November 11, 1996, adopted the following resolution providing for the issuance
of two (2) series of the Corporation's Preferred Stock, par value $0.01 per
share, consisting of (i) forty-six thousand sixty-five (46,065) shares of
Convertible Preferred Stock, Series A, and twenty-eight thousand nine hundred
fifty-six (28,956) shares of Cumulative Preferred Stock, Series B:
"RESOLVED, that pursuant to the authority vested in this Board of
Directors in accordance with the provisions of ARTICLE FOURTH of the Certificate
of Incorporation, as amended, of the Corporation, two (2) series of Preferred
Stock of the Corporation known as (i) Convertible Preferred Stock, Series A, and
(ii) Cumulative Preferred Stock, Series B, respectively, be, and each hereby is,
created, classified, authorized and the issuance thereof provided for, and that
the designation and number of shares, and relative rights, preferences and
limitations thereof, shall be as set forth in the form appended hereto."
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SECTION 1. DESIGNATION AND AMOUNT. The shares of the first series of
Preferred Stock shall be designated as "Convertible Preferred Stock, Series A"
and the number of shares constituting such series shall be 46,065, with a par
value of $0.01 per share. The shares of the second series of Preferred Stock
shall be designated as "Cumulative Preferred Stock, Series B" and the number of
shares constituting such series shall be 28,956, with a par value of $0.01 per
share. The relative rights, preferences, restrictions and other matters relating
to the Preferred Stock are contained in this Certificate of Designation.
SECTION 2. DEFINITIONS. As used in this Certificate of Designation, the
following terms shall have the following meanings:
"AFFILIATE" means, with respect to any Person, any Person (other than
Persons affiliated with Apollo), that directly or indirectly, controls, is
controlled by or under common control with such Person. For the purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract or
otherwise.
"ANNUAL DIVIDEND RATE" has the meaning set forth in Sections 3(a) and
6(b)(i) hereof.
"APOLLO" means AP NH LLC, a Delaware limited liability company, and its
successors and assigns.
"BOARD OF DIRECTORS" means the board of directors of the Corporation.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a day
on which banking institutions in the City of New York, New York are authorized
or obligated by law or executive order to close.
"CAPITAL STOCK" means any and all shares, rights to purchase, warrants,
options, convertible securities, participation or other equivalents of or
interests (other than security interests) in (however designated and whether
voting or nonvoting) corporate stock.
"CERTIFICATE OF DESIGNATION" means this Certificate of Designation,
Preferences and Rights establishing the Preferred Stock pursuant to Section 151
of the General Corporation Law of the State of Delaware, as the same may be
amended, supplemented or modified from time to time in accordance with the terms
hereof and pursuant to applicable law.
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"CHANGE IN CONTROL" means the occurrence of any of the following
events:
(i) any Person or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act) acquires beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 20% or more of the number of shares of Common Stock or the combined
voting power of Voting Stock of the Corporation outstanding immediately
prior to such acquisition.
(ii) Preferred Directors cease for any reason to constitute at
least forty percent (40%) of the Board of Directors.
(iii) the Corporation enters into any agreement or arrangement
providing for the merger or consolidation of the Corporation with or
into any other entity (other than a transaction which results in the
ownership by the Corporation of not less than 51% of the voting power
of such other entity), the sale of all or substantially all of the
assets of the Corporation, the reorganization, liquidation or
dissolution of the Corporation, or any similar transaction or event.
"CLOSING DATE" means the date on which the shares of Preferred Stock
are initially issued pursuant to the Stock Purchase Agreement.
"COMMON STOCK" means the Common Stock, par value $.01 per share, of the
Corporation and all shares hereafter authorized of any class of common stock of
the Corporation, and, in the case of a reclassification, recapitalization or
other similar change in such Common Stock or in the case of a consolidation or
merger of the Corporation with or into another Person, such consideration to
which a holder of a share of Common Stock would have been entitled upon the
occurrence of such event.
"CONSOLIDATED NET INCOME" means, for any period, the aggregate net
income of the Corporation and its Subsidiaries for such period on a consolidated
basis, determined in accordance with generally accepted accounting principles
consistently applied, provided that there shall be excluded therefrom (i) the
proceeds of sales of assets outside of the ordinary course of business of the
Corporation and its Subsidiaries, and (ii) income attributed to any items
classified as extraordinary or nonrecurring.
"CONVERSION DATE" has the meaning set forth in Section 9(b) hereof.
"CONVERSION NOTICE" has the meaning set forth in Section 9(b) hereof.
"CONVERSION PRICE" has the meaning set forth in Section 9(a) hereof.
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"CREDIT AGREEMENT" means the Credit Agreement, dated as of November 14,
1996, by and between AP LOM LLC, a Delaware limited liability company, and the
Corporation, as amended, modified and/or supplemented from time to time.
"CREDIT AGREEMENT DEFAULT" means an Event of Default under, and as
defined in, the Credit Agreement, without giving effect to any amendment or
waiver to the Credit Agreement that is not agreed to by the Lender (as defined
in the Credit Agreement).
"DEFAULT" has the meaning set forth in Section 6(a) hereof.
"DEFAULT PRICE" has the meaning set forth in Section 5(e) hereof.
"DEFAULT RIGHT" has the meaning set forth in Section 5(e) hereof.
"DIVIDEND PAYMENT DATE" has the meaning set forth in Section 3(a)
hereof.
"DIVIDEND PERIOD" has the meaning set forth in Section 3(a) hereof.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time.
"FAIR MARKET VALUE" of Common Stock means, as of any date, the average
of the closing prices of Common Stock for the 20 consecutive Trading Days next
preceding the date 5 days prior to the date in question. The closing price for
each day shall be: (i) the closing sales price of one share of Common Stock
quoted in the NASDAQ National Market System or any similar system of automated
dissemination of quotations of securities prices then in common use, if so
quoted; or (ii) if not quoted as described in clause (i), the average of the
highest bid and lowest offered quotations for Common Stock as reported by the
National Quotation Bureau Incorporated if at least two securities dealers have
inserted both bid and offered quotations for Common Stock on at least 5 of the
20 consecutive Trading Days next preceding the date 5 days prior to the date in
question; or (iii) if the Common Stock is listed or admitted for trading on any
national securities exchange, the last sale price, or the closing bid price if
no sale occurred, of Common Stock on the principal securities exchange on which
the Common Stock is listed or admitted for trading. If none of the conditions
set forth above is met, the closing price of Common Stock on any day or the
average of such closing prices for any period shall be the fair market value of
Common Stock for such day or period as determined by a member firm of the New
York Stock Exchange selected by the Corporation and approved by the Holders of a
majority of the outstanding Preferred Stock. If the Corporation and such Holders
are unable to agree on the selection of a member firm, then the matter shall be
submitted for arbitration to be held in New York City in accordance with the
rules of the American Arbitration Association then in effect.
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"GAAP" means those generally accepted accounting principles and
practices which are recognized as such by the American Institute of Certified
Public Accountants acting through its Accounting Principles Board or by the
Financial Accounting Standards Board or through other appropriate boards or
committees thereof and which are consistently applied for all periods after the
date hereof so as to properly reflect the financial condition, results of
operations and changes in financial position of any Person, except that any
accounting principle or practice required to be changed by such Accounting
Principles Board or Financial Accounting Standards Board (or other appropriate
board or committee of such Boards) in order to continue as a generally accepted
accounting principle or practice may be so changed.
"HOLDER" of a share of Preferred Stock means the person in whose name
shares of Preferred Stock are registered on the books of the Corporation.
"HOLDER'S NOTICE" has the meaning set forth in Section 5(f) hereof.
"INDEBTEDNESS" means, with respect to any Person, all indebtedness,
obligations and liabilities of such Person, including without limitation (i) all
"liabilities" which would be reflected on a balance sheet of such Person,
prepared in accordance with GAAP, (ii) all obligations of such Person in respect
of any Guaranty, (iii) all obligations of such Person in respect of any lease of
property, real or personal, which would be capitalized on a balance sheet of the
lessee prepared in accordance with GAAP (but excluding, in any event, office
leases and equipment leases to the extent capitalized), and (iv) all
obligations, indebtedness and liabilities secured by any lien or security
interest on any property or assets of such Person; except that "Indebtedness"
shall not include any trade payables and other liabilities incurred in the
ordinary course of the Person's business up to a maximum of $250,000 in the
aggregate or otherwise approved by a majority of the Preferred Directors.
"Guaranty" means, with respect to any Person, any contract, lease, loan
agreement, indenture, mortgage, security agreement or other agreement or
obligation, whether written or oral, or any understanding of such Person,
pursuant to which such Person guarantees any Indebtedness of any other Person
(the "Primary Obligor") in any manner, whether directly or indirectly, including
without limitation agreements (i) to purchase such Indebtedness or any property
constituting security therefor, (ii) to advance or supply funds for the purchase
or payment of such Indebtedness or to maintain net worth or working capital or
other balance sheet conditions, or otherwise to advance or make available funds
for the purchase or payment of such Indebtedness, (iii) to purchase property,
securities or services primarily for the purpose of assuring the holder of such
Indebtedness of the ability of the Primary Obligor to make payment of the
Indebtedness, or (iv) otherwise to assure the holder of the Indebtedness of the
Primary Obligor against loss in respect thereof; except that "Guaranty" shall
not include the endorsement by the Corporation or by a Subsidiary in the
ordinary course of business of negotiable instruments or documents for deposit
or collection.
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"JUNIOR STOCK" means Common Stock and any other class or series of
Capital Stock of the Corporation now or hereafter issued and outstanding that
ranks junior as to dividends and/or liquidation to the Preferred Stock.
"NASDAQ" means the National Association of Securities Dealers Automated
Quotation System.
"PERSON" means an individual, a corporation, a partnership, a joint
venture, an association, a joint-stock company, a trust, a business trust, a
government or any agency or any political subdivision, any unincorporated
organization, or any other entity.
"PREFERRED DIRECTORS" means the four members of the Board of Directors
elected by the Holders of Preferred Stock pursuant to Section 8(b).
"PREFERRED STOCK" means the Series A Preferred Stock and the Series B
Preferred Stock.
"PUT" has the meaning set forth in Section 5(d) hereof.
"PUT PRICE" has the meaning set forth in Section 5(d) hereof.
"REDEMPTION DATE" means any date on which shares of Preferred Stock are
to be redeemed pursuant to Section 5 hereof.
"REDEMPTION PRICE" means, with respect to each share of Preferred
Stock, an amount equal to $92.26.
"RESTRICTED PAYMENT" has the meaning set forth in Section 3(c) hereof.
"SERIES A PREFERRED STOCK" means the Convertible Preferred Stock of the
Corporation, $0.01 par value per share, established pursuant to this Certificate
of Designation.
"SERIES B PREFERRED STOCK" means the Cumulative Preferred Stock of the
Corporation, $0.01 par value per share, established pursuant to this Certificate
of Designation.
"STOCK PURCHASE AGREEMENT" means the Stock and Warrant Purchase
Agreement dated as of November 14, 1996, between the Corporation and Apollo, as
the same may be amended, supplemented or modified from time to time in
accordance with the terms thereof.
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"STOCK PURCHASE AGREEMENT DEFAULT" means any material breach or
violation of the Corporation's representations and warranties (as of the closing
thereunder) or covenants set forth in Section 4 or 6.1 of the Stock Purchase
Agreement.
"SUBSIDIARY" means (i) any corporation fifty percent (50%) or more of
the Voting Stock of which is owned, directly or indirectly, by the Corporation,
or (ii) any Person (other than a corporation) under the control of the
Corporation.
"TRADING DAY" means, with respect to the Common Stock: (i) if any
series of Common Stock is quoted on the NASDAQ National Market System, any
similar system of automated dissemination of quotations of securities prices, or
the National Quotation Bureau Incorporated, each day on which quotations may be
made on such system; or (ii) if any series of Common Stock is listed or admitted
for trading on any national securities exchange, days on which such national
securities exchange is open for business; or (iii) if shares of the
Corporation's Common Stock are not quoted on any system or listed or admitted
for trading on any securities exchange, a Business Day.
"VOTING STOCK" means, with respect to any Person, all classes of
Capital Stock of such Person then outstanding and normally entitled to vote for
the election of directors of such Person. Any reference to a percentage of
Voting Stock shall refer to the percentage of votes eligible to be cast for the
election of directors which are attributable to the applicable shares of Voting
Stock.
SECTION 2. RANK. All shares of Preferred Stock shall rank prior, both
as to payment of dividends and as to distributions of assets upon liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
to all of the Corporation's now or hereafter-issued Junior Stock.
SECTION 3. DIVIDENDS.
(a) PAYMENT OF DIVIDENDS ON PREFERRED STOCK. The Holders of
Preferred Stock shall be entitled to receive, when and as declared by the Board
of Directors, out of funds legally available therefor, cash dividends at the
rate per annum (the "Annual Dividend Rate") set forth below during the time
periods indicated, on the Redemption Price:
Annual
Period Dividend Rate
Series A Preferred Stock
January 1, 1997 and thereafter 00.0%
Series B Preferred Stock
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January 1, 1997 to January 31, 1997 12.0%
February 1, 1997 and thereafter 18.0%.
Such dividends shall accrue (whether or not declared) from and including the
first day of the initial Dividend Period to and including the date on which the
Redemption Price is paid on such shares or on which such shares are converted or
redeemed and, to the extent not paid for any Dividend Period, will be
cumulative. Dividends on the Preferred Stock shall be payable quarterly, in
arrears, on March 31, June 30, September 30, and December 31 of each year
commencing March 31, 1997 (each such date, a "Dividend Payment Date"), except
that if any such date is not a Business Day, then such dividend shall be paid on
the next succeeding Business Day. Each such dividend shall be payable to Holders
of Preferred Stock at the close of business on the record date established by
the Board of Directors, which record date shall be not more than 60 days prior
to the date fixed for payment thereof. Quarterly dividend periods (each a
"Dividend Period") shall commence on and include the first day of January,
April, July and October of each year and shall end on and include the next
Dividend Payment Date; provided, however, that the initial Dividend Period shall
commence on January 1, 1997. The amount of dividends payable per share of
Preferred Stock for each full Dividend Period shall be computed by applying the
applicable Annual Dividend Rate to the Redemption Price and dividing such amount
by four (4). The amount of dividends payable for the initial Dividend Period and
any period shorter than a full Dividend Period shall be computed on the basis of
actual days elapsed and a 360-day year consisting of twelve 30-day months.
Dividends on the Preferred Stock shall accrue on a daily basis whether or not
the Corporation shall have earnings or surplus at the time.
(b) DISTRIBUTION OF PARTIAL DIVIDEND PAYMENTS. Except as
otherwise provided in this Certificate of Designation, if on any Dividend
Payment Date the Corporation pays less than the total amount of dividends then
accrued with respect to a Series of Preferred Stock, the amount so paid shall be
distributed ratably among the Holders of that Series of Preferred Stock based
upon the number of shares of that Series of Preferred Stock held by each such
Holder.
(c) LIMITATIONS ON CERTAIN PAYMENTS. So long as any Preferred
Stock shall be outstanding, the Corporation shall not declare or pay or set
apart for payment any dividends or make any other distributions on, or make any
payment on account of the purchase, redemption, exchange or other retirement of,
any Junior Stock (each, a "Restricted Payment"); provided, however, that a
"Restricted Payment" shall not include (i) any dividend or distribution payable
solely in shares of Junior Stock, (ii) the acquisition of any shares of Capital
Stock in exchange solely for shares of Junior Stock, or (iii) the acquisition of
any shares of Capital Stock from employees of the Corporation upon termination
of their services pursuant to binding written agreements entered into prior to
the issuance of the Preferred Stock or otherwise approved by a majority of
Preferred Directors.
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SECTION 4. LIQUIDATION PREFERENCE AS TO ACCRUED AND UNPAID DIVIDENDS.
In the event of any liquidation, dissolution, or winding up of the Corporation,
either voluntary or involuntary, the Holders of Preferred Stock shall be
entitled to receive out of assets of the Corporation available for distribution
to shareholders, an amount equal to the accrued and unpaid dividends on such
shares through the date of final distribution to shareholders, whether or not
declared, before any payment shall be made or any assets distributed to the
holders of Junior Stock. If the assets and funds thus distributed among the
Holders of the Preferred Stock shall be insufficient to permit the payment to
such Holders of the full preferential amount described above, then the entire
assets and funds of the Corporation legally available for distribution shall be
distributed among the Holders of the Preferred Stock in proportion to the shares
of Preferred Stock then held by them.
SECTION 5. REDEMPTION.
(a) OPTIONAL REDEMPTION BY THE COMPANY. Except as provided in
Sections 5(c), 5(d) and 5(e) of this Certificate of Designation, the Corporation
may not redeem the Preferred Stock at any time before January 1, 2001.
Commencing on January 1, 2001, the Corporation may, at its option on any date
thereafter set by the Board of Directors, redeem for cash, out of funds legally
available therefor, all but not less than all of the outstanding shares of
Preferred Stock at a price per share equal to the Redemption Price plus all
accrued but unpaid dividends on such share.
(b) PROCEDURES FOR OPTIONAL REDEMPTION BY THE COMPANY.
(i) At least 30 days but not more than 60 days before
the applicable Redemption Date, the Corporation or its transfer agent
shall mail a notice of redemption by first-class mail postage prepaid
to each Holder, addressed to such Holders at their last addresses shown
on the stock transfer books of the Corporation. Such notice shall
indicate that the shares of Preferred Stock are to be redeemed and
shall, among other things, state:
(A) the Redemption Date;
(B) the Redemption Price and the amount of
all accrued but unpaid dividends on such shares;
(C) the Conversion Price then in effect;
(D) that the shares of Preferred Stock
called for redemption must be surrendered to the Corporation
to collect the Redemption Price and all accrued and unpaid
dividends on such shares;
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(E) that shares of Preferred Stock called
for redemption may be converted at any time before the close
of business on the first Business Day preceding the Redemption
Date;
(F) the section of this Certificate of
Designation pursuant to which the shares of Preferred Stock
called for redemption are being redeemed.
Failure to give notice or any defect in the notice to any Holder shall
not affect the validity of the notice given to any other Holder.
(iii) As long as the Corporation has complied with
the requirements set forth in this Section 5(b), from and after the
applicable Redemption Date, dividends on the shares of Preferred Stock
so called for redemption shall cease to accrue, such shares shall be
canceled and shall no longer be deemed to be outstanding, and all
rights of the Holders thereof as stockholders of the Corporation
(except the right to receive from the Corporation the Redemption Price
and accrued and unpaid dividends) shall cease.
(c) OPTIONAL REDEMPTION BY THE HOLDER UPON CERTAIN CONDITIONS.
Subject to Section 9(j), from and after March 15, 1997, provided shares of
Series B Preferred Stock are then outstanding, each Holder of Preferred Stock
shall have the option to require the Corporation to redeem, out of funds legally
available therefor, all or any portion of the shares of Preferred Stock held by
such Holder (the "Conditional Redemption Right") at a price per share equal to
the Redemption Price plus all accrued but unpaid dividends on such shares.
(d) OPTIONAL REDEMPTION BY THE HOLDER UPON A CHANGE IN
CONTROL. In the event of a Change in Control and provided shares of Series B
Preferred Stock are then outstanding, each Holder of Preferred Stock shall have
the option to require the Corporation to redeem, out of funds legally available
therefor, all but not less than all of the shares of Preferred Stock held by
such Holder (the "Put"), at a price per share of Preferred Stock equal to (A)
all accrued but unpaid dividends on such share, plus (B) the higher of (i) 200%
of the Redemption Price of such share or (ii) the Fair Market Value of the
aggregate number of shares of Common Stock into which such share is convertible
on the effective date of such Change in Control (the "Put Price").
(e) OPTIONAL REDEMPTION BY THE HOLDER UPON A DEFAULT. In the
event of the occurrence of any Default and provided shares of Series B Preferred
Stock are then outstanding, and for so long as any such Default shall continue
to exist unwaived or uncured, each Holder of Preferred Stock shall have the
right to require the Corporation to redeem, out of funds legally available
therefor, all but not less than all of the shares of Preferred Stock held by
such Holder (the "Default Right"), at a price per share equal to the Redemption
Price plus all accrued but unpaid dividends on such share (the "Default Price").
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(f) PROCEDURES FOR REDEMPTION UPON CONDITIONAL REDEMPTION,
CHANGE IN CONTROL OR DEFAULT. If any Holder elects to exercise its Conditional
Redemption Right, the Put or its Default Right, then such Holder shall notify
the Corporation in writing of its election (the "Holder's Notice"), and shall
surrender stock certificates evidencing the shares of Preferred Stock to be
redeemed by the Corporation pursuant to the Conditional Redemption Right, the
Put or the Default Right. Not later than twenty (20) Business Days following the
Corporation's receipt of the Holder's Notice and such surrendered stock
certificates (the "Redemption Date"), the Corporation shall pay the Redemption
Price, Put Price or the Default Price, as applicable, in cash for each share of
Preferred Stock so redeemed. As long as the Corporation has complied with the
requirements set forth in this Section 5(f), from and after the date the
Holder's Notice is given, dividends on the shares of Preferred Stock redeemed
pursuant to the Conditional Redemption Right, the Put or the Default Right shall
cease to accrue, such shares shall be canceled and shall no longer be deemed to
be outstanding, and all rights of the Holders thereof as stockholders of the
Corporation (except the right to receive from the Corporation the Redemption
Price, the Put Price or the Default Price) shall cease.
SECTION 6. DEFAULT.
(a) Each of the following events shall constitute a "Default"
under this Certificate of Designation:
(i) the Corporation shall fail to pay dividends
payable at the applicable Annual Dividend Rate on the
Preferred Stock on any two consecutive or non-consecutive
Dividend Payment Dates or on the date of final distribution of
dividends to Holders of Preferred Stock pursuant to Section 4.
(ii) the Corporation shall make any Restricted
Payment in violation of Section 3(c) above.
(iii) the Corporation shall fail to pay the
liquidation preference with respect to accrued and unpaid
dividends pursuant to Section 4.
(iv) the Corporation shall fail to redeem any shares
of Preferred Stock required to be redeemed pursuant to Section
5.
(v) the Corporation shall merge or consolidate with,
or transfer all or substantially all of its assets to, another
Person in violation of Section 7.
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(vi) the Corporation shall take any action in
violation of, or shall fail to take any action required in
order to give effect to, the voting rights granted to Holders
of Preferred Stock contained in Section 8.
(vii) the Corporation shall authorize, create or
issue any class or series of Capital Stock of the Corporation
that is senior to or pari passu with the Preferred Stock with
respect to dividends or the distribution of assets upon
dissolution, liquidation or winding up of the Corporation.
(viii) without the written consent or affirmative
vote of the Preferred Directors, the Corporation shall amend,
alter or repeal any of the provisions of its by-laws, as
amended to date, so as to directly or indirectly adversely
affect any right, preference or voting power of the Holders of
Preferred Stock.
(ix) without the written consent or affirmative vote
of the Preferred Directors, the Corporation shall, or shall
permit any Subsidiary to: (A) incur any additional
Indebtedness not outstanding on the date of such Default; or
(B) enter into any acquisition, financing or other transaction
or series of related transactions having a total value in
excess of $250,000.
(x) a Stock Purchase Agreement Default and the
passage of 15 days thereafter.
(xi) a Credit Agreement Default.
(b) In the event of the occurrence of any Default, and
provided (i) written notice thereof shall have been given to the Corporation,
and (ii) such Default has not been cured or waived (within 15 days after such
notice is given), to the extent any agreement governing such Default permits
such cure or waiver:
(i) provided any shares of Series B Preferred Stock
are then outstanding, the Annual Dividend Rate applicable to
the Preferred Stock shall be increased to 18% commencing on
the date of such Default, and shall be calculated thereafter
on a quarterly compounded basis.
(ii) each Holder of Preferred Stock shall have the
right, provided any shares of Series B Preferred Stock are
then outstanding, to require the Corporation to redeem shares
of Preferred Stock pursuant to the Default Right described
above in Section 5(e).
(iii) notwithstanding anything to the contrary
contained in Section 9(a), each share of Series A Preferred
Stock and each share of Series B Preferred Stock shall be
convertible at the option of the Holder thereof
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into fully paid and nonassessable shares of Common Stock in
accordance with the provisions of Section 9.
(iv) Shares of Preferred Stock shall entitle the
Holders thereof, voting as a separate class, to elect by
plurality vote of the Holders of shares of Preferred Stock a
majority of the Board of Directors at any special meeting of
the Holders of Preferred Stock, at any annual or special
meeting of stockholders held for the purpose of electing
directors, or by written consent in accordance with the
General Corporation Law of the State of Delaware. Each Holder
of Preferred Stock shall have one vote for each share of stock
so held. At any time that such additional voting rights have
vested, the Corporation shall, and any Holder of Preferred
Stock may, call a special meeting of the Holders of shares of
Preferred Stock for the election of the directors to be
elected by them. Any vacancy in the office of the directors so
elected may be filled by the remaining directors elected by
the Holders of shares of Preferred Stock or, if none, by the
Holders of shares of Preferred Stock as described above.
SECTION 7. CONSOLIDATION, MERGER AND SALE OF ASSETS, ETC. The
Corporation shall not consolidate with or merge into, or transfer all or
substantially all of its assets to, another Person unless (i) in the case of a
merger or consolidation, the Corporation is the surviving entity, the rights and
preferences of the Preferred Stock are not modified and the Corporation, as the
surviving entity, does not have outstanding any Capital Stock that ranks senior
to or pari passu with the Preferred Stock, or (ii) (A) the surviving, resulting
or acquiring Person is a Person organized under the laws of the United States,
any state thereof or the District of Columbia, or a Person organized under the
laws of a foreign jurisdiction whose equity securities are listed on a national
securities exchange in the United States or authorized for quotation on the
NASDAQ National Market System, (B) the Corporation shall make effective
provision such that, upon consummation of such transaction, the Holders of
Preferred Stock shall receive preferred stock of the surviving entity having
substantially identical terms as the Preferred Stock, and the surviving,
resulting or acquiring Person does not have outstanding any Capital Stock that
ranks senior to or pari passu with the Preferred Stock, and (C) the merger,
consolidation or transfer is approved by the written consent or affirmative vote
of the Preferred Directors.
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<PAGE> 14
SECTION 8. VOTING RIGHTS OF PREFERRED STOCK.
(a) Except as set forth in this Certificate of Designation or
as otherwise required by law, Holders of shares of Series A Preferred Stock
shall be entitled to vote together as a single class with the holders of shares
of Common Stock on all matters submitted for a vote of stockholders, shall be
entitled to vote separately as a separate class on all matters other than the
election of directors, and shall be entitled to notice of all stockholders'
meetings and to act by written consent in the same manner as the holders of
Common Stock. Each share of Series A Preferred Stock shall entitle the Holder
thereof to such number of votes per share as shall equal the number of shares of
Common Stock into which such share of Series A Preferred Stock is then
convertible. Any shares of Series A Preferred Stock owned, directly or
indirectly, by the Corporation or any of its Subsidiaries shall not have voting
rights hereunder and shall not be counted in determining the presence of a
quorum.
(b) Shares of Series A Preferred Stock shall entitle the
Holders thereof, voting as a separate class, to increase by four (4) the
then-authorized number of directors comprising the whole Board of Directors and
to elect by plurality vote of the Holders of shares of Series A Preferred Stock
four (4) directors (the "Preferred Directors") at any special meeting of the
Holders of Series A Preferred Stock, at any annual or special meeting of
stockholders held for the purpose of electing directors, or by written consent
in accordance with the General Corporation Law of the State of Delaware. Each
Holder of Series A Preferred Stock shall have one vote for each share of stock
so held. At any time that such voting rights have vested, the Corporation shall,
and any Holder of Series A Preferred Stock may, call a special meeting of the
Holders of shares of Series A Preferred Stock for the election of the Preferred
Directors to be elected by them. Any vacancy in the office of the Preferred
Directors may be filled by the remaining Preferred Director or, if none, by the
Holders of shares of Series A Preferred Stock as described above.
(c) So long as any shares of Series A Preferred Stock remain
outstanding, the affirmative vote of the Holders of a majority of the
outstanding shares of Series A Preferred Stock, voting as a separate class,
shall be required in order to:
(i) amend, alter or repeal any of the provisions of the Certificate of
Incorporation of the Corporation, as amended to date, so as to
adversely affect any right, preference or voting power of the Holders
of Series A Preferred Stock, or any of the provisions of this
Certificate of Designation.
(ii) authorize, create or issue any class or series of Capital Stock of
the Corporation that is senior to or pari passu with the Series A
Preferred Stock with respect to dividends or the distribution of assets
upon dissolution, liquidation or winding up of the Corporation.
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<PAGE> 15
(iii) enter into, or permit any Subsidiary to enter into, any
transaction or series of transactions having a total value in excess of
$250,000 per transaction or series of related transactions, or grant or
consent to, or otherwise permit, any amendment to, supplement of, or
waiver under, any agreement or contract with any Affiliate, unless the
Board of Directors has determined in good faith, and has certified in
writing to Apollo, that such transaction is (i) in the best interests
of the Corporation or such Subsidiary, as applicable, based on full
disclosure of all relevant facts and circumstances, and (ii) is on fair
and reasonable terms, no less favorable to the Corporation or such
Subsidiary than terms that the Corporation or such Subsidiary and a
non-affiliated Person in a similar situation would agree to in an arm's
length transaction, the terms of which have been negotiated in good
faith.
(d) The foregoing voting provisions shall not apply if, at or
prior to the time when the action with respect to which such vote would
otherwise be required to be effected, all outstanding shares of Series A
Preferred Stock shall have been redeemed.
(e) The Series B Preferred Stock shall not have any voting
rights.
SECTION 9. CONVERSION OF PREFERRED STOCK.
(a) RIGHT OF CONVERSION OF SERIES A PREFERRED STOCK.
(i) Subject to Section 6(b)(iii), each share of
Series A Preferred Stock shall be convertible at the option of the Holder
thereof, at any time and from time to time after the date of issuance of such
share, into a number of fully paid and nonassessable shares of Common Stock
equal to (x) the Redemption Price of such share of Preferred Stock as of the
Conversion Date, divided by (y) the Conversion Price in effect on the Conversion
Date, or into such additional or other securities, cash or property and at such
other rates as required in accordance with the provisions of this Section 9. For
purposes of this Certificate of Designation, the "Conversion Price" shall
initially be $0.9226 and shall be adjusted from time to time in accordance with
the provisions of this Section 9.
(ii) The Series B Preferred Stock shall not be
convertible into shares of Common Stock except as provided for in Section
6(b)(iii).
(b) CONVERSION PROCEDURES. In order to exercise the conversion
privilege, the Holder of any shares of Preferred Stock to be converted in whole
or in part shall surrender the certificate or certificates evidencing such
shares to the Corporation and shall give written notice to the Corporation
("Conversion Notice") that the Holder elects to convert such shares or the
portion thereof specified in said notice into shares of Common Stock. The
Conversion Notice shall also state the name or names (with address) in which the
certificates for shares of Common Stock which shall be issuable upon such
conversion shall be issued. Each certificate evidencing Preferred Stock
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<PAGE> 16
surrendered for conversion shall, unless the shares issuable on conversion are
to be issued in the same name as the registration of such shares of Preferred
Stock, be duly endorsed by, or be accompanied by instruments of transfer in form
satisfactory to the Corporation duly executed by, the Holder or its duly
authorized attorney.
Within three (3) Business Days after receipt of a Conversion Notice and
surrender of the certificate or certificates evidencing the Preferred Stock
relating thereto, the Corporation shall issue and deliver to such Holder (or
upon the written order of such Holder) a certificate or certificates for the
number of full shares of Common Stock issuable upon the conversion of such
shares of Preferred Stock or portion thereof in accordance with the provisions
of this Section 9, and a check or cash in respect of any fractional shares of
Common Stock issuable upon such conversion, as provided in Section 9(e). In the
event that less than all the shares of Preferred Stock represented by a
certificate are to be converted, the Corporation shall issue and deliver or
cause to be issued and delivered to (or upon the written order of) the Holder of
the shares of Preferred Stock so surrendered, without charge to such Holder, a
new certificate or certificates representing a number of shares of Preferred
Stock equal to the unconverted portion of the surrendered certificate.
Each conversion shall be deemed to have been effected on the date (the
"Conversion Date") on which the certificate or certificates evidencing shares of
Preferred Stock shall have been surrendered to the Corporation or its transfer
agent and a Conversion Notice with respect to such shares shall have been
received by the Corporation, as described above. Any Person in whose name any
certificate or certificates for shares of Common Stock shall be issuable upon
conversion shall be deemed to have become the holder of record of the shares
represented thereby on the Conversion Date; provided, however, that surrender of
the certificate or certificates evidencing shares of Preferred Stock on any date
when the stock transfer books of the Corporation shall be closed shall
constitute the Person in whose name the certificates are to be issued as the
record holder thereof for all purposes on the next succeeding day on which such
stock transfer books are open, but such conversion shall be at the Conversion
Rate in effect on the date on which such certificate or certificates shall have
been surrendered.
Except as otherwise provided in this Section 9, no payment or
adjustment will be made for dividends or other distributions with respect to any
shares of Common Stock issuable upon conversion of shares of Preferred Stock as
provided herein. Full payment shall be made by the Corporation to any Holder of
shares of Preferred Stock surrendered for conversion in respect of dividends
accrued since the last preceding Dividend Payment Date on the shares of
Preferred Stock surrendered for conversion; provided, however, that if shares of
Preferred Stock shall be converted subsequent to any record date with respect to
any Dividend Payment Date and prior to the next succeeding Dividend Payment
Date, the dividend due on such Dividend Payment Date shall be payable with
respect to such shares of Preferred Stock notwithstanding such conversion, and
such dividend (whether or not punctually paid or duly provided for)
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<PAGE> 17
shall be paid to the Holder of such shares as of the close of business on such
record date, and the converting Holder need not include payment in the amount of
such dividend upon surrender of shares of Preferred Stock for conversion. Upon
conversion of any shares of Preferred Stock, the Fair Market Value of the shares
of Common Stock issued in respect thereof (together with any cash payment in
lieu of any fractional share) shall be treated as issued in exchange for the
Redemption Price of such shares of Preferred Stock.
(c) CASH PAYMENTS IN LIEU OF FRACTIONAL SHARES. No fractional
shares of Common Stock or scrip representing fractional shares shall be issued
upon conversion of shares of Preferred Stock. If any fractional share of Common
Stock would, but for this Section 9(c), be issuable upon the conversion of any
shares of Preferred Stock, the Corporation shall make a payment therefor in cash
on the first Business Day immediately preceding the Conversion Date equal to the
Fair Market Value of such fractional share.
(d) ADJUSTMENT OF CONVERSION PRICE. The Conversion Price shall
be adjusted from time to time by the Corporation as follows:
(i) In case the Corporation shall (A) declare a
dividend, or make a distribution, in shares of any series of its Common
Stock, on any series of its Common Stock, (B) subdivide or reclassify
any series of its outstanding Common Stock into a greater number of
shares, (C) combine any series of its outstanding Common Stock into a
smaller number of shares, (D) pay a dividend or make a distribution on
any series of its Common Stock in shares of any series of its Capital
Stock other than Common Stock, or (E) issue by reclassification of any
series of its Common Stock shares of any series of its Capital Stock,
the conversion privilege and the Conversion Price in effect immediately
prior thereto shall be adjusted so that the Holder of any shares of
Preferred Stock thereafter surrendered for conversion shall be entitled
to receive the number of shares of Common Stock or other Capital Stock
of the Corporation which such Holder would have owned or have been
entitled to receive after the happening of any of the events described
above had such Preferred Stock been converted immediately prior to the
happening of such event. An adjustment made pursuant to this Section
9(d)(i) shall become effective immediately after the record date in the
case of a dividend or distribution and shall become effective
immediately after the effective date in the case of subdivision,
combination or reclassification. Such adjustment shall be made
successively whenever any event referred to above shall occur. In the
event such dividend, distribution, subdivision, reclassification or
combination is not so made, the conversion privilege and the Conversion
Price then in effect shall be readjusted to the conversion privilege
and the Conversion Price which would then be in effect if such
dividend, distribution, subdivision, reclassification or combination
had not been declared or made, but such readjustment shall not affect
the number of shares of Common
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<PAGE> 18
Stock or other shares of Capital Stock delivered upon any conversion
prior to the date such readjustment is made.
(ii) In case the Corporation shall issue any shares
of Common Stock (or any rights, warrants, options or convertible
securities entitling the holders thereof to subscribe for or purchase
any shares of Common Stock or any stock appreciation rights entitling
the holders thereof to any interest in an increase in value of shares
of Common Stock) at a price per share less than the Conversion Price in
effect on the date of such issuance, then the Conversion Price shall be
adjusted to equal such lesser price. An adjustment made pursuant to
this Section (ii) shall become effective immediately upon the effective
date of such issuance. Such adjustment shall be made successively
whenever any shares, rights, warrants, options, convertible securities
are issued at an effective price per share of Common Stock that is less
than the Conversion Price in effect on the date of such issuance. To
the extent that any such rights, warrants, options or convertible
securities expire unexercised, the Conversion Price then in effect
shall be readjusted to the Conversion Price which then would be in
effect if such rights, options, warrants or convertible securities had
not been issued, but such readjustment shall not affect the number of
shares of Common Stock or other shares of Capital Stock delivered upon
any conversion prior to the date such readjustment is made.
(iii) In case the Corporation shall distribute to all
holders of any series of its Common Stock any of its assets or debt
securities, or rights, options, warrants or convertible or exchangeable
securities of the Corporation (including securities for cash, but
excluding (A) distributions of Capital Stock referred to in Section
9(d)(i) above, (B) distributions of rights, warrants or options
referred to in Section 9(d)(ii) above, if the adjustment to the
Conversion Price under that Section would be greater than an adjustment
under this Section, (C) cash dividends or other cash distributions that
are paid out of Consolidated Net Income for any current Dividend
Period, earned surplus or retained earnings, unless the amount of such
cash dividends or other cash distributions exceeds 5% of the aggregate
Fair Market Value of all shares of Common Stock outstanding on the date
such dividends or distributions are declared), then in each such case,
the Conversion Price shall be adjusted to equal the Conversion Price in
effect immediately prior to such distribution less an amount equal to
the then fair market value (as reasonably determined by the Board of
Directors, in good faith and as described in a resolution of the Board
of Directors) of the portion of the assets or debt Securities of the
Corporation so distributed or of such rights, options, warrants or
convertible or exchangeable securities applicable to one share of
Common Stock. Such adjustment shall become effective immediately after
the record date for the determination of shares entitled to receive
such distribution. Notwithstanding the foregoing, no adjustment of the
Conversion Price shall be made upon the distribution to holders of any
series of Common Stock of such rights, options, warrants, convertible
securities, assets or debt securities if the plan or arrangement under
which such rights, options, warrants,
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<PAGE> 19
convertible securities, assets or debt securities are issued provides
for their issuance to Holders of shares of Preferred Stock in the same
pro rata amounts upon conversion thereof. Such adjustment shall be made
successively whenever any event listed above shall occur.
(iv) Anything in this Section 9(d) to the contrary
notwithstanding, the Corporation shall be entitled to make such
reductions in the Conversion Price, in addition to those required by
this Section 9(d), as it in its reasonable discretion shall determine
to be advisable in order that any stock dividends, subdivision of
shares, distribution of rights to purchase stock or securities, or
distribution of securities convertible into or exchangeable for stock
hereafter made by the Corporation to its stockholders, shall not be
taxable.
(v) Whenever the Conversion Price is adjusted as
provided in this Section 9(d), or the Preferred Stock becomes
convertible into shares of stock, securities, property or assets
pursuant to Section 9(e) below, or the Corporation reduces the
Conversion Price pursuant to Section 9(f) below, the Corporation shall
prepare a notice of such adjustment of the Conversion Price setting
forth the adjusted Conversion Price and the date on which such
adjustment becomes effective, and setting forth in reasonable detail
the facts requiring such adjustment and the calculation of such
adjustment, and shall mail such notice of adjustment to all Holders of
Preferred Stock at their last addresses appearing on the stock transfer
books of the Corporation.
(vi) In any case in which this Section 9(d) provides
that an adjustment shall become effective immediately after a record
date for an event, the Corporation may defer until the occurrence of
such event (i) issuing to the Holder of any shares of Preferred Stock
converted after such record date and before the occurrence of such
event the additional shares of Common Stock issuable upon such
conversion by reason of the adjustment required by such event over and
above the Common Stock issuable upon such conversion before giving
effect to such adjustment, and (ii) paying to such Holder any amount in
cash in lieu of any fractional share of Common Stock pursuant to
Section 9(c).
(vii) For purposes of any computations pursuant to
this Section 9(d), respecting consideration received, the following
shall apply:
(1) in the case of the issuance of shares of
Capital Stock for cash, the consideration shall be the amount
of such cash, provided that in no case shall any deduction be
made for any commissions, discounts or other expenses incurred
by the Corporation for any underwriting of the issue or
otherwise in connection therewith;
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<PAGE> 20
(2) in the case of the issuance of shares of
Capital Stock for a consideration in whole or in part other
than cash, the consideration other than cash shall be deemed
to be the fair market value thereof as reasonably determined
in good faith by the Board of Directors or a duly authorized
committee thereof (irrespective of the accounting treatment
thereof), and described in a resolution of the Board of
Directors or such committee; and
(3) in the case of the issuance of
securities convertible into or exchangeable or exercisable for
shares of Capital Stock, the aggregate consideration received
therefor shall be deemed to be the consideration received by
the Corporation for the issuance of such securities plus the
additional minimum consideration, if any, to be received by
the Corporation upon the conversion or exchange thereof (the
consideration in each case to be determined in the same manner
as provided in clauses (1) and (2) of this Section).
(viii) If after an adjustment a Holder of shares of
Preferred Stock may, upon conversion of such Security, receive shares
of two or more classes of Capital Stock of the Corporation, the
Corporation shall determine on a fair basis the allocation of the
adjusted Conversion Price between the classes of Capital Stock. After
such allocation, the conversion privilege and the Conversion Price of
each class of Capital Stock shall thereafter be subject to adjustment
on terms comparable to those applicable to Common Stock in this Section
9.
(ix) In no event shall an adjustment pursuant to this
Section 9(d) reduce the Conversion Price below the then par value, if
any, of the shares of Common Stock issuable upon conversion of shares
of Preferred Stock.
(e) EFFECT OF RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE.
If any of the following events occur, namely (i) any reclassification or change
of outstanding shares of Common Stock issuable upon conversion of shares of
Preferred Stock (other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination), (ii) any consolidation or merger of the Corporation with another
Person shall be effected as a result of which holders of Common Stock issuable
upon conversion of shares of Preferred Stock shall be entitled to receive stock,
securities or other property or assets (including cash) with respect to or in
exchange for such Common Stock, or (iii) any sale or conveyance of the
properties and assets of the Corporation as, or substantially as, an entirety to
any other Person, then the Corporation or such successor or purchasing Person,
as the case may be, shall make provisions in its certificate or articles of
incorporation or other constituent documents to establish that each share of
Preferred Stock then outstanding shall be convertible into the kind and amount
of shares of stock and other securities or property or assets (including cash)
receivable upon such reclassification, change, consolidation, merger, sale or
conveyance by a holder of the number of shares of Common Stock
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<PAGE> 21
issuable upon conversion of such shares of Preferred Stock immediately prior to
such reclassification, change, consolidation, merger, sale or conveyance. Such
provisions shall provide for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 9.
If this Section 9(e) applies with respect to a transaction, Section
9(d) shall not apply with respect to that transaction. The above provisions of
this Section 9(e) shall similarly apply to successive reclassifications,
consolidations, mergers and sales.
(f) VOLUNTARY ADJUSTMENT. The Corporation at any time may
reduce the Conversion Price by any amount and for any period of time, provided
that such period is not less than twenty (20) Business Days. Whenever the
Conversion Price is reduced pursuant to this Section 9(f), the Corporation shall
mail to the Holders, a notice of the reduction at least 15 days before the date
the reduced Conversion Price takes effect and such notice shall state the
reduced Conversion Price and the period it will be in effect.
(g) TAXES ON SHARES ISSUED. The issuance of stock certificates
upon conversion or transfer of shares of Preferred Stock shall be made without
charge to the converting Holder for any tax in respect of the issuance thereof.
(h) RESERVATION OF SHARES; SHARES TO BE FULLY PAID; COMPLIANCE
WITH GOVERNMENTAL REQUIREMENTS. The Corporation shall reserve, free from
preemptive rights, out of its authorized but unissued shares, or out of shares
held in its treasury, sufficient shares of Common Stock to provide for the
conversion of all shares of Preferred Stock from time to time outstanding. The
Corporation covenants that all shares of Common Stock which may be issued upon
conversion of shares of Preferred Stock will upon issuance be fully paid and
nonassessable by the Corporation and free from all taxes, liens and charges with
respect to the issuance thereof.
(i) NOTICE TO HOLDERS PRIOR TO CERTAIN ACTIONS. In the event:
(A) that the Corporation shall take any action that
would require an adjustment in the Conversion Price pursuant to clauses
(i), (ii) or (iii) of Section 9(d) above; or
(B) that any event described in Section 9(e) above
shall occur; or
(C) of the voluntary or involuntary dissolution,
liquidation or winding-up of the Corporation;
the Corporation shall cause notice of such proposed action or event to be mailed
to each Holder of record of Preferred Stock at its address appearing on the
stock transfer
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books of the Corporation, as promptly as possible but in any event at least
thirty (30) days prior to the record date for such proposed action or the
effective date of such event; provided, however, that in the event that the
Corporation provides public notice of such proposed action or event specifying
the information set forth below at least ten (10) days prior to the proposed
record date or effective date, the Corporation shall be deemed to have satisfied
its obligation to provide notice pursuant to this Section 9(i). In any event,
such notice shall specify (A) the date on which a record is to be taken for the
purpose of such action, or, if a record is not to be taken, the date as of which
the holders of record of Common Stock are to be determined, or (B) the date on
which such proposed event is expected to become effective, and the date as of
which it is expected that holders of record of Common Stock shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such event. Failure to give such notice, or any defect therein, shall not affect
the legality or validity of such action or event.
(j) MANDATORY CONVERSION OF SERIES B PREFERRED STOCK. Each
share of Series B Preferred Stock shall be automatically converted into one
share of Series A Preferred Stock and shall not be deemed outstanding upon the
occurrence of the approval, by vote or written consent of a majority of total
votes cast in person or by proxy, by stockholders of the Corporation in
accordance with applicable Delaware and federal law, of the issuance of
additional shares of Series A Preferred Stock in excess of 17,109 shares.
(k) OPTIONAL CONVERSION OF SERIES B PREFERRED STOCK BY THE
HOLDER. Each share of Series B Preferred Stock shall be convertible at the
option of the Holder thereof into one share of Series A Preferred Stock, at any
time or from time to time (A) after March 15, 1997 unless the approval, by vote
or written consent of a majority of total votes cast in person or by proxy, by
stockholders of the Corporation in accordance with applicable Delaware and
federal law, of the issuance of additional shares of Series A Preferred Stock in
excess of 17,109 shares has been obtained by that date, and (B) after June 15,
1997 unless an amendment of the Corporation's Certificate of Incorporation
deleting Article 9 thereof has been (i) approved, by vote or written consent of
holders of at least two-thirds of the voting power of the outstanding stock of
the corporation entitled to vote thereon, by stockholders of the Corporation in
accordance with applicable Delaware and federal law, and (ii) filed and recorded
with the Secretary of State of the State of Delaware by that date.
SECTION 10. TRANSFERS; REPLACEMENT OF CERTIFICATES.
(a) TRANSFERS. Subject to any restrictions on transfer under
applicable securities or other laws, shares of Preferred Stock may be
transferred on the books of the Corporation by the surrender to the Corporation
of the certificate therefor properly endorsed or accompanied by a written
assignment and power of attorney properly
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executed, with transfer stamps (if necessary) affixed, and such proof of the
authenticity of signature as the Corporation or its transfer agent may
reasonably require.
(b) REPLACEMENT OF CERTIFICATES. If any mutilated certificate
representing shares of Preferred Stock is surrendered to the Corporation, or if
a Holder claims the certificate representing shares of Preferred Stock has been
lost, destroyed or willfully taken, the Corporation shall issue a replacement
certificate of like tenor and date if (i) the Holder provides an indemnity bond
or other security sufficient, in the reasonable judgment of the Corporation, to
protect the Corporation and any authenticating agent and any of their officers,
directors, employees or representatives from any loss which any of them may
suffer if a certificate representing shares of Preferred Stock is replaced, and
(ii) the Holder satisfies any other reasonable requirements of the Corporation.
SECTION 11. REACQUIRED SHARES. Any shares of Preferred Stock which are
converted, purchased, redeemed or otherwise acquired by the Corporation, shall
be retired and canceled by the Corporation promptly thereafter. No such shares
shall upon their cancellation be reissued.
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IN WITNESS WHEREOF, NextHealth, Inc. has caused this Certificate of
Designation to be duly signed by William T O'Donnell, Jr, its President, and
attested by Bertha B Kenny, its Secretary, this 14th day of November, 1996.
NEXTHEALTH, INC.
BY: /S/WILLIAM T O'DONNELL, JR
--------------------------
NAME: WILLIAM T O'DONNELL, JR
TITLE: PRESIDENT
ATTEST:
BY: /S/BERTHA B KENNY
-----------------------
NAME: BERTHA B KENNY
TITLE: CORPORATE SECRETARY
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<PAGE> 1
Exhibit 10.80
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER THE ACT
AND SUCH LAWS OR (1) REGISTRATION UNDER APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED AND (2) AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY IS FURNISHED
TO THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED.
A TERM NOTE
$8,090,000 November 14, 1996
FOR VALUE RECEIVED, NEXTHEALTH, INC., a Delaware corporation (the
"Borrower"), hereby promises to pay to the order of AP LOM LLC (the "Lender"),
in lawful money of the United States of America in immediately available funds,
at Lender's office located at 1301 Avenue of the Americas, 38th Floor, New York,
New York 10019, or at such other office as may be designated, from time to time,
by the holder hereof in writing, on the Maturity Date the principal sum of EIGHT
MILLION NINETY THOUSAND DOLLARS ($8,090,000), or, if less, the unpaid principal
amount of the A Term Loan made by the Lender pursuant to the Credit Agreement.
Unless otherwise defined herein, capitalized terms used herein shall have the
meanings ascribed to such terms in the Credit Agreement referred to below.
The Borrower promises also to pay interest on the unpaid principal
amount hereof in like money at said office from the date hereof until paid at
the rates and at the times provided in Section 2.4 of the Credit Agreement.
This Note is the A Term Note referred to in the Credit Agreement, dated
as of November 14, 1996 (as amended, modified or supplemented from time to time,
the "Credit Agreement"), between the Borrower and the Lender and is entitled to
the benefits thereof and of the other Loan Documents. This Note is secured by
the Mortgage, the Security Agreement and the Pledge Agreement and is entitled to
the benefits of the Guaranty. This Note is subject to voluntary prepayment and
mandatory repayment, in whole or in part, prior to the Maturity Date as provided
in the Credit Agreement.
Lender shall, and is hereby authorized by Borrower to, endorse on the
Schedule annexed to this Note, or otherwise record in Lender's internal records,
an appropriate notation evidencing the date and amount of all principal
disbursed by the Lender hereunder, as well as the date and amount of each
repayment and prepayment hereunder; provided, however, that the failure of
Lender to make such a notation or any error in such notation shall not affect
the obligation of the Borrower under this Note. The Lender shall provide to the
Borrower on request from time to time copies of the Schedule annexed to this
Note showing all endorsements thereto at the time of each such request.
<PAGE> 2
In case an Event of Default shall occur and be continuing, the
principal of and accrued interest on this Note may become or be declared to be
due and payable in the manner and with the effect provided in the Credit
Agreement.
The Borrower hereby waives presentment, demand, protest, notice of
dishonor, notice of nonpayment, notice of protest and diligence in collection,
and assents to the terms hereof and to any extension or postponement of the time
for payment or any other indulgence in connection with this Note. The Borrower
consents that the property securing this Note, or any part of such security, may
be released, exchanged, added to or substituted for by the Lender, without in
any way modifying, altering, releasing, affecting or limiting its liability
hereunder or the liens of the Mortgage, Security Agreement and Pledge Agreement,
and further agrees that the Lender shall not be required to first institute any
suit, or to exhaust any of its remedies against the Borrower or any other person
or party liable or to become liable hereunder, in order to enforce payment of
this Note.
This Note shall be construed in accordance with and governed by the
laws of the State of New York.
NEXTHEALTH, INC.
(Seal)
By:/s/ William T O'Donnell, Jr
----------------------------
Name: William T O'Donnell, Jr
Title: President
-2-
<PAGE> 1
Exhibit 10.81
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER THE ACT
AND SUCH LAWS OR (1) REGISTRATION UNDER APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED AND (2) AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY IS FURNISHED
TO THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED.
B TERM NOTE
$5,000,000 November 14, 1996
FOR VALUE RECEIVED, NEXTHEALTH, INC., a Delaware corporation (the
"Borrower"), hereby promises to pay to the order of AP LOM LLC (the "Lender"),
in lawful money of the United States of America in immediately available funds,
at Lender's office located at 1301 Avenue of the Americas, 38th Floor, New York,
New York 10019, or at such other office as may be designated, from time to time,
by the holder hereof in writing, on the Maturity Date the principal sum of FIVE
MILLION DOLLARS ($5,000,000), or, if less, the unpaid principal amount of the B
Term Loans made by the Lender pursuant to the Credit Agreement. Unless otherwise
defined herein, capitalized terms used herein shall have the meanings ascribed
to such terms in the Credit Agreement referred to below.
The Borrower promises also to pay interest on the unpaid principal
amount hereof in like money at said office from the date hereof until paid at
the rates and at the times provided in Section 2.4 of the Credit Agreement.
This Note is the B Term Note referred to in the Credit Agreement, dated
as of November 14, 1996 (as amended, modified or supplemented from time to time,
the "Credit Agreement"), between the Borrower and the Lender and is entitled to
the benefits thereof and of the other Loan Documents. This Note is secured by
the Mortgage, the Security Agreement and the Pledge Agreement and is entitled to
the benefits of the Guaranty. This Note is subject to voluntary prepayment and
mandatory repayment, in whole or in part, prior to the Maturity Date as provided
in the Credit Agreement.
Lender shall, and is hereby authorized by Borrower to, endorse on the
Schedule annexed to this Note, or otherwise record in Lender's internal records,
an appropriate notation evidencing the date and amount of all principal
disbursed by the Lender hereunder, as well as the date and amount of each
repayment and prepayment hereunder; provided, however, that the failure of
Lender to make such a notation or any error in such notation shall not affect
the obligation of the Borrower under this Note. The Lender shall provide to the
Borrower on request from time to time copies of the Schedule annexed to this
Note showing all endorsements thereto at the time of each such request.
In case an Event of Default shall occur and be continuing, the
principal of and accrued interest on this Note may become or be declared to be
due and payable in the manner and with the effect provided in the Credit
Agreement.
<PAGE> 2
The Borrower hereby waives presentment, demand, protest, notice of
dishonor, notice of nonpayment, notice of protest and diligence in collection,
and assents to the terms hereof and to any extension or postponement of the time
for payment or any other indulgence in connection with this Note. The Borrower
consents that the property securing this Note, or any part of such security, may
be released, exchanged, added to or substituted for by the Lender, without in
any way modifying, altering, releasing, affecting or limiting its liability
hereunder or the liens of the Mortgage, Security Agreement and Pledge Agreement,
and further agrees that the Lender shall not be required to first institute any
suit, or to exhaust any of its remedies against the Borrower or any other person
or party liable or to become liable hereunder, in order to enforce payment of
this Note.
This Note shall be construed in accordance with and governed by the
laws of the State of New York.
NEXTHEALTH, INC.
(Seal)
By: /s/ William T O'Donnell, Jr
-----------------------------
Name: William T O'Donnell, Jr
Title: President
-2-
<PAGE> 1
Exhibit 10.82
THIS WARRANT AND SHARES ISSUABLE ON EXERCISE OF THIS WARRANT MAY NOT HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
APPLICABLE STATE SECURITIES LAWS BY REASON OF EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND SUCH STATE SECURITIES LAWS AND MAY NOT BE SOLD,
PLEDGED, ASSIGNED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR AN
EXEMPTION THEREFROM UNDER SUCH ACT OR LAWS.
WARRANT
No. W-2 Exercisable Only On or after
March 15, 1997 and
Before November 14, 2006
NEXTHEALTH, INC.
This certifies that, for value received, AP NH LLC, a Delaware
limited liability company, or its registered assigns, is entitled to subscribe
for and purchase, at any time and from time to time during the Effective Period,
a number of shares of duly authorized, validly issued, fully paid and
non-assessable Common Stock, including fractional shares, equal to the Initial
Number of Shares at an initial exercise price of $1.50 per share, subject to
adjustment as hereinafter provided, upon the terms and subject to the conditions
hereinafter set forth.
1. Definitions. For the purposes of this Warrant, the following
terms have the following meanings:
"Additional Shares of Common Stock" shall mean all shares of
Common Stock issued by the Corporation after the date hereof other than (i)
Common Stock issued to AP NH LLC or any Person controlling, controlled by or
under common control with it, (iii) Common Stock issued upon conversion of the
Corporation's Series A Preferred Stock or Series B Preferred Stock initially
issued on or about the date hereof, and (ii) Common Stock issued upon exercise
of options granted prior to the date hereof pursuant to the Corporation's
Employee Stock Option Plan and Non-Employee Director Stock Option Plan.
"Business Day" shall mean any day other than a Saturday,
Sunday or other day on which commercial banks in New York, New York are required
by law to close.
"Common Stock" shall mean the Corporation's Common Stock, par
value $0.01 per share, and, in the case of a reclassification, recapitalization
or other similar change in such Common Stock or in the case of a consolidation
or merger of the Corporation with or into
<PAGE> 2
another Person, such consideration to which a holder of a share of Common Stock
would have been entitled upon the occurrence of such event.
"Common Stock Equivalent" shall mean any Convertible Security
or warrant, option or other right to subscribe for or purchase any shares of
Common Stock or any Convertible Security.
"Convertible Securities" shall mean evidences of indebtedness,
shares of Stock or other securities which are or may be at any time convertible
into or exchangeable for shares of Common Stock, including without limitation
any shares of the Corporation's preferred stock which are convertible into or
exchangeable for shares of Common Stock. The term "Convertible Security" shall
mean one of the Convertible Securities.
"Corporation" shall mean NextHealth, Inc., a Delaware
corporation, and its successors and assigns.
"Effective Period" shall mean the period beginning on March
15, 1997 at 9:00 a.m. Pacific/Mountain Standard Time and ending on November 12,
2006 at 5:00 p.m. Pacific/Mountain Standard Time.
"Exercise Date" shall mean the date on which an exercising
Holder has submitted to the Corporation this Warrant and the subscription form
attached hereto as Exhibit A and, if applicable, has paid the exercise price as
required by Section 3.3.1 hereof.
"Fair Market Value" of a share of Common Stock as of any date
shall mean, as of any date, the average of the closing prices of Common Stock
for the twenty (20) consecutive Trading Days next preceding the date five (5)
days prior to the date in question. The closing price for each day shall be:
(i) the average of the closing sale price or, in the
absence of a closing sale price, the highest bid and
lowest asked prices of one share of Common Stock
quoted in the NASDAQ National Market System or any
similar system of automated dissemination of
quotations of securities prices then in common use,
if so quoted; or
(ii) if not quoted as described in clause (i), the average
of the highest bid and lowest offered quotations for
one share of Common Stock as reported by the National
Quotation Bureau Incorporated if at least two
securities dealers have inserted both bid and offered
quotations for Common Stock on at least five (5) of
the twenty (20) consecutive Trading Days next
preceding the date five (5) days prior to the date in
question; or
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<PAGE> 3
(iii) if the Common Stock is listed or admitted for trading
on any national securities exchange, the last sale
price, or the closing bid price if no sale occurred,
of one share of Common Stock on the principal
securities exchange on which the Common Stock is
listed or admitted for trading.
If none of the conditions set forth above is met, the closing price of one share
of Common Stock on any day or the average of such closing prices for any period
shall be the Fair Market Value of Common Stock for such day or period as
determined by a member firm of the New York Stock Exchange selected by the
Corporation and approved by the Holder. If the Corporation and the Holder are
unable to agree on the selection of a member firm, then the issue of selection
of a member firm shall be submitted to the American Arbitration Association.
"Holder" shall mean AP NH LLC, as the original registered
holder of this Warrant, and any registered transferee of a Holder.
"Initial Number of Shares" shall initially mean Five Hundred
Thousand (500,000) shares of Common Stock and thereafter such number of shares
of Common Stock as shall result from the adjustments specified in Section 5
hereof.
"Person" shall mean an individual, a corporation, a
partnership, a trust, an unincorporated organization, limited liability company,
limited liability partnership, government organization or agency or political
subdivision thereof, association, sole proprietorship or any other form of
entity not specifically listed herein.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar Federal statute then in effect.
"Stock" shall include any and all shares, interests or other
equivalents (however designated) of, or participations in, the capital stock of
the Corporation of any class.
"Subsidiary" shall mean any corporation at least 50% of whose
outstanding capital stock shall at the time be owned directly or indirectly by
the Corporation or by one or more Subsidiaries or by the Corporation and one or
more Subsidiaries.
"Trading Day" shall mean, with respect to the Common Stock:
(i) if the Common Stock is quoted on the NASDAQ National Market System, any
similar system of automated dissemination or quotations of securities prices, or
the National Quotation Bureau Incorporated, each day on which quotations may be
made on such system; or (ii) if the Common Stock is listed or admitted for
trading on any national securities exchange, days on which such national
securities exchange is open for business; or (iii) if shares of the Common Stock
are not quoted on any system or listed or admitted for trading on any securities
exchange, a Business Day.
"Warrant" shall mean this Warrant.
-3-
<PAGE> 4
"Warrant Price" shall initially mean $1.50 per share of Common
Stock and thereafter such other prices as shall result from the adjustments
specified in Section 5 hereof.
"Warrant Spread" as of any date shall mean the difference
between (i) the Fair Market Value of a share of Common Stock as of that date and
(ii) the Warrant Price.
2. DURATION. The right to exercise this Warrant to subscribe for
and purchase shares of Common Stock represented hereby shall commence on date
hereof and shall expire at the end of the Effective Period.
3. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT; TRANSFER
AND EXCHANGE.
3.1 The purchase right represented by this Warrant may be
exercised at any time during the Effective Period.
3.2 The Holder hereof may exercise this Warrant, in whole
or in part, by delivery to the Corporation at its office at 1660 North Lago del
Oro Parkway, Tucson, Arizona 85739, Attention: Chief Executive Officer (or such
other address as the Corporation may specify to Holder from time to time), of
(i) a written notice of Holder's election to exercise this Warrant, which notice
shall specify the number of shares of Common Stock to be purchased, (ii) payment
of the Warrant Price in the manner provided in Section 3.3 and (iii) this
Warrant. Such notice shall be substantially in the form of the subscription form
appearing at the end of this Warrant as Exhibit A, duly executed by Holder or
its agent or attorney. In the event of any exercise of the rights represented by
this Warrant, (i) certificates for the shares of Common Stock so purchased shall
be dated the date of such exercise and delivered to the Holder hereof within a
reasonable time, not exceeding 15 days after such exercise, and the Holder
hereof shall be deemed for all purposes to be the Holder of the shares of Common
Stock so purchased as of the date of such exercise, and (ii) unless this Warrant
has expired, a new Warrant representing the number of shares, if any, with
respect to which this Warrant shall not then have been exercised shall also be
issued to the Holder hereof within such time. Any such warrant shall be dated
the date hereof and shall be identical with this Warrant except as to the number
of shares of Common Stock issuable pursuant thereto.
3.3 Subject to the provisions of this Warrant, this
Warrant may be exercised in the manner set forth in either Section 3.3.1 or
Section 3.3.2 below:
3.3.1 Upon presentation to the Corporation at the
office specified in Section 3.2 of this Warrant with the subscription form
appearing at the end of this Warrant as Exhibit A duly completed, indicating a
cash exercise and signed by the Holder, and upon payment of an amount equal to
the product of the Warrant Price and the number of shares of Common Stock to be
purchased, by, at the option of Holder, (i) wire transfer to an account in a
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<PAGE> 5
bank located in the United States designated for such purpose by the Corporation
or (ii) certified or official bank check, the Corporation shall issue and cause
to be delivered to or upon the written order of the Holder and in such name or
names as Holder may designate, a certificate for the shares of Common Stock
issued upon such exercise.
3.3.2 Upon presentation to the Corporation at the
office specified in Section 3.2 of this Warrant with the subscription form
appearing at the end of this Warrant as Exhibit A duly completed, indicating a
non-cash exercise and signed by the Holder, the Corporation shall issue and
cause to be delivered to or upon the written order of the Holder and in such
name or names as Holder may designate, a certificate for a number of shares of
Common Stock equal to the result of dividing (i) the product of (A) the number
of shares of Common Stock for which this Warrant may be exercised and (B) the
Warrant Spread on the Exercise Date, by (ii) the Fair Market Value of a share of
Common Stock on the Exercise Date.
3.4 Subject to compliance with Section 7 hereof, this Warrant
may be transferred on the books of the Corporation by the Holder hereof in
person or by duly authorized attorney, upon surrender of this Warrant at the
principal office of the Corporation, properly endorsed and upon payment of any
necessary transfer tax or other governmental charge imposed upon such transfer.
Subject to compliance with Section 7 hereof, this Warrant is exchangeable at the
aforesaid principal office of the Corporation for warrants for the purchase of
the same aggregate number of shares of Common Stock, each new warrant to
represent the right to purchase such number of shares of Common Stock as the
Holder hereof shall designate at the time of such exchange. All warrants issued
on transfers or exchanges shall be dated the date hereof and shall be identical
with this Warrant except as to the number of shares of Common Stock issuable
pursuant hereto.
3.5 The Corporation will, at its own expense, from time to
time take all action which may be necessary to obtain and keep effective any and
all permits, consents, orders and approvals of governmental agencies and
authorities which are or become required or necessary so that any Common Stock,
immediately upon its issuance upon the exercise of this Warrant, will be listed
on each securities exchange or listing or quotation services, if any, on which
Common Stock of the Corporation is then listed.
4. STOCK FULLY PAID; RESERVATION OF SHARES.
4.1 The Corporation covenants and agrees that all shares
of Common Stock which may be issued upon the exercise of the rights represented
by this Warrant will, upon issuance, be fully paid and non-assessable and free
from all taxes, liens and charges with respect to issuance. The Corporation
further covenants and agrees that during the Exercise Period, the Corporation
will at all times have authorized and reserved for the purpose of the issue upon
exercise of this Warrant a sufficient number of shares of Common Stock to
provide for the exercise of the rights represented by this Warrant. If the
Warrant Price is at any time less than the par value of the Common Stock, the
Corporation also covenants and agrees to cause to be
-5-
<PAGE> 6
taken such action (whether by decreasing the par value of the Common Stock, the
conversion of the Common Stock from par value to no par value, or otherwise) as
will permit the exercise of this Warrant and the issuance of the Common Stock
without any additional payment by the Holder hereof (other than payment of the
Warrant Price and applicable transfer taxes, if any), which Common Stock, upon
such issuance, will be fully paid and non-assessable.
4.2 The Corporation shall not by any action, including,
without limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of the Holder hereof against impairment. Without limiting the generality
of the foregoing, the Corporation will (a) not increase the par value of any
shares of Common Stock above the amount payable therefor upon the exercise of
this Warrant immediately prior to such increase in par value and (b) take all
such action as may be necessary or appropriate in order that the Corporation may
validly and legally issue fully paid and nonassessable shares of Common Stock,
free and clear of any liens, claims, encumbrances and restrictions (other than
as provided herein) upon the exercise of this Warrant.
5. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES. The number
and kind of securities purchasable upon the exercise of this Warrant and the
amount of the Warrant Price shall be subject to adjustment from time to time
upon the happening of certain events as follows:
5.1 RECAPITALIZATION, REORGANIZATION, RECLASSIFICATION,
CONSOLIDATION OR MERGER. In case of any recapitalization or reorganization of
the Corporation or any reclassification or change of outstanding Stock issuable
upon exercise of this Warrant (other than a change in par value, or from par
value to no par value, or from no par value to par value or as a result of a
subdivision of combination), or in case of any consolidation or merger of the
Corporation with or into another corporation (other than a merger with another
corporation in which the Corporation is the surviving corporation and which does
not result in any reclassification or change (other than a change in par value,
or from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination) of outstanding Stock issuable upon
exercise of this Warrant), the Holder of this Warrant shall be entitled to
receive, upon exercise of this Warrant, the kind and the highest amount of
shares of Stock, other securities, money and property receivable upon such
recapitalization, reorganization, reclassification, change, consolidation or
merger by a Holder of one share of Common Stock as if this Warrant had been
exercised immediately prior to such recapitalization, reorganization,
reclassification, change, consolidation or merger. The provisions of this
Section 5.1 shall similarly apply to successive recapitalizations,
reorganizations, reclassifications, changes, consolidations and mergers.
5.2 SUBDIVISION OR COMBINATION OF SHARES. If the
Corporation, at any time while this Warrant is outstanding, shall subdivide or
combine any class or classes of its Common
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<PAGE> 7
Stock, the Warrant Price shall be proportionately reduced, in case of
subdivision of shares, to reflect the increase in the total number of shares of
Common Stock outstanding as a result of such subdivision, as at the effective
date of such subdivision, or if the Corporation shall take a record of holders
of any class or classes of its Common Stock for the purpose of so subdividing,
as at the applicable record date, whichever is earlier, or shall be
proportionately increased, in the case of combination of shares, to reflect the
reduction in the total number of shares of Common Stock outstanding as a result
of such combination, as at the effective date of such combination or, if the
Corporation shall take a record of holders of any class or classes of its Common
Stock for the purpose of so combining, as at the applicable record date,
whichever is earlier.
5.3 STOCK DIVIDENDS. If the Corporation, at any time
while this Warrant is outstanding, shall pay a dividend in, or make any other
distribution of, Common Stock, the Warrant Price shall be adjusted, as at the
date the Corporation shall take a record of the holders of such class or classes
of Common Stock, for the purpose of receiving such dividend or other
distribution (or if no such record is taken, as at the date of such payment on
other distribution), to that price determined by multiplying the Warrant Price
in effect immediately prior to the record date (or if no such record is taken,
then immediately prior to such payment or other distribution), by a fraction (i)
the numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution, and (ii) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution (plus in the event
that the Corporation paid cash for fractional shares, the number of additional
shares which would have been outstanding had the Corporation issued fractional
shares in connection with said dividends).
5.4 ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. If the
Corporation, at any time while this Warrant is outstanding, shall issue any
Additional Shares of Common Stock (otherwise than as provided in the foregoing
Sections 5.1 through 5.3), at a price per share less than the Warrant Price or
without consideration, then the Warrant Price upon each such issuance shall be
adjusted to that issuance price. The provisions of this Section 5.4 shall not
apply under any of the circumstances for which an adjustment is provided in
Sections 5.1, 5.2 or 5.3. No adjustment of the Warrant Price shall be made under
this Section 5.4 upon the issuance of any Additional Shares of Common Stock
which are issued pursuant to any Common Stock Equivalent if upon the issuance of
such Common Stock Equivalent (a) any adjustment shall have been made pursuant to
Section 5.5 or (b) no adjustment was required pursuant to Section 5.5.
5.5 ISSUANCE OF COMMON STOCK EQUIVALENTS. If the
Corporation shall, at any time while this Warrant is outstanding, issue any
Common Stock Equivalent, and the price per share for which Additional Shares of
Common Stock may be issuable thereafter pursuant to such Common Stock Equivalent
shall be less than the current Warrant Price then in effect, or if, after any
such issuance of Common Stock Equivalents, the price per share for which
Additional Shares of Common Stock may be issuable thereafter is amended, and
such price as so amended shall be less than the current Warrant Price in effect
at the time of such amendment, then the Warrant Price upon each such issuance or
amendment shall be adjusted as provided in the first
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<PAGE> 8
sentence of Section 5.4 on the basis that Additional Shares of Common Stock
issuable pursuant to such Common Stock Equivalents shall be deemed to have been
issued (whether or not such Common Stock Equivalents are actually then
exercisable, convertible or exchangeable in whole or in part) as of the earlier
of (a) the date on which the Corporation shall enter into a firm contract for
the issuance of such Common Stock Equivalent, or (b) the date of actual issuance
of such Common Stock Equivalent. No adjustment of the Warrant Price shall be
made under this Section 5.5 upon the issuance of any Convertible Security which
is issued pursuant to the exercise of any warrants or other subscription or
purchase rights therefor, if any adjustment shall previously have been made in
the Warrant Price then in effect upon the issuance of such warrants or other
rights pursuant to this Section 5.5.
5.6 OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS
SECTION 5. The following provisions shall be applicable to the making of
adjustments in the Warrant Price hereinbefore provided in this Section 5:
5.6.1 COMPUTATION OF CONSIDERATION. The consideration
received by the Corporation shall be deemed to be the following: to the extent
that any Additional Shares of Common Stock or any Common Stock Equivalents shall
be issued for a cash consideration, the consideration received by the
Corporation therefor; or, if such Additional Shares of Common Stock or Common
Stock Equivalents are offered by the Corporation for subscription, the
subscription price; or, if such Additional Shares of Common Stock or Common
Stock Equivalents are sold to underwriters or dealers for public offering
without a subscription offering, the initial public offering price, in any such
case excluding any amounts paid or receivable for accrued interest or accrued
dividends and without deduction of any compensation, discounts, commissions, or
expenses paid or incurred by the Corporation for or in connection with the
underwriting thereof or otherwise in connection with the issue thereof. The
consideration for any Additional Shares of Common Stock issuable pursuant to any
Common Stock Equivalents shall be the consideration received by the Corporation
for issuing such Common Stock Equivalents, plus the additional consideration
payable to the Corporation upon the exercise, conversion or exchange of such
Common Stock Equivalents. In case of the issuance at any time of any Additional
Shares of Common Stock or Common Stock Equivalents in payment or satisfaction of
any dividend upon any class of Stock other than Common Stock, the Corporation
shall be deemed to have received for such Additional Shares of Common Stock or
Common Stock Equivalents a consideration equal to the amount of such dividend so
paid or satisfied. In any case in which the consideration to be received or paid
shall be other than cash, the Board of Directors of the Corporation shall
determine in good faith the fair market value of such consideration and promptly
notify the Holder of its determination of the fair market value of such
consideration prior to payment or accepting receipt thereof. If, within thirty
(30) days after receipt of said notice, the Holder shall notify the Board of
Directors of the Corporation in writing of its objection to such determination,
a determination of fair market value of such consideration shall be made by an
appraiser selected by the Corporation and approved by the Holder. If the
Corporation and the Holder are unable to agree on the selection of an appraiser,
the issue of selection of an appraiser shall be submitted to the American
Arbitration Association.
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<PAGE> 9
5.6.2 READJUSTMENT OF WARRANT PRICE. Upon the
expiration of the right to convert, exchange or exercise any Common Stock
Equivalent the issuance of which effected an adjustment in the Warrant Price, if
such Common Stock Equivalent shall not have been converted, exercised or
exchanged, the number of shares of Common Stock deemed to be issued and
outstanding by reason of the fact that they were issuable upon conversion,
exchange or exercise of any such Common Stock Equivalent shall no longer be
computed as set forth above, and the Warrant Price shall forthwith be readjusted
and thereafter be the price which it would have been (but reflecting any other
adjustments in the Warrant Price made pursuant to the provisions of this Section
5 after the issuance of such Common Stock Equivalent) had the adjustment of the
Warrant Price been made in accordance with the issuance or sale of the number of
Additional Shares of Common Stock actually issued upon conversion, exchange or
issuance of such Common Stock Equivalent and thereupon only the number of
Additional Shares of Common Stock actually so issued shall be deemed to have
been issued and only the consideration actually received by the Corporation
(computed as in Section 5.6.1) shall be deemed to have been received by the
Corporation.
5.7 TREASURY SHARES. In making any adjustments in the Warrant
Price hereinbefore provided in this Section 5, the number of shares of Common
Stock at any time outstanding shall not include any shares thereof then directly
or indirectly owned or held by or for the account of the Corporation or any of
its Subsidiaries.
5.8 OTHER ACTION AFFECTING COMMON STOCK. In case after the date
hereof the Corporation shall take any action affecting its Common Stock, other
than an action described in any of the foregoing Sections 5.1 through 5.6,
inclusive, and the failure to make any adjustment would not fairly protect the
purchase rights represented by this Warrant in accordance with the essential
intent and principals of this Section 5, then the Warrant Price shall be
adjusted in such manner as the Board of Directors of the Corporation shall in
good faith determine to be equitable in the circumstances.
5.9 ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment in the
Warrant Price pursuant to any provision of this Section 5, the number of shares
of Common Stock purchasable hereunder shall be adjusted, to the nearest whole
share, to the product obtained by multiplying the number of such shares
purchasable immediately prior to such adjustment in the Warrant Price by a
fraction, the numerator of which shall be the Warrant Price immediately prior to
such adjustment and the denominator of which shall be the Warrant Price
immediately thereafter. If the Corporation shall be in default under any
provision contained in the last sentence of Section 4.2 of this Warrant so that
such shares, upon issuance, would not be validly issued under applicable law at
the Warrant Price adjusted in accordance with this Section 5, the adjustment of
shares provided in the foregoing sentence shall nonetheless be made and the
Holder of this Warrant shall be entitled to purchase such greater number of
shares at the lowest price at which such shares may be validly issued under
applicable law. Such exercise shall not constitute a
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<PAGE> 10
waiver of any claim arising against the Corporation by reason of its default
under Section 4.2 of this Warrant.
6. NOTICE OF ADJUSTMENTS. Whenever the Warrant Price or number of
shares of Common Stock purchasable upon exercise of this Warrant shall be
adjusted pursuant to Section 5 hereof, the Corporation shall cause the
independent accounting firm then regularly engaged by it to report on its
financial statements to prepare and execute a certificate setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated (including a
description of the basis on which the Board of Directors of the Corporation made
any determination hereunder), and the Warrant Price and number of shares of
Common Stock purchasable hereunder after giving effect to such adjustment, and
shall cause copies of such certificate to be mailed (by first class mail postage
prepaid) to the Holder of this Warrant promptly after each adjustment.
7. RESTRICTIONS ON TRANSFERABILITY. The Warrant and the Common
Stock issued upon exercise of the Warrant shall not be transferred, hypothecated
or assigned before satisfaction of the conditions specified in this Section 7
(unless transferred or assigned pursuant to Section 8), which conditions are
intended to ensure compliance with the provisions of the Securities Act and
state securities or "blue sky" laws with respect to the transfer, hypothecation
or assignment of any Warrant or Common Stock issued upon exercise of any
Warrant. Holder, by acceptance of this Warrant, agrees to be bound by the
provisions of this Section 7.
Prior to any transfer, hypothecation or assignment or
attempted transfer, hypothecation or assignment of the Warrant or any Common
Stock issued upon exercise of the Warrant, the Holder of such Warrant or Common
Stock shall give ten (10) days prior written notice (a "Transfer Notice") to the
Corporation of such Holder's intention to effect such transfer, hypothecation or
assignment, describing the manner and circumstances of the proposed transfer,
hypothecation or assignment, and provide the Corporation with a written opinion
of counsel addressed to the Corporation that the proposed transfer,
hypothecation or assignment of the Warrant or such Common Stock may be effected
without registration under the Securities Act and applicable state securities or
"blue sky" laws. After receipt of the Transfer Notice and written opinion, the
Corporation shall, within five (5) days thereof, so notify the Holder of the
Warrant or such Common Stock in writing and such Holder shall thereupon be
entitled to transfer, hypothecate or assign the Warrant or Common Stock, in
accordance with the terms of the Transfer Notice. The Holder of the Warrant or
such Common Stock, as the case may be, giving the Transfer Notice shall not be
entitled to transfer the Warrant or such Common Stock until receipt of notice
from the Corporation under this Section 7.2.
8. REGISTRATION RIGHTS. The Holder of this Warrant shall be
entitled to the rights, privileges and benefits set forth in the Registration
and Pre-Emptive Rights Agreement dated as of the date hereof between the initial
Holder of this Warrant and the Corporation.
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<PAGE> 11
9. AMENDMENT AND WAIVER. Any term, covenant, agreement or
condition in this Warrant may be amended, or compliance therewith may be waived
(either generally or in a particular instance and either retroactively or
prospectively), by a written instrument or written instruments executed by the
Corporation and the Holder.
10. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE (WITHOUT GIVING
EFFECT TO THE CHOICE OF LAW PRINCIPLES OF SUCH STATE).
11. REPLACEMENT. On receipt of evidence reasonably satisfactory to
the Corporation of the loss, theft, destruction or mutilation of this Warrant
and, in the case of loss, theft or destruction, on delivery of an indemnity
agreement or bond reasonably satisfactory in form and amount to the Corporation
or, in the case of mutilation, on surrender and cancellation of this Warrant,
the Corporation, at its expense, will execute and deliver in lieu of this
Warrant, a new warrant of like tenor.
12. SPECIFIC PERFORMANCE. The Holder shall have the right to
specific performance by the Corporation of the provisions of this Warrant. The
Corporation hereby irrevocably waives, to the extent that it may do so under
applicable law, any defense based on the adequacy of a remedy at law which may
be asserted as a bar to the remedy of specific performance in any action brought
against the Corporation for specific performance of this Warrant by the Holder.
Dated: November 14, 1996 NEXTHEALTH, INC.
ATTEST: BY: /S/ WILLIAM T O'DONNELL, JR
-----------------------------
NAME: WILLIAM T O'DONNELL, JR
TITLE: PRESIDENT
/S/ BERTHA B KENNY
SECRETARY
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<PAGE> 12
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
CASH EXERCISE METHOD
The undersigned registered owner of the attached Warrant
irrevocably exercises, by the Cash Exercise Method in accordance with Section
3.3.1 of the Warrant, the attached Warrant for the purchase of ________ shares
of Common Stock, $0.01 par value, of NextHealth, Inc. and herewith makes payment
therefor, to the order of the Corporation in the amount of $_________________ as
payment of the Exercise Price in accordance with the terms set forth in Section
3.3.1.
NON-CASH EXERCISE METHOD
The undersigned registered owner of the attached Warrant
irrevocably exercises, by the Non-cash Exercise Method in accordance with
Section 3.3.2 of the Warrant, the attached Warrant for the purchase of _______
shares of Common Stock, $0.01 par value, of NextHealth, Inc., calculated as
follows:
(a) Number of shares of Common Stock for which the
Warrant may be exercised: _____________________
(b) The Warrant Spread on the Exercise Date:
__________________
(c) The Fair Market Value of a share of Common Stock on
the Exercise Date: _____________________________
(d) Number of shares of Common Stock to be purchased
(line (a) times line (b) divided by line (c)):
_________________________________
ISSUANCE INSTRUCTIONS
The undersigned requests that a certificate for such Common
Stock be registered in the name of __________________________________________
whose address is ____________________________________________________________
and that such certificate be delivered to ___________________________________
whose address is ____________________________________________________________.
If such number of shares of Common Stock is less than all of the shares of
Common Stock which may
<PAGE> 13
be purchased upon the exercise of the Warrant, the undersigned hereby requests
that a new Warrant representing the remaining balance of this Warrant be
registered in the name of
___________________________________________________________ whose address is
___________________________________________________________ and that such
Warrant be delivered to _______________________________________ whose address is
__________________________________________.
________________________________
Name of Registered Owner
________________________________
Signature of Registered Owner
________________________________
________________________________
Address
________________________________
Federal ID Number
<PAGE> 1
EXHIBIT 10.83
DEED OF TRUST
THIS Deed of Trust made the 14 day of November, 1996,
between NEXTHEALTH, INC., a Delaware corporation having an
office at 16600 N. Lago Del Oro Parkway, Tucson, Arizona 85739
(hereinafter referred to as "Grantor"), and FIDELITY NATIONAL
TITLE AGENCY, INC., an Arizona corporation whose mailing
address is 7750 E. Broadway, Suite A-200, Tucson, Arizona
85710-3903 (hereinafter referred to as "Trustee"), for the use
and benefit of AP LOM LLC a Delaware limited liability company
having an office at c/o Apollo Real Estate Advisors L.P., 1301
Avenue of the Americas, 38th Floor, New York, New York 10019
(hereinafter referred to as "Beneficiary"),
W I T N E S S E T H :
A. Whereas Grantor is the owner of a fee estate in the premises
described in EXHIBIT A attached hereto (hereinafter referred to as the
"Premises");
B. NOW, THEREFORE, to secure the payment of an indebtedness in the
aggregate principal sum of up to THIRTEEN MILLION NINETY THOUSAND and 00/100
Dollars ($13,090,000), lawful money of the United States of America, or so much
thereof as may be advanced in accordance with the provisions of the Credit
Agreement, to be paid with interest according to (i) that certain A Term Note in
an amount up to $8,090,000 and (ii) that certain B Term Note in an amount up to
$5,000,000 (hereinafter referred to collectively as the "Notes") given by
Grantor to Beneficiary (said indebtedness, interest and all other sums of any
nature whatsoever which may or shall become due under or pursuant to the
provisions of the Notes, as such Notes may be extended, modified or renewed,
this Deed of Trust or the other Loan Documents being hereinafter collectively
referred to as the "Debt"), Grantor has given, granted, bargained, sold,
aliened, enfeoffed, conveyed, confirmed and assigned, and by these presents does
give, grant, bargain, sell, alien, enfeoff, convey, confirm and assign unto
Trustee IN TRUST FOREVER, WITH POWER OF SALE, all right, title and interest of
Grantor now owned, or hereafter acquired, in and to the following property,
rights and interests (such property, rights and interests being hereinafter
collectively referred to as the "Trust Property"):
(a) the Premises;
<PAGE> 2
(b) all buildings and improvements now or hereafter located on
the Premises (hereinafter referred to as the "Improvements");
(c) all of the estate, right, title, claim or demand of any
nature whatsoever of Grantor, either in law or in equity, in possession
or expectancy, in and to the Trust Property or any part thereof;
(d) all easements, rights-of-way, gores of land, streets,
ways, alleys, passages, sewer rights, waters, water courses, water
rights and powers, and all estates, rights, titles, interests,
privileges, liberties, tenements, hereditaments, and appurtenances of
any nature whatsoever, in any way belonging, relating or pertaining to
the Trust Property (including, without limitation, any and all
development rights, air rights or similar or comparable rights of any
nature whatsoever now or hereafter appurtenant to the Premises or now
or hereafter transferred to the Premises) and all land lying in the bed
of any street, road or avenue, opened or proposed, in front of or
adjoining the Premises to the center line thereof;
(e) all machinery, apparatus, equipment, fittings, fixtures
and other property of every kind and nature whatsoever owned by
Grantor, or in which Grantor has or shall have an interest, now or
hereafter located upon the Trust Property, or appurtenances thereto, or
usable in connection with the present or future operation and occupancy
of the Trust Property and all building equipment, materials and
supplies of any nature whatsoever owned by Grantor, or in which Grantor
has or shall have an interest, now or hereafter located upon the Trust
Property (hereinafter collectively referred to as the "Equipment"), and
the right, title and interest of Grantor in and to any of the Equipment
which may be subject to any security agreements (as defined in the
Uniform Commercial Code of the State in which the Premises are
located), superior in lien to the lien of this Deed of Trust;
(f) all awards or payments, including interest thereon, and
the right to receive the same, which may be made with respect to the
Trust Property, whether from the exercise of the right of eminent
domain (including any transfer made in lieu of the exercise of said
right), or for any other injury to or decrease in the value of the
Trust Property;
(g) all leases, licenses and other agreements affecting or
relating to the use or occupancy of the Trust Property now or hereafter
entered into (hereinafter referred to as the "Leases") and the right to
receive and apply the rents, income, revenues, receipts, accounts,
accounts receivable, issues and profits of or derived from or relating
to the Trust Property and the fees, charges, accounts, accounts
receivable or other payments for the use or occupancy of rooms, suites
and private and public function space constituting part of or located
in the Trust Property including but not limited to the rental of any
office
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<PAGE> 3
space, retail space, halls, stores, and offices of every kind, and
rentals, revenues of the rental of rooms, food and beverage facilities,
telephone services, laundry, vending, television and parking
(hereinafter collectively referred to as the "Rents") to the payment of
the Debt;
(h) all proceeds of and any unearned premiums on any insurance
policies covering the Trust Property, including, without limitation,
the right to receive and apply the proceeds of any insurance,
judgments, or settlements made in lieu thereof, for damage to the Trust
Property; and
(i) the right, in the name and on behalf of Grantor, to appear
in and defend any action, case or proceeding brought with respect to
the Trust Property and to commence any action, case or proceeding to
protect the interest of Beneficiary in the Trust Property;
TO HAVE AND TO HOLD the above granted and described Trust Property unto
and to the proper use and benefit of Trustee, and the successors and assigns of
Trustee, forever;
IN TRUST, to secure the payment to Beneficiary of the Debt at the time
and in the manner provided for its payment in the Notes, this Deed of Trust and
the other Loan Documents;
AND Grantor covenants and agrees with and represents and warrants to
Trustee and Beneficiary as follows:
1. DEFINITIONS. Attached to this Deed of Trust as EXHIBIT B is an
index of the defined terms used in this Deed of Trust.
2. PAYMENT OF DEBT. Grantor will pay the Debt at the time and in
the manner provided for its payment in the Notes, this Deed of Trust and the
other Loan Documents.
3. WARRANTY OF TITLE. Subject only to those exceptions to title
specifically set forth in the title policy issued or to be issued by Fidelity
National Title Agency, Inc. to Beneficiary and insuring the lien of this Deed of
Trust, Grantor warrants the title to the Premises, the Improvements, the
Equipment and the balance of the Trust Property.
4. INSURANCE COVERAGE. Grantor will insure the Trust Property
against such perils and hazards, and in such amounts and with such limits, as
Beneficiary may from time to time require, and in any event will continuously
maintain, without cost or expense to Beneficiary, the insurance described in
EXHIBIT C attached to this Deed of Trust (hereinafter collectively referred to
as the "Insurance Policies"). All Insurance Policies shall be in form, issued by
companies and in amounts satisfactory to Beneficiary from time to time. An
insurance company shall not be satisfactory unless such insurance company (i)
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<PAGE> 4
has Best's general policyholder rating of "A-" or better and a financial rating
of "Class VIII" or better, (ii) is licensed in Delaware and in the State in
which the Premises are located, (iii) has actively been in business for at least
five (5) years, (iv) if it is a mutual company, is a nonassessable company, and
(v) does not provide insurance on any one building in excess of 10% of its
policyholders' surplus (including capital). All Insurance Policies insuring
against casualty and business interruption and other Insurance Policies, as
appropriate, shall include non-contributing mortgagee endorsements in favor of
Beneficiary, its affiliates, subsidiaries, successors and assigns, as their
interests may appear, with loss payable to Beneficiary, as well as standard
waiver of subrogation endorsements, and shall provide that the coverage shall
not be terminated or modified, nor a risk changed without thirty (30) days'
advance written notice to Beneficiary. A verified copy of each Insurance Policy
shall be delivered to Beneficiary. Blanket insurance policies shall not be
acceptable unless otherwise agreed to the contrary by Beneficiary. If any
portion of the insured risks are reinsured, the reinsurance policies shall
contain "cut-through" endorsements in form satisfactory to Beneficiary. Grantor
will deliver all Insurance Policies, premium prepaid for a period of one (1)
calendar year to Beneficiary and, in the case of Insurance Policies about to
expire, Grantor will deliver renewal or replacement policies not less than
thirty (30) days prior to the date of expiration. Grantor will provide
Beneficiary on a calendar year basis with evidence satisfactory to Beneficiary
that all insurance premiums (hereinafter referred to as the "Insurance
Premiums") for the required Insurance Policies have been paid with respect to
such calendar year. The foregoing requirements of the this paragraph shall apply
to any separate policies of insurance taken out by Grantor concurrent in form or
contributing in the event of loss with the Insurance Policies. If at any time
Beneficiary is not in receipt of written evidence that all insurance required
hereunder is in force and effect, Beneficiary shall have the absolute and
unconditional right without prior notice to Grantor to take such action as
Beneficiary deems necessary to protect its interest in the Trust Property,
including, without limitation, the obtaining of such insurance coverage as
Beneficiary in its sole and absolute discretion deems appropriate, and all
expenses incurred by Beneficiary in connection with such action or in obtaining
such insurance and keeping it in effect shall be paid by Grantor to Beneficiary
upon demand, together with interest thereon at the Default Rate. Grantor shall
at all times comply with and shall cause the Improvements and Equipment and the
use, occupancy, operation, maintenance, alteration, repair and restoration
thereof to comply with the terms, conditions, stipulations and requirements of
the Insurance Policies. If the Premises, or any portion thereof, are located in
a Federally designated "special flood hazard area", in addition to the other
Insurance Policies required under this paragraph, a flood insurance policy shall
be delivered by Grantor to Beneficiary. If no portion of the Premises is located
in a Federally designated "special flood hazard area" such fact shall be
substantiated by a certificate in form satisfactory to Beneficiary from a
licensed surveyor, appraiser or professional engineer or other qualified person.
If the Trust Property shall be damaged or destroyed, in
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<PAGE> 5
whole or in part, by fire or other property hazard or casualty, Grantor shall
give prompt notice thereof to Beneficiary. Except as otherwise hereinafter
specifically provided to the contrary in paragraph 6 of this Deed of Trust, sums
paid to Beneficiary by any insurer may be retained and applied by Beneficiary
toward payment of the Debt whether or not then due and payable in such order,
priority and proportions as Beneficiary in its discretion shall deem appropriate
or, at the discretion of Beneficiary, the same may be paid, either in whole or
in part, to Grantor for such purposes as Beneficiary shall designate. If
Beneficiary shall receive and retain such insurance proceeds, the lien of this
Deed of Trust shall be reduced only by the amount thereof received and retained
by Beneficiary and actually applied by Beneficiary in reduction of the Debt.
5. INSURANCE PREMIUM DEPOSITS. In order to assure the payment of
the Insurance Premiums as and when the same shall become due and payable,
Grantor shall deposit with Beneficiary on the first day of each calendar month
during the term of this Deed of Trust, an amount equal to one-twelfth (1/12) of
the Insurance Premiums to become due with respect to the required Insurance
Policies between one and thirteen months after the date of each such deposit, it
being the intention that at all times during the term of this Deed of Trust
there shall remain on deposit with Beneficiary an amount at least equal to
one-twelfth (1/12) of the Insurance Premiums to become due with respect to the
required Insurance Policies within the ensuing twelve (12) month period. The
amounts of such deposits (hereinafter referred to as the "Insurance Premium
Deposits") shall be based upon Beneficiary's estimate as to the amount of the
Insurance Premiums. Grantor shall, upon demand of Beneficiary, make additional
Insurance Premium Deposits as Beneficiary may from time to time require due to
(i) the failure of Beneficiary to require, or failure of Grantor to make,
Insurance Premium Deposits in previous months, (ii) under estimation of the
amount of the Insurance Premiums, (iii) the particular due dates and amount of
the Insurance Premiums, or (iv) application of the Insurance Premium Deposits
pursuant to the provision of this paragraph hereinafter set forth to the payment
of the Insurance Premiums. Beneficiary will, out of the Insurance Premium
Deposits, upon the presentation to Beneficiary by Grantor of the bills therefor
and at the direction of Grantor, pay the Insurance Premiums which are due or
will, upon the presentation of receipted bills therefor, reimburse Grantor for
such payments made by Grantor. If the total Insurance Premium Deposits on hand
shall not be sufficient to pay all of the Insurance Premiums for the Trust
Property when the same shall become due, then Grantor shall pay to Beneficiary
on demand the amount necessary to make up the deficiency. Beneficiary shall not
be obligated to pay any Insurance Premiums which are due unless it is in receipt
of available funds in an amount sufficient to pay such Insurance Premiums in
full. Notwithstanding anything to the contrary contained herein, Beneficiary
shall have the absolute right, regardless of whether it has received direction
from Grantor, to pay the Insurance Premiums at any time during the thirty (30)
day period prior to the due date thereof. Any excess monies remaining in the
Insurance Premium Escrow Account after the payment in full of the Insurance
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<PAGE> 6
Premiums which are due shall be applied as a credit against future Insurance
Premium Deposits pursuant to this paragraph. All Insurance Premium Deposits
shall be held by Beneficiary in a non-interest bearing account selected by
Beneficiary in its sole and absolute discretion (hereinafter referred to as the
"Insurance Premium Escrow Account"). The Insurance Premium Escrow Account may be
co-mingled with any other accounts of Beneficiary. In order to secure the
payment of the Debt and the performance by Grantor of its obligations under the
Loan Documents, Grantor hereby grants and assigns to Beneficiary a security
interest in and to the Insurance Premium Escrow Account and in and to all monies
from time to time on deposit therein. Until expended or applied in accordance
with the provisions of this Deed of Trust, any amounts in the Insurance Premium
Escrow Account shall constitute additional security for the payment of the Debt.
Upon the occurrence of an Event of Default, Beneficiary shall have the absolute
right to apply all or any portion of the balance held in the Insurance Premium
Escrow Account to the payment of the Debt whether or not then due and payable in
such order, priority and proportions as Beneficiary in its discretion shall deem
appropriate. Notwithstanding anything herein to the contrary, neither
Beneficiary nor its successors and assigns, shall be liable for any failure to
apply the Insurance Premium Deposits to the payment of Insurance Premiums which
are due unless Grantor, while no default exists under the Notes, this Deed of
Trust or any of the other Loan Documents, shall have requested Beneficiary in
writing to make application of the Insurance Premium Deposits on hand to the
payment of the Insurance Premiums which are due, accompanied by the bills
therefor. The provisions of this paragraph are for the benefit of Grantor and
Beneficiary alone. No provision of this Deed of Trust or the other Loan Document
shall be construed as creating in any party (other than Grantor and Beneficiary)
any rights in and to the Insurance Premium Deposits or the Insurance Premium
Escrow Account or any rights to have the Insurance Premium Deposits applied to
payments of the Insurance Premiums. Beneficiary shall have no obligation or duty
to any third party to collect the Insurance Premium Deposits. Notwithstanding
the foregoing, Beneficiary shall not exercise its rights hereunder to require
Insurance Premium Deposits unless and until a default has occurred hereunder or
under the other Loan Documents.
6. APPLICATION OF INSURANCE PROCEEDS TO REPAIR. If the
Improvements shall be damaged or destroyed, in whole or in part, by fire or
other casualty, Beneficiary shall, in accordance with the provisions of this
paragraph hereinafter set forth, make the net amount of all insurance proceeds
received by Beneficiary pursuant to the provisions of this Deed of Trust as a
result of such damage or destruction after deduction of its reasonable costs and
expenses, if any, in collecting the same (hereinafter referred to as the "Net
Proceeds") available for the repair and restoration of the Improvements,
provided that (i) no default shall have occurred and shall be continuing under
the Notes, this Deed of Trust or any of the other Loan Documents, (ii) Grantor
shall commence the repair and restoration of the Improvements, as nearly as
possible to the condition the Improvements were in immediately prior to such
fire or other casualty, with such alterations as may be approved by
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<PAGE> 7
Beneficiary, as soon as reasonably practicable (but in no event later than
thirty (30) days after such damage or destruction occurs) and shall diligently
pursue the same to satisfactory completion, (iii) Beneficiary shall be satisfied
that any operating deficits which will be incurred with respect to the Trust
Property as a result of the occurrence of any such fire or other casualty will
be covered out of the Net Proceeds or by Grantor out-of-pocket or with the
proceeds, if any, of business interruption or rental interruption insurance,
(iv) Beneficiary shall be satisfied that, upon the completion of such repair and
restoration of the Improvements, the gross cash flow and the net cash flow of
the Trust Property will be restored to a level sufficient to cover all carrying
costs and operating expenses of the Trust Property, and not less than the level
immediately prior to such casualty, (v) Beneficiary shall be satisfied that the
repair and restoration of the Improvements will be completed on or before the
earlier to occur of (w) six (6) months prior to the maturity date of the Notes,
or (x) six (6) months after the occurrence of such fire or other casualty. The
Net Proceeds, shall be held by Beneficiary in a non-interest bearing account,
and until disbursed in accordance with the provisions of this paragraph, shall
constitute additional security for the payment of the Debt. The Net Proceeds
together with interest earned thereon, shall be disbursed by Beneficiary to, or
as directed by, Grantor from time to time during the course of the repair and
restoration of the Improvements, upon receipt of evidence satisfactory to
Beneficiary (which evidence shall in each instance and to the full extent
required by Beneficiary include receipted bills, invoices, lien waivers and a
continuation and date down of title to the Trust Property in form satisfactory
to Beneficiary and issued by the title company insuring the lien of this Deed of
Trust or another title company satisfactory to Beneficiary) that (i) all
materials installed and work and labor performed (except to the extent that they
are to be paid for out of the requested disbursement) in connection with the
repair and restoration of the Improvements have been paid for in full, and (ii)
there exist no notice of pendency, stop order, notice of intention to file
mechanic's or materialman's lien, mechanic's or materialman's lien or other lien
or encumbrance of any nature whatsoever on the Trust Property arising out of the
repair and restoration of the Improvements which have not either been fully
bonded to the satisfaction of Beneficiary and discharged of record or in the
alternative fully insured over to the satisfaction of Beneficiary by the title
company insuring the lien of this Deed of Trust. The repair and restoration of
the Improvements shall be done and completed by Grantor in an expeditious and
diligent fashion and in compliance with all applicable governmental laws, rules
and regulations (including, without limitation, all applicable Environmental
Requirements), and all plans and specifications required in connection with the
repair and restoration of the Improvements shall be subject to review and
acceptance in all respects by Beneficiary and by an independent consulting
engineer selected by Beneficiary (hereinafter referred to in this paragraph as
the "Consultant"). Upon the occurrence of an Event of Default, Beneficiary shall
have the use of such plan and specifications and all permits, licenses and
approvals required or obtained in connection with the repair and restoration of
the Improvements. The identity of the
-7-
<PAGE> 8
contractors, subcontractors and materialmen engaged in the repair and
restoration of the Improvements, as well as the contracts under which they have
been engaged, shall be subject to approval, review and acceptance by Beneficiary
and Consultant. All costs and expenses incurred by Beneficiary in connection
with making the Net Proceeds available for the repair and restoration of the
Improvements including, without limitation, reasonable counsel fees and the
Consultant's fees, shall be paid by Grantor. In no event shall Beneficiary be
obligated to make disbursements of the Net Proceeds in excess of an amount equal
to the costs actually incurred from time to time for work in place as part of
the repair and restoration of the Improvements, as certified by the Consultant,
minus the Casualty Retainage. The term "Casualty Retainage" as used in this
paragraph shall mean an amount equal to 10% of the costs actually incurred for
work in place as part of the repair and restoration of the Improvements, as
certified by the Consultant. The Casualty Retainage shall in no event, and
notwithstanding anything to the contrary hereinabove set forth in this
paragraph, be less than the amount actually held back by Grantor from
contractors, subcontractors and materialmen engaged in the making of the repair
and restoration of the Improvements. Beneficiary shall not be obligated to make
disbursements of the Net Proceeds more frequently than once every thirty (30)
days. The Casualty Retainage shall not be released until the Consultant
certifies to Beneficiary that the repair and restoration of the Improvements
have been completed in accordance with the provisions of this paragraph, and
Beneficiary receives evidence satisfactory to Beneficiary that the costs of the
repair and restoration of the Improvements have been paid in full or will be
paid in full out of the Casualty Retainage. Notwithstanding anything to the
contrary contained in this paragraph, if the Net Proceeds shall be less than
$500,000 and if the costs of completing the repair and restoration of the
Improvements shall be less than $500,000, the Net Proceeds will be disbursed by
Beneficiary to Grantor upon receipt, provided that no default shall have
occurred and shall be continuing under the Notes or this Deed of Trust, and
Grantor delivers to Beneficiary a written undertaking to expeditiously commence
and to satisfactorily complete with due diligence the repair and restoration of
the Improvements. If at any time the Net Proceeds or the undisbursed balance
thereof shall not, in the opinion of Beneficiary, be sufficient to pay in full
the balance of the costs which will be incurred in connection with the
completion of the repair and restoration of the Improvements, Grantor shall
deposit the deficiency (hereinafter referred to as the "Net Proceeds
Deficiency") with Beneficiary before any further disbursement of the Net
Proceeds shall be made, which Net Proceeds Deficiency deposit shall be held by
Beneficiary in a non-interest bearing account, shall be disbursed for costs
actually incurred in connection with the repair and restoration of the
Improvements on the same conditions applicable to the disbursement of the Net
Proceeds, and until so disbursed pursuant to this paragraph shall constitute
additional security for the payment of the Debt. Upon the occurrence of an Event
of Default, Beneficiary shall have the right to apply the undisbursed balance of
any Net Proceeds Deficiency deposit, to the payment of the Debt whether or not
then due and payable in such order, priority and proportions as
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Beneficiary shall deem to be appropriate in its discretion. The remaining
balance, if any, of the Net Proceeds Deficiency deposit, after the Consultant
certifies to Beneficiary that the repair and restoration of the Improvements
have been completed in accordance with the provisions of this paragraph, and the
receipt by Beneficiary of evidence satisfactory to Beneficiary that all costs
incurred in connection with the repair and restoration have been paid in full,
shall be remitted by Beneficiary to Grantor, provided no default shall have
occurred and shall be continuing under the Notes, this Deed of Trust or any of
the other Loan Documents. All costs of the repair and restoration of the
Improvements in excess of the Net Proceeds shall be paid for by Grantor. All
insurance proceeds received by Beneficiary and not required to be disbursed for
the repair and restoration of the Improvements may be retained and applied by
Beneficiary toward the payment of the Debt whether or not then due and payable
in such order, priority and proportions as Beneficiary in its discretion shall
deem proper or, at the discretion of Beneficiary, the same may be paid, either
in whole or in part, to Grantor for such purposes as Beneficiary shall
designate, in its discretion. If Beneficiary shall receive and retain insurance
proceeds, the lien of this Deed of Trust shall be reduced only by the amount
thereof received and retained by Beneficiary and actually applied by Beneficiary
in reduction of the Debt.
7. PAYMENT OF TAXES, ETC. Grantor shall pay all taxes,
assessments, water rates, sewer rents and other charges, including vault charges
and license fees for the use of vaults, chutes and similar areas adjoining the
Premises, now or hereafter levied or assessed against the Trust Property
(hereinafter referred to as the "Taxes") prior to the date upon which any fine,
penalty, interest or cost may be added thereto or imposed by law for the
nonpayment thereof. Grantor shall deliver to Beneficiary, upon request,
receipted bills, cancelled checks and other evidence satisfactory to Beneficiary
evidencing the payment of the Taxes prior to the date upon which any fine,
penalty, interest or cost may be added thereto or imposed by law for the
nonpayment thereof. Beneficiary shall have the right in its discretion to
maintain a tax services contract with respect to the Trust Property with a tax
reporting agency satisfactory to Beneficiary. Grantor shall reimburse
Beneficiary upon demand for the cost of maintaining such tax service contract
during the term of this Deed of Trust, provided that in no event will Grantor be
obligated to pay more than $500 per annum in respect of such tax services
contract. After prior notice to Beneficiary, in the case of any material item,
Grantor, at its own expense, may contest by appropriate legal proceeding,
promptly initiated and conducted in good faith and with due diligence, the
amount or validity or application in whole or in part of any of the Taxes,
provided that (i) no default shall have occurred and shall be continuing under
the Notes, this Deed of Trust or any of the other Loan Documents, (ii) Grantor
is permitted to do so under the provisions of any mortgage or deed of trust
superior in lien to this Deed of Trust, (iii) such proceeding shall suspend the
collection of the contested Taxes from Grantor and from the Trust Property, (iv)
such proceeding shall be permitted under and be conducted in accordance with the
provisions of any other instrument to
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which Grantor or the Trust Property is subject and shall not constitute a
default thereunder, (v) neither the Trust Property nor any part thereof nor any
interest therein will in the opinion of Beneficiary be in danger of being sold,
forfeited, terminated, cancelled or lost, and (vi) Grantor shall have set aside
in a manner satisfactory to Beneficiary adequate cash reserves for the payment
of the contested Taxes, together with all interest and penalties thereon, or in
the alternative Grantor shall have furnished such security as may be required in
the proceeding, or as may otherwise be requested or required by Beneficiary to
insure the payment of the contested Taxes, together with all interest and
penalties thereon.
8. TAX DEPOSITS. In order to assure the payment of Taxes as and
when the same shall become due and payable, Grantor shall deposit with
Beneficiary on the first day of each calendar month during the term of this Deed
of Trust, an amount equal to one-twelfth (1/12) of the Taxes to become due upon
the Trust Property between one and thirteen months after the date of each such
deposit, it being the intention that at all times during the term of this Deed
of Trust there shall remain on deposit with Beneficiary an amount at least equal
to one-twelfth (1/12) of the Taxes to become due within the ensuing twelve (12)
month period. The amounts of such deposits (hereinafter referred to as the "Tax
Deposits") shall be based upon Beneficiary's estimate as to the amount of the
Taxes. Grantor shall, upon demand of Beneficiary, make additional Tax Deposits
as Beneficiary may from time to time require due to (i) the failure of
Beneficiary to require, or failure of Grantor to make, Tax Deposits in previous
months, (ii) under estimation of the amounts of the Taxes, (iii) the particular
due dates and amount of the Taxes, or (iv) application of the Tax Deposits
pursuant to the provision of this paragraph hereinafter set forth to the payment
of the Taxes. Beneficiary will, out of the Tax Deposits, upon the presentation
to Beneficiary by Grantor of the bills therefor and at the direction of Grantor,
pay the Taxes which are due or will, upon the presentation of receipted bills
therefor, reimburse Grantor for such payments made by Grantor. If the total Tax
Deposits on hand shall not be sufficient to pay all of the Taxes for the Trust
Property when the same shall become due, then Grantor shall pay to Beneficiary
on demand the amount necessary to make up the deficiency. Beneficiary shall not
be obligated to pay any Taxes which are due unless it is in receipt of available
funds in an amount sufficient to pay such Taxes in full. Notwithstanding
anything to the contrary contained herein, but subject to Grantor's right to
contest Taxes in accordance with the provisions of paragraph 7 of this Deed of
Trust, Beneficiary shall have the absolute right, regardless of whether it has
received direction from Grantor, to pay the Taxes at any time during the thirty
(30) day period prior to the due date thereof. Any excess monies remaining in
the Tax Escrow Account after the payment in full of the Taxes which are due
shall be applied as a credit against future Tax Deposits pursuant to this
paragraph. All Tax Deposits shall be held by Beneficiary in a non-interest
bearing account selected by Beneficiary in its sole and absolute discretion
(hereinafter referred to as the "Tax Escrow Account"). The Tax Escrow Account
may be co-mingled with any other accounts of
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Beneficiary. In order to secure the payment of the Debt and the performance by
Grantor of its obligations under the Loan Documents, Grantor hereby grants and
assigns to Beneficiary a security interest in and to the Tax Escrow Account and
in and to all monies from time to time on deposit therein. Until expended or
applied in accordance with the provisions of this Deed of Trust, any amounts in
the Tax Escrow Account shall constitute additional security for the payment of
the Debt. Upon the occurrence of an Event of Default, Beneficiary shall have the
absolute right to apply all or any portion of the balance held in the Tax Escrow
Account to the payment of the Debt whether or not then due and payable in such
order, priority and proportions as Beneficiary in its discretion shall deem
appropriate. Notwithstanding anything herein to the contrary, neither
Beneficiary nor its successors and assigns, shall be liable for any failure to
apply the Tax Deposits to the payment of any Taxes which are due, unless
Grantor, while no default exists under the Notes, this Deed of Trust or any of
the other Loan Documents, shall have requested Beneficiary in writing to make
application of the Tax Deposits on hand to the payment of the Taxes which are
due, accompanied by the bills therefor. The provisions of this paragraph are for
the benefit of Grantor and Beneficiary alone. No provision of this Deed of Trust
or the other Loan Document shall be construed as creating in any party (other
than Grantor and Beneficiary) any rights in and to the Tax Deposits or the Tax
Escrow Account or any rights to have the Tax Deposits applied to payments of the
Taxes. Beneficiary shall have no obligation or duty to any third party to
collect the Tax Deposits. Notwithstanding the foregoing, Beneficiary shall not
exercise its rights hereunder to require Tax Deposits unless and until a default
has occurred hereunder or under the other Loan Documents.
9. CONDEMNATION. Notwithstanding any taking by any public or
quasi-public authority through eminent domain or otherwise, Grantor shall
continue to pay the Debt at the time and in the manner provided for its payment
in the Notes and this Deed of Trust and the Debt shall not be reduced until any
award or payment therefor shall have been actually received and applied by
Beneficiary to the discharge of the Debt. Subject to the provisions of paragraph
10 of this Deed of Trust, Beneficiary may apply the entire amount of any such
award or payment to the discharge of the Debt whether or not then due and
payable in such order, priority and proportions as Beneficiary in its discretion
shall deem proper. If the Trust Property is sold, through foreclosure or
otherwise, prior to the receipt by Beneficiary of such award or payment,
Beneficiary shall have the right, whether or not a deficiency judgment on the
Notes shall have been sought, recovered or denied, to receive such award or
payment, or a portion thereof sufficient to pay the Debt, whichever is less.
Grantor shall file and prosecute its claim or claims for any such award or
payment in good faith and with due diligence and cause the same to be collected
and paid over to Beneficiary. Grantor hereby irrevocably authorizes and empowers
Beneficiary and Trustee, in the name of Grantor or otherwise, to collect and
receipt for any such award or payment and to file and prosecute such claim or
claims. Although it is hereby expressly agreed that the same shall not be
necessary in any event, Grantor shall, upon
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demand of Beneficiary, make, execute and deliver any and all assignments and
other instruments sufficient for the purpose of assigning any such award or
payment to Beneficiary and Trustee, free and clear of any encumbrances of any
kind or nature whatsoever.
10. APPLICATION OF CONDEMNATION AWARD TO REPAIR. If less than all
the Trust Property is taken by any public or quasi-public authority through
eminent domain or otherwise, Beneficiary shall, in accordance with the
provisions of this paragraph hereinafter set forth, make the portion of the
aggregate award or payment received by Beneficiary pursuant to the provisions of
this Deed of Trust as a result of such taking which is specifically awarded for
the repair and restoration of the portion of the Improvements not taken or, in
the absence of any such specific award, is in the sole, but reasonable, opinion
of Beneficiary necessary to pay for the costs which will be incurred in
connection with the repair and restoration of the portion of the Improvements
not taken after deduction of its reasonable costs and expenses, if any, in
collecting the same (hereinafter referred to as the "Net Restoration Award")
available for the repair and restoration of the Improvements, provided that (i)
no default shall have occurred and shall be continuing under the Notes, this
Deed of Trust or any of the other Loan Documents, (ii) Grantor shall commence
the repair and restoration of the Improvements, as nearly as possible to the
condition the Improvements were in immediately prior to such taking, with such
alterations as may be approved by Beneficiary, as soon as reasonably practicable
(but in no event later than thirty (30) days after the earlier to occur of the
date of such taking or the date the condemnation award or payment is settled)
and shall diligently pursue the same to satisfactory completion, (iii)
Beneficiary shall be satisfied that upon the completion of the repair and
restoration of the Improvements the maximum possible principal balance of the
Notes will not be in excess of 75% of the appraised value of the portion of the
Trust Property remaining subject to the lien of this Deed of Trust, as
determined by appraisal satisfactory in all respects to Beneficiary, (iv)
Beneficiary shall be satisfied that any operating deficits which will be
incurred with respect to the Trust Property as a result of the occurrence of any
such taking will be covered out of the Net Restoration Award or by Grantor
out-of-pocket, (v) Beneficiary shall be of the opinion that it is economically
feasible to repair and restore the Improvements, (vi) Beneficiary shall be
satisfied that, upon completion of the repair and restoration of the
Improvements, the gross cash flow and the net cash flow of the Trust Property
will be restored to a level sufficient to cover all carrying costs and operating
expenses of the Trust Property and not less than the level immediately prior to
such condemnation, (vii) Beneficiary shall be satisfied that the repair and
restoration of the Improvements will be completed on or before the earlier to
occur of (w) six (6) months prior to the maturity date of the Notes, or (x) six
(6) months after the occurrence of such taking. The Net Restoration Award shall
be held by Beneficiary in a non-interest bearing account, and until disbursed in
accordance with the provisions of this paragraph, shall constitute additional
security for the payment of the Debt. The Net Restoration Award, together with
interest
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thereon, shall be disbursed by Beneficiary to, or as directed by, Grantor from
time to time during the course of the repair and restoration of the
Improvements, upon receipt of evidence satisfactory to Beneficiary (which
evidence shall in each instance and to the full extent required by Beneficiary
include receipt bills, invoices, lien waivers and a continuation and date down
of title to the Trust Property in form satisfactory to Beneficiary and issued by
the title company insuring the lien of this Deed of Trust or another title
company satisfactory to Beneficiary) that (i) all materials installed and work
and labor performed (except to the extent that they are to be paid for out of
the requested disbursement) in connection with the repair and restoration of the
Improvements have been paid for in full, and (ii) there exist no notice of
pendency, stop order, notice of intention to file mechanic's or materialman's
lien, mechanic's or materialman's lien or other lien or encumbrance of any
nature whatsoever on the Trust Property arising out of the repair and
restoration of the Improvements which have not either been fully bonded to the
satisfaction of Beneficiary and discharged of record or in the alternative
otherwise fully insured over to the satisfaction of Beneficiary by the title
company insuring the lien of this Deed of Trust. The repair and restoration of
the Improvements shall be done and completed by Grantor in an expeditious and
diligent fashion and in compliance with all applicable governmental laws, rules
and regulations (including, without limitation, all applicable Environmental
Requirements), and all plans and specifications required in connection with the
repair and restoration of the Improvements shall be subject to review and
acceptance in all respects by Beneficiary and by an independent consulting
engineer selected by Beneficiary (hereinafter referred to in this paragraph as
the "Consultant"). Upon the occurrence of an Event of Default, Beneficiary shall
have the use of such plans and specifications and all permits, licenses and
approvals required or obtained in connection with the repair and restoration of
the Improvements. The identity of the contractors, subcontractors and
materialmen engaged in the repair and restoration of the Improvements, as well
as the contracts under which they have been engaged, shall be subject to
approval, review and acceptance by Beneficiary and Consultant. All costs and
expenses incurred by Beneficiary in connection with making the Net Restoration
Award available for the repair and restoration of the Improvements, including,
without limitation, appraisal fees, reasonable counsel fees and the Consultant's
fees, shall be paid by Grantor. In no event shall Beneficiary be obligated to
make disbursements of the
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Net Restoration Award in excess of an amount equal to the costs actually
incurred for work in place as part of the repair and restoration of the
Improvements, as certified by the Consultant, minus the Condemnation Retainage.
The term "Condemnation Retainage" as used in this paragraph shall mean an amount
equal to 10% of the costs actually incurred for work in place as part of the
repair and restoration of the Improvements, as certified by the Consultant. The
Condemnation Retainage shall in no event, and notwithstanding anything to the
contrary hereinabove set forth in this paragraph, be less than the amount
actually held back by Grantor from contractors, subcontractors and materialmen
engaged in the making of the repair and restoration of the Improvements.
Beneficiary shall not be obligated to make disbursements of the Net Restoration
Award more frequently than once every thirty (30) days. The Condemnation
Retainage shall not be released until the Consultant certifies that the repair
and restoration of the Improvements have been completed in accordance with the
provisions of this paragraph, and Beneficiary receives evidence satisfactory to
Beneficiary that the costs of the repair and restoration of the Improvements
have been paid in full or will be paid in full out of the Condemnation
Retainage. The excess, if any, of the Net Restoration Award after the repair and
restoration of the Improvements as nearly as possible to their former condition
and the payment in full of all costs incurred in connection therewith shall be
applied by Beneficiary in reduction of the Debt in such order, priority and
proportions as Beneficiary in its discretion shall deem proper. If at any time
the Net Restoration Award, or the undisbursed balance thereof, shall not, in the
opinion of Beneficiary, be sufficient to pay in full the balance of the costs
which will be incurred in connection with the completion of the repair and
restoration of the Improvements, Grantor shall deposit the deficiency
(hereinafter referred to as the "Net Award Deficiency") with Beneficiary before
any further disbursement of the Net Restoration Award shall be made, which Net
Award Deficiency deposit shall be held by Beneficiary in a non-interest bearing
special account, shall be disbursed, for costs actually incurred in connection
with the repair and restoration of the Improvements on the same conditions
applicable to the disbursement of the Net Restoration Award, and shall until so
disbursed pursuant to this paragraph constitute additional security for the
payment of the Debt. Upon the occurrence of an Event of Default, Beneficiary
shall have the right to apply the undisbursed balance of any Net Award
Deficiency deposit, together with interest thereon, to the payment of the Debt
whether or not then due and payable in such order, priority and proportions as
Beneficiary shall deem to be appropriate in its discretion. All costs of the
repair and restoration of the Improvements in excess of the Net Restoration
Award shall be paid for by Grantor. Notwithstanding anything to the contrary
contained in this paragraph, if a non-material part of the Premises is taken
through eminent domain or otherwise and if such taking does not involve a
physical taking of the Improvements, or any portion thereof, any award given as
a result of such taking may be retained by Grantor, provided (i) such award is
not in excess of $500,000, (ii) no default shall have occurred and shall be
continuing under the Notes or this Deed of Trust, (iii) Grantor promptly
commences any necessary repair or restoration to the Premises and the
Improvements, (iv) Beneficiary is satisfied that neither the value, use nor
operation of the Premises and the Improvements will be adversely affected in any
material way as a result of such taking, and (v) Beneficiary is satisfied that
all necessary repairs and restorations to the Premises and the Improvements will
be diligently and satisfactorily completed by Grantor within a reasonable period
of time taking into account the nature of the taking.
11. LEASES AND RENTS. Subject to the terms of this paragraph,
Beneficiary and Trustee waive the right to enter the Trust Property for the
purpose of collecting the Rents, and grant Grantor the right to collect the
Rents. Grantor shall hold the Rents, or an amount sufficient to discharge all
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current sums due on the debt, in trust for use in payment of the Debt. The right
of Grantor to collect the Rents may be revoked by Beneficiary upon the
occurrence of any default under the Notes or this Deed of Trust by giving notice
of such revocation to Grantor. Following such notice Beneficiary or Trustee may
retain and apply the Rents toward payment of the Debt in such order, priority
and proportions as Beneficiary, in its discretion, shall deem proper, or to the
operation, maintenance and repair of the Trust Property, and irrespective of
whether Beneficiary or Trustee shall have commenced a foreclosure of this Deed
of Trust or a sale of the Trust Property pursuant to this Deed of Trust or shall
have applied or arranged for the appointment of a receiver. In addition,
Beneficiary shall have the absolute and unconditional right following the
occurrence of a default under the Notes or this Deed of Trust, and without prior
notice to Grantor, to notify the tenants under the Leases that all Rents should
be paid directly to Beneficiary or Trustee. Grantor shall (a) fulfill or perform
each and every provision of the Leases on the part of Grantor to be fulfilled or
performed, (b) promptly send copies of all notices of default which Grantor
shall send or receive under the Leases to Beneficiary, and (c) enforce, short of
termination of the Leases, the performance or observance of the provisions
thereof by the tenants thereunder. In addition to the rights which Beneficiary
may have herein, in the event of any default under the Notes, this Deed of Trust
or any of the other Loan Documents, Beneficiary, at its option, may require
Grantor to pay monthly in advance to Beneficiary, Trustee or any receiver
appointed to collect the Rents, the fair and reasonable rental value for the use
and occupation of such part of the Trust Property as may be in possession of
Grantor. Upon default in any such payment, Grantor will vacate and surrender
possession of the Trust Property to Beneficiary, Trustee or to such receiver
and, in default thereof, Grantor may be evicted by summary proceedings or
otherwise. Nothing contained in this paragraph shall be construed as imposing on
Beneficiary or Trustee any of the obligations of the lessor under the Leases.
Grantor, without the prior written consent of Beneficiary, shall not: (i)
assign, transfer, pledge or encumber, the whole or any part of the Leases and
Rents to anyone other than Beneficiary; or (ii) do or permit anything to be
done, the doing of which, or omit or refrain from doing anything, the omission
of which, could be a breach or default under the terms of any Lease or a basis
for termination thereof. Grantor shall not, without the prior consent of
Beneficiary, make or suffer to be made, any Leases or modify any Leases or
cancel any Leases or accept prepayments of installments of the Rents for a
period of more than one (1) month in advance.
12. MAINTENANCE OF THE TRUST PROPERTY. Grantor shall cause the
Trust Property to be maintained in good condition and repair and will not commit
or suffer to be committed any waste of the Trust Property. The failure of
Grantor to pay any Taxes or any installment thereof, or any Insurance Premiums
payable with respect to any of the Insurance Policies covering the Trust
Property or any portion thereof, or to use and apply the Rents strictly in
accordance with the provisions of this Deed of Trust and the other Loan
Documents, shall be deemed for all purposes to constitute waste, regardless of
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whether the same would, in the absence of this provision, otherwise constitute
waste under applicable law. The Improvements and the Equipment shall not be
removed, demolished or materially altered (except for normal replacement of the
Equipment), without the consent of Beneficiary. Grantor shall promptly comply
with all existing and future governmental laws, orders, ordinances, rules and
regulations affecting the Trust Property, or any portion thereof or the use
thereof including, without limitation, the provisions of the Americans with
Disabilities Act. Grantor shall comply in all material respects with the
requirements of all, and shall not modify, amend or terminate any easements or
restrictive covenants which from time to time affect the whole or any portion of
the Trust Property. Grantor shall also comply in all material respects with the
requirements of, and to the extent reasonably within Grantor's control,
maintain, preserve, enforce and renew, all rights of way, easements, grants,
privileges, licenses, franchises and restrictive covenants which from time to
time benefit or pertain to the whole or any portion of the Trust Property, and
Grantor shall not without obtaining the prior consent of Beneficiary modify,
amend or terminate, or surrender any of its rights under, any of such rights of
way, easements, grants, privileges, licenses, franchises or restrictive
covenants. Grantor shall promptly repair, replace or rebuild any part of the
Trust Property which may be damaged or destroyed by fire or other property
hazard or casualty (including any fire or other property hazard or casualty for
which insurance was not obtained or obtainable) or which may be affected by any
taking by any public or quasi-public authority through eminent domain or
otherwise, and shall complete and pay for, within a reasonable time, any
structure at any time in the process of construction or repair on the Premises.
Grantor will not, without obtaining the prior consent of Beneficiary, initiate,
join in or consent to any private restrictive covenant, zoning ordinance, or
other public or private restrictions, limiting or affecting the uses which may
be made of the Trust Property or any part thereof.
13. ENVIRONMENTAL PROVISIONS. For the purposes of this paragraph
the following terms shall have the following meanings: (i) the term "Hazardous
Material" shall mean any material or substance that, whether by its nature or
use, is now or hereafter defined as a hazardous waste, hazardous substance,
pollutant or contaminant under any Environmental Requirement, or which is toxic,
explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic or otherwise hazardous and which is now or hereafter regulated under
any Environmental Requirement, or which is or contains petroleum, gasoline,
diesel fuel or another petroleum hydrocarbon product, (ii) the term
"Environmental Requirements" shall collectively mean all present and future
laws, statutes, ordinances, rules, regulations, orders, codes, licenses,
permits, decrees, judgments, directives or the equivalent of or by any
Governmental Authority and relating to or addressing the protection of the
environment or human health, and (iii) the term "Governmental Authority" shall
mean the Federal government, or any state or other political subdivision
thereof, or any agency, court or body of the Federal government, any state or
other political subdivision thereof, exercising executive, legislative,
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judicial, regulatory or administrative functions. Grantor hereby represents and
warrants to Trustee and Beneficiary that to the best of Grantor's knowledge
after diligent inquiry (i) no Hazardous Material is currently located at, on,
in, under or about the Trust Property, (ii) no Hazardous Material is currently
located at, in, on, under or about the Trust Property in a manner which violates
any Environmental Requirement, or which requires cleanup or corrective action of
any kind under any Environmental Requirement, (iii) no releasing, emitting,
discharging, leaching, dumping or disposing of any Hazardous Material from the
Trust Property onto or into any other property or from any other property onto
or into the Trust Property has occurred or is occurring in violation of any
Environmental Requirement, (iv) no notice of violation, lien, complaint, suit,
order or other notice with respect to the Trust Property is presently
outstanding under any Environmental Requirement, and (v) the Trust Property and
the operation thereof are in full compliance with all Environmental
Requirements. Grantor shall comply, and shall cause all tenants or other
occupants of the Trust Property to comply, in all respects with all
Environmental Requirements, and will not generate, store, handle, process,
dispose of or otherwise use, and will not permit any tenant or other occupant of
the Trust Property to generate, store, handle, process, dispose of or otherwise
use, Hazardous Materials at, in, on, under or about the Trust Property in a
manner that could lead or potentially lead to the imposition on Grantor,
Trustee, Beneficiary or the Trust Property of any liability or lien of any
nature whatsoever under any Environmental Requirement. Grantor shall notify
Beneficiary promptly in the event of any spill or other release of any Hazardous
Material at, in, on, under or about the Trust Property which is required to be
reported to a Governmental Authority under any Environmental Requirement, will
promptly forward to Beneficiary copies of any notices received by Grantor
relating to alleged violations of any Environmental Requirement and will
promptly pay when due any fine or assessment against Beneficiary, Trustee,
Grantor or the Trust Property relating to any Environmental Requirement. If at
any time it is determined that the operation or use of the Trust Property
violates any applicable Environmental Requirement or that there are Hazardous
Materials located at, in, on, under or about the Trust Property which, under any
Environmental Requirement, require special handling in collection, storage,
treatment or disposal, or any other form of cleanup or corrective action,
Grantor shall, within thirty (30) days after receipt of notice thereof from any
Governmental Authority or from Beneficiary, take, at its sole cost and expense,
such actions as may be necessary to fully comply in all respects with all
Environmental Requirements, provided, however, that if such compliance cannot
reasonably be completed within such thirty (30) day period, Grantor shall
commence such necessary action within such thirty (30) day period and shall
thereafter diligently and expeditiously proceed to fully comply in all respects
and in a timely fashion with all Environmental Requirements. If Grantor fails to
timely take, or to diligently and expeditiously proceed to complete in a timely
fashion, any such action, Beneficiary, may, in its sole and absolute discretion,
make advances or payments towards the performance or satisfaction of the same,
but shall in no event be under any obligation to do
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<PAGE> 18
so. All sums so advanced or paid by Beneficiary (including, without limitation,
counsel and consultant fees and expenses, investigation and laboratory fees and
expenses, and fines or other penalty payments) and all sums advanced or paid in
connection with any judicial or administrative investigation or proceeding
relating thereto, will immediately, upon demand, become due and payable from
Grantor and shall bear interest at the Default Rate from the date any such sums
are so advanced or paid by Beneficiary until the date any such sums are repaid
by Grantor to Beneficiary. Grantor will execute and deliver, promptly upon
request, such instruments as Beneficiary may deem useful or necessary to permit
Beneficiary to take any such action, and such additional notes, deeds of trust
and mortgages, as Beneficiary may require to secure all sums so advanced or paid
by Beneficiary. If a lien is filed against the Trust Property by any
Governmental Authority resulting from the need to expend or the actual expending
of monies arising from an action or omission, whether intentional or
unintentional, of Grantor or for which Grantor is responsible, resulting in the
releasing, spilling, leaking, leaching, pumping, emitting, pouring, emptying or
dumping of any Hazardous Material into the waters or onto land located within or
without the State in which the Premises are located, then Grantor will, within
thirty (30) days from the date that Grantor is first given notice that such lien
has been placed against the Trust Property (or within such shorter period of
time as may be specified by Beneficiary if such Governmental Authority has
commenced steps to cause the Trust Property to be sold pursuant to such lien)
either (a) pay the claim and remove the lien, or (b) furnish a cash deposit,
bond, or such other security with respect thereto as is satisfactory in all
respects to Beneficiary and is sufficient to effect a complete discharge of such
lien on the Trust Property. Beneficiary may, at its option, at intervals of not
less than one year, or more frequently if Beneficiary reasonably believes that a
Hazardous Material or other environmental condition violates or threatens to
violate any Environmental Requirement, cause an environmental audit of the Trust
Property or portions thereof to be conducted to confirm Grantor's compliance
with the provisions of this paragraph, and Grantor shall cooperate in all
reasonable ways with Beneficiary in connection with any such audit. If such
audit discloses that a violation of an Environmental Requirement exists, Grantor
shall pay all costs and expenses incurred in connection with such audit,
otherwise, the costs and expenses of such audit shall, notwithstanding anything
to the contrary set forth in this paragraph, be paid by Beneficiary. If this
Deed of Trust is foreclosed, or if the Trust Property is sold pursuant to the
provisions of this Deed of Trust, or if Grantor tenders a deed or assignment in
lieu of foreclosure or sale, Grantor shall deliver the Trust Property to the
purchaser at foreclosure or sale or to Beneficiary, its nominee, or wholly owned
subsidiary, as the case may be, in a condition that complies in all respects
with all Environmental Requirements. Grantor will defend, indemnify, and hold
harmless Beneficiary, Trustee and their respective employees, agents, officers,
and directors, from and against any and all claims, demands, penalties, causes
of action, fines, liabilities, settlements, damages, costs, or expenses of
whatever kind or nature, known or unknown, foreseen or unforeseen, contingent or
otherwise (including, without
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limitation, counsel and consultant fees and expenses, investigation and
laboratory fees and expenses, court costs, and litigation expenses) arising out
of, or in any way related to, (i) any breach by Grantor of any of the provisions
of this paragraph, (ii) the presence, disposal, spillage, discharge, emission,
leakage, release, or threatened release of any Hazardous Material which is at,
in, on, under, about, from or affecting the Trust Property, including, without
limitation, any damage or injury resulting from any such Hazardous Material to
or affecting the Trust Property or the soil, water, air, vegetation, buildings,
personal property, persons or animals located on the Trust Property or on any
other property or otherwise, (iii) any personal injury (including wrongful
death) or property damage (real or personal) arising out of or related to any
such Hazardous Material, (iv) any lawsuit brought or threatened, settlement
reached, or order or directive of or by any Governmental Authority relating to
such Hazardous Material, or (v) any violation of any Environmental Requirement.
The aforesaid indemnification shall, notwithstanding any exculpatory or other
provision of any nature whatsoever to the contrary set forth in the Notes, this
Deed of Trust or any of the other Loan Documents, constitute the personal
recourse undertakings, obligations and liabilities of Grantor. The obligations
and liabilities of Grantor under this paragraph shall survive and continue in
full force and effect and shall not be terminated, discharged or released, in
whole or in part, irrespective of whether the Debt has been paid in full and
irrespective of any foreclosure of this Deed of Trust, sale of the Trust
Property pursuant to the provisions of this Deed of Trust or acceptance by
Beneficiary, its nominee or wholly owned subsidiary of a deed or assignment in
lieu of foreclosure or sale and irrespective of any other fact or circumstance
of any nature whatsoever.
14. ESTOPPEL CERTIFICATES. Grantor, within ten (10) days after
request by Beneficiary and at its expense, will furnish Beneficiary with a
statement, duly acknowledged and certified, setting forth the amount of the Debt
and the offsets or defenses thereto, if any.
15. TRANSFER OR ENCUMBRANCE OF THE TRUST PROPERTY. No part of the
Trust Property shall in any manner be further encumbered, sold, transferred,
assigned or conveyed, or permitted to be further encumbered, sold, transferred,
assigned or conveyed without the prior consent of Beneficiary, which consent in
any and all circumstances may be withheld in the sole and absolute discretion of
Beneficiary. The provisions of the foregoing sentence of this paragraph shall
apply to each and every such further encumbrance, sale, transfer, assignment or
conveyance, regardless of whether or not Beneficiary has consented to, or waived
by its action or inaction its rights hereunder with respect to, any such
previous further encumbrance, sale, transfer, assignment or conveyance, and
irrespective of whether such further encumbrance, sale, transfer, assignment or
conveyance is voluntary, by reason of operation of law or is otherwise made.
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16. NOTICE. All notices, demands, instructions and other
communications required or permitted to be given to or made upon any party
hereto shall be in writing delivered to the parties at the addresses set forth
below (or such other addresses or may be provided by one party in a notice to
the other parties):
If to Grantor:
NextHealth, Inc.
16600 N. Lago Del Oro Parkway
Tucson, Arizona 85739
Attention:
With a copy to:
Neal, Gerber & Eisenberg
2 North LaSalle Street
Chicago, Illinois 60602
Attention: Steve Berger, Esq.
If to Beneficiary:
c/o Apollo Real Estate Advisors, L.P.
1301 Avenue of the Americas, 38th Floor
New York, New York 10019
Attention: Alfred Trivilino
With a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Mary Ann Villari, Esq.
If to Trustee:
Fidelity National Title Agency, Inc.
7750 E. Broadway, Suite A-200
Tucson, Arizona 85710
Attention: Cathy Hansen
Notice delivered in accordance with the foregoing shall be effective (i) when
delivered, if delivered personally or by facsimile transmission, (ii) two days
after being delivered in the United States (properly addressed and all fees
paid) for overnight delivery service to a courier (such as Federal Express)
which regularly provides such service and regularly obtains executed receipts
evidencing delivery or (iii) five days after being deposited (properly
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addressed and stamped for first-class delivery) in a daily serviced United
States mail box.
17. SALE OF TRUST PROPERTY. If this Deed of Trust is foreclosed or
if the Trust Property is sold pursuant to this Deed of Trust, the Trust
Property, or any interest therein, may, at the discretion of Beneficiary, be
sold in one or more parcels or in several interests or portions and in any order
or manner.
18. CHANGES IN LAWS REGARDING TAXATION. In the event of the
passage after the date of this Deed of Trust of any law of the State in which
the Premises are located deducting from the value of real property for the
purpose of taxation any lien or encumbrance thereon or changing in any way the
laws for the taxation of deeds of trust or mortgages or debts secured by deeds
of trust or mortgages for state or local purposes or the manner of the
collection of any such taxes, and imposing a tax, either directly or indirectly,
on this Deed of Trust, the Notes or the Debt, Grantor shall, if permitted by
law, pay any tax imposed as a result of any such law within the statutory period
or within fifteen (15) days after demand by Beneficiary, whichever is less,
provided, however, that if, in the opinion of the attorneys for Beneficiary,
Grantor is not permitted by law to pay such taxes, Beneficiary shall have the
right, at its option, to declare the Debt due and payable on a date specified in
a prior notice to Grantor of not less than thirty (30) days.
19. NO CREDITS ON ACCOUNT OF THE DEBT. Grantor will not claim or
demand or be entitled to any credit or credits on account of the Debt for any
part of the Taxes assessed against the Trust Property or any part thereof and no
deduction shall otherwise be made or claimed from the taxable value of the Trust
Property, or any part thereof, by reason of this Deed of Trust or the Debt.
20. OFFSETS, COUNTERCLAIMS AND DEFENSES. Any assignee of this Deed
of Trust, the Notes and the other Loan Documents shall take the same free and
clear of all offsets, counterclaims or defenses of any nature whatsoever which
Grantor may have against any assignor of this Deed of Trust, the Notes and the
other Loan Documents, and no such offset, counterclaim or defense shall be
interposed or asserted by Grantor in any action, case or proceeding brought by
any such assignee upon this Deed of Trust, the Notes or any of the other Loan
Documents and any such right to interpose or assert any such offset,
counterclaim or defense in any such action, case or proceeding is hereby
expressly waived by Grantor.
21. LOAN DOCUMENTS. Grantor shall observe and perform, and cause
to be the observed and performed, all of the terms, covenants and provisions
contained in the Notes, this Deed of Trust and the other Loan Documents.
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<PAGE> 22
22. DOCUMENTARY STAMPS. If at any time the United States of
America, any state thereof, or any governmental subdivision of any such state,
shall require revenue or other stamps to be affixed to the Notes, this Deed of
Trust or any of the other Loan Documents, Grantor will pay for the same, with
interest and penalties thereon, if any.
23. RIGHT OF ENTRY. Beneficiary and its agents shall have the
right to enter and inspect the Trust Property at all reasonable times.
24. PERFORMANCE OF OTHER AGREEMENTS. Grantor shall observe and
perform each and every term to be observed or performed by Grantor pursuant to
the terms of any agreement or recorded instrument affecting or pertaining to the
Trust Property.
25. EVENTS OF DEFAULT. The occurrence of any one or more of the
following events, acts or occurrences shall constitute an event of default
(each an "Event of Default"):
(a) if any portion of the Debt is not paid within five (5)
days after the date when due;
(b) if an Event of Default shall have occurred under the
Credit Agreement;
(c) if any Insurance Premium Deposit is not made within five
(5) days after the date when due;
(d) if any Tax Deposit is not made within five (5) days after
the date when due;
(e) if Grantor shall fail to pay within twenty (20) days of
notice and demand by Beneficiary, any installment of any assessment
against the Trust Property for local improvements heretofore or
hereafter laid, which assessment is or may become payable in annual or
periodic installments and is or may become a lien on the Trust
Property, notwithstanding the fact that such installment may not be due
and payable at the time of such notice and demand;
(f) if without the consent of Beneficiary any Improvement or
the Equipment (except for normal replacement of the Equipment) is
removed, demolished or materially altered, or if the Trust Property is
not kept in good condition and repair;
(g) if the Insurance Policies are not kept in full force and
effect, or if the Insurance Policies are not delivered to Beneficiary
upon request;
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(h) if without the consent of Beneficiary any Leases are made,
cancelled or modified or if any portion of the Rents is paid for a
period of more than one (1) month in advance or if any of the Rents are
further assigned;
(i) if the Trust Property shall become subject (i) to any tax
lien, other than a lien for local real estate taxes and assessments not
due and payable, or (ii) to any lis pendens, notice of pendency, stop
order, notice of intention to file mechanic's or materialman's lien,
mechanic's or materialman's lien or other lien of any nature whatsoever
and the same shall not either be discharged of record or in the
alternative insured over to the satisfaction of Beneficiary by the
title company insuring the lien of this Deed of Trust within a period
of thirty (30) days after the same is filed or recorded, and
irrespective of whether the same is superior or subordinate in lien or
other priority to the lien of this Deed of Trust and irrespective of
whether the same constitutes a perfected or inchoate lien or encumbered
on the Trust Property or is only a matter of record or notice; or
(j) if Grantor shall continue to be in default under any of
the other terms, covenants or conditions of this Deed of Trust for five
(5) days after notice from Beneficiary in the case of any default which
can be cured by the payment of a sum of money or for thirty (30) days
after notice from Beneficiary in the case of any other default,
provided that if such default cannot reasonably be cured within such
thirty (30) day period and Grantor shall have commenced to cure such
default within such thirty (30) day period and thereafter diligently
and expeditiously proceeds to cure the same, such thirty (30) day
period shall be extended for so long as it shall require Grantor in the
exercise of due diligence to cure such default, it being agreed that no
such extension shall be for a period in excess of sixty (60) days.
26. RIGHT TO CURE DEFAULTS. If default in the performance of any
of the covenants of Grantor herein occurs, Beneficiary or Trustee may, at their
discretion, remedy the same and for such purpose shall have the right to enter
upon the Trust Property or any portion thereof without thereby becoming liable
to Grantor or any person in possession thereof holding under Grantor, and to pay
all sums as may be necessary to cure any such default (including, without
limitation, any default by Grantor in the payment of any Insurance Premiums or
any Taxes or other liens or encumbrances covering the Trust Property or any part
thereof). If Beneficiary or Trustee shall remedy any such default (including,
without limitation, any default by Grantor in the payment of any Insurance
Premiums or any Taxes or other liens or encumbrances covering the Trust Property
or any part thereof) or appear in, defend, or bring any action, case or
proceeding to protect its interest in the Trust Property or to foreclose this
Deed of Trust or to sell the Trust Property pursuant to this Deed of Trust or
collect the Debt, the costs and expenses thereof (including reasonable
attorneys' fees to the extent permitted by law),
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<PAGE> 24
with interest as provided in this paragraph, shall be paid by Grantor to
Beneficiary upon demand, and shall be added to and constitute part of the Debt
secured by this Deed of Trust. All such costs and expenses incurred by
Beneficiary or Trustee in remedying any such default or in appearing in,
defending, or bringing any such action, case or proceeding shall be paid by
Grantor to Beneficiary upon demand, with interest at the Default Rate.
27. APPOINTMENT OF RECEIVER. Beneficiary or Trustee, in any action
to foreclose this Deed of Trust or upon the actual or threatened waste to any
part of the Trust Property or upon the occurrence of any default hereunder,
shall be at liberty, without notice, to apply for the appointment of a receiver
of the Rents, and shall be entitled to the appointment of such receiver as a
matter of right, without regard to the value of the Trust Property as security
for the Debt, or the solvency or insolvency of any person then liable for the
payment of the Debt.
28. NON-WAIVER. The failure of Beneficiary or Trustee to insist
upon strict performance of any term of this Deed of Trust shall not be deemed to
be a waiver of any term of this Deed of Trust. Grantor shall not be relieved of
Grantor's obligation to pay the Debt at the time and in the manner provided for
its payment in the Notes and this Deed of Trust by reason of (i) failure of
Beneficiary or Trustee to comply with any request of Grantor to take any action
to foreclose this Deed of Trust or to sell the Trust Property pursuant to this
Deed of Trust or otherwise enforce any of the provisions of this Deed of Trust,
the Notes or any of the other Loan Documents, (ii) the release, regardless of
consideration, of the whole or any part of the Trust Property or any other
security for the Debt, or (iii) any agreement or stipulation between Beneficiary
or Trustee and any subsequent owner or owners of the Trust Property or other
person extending the time of payment or otherwise modifying or supplementing the
terms of the Notes, this Deed of Trust or any of the other Loan Documents
without first having obtained the consent of Grantor, and in the latter event,
Grantor shall continue to be obligated to pay the Debt at the time and in the
manner provided in the Notes and this Deed of Trust, as so extended, modified
and supplemented, unless expressly released and discharged from such obligation
by Beneficiary in writing. 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 Trust Property, Beneficiary
may release any person at any time liable for the payment of the Debt or any
portion thereof or any part of the security held for the Debt and may extend the
time of payment or otherwise modify the terms of the Notes, this Deed of Trust
or any of the other Loan Documents, including, without limitation, a
modification of the interest rate payable on the principal balance of the Notes,
without in any manner impairing or affecting this Deed of Trust or the lien
thereof or the priority of this Deed of Trust, as so extended and modified, as
security for the Debt over any such subordinate lien, encumbrance, right, title
or interest. Beneficiary may resort for the payment of the Debt to any other
security held by Beneficiary in such order and manner as Beneficiary, in its
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discretion, may elect. Beneficiary or Trustee may take action to recover the
Debt, or any portion thereof, or to enforce any covenant hereof without
prejudice to the right of Beneficiary or Trustee thereafter to foreclose this
Deed of Trust or to effect a sale of the Trust Property pursuant to this Deed of
Trust. Beneficiary and Trustee shall not be limited exclusively to the rights
and remedies herein stated but shall be entitled to every additional right and
remedy set forth in the Loan Document or now or hereafter afforded by law. The
rights of Beneficiary and Trustee under this Deed of Trust and the other Loan
Documents shall be separate, distinct and cumulative and none shall be given
effect to the exclusion of the others. No act of Beneficiary or Trustee shall be
construed as an election to proceed under any one provision of this Deed of
Trust or of the other Loan Documents to the exclusion of any other provision set
forth in this Deed of Trust or the other Loan Documents.
29. POWER OF SALE. Upon the occurrence of any Event of Default,
and at any time while such Event of Default is continuing, Beneficiary may give
such notice of default and of election to cause the Trust Property to be sold as
may be required by law or as may be necessary to cause Trustee to exercise the
power of sale granted herein. Trustee shall then record and give such notice of
trustee's sale as then required by law and, after the expiration of such time as
may be required by law, may sell the Trust Property at the time and place
specified in the notice of sale, as a whole or in separate parcels as directed
by Beneficiary, or by Grantor to the extent required by law, at public auction
to the highest bidder for cash in lawful money of the United States, payable at
time of sale, all in accordance with applicable law. Trustee, from time to time,
may postpone or continue the sale of all or any portion of the Trust Property by
public declaration at the time and place last appointed for the sale. No other
notice of the postponed sale shall be required. Upon any sale, Trustee shall
deliver its deed conveying the property sold, without any covenant or warranty,
express or implied, to the purchaser or purchasers at the sale. The recitals in
such deed of any matters of facts shall be conclusive as to the accuracy
thereof. Any person, including Grantor, Trustee or Beneficiary, may purchase at
the sale.
30. CONCERNING TRUSTEE. Trustee shall be under no duty to take any
action hereunder except as expressly required hereunder or by law, or to perform
any act which would involve Trustee in any expense or liability or to institute
or defend any suit in respect hereof, unless properly indemnified to Trustee's
reasonable satisfaction. Trustee, by acceptance of this Deed of Trust, covenants
to perform and fulfill the trusts herein created, being liable, however, only
for willful negligence or misconduct, and hereby waives any statutory fee and
agrees to accept reasonable compensation, in lieu thereof, for any services
rendered by Trustee in accordance with the terms hereof. Trustee may resign at
any time upon giving thirty (30) days' notice to Grantor and to Beneficiary.
Beneficiary may in its sole and absolute discretion and with or without cause
remove Trustee at any time or from time to time and select a successor trustee.
In the event of the death, removal,
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resignation, refusal to act, or inability to act of Trustee, or in its sole and
absolute discretion for any reason whatsoever Beneficiary may, without notice
and without specifying any reason therefor and without applying to any court,
select and appoint a successor trustee, by an instrument recorded wherever this
Deed of Trust is recorded and all powers, rights, duties and authority of
Trustee, as aforesaid, shall thereupon become vested in such successor. Such
substitute trustee shall not be required to give bond for the faithful
performance of the duties of Trustee hereunder unless required to do so by
Beneficiary.
31. TRUSTEE'S FEES. Grantor shall pay all costs, fees and expenses
incurred by Trustee and Trustee's agents and counsel in connection with the
performance by Trustee of Trustee's duties hereunder and all such costs, fees
and expenses shall be secured by this Deed of Trust.
32. LIABILITY. If Grantor consists of more than one person, the
obligations and liabilities of each such person hereunder shall be joint and
several.
33. CONSTRUCTION. The terms of this Deed of Trust shall be
construed in accordance with the laws of the State in which the Premises are
located.
34. SECURITY AGREEMENT. This Deed of Trust constitutes both a real
property mortgage and a "security agreement", within the meaning of the Uniform
Commercial Code of the State in which the Premises are located, and the Trust
Property includes both real and personal property and all other rights and
interest, whether tangible or intangible in nature, of Grantor in the Trust
Property. Grantor by executing and delivering this Deed of Trust has granted to
Beneficiary and Trustee, as security for the Debt, a security interest in the
Equipment. If Grantor shall default under the Notes or this Deed of Trust,
Beneficiary and Trustee, in addition to any other rights and remedies which they
may have, shall have and may exercise immediately and without demand any and all
rights and remedies granted to a secured party upon default under the Uniform
Commercial Code, including, without limiting the generality of the foregoing,
the right to take possession of the Equipment or any part thereof, and to take
such other measures as Beneficiary or Trustee may deem necessary for the care,
protection and preservation of the Equipment. Upon request or demand of
Beneficiary or Trustee, Grantor shall at its expense assemble the Equipment and
make it available to Beneficiary and Trustee at a convenient place acceptable to
Beneficiary and Trustee. Grantor shall pay to Beneficiary on demand any and all
expenses, including legal expenses and attorneys' fees, incurred or paid by
Beneficiary or Trustee in protecting the security interest in the Equipment
granted hereby and in enforcing the rights hereunder with respect to the
Equipment. Any notice of sale, disposition or other intended action by
Beneficiary or Trustee with respect to the Equipment sent to Grantor in
accordance with the provisions of this Deed of Trust at least seven (7) days
prior to the date of any such sale,
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disposition or other action, shall constitute reasonable notice to Grantor, and
the method of sale or disposition or other intended action set forth or
specified in such notice shall conclusively be deemed to be commercially
reasonable within the meaning of the Uniform Commercial Code unless objected to
in writing by Grantor within five (5) days after receipt by Grantor of such
notice. The proceeds of any sale or disposition of the Equipment, or any part
thereof, may be applied by Beneficiary to the payment of the Debt in such order,
priority and proportions as Beneficiary in its discretion shall deem proper.
35. FURTHER ACTS, ETC. Grantor will, at the cost of Grantor, and
without expense to Beneficiary or Trustee, do, execute, acknowledge and deliver
all and every such further acts, deeds, conveyances, deeds of trust, mortgages,
assignments, notices of assignments, transfers and assurances as Beneficiary or
Trustee shall, from time to time, require for the better assuring, conveying,
assigning, transferring and confirming unto Beneficiary or Trustee, as the case
may be, the property and rights hereby conveyed or assigned or intended now or
hereafter so to be, or which Grantor may be or may hereafter become bound to
convey or assign to Beneficiary or Trustee, or for carrying out the intention or
facilitating the performance of the terms of this Deed of Trust or for filing,
registering or recording this Deed of Trust and, on demand, will execute and
deliver and hereby authorizes Beneficiary or Trustee to execute in the name of
Grantor to the extent Beneficiary or Trustee may lawfully do so, one or more
financing statements, chattel mortgages or comparable security instruments, to
evidence more effectively the lien hereof upon the Trust Property.
36. HEADINGS, ETC. The headings, titles and captions of various
paragraphs of this Deed of Trust are for convenience of reference only and are
not to be construed as defining or limiting, in any way, the scope or intent of
the provisions hereof.
37. FILING OF DEED OF TRUST, ETC. Grantor forthwith upon the
execution and delivery of this Deed of Trust and thereafter, from time to time,
will cause this Deed of Trust, and any security instrument creating a lien or
evidencing the lien hereof upon the Trust Property and each instrument of
further assurance to be filed, registered or recorded in such manner and in such
places as may be required by any present or future law in order to publish
notice of and fully to protect, preserve and perfect the lien hereof upon, and
the interest of Beneficiary and Trustee in, the Trust Property. Grantor will pay
all filing, registration and recording fees, and all expenses incident to the
preparation, execution and acknowledgement of this Deed of Trust, any deed of
trust or mortgage supplemental hereto, any security instrument with respect to
the Trust
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Property, and any instrument of further assurance, and all Federal, state,
county and municipal taxes, duties, imposts, assessments and charges arising out
of or in connection with the execution and delivery of this Deed of Trust, any
deed of trust or mortgage supplemental hereto, any security instrument with
respect to the Trust Property or any instrument of further assurance. Grantor
shall hold harmless and indemnify Beneficiary and Trustee, and their respective
successors and assigns, against any liability incurred by reason of the
imposition of any tax on the making and recording of this Deed of Trust.
38. USURY LAWS. This Deed of Trust and the Notes are subject to
the express condition that at no time shall Grantor be obligated or required to
pay interest on the principal balance due under the Notes at a rate which could
subject the holder of the Notes to either civil or criminal liability as a
result of being in excess of the maximum interest rate which Grantor is
permitted by law to contract or agree to pay. If by the terms of this Deed of
Trust or the Notes Grantor is at any time required or obligated to pay interest
on the principal balance due under the Notes at a rate in excess of such maximum
rate, the rate of interest under the Notes shall be deemed to be immediately
reduced to such maximum rate and the interest payable shall be computed at such
maximum rate and all prior interest payments in excess of such maximum rate
shall be applied and shall be deemed to have been payments in reduction of the
principal balance of the Notes.
39. SOLE DISCRETION OF BENEFICIARY AND TRUSTEE. Except as may
otherwise be expressly provided to the contrary, wherever pursuant to the Notes,
this Deed of Trust, or any of the other Loan Documents, Beneficiary or Trustee
exercises any right given to it to consent or not consent, or to approve or
disapprove, or any arrangement or term is to be satisfactory to Beneficiary or
Trustee, the decision of Beneficiary or Trustee, as the case may be, to consent
or not consent, or to approve or disapprove or to decide that arrangements or
terms are satisfactory or not satisfactory, shall be in the sole and absolute
discretion of Beneficiary or Trustee, as the case may be, and shall be final and
conclusive.
40. REASONABLENESS. If at any time Grantor believes that
Beneficiary or Trustee has not acted reasonably in granting or withholding any
approval or consent under the Notes, this Deed of Trust or any of the other Loan
Documents, as to which approval or consent either Beneficiary or Trustee has
expressly agreed to act reasonably, or absent such agreement, a court of law
having jurisdiction over the subject matter would require Beneficiary or Trustee
to act reasonably, then Grantor's sole remedy shall be to seek injunctive relief
or specific performance and no action for monetary damages or punitive damages
shall in any event or under any circumstance be maintained by Grantor against
Beneficiary or Trustee.
41. RECOVERY OF SUMS REQUIRED TO BE PAID. Beneficiary and Trustee
shall have the right from time to time to take action to recover any sum or sums
which constitute a part of the Debt as the same become due, without regard to
whether or not the balance of the Debt shall be due, and without prejudice to
the right of Beneficiary or Trustee thereafter to bring an action of
foreclosure, or any other action, or to otherwise effect a sale
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of the Trust Property pursuant to this Deed of Trust, for a default or defaults
by Grantor existing at the time such earlier action was commenced.
42. AUTHORITY. Grantor (and the undersigned representative of
Grantor, if any) has full power, authority and legal right to execute this Deed
of Trust, and to give, grant, bargain, sell, alien, enfeoff, convey, confirm and
assign the Trust Property pursuant to the terms hereof and to keep and observe
all of the terms of this Deed of Trust on Grantor's part to be performed.
43. ACTIONS, CASES AND PROCEEDINGS. Beneficiary and Trustee, shall
have the right to appear in and defend any action, case or proceeding brought
with respect to the Trust Property and to bring any action, case or proceeding,
in the name and on behalf of Grantor, which Beneficiary or Trustee, in its
discretion, feels should be brought to protect their respective interests in the
Trust Property.
44. INAPPLICABLE PROVISIONS. If any term, covenant or condition of
this Deed of Trust shall be held to be invalid, illegal or unenforceable in any
respect, this Deed of Trust shall be construed without such provision.
45. DUPLICATE ORIGINALS. This Deed of Trust may be executed in any
number of duplicate originals and each such duplicate original shall be deemed
to constitute but one and the same instrument.
46. CERTAIN DEFINITIONS. Unless the context clearly indicates a
contrary intent or unless otherwise specifically provided herein, words used in
this Deed of Trust shall be used interchangeably in singular or plural form and
the following words shall have the following respective meanings:
(a) "Affiliate" shall have the meaning given to such term
under Title 11 of the United States Code as now constituted;
(b) "Beneficiary" shall mean Beneficiary or any subsequent
holder of the Notes;
(c) "Debt" shall mean all sums secured by this Deed of Trust;
(d) "default" shall mean the occurrence of any default by
Grantor or other person in the observance or performance of any of the
terms, covenants or provisions of the Notes, this Deed of Trust or any
of the other Loan Documents on the part of Grantor or such other person
to be observed or performed without regard to whether such default
constitutes or would constitute upon notice or lapse of time, or both,
an Event of Default under this Deed of Trust or an event of default
under the Notes or any of the other Loan Documents;
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(e) "Default Rate" shall mean the lesser of (i) eighteen (18%)
percent per annum or (ii) the highest rate of interest permitted under
the laws of the State of Arizona.
(f) "Grantor" shall mean each Grantor and any subsequent owner
or owners of the Trust Property or any part thereof or interest
therein;
(g) "Guarantor" shall mean each person guaranteeing payment of
the Debt or any portion thereof or performance by Grantor of any of the
terms of this Deed of Trust or any of the other Loan Documents and
their respective heirs, executors, administrators, legal
representatives, successors and assigns;
(h) "Loan" shall mean the loan in the principal sum of
$13,090,000 made by Beneficiary to Grantor which is evidenced by the
Notes and secured by this Deed of Trust;
(i) "Loan Documents" shall collectively mean the Notes, this
Deed of Trust, the Credit Agreement and all other documents and
instruments now or hereafter executed and delivered in connection
therewith or otherwise pertaining to the Loan, as the same may be
modified or amended from time to time;
(j) "Notes" shall mean the Notes or any other evidence of
indebtedness secured by this Deed of Trust;
(k) "person" shall include an individual, corporation,
partnership, trust, unincorporated association, government,
governmental authority, or other entity;
(l) "Trust Property" shall include any portion of the Trust I
Property or interest therein; and
(m) "Trustee" shall mean Trustee or any successor trustee
under this Deed of Trust.
Whenever the context may require, any pronouns used herein shall include the
corresponding masculine, feminine or neuter forms, and the singular form of
nouns and pronouns shall include the plural and vice versa.
47. WAIVER OF NOTICE. Grantor shall not be entitled to any notices
of any nature whatsoever from Beneficiary or Trustee except with respect to
matters for which this Deed of Trust specifically and expressly provides for the
giving of notice by Beneficiary or Trustee to Grantor, and Grantor hereby
expressly waives the right to receive any notice from Beneficiary or Trustee
with respect to any matter for which this Deed of Trust does not specifically
and expressly provide for the giving of notice by Beneficiary or Trustee to
Grantor.
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<PAGE> 31
48. NO ORAL CHANGE. This Deed of Trust may only be modified,
amended or changed by an agreement in writing signed by Grantor and Beneficiary,
and may only be released, discharged or satisfied of record by an agreement in
writing signed by Beneficiary. Trustee shall join in any such agreement if
required for such agreement to be effective under applicable law. No waiver of
any term, covenant or provision of this Deed of Trust shall be effective unless
given in writing by Beneficiary and if so given by Beneficiary shall only be
effective in the specific instance in which given. Grantor acknowledges that the
Notes, this Deed of Trust and the other Loan Documents set forth the entire
agreement and understanding of Grantor and Beneficiary with respect to the loan
secured hereby and that no oral or other agreements, understanding,
representation or warranties exist with respect to the loan secured hereby other
than those set forth in the Notes, this Deed of Trust and the other Loan
Documents.
49. ABSOLUTE AND UNCONDITIONAL OBLIGATION. Grantor acknowledges
that Grantor's obligation to pay the Debt in accordance with the provision of
the Notes and this Deed of Trust is and shall at all times continue to be
absolute and unconditional in all respects, and shall at all times be valid and
enforceable irrespective of any other agreements or circumstances of any nature
whatsoever which might otherwise constitute a defense to the Notes or this Deed
of Trust or the obligation of Grantor thereunder to pay the Debt or the
obligations of any other person relating to the Notes or this Deed of Trust or
the obligations of Grantor under the Notes or this Deed of Trust or otherwise
with respect to the loan secured hereby, and Grantor absolutely, unconditionally
and irrevocably waives any and all right to assert any defense, setoff,
counterclaim or crossclaim of any nature whatsoever with respect to the
obligation of Grantor to pay the Debt in accordance with the provisions of the
Notes and this Deed of Trust or the obligations of any other person relating to
the Notes or this Deed of Trust or obligations of Grantor under the Notes or
this Deed of Trust or otherwise with respect to the loan secured hereby in any
action, case or proceeding brought by Beneficiary to collect the Debt, or any
portion thereof, or to enforce, foreclose and realize upon the lien and security
interest created by this Deed of Trust or any other document or instrument
securing repayment of the Debt, in whole or in part
50. WAIVER OF TRIAL BY JURY. GRANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES, AND TRUSTEE BY ITS ACCEPTANCE OF THIS DEED OF TRUST AND
BENEFICIARY BY ITS ACCEPTANCE OF THE NOTES AND THIS DEED OF TRUST IRREVOCABLY
AND UNCONDITIONALLY WAIVE, ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION,
CASE, PROCEEDING, SUIT OR COUNTERCLAIM ARISING IN CONNECTION WITH, OUT OF OR
OTHERWISE RELATING TO THE NOTES, THIS DEED OF TRUST OR ANY OF THE OTHER LOAN
DOCUMENTS.
51. WAIVER OF STATUTORY RIGHTS. Grantor shall not and will not
apply for or avail itself of any appraisement, valuation, stay, extension or
exemption laws, or any so-called "Moratorium Laws", now existing or hereafter
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<PAGE> 32
enacted, in order to prevent or hinder the enforcement or foreclosure of this
Deed of Trust, but hereby waives the benefit of such laws to the full extent
that Grantor may do so under applicable law. Grantor for itself and all who may
claim through or under it waives any and all right to have the property and
estates comprising the Trust Property marshalled upon any foreclosure of the
lien of this Deed of Trust and agrees that any court having jurisdiction to
foreclose such lien may order the Trust Property sold as an entirety. Grantor
hereby waives for itself and all who may claim through or under it, and to the
full extent Grantor may do so under applicable law, any and all rights of
redemption from sale under any order or decree of foreclosure of this Deed of
Trust or granted under any statute now existing or hereafter enacted.
52. RELATIONSHIP. The relationship of Beneficiary to Grantor
hereunder is strictly and solely that of lender and borrower and nothing
contained in the Notes, this Deed of Trust or any of the other Loan Documents is
intended to create, or shall in any event or under any circumstance be construed
as creating, a partnership, joint venture, tenancy-in-common, joint tenancy or
other relationship of any nature whatsoever between Beneficiary and Grantor
other than as lender and borrower.
53. CREDIT AGREEMENT. This Deed of Trust is subject to all of the
terms, covenants and conditions of a certain Credit Agreement dated the date
hereof entered into between Beneficiary and Grantor (herein referred to as the
"Credit Agreement"), which Credit Agreement and all of the terms, covenants and
conditions thereof are by this reference incorporated herein and made a part
hereof with the same force and effect as if set forth at length herein. The
proceeds of the Loan secured hereby are to be advanced by Beneficiary to Grantor
in accordance with the provisions of the Credit Agreement. Grantor shall observe
and perform all of the terms, covenants and conditions of the Credit Agreement
on Grantor's part to be observed or performed. All advances made and all
indebtedness arising and accruing under the Credit Agreement from time to time
shall constitute part of the Debt and shall be secured hereby. In the event of
any conflict or ambiguity between the terms, covenants and conditions of this
Deed of Trust and the Credit Agreement, the terms, covenants and conditions
which shall enlarge the rights and remedies of Beneficiary and the interest of
Beneficiary in the Trust Property, afford Beneficiary greater financial security
in the Trust Property and better assure payment of the Debt in full, shall
control.
54. DEPOSITS. Whenever in this Deed of Trust, Grantor is required
to deposit monies with Beneficiary to secure obligations of Grantor under this
Deed of Trust or as a condition precedent to Grantor right to contest certain
obligations, such monies shall (unless otherwise specifically provided to the
contrary in this Deed of Trust) be held in a non-interest bearing account
selected by Beneficiary, which account may be co-mingled with other funds of or
held by Beneficiary and on which non-interest bearing account Beneficiary shall
be entitled to earn interest for its own account
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<PAGE> 33
notwithstanding the fact that insofar as Grantor is concerned such account is
non-interest bearing. In order to secure the payment of the Debt and the
performance by Grantor of their respective obligations under the Loan Documents,
Grantor hereby grants and assigns to Beneficiary a security interest in and to
all monies from time to time on deposit in any such account. Upon the occurrence
of an Event of Default, Beneficiary shall have the absolute right to apply all
or any portion of the balances held in any such accounts to the payment of the
Debt whether or not due and payable in such order, priority and proportions as
Beneficiary in its discretion shall deem appropriate.
55. RETENTION OF COUNSEL AND CONSULTANTS. If Beneficiary deems it
to be in its best interest to retain the assistance of persons, firms or
corporations (including, but not limited to, attorneys, title insurance
companies, third party escrow agents, appraisers, engineers and surveyors) with
respect to any request for consent or approval by Beneficiary under the Loan
Documents, Grantor shall reimburse Beneficiary within ten (10) days of demand by
Beneficiary for all reasonable costs incurred in connection with the employment
of such persons, firms or corporations.
56. TRANSACTION COSTS. Grantor shall pay all recording and filing
fees, transfer taxes, title insurance premiums, escrow and other title company
charges, attorneys' fees (including the fees and expenses of outside counsel for
Beneficiary and excluding fees and expenses of in-house counsel for
Beneficiary), appraisal and survey fees, environmental engineer and consultant
fees, consulting architect fees, financial consultant fees, fees of other
engineers and consultants, if any, insurance costs and all other expenses in
connection with the making of the Loan.
IN WITNESS WHEREOF, Grantor has duly executed and delivered this Deed
of Trust the day and year first above written.
NEXTHEALTH, INC., a Delaware
corporation
By:/s/ Bertha B Kenny
------------------------
Name:Bertha B Kenny
Title: Corp Secretary
FIDELITY NATIONAL TITLE AGENCY,
INC., trustee aforesaid, an Arizona
corporation
By:/s/ Anna M Kane
------------------------
Name: Anna M Kane
Title: Assistant Vice President
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<PAGE> 34
AP LOM LLC, a Delaware limited
liability company
By: AP GP LOM LLC, its Managing Member
By: Kronus Property, Inc.
By:/s/ Alfred Trivilino
-------------------------
Name: Alfred Trivilino
Title: Vice President
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<PAGE> 1
EXHIBIT 10.84
GUARANTY
GUARANTY, dated as of November 14, 1996 (as amended, modified or
supplemented from time to time, this "Guaranty"), made by each of the
undersigned (each, a "Guarantor" and, collectively, the "Guarantors"). Unless
otherwise defined herein, capitalized terms used herein shall the meanings
provided in the Credit Agreement referred to below.
WHEREAS, NextHealth, Inc. (the "Borrower") and AP LOM LLC, a Delaware
limited liability company (the "Lender"), have entered into a Credit Agreement,
dated as of November 14, 1996 (as amended, modified or supplemented from time to
time, the "Credit Agreement"), providing for the making of Loans to the
Borrower;
WHEREAS, each Guarantor is a Subsidiary of the Borrower;
WHEREAS, it is a condition precedent to the making of Loans under the
Credit Agreement that each Guarantor shall have executed and delivered to the
Lender this Guaranty; and
WHEREAS, each Guarantor will obtain benefits from the incurrence of
Loans by the Borrower under the Credit Agreement and, accordingly, desires to
execute this Guaranty in order to satisfy the condition precedent described in
the preceding paragraph and induce the Lender to make Loans to the Borrower;
NOW, THEREFORE, in consideration of the foregoing and other benefits
accruing to each Guarantor, the receipt and sufficiency of which are hereby
acknowledged, each Guarantor hereby makes the following representations and
warranties to the Lender and hereby covenants and agrees with the Lender as
follows:
Section
1. Guaranty. Each Guarantor hereby, jointly and severally, irrevocably and
unconditionally guarantees the full and punctual payment when due (whether at
stated maturity, by acceleration or otherwise), of (x) the principal of,
interest on and all other amounts owing in respect of the Loans made to the
Borrower under the Credit Agreement and (y) all other obligations and
liabilities owing by the Borrower to the Lender under the Credit Agreement
(including, without limitation, indemnities) and the other Loan Documents to
which the Borrower is a party, whether now existing or hereafter incurred under,
arising out of or in connection with the Credit Agreement or any such other Loan
Document and the due performance and compliance by the Borrower with the terms
of the Credit Agreement and such other Loan Documents (the foregoing being
herein referred to as the "Guaranteed Obligations"); provided, however, that the
maximum
<PAGE> 2
amount payable by each Guarantor hereunder shall not exceed an amount equal to
the largest amount that would not render such Guarantor's obligations hereunder
subject to avoidance under Section 548 of the United States Bankruptcy Code or
any equivalent provision of the law of any state. Subject to the proviso in the
preceding sentence, each Guarantor understands, agrees and confirms that the
Lender may enforce this Guaranty up to the full amount of the Guaranteed
Obligations against each Guarantor without proceeding against any other
Guarantor, the Borrower, any security for the Guaranteed Obligations, or under
any other guaranty covering all or a portion of the Guaranteed Obligations. All
payments made by each Guarantor hereunder shall be made on the same basis as
payments by the Borrower under Section 3.3 of the Credit Agreement.
Section 1. Waiver. Each Guarantor hereby absolutely, unconditionally
and irrevocably waives, to the fullest extent permitted by law, (i) promptness,
diligence, notice of acceptance and any other notice with respect to this
Guaranty, (ii) presentment, demand of payment, protest, notice of dishonor or
nonpayment and any other notice with respect to the Guaranteed Obligations,
(iii) any requirement that the Lender protect, secure, perfect or insure any
security interest or Lien or any property subject thereto, and (iv) any other
action, event or precondition to the enforcement of this Guaranty or the
performance by the Guarantor of the obligations hereunder.
Section 2. Guaranty Absolute. (a) Each Guarantor guarantees that, to
the fullest extent permitted by law, the Guaranteed Obligations will be paid or
performed strictly in accordance with their terms, regardless of any law,
regulation or order now or hereafter in effect in any jurisdiction affecting any
of such terms or the rights of the Lender with respect thereto.
(b) No invalidity, irregularity, voidability, voidness or
unenforceability of the Credit Agreement, the Notes, or any other Loan Document
or any other agreement or instrument relating thereto, or of all or any part of
the Guaranteed Obligations or of any security therefor shall affect, impair or
be a defense to this Guaranty.
(c) This Guaranty is one of payment and performance, not collection,
and the obligations of each Guarantor under this Guaranty are independent of the
obligations of any other Guarantor, any other guarantor or the Borrower under
the Loan Documents, and a separate action or actions may be brought and
prosecuted against any Guarantor to enforce this Guaranty, irrespective of
whether any action is brought against the Borrower or whether the Borrower is
joined in any such action or actions.
(d) The liability of each Guarantor hereunder shall be absolute and
unconditional irrespective of:
(i) any change in the manner, place or terms of payment or
performance, and/or any change or extension of the time of payment or
performance of, renewal or alteration of, any of the Guaranteed
Obligations, any security therefor, or any liability
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<PAGE> 3
incurred directly or indirectly in respect thereof, or any other
amendment or waiver of or any consent to departure from the Credit
Agreement or the Notes or any other Loan Document, including any
increase in the Guaranteed Obligations resulting from the extension of
additional credit to the Borrower or any of its subsidiaries or
otherwise;
(ii) any sale, exchange, release, surrender, realization upon
any property by whomsoever at any time pledged or mortgaged to secure,
or howsoever securing, all or any of the Guaranteed Obligations, and/or
any offset thereagainst, or failure to perfect, or continue the
perfection of, any Lien in any such property, or delay in the
perfection of any such Lien, or any amendment or waiver of or consent
to departure from any other guaranty for all or any of the Guaranteed
Obligations;
(iii) any exercise or failure to exercise any rights against
the Borrower or others (including any Guarantor);
(iv) any settlement or compromise of any Obligations, any
security therefor or any liability (including any of those hereunder)
incurred directly or indirectly in respect thereof or hereof, and any
subordination of the payment of all or any part thereof to the payment
of any obligation (whether due or not) of the Borrower to creditors of
the Borrower other than the Guarantors;
(v) any manner of application of Collateral, or proceeds
thereof, to all or any of the Guaranteed Obligations, or any manner of
sale or other disposition of any Collateral for all or any of the
Guaranteed Obligations or any other assets of the Borrower or any of
its Subsidiaries;
(vi) any change, restructuring or termination of the existence
of the Borrower or any of its Subsidiaries; or
(vii) any other agreements or circumstance of any nature
whatsoever which might otherwise constitute a defense available to, or
a discharge of, this Guaranty and/or obligations of any Guarantor
hereunder, or a defense to, or discharge of, the Borrower or any other
person or party relating to this Guaranty or the obligations of any
Guarantor hereunder or otherwise with respect to the Loans, or other
financial accommodations to the Borrower.
(e) The Lender may at any time and from time to time (whether or not
after revocation or termination of this Guaranty) without the consent of, or
notice (except as shall be required by applicable statute and cannot be waived)
to, the Guarantor, and without incurring responsibility to the Guarantors or
impairing or releasing the obligations of any Guarantors hereunder, apply any
sums by whomsoever paid or howsoever realized to any Guaranteed Obligation
regardless of what Guaranteed Obligations remain unpaid.
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<PAGE> 4
(f) This Guaranty shall continue to be effective or be reinstated, as
the case may be, if claim is ever made upon the Lender for repayment or recovery
of any amount or amounts received by the Lender in payment or on account of any
of the Guaranteed Obligations and the Lender repays all or part of said amount
by reason of any judgment, decree or order of any court or administrative body
having jurisdiction over the Lender or the respective property of each, or any
settlement or compromise of any such claim effected by the Lender with any such
claimant (including the Borrower), then and in such event each Guarantor agrees
that any such judgment, decree, order, settlement or compromise shall be binding
upon such Guarantor, notwithstanding any revocation hereof or the cancellation
of any note (including the Notes) or other instrument evidencing any obligation
of the Borrower, and such Guarantor shall be and remain liable to the Lender
hereunder for the amount so repaid or recovered to the same extent as if such
amount had never originally been received by the Lender.
Section 3. Continuing Guaranty. This Guaranty is a continuing one and
shall (i) remain in full force and effect until the indefeasible payment and
satisfaction in full of the Guaranteed Obligations, (ii) be binding upon each
Guarantor, its successors and assigns, and (iii) inure to the benefit of, and be
enforceable by, the Lender and its successors, transferees and assigns. All
obligations to which this Guaranty applies or may apply under the terms hereof
shall be conclusively presumed to have been created in reliance hereon.
Section 4. Representations, Warranties and Covenants. Each Guarantor
hereby represents, warrants and covenants to and with the Lender that:
(a) Such Guarantor (i) is a duly organized and validly
existing corporation in good standing under the laws of the
jurisdiction of its organization, (ii) has the corporate power and
authority to own its property and assets and to transact the business
in which it is engaged and (iii) is duly qualified and authorized to do
business and is in good standing in all jurisdictions where it is
required to be so qualified and where the failure to be so qualified
could reasonably be expected to have a material adverse effect on the
assets, properties, liabilities and condition (financial or otherwise)
on the Borrower or the Borrower and its Subsidiaries taken as a whole.
(b) Such Guarantor has the corporate power and authority to
execute, deliver and carry out the terms of this Guaranty and each
other Loan Document to which it is a party and has taken all necessary
corporate action to authorize the execution, delivery and performance
by it of each such Loan Document. Such has duly executed and delivered
this Guaranty and each other Loan Document to which it is a party and
constitutes the legal, valid and binding obligation of the Guarantor,
and is enforceable against such Guarantor in accordance with its terms,
except as enforcement thereof may be subject to the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium or
similar law affecting creditors' rights generally, and general
principles of equity (regardless of whether such enforcement is sought
in a proceeding in equity or at law).
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<PAGE> 5
(c) No consent, approval, authorization or other action by,
and no notice to or of, or declaration or filing with, any governmental
or other public body, or any other Person, is required for the due
authorization, execution, delivery and performance by any Guarantor of
this Guaranty or the consummation of the transactions contemplated
hereby.
(d) The execution, delivery and performance by each Guarantor
of this Guaranty do not and will not violate or otherwise conflict with
any term or provision of any material agreement, instrument, judgment,
decree, order or any statute, rule or governmental regulation
applicable to each Guarantor or result in the creation of any Lien upon
any of its properties or assets pursuant thereto.
Section 5. Expenses. The Guarantors jointly and severally agree to
reimburse the Lender for any sums, costs, and expenses which the Lender may pay
or incur pursuant to the provisions of this Guaranty or in negotiating,
executing, perfecting, defending, protecting or enforcing this Guaranty or in
enforcing payment of the Guaranteed Obligations or otherwise in connection with
the provisions hereof, including court costs, collection charges, travel
expenses, and reasonable attorneys' fees, together with interest thereon as
specified in Section 12 hereof.
Section 6. Terms. (a) All terms defined in the Uniform Commercial Code
in effect in the State of New York on the date hereof (the "UCC") and used
herein shall have the meanings as defined in the UCC, unless the context
otherwise requires.
(b) The words "include," "includes" and "including" shall be
deemed to be followed by the phrase "without limitation".
(c) All references herein to Sections and subsections shall be
deemed to be references to Sections and subsections of this Guaranty
unless the context shall otherwise require.
Section 7. Amendments and Modification. No provision hereof shall be
modified, altered or limited except by written instrument expressly referring to
this Guaranty and to such provision, and executed by the party to be charged.
Section 8. Subordination; Waiver of Subrogation Rights. Any
indebtedness of the Borrower now or hereafter held by any Guarantor is hereby
subordinated to the indebtedness of the Borrower to the Lender; and such
indebtedness of the Borrower to any Guarantor, if the Lender, after an Event of
Default has occurred and is continuing, so requests, shall be collected,
enforced and received by such Guarantor as trustee for the Lender and be paid
over to the Lender on account of the indebtedness of the Borrower to the Lender,
but without affecting or impairing in any manner the liability of such Guarantor
under the other provisions of this Guaranty. Without limiting the generality of
the foregoing, each Guarantor hereby agrees with the Lender that it will not
exercise any right of subrogation which it may at any time otherwise have as a
5
<PAGE> 6
result of this Guaranty (whether contractual, under Section 509 of the United
States Bankruptcy Code, or otherwise) until all Guaranteed Obligations have been
paid in full in cash.
Section 9. Remedies Upon Default; Right of Set-Off. (a) Upon the
occurrence and during the continuance of any Event of Default, the Lender may,
without notice to or demand upon the Borrower or the Guarantors, declare any
Guaranteed Obligations immediately due and payable, and shall be entitled to
enforce the obligations of the Guarantors hereunder.
(b) Upon such declaration by the Lender, the Lender is hereby
authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by the Lender to or for the credit
or the account of any Guarantor against any and all of the obligations
of such Guarantor now or hereafter existing under this Guaranty,
whether or not the Lender shall have made any demand under this
Guaranty and although such obligations may be contingent and unmatured.
The Lender agrees promptly to notify such Guarantor after any such
set-off and application, provided that the failure to give such notice
shall not affect the validity of such set-off and application. The
rights of the Lender under this Section 10 are in addition to other
rights and remedies (including other rights of set-off) which the
Lender may have.
Section 10. Statute of Limitations. Each Guarantor waives, to the
fullest extent permitted by law, the benefit of any statute of limitations
affecting its liability hereunder or the enforcement thereof. To the extent
permitted by law, any payment by the Borrower or other circumstance which
operates to toll any statute of limitations as to the Borrower shall operate to
toll the statute of limitations as to each Guarantor.
Section 11. Interest. All amounts payable from time to time by each
Guarantor hereunder shall bear interest at the interest rate per annum specified
in Section 2.4 of the Credit Agreement.
Section 12. Rights and Remedies Not Waived. No act, omission or delay
by the Lender shall constitute a waiver of its rights and remedies hereunder or
otherwise. No single or partial waiver by the Lender of any default hereunder or
right or remedy which it may have shall operate as a waiver of any other
default, right or remedy or of the same default, right or remedy on a future
occasion.
Section 13. Admissibility of Guaranty. Each Guarantor agrees that any
copy of this Guaranty signed by such Guarantor and transmitted by telecopier for
delivery to the Lender shall be admissible in evidence as the original itself in
any judicial or administrative proceeding, whether or not the original is in
existence.
Section 14. Notices. All notices, requests and demands to or upon the
Lender or any Guarantor under this Guaranty shall be in writing and given as
provided in the Credit
6
<PAGE> 7
Agreement (with respect to any Guarantor, to the address of the Borrower set
forth in the Credit Agreement).
Section 15. Counterparts. This Guaranty may be executed in any number
of counterparts and by the different parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original and all of
which shall together constitute one and the same agreement.
SECTION 16. CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL; ETC. (A) ANY
LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY MAY BE BROUGHT IN THE
COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS GUARANTY,
EACH GUARANTOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID
COURTS. EACH GUARANTOR HEREBY IRREVOCABLY WAIVES, IN CONNECTION WITH ANY SUCH
ACTION OR PROCEEDING, (I) TRIAL BY JURY, (II) TO THE EXTENT IT MAY EFFECTIVELY
DO SO UNDER APPLICABLE LAW, ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING
OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH
RESPECTIVE JURISDICTIONS AND (III) THE RIGHT TO INTERPOSE ANY SET-OFF,
COUNTERCLAIM OR CROSS-CLAIM (UNLESS SUCH SET-OFF, COUNTERCLAIM OR CROSS-CLAIM
COULD NOT, BY REASON OF ANY APPLICABLE FEDERAL OR STATE PROCEDURAL LAWS, BE
INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER ACTION).
(b) Each Guarantor irrevocably consents to the service of
process of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by certified mail, postage
prepaid, to such Guarantor at its address determined pursuant to
Section 15 hereof.
(c) Nothing herein shall affect the right of the Lender to
serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against any Guarantor in any other
jurisdiction.
(d) Each Guarantor hereby waives presentment, notice of
dishonor and protests of all instruments included in or evidencing any
of the Guaranteed Obligations, and any and all other notices and
demands whatsoever (except as expressly provided herein).
SECTION 17. GOVERNING LAW. THIS GUARANTY AND THE GUARANTEED OBLIGATIONS
SHALL BE GOVERNED IN ALL RESPECTS BY THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS EXECUTED
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<PAGE> 8
AND TO BE PERFORMED IN SUCH STATE, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW
PRINCIPLES THEREOF.
Section 18. Captions; Separability. (a) The captions of the Sections
and subsections of this Guaranty have been inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Guaranty.
(b) If any provision of this Guaranty shall be held to be
invalid, illegal or unenforceable by any court of competent
jurisdiction, such holding shall not invalidate or render unenforceable
any other provision hereof.
Section 19. Acknowledgment of Receipt. Each Guarantor acknowledges
receipt of a copy of this Guaranty and each of the other Loan Documents.
Section 21. Deficiency. Each Guarantor jointly and severally agrees
that it shall be and remain liable hereunder with respect to any deficiency
remaining after foreclosure of any mortgage or security interest securing the
Guaranteed Obligations, whether or not the liability of any obligor for such
deficiency is discharged pursuant to statute or judicial.
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<PAGE> 9
IN WITNESS WHEREOF, each Guarantor has duly executed or caused this
Guaranty to be duly executed as of the date first above written.
Address: SIERRA TUSCON, INC.
16500 N. Lago del Oro Parkway
Tucson, AZ 85739 By:/s/ Bertha B Kenny
------------------
Attention: President Name: Bertha B Kenny
Title: Corporate Secretary
Address: SIERRA TUSCON AC, INC.
16500 N. Lago del Oro Parkway
Tucson, AZ 85739 By:/s/ Bertha B Kenny
------------------
Attention: President Name: Bertha B Kenny
Title: Corporate Secretary
Address: SIERRA TUSCON
16500 N. Lago del Oro Parkway EDUCATIONAL MATERIALS
Tucson, AZ 85739 (S.T.E.M.), INC.
Attention: President By:/s/ Bertha B Kenny
--------------------
Name: Bertha B Kenny
Title: Corporate Secretary
Address: SIERRA HEALTHSTYLES, INC.
16500 N. Lago del Oro Parkway D/B/A MIRAVAL
Tucson, AZ 85739
Attention: President By:/s/ Bertha B Kenny
----------------------
Name: Bertha B Kenny
Title: Corporate Secretary
9
<PAGE> 10
Address: ONSITE WORKSHOPS, INC.
16500 N. Lago del Oro Parkway
Tucson, AZ 85739
By:/s/ Bertha B Kenny
---------------------
Attention: President Name: Bertha B Kenny
Title: Corporate Secretary
Address: NEXTHEALTH WATER
16600 N. Lago del Oro Parkway RESOURCES, INC.
Tucson, AZ 85739
Attention: President By:/s/ Bertha B Kenny
---------------------
Name: Bertha B Kenny
Title: Corporate Secretary
Address: SOFTEN REALTY, L.L.C.
16600 N. Lago del Oro Parkway
Tucson, AZ 85739
Attention: President By: NEXTHEALTH, INC.,
a Member
By:/s/ Bertha B Kenny
----------------------
Name: Bertha B Kenny
Title: Corporate Secretary
Accepted and Agreed to:
AP LOM LLC
By: AP GP LOM LLC, its
Managing Member
By Kronus Property, Inc.
By: /s/ Alfred C Trivilino
-----------------------
Name: Alfred C Trivilino
Title: Vice President
10
<PAGE> 1
EXHIBIT 10.85
GENERAL SECURITY AGREEMENT
GENERAL SECURITY AGREEMENT, dated as of November 14, 1996 (this
"Agreement"), among each of the undersigned (each an "Assignor" and,
collectively, the "Assignors") and AP LOM LLC (the "Secured Party"). Unless
otherwise defined herein, capitalized terms used herein shall have the meanings
ascribed to such terms in the Credit Agreement referred to below.
WHEREAS, NextHealth, Inc. (the "Borrower") and the Secured Party have
entered into a Credit Agreement, dated as of November 14, 1996 (as amended,
modified or supplemented from time to time, the "Credit Agreement"), providing
for the making of Loans to the Borrower;
WHEREAS, pursuant to the Guaranty, each Assignor (other than the
Borrower) has jointly and severally guaranteed to the Secured Party the payment
when due of all obligations and liabilities of the Borrower under or in respect
to the Loan Documents;
WHEREAS, it is a condition precedent to the making of Loans to the
Borrower under the Credit Agreement that the Assignors shall have executed and
delivered to the Secured Party this Agreement; and
WHEREAS, each Assignor desires to execute this Agreement to satisfy the
condition precedent described in the preceding paragraph;
NOW, THEREFORE, in consideration of the benefits accruing to each
Assignor, the receipt and sufficiency of which are hereby acknowledged, each
Assignor hereby makes the following representations and warranties to the
Secured Party and hereby covenants and agrees with the Secured Party as follows:
1. As security for the due and punctual payment of any and all of
the present and future Obligations (as defined in Section 2 below), each
Assignor hereby grants to the Secured Party a continuing security interest in,
all of the right, title and interest of such Assignor in, to and under all of
the following, whether now existing or hereafter from time to time acquired: (1)
all of the Collateral (as defined in Section 3 below), and (2) all present and
future products and proceeds of the Collateral, subject to no prior security
interest.
2. For purposes of this Agreement, the term "Obligations" shall
mean the full and prompt payment when due (whether at stated maturity, by
acceleration or otherwise) of all
<PAGE> 2
obligations and liabilities of each Assignor to the Secured Party, now existing
or hereafter incurred under, arising out of or in connection with any Loan
Document to which it is a party and the due performance and compliance by each
Assignor with the terms of each such Loan Document.
3. As used herein, the term "Collateral" means the property
described below together with the property described in Section 4 below:
A. ALL PERSONAL PROPERTY. All of the personal property and
fixtures of each Assignor wherever located and whether now owned or in existence
or hereafter acquired or created, of every kind and description, tangible or
intangible, including without limitation all instruments, documents, contract
rights and general intangibles, such terms having the meaning ascribed by the
Uniform Commercial Code in effect in the State of New York on the date hereof
(the "Uniform Commercial Code").
B. EQUIPMENT. Equipment (of any nature and description), now
owned or hereafter acquired and wherever located, employed in the operation of
any Assignor's business, and all proceeds thereof and products of such equipment
in any form whatsoever, except and subject to any subsequent purchase money
liens. As used herein, the term "equipment" shall also mean and include all
spare parts therefor, all present and future additions, attachments and
accessions thereto, all substitutions therefor and replacements thereof, and
shall specifically include all "equipment" as such term is defined in the
Uniform Commercial Code.
C. INVENTORY. All of the inventory of each Assignor, of every
type or description, now owned or hereafter acquired and wherever located,
whether raw, in process or finished, all goods usable in processing the same and
all documents of title covering any inventory, and all proceeds thereof and
products of such inventory in any form whatsoever, including but not limited to
accounts and chattel paper, but excluding all inventory which is pledged to
secure accounts payable of such Assignor to the supplier of such inventory and
shall specifically include all "inventory" as such term is defined in the
Uniform Commercial Code.
D. ACCOUNTS AND CHATTEL PAPER. All of each Assignor's present
and future accounts, contract rights, general intangibles and chattel paper and
all other rights to the payment of money arising out of the sale (or lease) of
goods or services (hereinafter referred to in the plural as "Accounts" and in
the singular as "Account"), all proceeds thereof and all liens, securities,
guarantees, remedies and privileges pertaining thereto, together with all rights
and liens of each Assignor in and to such goods, including returned or
repossessed goods, and all rights and property of any kind forming the subject
matter of any of the Accounts, including the right of stoppage in transit.
4. Any and all deposits or other sums at anytime credited by or
due from the Secured Party to any Assignor; and any and all monies, securities
and other property of such Assignor, and the proceeds, thereof now or hereafter
held or received by or in transit to the
2
<PAGE> 3
Secured Party from or for such Assignor, whether for safekeeping, custody,
pledge, transmission, collection or otherwise, shall at all times constitute
security for any and all Obligations.
5. Each Assignor represents and warrants that: (a) no Financing
Statement (other than any which may have been filed on behalf of the Secured
Party) relating to any of the Collateral is on file in any public office and so
long as any Note remains unpaid or any of the Obligations remain unpaid, such
Assignor will not execute or authorize to be filed in any public office any
Financing Statement or Statements relating to the Collateral, except Financing
Statements filed or to be filed in respect of and covering the security
interests granted hereby by such Assignor and (b) the Chief Executive Office (or
Major Executive Office) of such Assignor is located at the address set forth
opposite its signature below, and the Collateral is located at the address(es)
set forth in Schedule I hereto and such Assignor will not change such locations
without at least 30 days' prior written notice to the Secured Party; and (c)
such Assignor has not created and is not aware of any security interest, lien or
encumbrance on or affecting the Collateral other than created hereby or
referenced herein.
6. Each Assignor assumes all liability and responsibility in
connection with all Collateral acquired by such Assignor; and the obligation of
such Assignor to pay all Obligations shall in no way be affected or diminished
by reason of the fact that any such Collateral may be lost, destroyed, stolen,
damaged or for any reason whatsoever unavailable to such Assignor.
7. As long as this Agreement shall remain in effect, each
Assignor agrees:
(a) such Assignor will not sell transfer, lease or otherwise
dispose of any of the Collateral or any interest therein without the prior
consent of the Secured Party, except for Inventory sold in the ordinary course
of such Assignor's business.
(b) in order to enable the Secured Party to comply with the
law of any jurisdiction, including state, federal and foreign, applicable to any
security interest granted hereby or to the Collateral, to execute and deliver
upon request, in form acceptable to the Secured Party, any Financing Statement,
notice, statement, instrument, document, agreement or other paper and/or to
perform any act requested by the Secured Party which may be necessary to create,
perfect, preserve, validate or otherwise protect such security interest or to
enable the Secured Party to exercise and enforce the Secured Party's rights
hereunder or with respect to such security interest;
(c) promptly to pay any filing fees or other costs in
connection with (i) the filing or recordation of such Financing Statements or
any other papers described above and (ii) such searches of the public records as
the Secured Party in its sole discretion shall require;
(d) that the Secured Party is authorized to file or record any
such Financing Statements or other papers without the signature of such Assignor
if permitted by applicable law;
3
<PAGE> 4
(e) that the Secured Party may file a photographic or other
reproduction of this Agreement in lieu of a Financing Statement in any filing
office where it is permissible to do so;
(f) except for the security interest granted hereby, any liens
referenced in the Search Report, and any subsequent purchase money liens, such
Assignor shall keep the Collateral and proceeds and products thereof free and
clear of any security interest, liens or encumbrances of any kind, such Assignor
shall promptly pay, when due, all taxes and transportation, storage and
warehousing charges and fees affecting or arising out of the Collateral and
shall defend the Collateral against all claims and demands of all persons at any
time claiming the same or any interest therein adverse to the Secured Party;
(g) at all times to keep all insurable Collateral insured at
the expense of such Assignor to the Secured Party's satisfaction against loss by
fire, theft and any other risk to which the Collateral may be subject; all
policies shall name the Secured Party as an additional insured; and in any
event, such policies will provide that each insurer will give the Secured Party
not less than 30 days notice in writing prior to the exercise of any right of
cancellation; in the event any Assignor fails to maintain any insurance the
Secured Party may (but shall not be obligated to) place such insurance and pay
the premium therefor, in which event such Assignor will pay the Secured Party
such premium with interest; the Secured Party may apply any proceeds of such
insurance which may be received by it toward payment of the Obligations, whether
or not due, in such order of application as the Secured Party may determine;
(h) that the Secured Party's duty with respect to the
Collateral shall be solely to use reasonable care in the custody and
preservation of Collateral in its possession; the Secured Party shall not be
obligated to take any steps necessary to preserve any rights in any of the
Collateral against prior parties, and each Assignor hereby agrees to take such
steps; each Assignor shall pay to the Secured Party all costs and expenses,
including filing and reasonable attorney's fees, incurred by the Secured Party
in connection with the custody, care, preservation or collection of the
Collateral; the Secured Party may, but is not obligated to, exercise any and all
rights of conversion or exchange or similar rights, privileges and options
relating to the Collateral; the Secured Party shall have no obligation to sell
or otherwise realize upon any of the Collateral as herein authorized and shall
not be responsible for any failure to do so or for any delay in so doing;
(i) to provide the Secured Party with such information as the
Secured Party may from time to time request with respect to the location of the
Collateral and any of its places of business;
(j) such Assignor will permit the Secured Party, by its
officers and agents, to have access to and examine at all reasonable times the
properties, minute books and other corporate records, and books of account and
financial records of such Assignor; and
4
<PAGE> 5
(k) such Assignor will promptly notify the Secured Party upon
the occurrence of any default, as provided in this Agreement, of which such
Assignor has knowledge.
8. The following provisions shall also be applicable:
A. As of the time when each of its Accounts arises, each
Assignor shall be deemed to have represented and warranted that each such
Account, and all records, papers and documents relating thereto (if any) are
genuine and in all respects what they purport to be, and that all papers and
documents (if any) relating thereto (i) to the best knowledge of the Assignor
will represent the genuine, legal, valid and binding obligation of the Account
debtor evidencing indebtedness unpaid and owed by the respective Account debtor
arising out of the performance of labor or services or the sale or lease and
delivery of the merchandise listed therein, or both, (ii) will be the only
original writings evidencing and embodying such obligation of the Account debtor
named therein (other than copies created for general accounting purposes), (iii)
to the best knowledge of the Assignor will evidence true and valid obligations,
enforceable in accordance with their respective terms and (iv) will be in
compliance and will conform in all material respects with all applicable
federal, state and local laws and applicable laws of any relevant foreign
jurisdiction.
B. Each Assignor will keep and maintain at its own cost and
expense accurate records of its Accounts, records of all payments received, all
credits granted thereon, all merchandise returned and all other dealings
therewith, and such Assignor will make the same available on such Assignor's
premises to the Second Party for inspection, at such Assignor's own cost and
expense, at any and all reasonable times upon prior notice to an authorized
officer of such Assignor. Upon the occurrence and during the continuance of an
Event of Default and at the request of the Secured Party, such Assignor shall,
at its own cost and expense, deliver all tangible evidence of its Accounts
(including, without limitation, all documents evidencing the Accounts) and such
books and records to the Secured Party or to its representatives (copies of
which evidence and books and records may be retained by such Assignor). Upon the
occurrence and during the continuance of an Event of Default and if the Secured
Party so directs, such Assignor shall legend, in form and manner satisfactory to
the Secured Party, the Accounts, as well as books, records and documents (if
any) of such Assignor evidencing or pertaining to such Accounts with an
appropriate reference to the fact that such Accounts have been assigned to the
Secured Party and that the Secured Party has a security interest therein.
C. Upon the occurrence and during the continuance of an Event
of Default, and if the Secured Party so directs any Assignor, such Assignor
agrees (x) to cause all payments on account of the Accounts to be made directly
to the Secured Party, (y) that the Secured Party may, at its option, directly
notify the obligors with respect to any Accounts to make payments with respect
thereto as provided in preceding clause (x) and (z) that the Secured Party may
enforce collection of any such Accounts and may adjust, settle or compromise the
amount of payment thereof, in the same manner and to the same extent as such
Assignor. Without notice to or assent by any Assignor, the Secured Party may
apply any or all amounts so received (after deducting
5
<PAGE> 6
costs and expenses of collection) in the manner provided in Section 8.2 of the
Credit Agreement. The costs and expenses (including reasonable attorneys' fees)
of collection, whether incurred by the Assignor or the Secured Party, shall be
borne by the relevant Assignor. The Secured Party shall deliver a copy of each
notice referred to in the preceding clause (y) to the relevant Assignor;
provided, that the failure by the Secured Party to so notify such Assignor shall
not affect the effectiveness of such notice or the other rights of the Secured
Party created by this subsection C.
D. No Assignor shall rescind or cancel any indebtedness
evidenced by any Account, or modify in any material respect any term thereof or
make any material adjustment with respect thereto, or extend or renew the same,
or compromise or settle any material dispute, claim, suit or legal proceeding
relating thereto, or sell any Account, or interest therein, without the prior
written consent of the Secured Party, except as permitted by subsection E
hereof. Each Assignor will duly fulfill all obligations on its part to be
fulfilled under or in connection with the Accounts and will do nothing to impair
the rights of the Secured Party in the Accounts.
E. Each Assignor shall endeavor in accordance with reasonable
business practices to cause to be collected from the Account debtor named in
each of its Accounts, as and when due (including, without limitation, amounts
which are delinquent, such amounts to be collected in accordance with generally
accepted lawful collection procedures) any and all amounts owing under such
Accounts, and apply forthwith upon receipt thereof all such amounts as are so
collected to the outstanding balance of such Account, except that, prior to the
occurrence of an Event of Default, any Assignor may allow in the ordinary course
of business as adjustments to amounts owing under its Accounts (i) an extension
or renewal of the time or times of payment, or settlement for less than the
total unpaid balance, which such Assignor finds appropriate in accordance with
reasonable business judgment and (ii) a refund or credit due as a result of
returned or damaged merchandise or improperly performed services or for other
reasons which such Assignor finds appropriate in accordance with reasonable
business judgment. The reasonable costs and expenses (including, without
limitation), attorneys' fees) of collection, whether incurred by an Assignor or
the Secured Party, shall be borne by the relevant Assignor.
9. If an Event of Default shall have occurred and be continuing,
then: (a) the Secured Party may at its option declare all Obligations to be at
once due and payable, without further notice, presentment, demand for payment or
protest, which are hereby expressly waived; (b) the Secured Party is authorized
to take possession of the Collateral and, for that purpose may enter with the
aid and assistance of any person or persons any premises where the Collateral or
any part thereof is, or may be, placed and remove same; (c) the Secured Party
may proceed to apply to the Obligations, any and all deposits or other sums
described in Section 4 hereof; (d) the Secured Party may require such Assignor
to assemble the Collateral and to make it available to the Secured Party at a
place designated by the Secured Party which is reasonably convenient to the
Secured Party and such Assignor; (e) the Secured Party shall have the right from
time to time to sell, resell, assign, transfer and deliver all or any part of
the Collateral, at any broker's board or exchange, or at public or private sale
or otherwise, at the option of the Secured Party, for cash or on credit for
future delivery, in such parcel or parcels and at such time or times and at such
place or places, and upon such terms, and conditions as the Secured Party, may
deem proper, all
6
<PAGE> 7
without (except as shall be required by applicable statute and cannot be waived)
advertisement or demand upon such Assignor or right of redemption to such
Assignor, which are hereby expressly waived; unless the Collateral is perishable
or threatens to decline speedily in value or is of a type customarily sold on a
recognized market, the Secured Party will give such Assignor reasonable notice
of the time and place of any such public sale or of the time after which any
private sale or any other intended disposition thereof is to be made and such
Assignor agrees that five (5) days prior notice shall be deemed reasonable
notice; (f) upon each such sale, the Secured Party may, unless prohibited by
applicable statute which cannot be waived, purchase all or any part of the
Collateral being sold, free from and discharged of all trusts, claims, rights of
redemption and equities of such Assignor, which are hereby waived and released;
(g) the Secured Party's obligations, if any, to give additional (or to continue)
financial accommodations of any kind to such Assignor shall immediately
terminate; and (h) in addition to the rights and remedies given to the Secured
Party hereunder or otherwise, the Secured Party shall have all of the rights and
remedies of a secured party under the Uniform Commercial Code.
10. In the case of each such sale or of any proceedings to collect
any of the Obligations, each Assignor shall pay all costs and expenses of every
kind for collection, sale or delivery, including reasonable attorneys' fees, and
after deducting such costs and expenses from the proceeds of sale or collection,
the Secured Party may apply any residue to pay any of the Obligations and each
Assignor will continue to be liable to the Secured Party for any deficiency with
interest.
11. The Secured Party may, but is not obligated to, (a) demand,
sue for, collect or receive any money or property at any time due, payable or
receivable on account of or in exchange for any obligations securing any of the
Obligations, (b) compromise and settle with any person liable on such
obligations, and/or (c) extend the time of payment of or otherwise change the
terms thereof, as to any party liable thereon; all without incurring
responsibility to the undersigned or affecting any of the Obligations.
12. In order to effectuate the terms and provisions hereof, each
Assignor hereby designates and appoints Secured Party and its designees or
agents as attorney-in-fact of such Assignor, irrevocably and with power of
substitution, with authority, effective upon an Event of Default: to receive,
open and dispose of all mail addressed to such Assignor, to notify the Post
Office authorities to change the address for delivery of mail addressed to such
Assignor to such address as Secured Party may designate; to endorse the name of
such Assignor on any notes, acceptances, checks, drafts, money orders,
instruments or other evidence of payment or proceeds of the Collateral that may
come into Secured Party's possession; to sign the name of such Assignor on any
invoices, documents, drafts against and notices (which also may direct, among
other things, that payment be made directly to the Secured Party) to Account
debtors or obligors of such Assignor, assignments and requests for verification
of Accounts; to execute proofs of claim and loss; to execute any endorsements,
assignments, or other instruments of conveyance or transfer, to adjust and
compromise any claims under insurance policies; to execute releases; and to do
all other acts and things necessary and advisable in the sole discretion of
Secured Party to carry out and enforce this Agreement. All acts of said attorney
or designee are
7
<PAGE> 8
hereby ratified and approved and said attorney or designee shall not be liable
for any acts of commission or omission, nor for any error of judgement or
mistake of fact or law. This power of attorney being coupled with an interest is
irrevocable while any of the Obligations shall remain unpaid.
13. All options, powers and rights granted to the Secured Party
hereunder or under any promissory note, instrument, document or other writing
delivered to the Secured Party shall be cumulative and shall be in addition to
any other options, powers or rights which the Secured Party may now or hereafter
have as a secured party under the Uniform Commercial Code or under any other
applicable law or otherwise. Each Assignor waives all rights of homestead
exemption under applicable law.
14. No delay on the part of the Secured Party in exercising any of
its options, powers, or rights, or partial or single exercise thereof, shall
constitute a waiver thereof. Neither this Agreement nor any provision hereof may
be modified, changed, waived, discharged or terminated orally, but only by an
instrument in writing, signed by the party against whom enforcement of the
modification, change, waiver, discharge or termination is sought.
15. Notice of acceptance of this Agreement by the Secured Party is
hereby waived. Upon execution hereof, this Agreement shall be immediately
binding upon each Assignor and its successors and assigns, whether or not the
Secured Party signs this Agreement.
16. It is the intention of the parties (a) that, this Agreement
shall constitute a continuing agreement applying to any and all future, as well
as existing transactions among each Assignor and the Secured Party, and (b) that
the security interest provided for herein shall attach to after acquired as well
as existing Collateral, and the Obligations covered by this Agreement shall
include future advances and other value, as well as existing advances and other
value, whether or not similar to prior or existing advances or other value, and
whether or not the advances or value are or shall be given pursuant to
commitment, all to the maximum extent permitted by the Uniform Commercial Code.
17. Unless the context otherwise requires, all terms used herein
which are defined in the Uniform Commercial Code shall have meanings therein
stated.
18. Mailing Address of each Assignor. For the purpose of Section
9.402(1) of the Uniform Commercial Code, the address of the each Assignor
specified below opposite its signature shall be such Assignor's mailing address.
19. This Agreement shall be construed in accordance with and be
governed by the law of the State of New York.
20. This Agreement may be executed in any number of counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall constitute one and the same instrument.
8
<PAGE> 9
IN WITNESS WHEREOF, each of the parties hereto have caused this
Agreement to be executed and delivered by its proper corporate officer or
officers as of the date first written above.
Address: NEXTHEALTH, INC.
16600 North Lago del Oro Parkway By:/s/ William T O'Donnell,Jr
Tucson, Arizona 85739 ---------------------------
Attention: President Name: William T. O'Donnell, Jr.
Title: President
Address: SIERRA TUCSON, INC.
16500 N. Lago del Oro Parkway By:/s/ William T. O'Donnell, Jr.
Tucson, AZ 85739 ----------------------------
Attention: President Name: William T. O'Donnell, Jr.
Title: President
Address: SIERRA TUCSON AC, INC.
16500 N. Lago del Oro Parkway By:/s/ William T. O'Donnell, Jr.
Tucson, AZ 85739 -----------------------------
Attention: President Name: William T. O'Donnell, Jr.
Title: President
Address: SIERRA TUCSON
16500 N. Lago del Oro Parkway EDUCATIONAL MATERIALS
Tucson, AZ 85739 (S.T.E.M.), INC.
Attention: President
By:/s/ William T. O'Donnell, Jr.
-----------------------------
Name: William T. O'Donnell, Jr.
Title: President
9
<PAGE> 10
Address: SIERRA HEALTHSTYLES, INC.
16500 N. Lago del Oro Parkway D/B/A MIRAVAL
Tucson, AZ 85739
Attention: President By:/s/ William T. O'Donnell, Jr.
------------------------------
Name: William T. O'Donnell, Jr.
Title: President
Address: ONSITE WORKSHOPS, INC.
16500 N. Lago del Oro Parkway
Tucson, AZ 85739 By:/s/ William T. O'Donnell, Jr.
Attention: President -----------------------------
Name: William T. O'Donnell, Jr.
Title: President
Address: NEXTHEALTH WATER
16600 N. Lago del Oro Parkway RESOURCES, INC.
Tucson, AZ 85739
Attention: President By:/s/ William T. O'Donnell, Jr.
-----------------------------
Name: William T. O'Donnell, Jr.
Title: President
Address: SOFTEN REALTY, L.L.C.
16600 N. Lago del Oro Parkway
Tucson, AZ 85739 By: NEXTHEALTH, INC., a Member
Attention: President
By:/s/ William T. O'Donnell, Jr.
------------------------------
Name: William T. O'Donnell, Jr.
Title: President
10
<PAGE> 11
Address: AP LOM LLC
1301 Avenue of the Americas
38th Floor By: AP GP LOM LLC, its
New York, NY 10019 Managing Member
Attention: Alfred Trivilino
By Kronus Property, Inc.
By:/s/ Alfred Trivilino
--------------------------
Name: Alfred Trivilino
Title: Vice President
11
<PAGE> 12
